CENTRAL BANK OF THE PHILIPPINES, petitioner, vs. SPOUSES ALFONSO and ANACLETA BICHARA, respondents. DE LEON, JR., J.

: FACTS: Respondent spouses Alfonso and Anacleta Bichara were the former registered owners of two lots situated in Legazpi City, each covered by a Transfer Certificate of Title. On July 19, 1983, the respondents sold the two properties to petitioner Central Bank of the Philippines. The deed of sale provided in its stipulation that the respondents shall undertake at their expense to fill the parcels of land with an escombro free from waste materials compacted to the street level upon signing of the Deed of Sale to suit the ground for the construction of the regional office of the Central Bank of the Philippines thereat. Petitioner caused the two properties to be consolidated, with several other parcels of land, into a single estate. The record discloses that despite respondents' failure to pay the capital gains tax and other transfer fees, the transfer certificate of title was nonetheless issued in petitioner's name on September 6, 1983. Despite the issuance of the title, petitioner failed to pay respondent. On its part, respondents did not fill up the lot with escombro despite several demands made by petitioner. Petitioner was thus constrained to undertake the filling up of the said lots, by contracting the services of BGV Construction. The filling up was made at the expense of the petitioner, which it deducted from the purchase price payable to respondents. Petitioner, however, still did not pay the respondents. Consequently, on September 7, 1992, respondents commenced an action for rescission or specific performance with damages, against petitioner before the Regional Trial Court. Petitioner tendered payment to respondents. Respondents refused the tender, however, in view of their complaint for rescission. After receipt of summons, petitioner filed its answer averring that it was justified in delaying payment of the purchase price in view of respondents' breach of several conditions in the contract. The trial court ordered the respondents to accept the tendered amount, deducting therefrom the costs of filling up the subject property made by the petitioner. Upon appeal, the Court of Appeals ordered the rescission of the contract of sale and the reconveyance of the properties to respondents. The appellate court likewise ordered respondents to reimburse petitioner the cost of filling up the lot with escambro, and petitioner to pay respondents attorney's fees and costs. ISSUE: Whether the petitioner was justified in withholding the payment and whether the rescission of the contract as ordered by the Court of Appeals is proper HELD: Yes, the petitioner was justified in withholding the payment. An instance where the law clearly allows the vendee to withhold payment of the purchase price is Article 1590 of the Civil Code. This is not, however, the only justified cause for retention or withholding the payment of the agreed price. A noted authority on civil law states that the vendee is nonetheless entitled if the vendor fails to perform any essential obligation SALES AND LEASE CASES BATCH 5

of the contract. Such right is premised not on the aforequoted article, but on general principles of reciprocal obligations. The use to which the parcels of land was to be devoted was no secret between the parties. The consolidated estate, which incorporated the lots sold by respondents to petitioner, was intended as the site of petitioner's regional office to serve the Bicol region. The project had its peculiar requirements, not the least of which was that since a substantial edifice was to be built on the property, the site had to be made suitable for the purpose. Thus, petitioner specified that the lots be filled up in the manner specified in paragraph 4 of the contract. The importance thereof could not have been lost on respondents. Evidently then, respondents were guilty of non-performance of said stipulation. The deed of sale expressly stipulated that the vendors were to undertake, at their expense, the filling up of the lots with escombro free from waste material compacted to the street level. This was to be accomplished upon the signing of the contract and insofar as petitioner was concerned, respondents obligation was demandable at once. Other than his testimony, Alfonso Bichara offered no proof tending to show that he had complied in the manner agreed upon. In this context, the appellate court erred in decreeing the rescission, otherwise called resolution, of the subject deed of sale. Respondents should not be allowed to rescind the contract where they themselves did not perform their essential obligation thereunder. It should be emphasized that a contract of sale involves reciprocity between the parties. Since respondents were in bad faith, they may not seek the rescission of the agreement they themselves breached. Consequently, the decision rendered by the trial court should be reinstated as being just and proper under the premises. G.R. No. 116635; July 24, 1997 CONCHITA NOOL and GAUDENCIO ALMOJERA, petitioners vs. CA, ANACLETO NOOL and EMILIA NEBRE, respondents PANGANIBAN, J.: Doctrine: A contract of repurchase arising out of a contract of sale where the seller did not have any title to the property "sold" is not valid. Since nothing was sold, then there is also nothing to repurchase. FACTS: Two parcels of land in San Miguel, Isabela are in dispute. (1-hectare owned by Victorino Nool - TCT No. T-74950 & 3.0880 hectares owned by Francisco Nool - TCT No. T100945) Petitioners seek their recovery from the Anacleto Nool, a younger brother of Conchita, and Emilia Nebre. The former said that they are the owners of subject lands, and they bought the same from Conchita's other brothers, Victorino and Francisco Nool; and obtained a loan from DBP secured by a real estate mortgage which was foreclosed; that within the period of 1

redemption, Anacleto Nool redeemed the foreclosed properties and as a result, the titles were transferred to him. As part of their arrangement or understanding, Anacleto Nool agreed to buy from Conchita Nool the lands under controversy, but failed to pay. Another covenant was entered into by the parties, whereby Anacleto agreed to return the lands in question but refused to return them; thereby impelling petitioners to come to court for relief. The petitioner-spouses plead for the enforcement of their agreement with private respondents as contained in Exhibits "C" and "D," and seek damages for the latter's alleged breach thereof. Exhibit C was a private handwritten document where petitioners appear to have "sold" to private respondents the parcels of land in controversy. In Exhibit D, private respondents agreed that Conchita Nool "can acquire back or repurchase later on said land when she has the money." ISSUE: Whether (1) the CA erred in ruling that the agreements are not binding NO; (2) the repurchase may be done by the petitioners NO; (3) respondents are estopped from disclaiming the contract. - NO HELD: Both RTC and CA ruled that the principal contract of sale contained in Exhibit C and the auxiliary contract of repurchase in Exhibit D are both void. It is clear that the sellers no longer had any title to the parcels of land at the time of sale. Since Exhibit D, the alleged contract of repurchase, was dependent on the validity of Exhibit C, it is itself void. A void contract cannot give rise to a valid one. It is likewise clear that the sellers can no longer deliver the object of the sale to the buyers, as the buyers themselves have already acquired title and delivery thereof from the rightful owner, the DBP. No one can give what he does not have nono dat quod non habet. Exhibit D presupposes that petitioners could repurchase the property that they "sold" to private respondents. As petitioners "sold" nothing, it follows that they can also "repurchase" nothing. Nothing sold, nothing to repurchase. In this light, the contract of repurchase is also inoperative and by the same analogy, void. One "repurchases" only what one has previously sold. In other words, the right to repurchase presupposes a valid contract of sale between the same parties. Undisputedly, private respondents acquired title to the property from DBP, and not from petitioners. Petitioners do not thereby acquire a right to repurchase the property. Article 1601 of the Civil Code provides: 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. The private respondents cannot be estopped from raising the defense of nullity of contract, specially in this case where they acted in good faith, believing that indeed petitioners could sell the two parcels of land in question. Article 1410 of the Civil Code mandates that "the action or defense for the declaration of the inexistence of a contract does not prescribe." A contract void at inception cannot be validated by ratification or prescription and certainly cannot be binding on or enforceable against private respondents. Petition DENIED. SALES AND LEASE CASES BATCH 5

STATE INVESTMENT HOUSE, INC. vs. CA and SABINA VDA. DE CUENCA GR No. 99308. November 13, 1992 MELO, J.

Facts: On Feb. 13, 1979, Cuenca obtained a loan from SIHI under a promissory note for P160,000 secured by a mortgage on Cuenca's property at Tandang Sora, QC. On Nov. 15, 1979 she obtained another loan of P500,000 secured by a real estate mortgage executed by Cuenca on another property along Timog, QC, with par. 6 of the contract expressly giving SIHI the option of extrajudicially foreclosing the mortgage property in the event of Cuenca's default in the payment of her indebtedness. Cuenca's unpaid balance of P120,000 under the first loan was deducted from the proceeds of the second loan. The mortgage on her property at Tandang Sora, QC was cancelled. Because of Cuenca's failure to pay on the maturity date of the loan, her account was restructured and rolled over 12 times through the execution of various PNs. On Nov. 29, 1982, the maturity date of the 12th PN, SIHI claimed that Cuenca's obligations, inclusive of interest, service charges, and penalties, reached P621,483.57. The loan was not anymore restructured and SIHI, on Dec. 2 and 15, 1982, made written demands on Cuenca for the payment of her outstanding obligation. Cuenca did not heed SIHI's demands for payments. SIHI thus initiated extra-judicial foreclosure of Cuenca's mortgaged property for which the corresponding notice of sheriff's sale was issued on Feb. 23, 1983, setting the auction sale on March 22, 1983. The scheduled foreclosure sale was, however, deferred by SIHI on account of Cuenca's request to be given time to pay the loan. Although Cuenca did make some payments, these were not enough to fully pay her outstanding obligation and as of July 28, 1983, SIHI claimed that Cuenca's outstanding loan amounted to P637,793.86. Consequently, SIHI proceeded with the auction sale on August 8, 1983 where it was declared the highest bidder for P742,181.55, Cuenca's outstanding debt at that time per SIHI's computation.The certificate of sale was registered with the Register of Deeds of QC on August 24, 1983. On July 10, 1984, SIHI received a letter from Cuenca requesting that she be furnished a Statement of Account before and after the foreclosure/auction sale for her to be able to redeem the foreclosed property from SIHI. This was followed by another letter from Cuenca on July 17, 1984 wherein she signified her intention to redeem the property for P500,000 payable in the ff. manner: 1. P100,000 payable within 30 days upon receipt of SIHI's approval of this proposal. 2. The balance of P400,000 shall be paid in 8 monthly installments, each installment payment shall be due on the 30th day of each month, the first monthly payment to be 2

reckoned from the date the amount stated in No. 1 has been paid. In a letter dated August 16, 1984, SIHI rejected Cuenca's offer to redeem reasoning that she should pay her total outstanding obligation amounting at that time to P870,739.36.

gave SIHI permission to proceed with the auction sale on Aug. 8, 1983 should she not be able to pay her account by then. As of that date, CA computed Cuenca's unpaid account with SIHI to be P279,963.42. This was not challenged or questioned by either SIHI or Cuenca. Foreclosure is valid where the debtor is in default in the payment of his obligation. In a

On August 23, 1984, Cuenca, through counsel, sent another letter to SIHI and reiterated her offer to redeem the property by "finally offering and tendering the full sum of P426,874.72 as the redemption price of the property, such price being the difference between the redemption price of P870,739.36 and the P441,312.76 which is the aggregate amount of the payment which [Cuenca] made on account of her loan of P500,000". Without waiting for SIHI's reply, Cuenca, on August 24, 1984, filed a complaint with RTC QC seeking annulment of the foreclosure sale on the ground that she had not defaulted in the payment of her loan to SIHI and alternatively prayed that the court fix the redemption price in the event that it is found that she is still indebted to SIHI. After the expiration of the one-year redemption period, the Register of Deeds issued a new title on the foreclosed property in SIHI's name. Issue: (1) Whether the foreclosure sale was valid. (2) Whether Cuenca still had the right to redeem the property. Held: (1) YES. By Nov. 29, 1982, Cuenca still had an outstanding indebtedness of P416,188.08. SIHI, in its letters to Cuenca dated December 2 and 15, 1982, demanded the payment of this unpaid account. Cuenca, however, failed to make any payments and thus, was already a debtor in default under Art. 1168 of the NCC. The extrajudicial foreclosure instituted by SIHI in Feb. 1983 was therefore valid. Cuenca's loan being then already almost 3 months overdue. Cuenca was already in default, the Real Estate Mortgage executed by the parties expressly granted SIHI the option to foreclose when it provided that: 6. In the event that the Mortgagor/Debtor herein, should fail or refuse to pay any of the sums of money secured by this mortgage, or any part thereof, in accordance with the terms and conditions herein set forth or those stipulated in the correlative promissory notes, or should he/it fail fail to perform any of the conditions stipulated herein, or those in the promissory notes, then and in such case the Mortgagee shall have the right, at its election, to foreclose this mortgage SIHI, however, deferred the auction sale when Cuenca subsequently asked for more time to pay her obligation. Cuenca's account however was not restructured and she herself SALES AND LEASE CASES BATCH 5

real estate mortgage when the principal obligation is not paid when due, the mortgagee has the right to foreclose the mortgage and to have the property seized and sold with the view of applying the proceeds to the payment of the obligation. Once the proceeds have been applied to the payment of the obligation, the debtor cannot anymore be required to pay, unless, of course, there is a deficiency between the amount of the loan and the foreclosure sale price, because the obligation has already been extinguished. (2) NO. Under Sec. 6 of RA 3135 (An Act to Regulate The Sale of Property Under Special Powers Inserted In or Annexed To Real Estate Mortgages) as amended by RA 4118, in all cases in which an extrajudicial sale is made under the special power herein before referred to, the debtor, his successors in interest or any judicial creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale. This redemption period is counted not from the date of foreclosure sale but from the time the certificate of sale is registered with the Register of Deeds. In this case, the redemption period should be reckoned from Aug. 24, 1983. Applying Art. 13 of the NCC, the last day to redeem fell on Aug. 23, 1984, said year being a leap year. Cuenca was not able to exercise her right of redemption by Aug. 23, 1984. Although she wrote to SIHI twice on July 17 and Aug. 23, 1984 and offered to redeem her property, these offers were not accompanied by simultaneous bona fide tender or delivery of the redemption price to SIHI. Tender of payment of the repurchase price is necessary to exercise in the right of redemption finds support in civil law, Art. 1616 provides that the vendor cannot avail himself of the right to repurchase without returning to the vendee the price of the sale. Redemption is not a matter of intent but involves making the proper payment or tender of the price of the land within the specified period. Where, as in this case, the complaint for redemption was filed after the redemption period expired, the complaint is a useless exercise which cannot defeat the purchaser's right to have the title of the property transferred in his name. Cuenca's consignation with the SC of the amount ordered by the CA to be paid to SIHI only 8 years after her action to redeem was filed in 1984 is a belated move which merely shows that in 1984 she had no ability to pay SIHI the redemption price. Her filing of the action was a mere devise and scheme to buy time to raise the amount needed to 3

redeem her property. The existence of the right of redemption operates to depress the market value of the land until the period expires, and to render that period indefinite by permitting the tenant to file a suit for redemption and virtually paralyze any efforts of the landowner to realize the value of his land. No buyer can be expected to acquire it without any certainty as to the amount for which it may be redeemed so that he can recover at least his investment in case of redemption. Foreclosure sale valid. Time to redeem expired.

a. b.

c.

Price was not inadequate. The vendors did not remain in possession of the land sold as lessees or otherwise. On their request in order to help them in the expenses of their children in Manila, the vendors were merely allowed by the vendees to collect the monthly rents of P300 for five months up to October, 1951, on the understanding that the amounts so collected would be charged against them. The Consunjis as new owners of the lot granted the Villaricas an option to buy the property within the period of one year from May 25, 1951 for the price of P37,750. Said option to buy is different and distinct from the right of repurchase which must be reserved by the vendor, by stipulation to that effect, in the contract of sale. This is clear from Article 1601 of the Civil Code, which provides:

ANGEL VILLARICA v. CA, MONTEVERDE, CONSUNJI and FRANCISCO Nov. 29, 1968 Capistrano FACTS: a. On May 19, 1951, the spouses Angel Villarica and Nieves Palma Gil de Villarica sold to the spouses Gaudencio Consunji and Juliana Monteverde a lot containing an area of 1,174 sq. meters, situated in the poblacion of the City of Davao, for the price of P35,000. Deeds of sale drafter by ESPOLONG, appointed agent to sell the lot. (PUBLIC INSTRUMENT) Public instrument of absolute sale was delivered to the vendees. Executed another public instrument whereby they granted the spouses Villarica an option to buy the same property within the period of one year for the price of P37,750 New TCT No. 3147 was issued in the names of the spouses Consunji. It was registered in the name of spouses Consunji Villarica brought action before the court for REFORMATION FO THE INSTRUMENT Defendants answered that the deed of absolute sale expressed the real intention of the parties and they also alleged a counterclaim for sums of money borrowed by the plaintiffs from the Consunjis which were then due and demandable. RTC DAVAO: it was really intended as an EQUIATABLE MORTGAGE CA: It expressed the true intention of the parties (Reversed the decision of RTC)

Conventional redemption shall take place when thevendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of article 1616 and other stipulation which may have been agreed upon.
The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like the option to buy in the instant case. Hence, Exhibits "B" and "D" cannot be considered as evidencing a contract of sale with pacto de retro. Since Exh. "D" did not evidence a right to repurchase but an option to buy, the extension of the period of one year for the exercise of the option by one month does not fall under No. 3, of Article 1602 of the Civil Code, which provides that:

b. c. d.

e. f. g. h.

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.
d. The taxes paid by the vendors were back taxes up to the time of the sale on May 19, 1951. The vendors had the obligation to pay the back taxes because they sold the land free of all liens and encumbrances. The taxes due after the sale were paid by the vendees. CA AFFIRMED.

i. j.

ISSUE: Whether the public instrument of absolute sale expressed the true intention of the parties under Article 1604 in relation to 1602 and 1603 of the Civil Code HELD: Villaricas contention is unmeritorious. SALES AND LEASE CASES BATCH 5 4

PRUDENCIA GLORIA-DIAZ and EUGENIO DIAZ, petitioners, vs. HON. COURT OF APPEALS, FELIX B. MAGALONG and ISIDRA G. MAGALONG, respondents. TEEHANKEE, J .: FACTS: Plaintiff, Prudencia Gloria, married to plaintiff Eugenio Diaz, is the aunt of Isidra Gloria-Magalong, wife of defendant, Felix B. Magalong. On 27 January, 1958, Prudencia with assistance of her husband, Eugenia executed a deed entitled one of sale with conventional redemption over 2 parcels of land in Barrio Buayaan, town of Bayambang, Pangasinan, in favor of Isidra Gloria, wife of Magalong, redeemable with 10 years then 2 years later, on 21 August 1961, a new deed of same tenor was signed by spouses Diaz increasing the original consideration. Again, on 1 October, 1964, a new deed once more of the same tenor executed by spouses Diaz increasing the sum received. Finally on 26 June 1965, another sum was added, and a new deed once again of the same tenor was signed by Prudencia. The period of redemption not having been changed in any of the deedswhich was to expire by 27 January 1968, and apparently because they did not have money to redeem, spouses Diaz wrote to spouses Magalong in America sometime in December, 1967 asking to renew and it is here where complication arose. Because according to plaintiffs, spouses Magalong answered in letter of 19 February, 1968 indicating willingness, which is in handwriting, instructing that new document of same tenor be drafted by Notary Public, Mr. Numeriano de Castro, Magalong's friend, this despite the fact that 10 year redemption period had already expired. On the other hand, according to defendants, Magalong, they never sent this handwritten letter, what they had sent was the letter dated 12 January 1968 wherein they manifested their willingness to accept a new document of the same tenor but upon certain conditions, among them that because of depreciation of value of the peso, that the consideration should be placed at P9,000.00 if the dollar was worth 4 times the peso, further, that draft of new document to be sent unto them for perusal and if they were agreeable, they would send it back for notarization, and that also, before finalization, they should be notified, for them to send a special power of attorney for a relative who spoke English well. Plaintiffs, on the position that they were complying with the letter, caused preparation of new deed on 21 June, 1968 and had it ratified before the above-mentioned notary public, Mr. Numeriano G. de Castro. In turn, defendants refused to accept claiming they were not bound thereby. On May 8, 1972, petitioners-spouses Prudencia Gloria- Diaz and Eugenio Diaz as plaintiffs filed their complaint in the Pangasinan court of first instance praying that respondents-spouses Felix B. Magalong and Isidra G. Magalong as defendants be compelled to accept the tender of payment deposited in the court by way of redemption of their riceland in Bayambang, Pangasinan, subject of several contracts entitled "Deed of Sale with Conventional Redemption" executed by them with respondents as vendees and to execute the necessary deed reconveying the said property to them.

The trial court in its decision of November 29, 1973 dismissed the complaint on the ground of lapse of the 10-year repurchase period and ruling that if "[respondents] had set certain conditions for the reconveyance of the property to [petitioners] other than those agreed upon, [respondents] were well within their right to do so." The Court of Appeals held however that in the light of the admitted facts the transaction was in reality an equitable mortgage and therefore set aside the trial court's dismissal of the case. Upon respondent's motion for reconsideration, however, respondent appellate court issued its Resolution of February 3, 1978 setting aside its original decision and instead affirming the lower court's dismissal of petitioners' complaint. The appellate court in its Resolution of April 14, 1973 denied petitioners' motion for reconsideration in turn and reaffirmed its legal conclusion that the true transaction was a sale with rights to repurchase rather than a simple loan as held by the original decision of November 3, 1977. ISSUE: Whether the transaction between the parties was a pacto de retro sale HELD: No. In the light of the admitted facts of record the transaction between the parties was truly and in reality a simple loan and equitable mortgage regardless of the nomenclature given thereto as a pacto de retro sale. The original decision correctly held that it is not the parties but the law that determines the juridical situation created by the parties through their contract and the rights and obligations arising therefrom. The conclusion in the appellate court's countermanding Resolution that the true transaction a pacto de retro sale is contrary to the very admission of respondent Felix B. Magalong in his letter to petitioner Eugenie Diaz wherein said respondent expressly referred to petitioners' proposal "to redeem the land which has been mortgaged to us." The appellate court's countermanding Resolution recognized that the undisputed fact that on three occasions the original "purchase price" of P3,600.00 was increased with the "additional payments" of P200.00, P400.00 and P300.00, which added up to a total increased "purchased price" ofP4,500.00 indicated that only a simple loan was intended by the contracting parties." Yet, it rejected this correct indication and conclusion on three manifestly mistaken inferences as follows:

1st that "this is not one of the circumstances listed in Article 1602 of the Civil Code", completely disregarding the 6th circumstance or badge of equitable mortgage listed in the article, to wit, "(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"; 2nd, "The additional amounts did not result in any extension of the redemption period." Precisely, as stressed in the original decision of November 3, 1977, if the transaction were a true pacto de retro, the purchase price had been fixed at P3,600.00 not a centavo more and respondents' giving of
5

SALES AND LEASE CASES BATCH 5

additional amounts on three different occasions to be aggregated to the redemption price "was absolutely inconsistent" with the concept of "a true sale with pacto de retro"; and 3rd, the inference that the additional amounts did not benefit the respondents and were "acts of liberality" is patently mistaken. As already pointed out, such addition amounts merely reveal the nature of the transaction as a series of loans which did not involve any "liberality." As a matter of fact, respondents expressly insisted that they be repaid in dollars at the equivalent increased rate then of P6.40 to the dollar not, withstanding the prohibitory provision to the contrary of Republic Act No. 529.

More than four years after petitioner executed the Deed of Sale conveying his share of the property to his sister Felisa or on June 13, 1988, upon the request of Felisa, he executed another Deed of Absolute Sale in lieu of the first covering the same share in favor of Felisas son private respondent Margarito Flores and his wife private respondent Nerisa Herrera. A TCT in the name of respondent spouses covering petitioners share in the co-owned property was accordingly issued. On September 5, 1990, petitioner filed an action for reformation of instrument and/or annulment of document and title with reconveyance and damages before the Regional Trial Court of Cavite, alleging that the Deed of Absolute Sale in favor of respondent spouses does not express the true will and intention of the parties. Respondent spouses maintained that their acquisition of petitioners share was valid, legal and binding. After trial, finding for petitioner, the trial court ordered the annulment of the Deed of Absolute Sale. Upon recourse to the Court of Appeals, the trial courts decision was reversed and the complaint of petitioner was dismissed, hence the present petition. ISSUE: Whether the parties intended the Deed of Absolute Sale in favor of respondent to be an equitable mortgage HELD: No. An equitable mortgage is 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 intention of the parties to an agreement is shown not necessarily by the terminology used therein but by all the surrounding circumstances. For the presumption of an equitable mortgage to arise under Art. 1602, two (2) requisites 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. In the case at bar, the second requisite is conspicuously absent. That the alleged loan was received in installments of P1,000.00 per month for ten months or a total ofP10,000.00 in fact indicates that the transaction was not one of a loan but of sale on installment. That petitioner, prior to the execution of the impugned Deed, signed receipts identically denominated as "Kasunduan" under which he acknowledged receiving sums of money as payment for his property, which receipts were worded in the vernacular and could not have been mistaken or misunderstood for anything else other than as evidence of the sale of his property, seals the case against him. It confirms this Courts earlier observation that the transaction indicated was one of sale on installment. 6

The appellate court's countermanding Resolution furthermore completely disregarded the applicable provisions of Article 1603, Civil Code that "In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage" and of Article 1606, Civil Code, 3rd paragraph that "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", which latter provision was aptly applied in the original decision although it did not expressly cite the codal article. PEDRO MOLINA, petitioner-appellant, vs. HON. COURT OF APPEALS and SPOUSES MARGARITO M. FLORES and NERISA HERRERA, respondents-appellees. CARPIO-MORALES, J.: FACTS: Petitioner Pedro Molina and his siblings Felisa, Felix and Tomas Molina were coowners of a parcel of land in Naic, Cavite registered in their names under a TCT of the Registry of Deeds of Cavite. On April 23, 1984, petitioner, by Deed of Absolute Sale, conveyed to his sister Felisa his share in the co-owned property. The sale was not, however, registered. The siblings subsequently entered into an agreement wherein they partitioned the property as follows: Lot No. 98-A-1 with an area of 92 square m. for FELIX MOLINA; Lot No. 98-A-2 with an area of 92 square m. for PEDRO MOLINA; Lot No. 98-A-3 with an area of 92 square m. for FELISA MOLINA; Lot No. 98-A-4 with an area of 92 square m. for TOMAS MOLINA; Lot No. 98-A-5 with an area of 43 square m. as the RIGHT OF WAY;5

SALES AND LEASE CASES BATCH 5

Additionally, petitioner affixed his signature on the Deed after its contents were sufficiently explained to him in the vernacular, which was witnessed by two other persons of legal age and duly acknowledged before a notary public. More. Another witness to the document, Atty. Edwina Mendoza, testified that prior to the execution of the Deed, the parties thereto approached her "to tell [her] that sometime in the future, they will have to execute a deed of conveyance because they are entering to (sic) this kind of transaction,"23 adding that when petitioner was informed that he would actually be selling his property, the latter readily acceded.24 In fine, this Court finds that the parties to the Deed were fully aware of its contents and meaning, and that there were no acts done or events that occurred prior to, simultaneous to, or after the execution of the Deed that would indicate the intention of any of the parties to have been otherwise than to sell the property to respondent spouses. OSCAR C. FERNANDEZ, FERNANDEZ, petitioners, vs. TARUN, respondents. PANGANIBAN, J.: DOCTRINE: The right of redemption may be exercised by a co-owner, only when part of the community property is sold to a stranger. When the portion is sold to a co-owner, the right does not arise because a new participant is not added to the co-ownership. FACTS: A fishpond situated at Arellano-Bani, Dagupan City is disputed by respondents Carlos Tarun and Narcisa Zareno, and petitioners Corazon Cabal vda. de Fernandez and her children Oscar, Gil and Armando, all surnamed Fernandez. On June 4, 1967, Antonio Fernandez sold his share to Tarun. On June 18, 1967, Demetria Fernandez, also sold her share on the same fishpond to respondents. The two sales were registered and annotated on an OCT. On November 14, 1969, the co-owners of the subject fishpond and another fishpond executed a Deed of Extrajudicial Partition of two parcels of registered land with exchange of shares. Among the parties to the deed are Antonio, Santiago, Demetria and Angel, all surnamed Fernandez. It was stipulated in the deed that the parties recognize and respect the sale of a portion of said lot previously sold by Antonio and Demetria Fernandez in favor of respondents. This portion was excluded in the partition. Likewise, by virtue of the Deed of Extrajudicial Partition, Angel Fernandez exchanged his share on the other fishpond to the shares of his co-owners on the remaining portion of said lot, making Angel B. Fernandez and respondents as co-owners of the lot. SALES AND LEASE CASES BATCH 5 GIL C. FERNANDEZ Spouses CARLOS and ARMANDO C. and NARCISA

By virtue of the terms and conditions set forth in the Deed, a TCT of the Registry of Deeds of Dagupan City was issued in favor of Angel B. Fernandez and respondents. From the time the latter bought a portion of the fishpond, they had been paying the realty taxes thereon. However, it was Angel B. Fernandez and later on his heirs, petitioners, who remained in possession of the entire fishpond. When Angel B. Fernandez was still alive, respondents sought the partition of the property and their share of its income. Angel Fernandez refused to heed their demand. After the death of Angel Fernandez, respondents wrote petitioners of their desire for partition but this was rejected by petitioners. On August 1, 1996, the RTC rendered judgment in favor of petitioners, ruling that, under Articles 1620 and 1621 of the Civil Code, they were entitled to redeem the property that they had sold to respondents. It further held that the sale was highly iniquitous and void for respondents failure to comply with Article 1623 of the same code. Reversing the RTC, the CA held that petitioners were not entitled to redeem the controversial property for several reasons. First, it was Angel Fernandez who was its coowner at the time of the sale; hence, he was the one entitled to receive notice and to redeem the property, but he did not choose to exercise that right. Second, the execution of the Deed of Extrajudicial Partition was a substantial compliance with the notice requirement under that law. Finally, it was too late in the day to declare the exchange highly iniquitous, when Angel Fernandez had not complained about it. As his successors-in-interest, petitioners were bound by the terms of the agreement. ISSUES: 1) 2) HELD: 1) No. It must be stressed that right of redemption is available only when part of the co-owned property is sold to a third person. Otherwise put, the right to redeem referred to in Article 1620 applies only when a portion is sold to a non-co-owner. In this case, it is quite clear that respondents are petitioners co-owners. The sale of the contested property to Spouses Tarun had long been consummated before petitioners succeeded their predecessor, Angel Fernandez. By the time petitioners entered into the co-ownership, respondents were no longer "third persons," but had already become co-owners of the whole property. A third person, within the meaning of Article 1620, is anyone who is not a co-owner. Whether petitioners are entitled to exercise their right of legal redemption. Whether not the transaction is one of equitable mortgage.

Applying the presently prevailing principles, petitioners predecessor -- Angel Fernandez -- is deemed to have been given notice of the sale to respondents by the execution and signing of the Deed of Extrajudicial Partition and Exchange of Shares. As correctly held by the CA, the law does not require any specific form of written notice to the redemptioner. From such time, he had 30 days within which to redeem the property sold under Article 1623. The Deed was executed November 4, 1969; hence, the period to redeem expired on December 4, 1969. Consequently, the right to redeem was deemed waived, and petitioners are bound by such inaction of their predecessor. The former cannot now be allowed to exercise the right and adopt a stance contrary to that taken by the latter. Otherwise stated, the right to redeem had long expired during the lifetime of the predecessor and may no longer be exercised by petitioners who are his successors-in-interest. 2) No. On its face, a document is considered a contract of equitable mortgage when the circumstances enumerated in Article 1602 of the Civil Code are manifest, as follows: (a) when the price of the sale with the right to repurchase is unusually inadequate, and (b) when the vendor remains in possession as lessee or otherwise. Although it is undisputed that Angel Fernandez was in actual possession of the property, it is important to note that he did not sell it to respondents. The sellers were his co-owners -Antonio and Demetria Fernandez -- who, however, are not claiming that the sale between them was an equitable mortgage. For the presumption of an equitable mortgage to arise, one must first satisfy the requirement that the parties entered into a contract denominated as a contract of sale, and that their intention was to secure an existing debt by way of mortgage. Furthermore, mere alleged inadequacy of the price does not necessarily void a contract of sale, although the inadequacy may indicate that there was a defect in the consent, or that the parties really intended a donation, mortgage, or some other act or contract. Finally, unless the price is grossly inadequate or shocking to the conscience, a sale is not set aside. In this case, petitioners failed to establish the fair market value of the property when it was sold in 1967. Hence, there is no basis to conclude that the price was grossly inadequate or shocking to the conscience. CARLOS ALONZO and CASIMIRA ALONZO, petitioners, vs. APPELLATE COURT and TECLA PADUA, respondents. CRUZ, J.: FACTS: Five brothers and sisters inherited in equal pro indiviso shares a parcel of land registered in 'the name of their deceased parents under an OCT of the Registry of Deeds of Tarlac. On March 15, 1963, one of them, Celestino Padua, transferred his undivided share of the herein petitioners by way of absolute sale. One year later, on April 22, 1964, SALES AND LEASE CASES BATCH 5 INTERMEDIATE

Eustaquia Padua, his sister, sold her own share to the same vendees, in an instrument denominated "Con Pacto de Retro Sale." By virtue of such agreements, the petitioners occupied, after the said sales, an area corresponding to two-fifths of the said lot, representing the portions sold to them. The vendees subsequently enclosed the same with a fence. In 1975, with their consent, their son Eduardo Alonzo and his wife built a semi-concrete house on a part of the enclosed area. On February 25, 1976, Mariano Padua, one of the five coheirs, sought to redeem the area sold to the spouses Alonzo, but his complaint was dismissed when it appeared that he was an American citizen. On May 27, 1977, however, Tecla Padua, another co-heir, filed her own complaint invoking the same right of redemption claimed by her brother. The trial court dismissed the complaint on the ground that the right had lapsed, not having been exercised within thirty days from notice of the sales in 1963 and 1964. Although there was no written notice, it was held that actual knowledge of the sales by the co-heirs satisfied the requirement of the law. In reversing the trial court, the respondent court declared that the notice required by the said article was written notice and that actual notice would not suffice as a substitute. Citing the same case of De Conejero v. Court of Appeals applied by the trial court, the respondent court held that that decision, interpreting a like rule in Article 1623, stressed the need for written notice although no particular form was required. ISSUE: Whether there was a valid notice and if yes, when did the 30-day period of redemption began HELD: Yes. In the face of the established facts, we cannot accept the private respondents' pretense that they were unaware of the sales made by their brother and sister in 1963 and 1964. By requiring written proof of such notice, we would be closing our eyes to the obvious truth in favor of their palpably false claim of ignorance, thus exalting the letter of the law over its purpose. The purpose is clear enough: to make sure that the redemptioners are duly notified. We are satisfied that in this case the other brothers and sisters were actually informed, although not in writing, of the sales made in 1963 and 1964, and that such notice was sufficient. While we do not here declare that this period started from the dates of such sales in 1963 and 1964, we do say that sometime between those years and 1976, when the first complaint for redemption was filed, the other co-heirs were actually informed of the sale and that thereafter the 30-day period started running and ultimately expired. This could have happened any time during the interval of thirteen years, when none of the co-heirs made a move to redeem the properties sold. By 1977, in other words, when Tecla Padua filed her complaint, the right of redemption had already been extinguished because the period for its exercise had already expired.

This should be clearly stressed, we ourselves are not abandoning the De Conejero and Buttle doctrines. What we are doing simply is adopting an exception to the general rule, in view of the peculiar circumstances of this case. The co-heirs in this case were undeniably informed of the sales although no notice in writing was given them. And there is no doubt either that the 30-day period began and ended during the 14 years between the sales in question and the filing of the complaint for redemption in 1977, without the co-heirs exercising their right of redemption. These are the justifications for this exception. G.R. No. 104114; December 4, 1995 LEE CHUY REALTY CORPORATION, petitioner vs. CA and MARC REALTY AND DEVELOPMENT CORPORATION, respondents BELLOSILLO, J.: FACTS: A valuable piece of land in Malhacan, Meycauayan, Bulacan, 24,576 sq.m. covered by OCT No. 0-5290 is disputed. Originally the property was co-owned by Ruben Jacinto to the extent of one-sixth and Dominador, Arsenio, Liwayway, all surnamed Bascara, and Ernesto Jacinto who collectively owned the remaining five-sixths. In 1981, Ruben Jacinto sold his 1/6 pro-indiviso share to LEE CHUY REALTY. In 1989, the Bascaras and Ernesto Jacinto also sold their share to MARC REALTY. LEE CHUY REALTY claims that it was never informed of the existence of the latter sale. MARC REALTY contends otherwise. It insists that LEE CHUY REALTY was verbally notified of the sale and was in fact given a copy of the deed of sale. LEE CHUY REALTY filed a complaint for legal redemption against MARC REALTY and consigned in court a manager's check for 614,400. MARC REALTY insisted that the complaint be dismissed for failure to state a cause of action there being no allegation of prior valid tender of payment nor a prior valid notice of consignation. The trial court ruled in favor of LEE CHUY REALTY. CA reversed. LEE CHUY REALTY filed a motion for reconsideration but it was denied hence the present petition. MARC REALTY contends that prior tender of payment is a condition precedent to the filing of an action in court in order to validly exercise the right of legal redemption. LEE CHUY REALTY however argues that the filing of the action itself is equivalent to a formal offer to redeem, which is a condition precedent to the valid exercise of the right of legal redemption. ISSUE: Is the filing of the action with consignation equivalent to a formal offer to redeem? HELD: YES. LEE CHUY REALTY is sustained. Arts. 1620 and 1623 of the Civil Code on legal redemption provide: 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 SALES AND LEASE CASES BATCH 5

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.
A formal offer to redeem, accompanied by a bona fide tender of the redemption price, is not essential where the right to redeem is exercised through a judicial action within the redemption period and simultaneously depositing the redemption price. The filing of the action itself within the period of redemption is equivalent to a formal offer to redeem. The filing of the action itself is equivalent to a formal offer to redeem. In sum, the formal offer to redeem is not a distinct step or condition sine qua non to the filing of the action in Court for the valid exercise of the right of legal redemption. What constitutes a condition precedent is either a formal offer to redeem or the filing of an action in court together with the consignation of the redemption price within the reglementary period. Petition for certiorari is GRANTED. DOMINICO SONGALIA GR No. L-45164. March 16, 1987 PARAS, J. ETCUBAN vs. CA, JESUS C. SONGALIA & GUADALUPE S.

Facts: Dominico Etcuban inherited a piece of land with an area of approximately 14.0400 hectares together with his co-heirs from their deceased father. Said land was declared in their names as heirs of Eleuterio Etcuban under Tax Declaration No. 06837 and was the subject matter in dispute in SP No. 1192-R of CFI Cebu, a case for settlement of the estate of Eleuterio Etcuban. In said case, Dominico Etcuban, the spouse of the deceased Demetria Initan, and Pedro, Vicente, Felicitas, Anastacio, Froilan, Alfonso, Advincula, Anunciaciori, Jesus, Aguinaldo, surnamed Etcuban were declared co-owners of the property in question. Thereafter, the 11 co-heirs executed in favor of the Songalias 11 deeds of sale of their respective shares in the co-ownership for the total sum of P26,340. The earliest of the 11 deeds of sale was made on Dec. 9, 1963 and the last one in Dec. 1967. In his complaint before the trial court, Dominico alleged that his co-owners leased and/or sold their respective shares without giving due notice to him as a co-owner notwithstanding his intimations to them that he was willing to buy all their respective shares. He further maintained that even upon inquiry from his co-heirs/co-owners, and also from the alleged buyers, he elicited nothing from them. Dominico discovered for the first time the existence of these 11 deeds of sale during the hearing on Jan 31, 1972 of a civil case between him and Jesus Songalia. When he verified the supposed 9

sales with his co-owners, only 3 of them admitted their respective sales. Hence, the filing of the civil case by Dominico for redemption. The Songalias, in denying the material allegations of the complaint, argued that Dominico has no cause of action against them, that the cause of action is barred by prescription or laches, that the complaint is barred by the pendency of a civil case involving the same parties, same subject matter, and same cause of action, that the provisions of the law pertaining to legal redemption have been fully complied with in respect to the sale of the disputed land to them, that Dominico came to know of the sale of the land in Aug. 1968 or sometime prior thereto, that acting on his knowledge, Dominico thru counsel wrote to them about the matter on Aug. 15, 1968, that Jesus Songalia personally went to the office of Atty. Vicente Faelner or counsel for Dominico to inform him of the sale of the disputed land to them, that another demand letter was received on May 30, 1969 by the Songalias from the lawyers of Dominico but on both occasions, no action ws taken by Dominico despite the information Dominico received from the Songalias and that consequently Dominico lost his right to redeem under Art. 1623 of the NCC because the right of redemption may be exercised only within 30 days from notice of sale and Dominico was definitely notified of the sale years ago as shown by the records. Judgment was rendered in favor of Dominico and against the Songalias. CA reversed. In this petition, Dominico contends that his co-heirs should be the ones to give him written notice and not the vendees. Issue Whether Dominico may redeem the subject land. Held: NO. Under Art. 1623, the right of legal pre-emption or redemption shall not be exercised except within 30 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. The written notice was given to Dominico in the form of an answer with counterclaim to the complaint in the aforementioned civil case which appears to have been filed on March 18, 1972. This notice is sufficient to inform the plaintiff about the sale and the reckoning date for the 30-day period commenced upon receipt thereof. No other notice is needed under the premises because it is the substance conveyed rather than the form embodying it that counts. Dominico also deposited with the lower court the redemption price of P26,340 outside the 30-day period of legal redemption. Furthermore, furnishing a copy of the disputed deed of sale to redemptioner was equivalent to the giving of written notice required by law in a more authentic manner SALES AND LEASE CASES BATCH 5

than any other wirting could have done. In this case, the vendors stated under oath in the deeds of sale that notice of sale had been given to prospective redemption in accordance with Art. 1623. A sworn statement or clause in a deed of sale to the effect that a written notice of sale was given to possible redemptioners or co-owners might be used to determine whether an offer to redeem was made on or out of time, or whether there was substantial compliance with the requirement of said Art. 1623. Dominico failed to comply with the requirements of Art. 1623 on legal redemption. Petition dismissed.

10