Sales Finals Case Digest

SALES FINALS REVIEWER ATTY.
ADVIENTO 1
OBLIGATIONS OF THE VENDEE: PRE-EMPTION REDEMPTION

1. To accept delivery 1. arises before sale 1. arises after sale
2. To pay the price of the thing sold 2. no rescission because no 2. there can be rescission of the
sale as yet exists original sale
Ways of accepting goods: 3. the action is directed against 3. action is directed against the
1. Express acceptance the prospective seller buyer
2. When buyer does an act which only an owner can do
3. Failure to return after reasonable lapse of time Instances of legal redemption:
A. Under the Civil Code (legal redemption):
When vendee may suspend payment of the price: 1. Sale of a co-owner of his share to a stranger (Art. 1620)
1. If he is disturbed in the possession or ownership of the thing 2. When a credit or other incorporeal right in litigation is sold
bought (Art. 1634)
2. If he has well-grounded fear that his possession or 3. Sale of an heir of his hereditary rights to a stranger (Art.
ownership would be disturbed by a vindicatory action or 1088)
foreclosure of mortgage 4. Sale of adjacent rural lands not exceeding one hectare (Art.
1621)
EXTINGUISHMENT OF SALE 5. Sale of adjacent small urban lands bought merely for
1. Same causes as in all other obligations speculation (Art. 1622)
2. Conventional Redemption B. Under special laws:
3. Legal Redemption 1. An equity of redemption in cases of judicial foreclosures
2. A right of redemption in cases of extra-judicial foreclosures
CONVENTIONAL REDEMPTION
The right which the vendor reserves to himself, to reacquire the ASSIGNMENT OF CREDIT
property sold provided he returns to the vendee the price of the sale, a contract by which the owner of a credit transfers to another his
expenses of the contract , any other legitimate payments made rights and actions against a third person in consideration of a price
therefore and the necessary and useful expenses made on the thing certain in money or its equivalent
sold and fulfils other stipulations which may have been agreed upon.
A conventional redemption is deemed to be an equitable mortgage Warranties of the assignor of credit:
in any of the following cases: (IPERTOD) 1. He warrants the existence of the credit
1. unusually Inadequate purchase price; 2. He warrants the legality of the credit at the perfection of the
2. Possession by the vendor remains, as lessee or otherwise; contract
3. Extension of redemption period after expiration; There is no warranty as to the solvency of the debtor unless it is
4. Retention by the vendee of part of the purchase price; expressly stipulated or unless the insolvency was already existing and of
5. Vendor binds himself to pay the Taxes of the thing sold; public knowledge at the time of the assignment
6. Any Other case where the parties really intended that the
transaction should secure the payment of a debt or the The seller of an inheritance warrants only the fact of his heirship but
performance of any obligation; or not the objects which make up his inheritance.
7. when there is Doubt as to whether contract is contract of sale
with right of repurchase or an equitable mortgage. SALE OF CREDIT OR OTHER INCORPOREAL RIGHTS IN LITIGATION
GENERAL RULE: Debtor has the right of legal redemption in sale of
Equitable Mortgage credit or incorporeal rights in litigation
one which lacks the proper formalities, form of words, or other EXCEPTIONS:
requisites prescribed by law for a mortgage, but shows the intention of 1. Sale to a co-heir or co-owner
the parties to make the property subject of the contract as security for a 2. Sale to a co-owner
debt and contains nothing impossible or contrary to law 3. Sale to the possessor of property in question
Redemption Period
a. if there is an agreement: period agreed upon cannot exceed 10
years
b. if no agreement as to the period: 4 years from the date of the
contract
Note: The vendor who fails to repurchase the property within the
period agreed upon may, however, exercise the right to repurchase
within 30 days from the time the final judgment was rendered in a
civil action on the basis that the contract was a true sale with right of
repurchase.
LEGAL REDEMPTION
The right to be subrogated, upon the same terms and conditions
stipulated in the contract, in the place of one who acquires a thing by
purchase or dation in payment, or by any other transaction whereby
ownership is transferred by onerous title.
It must be exercised within thirty (30) days from the notice in writing
by the vendor.
Tender of payment is not necessary; offer to redeem is enough.
SALES FINALS REVIEWER ATTY. ADVIENTO 2
Chapter 5
Obligations of the Vendee
Arts. 1582-1593
Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place stipulated in the contract.
If the time and place should not have been stipulated, the payment must be made at the time and place of the delivery of the thing sold. (1500a)
Art. 1583. Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by installments.
Where there is a contract of sale of goods to be delivered by stated installments, which are to be separately paid for, and the seller makes defective
deliveries in respect of one or more instalments, or the buyer neglects or refuses without just cause to take delivery of or pay for one more instalments,
it depends in each case on the terms of the contract and the circumstances of the case, whether the breach of contract is so material as to justify the
injured party in refusing to proceed further and suing for damages for breach of the entire contract, or whether the breach is severable, giving rise to a
claim for compensation but not to a right to treat the whole contract as broken. (n)
Art. 1584. Where goods are delivered to the buyer, which he has not previously examined, he is not deemed to have accepted them unless and until he
has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract if there is no
stipulation to the contrary.
Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity
of examining the goods for the purpose of ascertaining whether they are in conformity with the contract.
Where goods are delivered to a carrier by the seller, in accordance with an order from or agreement with the buyer, upon the terms that the goods shall
not be delivered by the carrier to the buyer until he has paid the price, whether such terms are indicated by marking the goods with the words "collect
on delivery," or otherwise, the buyer is not entitled to examine the goods before the payment of the price, in the absence of agreement or usage of
trade permitting such examination. (n)
Art. 1585. The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been
delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable
time, he retains the goods without intimating to the seller that he has rejected them. (n)
Art. 1586. In the absence of express or implied agreement of the parties, acceptance of the goods by the buyer shall not discharge the seller from
liability in damages or other legal remedy for breach of any promise or warranty in the contract of sale. But, if, after acceptance of the goods, the buyer
fails to give notice to the seller of the breach in any promise of warranty within a reasonable time after the buyer knows, or ought to know of such
breach, the seller shall not be liable therefor. (n)
Art. 1587. Unless otherwise agreed, where goods are delivered to the buyer, and he refuses to accept them, having the right so to do, he is not bound to
return them to the seller, but it is sufficient if he notifies the seller that he refuses to accept them. If he voluntarily constitutes himself a depositary
thereof, he shall be liable as such. (n)
Art. 1588. If there is no stipulation as specified in the first paragraph of article 1523, when the buyer's refusal to accept the goods is without just cause,
the title thereto passes to him from the moment they are placed at his disposal. (n)
Art. 1589. The vendee shall owe interest for the period between the delivery of the thing and the payment of the price, in the following three 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. (1501a)
Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired, or should he have reasonable grounds to fear such
disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price until the vendor has caused the disturbance
or danger to cease, unless the latter gives security for the return of the price in a proper case, or it has been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the payment. A mere act of trespass shall not authorize the suspension of the payment of the price.
(1502a)
Art. 1591. Should the vendor have reasonable grounds to fear the loss of immovable property sold and its price, he may immediately sue for the
rescission of the sale.
Should such ground not exist, the provisions of Article 1191 shall be observed. (1503)
Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of
the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. (1504a)
Art. 1593. With respect to movable property, the rescission of the sale shall of right take place in the interest of the vendor, if the vendee, upon the
expiration of the period fixed for the delivery of the thing, should not have appeared to receive it, or, having appeared, he should not have tendered the
price at the same time, unless a longer period has been stipulated for its payment. (1505)
I. To accept delivery
A. Requirement of previous examination by the buyer
- when the goods are delivered to buyer, which he has not previously examined, he is not deemed to have accepted them unless and
until he has had a reasonable opportunity of examining them, to ascertain if they are in conformity with the contract, if there is no
stipulation to the contrary
- seller is bound to afford the buyer a reasonable opportunity to examine the goods if they are in conformity with the contract upon
delivery, unless otherwise agreed
a. Case: Sale of jewelry where buyer had opportunity to examine the items
Fule vs CA & Dr. Cruz, GR 112212, March 2, 1998
-Fule is a banker and a jeweler. He sold his Tanay property to Dr. Cruz, with the diamond of Dr. Cruz as consideration. He had previously
examined the diamond, and also made a sketch. On the day that the diamond was to be given to Fule, he was given ample time to
examine the same. After two hours, he contacted Dr. Cruz, and said that the diamonds were fake, and that he wanted the sale annulled.
The Supreme Court held that he had reasonable time to examine the diamonds, considering also his status and occupation, wherein he
should exercise more care in such dealings. So he cannot annul the sale.
Furthermore, petitioner was afforded the reasonable opportunity required in Article 1584 of the Civil Code within which to examine the
jewelry as he in fact accepted them when asked by Dr. Cruz if he was satisfied with the same. By taking the jewelry outside the bank,
petitioner executed an act which was more consistent with his exercise of ownership over it. This gains credence when it is borne in mind
that he himself had earlier delivered the Tanay property to Dr. Cruz by affixing his signature to the contract of sale. That after two hours he
later claimed that the jewelry was not the one he intended in exchange for his Tanay property, could not sever the juridical tie that now
bound him and Dr. Cruz. The nature and value of the thing he had taken preclude its return after that supervening period within which
anything could have happened, not excluding the alteration of the jewelry or its being switched with an inferior kind.
b. Exception The right of inspection may be given up by the buyer by stipulation. The waiver need not be in express terms.
An illustration of a bargain inconsistent with examination of the goods before payment is a contract by which goods are to
be sent to the buyer COD. But the buyer is still entitled to examine the goods after their delivery and payment of the price.
It should be noted that even in a COD sale, the buyer is allowed to examine the goods before payment of the price should it
have been so agreed upon or if it is permitted by usage.
c.Effect of acceptance by the buyer (for sellers liability)

-the mere acceptance of the goods by the buyer does not necessarily discharge the seller from liability for the breach
of any promise or warranty, however, to make the seller liable, the buyer must notify the seller within reasonable time
about the breach of promise or warranty
i. Exception if there is an agreement to the contrary
ii. Case:
De Guzman vs. Triangle Ace Corp. [G.R. No. 149153, September 12, 2001]
Petitioner is engaged in the business of manufacturing and selling reinforced concrete pipes. From October 1987 to November 1988, he
purchased large quantities of steel bars from respondent. Some of the steel bars were used in the manufacture of reinforced concrete
pipes delivered to the Vinnel Belvoir Corporation. Respondent brought a suit for recovery of unpaid price of the steel bars and obtained a
writ of attachment against petitioner. Petitioner did not deny this but claimed a lesser liability of P115,863.00 only, of which P36,353.00
had been paid, leaving an unpaid balance of P79,510.00. He filed a counterclaim for damages allegedly suffered as a result of the
cancellation of his contract with the Vinnel Belvoir Corporation due to the fact that the steel bars delivered by respondent measured only
8 mm. X 20 ft. instead of 9 mm. X 20 ft. as agreed upon by them.
The trial court gave judgment for respondent and ordered petitioner to pay. On appeal, the CA affirmed but set aside the writ of
attachment. It ruled that petitioner had waived his right to claim damages for the alleged deliveries of undersized steel bars as he failed to
give notice of such fact to respondent within six months from the date of the delivery of the steel bars based on Art. 1586, in relation to
Art. 1571, of the Civil Code. Petitioner contends that he has ten years within which to notify the seller of the breach of warranty, arguing
that since the orders for steel bars were covered by invoices issued by respondent, Art. 1144 (1), which pertains to the ten-year
prescriptive period for filing of actions based upon a written contract, is applicable. Petitioner adds that since he filed his counterclaim on
April 28, 1999, or within ten years from the deliveries of the steel bars in 1987 and 1988, he should be deemed to have timely notified
respondent of the breach of warranty.
RULING:
Art. 1586 provides that the seller shall not be liable if after the acceptance of the goods the buyer fails to give notice to the seller of the
breach in any warranty within a reasonable time after the buyer knows, or ought to know of such breach. The CA correctly ruled that the
"reasonable time" provided in Art. 1571, which involves the period for the filing of actions for breach of implied warranty. At any rate, the
buyer must notify the seller of the breach of warranty at any time before the latter has filed the suit for the collection of the unpaid price
since the purpose of the rule requiring notice is to prevent the buyer from interposing belated claims for damages as an offset to a suit
begun by the seller for the purchase price. In this case, petitioner has failed to establish by satisfactory evidence that he notified
respondent of the delivery of the alleged undersized steel bars either within six months from his receipt thereof or at any time before the
filing of the complaint by petitioner.
Contrary to petitioner's contention, Art. 1144(1) cannot apply to this case, not only because such provision refers to the prescriptive
period for filing of actions, but also because the period of ten years, counted from the date of the delivery of the goods, is too long a time
within which to notify the seller of the breach of warranty.
Furthermore, even assuming that the alleged deliveries of the undersized steel bars do not constitute a breach of warranty but of the
terms of the sale itself, respondent's counterclaim cannot prosper. Art. 1595 provides that if the ownership of the goods has passed to
the buyer and he wrongfully refuses to pay for such, the seller may maintain an action for the price of the goods. A buyer is deemed to
have accepted the goods when he does an act inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time,
he retains the goods without intimating to the seller that he has rejected them (Civil Code, Art. 1585). In the case at bar, there is no
dispute that the steel bars purchased by petitioner were received by him. It is also not disputed that petitioner made partial payments for
the goods and that some of the steel bars were in fact used by him to manufacture reinforced concrete pipes although they were
allegedly rejected on the ground that the steel bars were undersized. The retention and use of the steel bars by petitioner clearly show
that he accepted the goods and for this reason he should pay of the price of the same.
Goodyear vs Sy. GR 154554. November 9, 2005

-Goodyear owns a truck, it was stolen but was recovered. Goodyear sold the truck to Sy, and Sy sold it to Lee. When Lee tried to register
the truck in his name, it was impounded and refused registration because a the alert status was not yet lifted. So Sy filed a case against
Goodyear for breach of warranty. The Supreme Court held that Sy had no cause of action because the third element, of there being an act
or omission that violates such right is missing.
The impoundment of the vehicle and the failure to register it were clearly acts that were not deliberately caused by petitioner, but
that resulted solely from the failure of the PNP to lift the latters own alarm over the vehicle. Pursuant to Republic Act 6975,[26] these
matters were purely administrative and governmental in nature. Petitioner had no authority, much less power, over the PNP. Hence, the
former did not breach its obligation as a vendor to Respondent Sy; neither did it violate his right for which he could maintain an action for
the recovery of damages. Without this crucial allegation of a breach or violation, no cause of action exists.
Gratia argumenti that there was a breach of the implied warranty against hidden encumbrances, notice of the breach was not given
to petitioner within a reasonable time. Article 1586 of the Civil Code requires that notice be given after the breach, of which Sy ought to
have known. In his Third-Party Complaint against petitioner, there was no allegation at all that respondent had given petitioner the
requisite notice.
More important, an action for damages for a breach of implied warranties must be brought within six months from the delivery of
the thing sold.[35] The vehicle was understood to have been delivered to Sy when it was placed in his control or possession. Upon
execution of the Deed of Sale on September 12, 1996, control and possession of the vehicle was transferred to respondent. That the
vehicle had been delivered is bolstered by the fact that no contrary allegation was raised in the Third-Party Complaint. Whether the
period should be reckoned from the actual or from the constructive delivery through a public instrument, more than six months had
lapsed before the filing of the Third-Party Complaint.
Finally, the argument that there was a breach of the implied warranty against eviction does not hold water, for there was never any
final judgment based on either a right prior to the sale; or an act that could be imputed to petitioner and deprive Sy of ownership or
possession of the vehicle purchased.
GOODYEAR PHILIPPINES, INC., v. ANTHONY SY and JOSE L. LEE
Facts: A motor vehicle originally owned by Goodyear until April 1986 when it was hijacked and was recovered in 1986. The
vehicle was used by Goodyear until 1996, when it sold it to Anthony Sy. Sy sold it to Lee in January 1997. But the latter on
December 1997, filed an action for rescission of contract with damages against Sy because he could not register the vehicle in
his name due to the certification from the PNP that it was a stolen vehicle and the alarm covering the same was not lifted. The
PNP impounded the vehicle and charged Lee criminally. Goodyear requested the PNP to lift the stolen vehicle alarm status.
Goodyear was impleaded as third-party defendant in the third-party complaint filed by Sy in January 1998.
Issue: WON Sy could validly rescind the contract

HELD:
Warranties Passed On By the Vendor to the Vendee
In a contract of sale, the vendor is bound to transfer the ownership of and to deliver the thing that is the object of the sale. The
implied warranties are as follows: first, the vendor has a right to sell the thing at the time that its ownership is to pass to the
vendee, as a result of which the latter shall from then on have and enjoy the legal and peaceful possession of the thing; and,
second, the thing shall be free from any charge or encumbrance not declared or known to the vendee.
Upon the execution of the Deed of Sale, petitioner did transfer ownership of and deliver the vehicle to Respondent Sy. No other owner or
possessor of the vehicle had been alleged, and the ownership and possession rights of petitioner over it had never been contested. The Deed
of Sale executed in 1996 showed that petitioner was the absolute owner. Therefore, at the time that ownership passed to Sy, petitioner alone
had the right to sell the vehicle.
When he sold the same truck to Lee, Respondent Sy was exercising his right as absolute owner. Unfortunately, from the time
Respondent Lee attempted to register the truck in his name, he could not have or enjoy the legal and peaceful possession of the
vehicle, because it had been impounded by the PNP, which also opposed its registration. The impoundment of the vehicle and
the failure to register it were not deliberately caused by petitioner, but that resulted solely from the failure of the PNP to lift the
latters own alarm over the vehicle.
A warranty is an affirmation of fact or any promise made by a vendor in relation to the thing sold. As such, a warranty has a
natural tendency to induce the vendee -- relying on that affirmation or promise -- to purchase the thing. The vendor impliedly
warrants that that which is being sold is free from any charge or encumbrance not declared or known to the vendee. The
decisive test is whether the vendor assumes to assert a fact of which the vendee is ignorant.
No Lien or Breach of Warranty
Petitioner did not breach the implied warranty against hidden encumbrances. The subject vehicle that had earlier been stolen
by a third party was subsequently recovered by the authorities and restored to petitioner, its rightful owner. Whether Sy had
knowledge of the loss and subsequent recovery, the fact remained that the vehicle continued to be owned by petitioner, free
from any charge or encumbrance whatsoever.
No Notice of Any Breach of Warranty
Gratia argumenti that there was a breach of the implied warranty against hidden encumbrances, notice of the breach was not
given to petitioner within a reasonable time. Article 1586 of the Civil Code requires that notice be given after the breach, of
which Sy ought to have known. In his Third-Party Complaint against petitioner, there was no allegation at all that respondent
had given petitioner the requisite notice.
An action for damages for a breach of implied warranties must be brought within six months from the delivery of the thing sold.
The vehicle was understood to have been delivered to Sy when it was placed in his control or possession. Whether the period
should be reckoned from the actual or from the constructive delivery through a public instrument, more than six months had
lapsed before the filing of the Third-Party Complaint.
B. Rule for unjustified refusal of the buyer to accept When the buyer, without just cause, refuses to accept the goods, title or ownership to
the goods passes to him from the time the goods were placed at his disposal. Consequently, the risk of loss is borne by him. Exception:
Even if the refusal is without a valid cause, the ownership shall not pass to the buyer if (a) there is a contrary agreement, or (b)the seller
reserves the ownership as security for the payment of the price.
C. Rule if he buyer justifiably refused to accept (in absence of contrary stipulation)

1. Buyer has no duty to return the goods to the seller, but he must notify the seller of his refusal to accept the goods (risk of loss,
seller);
2. Buyer may voluntarily constitute himself as depositary of the goods, but he will be liable for damages if he does not fulfill the
duties of a depositary as required by law (risk of loss buyer).
II. Payment of Price and Interest

A. Time and place what is stipulated in the contract, if not agreed, the payment must be made at the time and place of the delivery of
the thing sold
B. Suspension of payment by the buyer after delivery
a. Grounds
1. If he is disturbed in the possession or ownership of the thing bought
2. If he has a well-grounded fear that his possession or ownership would be disturbed by a vindicatory action or foreclosure of
mortgage
i. Case: Suspension of payment for refusal to issue title
ARRA REALTY CORPORATION and SPOUSES ARGUELLES vs. GUARANTEE DEVELOPMENT CORPORATION AND INSURANCE AGENCY and
ENGR. ERLINDA EALOZA
Facts: Arra Realty decided to construct a five-story building. Pealoza and the ARC agreed that Pealoza would share the purchase price of
one floor of the building, payable within (60) days and the balance payable in (20) equal quarterly installments. The parties further agreed
that the payments of Pealoza would be credited to her account in partial payment of her stock subscription in the ARCs capital stock.
Pealoza took possession of the one-half portion of the second floor. Unknown to her, ARC had executed a real estate mortgage over the
lot and the entire building in favor of the China Banking Corporation as security for a loan. She learned that the property had been
mortgaged to the China Banking Corporation sometime in July 1984. Thereafter, she stopped paying the installments due on the purchase
price of the property. The property was foreclosed extrajudicially and sold at public auction to China Banking. The ARC and the Guarantee
Development executed a deed of conditional sale covering the building and the lot. The property was redeemed and executed a deed of
absolute sale over the lot and building in favor Guarantee. Pealoza filed a complaint against the ARC, the GDCIA, and the Spouses
Arguelles.
HELD:
As gleaned from the agreement, ARC, as vendor, and Pealoza, as vendee, entered into a contract of sale over a portion of the second
floor of the building yet to be constructed payable in installments. As soon as the second floor was constructed within five (5) months,
respondent Pealoza would take possession of the property, and title thereto would be transferred to her name. The parties had agreed
on the three elements of subject matter, price, and terms of payment. Hence, the contract of sale was perfected, it being consensual in
nature, perfected by mere consent, which, in turn, was manifested the moment there was a meeting of the minds as to the offer and the
acceptance thereof. The perfection of the sale is not negated by the fact that the property subject of the sale was not yet in existence.
Pealoza took possession of a portion of the second floor of the building sold to her and became the owner of the property.
Pealoza failed to pay the downpayment on time. But then, the petitioner ARC accepted, without any objections, the delayed payments of
the respondent; hence, the obligation of the respondent is deemed complied with:
Art. 1235. When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or
objection, the obligation is deemed fully complied with.
The respondent cannot be blamed for suspending further remittances of payment to the ARC because when she pushed for the issuance
of her title to the property after taking possession thereof, the ARC failed to comply. She was aghast when she discovered that in July
1984, even before she took possession of the property, the petitioner ARC had already mortgaged the lot and the building to the China
Banking Corporation; when she offered to pay the balance of the purchase price of the property to enable her to secure her title thereon,
the petitioner ARC ignored her offer. Under Article 1590 of the New Civil Code, a vendee may suspend the payment of the price of the
property sold:
Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired, or should he have reasonable grounds to
fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price until the vendor has
caused the disturbance or danger to cease, unless the latter gives security for the return of the price in a proper case, or it has been
stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the payment. A mere act of trespass shall not
authorize the suspension of the payment of the price.
In view of the failure of the petitioner ARC to transfer the title of the property to her name because of the mortgage thereof to China
Banking Corporation and the subsequent sale thereof to the GDCIA, respondent Pealoza is entitled to the refund of the amount she paid
to the petitioner ARC.
Pealoza suspended the payment of the balance of the purchase price of the property because she had the right to do so. While she
failed to pay the purchase price on time, the petitioner ARC nevertheless accepted such delayed payments. The respondent even
proposed to assume the loan account of the petitioner ARC with the China Banking Corporation in an amount equivalent to the balance of
the purchase price of the subject property, which the petitioner ARC rejected. In fine, respondent Pealoza acted in accord with law and
in utmost good faith. Hence, she is not liable for damages to the petitioners under Article 19 of the New Civil Code.
b. When there is no right to suspend payment

1. When the vendor has given security for the return of the price in a proper case;
2. When the parties have stipulated that despite the presence of disturbance, the vendee will pay the price;
3. When the vendor has succeeded in eliminating the danger or disturbance;
4. If the disturbance is a mere act of trespass (but there can be suspension if trespass is in law)
C. Payment of Interest on the Price When vendee is bound to pay interest after delivery
1. If the parties so stipulate
2. If the thing sold and delivered produces fruits or income
3. If the vendee is in default, from the time demand is made upon him either judicially or extrajudicially
After default (moratory interest) Case: Rate of interest if payable as indemnity for delay in the performance of an obligation
Crismina Garments Inc vs CA. GR 128721. March 9, 1999.
Interest shall be computed in accordance with the stipulation of the parties. In the absence of such agreement, the rate shall be twelve
percent (12%) per annum when the obligation arises out of a loan or a forbearance of money, goods or credits. In other cases, it shall be
six percent (6%).
Because the amount due in this case arose from a contract for a piece of work, not from a loan or forbearance of money, the legal interest
of six percent (6%) per annum should be applied. Furthermore, since the amount of the demand could be established with certainty when
the Complaint was filed, the six percent (6%) interest should be computed from the filing of the said Complaint. But after the judgment
becomes final and exuecutory until the obligation is satisfied, the interest should be reckoned at twelve percent (%12) per year.
Private respondent maintains that the twelve percent (12%) interest should be imposed, because the obligation arose from a forbearance
of money. This is erroneous. In Eastern Shipping, 23 the Court observed that a "forbearance" in the context of the usury law is a
"contractual obligation of lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to repay a
loan or debt then due and payable." Using this standard, the obligation in this case was obviously not a forbearance of money, goods or
credit.
D. Legal Guaranties for payment of the price

a. Suspension of delivery by the seller
b. Sellers lien on the goods in his possession
c. Stoppage in transit, if the buyer is insolvent and the price is unpaid
d. Resale of goods
e. Rescission of transfer of title
1. In case of goods (corporeal movables) If personal property has not yet been delivered to vendee, the Vendor as a matter
of right, can rescind the contract if the vendee without any valid cause does not accept delivery or does not pay the price
unless a credit period for its payment has been stipulated
2. In case of real property (1592)
i. Gen rule the vendor may sue for rescission of the contract should the vendee fail to pay the agreed price.
Before a demand for rescission of the contract (not payment of the price) has been made by the vendor, either
judicially or by a notarial act, the vendee may still pay the price even after the expiration of the stipulated period
for payment and notwithstanding a stipulation that failure to pay the price on the stipulated date ipso facto
resolves the sale.
There is no existing provision in our laws authorizing the automatic rescission of contracts for nonpayment of
purchase price.
ii. Exceptions when art. 1592 not applicable
1. To sales on installments of real property in which the parties have laid down the procedure to be followed in
the event the vendee failed to fulfill his obligation
2. To a mere promise to sell (executor contract to sell) where the title remains with the vendor until full
payment of the price
In other words, the vendee in such cases may no longer pay the price after the expiration of the time agreed
upon although no demand has yet been made upon him by suit or notarial act.
Topic: Rate of interest if payable as indemnity for delay in the performance of an obligation
RULE: Interest shall be computed in accordance with the stipulation of the parties. In the absence of such agreement, the rate shall be
twelve percent (12%) per annum when the obligation arises out of a loan or a forbearance of money, goods or credits. In other cases, it
shall be six percent (6%).
Crismina Garments, Inc. vs. CA [G.R. No. 128721, March 9, 1999]
Petitioner Crismina Garments is engaged in the export of girls denim pants. From February 1979 to April 1979, it contracted the services
of respondent Norma Siapno, the sole proprietress of DWilmar Garments, for the sewing of 20,762 pieces of assorted girls denims.
Petitioner was obliged to pay the respondent, for her services, in the total amount of P76,410.00. Respondent sewed the materials and
delivered the same to petitioner who acknowledged the same, in good order condition. Initially, respondent was told that the sewing of
some of the pants was defective. She offered to take delivery of the defective pants. However, she was later told by petitioners
representative that the goods were already good. She was told to just return for her check. However, petitioner failed to pay her the
amount. Respondent through counsel demanded payment of the amount within ten (10) days from receipt of the demand letter.
Petitioners VP-comptroller averred that the pairs of jeans sewn by her, numbering 6,164 pairs, were defective and that she was liable to
petitioner for the amount of P49,925.51 which was the value of the damaged pairs of denim pants and demanded refund of the aforesaid
amount. Respondent filed a complaint for the collection of the principal amount of P76,410.00. The trial court rendered judgment in favor
of the respondent. Petitioner submits that the interest rate should be six percent (6%), pursuant to Article 2209 of the Civil Code since the
case is an action for the enforcement of an obligation for payment of money arising from a contract for a piece of work. On the other
hand, respondent maintains that the interest rate should be twelve percent (12%) per annum, in accordance with Central Bank (CB)
Circular No. 416. She argues that the circular applies, since the money sought to be recovered by her is in the form of forbearance.
RULING:
The interest rate under CB Circular No. 416 applies to (1) loans; (2) forbearance of money, goods or credits; or (3) a judgment involving a
loan or forbearance of money, goods or credits. Cases beyond the scope of the said circular are governed by Article 2209 of the Civil
Code, which considers interest a form of indemnity for the delay in the performance of an obligation. A forbearance in the context of
the usury law is a contractual obligation of lender or creditor to refrain, during a given period of time, from requiring the borrower or
debtor to repay a loan or debt then due and payable. Using this standard, the obligation in this case was obviously not a forbearance of
money, goods or credit.
Because the amount due in this case arose from a contract for a piece of work, not from a loan or forbearance of money, the legal interest
of six percent (6%) per annum should be applied. Furthermore, since the amount of the demand could be established with certainty
when the complaint was filed, the six percent (6%) interest should be computed from the filing of the said complaint. But after the
judgment becomes final and executory until the obligation is satisfied, the interest should be reckoned at twelve percent (12%) per year.
Guidelines for the application of the proper interest rates (Eastern Shipping Lines, Inc. v. CA):
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for damages. The provisions under Title XVIII on Damages of the Civil Code govern in determining the
measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well
as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the
interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from
the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially
(Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be xxx the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the
case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period
being deemed to be by then an equivalent to a forbearance of credit.
CHAPTER 6
Actions For Breach of Contract of Sale of Goods
1594-1599
Art. 1594. Actions for breach of the contract of sale of goods shall be governed particularly by the provisions of this Chapter, and as to matters not
specifically provided for herein, by other applicable provisions of this Title. (n)
Art. 1595. Where, under a contract of sale, the ownership of the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the
goods according to the terms of the contract of sale, the seller may maintain an action against him for the price of the goods.
Where, under a contract of sale, the price is payable on a certain day, irrespective of delivery or of transfer of title and the buyer wrongfully neglects or
refuses to pay such price, the seller may maintain an action for the price although the ownership in the goods has not passed. But it shall be a defense
to such an action that the seller at any time before the judgment in such action has manifested an inability to perform the contract of sale on his part or
an intention not to perform it.
Although the ownership in the goods has not passed, if they cannot readily be resold for a reasonable price, and if the provisions of article 1596, fourth
paragraph, are not applicable, the seller may offer to deliver the goods to the buyer, and, if the buyer refuses to receive them, may notify the buyer that
the goods are thereafter held by the seller as bailee for the buyer. Thereafter the seller may treat the goods as the buyer's and may maintain an action
for the price. (n)
Art. 1596. Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages
for non-acceptance.
The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer's breach of contract.
Where there is an available market for the goods in question, the measure of damages is, in the absence of special circumstances showing proximate
damage of a different amount, the difference between the contract price and the market or current price at the time or times when the goods ought to
have been accepted, or, if no time was fixed for acceptance, then at the time of the refusal to accept.
If, while labor or expense of material amount is necessary on the part of the seller to enable him to fulfill his obligations under the contract of sale, the
buyer repudiates the contract or notifies the seller to proceed no further therewith, the buyer shall be liable to the seller for labor performed or
expenses made before receiving notice of the buyer's repudiation or countermand. The profit the seller would have made if the contract or the sale had
been fully performed shall be considered in awarding the damages. (n)
Art. 1597. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to
perform his obligations thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election
so to do to the buyer. (n)
Art. 1598. Where the seller has broken a contract to deliver specific or ascertained goods, a court may, on the application of the buyer, direct that the
contract shall be performed specifically, without giving the seller the option of retaining the goods on payment of damages. The judgment or decree
may be unconditional, or upon such terms and conditions as to damages, payment of the price and otherwise, as the court may deem just. (n)
Art. 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or extinction of the
price;
(2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to return
them to the seller and recover the price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without
prejudice to the provisions of the second paragraph of Article 1191.
Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of warranty when he accepted the
goods without protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or to offer to
return the goods to the seller in substantially as good condition as they were in at the time the ownership was transferred to the buyer. But if
deterioration or injury of the goods is due to the breach or warranty, such deterioration or injury shall not prevent the buyer from returning
or offering to return the goods to the seller and rescinding the sale.
Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon returning or offering to
return the goods. If the price or any part thereof has already been paid, the seller shall be liable to repay so much thereof as has been paid,
concurrently with the return of the goods, or immediately after an offer to return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the buyer to return the goods, the
buyer shall thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien to secure payment of any portion of the price
which has been paid, and with the remedies for the enforcement of such lien allowed to an unpaid seller by Article 1526.
(5) In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater
amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had
answered to the warranty. (n)
Topic: Failure to give notice of the breach within reasonable time; Action for the price (of personal property) (1595), grounds
De Guzman vs. Triangle Ace Corp. [G.R. No. 149153, September 12, 2001]
Petitioner is engaged in the business of manufacturing and selling reinforced concrete pipes. From October 1987 to November 1988, he
purchased large quantities of steel bars from respondent. Some of the steel bars were used in the manufacture of reinforced concrete
pipes delivered to the Vinnel Belvoir Corporation. Respondent brought a suit for recovery of unpaid price of the steel bars and obtained a
writ of attachment against petitioner. Petitioner did not deny this but claimed a lesser liability of P115,863.00 only, of which P36,353.00
had been paid, leaving an unpaid balance of P79,510.00. He filed a counterclaim for damages allegedly suffered as a result of the
cancellation of his contract with the Vinnel Belvoir Corporation due to the fact that the steel bars delivered by respondent measured only
8 mm. X 20 ft. instead of 9 mm. X 20 ft. as agreed upon by them.
The trial court gave judgment for respondent and ordered petitioner to pay. On appeal, the CA affirmed but set aside the writ of
attachment. It ruled that petitioner had waived his right to claim damages for the alleged deliveries of undersized steel bars as he failed to
give notice of such fact to respondent within six months from the date of the delivery of the steel bars based on Art. 1586, in relation to
Art. 1571, of the Civil Code. Petitioner contends that he has ten years within which to notify the seller of the breach of warranty, arguing
that since the orders for steel bars were covered by invoices issued by respondent, Art. 1144 (1), which pertains to the ten-year
prescriptive period for filing of actions based upon a written contract, is applicable. Petitioner adds that since he filed his counterclaim on
April 28, 1999, or within ten years from the deliveries of the steel bars in 1987 and 1988, he should be deemed to have timely notified
respondent of the breach of warranty.
RULING:
Art. 1586 provides that the seller shall not be liable if after the acceptance of the goods the buyer fails to give notice to the seller of the
breach in any warranty within a reasonable time after the buyer knows, or ought to know of such breach. The CA correctly ruled that the
"reasonable time" provided in Art. 1571, which involves the period for the filing of actions for breach of implied warranty. At any rate, the
buyer must notify the seller of the breach of warranty at any time before the latter has filed the suit for the collection of the unpaid price
since the purpose of the rule requiring notice is to prevent the buyer from interposing belated claims for damages as an offset to a suit
begun by the seller for the purchase price. In this case, petitioner has failed to establish by satisfactory evidence that he notified
respondent of the delivery of the alleged undersized steel bars either within six months from his receipt thereof or at any time before the
filing of the complaint by petitioner.
Contrary to petitioner's contention, Art. 1144(1) cannot apply to this case, not only because such provision refers to the prescriptive
period for filing of actions, but also because the period of ten years, counted from the date of the delivery of the goods, is too long a time
within which to notify the seller of the breach of warranty.
Furthermore, even assuming that the alleged deliveries of the undersized steel bars do not constitute a breach of warranty but of the
terms of the sale itself, respondent's counterclaim cannot prosper. Art. 1595 provides that if the ownership of the goods has passed to
the buyer and he wrongfully refuses to pay for such, the seller may maintain an action for the price of the goods. A buyer is deemed to
have accepted the goods when he does an act inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time,
he retains the goods without intimating to the seller that he has rejected them (Civil Code, Art. 1585). In the case at bar, there is no
dispute that the steel bars purchased by petitioner were received by him. It is also not disputed that petitioner made partial payments for
the goods and that some of the steel bars were in fact used by him to manufacture reinforced concrete pipes although they were
allegedly rejected on the ground that the steel bars were undersized. The retention and use of the steel bars by petitioner clearly show
that he accepted the goods and for this reason he should pay of the price of the same.
TOPIC: Buyers actions for breach of warranty, buyers choices

Harrison Motors Corp. vs. Navarro [G.R. No. 132269. April 27, 2000]
Sometime in June 1987, petitioner Harrison Motors, a known importer, assembler and manufacturer, assembled two (2) Isuzu Elf trucks
using imported component parts and sold them to respondent Navarro through its president, Renato Claros. Prior to the sale, Claros
represented to private respondent that all the BIR taxes and customs duties for the parts used on the trucks had been paid for. Sometime,
BIR, BOC and LTO entered into a tripartite MOA which provided that prior to the registration in the LTO of any locally assembled motor
vehicle using imported component parts, a Certificate of Payment should first be obtained from the BIR and the BOC to prove that all
existing taxes and customs duties have been paid. In December 1988, government agents seized and detained the two (2) Elf trucks of
respondent after discovering that there were still unpaid BIR taxes and customs duties thereon. Private respondent was ordered to pay
the proper assessments or her trucks would be impounded. Private respondent went to Claros to ask for the receipts evidencing payment
of BIR taxes and customs duties; however, Claros refused to comply. Private respondent then demanded from Claros that he pay the
assessed taxes and warned him that he would have to reimburse her should she be forced to pay for the assessments herself. Her
demands were again ignored. But wanting to secure the immediate release of the trucks to comply with her business commitments,
private respondent paid the assessed BIR taxes and customs duties. Consequently, she returned to petitioners office to ask for
reimbursement, but petitioner again refused, prompting her to send a demand letter through her lawyer. When petitioner still ignored her
letter, she filed a complaint for a sum of money. The Court found petitioner guilty of breach of an express warranty the moment petitioner
refused to furnish private respondent with the corresponding receipts since such documents were the best evidence to prove that all BIR
taxes and customs duties on the imported component parts were fully paid. Without evidence of payment, respondent was powerless to
prevent the trucks from being impounded.
RULING:
Under Art. 1599 of the Civil Code, once an express warranty is breached the buyer can accept or keep the goods and maintain an action
against the seller for damages. This was what private respondent did. She opted to keep the two (2) trucks which she apparently needed
for her business and filed a complaint for damages, particularly seeking the reimbursement of the amount she paid to secure the release
of her vehicles.
TOPIC: BUYERS ACTION FOR SELLERS SPECIFIC PERFORMANCE NATURE OF THE OPTIONS
"Article 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:
xxx
(4) Rescind the contract of sale and refuse to receive the goods, or if the goods have already been received, return them or offer to return
them to the seller and recover the price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without
prejudice to the provisions of the second paragraph of Article 1191.
x x x." (Underscoring supplied)
SUPERCARS MANAGEMENT & DEVELOPMENT CORPORATION vs. THE LATE FILEMON FLORES, [G.R. No. 148173, December 10, 2004]
Filemon Flores purchased from Supercars Management and Development Corporation, petitioner, an Isuzu Carter Crew Cab wherein a day
after the vehicle was delivered, respondent used it for his family's trip to Bauang, La Union where the the cab malfunctioned. Upon their
return Flores complained about the defects of the vehicle. Petitioner then had the vehicle repaired and returned, assuring Flores that it
was already in good condition.
But after driving the vehicle for a few days, the same defects resurfaced, prompting respondent to send petitioner a letter rescinding the
contract of sale and returning the vehicle due to breach of warranty against hidden defects. Respondent stopped paying the monthly
amortization for the vehicle.
Marquez and Catley denied having committed any breach of warranty against hidden defects, claiming that the vehicle had only "minor
and inconsequential defects" which "were promptly and satisfactorily repaired by petitioner Supercars pursuant to its warranty as the
seller.
Issue:
Whether respondent has the right to rescind the contract of sale and to claim damages as a result thereof.
Ruling: We rule for respondent.
Respondent's complaint filed with the RTC seeks to recover from petitioner the money he paid for the vehicle due to the latter's breach of
his warranty against hidden defects. The vehicle, after it was delivered to respondent, malfunctioned despite repeated repairs by
petitioner. Obviously, the vehicle has hidden defects. A hidden defect is one which is unknown or could not have been known to the
vendee.
It is well within respondent's right to recover damages from petitioner who committed a breach of warranty against hidden defects.
Petitioner's contention that under Article 1191 of the Civil Code, rescission can no longer be availed of as the vehicle was already in the
hands of an innocent purchaser for value lacks merit. Rescission is proper if one of the parties to a contract commits a substantial breach
of its provisions. It creates an obligation to return the object of the contract. It can be carried out only when the one who demands
rescission can return whatever he may be obliged to restore. Rescission abrogates the contract from its inception and requires a mutual
restitution of the benefits received. Petitioner is thus mandated by law to give back to respondent the purchase price upon his return of
the vehicle. Records show that at the time respondent opted to rescind the contract, the vehicle was still in his possession. He returned it
to petitioner who, without objection, accepted it. Accordingly, the 30% down payment equivalent to P63,600.00, plus the premium for the
comprehensive insurance amounting to P7,374.80 paid by respondent should be returned by petitioner.
As for the moral and exemplary damages, while no proof of pecuniary loss is necessary in order that moral damages may be awarded, the
amount of indemnity being left to the discretion of the court, it is nevertheless essential that the claimant satisfactorily prove the
existence of the factual basis of the damage and its causal relation to defendant's acts.
WHEREFORE, the petition is DENIED.
CHAPTER 7
Extinguishment of Sale
Art. 1600. Sales are extinguished by the same causes as all other obligations, by those stated in the preceding articles of this Title, and by conventional
or legal redemption. (1506)
SECTION 1. - Conventional Redemption
Art. 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with
the provisions of Article 1616 and other stipulations which may have been agreed upon. (1507)
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new
period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a
debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which
shall be subject to the usury laws. (n)
Art. 1603. In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. (n)
Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. (n)
Art. 1605. In the cases referred to in Articles 1602 and 1604, the apparent vendor may ask for the reformation of the instrument. (n)
Art. 1606. The right referred to in Article 1601, in the absence of an express agreement, shall last four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on the basis
that the contract was a true sale with right to repurchase. (1508a)
Art. 1607. In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with the provisions of
article 1616 shall not be recorded in the Registry of Property without a judicial order, after the vendor has been duly heard. (n)
Art. 1608. The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract no mention
should have been made of the right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect
to third persons. (1510)
Art. 1609. The vendee is subrogated to the vendor's rights and actions. (1511)
Art. 1610. The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they have exhausted the property of
the vendor. (1512)
Art. 1611. In a sale with a right to repurchase, the vendee of a part of an undivided immovable who acquires the whole thereof in the case of article
498, may compel the vendor to redeem the whole property, if the latter wishes to make use of the right of redemption. (1513)
Art. 1612. If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may
exercise this right for more than his respective share.
The same rule shall apply if the person who sold an immovable alone has left several heirs, in which case each of the latter may only redeem the part
which he may have acquired. (1514)
Art. 1613. In the case of the preceding article, the vendee may demand of all the vendors or co-heirs that they come to an agreement upon the
purchase of the whole thing sold; and should they fail to do so, the vendee cannot be compelled to consent to a partial redemption. (1515)
Art. 1614. Each one of the co-owners of an undivided immovable who may have sold his share separately, may independently exercise the right of
repurchase as regards his own share, and the vendee cannot compel him to redeem the whole property. (1516)
Art. 1615. If the vendee should leave several heirs, the action for redemption cannot be brought against each of them except for his own share, whether
the thing be undivided, or it has been partitioned among them.
But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action for redemption may be instituted against
him for the whole. (1517)
Art. 1616. The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and in addition:
(1) The expenses of the contract, and any other legitimate payments made by reason of the sale;
(2) The necessary and useful expenses made on the thing sold. (1518)
Art. 1617. If at the time of the execution of the sale there should be on the land, visible or growing fruits, there shall be no reimbursement for or
prorating of those existing at the time of redemption, if no indemnity was paid by the purchaser when the sale was executed.
Should there have been no fruits at the time of the sale and some exist at the time of redemption, they shall be prorated between the redemptioner
and the vendee, giving the latter the part corresponding to the time he possessed the land in the last year, counted from the anniversary of the date of
the sale. (1519a)
Art. 1618. The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee, but he shall respect the
leases which the latter may have executed in good faith, and in accordance with the custom of the place where the land is situated. (1520)
Uraca vs. CA
Facts: The private respondernts were the owners of a property and petitioners were the lessees of said building. Sometime, respondents
wrote a letter to petitioners offering to sell the subject property for 1,050, 000 and at the same time requesting petitioners to reply in 3
days. Petitioner now sent a reply-letter to the Velezes (respondents) accepting the offer to sell. Later, petitioner went to see respondent
about the offer to sell but she was told by respondent that the price was 1,400,000 and in cash or managers check but petitioner
counterproposed that payment be paid in installment with a down payment of 1,000,000 and the balance to be paid in 30 days. It was
later found that respondents sold the lots to Avenue Group. Hence, petitioner filed this complaint against the respondents. The
contention of respondent is that the sale of real property to petitioners was extinguished by novation after said parties negotiated to
increase the price to 1,400,000 which was not accepted.
Issue: WON first offer binding between the parties.
WON the sale was extinguished.
Ruling: The first offer was valid because it was accepted unconditionally by the petitioners within the 3-day period given, so therefor at
that time there was already a perfected contract of sale. The second offer which was counter-offered by petitioner offering to pay 1M now
and the balance to be paid by installment later was not accepted by the offeror, so there was no meeting of the minds to the second
agreement therefore there was no 2nd valid agreement and the 1st agreement subsists.
No Extinctive Novation. Extinctive novation requires: (1) the existence of a previous valid obligation; (2) the agreement of all the parties
to the new contract; (3) the extinguishment of the old obligation or contract; and (4) the validity of the new one. The foregoing clearly
show that novation is effected only when a new contract has extinguished an earlier contract between the same parties. It is never
presumed; it must be proven as a fact either by express stipulation of the parties or by implication derived from an irreconcilable
incompatibility between old and new obligations or contracts.
In the instant case, these elements are absent. The parties did not reach an agreement on the new price of 1,400,000. In this case, the
petitioners and the respondents did not perfect a new contract because the essential requisite of consent was absent, the parties having
failed to agree on the terms of payment. True, petitioner made a qualified acceptance of this offer by proposing that the payment be
made by installment. Such qualified acceptance constituted a counter-offer which was not accepted by petitioners. Since the parties failed
to enter into a new contract that could have extinguished their previously perfected contract of sale, there can be no novation of the
latter. Consequently, the first sale of property remain valid and existing.
Since this is a clear case of a double sale, the buyer who first registers in good faith acquires ownership. While Avenue Group first
registered the sale, it was not attendant with good faith. Hence, petitioners have better right over the property.
Caballero vs. Ong Tiao Bok [G.R. No. 147206]

cannot find this case transcribed recording nalang
Facts: A property owner who owned 2 parcels of land with a total area of 11 ha of which he sold under a pacto de retro sale for 60,000. At
the time of exec of document, the assessed value of the property was a little over 60,000. They provided for a period of redemption of 5
years with an extension of 3 years for a total of 8 years. Caballero was not able to repurchase the property within the 5-year period or
within the 3-year extension. Sixteen years after the expiration of period of redemption, in the meantime caballero dies. His heirs sued for
cancellation of sale claiming that it was an equitable mortgage - their ground is gross inadequacy of price. The court did not believe them.
SC: It is normal for a pacto de retro to have a lower consideration because of the right to repurchase. So it will not be more burdensome
on the part of the vendor to redeem the property because it is sold at a lower price. The fact that it was lower than the assessed value of
the property does not mean that the consideration was grossly inadequate. The argument of the heirs of Caballero was that it is a fact the
assessed value is much lower than the market value and therefor if it is even lower than the assessed value more so it is much lower than
the actual market value, but the court did not buy their argument and the court held that this was perfectly a pacto de retro sale. If you
fail to redeem the property within the redemption period, you cannot claim later on that the contract was an equitable mortgage just
because you were not able to exercise the right within the redemption period.
Ramos vs. Sarao

Facts: Ramos executed a contract over their conjugal house and lot in favor of respondent Sarao entitled Deed of Sale Under Pacto de
Retro. The contract granted the Ramos spouses the option to repurchase the property within 6 months and that should the spouses fail to
pay the interest or exercise the right to repurchase within the stipulated period, the conveyance would be deemed an absolute sale. Later,
Ramos tendered in form of managers check which the latter refused to accept for being insufficient. Hence, Ramos filed a complaint for
redemption of the property.
Issue: WON the agreement was a pacto de retro sale or an equitable mortgage.
Ruling: It was an equitable mortgage. Art. 1602 provides for cases where the contract shall be presumed to be an equitable mortgage. The
presence of just one of the circumstances suffices to convert a contract to an equitable mortgage. In the present case, the vendor retained
possession of the property allegedly sold. Petitioner and her children continued to use it as their residence. In fact, it remained as her
address for the service of the court orders and copies of Saraos pleadings. Inasmuch as the contract was an equitable mortgage, Saraos
remedy was to recover the loan amount from petitioner by filing an action for the amount due or by foreclosing the property.
Dino vs. Jardines

Facts: Dio (petitioner) filed a Petition for Consolidation of Ownership with the RTC. She alleged that: Jardines (respondent) executed in
her favor a Deed of Sale with Pacto de Retro over a parcel of land with improvements covered by a Tax Declaration, the consideration for
which amounted to P165,000.00; it was stipulated in the deed that the period for redemption would expire in six months; such period
expired but neither respondent nor any of her legal representatives were able to redeem or repurchase the subject property; as a
consequence, absolute ownership over the property has been consolidated in favor of petitioner.
Respondent countered that the Deed of Sale with Pacto de Retro did not embody the real intention of the parties; the transaction actually
entered into by the parties was one of simple loan and the Deed of Sale with Pacto de Retro was executed just as a security for the loan;
the amount borrowed by respondent was only P50,000.00 with monthly interest of 9% to be paid within a period of six months; it was
never the intention of respondent to sell her property to petitioner; the value of respondents residential house alone is over a million
pesos and if the value of the lot is added, it would be around 1.5 million; it is unthinkable that respondent would sell her property worth
one and a half million pesos for only P165,000.00. Petitioner insisted on appropriating the property of respondent which she put up as
collateral for the loan; respondent has been the one paying for the realty taxes on the subject property.
Issue: WON it is a pacto de retro sale.
Ruling: The fact that respondent has remained in actual physical possession of the property in question, and that respondent has been the
one paying the real property taxes on the subject property was established by the admission made by petitioner during the pre-trial
conference and embodied in the Pre-Trial Order. The finding that the purchase price in the amount of P165,000.00 earns monthly interest
was based on petitioners own testimony and admission that the amount of P165,000.00, if not paid, shall bear an interest of 10% per
month.
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a
new period is executed;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
The presence of even one of the above-mentioned circumstances is sufficient basis to declare a contract of sale with right to repurchase
as one of equitable mortgage. In practically all of the so-called contracts of sale with right of repurchase, the real intention of the parties is
that the pretended purchase price is money loaned and in order to secure the payment of the loan, a contract purporting to be a sale with
pacto de retro is drawn up.
In the instant case, the presence of the circumstances provided for under paragraphs (2) and (5) of Article 1602, and the fact that
petitioner herself demands payment of interests on the purported purchase price of the subject property, clearly show that the intention
of the parties was merely for the property to stand as security for a loan. The transaction between herein parties was then correctly
construed by the CA as an equitable mortgage.
Salonga vs. Conception [Gr. 151333]

Facts: The spouses Natalio Salonga and Felicidad Salonga were the owners of eight (8) prime parcels of land located in Dagupan
City[1]They had a commercial building with four floors which stood on their property located along A.B. Fernandez Avenue, Dagupan
City. The spouses leased the building to traders and merchants, and lived in a house along Arellano Street. The house stood on a lot which
they also owned. The spouses loaned from several banks and mortgaged several of their properties in order to finance their business. Due
to an earthquake that damaged their building they were un able to pay their loans and some of their properties were foreclosed. They
asked help from respondent to redeem their properties with the agreement that the building would be sold after 2 months and that the
loans would be paid. Due to this agreement a deed of absolute sale was made in favor of respondents with the condition that it will not
be registered. The loan was not repayed and the building was subsequently transferred in the name of respondents.
Issue: Issue: whether the contract above is one of Equitable Mortgage or Absolute Sale?
Sc:The Contract was one of equitable mortgage due to the following reasons..
FIRST. The petitioners were hard-pressed to pay their account to the respondents in the total principal amount of P3,198,886.47; the said
amount paid by the respondents for the account of the petitioners to the PNB, the Associated Bank and the DBP, excluding the amount of
36% interest a month or 36% interest per annum
SECOND. It was made to appear under the August 31, 1993 Deed of Absolute Sale that the petitioners had sold their five parcels of land
to the respondents for the principal amount of P575,000.00, and that the petitioners received the said amount from the respondents.
However, at the time of the execution of said deed, the petitioners were indebted to the respondents for the principal amount of
P586,520.50, which the respondents had remitted to the Associated Bank for the account of the petitioners. It is incredible that the
petitioners would sell the said parcels of land to the respondents, and that the latter would remit the purchase price of P575,000.00 to
the petitioners, and retain the said amount to be applied as payment to the petitioners account of P586,520.50.
THIRD. Respondent Manuel Concepcion had earlier signed on March 10, 1993 an undertaking that he would not register the deed of
absolute sale as long as the petitioners will pay their outstanding account plus interests thereon at the rate of 3% per month:
There was also gross inadequacy of price in this case as it appeared that their commercial building was sold for only 2M while the actual
market price was 10M.
Go vs. Bacaron [Gr. 159048]

Facts: As evidenced by the Transfer of Rights dated October 1, 1993, Eliodoro Bacaron conveyed a 15.3955-hectare parcel of land located
in Langub, Talomo, Davao City, in favor of Benny Go for P20,000.00.
About a year thereafter, Bacaron, seeking to recover his property, went to Go to pay his alleged P20,000.00 loan but the latter refused
to receive the same and to return his property saying that the transaction between the two of them was a sale and not a mortgage as
claimed by Bacaron.
Issue: whether the contract above is one of Equitable Mortgage or Absolute Sale? 2) Whether the instrument of the contract should be
reformed.
SC: The present case is one of mortgage due to the following..
The price was grossly inadequate.
The respondent remained in possession of the property.
The respondent also continued paying taxes.
The instrument should be reformed as it did not contain the true intention of the parties.
Romulo vs. Layug [G.r No.151217]

Facts:
The petitioners In1986 obtained from respondents a loan in the amount of P50,000.00 with a monthly interest of 10%, which
subsequently ballooned to P580,292.00. To secure the payment of the loan, respondents allegedly duped petitioners into signing a
Contract of Lease and a Deed of Absolute Sale covering petitioners house and lot located Sucat, Paraaque. The Deed of Absolute Sale
purportedly facilitated the cancellation of petitioners title on the house and lot and the issuance of a TCT in the name of respondents.
Thus, petitioners prayed for the nullification of the Deed of Absolute Sale, the contract of lease and TCT No. 20489, and the award of
moral and exemplary damages.5
Respondents denied petitioners allegations. In their Answer, 6 they vouched for the validity of the Deed of Absolute Sale, particularly as
having been voluntarily executed by the parties for the purpose of extinguishing petitioners indebtedness to respondents. As
consideration of the sale, respondents allegedly paid the amount of P200,000.00 in addition to the writing off of petitioners obligation to
them. That they allowed petitioners to occupy the house and lot as lessees thereof was founded on the trust they reposed on
petitioners,respondents. 7
Issue: whether the contract above is one of Equitable Mortgage or Absolute Sale?
Sc: The case above is one of equitable mortgage.
The form of the instrument cannot prevail over the true intent of the parties as established by the evidence. We have also decreed that in
determining the nature of a contract, courts are not bound by the title or name given by the parties. The decisive factor in evaluating such
agreement is the intention of the parties, as shown not necessarily by the terminology used in the contract but by their conduct, words,
actions and deeds prior to, during and immediately after execution of the agreement. 18 In order to ascertain the intention of the parties,
their contemporaneous and subsequent acts should be considered. Once the intention of the parties has been ascertained, that element
is deemed as an integral part of the contract as though it has been originally expressed in unequivocal terms. 19 As such, documentary and
parol evidence may be submitted and admitted to prove such intention. And, in case of doubt, a contract purporting to be a sale with right
to repurchase shall be construed as an equitable mortgage. 20
The following facts show that the contract was a mortgage.
That the petitioners remained in the property for more than 5 years. That price was unusually inadequate which was less than half of the
value of the property. That there were extensions to the amount of the loan. In cases where the true intentions of the parties cannot be
ascertained the doubt shall be resolved in favor of equitable mortgage since due to the less reciprocity of interest.
Bacungan vs. Ca [Gr. 170282]

Facts: The records reveal that respondents had earlier executed several real estate mortgages over the properties to secure the payment
of the total amount of P350,000.00.15 Respondents defaulted on the payments, prompting the bank to foreclose the properties. However,
as illustrated in the testimony of respondent Victoria Velo, respondents and petitioners devised a plan in which they agreed that in
exchange for the apparent transfer of ownership of the parcels of land to petitioners, the latter would provide for the funds for the
redemption of the properties from the bank in addition to the loan that petitioners would obtain from the bank. Thus, respondents were
able to redeem the properties for the amount of P369,000.00 that was advanced by way of mortgage to them by petitioners. 16 The
amount approximates the total loans in the amount of P350,000.00 secured by the properties subject of the real estate mortgages
executed by respondents.17
Thereafter, respondents executed several deeds of sale purporting to transfer the 18 parcels of lands for a total consideration of
P232,000.00. The parties further agreed that upon the transfer of the properties in the name of petitioners, the latter would obtain
another loan from the bank using the properties as collateral. Petitioners were supposed to remit the loan proceeds to respondents after
deducting the amount of P369,000.00 lent by petitioners to respondents and, thereafter, allow respondents to buy back the properties.
However, because petitioners had failed to secure a loan from the bank after the transfer of the titles in their names, respondents
instituted the present action to nullify the deeds of sale on the ground that the sale was simulated
Issue: whether the contract above is one of Equitable Mortgage or Absolute Sale?
Sc: The sale above is one of equitable Mortgage.
In the instant case, three telling circumstances indicating that an equitable mortgage exists are present. First, as established by the CA, the
price of each of the properties was grossly inadequate. Second, petitioners retained part of the "purchase price" when they failed to turn
over to the respondents the loan that they were supposed to secure from the bank. Third, petitioners insisted that part of the
consideration of the sale consisted of amounts previously borrowed by respondents from them, indicating that petitioners were using the
properties as "security" for the payment of respondents other loans from them.
The CA concluded that the sale was simulated because of the gross inadequacy of the prices and the failure by respondents to receive the
purchase price.
Gross inadequacy of price by itself will not result in a void contract. Gross inadequacy of price does not even affect the validity of a
contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or some other contract.
Inadequacy of cause will not invalidate a contract unless there has been fraud, mistake or undue influence.
It has been established that petitioners advanced the sum of P369,000.00 to respondents that prompted the latter to transfer the
properties to petitioners. Thus, before the respondents can recover the said amount, respondents must first return the amount of
P369,000.00 to petitioners. In Lustan v. Court Appeals,20 where the Court established the reciprocal obligations of the parties under an
equitable mortgage, the Court ordered the reconveyance of the property to the rightful owner therein upon the payment of the loan
within 90 days from the finality of this decision.
Applicable to all the following.

For the presumption in Article 1602 of the New Civil Code to arise, two requirements must concur: (a) that the parties entered into a
contract denominated as a contract of sale; and (b) that their intention was to secure an existing debt by way of a mortgage.
Article 1602 of the New Civil Code of the Philippines provides that a contract shall be presumed to be an equitable mortgage, in any of the
following cases:
(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a
new period is executed
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment
of a debt or the performance of any other obligation.
In any of the foregoing case, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as
interest which shall be subject to the usury laws.
Effect when the transaction is deemed an equitable mortgage

GO VS. BACARON: An equitable mortgage has been defined as 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 INSTANCES IN WHICH A CONTRACT OF SALE IS PRESUMED TO BE AN EQUITABLE MORTGAGE ARE ENUMERATED IN
ARTICLE 1602 OF THE CIVIL CODE AS FOLLOWS:
ART. 1602. THE CONTRACT SHALL BE PRESUMED TO BE AN EQUITABLE MORTGAGE, IN ANY OF THE FOLLOWING CASES:
(1) WHEN THE PRICE OF A SALE WITH RIGHT TO REPURCHASE IS UNUSUALLY INADEQUATE;
(2) WHEN THE VENDOR REMAINS IN POSSESSION AS LESSEE OR OTHERWISE;
(3) WHEN UPON OR AFTER THE EXPIRATION OF THE RIGHT TO REPURCHASE ANOTHER INSTRUMENT EXTENDING THE PERIOD OF
REDEMPTION OR GRANTING A NEW PERIOD IS EXECUTED;
(4) WHEN THE PURCHASER RETAINS FOR HIMSELF A PART OF THE PURCHASE PRICE;
(5) WHEN THE VENDOR BINDS HIMSELF TO PAY THE TAXES ON THE THING SOLD;
(6) IN ANY OTHER CASE WHERE IT MAY BE FAIRLY INFERRED THAT THE REAL INTENTION OF THE PARTIES IS THAT THE
TRANSACTION SHALL SECURE THE PAYMENT OF A DEBT OR THE PERFORMANCE OF ANY OTHER OBLIGATION.
IN ANY OF THE FOREGOING CASES, ANY MONEY, FRUITS, OR OTHER BENEFIT TO BE RECEIVED BY THE VENDEE AS RENT OR OTHERWISE
SHALL BE CONSIDERED AS INTEREST WHICH SHALL BE SUBJECT TO THE USURY LAWS.
FURTHERMORE, ARTICLE 1604 OF THE CIVIL CODE PROVIDES THAT [T]HE PROVISIONS OF ARTICLE 1602 SHALL ALSO APPLY TO A
CONTRACT PURPORTING TO BE AN ABSOLUTE SALE.
IN THE PRESENT CASE, THREE OF THE INSTANCES ENUMERATED IN ARTICLE 1602 -- GROSSLY INADEQUATE CONSIDERATION,
POSSESSION OF THE PROPERTY, AND PAYMENT OF REALTY TAXES -- ATTENDED THE ASSAILED TRANSACTION AND THUS SHOWED THAT
IT WAS INDEED AN EQUITABLE MORTGAGE.
REFORMATION OF INSTRUMENT TO REFLECT TRUE INTENTION OF THE PARTIES
GO VS. BACARON: ULTIMATELY, IT IS THE INTENTION OF THE PARTIES THAT DETERMINES WHETHER A CONTRACT IS ONE OF SALE OR OF
MORTGAGE. IN THE PRESENT CASE, ONE OF THE PARTIES TO THE CONTRACT RAISES AS AN ISSUE THE FACT THAT THEIR TRUE
INTENTION OR AGREEMENT IS NOT REFLECTED IN THE INSTRUMENT. UNDER THIS CIRCUMSTANCE, PAROL EVIDENCE BECOMES
ADMISSIBLE AND COMPETENT EVIDENCE TO PROVE THE TRUE NATURE OF THE INSTRUMENT. HENCE, UNAVAILING IS THE ASSERTION
OF PETITIONER THAT THE INTERPRETATION OF THE TERMS OF THE CONTRACT IS UNNECESSARY, AND THAT THE PARTIES CLEARLY
AGREED TO EXECUTE AN ABSOLUTE DEED OF SALE. HIS ASSERTION DOES NOT HOLD, ESPECIALLY IN THE LIGHT OF THE PROVISIONS OF
ARTICLE 1604 OF THE CIVIL CODE, UNDER WHICH EVEN CONTRACTS PURPORTING TO BE ABSOLUTE SALES ARE SUBJECT TO THE
PROVISIONS OF ARTICLE 1602.
MOREOVER, UNDER ARTICLE 1605 OF THE NEW CIVIL CODE, THE SUPPOSED VENDOR MAY ASK FOR THE REFORMATION OF THE
INSTRUMENT, SHOULD THE CASE BE AMONG THOSE MENTIONED IN ARTICLES 1602 AND 1604. BECAUSE RESPONDENT HAS MORE
THAN SUFFICIENTLY ESTABLISHED THAT THE ASSAILED CONTRACT IS IN FACT AN EQUITABLE MORTGAGE RATHER THAN AN ABSOLUTE
SALE, HE IS ALLOWED TO AVAIL HIMSELF OF THE REMEDY OF REFORMATION OF CONTRACTS.
NO RIGHT OF REPURCHASE AFTER AN ALLEGED EQUITABLE MORTGAGE WAS DECLARED A PACTO DE RETRO SALE
ABILLA VS. GOBONSENG: Respondents now insist that they are entitled to exercise the right to repurchase pursuant to the third
paragraph of Article 1606 of the Civil Code, which reads:
However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil
action on the basis that the contract was a true sale with right to repurchase.
The question now is, can respondents avail of the aforecited provision? Following the theory of the respondents which was sustained by
the trial court, the scenario would be that although respondents failed in their effort to prove that the contract was an equitable
mortgage, they could nonetheless still repurchase the property within 30 days from the finality of the judgment declaring the contract to
be truly a pacto de retro sale. However, under the undisputed facts of the case at bar, this cannot be allowed.
In the parallel case of Vda. de Macoy v. Court of Appeals,http://www.supremecourt.gov.ph/jurisprudence/2002/jan2002/146651.htm -
_edn15 the petitioners therein raised the defense that the contract was not a sale with right to repurchase but an equitable mortgage.
They further argued as an alternative defense that even assuming the transaction to be a pacto de retro sale, they can nevertheless
repurchase the property by virtue of Article 1606, third paragraph of the Civil Code. It was held that the said provision was inapplicable,
thus:
The application of the third paragraph of Article 1606 is predicated upon the bona fides of the vendor a retro. It must appear that there
was a belief on his part, founded on facts attendant upon the execution of the sale with pacto de retro, honestly and sincerely
entertained, that the agreement was in reality a mortgage, one not intended to affect the title to the property ostensibly sold, but merely
to give it as security for a loan or other obligation.
In that event, if the matter of the real nature of the contract is submitted for judicial resolution, the application of the rule is meet and
proper; that the vendor a retro be allowed to repurchase the property sold within 30 days from rendition of final judgment declaring the
contract to be a true sale with right to repurchase.
Conversely, if it should appear that the parties agreement was really one of sale transferring ownership to the vendee, but
accompanied by a reservation to the vendor of the right to repurchase the property and there are no circumstances that may
reasonably be accepted as generating some honest doubt as to the parties' intention, the proviso is inapplicable. The reason is quite
obvious.
If the rule were otherwise, it would be within the power of every vendor a retro to set at naught a pacto de retro, or resurrect an expired
right of repurchase, by simply instituting an action to reform the contract known to him to be in truth a sale with pacto de retro into
an equitable mortgage. As postulated by the petitioner, to allow herein private respondents to repurchase the property by applying said
paragraph x x x to the case at bar despite the fact that the stipulated redemption period had already long expired when they instituted the
present action, would in effect alter or modify the stipulation in the contract as to the definite and specific limitation of the period for
repurchase (2 years from date of sale or only until June 25, 1958) thereby not simply increasing but in reality resuscitating the expired
right to repurchase x x x and likewise the already terminated and extinguished obligation to resell by herein petitioner. The rule would
thus be made a tool to spawn, protect and even reward fraud and bad faith, a situation surely never contemplated or intended by the law.
In the case at bar, both the trial court and the Court of Appeals were of the view that the subject transaction was truly a pacto de retro
sale; and that none of the circumstances under Article 1602 of the Civil Code exists to warrant a conclusion that the transaction subject of
the Deed of Sale and Option to Buy was an equitable mortgage. The Court of Appeals correctly noted that if respondents really
believed that the transaction was indeed an equitable mortgage, as a sign of good faith, they should have, at the very least, consigned
with the trial court the amount of P896,000.00, representing their alleged loan, on or before the expiration of the right to repurchase on
August 21, 1983. Clearly, therefore, the declaration of the transaction as a pacto de retro sale will not, under the circumstances, entitle
respondents to the right of repurchase set forth under the third paragraph of Article 1606 of the Civil Code.
SECTION 2: LEGAL REDEMPTION

Art. 1619. Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who
acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title. (1521a)
Art. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them, are sold to a third
person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in
the thing owned in common. (1522a)
Art. 1621. The owners of adjoining lands shall also have the right of redemption when a piece of rural land, the area of which does not exceed one
hectare, is alienated, unless the grantee does not own any rural land.
This right is not applicable to adjacent lands which are separated by brooks, drains, ravines, roads and other apparent servitudes for the benefit of
other estates.
If two or more adjoining owners desire to exercise the right of redemption at the same time, the owner of the adjoining land of smaller area shall be
preferred; and should both lands have the same area, the one who first requested the redemption. (1523a)
Art. 1622. Whenever a piece of urban land which is so small and so situated that a major portion thereof cannot be used for any practical purpose
within a reasonable time, having been bought merely for speculation, is about to be re-sold, the owner of any adjoining land has a right of pre-emption
at a reasonable price.
If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a reasonable price.
When two or more owners of adjoining lands wish to exercise the right of
pre-emption or redemption, the owner whose intended use of the land in question appears best justified shall be preferred. (n)
Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective
vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of
the vendor that he has given written notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners. (1524a)
AGUILAR vs. AGUILAR, G. R. No. 141613, December 16, 2005

Facts:
On March 27, 1995, Senen filed with the Regional Trial Court, Branch 260, Paraaque City, an action for legal redemption against
Virgilio and another brother, Angel, docketed as Civil Case No. 95-039. In his complaint, Senen alleged that while he knows that Virgilio
sold his share of the property to Angel in January 1989, however, he (Senen) was not furnished any written notice of the sale.
Consequently, as a co-owner, he has the right to redeem the property.
By then, Virgilio had moved to California, USA. It was only on January 25, 1997 that he was served, through the Philippine
Consulate in San Francisco, a copy of Senens complaint in Civil Case No. 95-039.
In an Order dated June 27, 1997, the trial court dismissed Civil Case No. 05-039 on the ground of laches, holding that Senen incurred
a delay of seven (7) years before asserting his right to redeem the property in question.
Issue:
Whether the Court of Appeals erred in holding that Senens complaint for legal redemption in Civil Case No. 05-039 is barred by laches.
Ruling:
Legal redemption (retracto legal de comuneros) is a privilege created by law, partly by reason of public policy and partly for the benefit of
the redemptioner to afford him a way out of a disagreeable or inconvenient association into which he has been thrust.
With respect to redemption by co-owners, in case the share of a co-owner is sold to a third person, the governing law is Article 1620 of
the Civil Code which provides:
ART. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of
them are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable rate.
Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may
respectively have in the thing owned in common.
The purpose behind Article 1620 is to provide a method for terminating the co-ownership and consolidating the dominion in one sole
owner.
Article 1623 of the same Code also provides:
ART. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing
by the prospective vendee, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendee that he has given written notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
From the above provisions, the following are the requisites for the exercise of legal redemption: (1) There must be a co-
ownership; (2) one of the co-owners sold his right to a stranger; (3) the sale was made before the partition of the co-owned property;
(4) the right of redemption must be exercised by one or more co-owners within a period of thirty days to be counted from the time
that he or they were notified in writing by the vendee or by the co-owner vendor; and (5) the vendee must be reimbursed for the price
of the sale.
Petitioner has actual knowledge of the sale of Virgilios share to Angel in 1989. As provided by Article 1623, he has thirty days from such
actual knowledge within which to exercise his right to redeem the property. Inexplicably, petitioner did not take any action. He waited
for seven (7) years before filing his complaint. Definitely, such an unexplained delay is tantamount to laches. To be sure, to uphold his
right would unduly cause injury to respondent-intervenor, a purchaser in good faith and for value.
Moreover, by the time Senen filed Civil Case No. 95-039 for legal redemption, his right was no longer available to him. We have
held that after a property has been subdivided and distributed among the co-owners, the community has terminated and there is no
reason to sustain any right of pre-emption or redemption.
AVILA v. BARABAT, G. R. No. 141993, March 17, 2006

Facts:
The subject of this controversy is a portion of a 433-square meter parcel of land located in Poblacion, Toledo City, Cebu. The entire
property is registered in the name of Anunciacion Bahena vda. de Nemeo. Upon her death, ownership of the lot was transferred by
operation of law to her five children, petitioners Narcisa Avila, Natividad Macapaz, Francisca Adlawan, Leon Nemeo and Jose Bahena.
These heirs built their respective houses on the lot.
In 1964, respondent Benjamin Barabat leased a portion of the house owned by Avila. His co-respondent, Jovita Barabat, moved in with
him in 1969 when they got married.
Avila subsequently relocated to Cagayan de Oro City. She came back to Toledo City in July 1979 to sell her house and share in the lot to her
siblings but no one showed interest in it. She then offered it to respondents who agreed to buy it. Their agreement was evidenced by a
private document. Respondents stopped paying rentals to Avila and took possession of the property as owners. They also assumed the
payment of realty taxes on it.
Sometime in early 1982, respondents were confronted by petitioner Januario Adlawan who informed them that they had until March
1982 only to stay in Avilas place because he was buying the property. Respondents replied that the property had already been sold to
them by Avila. They showed Adlawan the July 17, 1979 document executed by Avila.
Issue:
Whether or not petitioners reliance on Art. 1623 in relation to Art. 1620 to justify their right of redemption is correct.
Ruling:
Art. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or any of them, are
sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one.
Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners.
Petitioners right to redeem would have existed only had there been co-ownership among petitioners-siblings. But there was none. For
this right to be exercised, co-ownership must exist at the time the conveyance is made by a co-owner and the redemption is demanded
by the other co-owner or co-owner(s). However, by their own admission, petitioners were no longer co-owners when the property was
sold to respondents in 1979. The co-ownership had already been extinguished by partition.
CABALES v. CA, G. R. No.162421, August 31, 2007

Facts:
Rufino Cabales died on July 4, 1966 and left a 5,714-square meter parcel of land located in Brgy. Rizal, Sogod, Southern Leyte,
covered by Tax Declaration No. 17270 to his surviving wife Saturnina and children Bonifacio, Albino, Francisco, Leonora, Alberto and
petitioner Rito. Alberto died leaving his wife and son, petitioner Nelson. On even date, Saturnina and her four (4) children Bonifacio,
Albino, Francisco and Leonora sold the subject parcel of land to respondents-spouses Jesus and Anunciacion Feliano for P8,000.00.
On December 17, 1985, the Register of Deeds of Southern Leyte issued Original Certificate of Title No. 17035 over the purchased land in
the names of respondents-spouses.
On December 30, 1985, Saturnina and her four (4) children executed an affidavit to the effect that petitioner Nelson would only receive
the amount of P176.34 from respondents-spouses when he reaches the age of 21 considering that Saturnina paid Dr. Corrompido P966.66
for the obligation of petitioner Nelsons late father Alberto, i.e., P666.66 for his share in the redemption of the sale with pacto de retro as
well as his vale of P300.00.
On July 24, 1986, 24-year old petitioner Rito Cabales acknowledged receipt of the sum of P1,143.00 from respondent Jesus Feliano,
representing the formers share in the proceeds of the sale of subject property.
In 1988, Saturnina died. Petitioner Nelson, then residing in Manila, went back to his fathers hometown in Southern Leyte. That same
year, he learned from his uncle, petitioner Rito, of the sale of subject property. In 1993, he signified his intention to redeem the subject
land during a barangay conciliation process that he initiated.
On January 12, 1995, contending that they could not have sold their respective shares in subject property when they were minors,
petitioners filed before the Regional Trial Court of Maasin, Southern Leyte, a complaint for redemption of the subject land plus damages.
Issue:
Whether or not petitioners may redeem the subject land from respondent-spouses.
Ruling:
Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be subrogated
to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one month from the
time they were notified in writing of the sale by the vendor.
Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners.
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.
In requiring written notice, Article 1088 (and Article 1623 for that matter) seeks to ensure that the redemptioner is properly notified of
the sale and to indicate the date of such notice as the starting time of the 30-day period of redemption. Considering the shortness of the
period, it is really necessary, as a general rule, to pinpoint the precise date it is supposed to begin, to obviate the problem of alleged
delays, sometimes consisting of only a day or two. A
In the instant case, the right of redemption was invoked not days but years after the sale was made in 1978. We are not unmindful of the
fact that petitioner Nelson was a minor when the sale was perfected. Nevertheless, the records show that in 1988, petitioner Nelson,
then of majority age, was informed of the sale of subject property. Moreover, it was noted by the appellate court that petitioner Nelson
was likewise informed thereof in 1993 and he signified his intention to redeem subject property during a barangay conciliation process.
But he only filed the complaint for legal redemption and damages on January 12, 1995, certainly more than thirty days from learning
about the sale.
GALVEZ v. CA, G. R. No. 157954, March 24, 2006

Facts:
Timotea F. Galvez died intestate leaving behind her children Ulpiano and Paz Galvez. Ulpiano, who died and predeceased his mother,
Timotea, was survived by his son, Porfirio Galvez. Timotea left a parcel of land situated at Pagdaraoan, San Fernando, La Union.
Considering that all the other compulsory heirs of Timotea already received their respective shares, the property passed by succession,
both to Timoteas daughter, Paz Galvez, and to the formers grandson, Porfirio, the latter succeeding by right of representation as the son
of Ulpiano.
Porfirio Galvez was surprised to discover that on 4 May 1970, Paz Galvez executed an affidavit of adjudication stating that she is the true
and lawful owner of the said property. Tax Declarations were then issued in the name of Paz Galvez. On 22 June 1992, without the
knowledge and consent of Porfirio Galvez, Paz Galvez sold the property to Carlos Tam for P10,000.00 by way of a Deed of Absolute Sale.
Carlos Tam sold the property to Tycoon Properties, Inc. through a Deed of Absolute Sale executed by the former in favor of the latter. As a
result, the title of Carlos Tam over the property was cancelled and a new one was issued in favor of Tycoon Properties, Inc.
On 12 May 1994, Porfirio Galvez filed Civil Case No. 4895 before the RTC, Branch 26, of San Fernando, La Union, for Legal Redemption
with Damages and Cancellation of Documents against Paz Galvez and Carlos Tam. The Complaint was later amended to implead as
additional defendant, Tycoon Properties, Inc.
Issue:
Whether or not Porfirio Galvez is correct in invoking legal redemption.

Ruling:
The pertinent provisions of the Civil Code on legal redemption are as follows:
ART. 1619. Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of
one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous
title.
ART. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them, are
sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one.
It is a one-way street. It is always in favor of the redemptioner since he can compel the vendee to sell to him but he cannot be compelled
by the vendee to buy the alienated property.
The rule on redemption is liberally construed in favor of the original owner of the property and the policy of the law is to aid rather than
defeat him in the exercise of his right of redemption.
Thus, petitioners cannot be accommodated in this respect and we agree with the trial court when it held:
The provision of Art. 1088 of the Civil Code of the Philippines is very clear on the matter.
Art. 1088: Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all the co-heirs may be subrogated
to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one (1) month from
the time they were notified in writing of the sale by the vendor.
No written notice of the sale was given by Paz Galvez (vendor) to Porfirio Galvez, the co-owner as required under Art. 1623 of the Civil
Code. The written notice is mandatory. Hence, the right to redeem commenced when plaintiff sought to exercise it by instituting the
complaint in the instant case on June 12, 1994. The complaint of legal redemption may be filed even several years after the
consummation of sale.
Topic: Redemption by adjoining owners: Rural Lands

Spouses Fabia vs IAC, Mararac November 21, 1984 GR 66101
Facts:
Spouses Mararac wanted to exercise their legal right of redemption, on an adjoining lot sold to Fabia. The trial court held that there can
be no legal redemption because the land was residential, notwithstanding the trees contained therein. The IAC reversed the trial court
saying that it is the location of the lot that determines if the land is Urban or Rural. The presence of the trees was also considered by the
IAC.
Issue:
Whether the land is Rural or Urban.
Ruling:
The Supreme Court held that it was not a Rural land, therefore it cannot be subject to redemption. It is not what the readers of the law
understand it to be that is controlling but rather the intent of the framers.
As expressed in Del Pilar v. Catindig (35 Phil. 263) the reason for the law in question is to foster the development of agricultural areas by
adjacent owners who may desire the increase for the improvement of their own land." The intention of the law in giving this right of
redemption is to protect agriculture, by the union of small agricultural lands and those adjoining thereto under one single owner for their
better exploitation. (Tolentino, The Civil Code of the Philippines, Annotated, Volume V, 1959 Edition, p. 161)
In view of this legislative objective, the "use" of property for agricultural purpose is essential in order that the same be characterized as
rural land for purposes of legal redemption under Article 1621 of the Civil Code. The consideration of the use and destination of the lands
and that of the customs of each town will be the data that ought to be taken into account in order to decide fitly the cases where the
qualification appears doubtful (10 Manresa 372). The small parcel of land one hectare or less in area, must be dedicated to agriculture
before the owners of adjoining lands may claim a right of redemption under Article 1621 of the Civil Code.
The respondents have failed to satisfy the above criterion. The land in question cannot be legally classified as rural land since it is
principally used for residential rather than agricultural purposes.
A further requisite laid down by the law to enable legal redemption of adjoining lands is that both the land of the one exercising the right
and the adjacent property sought to be redeemed should be rural or destined for agricultural exploitation. If either, is urban or both are
urban, there is no right of redemption. Again, the intention of the law in providing for this right of redemption must be home in mind. If
the land adjacent to that which is sought to be redeemed is not agricultural, then the redemption is in vain,-it does not answer the
purpose behind the law. So that, if one of the tenements is urban, the right of legal redemption allowed under this article cannot be
invoked (Cortes v. Flores, 47 Phil. 992; Sentencia, May 12, 1902; Baltazar v. Court of Appeals, 104 SCRA 619).
Thus, the circumstances under which legal redemption may be exercised not having been found present in the case at bar, the
respondents have no right to enforce against the petitioners.
Topic: Redemption by Adjoining Owners: Rural Lands

Primary Structures Corp vs Valencia August 19, 2003 GR 150060
Facts:
Petitioner corporation is registered owner of lots in Liloan Cebu. Three adjoining lots were sold to respondents. Petitioner knew of the
sale only two years after and manifested its intent to exercise its right of redemption. Respondents said that they were not willing to sell
the lots. 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. The RTC dismissed the complaint, and it was affirmed in toto by the appellate court.
Issue:
Does petitioner have a right to legal redemption?
Ruling:
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. Unlike the case of Fabia vs. Intermediate Appellate Court (which ruled, on the
issue of whether a piece of land was rural or not, that the use of the property for agricultural purpose would be essential in order that the
land might be characterized as rural land for purposes of legal redemption), respondents in the instant case, however, did not dispute
before the Court of Appeals the holding of the trial court that the lots in question are rural lands. In failing to assail this factual finding on
appeal, respondents would be hardput to now belatedly question such finding and to ask the Court to still entertain that issue. 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.
With respect to the second issue, 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 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.
Even in Alonzo vs. Intermediate Appellate Court (150 SCRA 259), relied upon by petitioner in contending that actual knowledge should be
an equivalent to a written notice of sale, the Court made it clear that it was not reversing the prevailing jurisprudence; said the Court:
We realize that in arriving at our conclusion today, we are deviating from the strict letter of the law, which the respondent court
understandably applied pursuant to existing jurisprudence. The said court acted properly as it had no competence to reverse the
doctrines laid down by this Court in the above-cited cases. In fact, and this should be clearly stressed, we ourselves are not abandoning
the De Conejero and Buttle doctrines. What we are doing simply is adopting an exception to the general rule, in view of the peculiar
circumstances of this case.
In Alonzo, the right of legal redemption was invoked several years, not just days or months, after the consummation of the contracts of
sale. The complaint for legal redemption itself was there filed more than thirteen years after the sales were concluded.
Petitioner is hereby given a period of thirty days from finality of this decision within which to exercise its right of legal redemption.
Topic: Redemption by adjoining owners: Urban Lands

Contreras vs CA, Alcantara March 9, 2007 GR 164819
Facts:
Contreras is renting the first floor of the house owned by Alcantara, but the land on which it stands is not owned by the latter. Alcantara
rather owns the adjoining lot. The lot on which the house stands is owned by Matawaran, and it was mortgaged to bank together with the
house which was foreclosed later. The bank then sold the lot together with the house to Contreras. Alcantara then asserted his ownership
of the house and wanted to exercise his right of redemption to the adjoining lot. The RTC ruled in favor of Alcantara. The Court of Appeals
also held that since the ownership by the Alcantaras of the adjacent lot was never controverted, the RTC had validly applied Articles 1621
and 1622 of the Civil Code, which allow the adjoining owner to exercise the right of pre-emption.
Issue:
The propriety of the RTC and CA ruling.
Ruling:
The RTC found that the evidence clearly established the Alcantaras ownership of the subject house, as evidenced by the Deed of Sale
between RBTRI and Isabelita, the various tax declarations, the testimony of Lourdes Pascual that petitioner had rented the house from the
Alcantaras beginning in 1987, and the declaration of the Matawarans that they were not the owners of the house. These facts, found by
the RTC, were sufficient to "negate the general presumption that the accessory follows the principal." From this finding, the RTC held that
it was error on the part of CCDB to have included the subject house in the deed of sale it executed with Contreras when in fact the said
house was never included in the mortgage executed by the spouses Matawaran, who had no capacity anyway to mortgage such house.
The RTC further held that the Alcantaras were entitled to exercise the right of pre-emption: It is a well-settled rule that the owner of an
adjoining land is given the right of pre-emption when the said land is to be sold.
Petitioner has taken the effort of reproducing the entire complaint in the text of the present petition30 to stress that what the Alcantaras
were merely claiming was "a portion of the house, but never the whole house and lot as what the Regional Trial Court illegally ruled."31
This is erroneous. For one, the complaint proceeded from the premise that the Alcantaras were still the owners of the whole house, and
thus sought a judicial affirmation of such ownership. In paragraph 20 of the complaint the Alcantaras further explained that they are also
the owners of the adjacent lot, while in paragraph 23 they manifested that they "are now actively asserting their right of ownership over
the HOUSE in question and their pre-emptive right over the lot whereon it stands." Finally, in paragraph 29 they asserted that they
"should therefore be allowed to exercise their right of pre-emption and redemption under Article 1622 of the Civil Code of the
Philippines."
Clearly, it is sufficiently alleged in the complaint that the Alcantaras are entitled to exercise their right of pre-emption and redemption
under Article 1622 of the Civil Code. They specifically prayed that judgment be rendered entitling them to exercise such right, which under
Article 1622 entails the following:
Art. 1622. Whenever a piece of urban land which is so small and so situated that a major portion thereof cannot be used for any practical
purpose within a reasonable time, having been bought merely for speculation, is about to be re-sold, the owner of the adjoining land has
a right of pre-emption at a reasonable price.
If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a reasonable price.
xxxx
The petition betrays a lack of understanding on petitioners part that the exercise of the right of redemption would entail the
reconveyance to petitioner of the subject land on which the house stands. This relief stands apart from the judicial affirmation in the same
RTC decision that the Alcantaras are also the owners of the house. It was not the case, as petitioner says, of the Alcantaras lodging a claim
only as against the house, as they had also lodged a claim against the subject land proceeding from their right of redemption under Article
1622. In the case at bar, the trial court found that the Alcantaras were entitled to exercise their rights under Article 1622, but it would not
have been sufficient nor correct for it to just make the corresponding pronouncement in the decision and then stop. The relief assailed by
petitioner as unwarranted is nothing more but the affordance of the right of redemption to the Alcantaras at the same reasonable price
the bank had sold the property to petitioner. We see no error in granting such relief.
Verdad v. CA
Facts:
During her lifetime, Macaria contracted two marriages. At the time of her own death, Macaria was survived by her son Ramon A. Burdeos
and her grandchild Estela Lozada of the first marriage and her children of the second marriage, namely, David Rosales, Justo Rosales,
Romulo Rosales, and Aurora Rosales. Socorro Rosales is the widow of David Rosales who himself, some time after Macaria's death, died
intestate without an issue.
In an instrument, dated 14 June 1982, the heirs of Ramon Burdeos, sold to petitioner Zosima Verdad (their interest on) the disputed lot
supposedly for the price of P55,460.00. Socorro discovered the sale on 30 March 1987 while she was at the City Treasurer's Office. On 31
March 1987, she sought the intervention of the Lupong Tagapayapa of Barangay 9, Princess Urduja, for the redemption of the property.
On 29 June 1990, following the reception of evidence, the trial court handed down its decision holding, in fine, that private respondents'
right to redeem the property had already lapsed.The Court of Appeals reversed the court a quo.
Issue:
Whether Soccoro has timely exercised her right of legal redemption
Held:
Private respondent has timely exercised her right of redemption which she did a day after she discovered the sale from the office of the city
treasure-
We hold that the right of redemption was timely exercised by private respondents. Concededly, no written notice of the sale was given by
5
the Burdeos heirs (vendors) to the co-owners required under Article 1623 of the Civil
Code
Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in
writing by the prospective vendor, or by the vendor, as the case may be. The deed of safe shall not be recorded in the Registry of Property,
unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners.
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.
Co-owner is entitled to a written notice from selling co-owner in order to remove all uncertainties about the sale, its terms and conditions,
as well as its efficacy and status-
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. //laiza
Francisco v Boiser
Facts:
Petitioner Adalia B. Francisco and three of her sisters, Ester, Elizabeth and Adeluisa, were co-owners of four parcels of registered. On
August 6, 1979, they sold 1/5 of their undivided share in the subject parcels of land to their mother, Adela Blas, for P10,000.00, thus
making the latter a co-owner of said real property to the extent of the share sold. On August 8, 1986, without the knowledge of the other
co-owners, Adela Blas sold her 1/5 share for P10,000.00 to respondent Zenaida Boiser who is another sister of petitioner.
On August 5, 1992, petitioner received summons, with a copy of the complaint in Civil Case No. 15510, filed by respondent demanding
her share in the rentals being collected by petitioner from the tenants of the building. Petitioner then informed respondent that she was
exercising her right of redemption as a co-owner of the subject property. On August 12, 1992, she deposited the amount of P10,000.00 as
redemption price with the Clerk of Court. This move to redeem the property was interposed as a permissive counterclaim in Civil Case No.
15510. However, said case was dismissed after respondent was declared non-suited with the result that petitioner's counterclaim was
likewise dismissed.
On September 14, 1995, petitioner instituted Civil Case No. C-17055 before the Regional Trial Court in Caloocan City. She alleged that the
30-day period for redemption under Art. 1623 of the Civil Code had not begun to run against her since the vendor, Adela Blas, never
informed her and the other owners about the sale to respondent. She learned about the sale only on August 5, 1992, after she received
the summons in Civil Case No. 15510, together with the complaint.
Respondent, on the other hand, contended that petitioner knew about the sale as early as May 30, 1992, because, on that date, she
wrote petitioner a letter 2 informing the latter about the sale, with a demand that the rentals corresponding to her 1/5 share of the
subject property be remitted to her.
On August 19, 1996, the trial court dismissed petitioner's complaint for legal redemption. Petitioner brought the matter to the Court of
Appeals, which, on October 26, 1998, affirmed the decision of the Regional Trial Court.
Issue:
Whether or not respondent has sufficiently complied with the notice requirement of Art. 1623 for the purpose of legal redemption
Held:
Art 1623 of the CC, unlike Art 1524 of the former CC, is clear in requiring that the written notification in a co-ownership should come from
the vendor or prospective vendor, not from any other person
There was thus a return to the doctrine laid down in Butte. That ruling is sound. In the first place, reversion to the ruling in Butte is proper.
Art. 1623 of the Civil Code is clear in requiring that the written notification should come from the vendor or prospective vendor, not from
any other person. There is, therefore, no room for construction. Indeed, the principal difference between Art. 1524 of the former Civil
Code and Art. 1623 of the present one is that the former did not specify who must give the notice, whereas the present one expressly
says the notice must be given by the vendor. Effect must be given to this change in statutory language.
It makes sense to require that the notice required in Art 1623 be given by the vendor and by nobody else- the vendor of an undivided
interest is in the best position to know who are his co-owners who under the law must be notified of the sale-
In the second place, it makes sense to require that the notice required in Art. 1623 be given by the vendor and by nobody else. As
explained by this Court through Justice J.B.L. Reyes in Butte, the vendor of an undivided interest is in the best position to know who are
his co-owners who under the law must be notified of the sale. It is likewise the notification from the seller, not from anyone else, which
can remove all doubts as to the fact of the sale, its perfection, and its validity, for in a contract of sale, the seller is in the best position to
confirm whether consent to the essential obligation of selling the property and transferring ownership thereof to the vendee has been
given.
Receipt by a co-owner of summons in a civil case for collection of share in the rentals by an alleged buyer of a co-owned property
constitutes actual knowledge of the sale on the basis of which the former may now exercise her right of redemption within 30 days from
finality of the decision-
Now, it is clear that by not immediately notifying the co-owner, a vendor can delay or even effectively prevent the meaningful exercise of
the right of redemption. In the present case, for instance, the sale took place in 1986, but it was kept secret until 1992 when vendee
(herein respondent) needed to notify petitioner about the sale to demand 1/5 rentals from the property sold. Compared to serious
prejudice to petitioner's right of legal redemption, the only adverse effect to vendor Adela Blas and respondent-vendee is that the sale
could not be registered. It is non-binding, only insofar as third persons are concerned. It is, therefore, unjust when the subject sale has
already been established before both lower courts and now, before this Court, to further delay petitioner's exercise of her right of legal
redemption by requiring that notice be given by the vendor before petitioner can exercise her right. For this reason, we rule that the
receipt by petitioner of summons in Civil Case No. 15510 on August 5, 1992 constitutes actual knowledge on the basis of which petitioner
may now exercise her right of redemption within 30 days from finality of this decision. //laiza
Vda de Ape v. Ca
Facts:
Cleopas Ape was the registered owner of a parcel of land particularly known as Lot No. 2319. Upon his death sometime, the property
passed on to his wife, Maria Ondoy, and their eleven (11) children, namely: Fortunato, Cornelio, Bernalda, Bienvenido, Encarnacion,
Loreta, Lourdes, Felicidad, Adela, Dominador, and Angelina, all surnamed Ape.
On 15 March 1973, Generosa Cawit de Lumayno (private respondent herein), joined by her husband, Braulio, instituted a case for
"Specific Performance of a Deed of Sale with Damages" against Fortunato and his wife Perpetua (petitioner herein) before the then CFI. It
was alleged in the complaint that on 11 April 1971, private respondent and Fortunato entered into a contract of sale of land under which
for a consideration of P5,000.00, Fortunato agreed to sell his share. Fortunato and petitioner denied the material allegations of the
complaint and claimed that Fortunato never sold his share in Lot No. 2319 to private respondent and that his signature appearing on the
purported receipt was forged.
The private respondent and her husband alleged that they had purchased from Fortunato's co-owners, as evidenced by various written
instruments,8 their respective portions of Lot No. 2319. By virtue of these sales, they insisted that Fortunato was no longer a co-owner of
Lot No. 2319 thus, his right of redemption no longer existed. Petitioner insisted that the entire Lot No. 2319 had not yet been formally
subdivided.
After due trial, the court a quo rendered a decision dismissing both the complaint and the counterclaim. The trial court also rejected
Fortunato and petitioner's claim that they had the right of redemption over the shares previously sold to private respondent . The Court
of Appeals, however, affirmed the trial court's ruling on the issue of petitioner and her children's right of redemption.
Issue:
Whether Fortunato was furnished with a written notice of sale of the shares of his co-owners as required by Article 1623 of the Civil Code
Held:
The exercise of the right to redeem presupposes the existence of a co-ownership at the time the conveyance is made by a co-owner and
when it is demanded by the other co-owner or co-owners as a legal redemption is intended to minimize co-ownership, once the property
is subdivided and distributed among the co-owners, the community ceases to exist and there is no more reason to sustain any right of
legal redemption
In this case, the records are bereft of any indication that Fortunato was given any written notice of prospective or consummated sale of
the portions of Lot No. 2319 by the vendors or would-be vendors. The thirty (30)-day redemption period under the law, therefore, has
not commenced to run.
Despite this, however, we still rule that petitioner could no longer invoke her right to redeem from private respondent for the exercise of
this right "presupposes the existence of a co-ownership at the time the conveyance is made by a co-owner and when it is demanded by
the other co-owner or co-owners." 42 The regime of co-ownership exists when ownership of an undivided thing or right belongs to
different persons.43 By the nature of a co-ownership, a co-owner cannot point to specific portion of the property owned in common as his
own because his share therein remains intangible. 44 As legal redemption is intended to minimize co-ownership, 45 once the property is
subdivided and distributed among the co-owners, the community ceases to exist and there is no more reason to sustain any right of legal
redemption.46
In this case, records reveal that although Lot No. 2319 has not yet been formally subdivided, still, the particular portions belonging to the
heirs of Cleopas Ape had already been ascertained and they in fact took possession of their respective parts.
Although a partition might have been informal, it is of no moment for even an oral agreement of partition is valid and binding upon the
parties-
Similarly telling of the partition is the stipulation of the parties during the pre-trial wherein it was admitted that Lot No. 2319 had not
been subdivided nevertheless, "Fortunato Ape had possessed a specific portion of the land ostensibly corresponding to his share." 49
From the foregoing, it is evident that the partition of Lot No. 2319 had already been effected by the heirs of Cleopas Ape. Although the
partition might have been informal is of no moment for even an oral agreement of partition is valid and binding upon the parties. 50
Likewise, the fact that the respective shares of Cleopas Ape's heirs are still embraced in one and the same certificate of title and have not
been technically apportioned does not make said portions less determinable and identifiable from one another nor does it, in any way,
diminish the dominion of their respective owners. //laiza
Caballes v CA
Facts:
Please refer to the same case above
Held:
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-
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.
Co-owners entitles to redeem must do so within 30days from notice in writing of the sale by theor co-owners vendors-
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 absence of proof of written notice of sale in the instant case, the 30-day redemption commenced when the one seeking redemption
sought the barangay conciliation process to redeem his property to require strict proof of written notice of the sale would be to
countenance an obvious false claim of lack of knowledge thereof, thus commending the letter of the law over its purpose, i.e., the
notification of the redemptioners
In the instant case, the right of redemption was invoked not days but years after the sale was made in 1978. We are not
unmindful of the fact that petitioner Nelson was a minor when the sale was perfected. Nevertheless, the records show that in 1988,
petitioner Nelson, then of majority age, was informed of the sale of subject property. Moreover, it was noted by the appellate court that
petitioner Nelson was likewise informed thereof in 1993 and he signified his intention to redeem subject property during a barangay
conciliation process. But he only filed the complaint for legal redemption and damages on January 12, 1995, certainly more than thirty
days from learning about the sale.
In the face of the established facts, petitioner Nelson cannot feign ignorance of the sale of subject property in 1978. To require
strict proof of written notice of the sale would be to countenance an obvious false claim of lack of knowledge thereof, thus commending
the letter of the law over its purpose, i.e., the notification of redemptioners.
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. //laiza
Other cases of Legal Redemption

*Period of redemption in auction sale of homestead to satisfy money judgment

Tupas vs. Damasco [G.R. No. L-34654 October 23, 1984]
The land subject matter of this case was acquired by appellees spouses Benjamin Tupas and Leonor Baldonado under the homestead
provisions of the Public Land Law. The patent was issued to said appellees on March 8, 1951. Benjamin Tupas obtained a special crop loan
from PNB but failed to pay it. On April 4, 1959 the homestead was sold by the sheriff in an execution sale to satisfy the judgment in favor
of PNB and in which execution sale PNB was the highest bidder. The certificate of sale in its favor was executed on April 6, 1959 specifying
therein that the one-year period of redemption shall expire on April 4, 1960. The said certificate of sale was registered in the Office of the
Register of Deeds of Cotabato on August 26, 1959. The instant complaint for repurchase was filed on June 10, 1965.
RULING:
The 5-year period for redemption under Sec. 119 of CA 141, as amended is counted from date of foreclosure sale, not the expiry of the 1-
year period for foreclosure redemption. In the case at bar, appellees could only exercise the right to repurchase his former homestead
within five years from April 4, 1959, the date of the execution sale or up to April 4, 1964. Since this action to repurchase was filed on June
10, 1965, the same was filed out of time. At any rate, even if we have to compute the five-year period from the expiration of the right to
redeem granted to a judgment debtor, still this case was filed beyond five years, because the one-year period of redemption in this case
expired on April 4, 1960, and the five-year period from April 4, 1960 is April 4, 1965.
*Period of redemption in auction sale of homestead

Belisario vs. IAC [G.R. No. 73503 August 30, 1988]
The subject matter of this case is a piece of land covered by a homestead patent issued in the names of Rufino Belisario and Felipa Lauga
located in Valencia, Bukidnon. On August 3, 1948, upon the death of Belisario, the ownership of the land was extra-judicially settled
among his children (petitioners herein) and his widow, Felipa Lauga. Sometime in 1950, on the strength of an SPA executed by some of the
petitioners in favor of petitioner, Benjamin Belisario, said land was mortgaged to PNB to secure a promissory note in the sum of
P1,200.00. Petitioners-mortgagors defaulted in the payment of the loan. Consequently, the mortgage was extra-judicially foreclosed and
the land was sold at public auction to PNB. On April 21, 1971, petitioners wrote PNB making known their "desire to redeem and/or
repurchase the said property and enclosed therein a postal money order in the amount of P630.00 as partial payment, with the balance
to be paid in twelve equal monthly installments. PNB refused the tender of P630.00 as partial payment of the total obligations of
P7,041.41 due from petitioners and stated that under existing regulations of the bank, payment by way of redemption must be paid in full
and not by installments. On February 8, 1973, PNB sold the land in question to respondent Cabrera and the corresponding TCT was issued
in his name. On November 20, 1974, Cabrera filed an action for Recovery of Possession and Damages against herein petitioners, together
with their tenants, who were actual possessors of the land. In turn, petitioners filed on January 9, 1975, an action for Repurchase of
Homestead against the respondents PNB and Cabrera.
RULING:
The subject piece of land was sold at public auction to respondent PNB on January 31, 1963. However, the Sheriff's Certificate of Sale was
registered only on July 22, 1971. The redemption period, for purposes of determining the time when a formal Deed of Sale may be
executed or issued and the ownership of the registered land consolidated in the purchaser at an extrajudicial foreclosure sale under Act
3135, should be reckoned from the date of the registration of the Certificate of Sale in the Office of the Register of Deeds concerned and
not from the date of public auction. In this case, under Act 3135, petitioners may redeem the property until July 22, 1972. In addition,
Section 119 of Commonwealth Act 141 provides that every conveyance of land acquired under the free patent or homestead patent
provisions of the Public Land Act, when proper, shall be subject to repurchase by the applicant, his widow or legal heirs, within the period
of five years from the date of conveyance. The five-year period of redemption fixed in Section 119 of the Public Land Law of homestead
sold at extrajudicial foreclosure begins to run from the day after the expiration of the one-year period of repurchase allowed in an
extrajudicial foreclosure. Hence, petitioners still had five (5) years from July 22, 1972 (the expiration of the redemption period under Act
3135) within which to exercise their right to repurchase under the Public Land Act.
The general rule in redemption is that in making a repurchase, it is not sufficient that a person offering to redeem makes manifestation of
his desire to repurchase; this statement of intention must be accompanied by an actual and simultaneous tender of payment, which
constitutes the legal use or exercise of the right to repurchase. Where the right to repurchase was held to have been properly exercised,
there was a definite finding of tender of payment having been made by the vendor. The tender of payment must be for the full amount of
the repurchase price, otherwise the offer to redeem will be held ineffectual. Bona fide redemptio necessarily imports a reasonable and
valid tender of the entire repurchase price. There is no cogent reason for requiring the vendee to accept payment by installments from
the redemptioner, as it would ultimately result in an indefinite extension of the redemption period.
However, the filing of a complaint to enforce repurchase within the period for redemption is equivalent to an offer to redeem and has the
effect of preserving the right to redemption. For purposes of determining whether petitioners exercised their right to repurchase
effectively, we have only to consider their filing of the action for Repurchase of Homestead on January 9,1975, against respondent PNB
and Cabrera, which was filed well within the five-year period to repurchase. The question of timeliness of the tender of payment by
petitioners on August 1 and 4, 1977 of the amount of P5,000.00 had become insignificant in view of the filing of the action for Repurchase
of Homestead which has been held equivalent to an offer to redeem and has the effect by itself of preserving their right of recovering the
property. The right of redemption under Commonwealth Act 141 legally began to accrue only on June 22, 1972. Certainly, an action for
Repurchase of Homestead filed on January 9, 1975 cannot be held to be barred.
CHAPTER 8: ASSIGNMENT OF CREDIT
Art. 1624. An assignment of creditors and other incorporeal rights shall be perfected in accordance with the provisions of Article 1475. (n)
Art. 1625. An assignment of a credit, right or action shall produce no effect as against third person, unless it appears in a public instrument, or the
instrument is recorded in the Registry of Property in case the assignment involves real property. (1526)
Art. 1626. The debtor who, before having knowledge of the assignment, pays his creditor shall be released from the obligation. (1527)
Art. 1627. The assignment of a credit includes all the accessory rights, such as a guaranty, mortgage, pledge or preference. (1528)
Art. 1628. 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.
Even in these cases he shall only be liable for the price received and for the expenses specified in No. 1 of Article 1616.
The vendor in bad faith shall always be answerable for the payment of all expenses, and for damages. (1529)
Art. 1629. In case the assignor in good faith should have made himself responsible for the solvency of the debtor, and the contracting parties should not
have agreed upon the duration of the liability, it shall last for one year only, from the time of the assignment if the period had already expired.
If the credit should be payable within a term or period which has not yet expired, the liability shall cease one year after the maturity. (1530a)
Art. 1630. One who sells an inheritance without enumerating the things of which it is composed, shall only be answerable for his character as an heir.
(1531)
Art. 1631. One who sells for a lump sum the whole of certain rights, rents, or products, shall comply by answering for the legitimacy of the whole in
general; but he shall not be obliged to warrant each of the various parts of which it may be composed, except in the case of eviction from the whole or
the part of greater value. (1532a)
Art. 1632. Should the vendor have profited by some of the fruits or received anything from the inheritance sold, he shall pay the vendee thereof, if the
contrary has not been stipulated. (1533)
Art. 1633. The vendee shall, on his part, reimburse the vendor for all that the latter may have paid for the debts of and charges on the estate and satisfy
the credits he may have against the same, unless there is an agreement to the contrary. (1534)
Art. 1634. When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to extinguish it by reimbursing the assignee for the
price the latter paid therefor, the judicial costs incurred by him, and the interest on the price from the day on which the same was paid.
A credit or other incorporeal right shall be considered in litigation from the time the complaint concerning the same is answered.
The debtor may exercise his right within thirty days from the date the assignee demands payment from him. (1535)
Art. 1635. From the provisions of the preceding article shall be excepted the assignments or sales made:
(1) To a co-heir or co-owner of the right assigned;
(2) To a creditor in payment of his credit;
(3) To the possessor of a tenement or piece of land which is subject to the right in litigation assigned. (1536)
I. Concept
Ledonio vs. Capitol Development Corp.[G.R. No. 149040; July 4, 2007]
Facts:
Petitioner obtained loans from Ms. Pichace, for which he executed promissory notes. He failed to pay any of the said loans. Ms.
Picache executed an Assignment of Credit covering petitioner's loans in favor of respondent. Petitioner had knowledge of the assignment
of credit, and petitioner still failed to pay his indebtedness despite repeated demands by respondent and its counsel.
Petitioner asserts the position that consent of the debtor to the assignment of credit is a basic/essential element in order for
the assignee to have a cause of action against the debtor. Without the debtor's consent, the recourse of the assignee in case of non-
payment of the assigned credit, is to recover from the assignor.
Issues:
WON the assignment of credit is valid.
What is the effect of a valid assignment?
Held:
YES. The assignment of credit is valid. 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 an assignment of credit, the consent of the debtor is not necessary in order that the assignment may fully produce the legal
effects. What the law requires in an assignment of credit is not the consent of the debtor, but merely notice to him as the assignment
takes effect only from the time he has knowledge thereof. A creditor may, therefore, validly assign his credit and its accessories without
the debtor's consent.
The deed of assignment clearly states that the private respondent became an assignee and, therefore, he became the only party
entitled to collect the indebtedness. As a result of the Deed of Assignment, the plaintiff acquired all rights of the assignor including the
right to sue in his own name as the legal assignee.
{NOTE: Even if the consent of petitioner as debtor is unnecessary for the validity and enforceability of the assignment of credit,
nonetheless, the petitioner must have knowledge, acquired either by formal notice or some other means, of the assignment so that he
may pay the debt to the proper party, which shall now be the assignee. This much can be gathered from a reading of Article 1626 of the
Civil Code providing that, "The debtor who, before having knowledge of the assignment, pays his creditor shall be released from the
obligation." }
II. Essential Requisites and Formalities

A. These depend in each case upon the contract or act giving rise to the assignment.
a. Assignment of real rights upon immovable property, done by way of donation, requires a public instrument.
b. Assignment by way of legacy requires a probated will.
c. Assignment of choses in action by sale or onerous contract, if involving P500 or more, is unenforceable inter
partes, and comes under the Statute of Frauds (a written memo is required)
d. Assignment of a negotiable instrument requires indorsement or delivery.
B. As against third person (but not the debtor of the credit assigned) an assignment of a credit, right or action shall
produce no effect unless it appears in a public instrument, or the instrument is recorded in the registry of property, in
case the assignment involves real property (1625)
a. The consent of the debtor of the assigned credit is not required for the validity of the assignment, but the
assignment is not fully effective against the debtor until he is notified thereof or has actual knowledge of the
assignment; i.e. the debtor until then is not bound to pay the assignee.
III. Effect of a valid assignment
A. It transfers title to the assigned credit to the assignee, even if the debtor is unaware thereof.
a. The assignment includes all accesory rights, such as guaranty, pledge, mortgage or preference (1672)
B. The assignee takes the credit subject to all defenses acquired by the debtor before notice or knowledge of the
assignment.
a. The debtor who, before having knowledge of the assignment, pays his creditor shall be released from the
obligation. (1626)
b. The debtor may set up compensation of credits acquired after assignment but before notice thereof (1198)
unless the debtor agreed to the assignment (when he cannot compensate).
c. Any compromise or release of the assigned claim made by the assignor before notice, will be valid against the
assignee and discharge the debtor.
C. Warranty by the assignor
a. The assignor in good faith shall be responsible for the existence and legality of the credit at the time of sale,
unless it should have been sold as doubtful. Doubtfulness of the credit assigned must expressly appear; it is not
presumed. (Manresa)
b. The assignor in good faith does not answer for the solvency of the debtor unless:
1. Expressly stipulated; or
2. The insolvency of the debtor was known to him personally; or
3. The insolvency of the debtor was prior to the sale and of common knowledge (1628)
Servicewide Specialists, Inc vs. CA [G.R. No. 116363; December 10, 1999]
Facts:
Respondent spouses Atty. Jesus and Elizabeth Ponce bought on installment a vehicle from C.R. Tecson Enterprises. They
executed a promissory note and a chattel mortgage on the vehicle in favor of the latter to secure payment of the note. On the same date,
C.R. Tecson executed a deed of assignment of said promissory note and chattel mortgage in favor of Filinvest Credit Corp with the
conformity of respondent spouses.
In 1976, respondent spouses transferred and delivered the vehicle to Conrado Tecson by way of sale with assumption of
mortgage. Subsequently, in 1978, Filinvest assigned all its rights and interest over the same note and mortgage to petitioner Servicewide
Specialists Inc. without notice to respondent spouses.
Due to the failure of respondent spouses to pay the installments, and despite demands to pay the same or to return the vehicle,
petitioner file d a complaint for replevin. In their answer, respondent spouses denied any liability claiming they had already returned the
car to Conrado Tecson pursuant to a Deed of Sale with Assumption of mortgage.
Issue:
WON the assignment of credit requires notice to the debtor in order to bind him.
Held:
NO. Only notice to the debtor of the assignment of credit is required. His consent is not required. In contrast, consent of the
creditor mortgagee to the alienation of the mortgaged property is necessary in order to bind said creditor. To evade liability, respondent
spouses invoked Article 1626 of the Civil Code which provides that "the debtor who, before having knowledge of the assignment, pays his
creditor shall be released from the obligation." They argue that they were not notified of the assignment made to petitioner. This
provision, however, is applicable only where the debtor pays the creditor prior to acquiring knowledge of the latter's assignment of his
credit. It does not apply, nor is it relevant, to cases of non-payment after the debtor came to know of the assignment of credit. This is
precisely so since the debtor did not make any payment after the assignment.
Lo vs. KJS Eco-Formwork System Phil Inc. [G.R. No. 149420; October 8, 2003]
Facts:
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.http://www.lawphil.net/judjuris/juri2003/oct2003/gr_149420_2003.html - fnt2 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.
Petitioner and respondent executed a Deed of Assignment, whereby petitioner assigned to respondent his receivables 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. Respondent sent a letter to 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.
Issue:
WON petitioners obligation was extinguished with the execution of the Deed of Assignment of credit.
Held:
NO. 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.
More specifically, the first paragraph of 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.
From the above provision, petitioner, as vendor or assignor, is bound to warrant the existence and legality of the credit at the
time of the sale or assignment. 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 non-existence 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.
Atok Finance Corp vs. CA [G.R. No. 80078 May 18, 1993]
Facts:
Private respondents Sanyu Chemical as principal and Sanyu Trading along with individual private stockholders of Sanyu Chemical
as sureties, executed in the continuing Suretyship Agreement in favor of Atok Finance as creditor. Under this Agreement, Sanyu Trading
and the individual private respondents who were officers and stockholders of Sanyu Chemical guarantee to ATOK (Creditor), the full,
faithful and prompt payment and discharge of any and all indebtedness of Sanyu Chemical.
Sanyu Chemical assigned its trade receivables to Atok Finance in consideration of receipt from Atok Finance. The latter
commenced action against Sanyu Chemical alleging that Sanyu Chemical had failed to collect and remit the amount due under the trade
receivables.
Sanyu Chemical and the individual private respondents sought dismissal of Atok's claim upon the ground that such claim had
prescribed under Article 1629 of the Civil Code and for lack of cause of action. The private respondents contended that the Continuing
Suretyship Agreement, being an accessory contract, was null and void since, at the time of its execution, Sanyu Chemical had no pre-
existing obligation due to Atok Finance.
Issue:
WON private respondents are liable under the Deed of Assignment which they, along with the principal debtor Sanyu Chemical,
executed in favor of petitioner, on the receivables thereby assigned.
Held:
YES. It may be stressed as a preliminary matter that the Deed of Assignment was valid and binding upon Sanyu Chemical.
Assignment of receivables is a commonplace commercial transaction today. It is an activity or operation that permits the assignee to
monetize or realize the value of the receivables before the maturity thereof. In other words, Sanyu Chemical received from Atok Finance
the value of its trade receivables it had assigned; Sanyu Chemical obviously benefitted from the assignment. The payments due in the first
instance from the trade debtors of Sanyu Chemical would represent the return of the investment which Atok Finance had made when it
paid Sanyu Chemical the transfer value of such receivables.
The obligations of individual private respondent officers and stockholders of Sanyu Chemical under the Continuing Suretyship
Agreement, were activated by the resulting obligations of Sanyu Chemical as solidary obligor under each of the assigned receivables by
virtue of the operation of the Deed of Assignment. That solidary liability of Sanyu Chemical is not subject to the limiting period set out in
Article 1629 of the Civil Code.
IV. Special Assignments

A. Sale of inheritance (estate):
a. If without enumeration of the items composing it, the vendor only answers for his character as heir (1630)
b. The vendor shall reimburse the vendee for the fruits obtained or anything received from the inheritance sold
(1632) if the contrary is not stipulated.
c. The vendee shall reimburse the vendor for
1. All that the vendor paid on account of the estate debts;
2. Credits that the vendor had against the estate (1633)
B. Sale rights, rents or products for a lump sum
a. The vendor answers for the legitimacy of the whole in general

b. There is no warranty of individuals items, unless there is eviction of the whole or of the part of greater value
(1631)
C. Sale and redemption of litigous credits
a. Concept of litigous credit a credit is considered in litigation from the time the complaint concerning the same is
answered.
b. Effect of Sale
1. Legal Redemption by the debtor
Requisites:
i. The debtor must reimburse the assignee for
a. The price the assignee paid
b. Judicial costs incurred by him
c. Interest on the price from the day it was paid (1634 par.1)
ii. The right must be exercised within 30 days from the date the assignee demands payment from
him. (1634 p.3)
2. Excepted from the rule are sales (or assignments) made to:
a. A co-heir or co-owner of the right assigned;
b. A creditor in payment of the credit;
c. The possessor of a tenement or piece of land which is subject to the right in litigation assigned (1635).

Sales Finals Case Digest

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Sales Finals Case Digest

Uploaded by

Copyright:

Available Formats

SALES FINALS REVIEWER ATTY.

OBLIGATIONS OF THE VENDEE: PRE-EMPTION REDEMPTION

(1) Should it have been so stipulated;

c.Effect of acceptance by the buyer (for sellers liability)

Goodyear vs Sy. GR 154554. November 9, 2005

GOODYEAR PHILIPPINES, INC., v. ANTHONY SY and JOSE L. LEE

Issue: WON Sy could validly rescind the contract

C. Rule if he buyer justifiably refused to accept (in absence of contrary stipulation)

II. Payment of Price and Interest

b. When there is no right to suspend payment

D. Legal Guaranties for payment of the price

Crismina Garments, Inc. vs. CA [G.R. No. 128721, March 9, 1999]

TOPIC: Buyers actions for breach of warranty, buyers choices

SECTION 1. - Conventional Redemption

(2) When the vendor remains in possession as lessee or otherwise;

Should there be an agreement, the period cannot exceed ten years.

Caballero vs. Ong Tiao Bok [G.R. No. 147206]

Ramos vs. Sarao

Dino vs. Jardines

Salonga vs. Conception [Gr. 151333]

Go vs. Bacaron [Gr. 159048]

Romulo vs. Layug [G.r No.151217]

Bacungan vs. Ca [Gr. 170282]

Applicable to all the following.

Effect when the transaction is deemed an equitable mortgage

SECTION 2: LEGAL REDEMPTION

The right of redemption of co-owners excludes that of adjoining owners. (1524a)

AGUILAR vs. AGUILAR, G. R. No. 141613, December 16, 2005

AVILA v. BARABAT, G. R. No. 141993, March 17, 2006

CABALES v. CA, G. R. No.162421, August 31, 2007

GALVEZ v. CA, G. R. No. 157954, March 24, 2006

Whether or not Porfirio Galvez is correct in invoking legal redemption.

Topic: Redemption by adjoining owners: Rural Lands

Topic: Redemption by Adjoining Owners: Rural Lands

Topic: Redemption by adjoining owners: Urban Lands

Other cases of Legal Redemption

*Period of redemption in auction sale of homestead to satisfy money judgment

*Period of redemption in auction sale of homestead

CHAPTER 8: ASSIGNMENT OF CREDIT

(1) To a co-heir or co-owner of the right assigned;

(2) To a creditor in payment of his credit;

II. Essential Requisites and Formalities

IV. Special Assignments

a. The vendor answers for the legitimacy of the whole in general

You might also like