Atty. C.

Busmente
Sales and Lease

CASE DOCTRINES
Midterms 2017 – 2018

1. Dignos v. CA A deed of sale is absolute in nature although denominated as a "Deed of

Conditional Sale" where nowhere in the contract in question is a proviso or
stipulation to the effect that title to the property sold is reserved in the vendor until
full payment of the purchase price, nor is there a stipulation giving the vendor the
right to unilaterally rescind the contract the moment the vendee fails to pay within a
fixed period. A careful examination of the contract shows that there is no such
stipulation reserving the title of the property on the vendors nor does it give them
the right to unilaterally rescind the contract upon non-payment of the balance
thereof within a fixed period.
On the contrary, all the elements of a valid contract of sale under Article 1458 of the
Civil Code, are present, such as: (1) consent or meeting of the minds; (2)
determinate subject matter; and (3) price certain in money or its equivalent. In
addition, Article 1477 of the same Code provides that "The ownership of the thing
sold shall be transferred to the vendee upon actual or constructive delivery thereof.
In the absence of stipulation to the contrary, the ownership of the thing sold passes
to the vendee upon actual or constructive delivery thereof.
While it may be conceded that there was no constructive delivery of the land sold
in the case at bar, as subject Deed of Sale is a private instrument, it is beyond
question that there was actual delivery thereof. As found by the trial court, the
Dignos spouses delivered the possession of the land in question to Jabil as early
as March 27,1965 so that the latter constructed thereon Sally's Beach Resort
Be that as it may, it is evident that when petitioners sold said land to the Cabigas
spouses, they were no longer owners of the same and the sale is null and void.
2. Tan v. the contract between the parties was merely a contract to sell where the vendors
Benorilao retained title and ownership to the property until Tan had fully paid the purchase
price. Since Tan had no claim of ownership or title to the property yet, he obviously
had no right to ask for the annotation of a lis pendens notice on the title of the
property.
Contract is a mere contract to sell
A contract is what the law defines it to be, taking into consideration its essential
elements, and not what the contracting parties call it.[8] Article 1485 of the Civil
Code defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
The very essence of a contract of sale is the transfer of ownership in exchange for
a price paid or promised. [9]
In contrast, a contract to sell is defined as a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the property despite
delivery thereof to the prospective buyer, binds himself to sell the property
exclusively to the prospective buyer upon fulfillment of the condition agreed, i.e.,
full payment of the purchase price.
In the present case, the true nature of the contract is revealed by paragraph D
thereof, which states:
xxx
d) That in case, BUYER has complied with the terms

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and conditions of this contract, then the SELLERS shall execute and deliver to the
BUYER the appropriate Deed of Absolute Sale;
xxx
Jurisprudence has established that where the seller promises to execute a deed of
absolute sale upon the completion by the buyer of the payment of the price, the
contract is only a contract to sell.[12] Thus, while the contract is denominated as a
Deed of Conditional Sale, the presence of the above-quoted provision identifies the
contract as being a mere contract to sell.
The contract to sell was terminated when the vendors could no longer legally
compel Tan to pay the balance of the purchase price as a result of the legal
encumbrance which attached to the title of the property. Since Tans refusal to pay
was due to the supervening event of a legal encumbrance on the property and not
through his own fault or negligence, we find and so hold that the forfeiture of Tans
down payment was clearly unwarranted.
3. Artates v. Urbi For a period of five years from the date of the government grant, lands acquired by
free or homestead patent shall not only be incapable of being encumbered or
alienated except in favor of the government itself or any of its institutions or of duly
constituted banking corporations, but also, they shall not be liable to the satisfaction
of any debt contracted within the said period,3 whether or not the indebtedness
shall mature during or after the prohibited time.4 This provision against the
alienation or encumbrance of public lands granted within five years from the
issuance of the patent, it has been held, is mandatory;5 a sale made in violation
thereof is null and void6 and produces no effect whatsoever.

4. Heirs of The sale of a homestead lot within the five-year prohibitory period is illegal and void.
Zambales v. CA The law does not distinguish between executory and consummated sales.
The law prohibiting any transfer or alienation of homestead land within five years
from the issuance of the patent does not distinguish between executory and
consummated sales.
the bilateral promise to buy and sell the homestead lot at a price certain, which was
reciprocally demandable 10, was entered into within the five-year prohibitory period
and is therefore, illegal and void.
We hold, therefore, that the bilateral promise to buy and sell, and the agency to sell,
entered into within five years from the date of the homestead patent, was in violation
of section 118 of the Public Land Law, although the executed sale was deferred
until after the expiration of the five-year- prohibitory period.
5. Quiroga v. In order to classify a contract, due regard must be given to its essential clauses. In
Parsons the contract in question, the clauses, constituting its cause and subject matter, are
precisely the essential features of a contract of purchase and sale. There was the
obligation on the part of Quiroga to supply the beds, and, on the part of Parson, to
pay their price. These features exclude the legal conception of an agency or order
to sell whereby the mandatory or agent received the thing to sell it, and does not
pay its price, but delivers to the principal the price he obtains from the sale of the
thing to a third person, and if he does not succeed in selling it, he returns it. By
virtue of the contract between Quiroga and Parson, the latter, on receiving the beds,
was necessarily obliged to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not sold the beds.
In the classification of the contract, it must be understood that a contract is what the
law defines it to be, and not what it is called by the contracting parties.
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6. Concrete We see no reason to disturb the findings of respondent court. Petitioner is a
Aggregates v. manufacturer as defined by Section 194(x), now Section 187(x), of the Tax Code.
CTA Sec. 1 94. Words and phrases defined. — In applying the provisions of this Title
words and phrases shall be taken in the sense and extension indicated below:
xxx xxx xxx
(x) "Manufacturer" includes every person who by physical or chemical process
alters the exterior texture or form or inner substance of any raw material or
manufactured or partially manufactured product in such manner as to prepare it for
a special use or uses to which it could not have been put in its original condition, or
who by any such process alters the quality of any such raw material or
manufactured or partially manufactured product so as to reduce it to marketable
shape or prepare it for any of the uses of industry, or
who by any such process combines any such raw material or manufactured or
partially manufactured products with other materials or products of the same or
different kinds and in such manner that the finished product of such process or
manufacture can be put to a special use or uses to which such raw material or
manufactured or partially manufactured products, in their original condition could
not have been put, and who in addition alters such raw material or manufactured or
partially manufactured products, or combines the same to produce such finished
products for the purpose of their sale or distribution to others and not for his own
use or consumption.
As aptly pointed out by the Solicitor General, petitioner's raw materials are
processed under a prescribed formula and thereby changed by means of machinery
into a finished product, altering their quality, transforming them into marketable
state or preparing them for any of the specific uses of industry. Thus, the raw
materials become a distinct class of merchandise or "finished products for the
purpose of their sales or distribution to others and not for his own use or
consumption." Evidently, without the above process, the raw materials or
aggregates could not, in their original form, perform the uses of the finished product.
14
In a case involving the making of ready-mixed concrete, it was held that concrete is
a product resulting from a combination of sand or gravel or broken bits of limestones
with water and cement; a combination which requires the use of skill and most
generally of machinery. Concrete in forms designed for use and supplied to others
for buildings, bridges and other structures is a distinct article of commerce and the
making of them would be manufacturing by the corporation doing so. 15
Selling or distribution is an essential ingredient of manufacturing. The sale of a
manufactured product is properly incident to manufacture. The power to sell is an
indispensable adjunct to a manufacturing business. 16 Petitioner, as a
manufacturer, not only manufactures the finished articles but also sells or
distributes them to others. This is inferable from the testimonial evidence of
petitioner's witness that, in the marketing of its products, the company has
marketing personnel who visit the client, whether he is a regular or a prospective
customer, and that it is the customer who specifies the requirement according to
his needs by filling up a purchase order, after which a job order is issued. This is
followed by the delivery of the finished product to the job site
7. People’s We hold that there was no perfected sale of Lot 4. It was conditionally or
Homesite v. contingently awarded to the Mendozas subject to the approval by the city council of
CA the proposed consolidation subdivision plan and the approval of the award by the

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valuation committee and higher authorities.
The city council did not approve the subdivision plan. The Mendozas were advised
in 1961 of the disapproval. In 1964, when the plan with the area of Lot 4 reduced to
2,608.7 square meters was approved, the Mendozas should have manifested in
writing their acceptance of the award for the purchase of Lot 4 just to show that they
were still interested in its purchase although the area was reduced and to obviate
ally doubt on the matter. They did not do so. The PHHC board of directors acted
within its rights in withdrawing the tentative award.
"The contract of sale is perfected at the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the price. From that
moment, the parties may reciprocally demand performance, subject to the law
governing the form of contracts." (Art. 1475, Civil Code).
Under the facts of this case, we cannot say there was a meeting of minds on the
purchase of Lot 4 with an area of 2,608.7 square meters at P21 a square meter.
8. Toyota Shaw v. Article 1458 of the Civil Code defines a contract of sale as “By the contract of the
CA sale one of the contracting parties obligates himself to transfer the ownership of and
to deliver a determinate thing, and the other to pay therefor a price certain in money
or its equivalent. A contract of sale may be absolute or conditional.

Article 1475 of the Civil Code specifically provides when the contract of sale is
deemed perfected, i.e. “The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and upon the
price. From that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.

The “Agreements between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc.”
executed on 4 June 1989, is not a contract of sale. No obligation on the part of
Toyota to transfer ownership of a determinate thing to Sosa and no correlative
obligation on the part of the latter to pay therefor a price certain appears therein.
The provision on the down payment of P100,000.00 made no specific reference to
a sale, it could only refer to a sale on installment basis.

A definite agreement on the manner of payment of the price is an essential element

in the formation of a binding and enforceable contract of sale. This is so because
the agreement as to the manner of payment goes into the price such that a
disagreement on the manner of payment is tantamount to a failure to agree on the
price. Definiteness as to the price is an essential element of a binding agreement
to sell personal property.

There are three stages in the contract of sale, namely

(a) preparation, conception, or generation, which is the period of negotiation

and bargaining, ending at the moment of agreement of the parties;
(b) perfection of birth of the contract, which is the moment when the parties
come to agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance of the
terms agreed upon in the contract.

In the present case, the “Agreements between Mr. Sosa & Popong Bernardo of
Toyota Shaw, Inc.” may be considered as part of the initial phase of the generation
of negotiation stage of a contract sale.
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9. Sampaguita When the glass and wooden jalousies in question were delivered and installed in
Pictures v. the leased premises, Capitol became the owner thereof. Ownership is not
Jalwindor transferred by perfection of the contract but by delivery, either actual or
constructive. This is true even if the purchase has been made on credit, as in the
case at bar. Payment of the purchase price is not essential to the transfer of
ownership as long as the property sold has been delivered. Ownership is acquired
from the moment the thing sold was delivered to vendee, as when it is placed in his
control and possession. (Arts. 1477, 1496 and 1497, Civil Code of the Phil.)

Capitol entered into a lease Contract with Sampaguita in 1964, and the latter
became the owner of the items in question by virtue of the agreement in said
contract "that all permanent improvements made by lessee shall belong to the
lessor and that said improvements have been considered as part of the monthly
rentals." When levy or said items was made on July 31, 1965, Capitol, the judgment
debtor, was no longer the owner thereof.
10. Southern The Supreme Court reversed the trial court’s decision applying Article 1479 of the
Sugar v. new Civil Code. The Court reiterated that "an accepted unilateral promise" can only
Atlantic Gulf have a binding effect if supported by a consideration, which means that the option
can still be withdrawn, even if accepted, if said option is not supported by any
consideration. The option that Atlantic had provided was without consideration,
hence, can be withdrawn notwithstanding Southwestern Company’s acceptance of
said option.

American jurisprudence hold that an offer, once accepted, cannot be withdrawn,

regardless of whether it is supported or not by a consideration, but the specific
provisions of Article 1479 commands otherwise. While under the "offer of option" in
question appellant Atlantic has assumed a clear obligation to sell its barge to
appellee Southwestern Company and the option has been exercised in accordance
with its terms, and there appears to be no valid or justifiable reason for the former
to withdraw its offer, the Court cannot adopt a different attitude because the law on
the matter is clear.
11. Atkins, Kroll & The acceptance of an offer to sell a determinate thing for a price certain creates a
Co. v Cua Hian bilateral contract to sell and to buy. The offeree, upon acceptance, ipso facto
Tek assumes the obligations of a purchaser. On the other hand, the offeror would be
liable for damages if he fails to deliver the thing he had offered for sale. If an option
is given without consideration, it is mere offer of contract of sale, which is not binding
until accepted. If, however, acceptance is made before a withdrawal, it constitutes
a binding contract of sale, even though the option was not supported by a sufficient
consideration.
12. Natino v. IAC The right to redeem becomes functus officio on the date of its expiry, and its
exercise after the period is not really one of redemption but a repurchase.
Distinction must be made because redemption is by force of law; the purchaser at
public auction is bound to accept redemption. Repurchase however of foreclosed
property, after redemption period, imposes no such obligation. After expiry, the
purchaser may or may not re-sell the property but no law will compel him to do so,
And, he is not bound by the bid price; it is entirely within his discretion to set a higher
price, for after all, the property already belongs to him as owner.

Even if Mrs. Brodeth is to be understood to have promised to petitioners to buy the

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property at any time they have the money, the not bound by the promise not only
because it was not approved or the Board of Directors but also because, and more
decisively, it was unsupported by a consideration distinct from the re-purchase
price.

The second paragraph of Article 1479 of the Civil Code expressly provides:

xxx xxx xxx

An accepted unilateral. promise to buy or to sell a determinate thing for a price

certain is binding upon the promissory if the promise is supported by a consideration
distinct from the price.

A commitment by the bank to resell the property within a specified period, although
accepted by the party in whose favor it was made, is considered an option not
supported by consideration distinct from the price, and therefore, not binding upon
the promisor.
13. Serra v. CA In a unilateral promise to sell, where the debtor fails to withdraw the promise before
the acceptance by the creditor, the transaction becomes a bilateral contract to sell
and to buy, because upon acceptance by the creditor of the offer to sell by the
debtor, there is already a meeting of the minds of the parties as to the thing which
is determinate and the price which is certain. In which case, the parties may then
reciprocally demand performance. 
Jurisprudence has taught us that an optional
contract is a privilege existing only in one party – the buyer. For a separate
consideration paid, he is given the right to decide to purchase or not, a certain
merchandise or properly, at any time within the agreed period, at a fixed price. This
being his prerogative, he may not be compelled to exercise the option to buy before
the time expires. 

14. Roman v. The sale of the schooner was not perfected and the purchaser did not consent to
Grimalt the execution of the deed of transfer for the reason that the title of the vessel was
in the name of one Paulina Giron and not in the name of Pedro Roman, the alleged
owner. If no contract of sale was actually executed by the parties, the loss of the
vessel must be borne by its owner and not by a party who only intended to purchase
it and who was unable to do so on account of failure on the part of the owner to
show proper title to the vessel and thus enable them to draw up the contract of sale.
The defendant was under no obligation to pay the price of the vessel, the purchase
of which had not been concluded. The conversations had between the parties and
the letter written by defendant to plaintiff did not establish a contract sufficient in
itself to create reciprocal rights between the parties.
15. Equatorial v. The sale of the property should be rescinded because Mayfair has the right of first
Mayfair refusal. Both Equatorial and Carmelo are in bad faith because they knew of the
stipulation in the contract regarding the right of first refusal.

The stipulation is a not an option contract but a right of first refusal and as such
the requirement of a separate consideration for the option, has no applicability in
the instant case. The consideration is built in the reciprocal obligation of the
parties.

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In reciprocal contract, the obligation or promise of each party is the consideration
for that of the other. (Promise to lease in return of the right to first refusal)
16. Norkis v. CA The issuance of a sales invoice does not prove transfer of ownership of the thing
sold to the buyer. An invoice is nothing more than a detailed statement of the nature,
quantity and cost of the thing sold and has been considered not a bill of sale. In all
forms of delivery, it is necessary that the act of delivery whether constructive or
actual, be coupled with the intention of delivering the thing. The act, without the
intention, is insufficient. When the motorcycle was registered by Norkis in the name
of private respondent, Norkis did not intend yet to transfer the title or ownership to
Nepales, but only to facilitate the execution of a chattel mortgage in favor of the
DBP for the release of the buyer's motorcycle loan. The Letter of Guarantee issued
by the DBP reveals that the execution in its favor of a chattel mortgage over the
purchased vehicle is a pre-requisite for the approval of the buyer's loan. If Norkis
would not accede to that arrangement, DBP would not approve private respondent's
loan application and, consequently, there would be no sale.

Article 1496 of the Civil Code which provides that "in the absence of an express
assumption of risk by the buyer, the things sold remain at seller's risk until the
ownership thereof is transferred to the buyer," is applicable to this case, for there
was neither an actual nor constructive delivery of the thing sold, hence, the risk of
loss should be borne by the seller, Norkis, which was still the owner and possessor
of the motorcycle when it was wrecked. This is in accordance with the well known
doctrine of res perit domino.

17. Southern Article 1484 of the Civil Code provides that in a contract of sale of personal property
Motors v. the price of which is payable in installments, the vendor may exercise any of the
Moscoso following remedies: (I) Exact fulfillment of the obligation, should the vendee fail to
pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more
installments; and (3) Foreclose the chattel mortgage on the thing sold, if one has
been constituted, should the vendee's failure to pay cover two or more installments.
In this case, he shall have no further action against the purchaser to recover any
unpaid balance of the price. Any agreement to the contrary shall be void.

The plaintiff had chosen the first remedy. The complaint is an ordinary civil action
for recovery of the remaining unpaid balance due on the promissory note. The
plaintiff had not adopted the procedure or methods outlined by Sec. 14 of the
Chattel Mortgage Law but those prescribed for ordinary civil actions, under the
Rules of Court. Had the plaintiff elected the foreclosure, it would not have instituted
this case in court; it would not have caused the chattel to be attached under Rule
59, and had it sold at public auction, in the manner prescribed by Rule 39. That the
plaintiff did not intend to foreclose the mortgage truck, is further evinced by the fact
that it had also attached the house and lot of the appellant at San Jose, Antique.

We perceive nothing unlawful or irregular in plaintiff's act of attaching the mortgaged

truck itself. Since the plaintiff has chosen to exact the fulfillment of the appellant's
obligation, it may enforce execution of the judgment that may be favorably rendered
hereon, on all personal and real properties of the latter not exempt from execution
sufficient to satisfy such judgment. It should be noted that a house and lot at San
Jose, Antique were also attached. No one can successfully contest that the
attachment was merely an incident to an ordinary civil action. The mortgage creditor
may recover judgment on the mortgage debt and cause an execution on the

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mortgaged property and may cause an attachment to be issued and levied on such
property, upon beginning his civil action.

18. Pascual v. Article 1484 withholds from the vendor is the right to recover any deficiency from
Universal the purchaser after the foreclosure of the chattel mortgage and not a recourse to
Motors the additional security put up by a third party to guarantee the purchaser's
performance of his obligation. A similar argument has been answered by this Court
in this wise: "(T)o sustain appellant's argument is to overlook the fact that if the
guarantor should be compelled to pay the balance of the purchase price, the
guarantor will in turn be entitled to recover what she has paid from the debtor
vendee (Art. 2066, Civil Code); so that ultimately, it will be the vendee who will be
made to bear the payment of the balance of the price, despite the earlier foreclosure
of the chattel mortgage given by him. Thus, the protection given by Article 1484
would be indirectly subverted, and public policy overturned."

19. Filinvest v. CA The intent of the parties to the subject contract is for the so-called rentals to be the
installment payments. Upon the completion of the payments, then the rock crusher,
subject matter of the contract, would become the property of the private
respondents. This form of agreement has been criticized as a lease only in name.


Sellers desirous of making conditional sales of their goods, but who do not wish
openly to make a bargain in that form, for one reason or another, have frequently
restored to the device of making contracts in the form of leases either with options
to the buyer to purchase for a small consideration at the end of term, provided the
so-called rent has been duly paid, or with stipulations that if the rent throughout the
term is paid, title shall thereupon vest in the lessee. It is obvious that such
transactions are leases only in name. The so-called rent must necessarily be
regarded as payment of the price in installments since the due payment of the
agreed amount results, by the terms of bargain, in the transfer of title to the lessee.


20. Ridad v. Article 1484 of the Civil Code provides that “In a contract of sale of personal property
Filinvest the price of which is payable in installments, the vendor may exercise any of the
following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to
pay; (2) Cancel the sale, should the vendee’s failure to pay cover two or more
installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee’s failure to pay cover two or more installments. In
this case, he shall have no further action against the purchaser to recover any
unpaid balance of the price. Any agreement to the contrary shall be void.”
Under Article 1484 of the Civil Code, the vendor of personal property the purchase
price of which is payable in installments, has the right, should the vendee default in
the payment of two or more of the agreed installments, to exact fulfillment by the
purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on
the purchased personal property, if one was constituted. Whichever right the vendor
elects, he cannot avail of the other, these remedies being alternative, not
cumulative. Furthermore, if the vendor avails himself of the right to foreclose his
mortgage, the law prohibits him from further bringing an action against the vendee
for the purpose of recovering whatever balance of the debt secured not satisfied by
the foreclosure sale. The precise purpose of the law is to prevent mortgagees from
seizing the mortgaged property, buying it at foreclosure sale for a low price and
then bringing suit against the mortgagor for a deficiency judgment, otherwise, the

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mortgagor-buyer would find himself without the property and still owing practically
the full amount of his original indebtedness.
21. Sps. Dela Cruz The instant case is covered by the so-called "Recto Law", now Art. 1484 of the New
v. Asian Consumer Civil Code, which provides: "In a contract of sale of personal property the price of
& CA which is payable in installments, the vendor may exercise any of the following
remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2)
Cancel the sale, should the vendee’s failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendee’s failure to pay cover two or more installments. In this case, he
shall have no further action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be void." In this jurisdiction, the three
(3) remedies provided for in the "Recto Law" are alternative and not cumulative; the
exercise of one would preclude the other remedies. Consequently, should the
vendee-mortgagor default in the payment of two or more of the agreed installments,
the vendor-mortgagee has the option to avail of any of these three (3) remedies:
either to exact fulfillment of the obligation, to cancel the sale, or to foreclose the
mortgage on the purchased chattel, if one was constituted.
22. Agustin v. CA The court recognized an exception to the rule stated under Art. 1484(3) upon which
the petitioner relies.
Where the mortgagor plainly refuses to deliver the chattel subject of the mortgage
upon his failure to pay two or more installments, or if he conceals the chattel to
place it beyond the reach of the mortgagee, he may be held liable to pay expenses
as a result of the enforcement of the foreclosure. It logically follows as a matter of
common sense, that the necessary expenses incurred in the prosecution by the
mortgagee of the action for replevin so that he can regain possession of the chattel,
should be borne by the mortgagor. Recoverable expenses would, in our view,
include expenses properly incurred in effecting seizure of the chattel and
reasonable attorney’s fees in prosecuting the action for replevin.
23. Fiestan v. CA Act No. 3135, as amended by Act No. 4118 otherwise known as "An Act to Regulate
the Sale of Property under Special Powers Inserted in or Annexed to Real Estate
Mortgages" applies in cases of extrajudicial foreclosure sale.
The case at bar, as the facts disclose, involves an extrajudicial foreclosure sale.
Levy, as understood under Section 15, Rule 39 of the Rules of Court in relation to
execution of money judgments, has been defined by this Court as the act whereby
a sheriff sets apart or appropriates for the purpose of satisfying the command of the
writ, a part or the whole of the judgment-debtor's property. 5
In extrajudicial foreclosure of mortgage, the property sought to be foreclosed need
not be identified or set apart by the sheriff from the whole mass of property of the
mortgagor for the purpose of satisfying the mortgage indebtedness. For, the
essence of a contract of mortgage indebtedness is that a property has been
identified or set apart from the mass of the property of the debtor-mortgagor as
security for the payment of money or the fulfillment of an obligation to answer the
amount of indebtedness, in case of default of payment.
The Court finds that the formalities prescribed under Sections 2, 3 and 4 of Act No.
3135, as amended, were substantially complied with in the instant case. Records
show that the notices of sale were posted by the Provincial Sheriff of Ilocos Sur and
the same were published in Ilocos Times
The prohibition mandated by par. (2) of Article 1491 in relation to Article 1409 of the
Civil Code does not apply in the instant case where the sale of the property in
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dispute was made under a special power inserted in or attached to the real estate
mortgage pursuant to Act No. 3135, as amended.
Under Act No. 3135, as amended, a mortgagee-creditor is allowed to participate in
the bidding and purchase under the same conditions as any other bidder, as in the
case at bar.
In other words, Section 5 of Act No. 3135, as amended, creates and is designed to
create an exception to the general rule that a mortgagee or trustee in a mortgage
or deed of trust which contains a power of sale on default may not become the
purchaser, either directly or through the agency of a third person, at a sale which
he himself makes under the power. Under such an exception, the title of the
mortgagee-creditor over the property cannot be impeached or defeated on the
ground that the mortgagee cannot be a purchaser at his own sale.
24. Borbon v. The remedies under Article 1484 of the Civil Code are not cumulative but alternative
Servicewide and exclusive.
When the seller assigns his credit to another person, the latter is likewise bound by
the same law. Accordingly, when the assignee forecloses on the mortgage, there
can be no further recovery of the deficiency,[5] and the seller-mortgagee is deemed
to have renounced any right thereto.[6] A contrario, in the event the seller-
mortgagee first seeks, instead, the enforcement of the additional mortgages,
guarantees or other security arrangements, he must then be held to have lost by
waiver or non- choice his lien on the chattel mortgage of the personal property sold
by any mortgaged back to him, although, similar to an action for specific
performance, he may still levy on it.
In ordinary alternative obligations, a mere choice categorically and unequivocally
made and then communicated by the person entitled to exercise the option
concludes the parties. The creditor may not thereafter exercise any other option,
unless the chosen alternative proves to be ineffectual or unavailing due to no fault
on his part. This rule, in essence, is the difference between alternative obligations,
on the one hand, and alternative remedies, upon the other hand, where, in the latter
case, the choice generally becomes conclusive only upon the exercise of the
remedy. For instance, in one of the remedies expressed in Article 1484 of the Civil
Code, it is only when there has been a foreclosure of the chattel mortgage that the
vendee- mortgagor would be permitted to escape from a deficiency liability.
25. Dizon v. The controlling provision is Article 559 of the Civil Code. It reads thus: The
Suntay possession of movable property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has been unlawfully deprived
thereof may recover it from the person in possession of the same. If the possessor
of a movable lost of which the owner has been unlawfully deprived, has/acquired it
in good faith at a public sale, the owner cannot obtain its return without reimbursing
the price paid therefore. The only exception the law allows is when there is
acquisition in good faith of the possessor at a public sale, in which case the owner
cannot obtain its return without reimbursing the price paid.
26. EDCA v. The contract of sale is consensual and is perfected once agreement is reached
Santos between the parties on the subject matter and the consideration.

According to the Civil Code:

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ART. 1475. The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to
the provisions of the law governing the form of contracts.

ART. 1477. The ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof.

ART. 1478. The parties may stipulate that ownership in the thing shall not pass
to the purchaser until he has fully paid the price.

It is clear that ownership in the thing sold shall not pass to the buyer until full
payment of the purchase price only if there is a stipulation to that effect. Otherwise,
the rule is that such ownership shall pass from the vendor to the vendee upon the
actual or constructive delivery of the thing sold even if the purchase price has not
yet been paid. Non-payment only creates a right to demand payment or to rescind
the contract, or to criminal prosecution in the case of bouncing checks. But absent
the stipulation above noted, delivery of the thing sold will effectively transfer
ownership to the buyer who can in turn transfer it to another. Actual delivery of the
books having been made, Cruz acquired ownership over the books which he could
then validly transfer to the private respondents. The fact that he had not yet paid for
them to EDCA was a matter between him and EDCA and did not impair the title
acquired by the private respondents to the books.
Article 559 provides that "the possession of movable property acquired in good faith
is equivalent to a title," thus dispensing with further proof. Leonor Santos took care
to ascertain first that the books belonged to Cruz before she agreed to purchase
them. The private respondent did not have to go beyond that invoice to satisfy
herself that the books being offered for sale by Cruz belonged to him; yet she did.
Although the title of Cruz was presumed under Article 559 by his mere possession
of the books, these being movable property, Leonor Santos nevertheless
demanded more proof before deciding to buy them.
27. Layug v. IAC The grace period clause should be read conjointly with the stipulation on rescission,
and in such a manner as to give full effect. The patent and logical import of both
provisions, taken together, is that when the vendee fails to pay any instalment on
its due date, he becomes entitled to a grace period of 30 days to cure default by
paying the amount of the instalment plus interest, but that if he should still fail to
pay within the grace period, then rescission of the contract takes place.

Layug cannot be permitted to claim that all his payments should be credited
to him in their entirety without regard whatever to the damages his default
might have caused to Gabuya.

R.A. 6552 governs sales of real estate on instalments. It recognizes the vendor's
right to cancel such contracts upon failure of the vendee to comply with the terms
of the sale, but imposes, chiefly for the latter's protection, certain conditions thereon.
We have had occasion to rule that "even in residential properties the Act"
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recognizes and reaffirms the vendor's right to cancel the contract to sell upon
breach and non-payment of the stipulated instalments. ..."
The law provides inter alia that "in all transactions or contracts involving the sale
or financing of real estate on installment payments, including residential
condominium apartments, ..., 15 where the buyer has paid at least two years of
installments, the buyer is entitled to the following rights in case he defaults in the
payment of succeeding installments:
[Grace Period]
(a) To pay, without additional interest, the unpaid installments due within the total
grace period earned by him which is hereby fixed at the rate of one month grace
period for every year of installment payments made: Provided , That this right
shall be exercised by the buyer only once in every five years of the life of the
contract and its extensions, if any;
[Refund of "Cash Surrender Value"]
(b) If the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty percent of
the total payments made and, after five years of installments, an additional five
per cent every year but not to exceed ninety per cent of the total payments made;
Provided, That the actual cancellation of the contract shall take place after thirty
days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer.
In the case at bar, Layug had paid two (2) annual instalments of P40,000.00 each.
He is deemed therefore, in the words of the law, to have "paid at least two years of
instalments." He therefore had a grace period of "one month .. for every year of
instalment payments made," or two (2) months (corresponding to the two years of
instalments paid) within which to pay the final instalment. He has thus been left
only with the right to a refund of the "cash surrender value of the payments
on the property equivalent to fifty percent of the total payments made," or
P40,000.00 (i.e., ½ of the total payments of P80,000.00). Such refund will be the
operative act to make effective the cancellation of the contract by Gabuya,
conformably with the terms of the law
28. Power Although most authorities consider transfer of ownership as the primary purpose of
Commercial v. sale, delivery remains an indispensable requisite as our law does not admit the
CA doctrine of transfer of property by mere consent.[21] The Civil Code provides that
delivery can either be (1) actual (Article 1497) or (2) constructive (Articles 1498-
1501). Symbolic delivery (Article 1498), as a species of constructive delivery,
effects the transfer of ownership through the execution of a public document. Its
efficacy can, however, be prevented if the vendor does not possess control over
the thing sold,[22] in which case this legal fiction must yield to reality.

The key word is control, not possession, of the land as petitioner would like us to
believe. The Court has consistently held that:[23]

x x x (I)n order that this symbolic delivery may produce the effect of tradition, it is
necessary that the vendor shall have had such control over the thing sold that xxx
its material delivery could have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession. The thing sold must be placed
in his control. When there is no impediment whatever to prevent the thing sold
passing into the tenancy of the purchaser by the sole will of the vendor, symbolic
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delivery through the execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and make use of it himself or through
another in his name, because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality -- the delivery has not been
effected.

Considering that the deed of sale between the parties did not stipulate or infer
otherwise, delivery was effected through the execution of said deed. The lot sold
had been placed under the control of petitioner; thus, the filing of the ejectment suit
was subsequently done. It signified that its new owner intended to obtain for itself
and to terminate said occupants’ actual possession thereof. Prior physical delivery
or possession is not legally required and the execution of the deed of sale is
deemed equivalent to delivery. [24] This deed operates as a formal or symbolic
delivery of the property sold and authorizes the buyer to use the document as proof
of ownership. Nothing more is required.

29. Addison v. The record shows that the plaintiff did not deliver the thing sold. With respect to two
Felix and Tioco of the parcels of land, he was not even able to show them to the purchaser; and as
regards the other two, more than two-thirds of their area was in the hostile and
adverse possession of a third person. 


The Code imposes upon the vendor the obligation to deliver the thing sold. The
thing is considered to be delivered when it is placed "in the hands and possession
of the vendee." It is true that the same article declares that the execution of a public
instrument is equivalent to the delivery of the thing which is the object of the
contract, but, in order that this symbolic delivery may produce the effect of tradition,
I t is necessary that the vendor shall have control over the thing sold that, at the
moment of sale, it its material delivery could have been made. 


It is not enough to confer upon the purchaser the ownership and the right of
possession. The thing sold must be placed in his control. When there is no
impediment whatever to prevent the thing sold passing into the tenancy of the
purchaser by the sole will of the vendor, symbolic delivery through the execution of
the public instrument is sufficient. But if, notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and material tenancy of the
thing and make use of it himself or through another in his name, because such
tenancy and enjoyment are opposed by the interposition of another will, then fiction
yields to reality - the delivery has not been effected. 

30. Ten Forty In a contract of sale, the buyer acquired the thing sold only upon its delivery. With
Realty v. Cruz respect to incorporeal properties, Art. 1498 lays down the general rule: the
execution of a public instrument shall be equivalent to the delivery of the thing that
is the object of the contract if, from the deed, the contrary does not appear or cannot
be clearly inferred.

However, ownership is transferred not by contract but by tradition or delivery. [32]

Nowhere in the Civil Code is it provided that the execution of a Deed of Sale is a
conclusive presumption of delivery of possession of a piece of real estate.

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The execution of a public instrument gives rise only to a prima facie presumption of
delivery. Such presumption is destroyed when the delivery is not effected because
of a legal impediment.

It is undisputed that petitioner did not occupy the property from the time it was
allegedly sold to it on December 5, 1996 or at any time thereafter. Nonetheless, it
maintains that Galino’s continued stay in the premises from the time of the sale up
to the time respondent’s occupation of the same on April 24, 1998, was possession
held on its behalf and had the effect of delivery under the law. petitioner did not gain
control and possession of the property, because Galino had continued to exercise
ownership rights over the realty. That is, she had remained in possession,
continued to declare it as her property for tax purposes and sold it to respondent in
1998.

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