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HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) and SALVACION S. TRIA, petitioners, vs. VICENTE RODRIGUEZ, respondent. G.R. No.

135634 Facts: Juan andres was the owner of the lot situated in liboton, naga city. The sale was evidenced by a deed of sale. Upon the death of juan andres, ramon san andres was appointed as administrator of the estate, and hired geodetic engineer. Jose panero prepared a consolidated plan of the estate and also prepared a sketch plan of the lot sold to respondent. It was found out that respondent had enlarged the area which he purchased from juan. The administrator sent a letter to the respoindent to vacate the said portion in which the latter refused to do. Respondent alleged that apart from the original lot, which had been sold to him, the latter likewise sold to him the following day the remaining portion of the lot. He alleged that the payment for such would be affected in 5 years from the eecution of the formal deed of sale after a survey is conducted. He also alleged that under the consent of juan, he took possession of the same and introduced improvements thereon. Respondent deposited in court the balance of the purchase price amounting to P7,035.00 for the aforesaid 509-square meter lot. On September 20, 1994, the trial court rendered judgment in favor of petitioner. It ruled that there was no contract of sale to speak of for lack of a valid object because there was no sufficient indication to identify the property subject of the sale, hence, the need to execute a new contract. Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a decision reversing the decision of the trial court. The appellate court held that the object of the contract was determinable, and that there was a conditional sale with the balance of the purchase price payable within five years from the execution of the deed of sale. Issue: whether or not there was a valid sale.
Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010

Held: Civil Code provides that By the contract of 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 conditional. of sale may be absolute or

May 31, 2000

As thus defined, the essential elements of sale are the following: a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject matter; and, c) Price certain in money or its equivalent. 12 As shown in the receipt, dated September 29, 1964, the late Juan San Andres received P500.00 from respondent as "advance payment for the residential lot adjoining his previously paid lot on three sides excepting on the frontage; the agreed purchase price was P15.00 per square meter; and the full amount of the purchase price was to be based on the results of a survey and would be due and payable in five (5) years from the execution of a deed of sale. Petitioner's contention is without merit. There is no dispute that respondent purchased a portion of Lot 1914-B-2 consisting of 345 square meters. This portion is located in the middle of Lot 1914-B-2, which has a total area of 854 square meters, and is clearly what was referred to in the receipt as the "previously paid lot." Since the lot subsequently sold to respondent is said to adjoin the "previously paid lot" on three sides thereof, the subject lot is capable of being determined without the need of any new contract. The fact that the exact area of these adjoining residential lots is subject to the result of a survey does not detract from the fact that they are determinate or determinable. As the Court of Appeals explained: 15 Concomitantly, the object of the sale is certain and determinate. Under Article 1460 of the New Civil Code, a thing sold is determinate if at the time the contract is entered into, the thing is
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capable of being determinate without necessity of a new or further agreement between the parties. Here, this definition finds realization. Thus, all of the essential elements of a contract of sale are present, i.e., that there was a meeting of the minds between the parties, by virtue of which the late Juan San Andres undertook to transfer ownership of and to deliver a determinate thing for a price certain in money. As Art. 1475 of the Civil Code provides: 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. . . .That the contract of sale is perfected was confirmed by the former administrator of the estates, Ramon San Andres, who wrote a letter to respondent on March 30, 1966 asking for P300.00 as partial payment for the subject lot. As the Court of Appeals observed: Without any doubt, the receipt profoundly speaks of a meeting of the mind between San Andres and Rodriguez for the sale. Evidently, this is a perfected contract of sale on a deferred payment of the purchase price. All the prerequisite elements for a valid purchase transaction are present. There is a need, however, to clarify what the Court of Appeals said is a conditional contract of sale. Apparently, the appellate court considered as a "condition" the stipulation of the parties that the full consideration, based on a survey of the lot, would be due and payable within five (5) years from the execution of a formal deed of sale. It is evident from the stipulations in the receipt that the vendor Juan San Andres sold the residential lot in question to respondent and undertook to transfer the ownership thereof to respondent without any qualification, reservation or condition. A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Applying these principles to this case, it cannot be gainsaid that the contract of sale between the
Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010

parties is absolute, not conditional. There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In fact, the sale was consummated upon the delivery of the lot to respondent. 20 Thus, Art. 1477 provides that the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. The stipulation that the "payment of the full consideration based on a survey shall be due and payable in five (5) years from the execution of a formal deed of sale" is not a condition which affects the efficacy of the contract of sale. It merely provides the manner by which the full consideration is to be computed and the time within which the same is to be paid. But it does not affect in any manner the effectivity of the contract. Consequently, the contention that the absence of a formal deed of sale stipulated in the receipt prevents the happening of a sale has no merit. The claim of petitioners that the price of P7,035.00 is iniquitous is untenable. The amount is based on the agreement of the parties as evidenced by the receipt (Exh. 2). Time and again, we have stressed the rule that a contract is the law between the parties, and courts have no choice but to enforce such contract so long as they are not contrary to law, morals, good customs or public policy. Otherwise, court would be interfering with the freedom of contract of the parties. Simply put, courts cannot stipulate for the parties nor amend the latter's agreement, for to do so would be to alter the real intentions of the contracting parties when the contrary function of courts is to give force and effect to the intentions of the parties. The decision of the Court of Appeals is AFFIRMED with the modification that respondent is ORDERED to reimburse petitioners for the expenses of the survey.

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Hernando R. Penalosa vs. Severino Santos G.R. No. 133749 Facts: Severino sold his property to henry. Henry applied for a loan with philam life. As It was already approved pending the submission of certain documents such as the owners duplicate of transfer certificate of title which is in possession of severino. Henry already took possession of the property in question after ejectment of the lessees. He also paid an ernest money of 300,000 under the premise that it shall be forfeited in favor of severino in case of nonpayment. Severino now claims ownership over the property claiming that henry did not pay for the property, therefore there was no sale to speak of. Issue: whether or not there is a contract of sale perfected in this case. Held: there was a perfected contract of sale due to the second deed of sale. The basic characteristic of an absolutely simulated or fictitious contract is that the apparent contract is not really desired or intended to produce legal effects or alter the juridical situation of the parties in any way. 30 However, in this case, the parties already undertook certain acts which were directed towards fulfillment of their respective covenants under the second deed, indicating that they intended to give effect to their agreement. Further, the fact that Severino executed the two deeds in question, primarily so that petitioner could eject the tenant and enter into a loan/mortgage contract with Philam Life, is to our mind, a strong indication that he intended to transfer ownership of the property to petitioner. For why else would he authorize the latter to sue the tenant for ejectment under a claim of ownership, if he truly did not intend to sell the property to petitioner in the first place? Needless to state, it does not make sense for Severino to allow petitioner to pursue the ejectment case, in petitioner's own name, with petitioner arguing
Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010

August 23, 2001

that he had bought the property from Severino and thus entitled to possession thereof, if petitioner did not have any right to the property. Also worth noting is the fact that in the case filed by Severino's tenant against Severino and petitioner in 1989, assailing the validity of the sale made to petitioner, Severino explicitly asserted in his sworn answer to the complaint that the sale was a legitimate transaction. He further alleged that the ejectment case filed by petitioner against the tenant was a legitimate action by an owner against one who refuses to turn over possession of his property. It should be emphasized that the nonappearance of the parties before the notary public who notarized the deed does not necessarily nullify nor render the parties' transaction void ab initio. We have held previously that the provision of Article 1358 of the New Civil Code on the necessity of a public document is only for convenience, not for validity or enforceability. Failure to follow the proper form does not invalidate a contract. Where a contract is not in the form prescribed by law, the parties can merely compel each other to observe that form, once the contract has been perfected.35 This is consistent with the basic principle that contracts are obligatory in whatever form they may have been entered into, provided all essential requisites are present.3 The elements of a valid contract of sale under Art. 1458 of the Civil Code are: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent.37 In the instant case, the second deed reflects the presence of all these elements and as such, there is already a perfected contract of sale. The non-payment of the contract price merely results in a breach of contract for nonperformance and warrants an action for rescission or specific performance under Article 1191 of the Civil Code. Be that as it may, we agree with petitioner that although the law allows rescission as a remedy for breach of contract, the same may not be availed of by respondents in this case. To begin with, it was Severino who prevented full payment of the stipulated price when he refused to deliver the owner's original duplicate title to
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Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 4 . In sum.Philam Life. the only conclusion which can be deduced from the aforesaid circumstances is that ownership of the property has been transferred to petitioner. WHEREFORE. His refusal to cooperate was unjustified. it cannot be said that petitioner breached his obligation towards Severino since the former has always been willing to and could comply with what was incumbent upon him. Thus. He also knew that the property was to be given as security therefor. he signed the deed precisely to enable petitioner to acquire the loan. the petition is GRANTED. because as Severino himself admitted.

SPO1 Gabutin. the sale was adequately proven and. Ratio Decidendi: Supreme Court held that the elements of a contract of sale were present. the Regional Trial Court of Pasay convicted her of both charges. Article III of the Dangerous Drugs Act of 1972 is reduced to an indeterminate sentence of three months of arresto mayor. she had the right to dispose of the prohibited drug. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 November 23. Supreme Court also held that failure to conduct prior surveillance and absence of marked money does not affect the evidence of the prosecution.. there was a meeting of minds upon a definite object and upon the price. accused-appellant Beth is acquitted for the charge of illegal possession of firearms on ground of reasonable doubt. She was also sentenced to an indeterminate penalty of ten years and one day of prision mayor. Hence. received a confidential report from an informant about the rampant trafficking of drugs by Elizabeth Ganguso y Decena a.Issue: PEOPLE OF THE PHILIPPINES v. At the same time. to twelve years and one day. J. though Beth is not the owner. as minimum. She was sentenced to suffer the penalty of life imprisonment and to pay a fine plus costs for the crime involving drugs. Therefore. 1995 Whether the trial court erred in finding that the prosecution has fully met the test of moral certainty as to the guilt of the accused on both charges of violation of section 15. since the shabu only weighs 0. JR. It is sufficient that the members of the operation were accompanied by the informant to the scene. penalty Page 5 . backedup by SPO1 Lumapat. In the case at bar. 115430 DAVIDE.a. with fine and costs for the crime of illegal possession of firearms. ELIZABETH GANGUSO G. No. as minimum. and the challenged decision of the Regional Trial Court of Pasay City is modified.: Facts: Major Juvenile Sulapas. Though she was not in possession of the object of sale. they were able to recover a .38 caliber Paltik revolver from the suspect. Decision: The instant appeal is partly granted. Beth appealed. Officer-incharge. defense presented two witnesses who also claimed that no buy bust operation took place and no revolver was in the possession of the suspect. Several documentary exhibits were presented as evidence to the crime. the drug subject was presented before the court. Beth is presumed to have given her consent by not inquiring as to the meaning of “S” when the officer posed to buy “Php 500 worth of S”. Article 1459 merely requires that the vendor must have the right to transfer ownership of the object sold at the time of delivery.k. Dangerous Drugs Enforcement Section. As modified. PO3s Mendoza and Garcia with SPO3 Fucanan as team leader. Pasay City Police Station. A buy-bust operation was planned with Dennis Vermug acting as poseur-buyer. Beth made statements in her testimony different to that of the police’s: policemen barged into her house.1954 grams. Ownership was thereafter acquired upon her delivery to the men in the alley after her payment of the price. At the trial. Article III of the Dangerous Drugs Act of 1972 and of illegal possession of firearms. "Beth Tomboy". The penalty imposed on her for the violation of section 15. as maximum. denied the revolver recovered from her. to three years of prision correccional. searched the premises and her person without a warrant and. As regards the penalty imposed.R. as maximum. The operation was carried out and they were successful in arresting Beth for the violation of Dangerous Drugs Act of 1972. Nevertheless.

proper penalty should be within the range of arresto mayor to prision correccional.A.A. amending R. and the decision in the case of People v. Simon. presumption of innocence stands for failure of the prosecution to establish such guilt. the maximum term of which shall not exceed the maximum fixed by said law and the minimum shall not be less than the minimum term prescribed by the same. took effect on 31 December 1993. there was no proof that Beth is guilty beyond reasonable doubt for the possession of firearms. Being patently favorable to the appellant. 7659. • R. that amendatory law should be applied retroactively.A. Applying R. ISLAW. Hence. No. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 6 . No.should be prision correccional to reclusion temporal depending upon the quantity. the court shall sentence the accused to an indeterminate sentence. 7659. • Finally. ISLAW: If an offense under the RPC is also punishable by another law. No. 6425.

Del Rosario claims malicious breach of a Deed of Sale. Attorney Santos. out of close friendship between the defendants and the plaintiff. They further alleged that the deed of sale was only an accommodation graciously extended. by agreement with the latter. Finally. Decision: The judgment appealed from is hereby affirmed in toto. The lower court resolved to deny the motion to dismiss. Issue: (As far as it concerns Sales) Whether the sale is valid as to the cause or object of the contract. which defendants own ½ interest thereof. 1981 and convey to plaintiff the 20. the lower court ordered the defendants to execute Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 The case at bar is not a case of a vain hope or expectancy which is void under the law. Aggrieved by the aforesaid decision. defendants alleged that the claim on which the action or suit is founded is unenforceable under the statute of frauds and that the cause or object of the contract did not exist at the time of the transaction. as his attorney’s fees. of land to be taken either from Lot 4 or from Lot 5-A of Custodio’s lots. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. Ratio Decidendi: Supreme Court held that the execution of the deed of sale is valid notwithstanding the lack of any title to the lot by appellants at the time of execution f the deed of sale in favor of appellee as there can be a sale of an expected thing in accordance with Article 1461 of the New Civil Code: Art. Said lot forms part of the several lots belonging to a certain Teofilo Custodio. owns ½ interest thereof. the defendants filed an appeal with the Court of Appeals which certified the records of the case to the Supreme Court for final determination. of which lots. abandonment or otherwise extinguishment of the demand set forth in the complaint.: Facts: DEL ROSARIO v.R.000 sq.000 sq. Due to the failure of spouses Andres to execute the deed after the fulfillment of the condition. After actions by respective parties. of land which is to be segregated from Lot 1. Parties agreed that spouses Andres shall thereafter execute a Deed of Confirmation of Sale in favor of Del Rosario as soon as the title has been released and the subdivision plan of said Lot 1 has been approved by the Land Registration Commissioner. with costs against the appellants. tantamount to waiver. Defendant thereafter filed a motion to dismiss setting up the defenses of lack of jurisdiction of the court over the subject of the action and lack of cause of action as well as the defense of prescription. The sale of a vain expectancy is void. 1461. September 30. m. m. Things having a potential existence may be the object of the contract of sale. hope or Amparo Del Rosario entered into a contract with Attorney Andres Santos and his wife Aurora Santos whereby the latter sold to the former a 20. J. No. The expectant right came into existence or materialized for the appellants actually derived titles from Lot I which subsequently became the object of subdivision. L-46892 GUERRERO. Page 7 .HEIRS OF AMPARO AURORA SANTOS G. hence.

COURT OF APPEALS and LEONARDO TIRO GR No. A contract with a false consideration is not null and void per se.000. never became effective or enforceable. when it does not prejudice a third person and is not intended for any purpose contrary to law. or one where the parties conceal their true agreement. adjoining the area covered in the first deed.The trial court dismissed the complaint hence. As to the nullity for the non-fulfilment of the conditions. hence the said deed is null and void for lack of cause or consideration. 1990 Regalado. By virtue of the deed. Spouses paid P 20. of Forestry directed a consolidation for the renewal of the concession. 48194 March 15. This finding is supported by the contemporaneous and subsequent acts of petitioners and private respondent. its birth or effectivity can take place only if and when the event which constitutes the condition happens or is fulfilled. Under Article 1346 of the Civil Code. said deed produces no effect.: FACTS: Leonardo Tiro executed a Deed of assignment concerning his shares of stock in Timberwealth Corporation on Feb. JAVIER vs. When a contract is subject to a suspensive condition. morals. the Dir. 15. which had for its object the transfer of said right to petitioners.000 shall be paid as soon as the application is approved. It appeared in record that the Timberwealth Corporation was a non-existent organization. Since private respondent did not obtain that approval. under the second paragraph of Article 1461 of the Civil Code.Spouses filed their answer arguing therein the nullity of the deeds and the return of the payments made by them. since private respondent never acquired any right over the additional area for failure to secure the approval of the Bureau of Forestry. Tiro appealed to CA.On July 16. Moreover. J. stated in the deed itself.JOSE M. RULING: Decision Modified. On Nov. CA reversed the judgment. JAVIER and ESTRELLA F. The deed of assignment of February 15. good customs. ISSUE: W/N THE TWO DEEDS ARE NULL AND VOID. a relatively simulated contract.00. public order or public policy binds the parties to their real agreement. In this case. spouses Javier consolidated with the other adjoining concessionaires. The true cause or consideration of said deed was the transfer of the forest concession of private respondent to petitioners for P120. the payment therefor of P 30. It is settled that the previous and simultaneous and subsequent acts of the parties are properly cognizable indicia of their true intention. Petitioners contend that the deed of assignment conveyed to them the shares of stocks of private respondent in Timberwealth Corporation. the agreement executed therefor.000 as initial payment and the balance to be paid in instalments as agreed. SC agrees. Tiro filed a complaint for failure of the spouses to pay the remaining balance. THE FORMER FOR TOTAL ABSENCE OF CONSIDERATION AND THE LATTER FOR NON-FULFILLMENT OF CONDITIONS. the efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. as Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 8 . 1968. 1966 is a relatively simulated contract which states a false cause or consideration. subject of a pending application. 18. 28. Their acts reveal that the cause stated in the questioned deed of assignment is false. Petition to review filed with SC. Since said corporation never came into existence. The parties entered into another deed on Feb.000. 1966. The efficacy of said deed of assignment is subject to the condition that the application of private respondent for an additional area for forest concession be approved by the Bureau of Forestry. 1966 in favor of spouses Jose and Estrella Javier and for the amount of P 120. 1966 for the addt’l forest concession. no share of stocks was ever transferred to them. As agreed.

As stipulated in the trading contract. the transaction is null and void. The trading contract signed Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 9 . of Hongkong . in connection with such solicitation or acceptance of orders. COMMODITIES. vs. A commodity futures contract refers to an agreement to buy or sell a specified quantity and grade of a commodity at a future date at a price established at the floor of the exchange. ISSUE: W/N THE TRADING CONTRACT IS NULL AND VOID AS IT APPEARS TO BE A SPECIE OF GAMBLING RULING: Petition Dismissed. The trial court found and rendered the trading contract a specie of gambling and therefore null and void. The loser may recover what he has paid. the loser. which in turn must place the customer's orders with the Tokyo Exchange. 1993 Campos. petition for certiorari with SC. securities or shares of stock is entered into with the intention that the difference between the price stipulated and the exchange or market price at the time of the pretended delivery shall be paid by the loser to the winner. customer's orders shall be directly transmitted by the petitioner as broker to its principal. Futures Commission Merchant/Broker refers to a corporation or partnership. engaged in commodity futures trading. Commodities.. GR No. guarantee or secure any trade or contract that results or may result therefrom. CA upheld the judgment. Inc. Susan may withdraw anytime and she did. We draw the conclusion that no actual delivery of goods and commodity was intended and ever made by the parties. so petitioner would have to pay private respondent the "margin". By delivery is meant the act by which the res or subject is placed in the actual or constructive possession or control of another. in Hongkong nor were the orders forwarded to the Tokyo Exchange. Jr. J. The petitioner would keep the money or collect the difference from the private respondent. is a contract for the sale of products for future delivery. Hence. As per terms of the trading contract. she was able to get only P 470. From P 800.000.ONAPAL PHILS. But if private respondent was wrong in her speculation then she would emerge as the loser and the petitioner. Frankwell Enterprises Ltd. securities or property (or extends credit in lieu thereof) to margin.000 Susan invested. Its Account Executive Elizabeth Diaz invited Susan Chua to invest in commodity futures trading and they subsequently entered into a commodity futures contract without explanation to Susan as to the risks involved. accepts any money. the parties merely speculated on the rise and fall in the price of the goods/commodity subject matter of the transaction.: FACTS: ONAPAL Phils. the winner. which must be registered and licensed as a Futures Commission Merchant/Broker and is engaged in soliciting or in accepting orders for the purchase or sale of any commodity for future delivery on or subject to the rules of the contract market and that. but where no such delivery is actually made. If private respondent's speculation was correct. complaint was filed with the trial court. in which either seller or buyer may elect to make or demand delivery of goods agreed to be bought and sold. she would be the winner and the petitioner. There is no evidence that the orders and money were transmitted to its principal Frankwell Enterprises Ltd. In the realities of the transaction. 90707 by the parties. Hence. is a commission merchant/broker licensed by SEC. This is clearly a form of gambling provided for with unmistakeable certainty under Article 2018 If a contract which purports to be for the delivery of goods. ONAPAL received the customer's orders and private respondent's money. INC. THE COURT OF APPEALS and SUSAN CHUA February 1.

a contract of sale becomes a binding and valid contract upon the meeting of the minds as to Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 price. on the other hand aver (1) that the sales were with sufficient considerations and made by defendants parents voluntarily. As a consensual contract. Felicitas. If there is no meeting of the minds of the parties as to the price. despite the manner of payment. Article 1470 of the Civil Code further provides: Art. all surnamed Joaquin. mistake or undue influence. respondent siblings have also fully paid the price to their respondent father. Fe. the Court of Appeals affirmed the decision of the RTC. Article 1471 of the Civil Code states that if the price in a contract of sale is simulated. (1) A contract of sale is not a real contract. and (3) the deeds of sale do not reflect and express the true intent of the parties Defendants. the contract of sale is valid. Nora. told her that he would transfer a lot to her through a deed of sale without need for her payment of the purchase price. and with full knowledge of the consequences of their deeds of sale. To prove simulation. Except in cases specified by law. but a consensual contract. and (2) that the certificates of title were issued with sufficient factual and legal basis. Artemio. Petitioners then filed an action the Regional Trial Court (RTC) of Makati seeking to declare as null and void ab initio the deeds of sale executed by Leonardo and Feliciana claiming that: (1) here was no actual valid consideration for the deeds of sale. GR No. Payment of the price goes into the performance of the contract. On the other hand. Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. because the price stipulated in the contract is simulated. As of the filing of the complaint. or even the breach of that manner of payment. the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Court of Appeals November 20. J. Not only did respondents’ minds meet as to the purchase price. The RTC dismissed the case. If the real price is not stated in the contract. Clarita. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract. the properties are more than three-fold times more valuable than the measly sums appearing therein. but the real price was also stated in the Deeds of Sale. the sale is void. lesion or inadequacy of cause shall not invalidate a contract. Issues: (1) Whether there the deeds of sale are void for lack of consideration (2) Whether the deeds of sale are void for gross inadequacy of price Held: The petition is without merit. Failure to pay the consideration is different from lack of consideration. Emma and Natividad as well as of defendants Fidel. The trial court did not find the allegation of absolute simulation of price credible.Sps. unless there has been fraud. Gross inadequacy of price does not affect a contract of sale. On appeal. It is not the act of payment of price that determines the validity of a contract of sale. Tomas. 1470. Bernardo Buenaventura and Consolacion Joaquin vs. 1355. 126376 Facts: Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion. (2) Articles 1355 of the Civil Code states: Art. Leonardo and Feliciana executed several deeds of sale in favour of their co-defendant children. except as may Page 10 . then the contract is void. in good faith. 2003 First Division Ponente: Carpio. Payment of the price has nothing to do with the perfection of the contract. (2) assuming that there was consideration in the sums reflected in the questioned deeds. declaring that the deeds of sale were all executed for valuable consideration. and Gavino. If there is a meeting of the minds of the parties as to the price. petitioners presented Emma Joaquin Valdozs testimony stating that their father. Petitioners failure to prove absolute simulation of price is magnified by their lack of knowledge of their respondent siblings financial capacity to buy the questioned lots. then the contract of sale is valid but subject to reformation. respondent Leonardo Joaquin.

or that the parties really intended a donation or some other act or contract. the Deeds of Sale. Santiago Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 11 . All the respondents believed that they received the commutative value of what they gave. Labagala vs. Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code which would invalidate. there is no requirement that the price be equal to the exact value of the subject matter of sale. Indeed.indicate a defect in the consent. or even affect.

On April 20. the sale is void. Moreover.000 for the sale of the subject property because petitioner was unemployed and without any visible means of livelihood at the time of the alleged sale. the respondents filed an action before the Regional Trial Court of Manila seeking to recover Jose’s 1/3 share over the property. petitioner admittedly did not pay any centavo for the property. Jose died intestate. Thereafter. On appeal. his sisters Nicolasa and Amanda Santiago (respondents). They allege that it is highly improbable for petitioner to have paid the supposed consideration of P150. Consent of the contracting parties is among the essential requisites of a contract. claims that she is the daughter of Jose and argued that the purported sale of the property was in fact a donation to her. including one of sale. which makes the sale void. being a minor at the time. 1981. Jose did not have the right to transfer ownership of the entire property to petitioner since 2/3 thereof belonged to his sisters. Article 1471 of the Civil Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Dizon vs.December 4. Clearly. No. Court of Appeals G. Alleging that Jose had fraudulently registered it in his name alone. the trial court in that case decided in favor of the sisters. recognizing their right of ownership over portions of the property. 132305 Code provides: If the price is simulated. who died intestate and without issue. Santiago owned a parcel of land. Facts: Jose T. on the other hand. but said deed constitutes a valid donation. sued Jose for recovery of 2/3 share of the property. 122544 302 SCRA 288 Page 12 . the Court of Appeals reversed the decision of the RTC Issue: Whether the purported deed of sale was valid Held: There is no valid sale. The RTC held that while there was indeed no consideration for the deed of sale executed by Jose in favor of petitioner. but the act may be shown to have been in reality a donation. or some other act or contract. Respondents claim that Jose’s share in the property ipso jure belongs to them because they are the only legal heirs of their brother. Petitioner Labagala. Petitioner could not have given her consent to the contract. GR No. 2001 Second Division Ponente: Quisumbing.R. there is no valid sale in this case. J. absent which there can be no valid contract.

lessee filed for an action for specific performance to compel the execution of a deed of sale pursuant to the option to purchase and the receipt of the partial consideration given to Alice Dizon and for the fixing of period to pay the balance. Heirs of San Juan Andres vs. The filing of lessor of a suit with the RTC did not divest the City Court of its jurisdiction to take cognizance over the ejectment case. The term stipulated in the contract of lease with option to buy is just one (1) year. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 2. There was no perfected contract of sale between the parties. During that period the respondent was granted an option to purchase the land. Thereafter. when the lessee tendered the amount on 1975.R. Issues: Whether the Quezon City court has jurisdiction over the ejectment case? Whether the money given constitutes partial consideration to the option to purchase the land? Whether or not there is a perfected contract of sale? Ruling: 1. there was an implicit renewal of the contract reviving all the terms in the original contract which are only germane to the lessee’s rights of continued enjoyment of the property leased. Such petition was denied. Inc (lessee) entered into a Contract of Lease with Option to Buy with petitioners (lessors) involving a land situated at Quezon City for one (1) year. Private respondent Overland Express Lines.The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. Since the lessee did not purchase within the stipulated one (1) year and afterwhich still kept possession thereof. Respondent Court of Appeals rendered a decision upholding the jurisdiction of City Court and concluding that there was a perfected contract of sale between the parties due to the said partial payment. The option to purchase is not deemed incorporated. The City Court rendered judgment ordering lessee to vacate the leased premises and to pay the rentals in arrears and damages with interests.FIRST DIVISION Ponente: Martinez. J Facts: On 1974. the lessee gave the money to Alice Dizon in an attempt to resurrect the lapsed option. 1976. for failure of lessee to pay the rentals the petitioners filed an action for ejectment. 3. Petitioner’s motion for reconsideration was denied by the respondent Court. Having failed to exercise the option within that period. the lessee cannot enforce its option to purchase anymore. there was no showing that petitioners consented to the act of Alice Dizon nor authorized her to act on their behalf with regard to her transaction with the lessee. 135634 332 SCRA 769 SECOND DIVISION Page 13 . the suit for specific performance to enforce the option to purchase was filed only on 1985 ore more than ten (10) years after accrual of the cause of action. Even assuming that such option still subsists. HTP. The petitioneres had a cause of action to institute an ejectment suit against the lessee with the City Court thus the city court (now MTC) has jurisdiction over it. Lessee filed a petition enjoining the enforcement of said judgment and dismissal of the case for lack of jurisdiction. one of the essential elements for a contract of sale to be perfected is lacking: consent. Here. In herein case. Rodriguez G. Therefore.

Ramon San Andres was appointed judicial administrator of his estate. it is binding and the court can only give force and effect to the intentions of the parties. J Facts: Juan San Andres sold a portion of his land to respondent Vicente Rodriguez evidenced by a Deed of Sale. petitioner.. BOY. 4. Whether the respondent is barred by prescription and laches from enforcing the contract? Rulings: 1. thtey discovered that the respondent had enlarged the area which he purchased from the late Juan. Ramon engaged the serviced of geodetic engineers to survey the lot. Since there was no Deed of Sale yet and the respondent wants to pay the purchase price. the subject lot is capable of being determined without the need of any new contract. he deemed it proper to deposit it in the Court. Consignation is proper only in cases where an existing obligation is due. Respondent further alleged that the full payment of the additional lot would be effected within five (5) years from the execution of the deed of sale after a survey is conducted over said property. Respondent attached to his answer a receipt signed by the late Juan as proof of the purchase. respondent refused to do so claiming that he purchased the same from the late Juan with both parties treating the two lots as one who parcel of land. The contract of Sale can be gainsaid to be absolute because there is no reservation of ownership. Thus. RAMOS Page 14 . Respondent Court of Appeals reversed the decision rendered by the Trial Court. However.Ponente: Mendoza. In herein case since there is no deed of sale yet thus the period when the purchase price should be paid has not commenced yet which makes it not yet due and demandable. The stipulation “payment of full consideration based on a survey shall be due and payable in five (5) years from the execution of deed of sale” is not a condition which affects the efficacy of the contract. The trial court rendered judgement in faovr of the petitioner and ruled that there was no contract of sale because there is no valid object because there is no sufficient indication. Ramon died and was replaced by son Ricardo. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 LAGRIMAS A. Respondent thereafter deposited in the court the balance of the purchase price. Issues: Whether the Court erred in holding that there is a valid contract of sale? Whether the Court erred in holding that the consignation is valid? Whether the untenable? amount of consignation is Since the lot subsequently sold to respondent is said to adjoin the “previously paid lot” on three sides thereof. From such survey. There is a valid Contract of Sale because all the essential elements are present. COURT OF APPEALS. Prescription does not apply. The amount is based on the agreement which is the law between the parties. Vicente also died and was substituted by his heirs. ISAGANI P. Ramon then send a letter demanding the respondent to vacate the portion allegedly encroached by him. The receipt described the lot as “previously paid lot”. vs. Thus. It merely provides for the manner of computation of payment. In herein case. petitioner’s contention that there is no determinate object is without merit. The court is not erroneous because it thereafter ordered the execution of deed and the acceptance of the deposit. Upon the death of Juan. 2. While the case is pending. 3.

In this case. the ownership of the property sold passes to the vendee upon the actual or constructive delivery thereof. supports private respondents’ right of material possession over the subject property.500 (representing P15.200.R. they initiated this action for ejectment against Lagrimas.000. spouses Isagani P. therefore. 2004 G.000. Boy (Lagrimas). without any provision that title to the property is reserved in the vendor until full payment of the purchase price.500 as interest from September 1984 to May 1988) had been paid. but she refused to do so. They acquired the said properties from Lagrimas who sold the same to them by virtue of a Deed of Absolute Sale. Singalong. However. J. Hence. Time came when they needed the said house as they were only renting their own residence.. that of the said price. Erlinda Ramos and Lagrimas executed an agreement (Kasunduan) acknowledging that the subject parcel of land. because they were not in immediate need of the premises. CA gave weight to the argument of private respondents that Erlinda Ramos was merely tricked into signing the Kasunduan. Article 1498 of the Civil Code provides that when the sale is made through a public instrument. as in this case. the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. with the Metropolitan Trial Court of Manila. had been sold by Lagrimas to the spouses Ramos for P31. In their Complaint. GASINGAN RAMOS. filed an action for ejectment against Lagrimas A. the Deed of Absolute Sale does not contain any stipulation against the constructive delivery of the property to private respondents. 125088 FIRST DIVISION AZCUNA. It has been established that petitioner sold the subject property to private respondents for the price of P31. No.000 cash loan plus P7. 1993. the spouses alleged that they are the owners of a parcel of land and the house existing thereon at 1151 Florentino Torres St. In addition. By the contract of sale. if from the deed the contrary does not appear or cannot clearly be inferred. They then demanded that Lagrimas vacate the subject premises. Ruling: The Court of Appeals did not give credence to the statement in the Kasunduan that private respondents paid only P22. which was executed on June 4. and to deliver.: Facts: On September 24. Sometime in May 1988. Manila. Under Article 1477 of the Civil Code. and that possession of the property would be transferred to the spouses Ramos only upon full payment of the purchase price. In the absence of stipulation to the contrary. Page 15 .000. Issue: WHETHER OR NOT THE COURT OF APPELS GRAVELY ERRED AND ABUSED ITS DISCRETION IN NOT INTERPRETING THAT THE "KASUNDUAN" EXECUTED BY AND Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 BETWEEN PETITIONER (DEFENDANT) AND PRIVATE RESPONDENT (PLAINTIFF) SUPERSEDES THE DEED OF SALE WHICH HAS NOT BEEN CONSUMMATED. Lagrimas requested for time to vacate the premises. as evidenced by the Deed of Absolute Sale. that the balance of P8. obligated herself to transfer the ownership of. the due execution of which was not controverted by petitioner. Ramos and Erlinda Gasingan Ramos. April 14. NO. together with the upper portion of the house thereon. and they agreed thereto. petitioner (as vendor). the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract.500 would be paid on the last week of August 1988.500 to petitioner since her indebtedness already reached P26. the subject property to private respondents (as vendees) after they paid the price of P31. The Deed of Absolute Sale. The contract is absolute in nature.and ERLINDA respondents. the sum of P22. 1986.

SPS. petitioners. HENRY CO AND ELIZABETH CO AND MELODY CO. vs. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 16 .

000. A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. Metro Manila. .00 to complete the sum owed of $100.R. 1984.00. 1985. although the period of payment had already expired. The COS were of the mistaken belief that CUSTODIO had lost her "option" over the Beata property when she failed to pay the remaining balance of $70.000. subject of the sale at a price of $100. The property involved has not been Page 17 Ruling: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 . One week thereafter. Custodio's offer to purchase the Beata property.00 is payable in two payments $40. Even the manner of payment of the price was set forth in the letter. plaintiff paid to the defendants the amounts of $1. Muntinlupa. earnest money given in a sale transaction is considered part of the purchase price and proof of the perfection of the sale. ADORACION CUSTODIO. for and in consideration of the sum of $100. From that moment the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. Accordingly. 1985. On January 25. J.00 pursuant to their August 8. 1986. Atty.000. 1986 letter. New Alabang Village.00 and not receiving any response thereto. 1985 letter sent by the COS through their lawyer to the CUSTODIO reveals that the parties entered into a perfected contract of sale and not an option contract.00 paid by CUSTODIO pursuant to the "option" granted to her over the Beata property? NO. plaintiff entered into a verbal contract with defendant for her purchase of the latter's house and lot located at 316 Beata St.000. sometime on October 9.000.000. 112330 THIRD DIVISION GONZAGA-REYES. and (3) price certain in money or its equivalent. As evidenced by the March 15. No. The March 15.000.: Facts: . 1985. When the COS refused to accept said payment and to deliver the Beata property. respondents. rescission creates the obligation to return the things which were the object of the contract but such rescission can only be carried out when the one who demands rescission can return whatever he may be obliged to restore. informing her that she has lost her "option to purchase" the property subject of this case and offered to sell her another property. Defendant's counsel. as partial payment of the purchase price. 1999 G. plaintiff paid to the defendant Melody Co in the United States.00 and P40.000.00 was accepted by the COS. CUSTODIO immediately sued for the rescission of the contract of sale and prayed for the return of the $30.000. . represented by her Attorney-in-fact. demanding that she pay the balance of $70. August 17.000.00 was already received by the COS. CUSTODIO acted well within her rights when she attempted to pay the remaining balance of $70.000.00.COURT OF APPEALS AND MRS.000. said lawyer wrote another letter to plaintiff dated August 8.00 as earnest money. Under Article 1482 of the Civil Code.000.00 on January 5. said earnest money to be deducted from the total purchase price. Under Article 138518 of the Civil Code. Leopoldo Cotaco.00 she had initially paid. in order that the same may be reserved for her purchase.. The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds. Earnest money in the amounts of US$1. wrote a letter to the plaintiff dated March 15.000.00 as the contract was still subsisting at that time.000. TRINIDAD KALAGAYAN. the sum of $30. (2) determinate subject matter. all three elements of a contract of sale are present in the transaction between the petitioners and respondent.00 on December 4.000. Issue: Whether or not the Court of Appeals erred in ordering the spouses Co (COS) to return the $30. The purchase price of $100. 1985 letter.00 and P40. . 1984 and the balance of $60.

The price received by the appellants has to be returned to the appellee as aptly ruled by the lower court. for such is a consequence of rescission.delivered to the appellee. RESPONDENTS. which is to restore the parties in their former situations. INC. VS. SAN MIGUEL PROPERTIES PHILIPPINES. She has therefore nothing to return to the appellants. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 18 .. PETITIONER. SPOUSES ALFREDO HUANG AND GRACE HUANG.

Thus on August 16. Isidro Sobrecarey. we will negotiate on the terms and conditions of the purchase. Dauz informing her that because the parties failed to agree on the terms and conditions of the sale despite the extension granted by San Miguel. Capinpin St. it shall be considered as part of the price and proof of the perfection of the contract. 1994. the complaint did not allege a cause of action because there was no meeting of the minds between the parties and therefore.000 would be given as earnest money and the balance would be paid in 8 equal monthly installments from May to December 1994. On February 21. subject to the following conditions: “1. the alleged “exclusive option” of respondent spouses lacked a consideration separate and distinct from the purchase price and was thus unenforceable. through its president. and (2) the documentary evidence in the records show that there was perfected contract of sale. 738 square meters at the corner of Meralco Avenue and Gen. no perfected contract of sale. 1994.000 shall be refundable to us in full upon demand. Barrio Oranbo.140. However. through their counsel. Federico Gonzales. Respondents presented the amount merely as deposit of what would eventually become earnest money or down payment should a Page 19 Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 . Respondent spouses. The offer was made to Atty. the CA relied on the following findings: (1) earnest money was allegedly given by respondents and accepted by SMPPI through its vice-president and operations manager.” On July 7. In the event that we do not come to an agreement on this transaction. the SC holds that respondents did not give the ₱1 Million as earnest money as contemplated in Art. 1994. the said amount of ₱1. 2000] First Division Facts: Petitioner San Miguel Properties Philippines. RTC granted the motion to dismiss but the CA reversed it on appeal and held that all the requisites of a perfected contract of sale had been complied with as the offer made in connection with which the earnest money in the amount of ₱1 Million was tendered by respondent spouses had already been accepted by SMPPI. Dauz signified her clients’ interest in purchasing the properties for the amount for which they were offered by petitioner. 2. In a letter dated March 24. it is already returning the amount of ₱1 Million given as “earnest-deposit”. is a domestic corporation engaged in the purchase and sale of real properties. The court cited Art.000 in cash. 3. We will be given the exclusive option to purchase the property within 30 days from date of your acceptance of this offer. In holding that there is perfected contract of sale.” Issue: Whether or not the contract of sale was perfected. SMPPI will secure the necessary management and board approvals. Ruling: The contract of sale was not perfected. Pasig City. and we initiate the documentation if there is mutual agreement between us. wrote Atty.000. San Miguel. Inc. With regard to the alleged payment and acceptance of the earnest money. 1482. petitioner refused the counter-offer. This motion was opposed by respondent spouses. under the following terms: the sum of ₱500. Atty. Dauz thus wrote San Miguel expressing the interest of respondent spouses. Parts of its inventory are two parcels of land totaling to 1.[GRN 137290 July 31. respondent spouses filed a complaint for specific performance against SMPPI but the latter moved to dismiss said complaint alleging that: 1. Atty. 1994. and 2. demanded the execution of the Deed of Sale and attempted to return the earnest-deposit but SMPPI refused to accept it on the ground that the option to purchase had already expired. the properties were offered for sale for ₱52. 1482 of the Civil Code which provides that “whenever earnest money is given in a contract of sale.. During said period. Helena Dauz who was acting for respondent spouses as undisclosed principals.

VS. was just an privilege was there was a payment.contract of sale be made by them. The amount was thus given not as part of the purchase price and proof of the perfection of the contract of sale but only as guarantee that respondents would not back out of the sale. RESPONDENT. [GRN 139173 February 28. GODOFREDO CAGUIAT. 2007]First Division Facts: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 20 . They even described it as “earnest-deposit”. No enforced by SPOUSES ONNIE SERRANO AND AMPARO HERRERA. All that respondents had option to buy the properties which not exercised by them because failure to agree on the terms of contract of sale may thus be respondents. PETITIONERS.

GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIÑAS… MR. “Clearly. the parties would stand as if the conditional obligation had never existed.X Creative Imaging. The trial court ruled that there was already a perfected contract of sale between the parties and ordered the petitioners to execute a final deed of sale in favor of respondent.” PCI Leasing and Finance Inc. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership. ownership over the property was retained by petitioners and was not to pass to respondent until full payment of the purchase price. “In this case. Respondent thus filed a complaint for specific performance and damages with the RTC of Makati. In this case. through counsel. A few days after.500 per square meter. petitioners retained possession of the certificate of title of the lot. it shall be considered as part of the price and proof of the perfection of the contract. “A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor’s obligation to transfer title is subordinated to the happening of a future and uncertain event. The suspensive condition is commonly full payment of the purchase price. the “Receipt for Partial Payment” shows that the true agreement between the parties is a contract to sell. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. Second. but only a transfer after full payment of the purchase price. respondent. so that if the suspensive condition does not take place. Issue: Whether or not there was a contract of sale. Ruling: The transaction was a contract to sell.000) anytime. 1990 and they are canceling the transaction and that respondent may recover the earnest money (₱100. J Facts: -On December 4. respondent cannot compel petitioners to transfer ownership of the property to him. On March 23. However. informed respondent in a letter that Amparo Herrera would be leaving for abroad on or before April 15. Petitioners also wrote him stating that they already delivered a manager’s check to his counsel in said amount. through his counsel. DEED OF SALE ON THIS DATE. Respondent then gave ₱100.” there can be no other interpretation than that they agreed to a conditional contract of sale. July 12.000 as partial payment. “First. the agreement between the parties was not embodied in a deed of sale. Giraffe. 1900. Inc. wrote petitioners informing them of his readiness to pay the balance of the contract price and requesting them to prepare the Deed of Sale. Petitioners. 1990. whereby the former Page 21 “When petitioners declared in “Receipt for Partial Payment” that they – the “RECEIVED FROM MR. petitioner PCI LEASING and respondent GIRAFFE entered into a Lease Agreement. 1996.Petitioners are registered owners of a lot located in Las Piñas. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23. “It is true that Article 1482 provides that whenever earnest money is given in a contract of sale. The Court of appeals affirmed said decision. this article speaks of earnest money given in a contract of sale. AND THAT WE WILL EXECUTE AND SIGN THE FINAL Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 . 2007 GR 142618 First Division Garcia. the earnest money was given in a contract to sell. consummation of which is subject only to the full payment of the purchase price. Third. Vs. respondent offered to buy the lot and petitioners agreed to sell it at ₱1.

as last amended by R. Article 1485 of the Civil Code should apply.The demand went unheeded. Issue: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Whether the agreement between PCI Leasing and GIRAFFE is governed by Articles 1484 and 1485 of the Civil Code? Held: Petition denied.motion for reconsideration was denied. adding that the agreement between the parties is in reality a lease of movables with option to buy. PCI LEASING addressed a formal pay-or-surrender-equipment type of demand letter dated February 24.A. however. 1998 to GIRAFFE. And following a threemonth default. . to deprive the respondent of possession of the leased equipment. pursuant to Article 1484 of the Civil Code on installment sales of personal property.Instead of an answer.00. and is outside the application and coverage of the Recto Law. It may be.500. R. in order that the provisions of the Recto Law may be circumvented. the contracts in question are subject to the provision that when the lessor in such case “has chosen to deprive the lessee of the enjoyment of such personal property. PCI prayed for the issuance of a writ of replevin for the recovery of the leased property . GIRAFFE defaulted in its monthly rentalpayment obligations. -Being leases of personal property with option to purchase as contemplated in the above article. long been aware of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid. “agreement to the contrary being null and void.A year into the life of the Lease Agreement.PCI Leasing on the other hand maintains that its contract with GIRAFFE is a straight lease without an option to buy. Paragraph (3).petitioner contends that the financial leasing arrangement it concluded with the respondent represents a straight lease covered by R. the petitioner waived its right to bring an action to recover unpaid rentals on the said leased items. . to be sure. otherwise known as Financing Company Act of 1998.” -In choosing.The present case reflects a situation where the financing company can withhold and conceal up to the last moment . . which we are hereunder re-reproducing.00 and one (1) unit of Oxberry Cinescan 6400-10 worth P6. then it should return them. the trial court issued a writ of replevin. cannot be any Page 22 . -GIRAFFE asserts in its Motion to Dismiss that the civil complaint filed by PCI LEASING is proscribed by the application to the case of Articles 1484 and 1485. 8556.leased out to the latter one (1) set of Silicon High Impact Graphics and accessories worth P3.000. .Upon PCI LEASING’s posting of a replevin bond. GIRAFFE filed a Motion to Dismiss. No. No. does not necessarily argue against the idea that what the parties are into is not a straight lease. supra. foremost of which is the declarations made in its demand letter to the respondent. that the basic “lease agreement” does not contain a “purchase option” clause. through replevin.” “he shall have no further action” against the lessee “for the recovery of any unpaid balance” owing by the latter. -GIRAFFE argues that. This has been made manifest by the actions of the petitioner itself. Trial Court’s decision affirmed Ratio: -The PCI LEASING.A. To the petitioner.A. but a lease with option to purchase. . then it could keep the equipment for its own.GIRAFFE lease agreement is in reality a lease with an option to purchase the equipment. Article 1484 in relation to Article 1485 of the Civil Code. Being so. the Financing Company Act.its intention to sell the property subject of the finance lease. hence this petition for review. as petitioner pointed out. 5980 defines and authorizes its existence and business. if not.arguing that the seizure of the two (2) leased equipment stripped PCI LEASING of its cause of action. paving the way for PCI LEASING to secure the seizure and delivery of the equipment covered by the basic lease agreement. -the trial court granted GIRAFFE’s motion to dismiss . PCI LEASING is barred from further pursuing any claim arising from the lease agreement and the companion contract documents. No. of the Civil Code. There could be no other explanation than that if the respondent paid the balance. . 5980.900. This is clearly an option to purchase given to the respondent.PCI Leasing instituted a case against GIRAFFE. This Court has. The absence. .00.

the petitioner can still sue upon its claim. Not only to the respondent. Court of Appeals et. By virtue of the writ of seizure issued by the trial court. In a contract of sale of personal property the price of which is payable in installments. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Article 1485 was fulfilled in this case by the filing by petitioner of the complaint for a sum of money with prayer for replevin to recover possession of the office equipment. 1485. -As we articulated in Elisco Tool Manufacturing Corp. but those similarly situated who may fall prey to a similar scheme. Any agreement to the contrary shall be void. provide another reason why we must hold the petitioner to its word as embodied in its demand letter. v.47). The imperatives of honest dealings given prominence in the Civil Code under the heading: Human Relations. if one has been constituted. the vendor may exercise any of the following remedies: xxx xxx xxx (3) Foreclose the chattel mortgage on the thing sold. Else. the petitioner has effectively deprived respondent of their use. May 31. by force of the Recto Law. ART. the very word “or” as used in the letter conveys distinctly its intention not to claim both the unpaid balance and the equipment. Court of Appeals. The exercise of one bars the exercise of the others. the respondent. 1999 GR 109966 Second Division Mendoza J. when the lessor has deprived the lessee of the possession or enjoyment of the thing. 1484.clearer. a situation which. we cannot allow this to happen. and the amount claimed by the petitioner as sued upon herein (for a total of P21. On Page 23 . It is not difficult to discern why: if we add up the amounts paid by the respondent. then it would end up making an instant killing out of the transaction at the expense of its client. al. This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of the same Article 1485. Vs. We cannot allow the petitioner to Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 renege on its word. The Recto Law was precisely enacted to prevent this kind of aberration. In this case. the residual value of the property recovered. we would witness a situation where even if the respondent surrendered the equipment voluntarily. Elisco Tool Manufacturing Corp. This would be most unfair for the respondent. Facts: -Private respondent Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as head of its cash department. due to considerations of equity. Yet more than that. the remedies provided for in Article 1484 of the Civil Code are alternative. he shall have no further action against the purchaser to recover any unpaid balance of the price.029. in turn precludes the former from maintaining an action for recovery of “accrued rentals” or the recovery of the balance of the purchase price plus interest.779. Moreover. public policy and justice. should the vendee's failure to pay cover two or more installments. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy. ART. not cumulative.

After taking possession of the car. -On the same day.that. Held: The decision of the Court of Appeals is AFFIRMED with costs against petitioner. oil. at the end of FIVE (5) year period or upon payment of the 60th monthly rental. The company retains ownership of the motor vehicle until it shall have been fully paid for.trial court rendered its decision in favor of the private respondent . he shall for the duration of the lease contract. repair and maintenance. 1980. Elisco Tool ceased operations. (c) in holding that respondents had fully paid their obligations.petitioner appealed to CA. Elisco shall have the full right to lease the vehicle to another EMPLOYEE. . and that in case private respondents could not return the car. retention of registration of the car in the company’s name is only a form of a lien on the vehicle in the event that the employee would abscond before he has fully paid for it.000. 1984. hence the petition for review on certiorari Issue/s: Whether the Court of Appeals erred (a) in disregarding the admission in the pleadings as to what documents contain the terms of the parties’ agreement. private respondent executed a promissory note which states his promise to pay P 1. . identified only as John and Susan Doe. in the event of resignation and or dismissal from the service. petitioner filed a complaint. should Lantan desire to exercise this option before the 5-year period lapse.Upon the posting of the bond. Lantan may exercise the option to purchase the motor vehicle from Elisco and all monthly rentals shall be applied to the payment of the full purchase price of the car and further.65 without the necessity of notice or demand in accordance with the schedule of payment . Lantan shall return the subject motor vehicle to the EMPLOYER in good working and body condition. petitioner maintained that the contract was one of lease with option to purchase and that the promissory note was merely a “nominal security” for the agreement. his wife Rina.070. it being understood however that the option is limited to the EMPLOYEE. Under a typical car plan. Rolando Lantan shall pay the lease thru salary deduction from his monthly remuneration in the amount as above specified for a period of FIVE (5) years.” against private respondent Rolando Lantan. Metro Manila. until fully paid. the sheriff took possession of the car and after 5 days turned it over to the petitioner . as of December 4. Ratio: First.65 will be leased to Rolando Lantan for 5 years . -That. -On June 6. and two other persons. with interest at the rate of 14% per annum.private respondents claim that their agreement was to buy and sell and not lease with option to buy the car .That.010.CA affirmed in toto the decision of the trial court. shoulder all expenses and costs of registration. Elisco Tool Manufacturing Corp is the owner of a car which for and in consideration of a monthly rental of P 1010. (b) in holding that the interest stipulation in respondents’ Promissory Note was not valid and binding. insurance. gasoline. However. petitioner filed motion for execution pending appeal . 1980. Petitioner does not deny that private respondent Rolando Lantan acquired the vehicle in question under a car plan for executives of the Elizalde group of companies.January 9. before the Regional Trial Court of Pasig.00 -In 1981.000 plus the accrued monthly rentals thereof.in its reply.000. -Petitioner alleged that private respondents failed to pay the monthly rentals that despite Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 demands. There are also stipulations in car plan agreements to Page 24 . he may do so upon payment of the remaining balance on the five year rental unto Elisco. .That. as a result of which private respondent Rolando Lantan was laid off. -That. they should be held liable for the amount of P60. which was P60. in case of default in payment THREE (3) accumulated monthly rentals. private respondents failed to settle their obligation thereby entitling petitioner to the possession of the car. the company advances the purchase price of a car to be paid back by the employee through monthly deductions from his salary. private respondent was able to make payments for the car in the total amount of P61. January 9. part replacement inclusive of all expenses necessary to maintain the vehicle in top condition -That. 1986. Nonetheless. Lantan installed accessories worth P15. he entered into an agreement with the company which provided as follows: . that petitioner was ready to post a bond in an amount double the value of the car.94. entitled “replevin plus sum of money.

This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of Art. it prayed for the issuance of a writ of replevin or Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 the delivery to it of the motor vehicle “complete with accessories and equipment. even assuming that private respondents have defaulted in the payment of their obligation. Both the trial court and the Court of Appeals correctly ruled that private respondents could no longer be held liable for the amounts of P39. hence. fraudulent. The award of attorney’s fees is likewise proper considering that private respondents were compelled to incur expenses to protect their rights PEOPLE'S INDUSTRIAL AND COMMERCIAL CORPORATION. G.R. have frequently resorted 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. title shall thereupon vest in the lessee. petitioner. but who do not wish openly to make a bargain in that form. 1484 are alternative. 112733 281 SCRA 206 Ponente: ROMERO. petitioner acted in a wanton. This led the trial court to say that petitioner wanted to eat its cake and have it too. provided the so-called rent has been duly paid. the Court of Appeals correctly applied to it the following provisions of the Civil Code: The remedies provided for in Art. The car was not returned to private respondent until April 16. This Court has long been aware of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid. Third. As the trial court correctly noted. Private respondents presented evidence that they “felt bad. Petitioner prayed that private respondents be made to pay the sum of P39.” In the event the car could not be delivered to petitioner. In addition. the award of exemplary damages is justified. plus interest at the legal rate. reckless and oppressive manner in filing the instant case. (THIRD DIVISION) Page 25 October 24. 1997 . As this Court noted in Vda. de Jose v. after two (2) years and eight (8) months.000. the vehicle will be taken by the employer and all installments paid shall be considered rentals per agreement. COURT OF APPEALS and MAR-ICK INVESTMENT CORPORATION. “plus accrued monthly rentals thereof with interests at the rate of fourteen percent (14%) per annum until fully paid.054. by the terms of the bargain. The contract being one of sale on installment. This has not been rebutted by petitioner. It is obvious that such transactions are leases only in name. There is thus a factual basis for the award of moral damages. the amount that they were supposed to pay as of May 1986. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Art. At the same time.86 or P60. 1989.00 because private respondents had fulfilled their part of the obligation.86.the effect that should the employment of the employee concerned be terminated before all installments are fully paid. By virtue of the writ of seizure issued by the trial court. 1986 and thereby deprived private respondents of its use. the “estimated actual value” of the car. the deputy sheriff seized the vehicle on August 6. Barrueco: Sellers desirous of making conditional sales of their goods. The agreement does not provide for the payment of interest on unpaid monthly “rentals” or installments because it was entered into in pursuance of a car plan adopted by the company for the benefit of its deserving employees. or with stipulations that if the rent throughout the term is paid. it was prayed that private respondent Rolando Lantan be made to pay petitioner the amount of P60. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results.00. respondents. The exercise of one bars the exercise of the others. for one reason or another. vs. 1485 was fulfilled in this case by the filing by petitioner of the complaint for replevin to recover possession of movable property. the car plan was intended to give additional benefits to executives of the Elizalde group of companies. were worried. Second. 1485. not cumulative. J.000.” This prayer of course cannot be granted. in the transfer of title to the lessee.054. embarrassed and mentally tortured” by the repossession of the car. upon issuance by the Court of Appeals of a writ of execution. No.

Facts: Private respondent Mar-ick Investment Corporation is the exclusive and registered owner of Mar-ick Subdivision in Barrio Buli, Cainta, Rizal. On May 29, 1961, private respondent entered into 6 agreements with petitioner People's Industrial and Commercial Corporation whereby it agreed to sell to petitioner 6 subdivision lots. Five of the agreements stipulate that the petitioner agreed to pay private respondent for each lot, the amount of P7,333.20 with a down payment of P480.00. The balance of P6,853.20 shall be payable in 120 equal monthly installments of P57.11 every 30th of the month, for a period of ten years. With respect to another lot, the parties agreed to the purchase price of P7,730.00 with a down payment of P506.00 and equal monthly installments of P60.20. After the lapse of ten years, petitioner still had not fully paid for the six lots. It had paid only the down payment and 8 installments. After a series of negotiations between the parties, they agreed to enter into a new contract to sell on October 11, 1983. The contract stipulates that the previous contracts have been cancelled due to the failure of the purchaser to pay the stipulated installments. Neither of the parties signed the new contract. Siatianum issued checks in the total amount of P37,642.72 to private respondent. Private respondent received but did not encash the checks. Instead, it filed in the Regional Trial Court of Antipolo, Rizal, a complaint for accion publiciana de posesion against petitioner and Tomas Siatianum, as president and majority stockholder of petitioner. It prayed that petitioner surrender possession of the lots of Mar-ick Subdivision, and that petitioner and Tomas Siatianum be ordered to pay reasonable rentals for the use of the lots. In the alternative, the complaint prayed that should the agreements be deemed not automatically cancelled, the same agreements should be declared null and void. Lower court rendered a decision finding that the original agreements of the parties were validly cancelled. The parties did not enter into a new contract in accordance with Art. 1403 (2) of the Civil Code as the parties did not sign the draft contract. Receipt by private respondent of the five checks could not amount to perfection of
Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010

the contract because private respondent never encashed and benefited from those checks. There was no meeting of the minds between the parties because Art. 475 of the Civil Code should be read with the Statute of Frauds that requires the embodiment of the contract in a note or memorandum. What was clearly proven was that both parties negotiated a new contract after the termination of the first. Thus, the fact that the parties tried to negotiate a new contract indicated that they considered the first contract as already cancelled. Petitioner elevated the case to the Court of Appeals which affirmed in toto the lower court's decision.

Issue: Whether or not there was a perfected and enforceable contract of sale on October 11, 1983 which modified the earlier contracts to sell which had not been validly rescinded. Ruling: The contracts to sell of 1961 were cancelled to which the parties voluntarily bound themselves. When petitioner failed to abide by its obligation to pay the installments provision No. 9 of the contract automatically took effect which states that “should the purchaser fail to make the payment of any of the monthly installments as agreed herein, this contract shall, by the mere fact of nonpayment, expire by itself and become null and void.” The 1961 agreements are contracts to sell and not contracts of sale. The distinction between these contracts is depicted in Adelfa Properties, Inc. v. Court of Appeals which states that “the distinction between the two is important for in a contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the
Page 26

property sold is reserved in the seller until the full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.” Being contracts to sell, Article 1592 of the Civil Code which requires rescission either by judicial action or notarial act is not applicable. Petitioner alleges that there was a new perfected and enforceable contract of sale between the parties in October 1983. Private respondent's company lawyer volunteered that after the cancellation of the 1961 agreements, the parties should negotiate and enter into a new agreement. However, after he had drafted the contract and sent it to petitioner, the latter deposited a check for downpayment but its representative refused to sign the prepared contract. In the absence of proof to the contrary, this draft contract may be deemed to embody the agreement of the parties. Private respondent did not and has not denied the existence of that contract. Under these facts, therefore, the parties may ideally be considered as having perfected the contract of October 1983. Justice and equity, however, will not be served by a positive ruling on the perfection and performance of the contract to sell. There are facts on record proving that the parties had not arrived at a definite agreement. By Atty. Villamayor's admission, the checks were not encashed because Tomas Siatianun did not sign the draft contract that he had prepared. On his part, Tomas Siatianun explained that he did not sign the contract because it covered 7 lots while their agreement was only for 6 lots. The number of lots to be sold is a material component of the contract to sell. Without an agreement on the matter, the parties may not in any way be considered as having arrived at a contract under the law. Moreover, installments paid by the petitioner on the land should be deemed rentals. Article 1486 of the Civil Code provides that a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. WHEREFORE, the instant petition for review on certiorari is hereby denied and the questioned Decision of the Court of Appeals is AFFIRMED.

REGALADO DAROY, complainant, vs. ATTY. ESTEBAN ABECIA, respondent. A.C. No. 3046 October 26, 1998

Ponente: MENDOZA, J. (SECOND DIVISION)

Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010

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Facts: This refers to the complaint for malpractice filed by Regalado Daroy against Esteban Abecia, a member of the Bar. Respondent Abecia was counsel of complainant Daroy in a case for forcible entry before the Municipal Trial Court of Opol, Misamis Oriental. Judgment was rendered in favor of complainant. To satisfy the judgment, the sheriff sold at public auction a parcel of land belonging to one of the defendants to complainant Daroy as highest bidder. Upon failure of the defendants to redeem the land, its ownership was consolidated in complainant Daroy. Complainant Daroy claimed that respondent Abecia forged his signature in a deed of absolute sale transferring the parcel of land to Jose Gangay and that in a fictitious deed of absolute sale it was made to appear that Gangay in turn conveyed the land to Nena Abecia, wife of respondent Abecia. Daroy alleged that he entrusted the title to the land to Abecia as his counsel and allowed him to take possession of the land upon the latter’s request. By means of the forged deed of sale, Abecia was able to obtain new transfer certificates of title, first in the name of Gangay and then in that of Mrs. Abecia, from the Registry of Deeds of Misamis Oriental. Daroy claimed he discovered the fraud only in 1984. On July 15, 1993, Commissioner Plaridel Jose ruled that respondent Abecia is guilty of malpractice and recommended his disbarment. The Integrated Bar of the Philippines approved the report but reduced the penalty to indefinite suspension. Respondent Abecia filed a Motion for Reconsideration and/or Appeal. Issues: Whether or not the Commission on Bar Discipline erred when it held that complainant had no knowledge of the execution of the Deed of Absolute Sale. Whether or not respondent Atty. Esteban Abecia is prohibited from acquiring the parcel of land. Ruling: Respondent’s motion is well taken. As already stated, the land in question was purchased by complainant at the sheriff’s sale. Deputy Sheriff stated that when he finally transferred the land to the buyer, he placed in
Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010

possession of the land not only the buyer, Regalado Daroy, but also the latter’s assignee, Nena Abecia, in whose name the title to the land had in fact been transferred. It would appear, therefore, that Daroy already knew that title to the land had already been transferred in the name of the respondent’s wife. Indeed, what appears to have happened in this case is that the parties thought that because the land had been acquired by complainant at a public sale held in order to satisfy a judgment in his favor in a case in which respondent was complainant’s counsel, the latter could not acquire the land. The parties apparently had in mind Art. 1491 of the Civil Code which provides: ART. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: 5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. In Guevara v. Calalang, we held that the prohibition in Art. 1491 does not apply to the sale of a parcel of land, acquired by a client to satisfy a judgment in his favor, to his attorney as long as the property was not the subject of the litigation. While judges, prosecuting attorneys, and others connected with the administration of justice are prohibited from acquiring property or rights in litigation or levied upon in execution, the prohibition with respect to attorneys in the case extends only to property and rights which may be the object of any litigation in which they may take part by virtue of their profession. WHEREFORE, the resolution of the IBP Board of Governors is RECONSIDERED and the complaint against respondent Esteban Abecia is DISMISSED.

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was suspended from the practice of law in Guam for Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 July 30. Page 29 . 435 SCRA 417. 2004. in a decision rendered by the Superior Court of Guam. B. Maquera.M. Leon G. Leon G.In Re: Suspension from the Practice of Law in the territory of Guam of Atty. MAquera. 793 FACTS: Atty. Tinga.

then sold it and as a consequence obtained an unreasonable high fee for handling his client’s case. the prohibition extends to sales in legal redemption. Castro. his client. They both agreed on a purchased price of P100. whichever came later. He then sold it to C.S Chang and C. The decision was based on Maquera’s misconduct. Maquera’s acts constitute grounds for his suspension or disbarment in the Philippine Jurisdiction. G. 2003 Carpio. Court of Appeals and Valdes-Choy. Thw suspension of Maquere was referred here in the Philippines through the Integrated Bar of the Philippines.00 payable in cash. ISSUE: Whether Atty. No. it concluded that there’s no evidence to establish that he also committed a breach of ethics in the Philippines. as he acquired his client’s property as payment for his legal services. April 9. Maquera’s acts in Guam which resulted in his two-year suspension from the practice of law in that jurisdiction are also valid grounds for his suspension from the practice of law in the Philippines. RULING: Atty. “a lawyer owes fidelity to the cause of his client and shall be mindful of the trust and confidence reposed in him. 401 SCRA 54. 119255 FACTS: Encarnacion Valdes-Choy advertised for sale her paraphernal house and lot in Makati City which Chua responded to. Maquera is suspended for one year for the meantime or until he shall have paid his membership dues. The decision was rendered in against Castro and ordered the auction sale of the land. It is also violative of Canon 17 which states. Under Article 1492.two years.000. a parcel of land. and his creditor was in a civil case where Castro’s property. It was purchased by the creditor but Castro retained his right of redemption which was later on assigned to Maquera as payment for his services. Page 30 . Such acts are violative of lawyer’s sworn duty to act with fidelity toward his clients. Paragraph 5 of Article 1491 of the New Civil Code prohibits lawyer’s acquisition by assignment of the client’s property which is the subject of the litigation handled by the lawyer.” Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Chua v. However. Chang which gave him a huge profit. was a subject.R. Maquera exercised this right and he was able to obtain the property.C.

respondents.000.00 to Valdes-Choy as an earnest money and another P485. G. Ownership over the property was retained by Valdes-Choy and was not to pass to Chua until full payment of the purchase price. INC. Chua filed a complaint for a specific performance against her which the trial court held in favor of Chua. 1993 Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 . JR.000. RULING: Petition is dismissed.000. The receipt made by both of them shows that the true agreement between the parties was a contract to sell. ISSUE: Whether there is a perfected contract of sale of immovable property.00 for the payment of capital gains tax since Valdes-Choy was not able to pay the said tax. In a contract of sale. the title of the property passes to the vendee upon the delivery of the thing sold and the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded. 83851 DAVIDE. vs. ValdesChoy wanted that the remaining purchase balance be deposited in her account before she could transfer the title of her property to him.R. There is no perfected contract of sale. On the other hand.215. In a contract to sell. However.00 but demanded that the property be first registered under his name. petitioners. THE HONORABLE COURT OF APPEALS and RJH TRADING. No. Facts: Ramon J. failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. proprietor.Chua gave P100. and ANG TAY. Hibionada and Visayan Sawmill Company (VISAYAN SAWMILL) entered into a sale involving scrap iron subject to the condition that plaintiff-appellee will open a letter of credit Page 31 March 3. HIBIONADA. VISAYAN SAWMILL COMPANY. represented by RAMON J. ownership is. reserved in the vendor and is not to pass to the vendee until full payment of the purchase price and the title is retained by the vendor until full payment of the price. payment of the price is a positive suspensive condition. The agreement that the parties entered into is a contract to sell and not a contract of sale.. Also in the contract to sell. However. by agreement. the Court of Appeals reversed the said decision. Chua did not pay the remaining balance of P10.

making or indorsing of the irrevocable and unconditional letter of credit. Hibionada filed the complaint below with a petition for preliminary attachment and prayed for judgment ordering the VISAYAN SAWMILL to comply with the contract by delivering to him the scrap iron subject thereof In their Answer with Counterclaim. among which is the opening of an irrevocable and unconditional letter of credit not later than 15 May 1983. This. Since what obtains in the case at bar is a mere promise to sell. proceeding with such endeavor until May 30 when VISAYAN SAWMILL allegedly directed Hibionada‘s men to desist from pursuing the work in view of an alleged case filed against Hibionada by a certain Alberto Pursuelo.e. the petitioner corporation may totally rescind. The VISAYAN SAWMILL's obligation to sell is unequivocally subject to a positive suspensive condition. on the contrary. said Article 1491 falls under the Chapter Page 32 . The seller bound and promised itself to sell the scrap iron upon the fulfillment by the private respondent of his obligation to make or indorse an irrevocable and unconditional letter of credit in payment of the purchase price. Otherwise stated. they sent a telegram to Hibionada cancelling the contract of sale because of failure of the latter to comply with the conditions thereof. The trial court ruled. Thus. and the public respondent was in agreement. Issue: Is there a contract of sale? Is the object of sale delivered? Held: The nature of the transaction between the petitioner corporation and the private respondent is a mere contract to sell or promise to sell. The former agreed to deliver the scrap iron only upon payment of the purchase price by means of an irrevocable and unconditional letter of credit. On May 26. pursuant to Article 1597 of the Civil Code. 1983. as held by the public respondent. however.000. and Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 not a contract of sale. the failure of the private respondent to comply with the positive suspensive condition cannot even be considered a breach — casual or serious — but simply an event that prevented the obligation of petitioner corporation to convey title from acquiring binding force.. VISAYAN SAWMILL received a letter advice from the Dumaguete City Branch of the Bank of the Philippine Islands dated May 26. otherwise a case will be filed against them. by no stretch of the imagination. started to dig and gather and scrap iron at the VISAYAN SAWMILL's premises.in the amount of P250. In short. 1983. Consequently. i. This permission or consent can. petitioners placed the private respondent in control and possession thereof. the obligation of the petitioner corporation to sell did not arise. that there had been an implied delivery in this case of the subject scrap iron because on 17 May 1983. however.00 in favor of defendant-appellant corporation on or before May 15. Ramon J. private respondent's men started digging up and gathering scrap iron within the petitioner's premises. citing Article 1497 of the Civil Code. The entry of these men was upon the private respondent's request. Article 1191 of the Civil Code does not apply. Hibionada through his man. it therefore cannot be compelled by specific performance to comply with its prestation. the private respondent's opening. there was to be no actual sale until the opening. In reply. making or indorsing of an irrevocable and unconditional letter of credit. In the first place. 1983. 1983. is denied by VISAYAN SAWMILL who allege that on May 23. be construed as delivery of the scrap iron in the sense that. VISAYAN SAWMILL is unwilling to continue with the sale due to Hibionada's failure to comply with essential preconditions of the contract. Hibionada sent a series of telegrams stating that the case filed against him by Pursuelo had been dismissed and demanding that VISAYAN SAWMILL comply with the deed of sale. VISAYAN SAWMILL insisted that the cancellation of the contract was justified because of Hibionada’s non-compliance with essential preconditions. the contract is not one of sale where the buyer acquired ownership over the property subject to the resolutory condition that the purchase price would be paid after delivery.

therefore. G. Book IV of the Civil Code. L-31189 March 31. In the instant case. 1987 PARAS. Thirdly. the conversion of the initial contract or promise to sell into a contract of sale by the petitioner corporation's alleged implied delivery of the scrap iron because its action and conduct in the premises do not support this conclusion. such an obligation had not yet arisen. respondents. petitioners demanded the fulfillment of the suspensive condition and eventually cancelled the contract. J. the obligation imposed therein is premised on an existing obligation to deliver the subject of the contract. Vda.R. 140 from her grandmother.15 Obligations of the Vendor. vs. petitioner. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 33 . which is found in Title VI (Sales). THE COURT OF APPEALS. NORMA LEUENBERGER and FRANCISCO SOLIVA.: Facts: Norma Leuenberger inherited the whole of Lot No. No. Indeed. Simeona J. In the second place. The private respondent was not thereby placed in possession of and control over the scrap iron. in view of the private respondent's failure to comply within the positive suspensive condition earlier discussed. As such. it was a mere accommodation to expedite the weighing and hauling of the iron in the event that the sale would materialize. MUNICIPALITY OF VICTORIAS.

demanding payment of past rentals and requesting delivery of the area allegedly illegally occupied by Municipality of Victorias.. when it is placed in the control and possession of the vendee. SABIO. The execution of the public instrument operates as a formal or symbolic delivery of the property sold and authorizes the buyer to use the document as proof of ownership. having bought it from Simeona Jingco Vda.).de Ditching. When the sale is made through a public instrument. converted into a subdivision. AYALA CORPORATION. Page 34 .157 sq. by way of special defense. LEDONIO-SABIO. Norma Leuenberger wrote the Mayor of Victorias regarding her discovery. LAS PINAS VENTURES.R. more or less 4 ha. No. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Respondent Norma Leuenberger admitted that she inherited the land covered by Transfer Certificate of Title No. 140. AYALA PROPERTY VENTURES CORPORATION. and MA. GOLDENROD. PAL EMPLOYEES SAVINGS AND LOAN ASSOCIATION. this petition for review on certiorari. if from the deed. is within her property. about 3 ha. petitioners. to the municipality for the ground of a certain high school and had 4 ha. or 33.747 sq.. or 208. In its answer. It was then that she discovered that the parcel of land. INC. When the Mayor replied that Petitioner bought the land she asked to be shown the papers concerning the sale but was referred by the Mayor to the municipal treasurer who refused to show the same. The lower court decided in favor of the Municipality. m. the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract. petitioner Municipality. (now UNION BANK OF THE PHILIPPINES)... she had the remaining 21 ha. September 4. In 1963. vs. who had already sold the land to the petitioner in 1934. the contrary does not appear or cannot be clearly inferred. she donated a portion of Lot No. On appeal Respondent appellate Court set aside the decision of the lower court hence. as a cemetery from 1934. 132709. she merely stepped into the shoes of her grandmother and she cannot claim a better right than her predecessor-in-interest. Norma Leuenberger filed a complaint for recovery of possession of the parcel of land occupied by the municipal cemetery. T-34036 from her grandmother. MARLENE A. Delivery produces its natural effects in law. used by Petitioner Municipality of Victorias. INC.m. Where there is no express provision that title shall not pass until payment of the price. FILIPINAS LIFE ASSURANCE COMPANY(now AYALA LIFE ASSURANCE. title passes from the moment the thing sold is placed in the possession and control of the buyer. INC. THE INTERNATIONAL CORPORATE BANK.. INC. relocated by a surveyor upon request of lessee Ramon Jover who complained of being prohibited by municipal officials from cultivating the land. Held: It is expressly provided by law that the thing sold shall be understood as delivered. respondents. subject of the complaint. INC. alleged ownership of the lot. and AYALA LAND. INC. hence. de Ditching sometime in 1934. the principal and most important of which being the conveyance of ownership. SPOUSES CAMILO L. In 1952. without prejudice to the right of the vendor to payment of the price. G. 2001. and the thing gold has been delivered.

LEOPOLDO C. Nothing more is required. control and enjoyment is a main attribute to ownership. The mere execution of the deed of conveyance in a public document is equivalent to the delivery of the property. Whether or not symbolic delivery by mere execution of the deed of conveyance is sufficient since actual possession. prior physical delivery or possession is not legally required. possession.: Facts: The instant controversy stemmed from a dispute over a lot located in Pasay City and Page 35 . (or Interbank) acquired from the Trans-Resource Management and Development Corporation all of the latter’s rights to the subject property by virtue of a deed of assignment executed between them. The deed operates as a formal or symbolic delivery of the property sold and authorizes the buyer or transferee to use the document as proof of ownership. to the petitioners by virtue of the deed of conveyance. Similarly. VIRGINIA TORRES MARAVILLA and LEONOR C. vs. the Sabios and Interbank settled their opposing claims by entering into a Memorandum of Agreement (or MOA) whereby the Sabios assigned. as substituted by FE NADAL.429 square meters. 2002.: Facts: The object of the controversy is a portion of a vast tract of land located at Tindig na Manga. as Administratrices of the Estate of MARIANO TORRES. petitioners claiming that respondent Interbank was obligated to complete and perfect its ownership and title to the parcels of land so that Interbank could transfer to petitioners the absolute ownership and title over the contiguous portion.” Possession is Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 also transferred. “when the sale is made through a public instrument.000 square meter contiguous portion of said lot. Petitioner’s contention that respondents “never acquired ownership over the subject property since the latter was never in possession of the subject property nor was the property ever delivered” is totally without merit. J. a dispute arose concerning the 58.R. Issue: Whether or not respondents failed to “complete and perfect ownership and title” to the subject property since it was never in actual occupation. the execution thereof shall be equivalent to the delivery of the object of the contract . Sometime thereafter. petitioner. November 27. represented by his daughter EMERCIANA LEONARDO. along with ownership thereof. respondents. while the subject property was still the object of several pending cases. Since the execution of the deed of conveyance is deemed equivalent to delivery.YNARES-SANTIAGO. control and enjoyment of said property. LEONARDO. Inc. YNARES-SANTIAGO. conveyed and transferred all their rights over the parcel assigned to them to Interbank. if from the deed the contrary does not appear or cannot be inferred. Held: Under Article 1498 of the Civil Code. interests. the International Corporate Bank. NADAL. The spouses Gerardo and Emma Ledonio. J. Las Pinas City. title and participation over a contiguous portion of the subject property measuring 119. 143369. Almanza. with the express exception of of 58. Thereafter. No. assigned to the spouses Camilo and Ma.000 square meter contiguous portion subject of the MOA. Marlene Sabio (herein petitioners) all their rights. G.

the predecessor-in-interest of respondents. Petitioner neither had. i. 1144 of the Civil Code. his action was clearly barred by statute of limitations. the case filed by petitioner was an action for specific performance of a written contract of sale which. Respondents. 1144 of the Civil Code which provides that an action upon a written contract shall prescribe in 10 years from the time the right of action accrued.e. Page 36 . countered that since 1938 up to the present. when the sale is made through a public instrument. said action is barred by laches having allowed 21 years to lapse before enforcing his alleged right. to enforce the deed of absolute sale allegedly executed in his favor and not an action for recovery of possession. petitioner’s complaint falls under Art. The Court of Appeals likewise ruled that since petitioner’s cause of action is founded on the the deed of sale dated September 29. he cannot claim that the instant case is an action to recover ownership and full possession of the property which. Issue: Whether or not petitioner’s action is barred by prescription and laches Held: The action by petitioner is already barred by prescription and laches. In the same vein. It was the respondents who have been in control and possession thereof in the concept of owners since 1983 up to the present. It follows that ownership of the lot was never transferred to petitioner. Owner’s Duplicate Certificate of Title. not conclusive delivery which can be rebutted by evidence to the contrary. pursuant to Art. Thus. in their answer. Petitioner filed a complaint for “Delivery of Possession of Property. Petitioner. nor demanded. never came into his possession for lack of requisite delivery. execution thereof shall be equivalent to the delivery of the thing which is the object of the contract. Rentals and Damages”. 1993 or 21 years from the time his supposed right of action accrued on September 29. the lot in question has been registered in the name of the late Mariano Torres y Chavarria. Since petitioner brought the instant case only on September 6. having purchased it from a certain Eusebio Leonardo Roxas who in turn acquired the same lot by purchase from Mariano Torres. the date of execution of the contract conveying him the questioned lot.e. 1498 of the Civil Code. as when there is failure on the part of the vendee to take material possession of the land subject of the sale in the concept of a purchaser-owner. their predecessors-in-interest and that they have been in material possession thereof in the concept of owners. it is not disputed that the lot in question was never delivered to petitioner notwithstanding the alleged execution of a deed of absolute sale. Under Art. for petitioner’s action is actually an action for specific performance.. 1972. In the case at bar. 1141 and not Art. in the first place. the execution of the contract is only a presumptive. Hence. being an action based on written contracts. on the other hand. Clearly. The trial court issued an order dismissing petitioner’s complaint on the ground of prescription and laches. Respondents maintain that they have been in open and peaceful possession of the said property and that it was only in 1993 when they came to know of the alleged claim of petitioners over the same property. 1972. The delivery of the thing constitutes a necessary and indispensable requisite for the purpose of acquiring the ownership of the same by virtue of a contract. contends that the applicable provision is Art.registered in the name of Mariano Torres y Chavarria. prescribes in 10 years from the accrual of the right of action. material possession of the disputed lot. It is a fundamental principle that ownership does not pass by mere stipulation but by delivery.1144 of the Civil Code because his action is one for recovery of possession of real property which prescribes in 30 years. i. Petitioner claims that he is the lawful owner of the disputed lot. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Petitioner’s contention is without merit. if from the deed the contrary does not appear or cannot be clearly inferred..

Jr. Both truck and tractor were mortgaged to Libra as a security for the loan. wanted to buy the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 37 . Jr. 1991 Third Division Justice Gutierrez. Court of Appeals July 8. vs. Perfecto Dy. The petitioner. Facts: Perfecto Dy and Wilfredo Dy are brothers.Perfecto Dy . Wilfredo Dy purchased a truck and a farm tractor through financing extended by Libra Finance and Investment Corporation.

The decision of the Court of Appeals was set aside. 1993 Third Division Justice Melo Facts: The respondent LPJ Enterprises. LPJ Enterprises. It was only when the check was cleared that Perfecto learned about Gelac having already taken custody of the subject tractor. Inc v. Perfecto Dy filed and action to recover the subject tractor against “Gelac Trading “ with the RTC in Cebu City. Libra insisted. pronouncing that Perfecto is the owner of the tractor and directing Gelac Trading Corporation and Antonio Gonzales to return the same to Perfecto. Ratio: (Dy. thru its manager. the Court of Appeals reversed the decision of the RTC and dismissed the complaint. a Vice-President of petitioner Industrial Textile Manufacturing Company of the Philippines(or Itemcop). Inc. therefore he wrote a letter to Libra requesting that he be allowed to purchase from Wilfredo Dy the said tractor and assume the mortgage debt from the latter. Court of Appeals) The mortgagor who gave the property as security under a chattel mortgage did not part with the ownership over the same. Jr. Ruling: Petition granted. Through an alias writ of execution. Issue: Whether or not the property(tractor) in question belongs to the mortgagor upon the execution of the chattel mortgage. The property was sold to Antonio Gonzales. Inc. Meanwhile a civil case entitled ‘”Gelac Trading. vs. asked Page 38 . Jr. Wilfredo executed a deed of absolute sale in favor of Perfecto. The sale of the object tractor was consummated upon the execution of the public instrument. And even if no consent was obtained from the mortgagee.tractor from his brother. The decision of the trial court was reinstated. It held that the tractor in question still belonged to Wilfredo Dy when it was seized and levied by the sheriff by virtue of the alias writ of execution. approved the petitioner’s request. Article 1496 of the civil code states that the ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501 or in any manner signifying an agreement that the possession is transferred from the vendor to the vendee. A PNB check was issued in favor of Libra.000 bags of cement per year to Atlas Consolidated Mining Development Corporation. Wilfredo Dy was pending in another court in Cebu regarding a collection case to recover a sum. v. had a contract to supply 300. the sheriff was able to seize and levy on the tractor which was in the premises of Libra in Carmen. thus the indebtedness of Wilfredo with the financing firm has bee settled. the validity of the sale would still not be affected. At this time constructive delivery was already effected. Inc. On appeal. Court of Appeals). Cesar Campos. however that it be cleared first before Libra could release the tractor in question. He had the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 right to sell it although he was under obligation to secure the written contract of the mortgagee. vs. Industrial Textile Manufacturing Company of the Philippines. RTC rendered judgment in favor of Perfecto. January 21. Cebu. Hence. Libra. the subject tractor was no longer owned by Wilfredo Dy when it was levied upon by the sheriff(Dy. The tractor was subsequently sold at public auction.

pp 326-327) The provision in the Uniform Sales Act and the Uniform Commercial Code from which Article 1502 was taken. If the purchase desired to incorporate a stipulation securing to him the right of return . The respondent corporation’s appeal was upheld by the appellate court when it reversed the trial court’s decision and dismissed the case with costs against petitioner. LPJ Enterprises.: FACTS: Petitioner Aerospace Industries purchased five hundred (500) metric tons of sulfuric acid from private respondent Philippine Phosphate Fertilizer Corporation (Philphos). cement dust still spilled through the gaps. 123. The petitioner agreed to the offer. pp 326-327). Philippine Phosphate Fertilizer Corporation. On the other hand. Petitioner as buyer committed to secure the means of transport to Page 39 . September 23. the respondent admitted its liability covered by the first purchase. the legal department of the petitioner sent demand letters to respondent corporation On the trial. The trial court rendered a decision sentencing the defendant to pay the sum of P84. G. The experiment.however. Therefore. respondent is liable for the plastic bags delivered to it by petitioner(Industrial Textile Manufacturing Company of the Phils. 123 with corresponding interest. respondent. Accordingly. clearly requires an express written agreement to make a sales contract either a “sale of return” or a “sale on approval”.Lauro Panganiban. Although the weaving of the plastic bags was already tightened. if he would like to cooperate in an experiment to develop a plastic cement bags. QUISUMBING. Court of Appeal. J. Aerospace Chemical Industries. LPJ Enterprises. v. was unsuccessful.80 Thus. Ratio: (Industrial Textile Manufacturing Company of the Phils.R. denied full responsibility.The agreement provided that the buyer shall pay its purchases in Philippine Currency five days before the shipment date. Issue: Whether or not respondent may be held liable for the plastic bags which were not actually used for packaging cement as originally intended. however. 1999. Jr. only the plastic bags actually used in packing cement. The second batch o plastic bags subjected to trial was likewise a failure. Petitoner delivered the orders consecutively but the respondent only remitted a part of the total amount leaving a balance of P84. Inc vs. we hold that the transaction between the respondent and petitioner constituted an absolute sale. fourth purchase orders. president of respondent corporation. Cement dust oozed out under pressure through the small holes of the woven plastic bags and the loading and the loading platform was filled with dust. With respect to the second. third.. Parol or extrinsic testimony could not be admitted for the purpose of showing that an Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 invoice or bill of sale that was complete in every aspect and purporting to embody a sale without condition or restriction constituted a contract of sale or return. he should have done so at the time the contract was made. Ruling: The decision appealed from is SET ASIDE and the decision of the trial court REINSTATED. Inc. 108129. Respondent said that it will pay for. No. the buyer cannoy accept part and reject the rest of the goods since this falls outside the normal intent of the parties in the “on approval” situation. v. Inc.

Court of Appeals reversed the decision of RTC. addressed a letter to private respondent.On October 3. Despite of several repairs of the vessel.000 for each delay in shipment. 1986. ruling in favor of the private respondent. Per agreement. July 24. No. 1997 PANGANIBAN. Petitioner Counsel. acting for the petitioner. Petitioner spouses Conchita and Gaudencio seek recovery of the parcel of land from Page 40 . the vessel underwent repairs. 1986. private respondent Philphos sent an advisory letter to petitioner to withdraw the sulfuric acid purchased at Basay because private respondent has been incurring incremental expenses of 2. Anacleto Nool and Emilia Nebre. The RTC ruled in favor of the petitioner. the vessel still failed to carry the whole metric tons of sulfuric acid. 530. Conchita Nool and Gaudencio Almojera vs. The chartered vessel only withdrew 70 metric tons of sulfuric acid from Basay because said vessel heavily tilted on its port side. sent a demand letter to private respondent for the delivery of the 272. 100 metric tons of sulfuric acid should be taken from Basay Negros Oriental storage tank. Hence. Petitioner chartered another vessel after several demand of the private respondent. J.116635. Private respondents asked petitioners to retrieve the remaining sulphur in Basay tanks so that said tanks are emptied before December 15. Court of Appeals. this petition ISSUES: Whether or not respondent Court of Appeals erred in holding that the petitioner committed breach of contract due to the delay in Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 the performance of its obligation? Did private respondent err in awarding damages to private respondent? RULING: Supreme Court ruled in sustaining the decision of the Court of Appeals finding in favor of private respondent.R.: FACTS: Two parcels of land are the subject of dispute in this case. Atty Santos. petitioner paid Php 553. Moreover. private respondent instructed petitioner to lift remaining 30 MT of sulfuric acid from Basay or pay maintenance and storage expenses. Hernandez. because of petitioner delay in complying with its obligation to replace immediately the defective chartered vessel despite several demand letters sent by private respondent to it. The contention that petitioner’s delay was caused by a storm or force majeure is untenable. petitioner filed a complaint for specific performance and/or damages before the RTC. Its unfortunate sinking was not due to force majeure. commencing additional orders to replace its sunken purchases.49 MT of sulfuric acid or return the purchase price of Php 307. the proximate cause of the delay of the petitioner cannot be attributed due to force majeure but because of the chartered vessel contracted by petitioner to carry out the sulfuric acid. Despite several demands to deliver remaining sulfuric acids and other counter demands also of private respondents. 1986.280 for 500 metric tons of sulfuric acid. On August 6. The first area was formerly owned by Victorino Nool and the other parcel of land previously owned by Francisco Nool. petitioner did not comply.Private respondent said that if petitioner will not comply petitioner will be charge storage and consequential costs.In reply. Petitioner charted the M/T Sultan Kayumanggi to carry out the agreed volumes of freight form designated loading areas. Private respondent contends that it was the petitioner who was remiss in the performance of its obligation. Isabela. Hence. Upon appeal. SC held that petitioner violated the subject contract of sale supported by preponderant evidence.pick-up the purchases from private respondents load ports. while the remaining 400 metric tons should be retrieve from Sangi. Since petitioner failed to comply with its obligation under the contract it became liable for its shortcomings. G. Because of this.Petitioner in this case is guilty of delay. Both parcels of land located in San Manuel. Despite demands to immediate replace M/T Sultan Kayumanggi. The report revealed that the vessel chartered by petitioner is unstable and incapable of carrying full load. the awarding of damages against the petitioner is justified . Cebu.

Moreover. Hence. since respondent Anacleto redeemed the property after the period of redemption given to the petitioners. 30. respondent Anacleto can impugn the nullity of the agreement at anytime.R. Thus. lot 4221. Facts: G. Since the petitioners defaulted in paying the loan the mortgaged lands were foreclosed. the ownership of the parcels of land was transferred already to DBP and then conveyed to Respondent upon buying the said property to DBP. respondents refused to return the same. Article 1410 of the Civil Code provides that the action or defense for the declaration of the inexistence of a contract does not prescribe. The petitioners in this case cannot assert the right to repurchase the property with the respondents. Anacleto Nool. 000 petitioners were to regain possession of the two parcel of land. they applied and were granted of a loan by DBP. believing that petitioners are still the owners of the parcels of land. such right to redeem is also void. The SC held that the sellers (petitioners) no longer had any title to the parcels of land at the time of sale.000 of which price is paid to Conchita and upon payment of 14. which defendants failed to pay. Thus. And since delivery is not possible in this case without transferring ownership of such parcels of land.000. Page 41 . Hence this petition ISSUES: Whether or not the agreement entered into by the parties (Petitioners and respondents) with respect to the sale and period of redemption of the parcels of land valid and enforceable? Whether or not the Respondent is estopped in impugning the validity of the agreement with the petitioner? RULING: Supreme Court ruled affirming the decision of the Court of Appeals and the Lower Court. As requested by Conchita. No. respondent cannot be estopped from raising the defense of nullity of contract. When petritioners asked to return the parcels of land. 1994 First Division Bellosillo. the contract of sale between petitioners and respondent is void. younger brother of Conchita and Emilia. The title of the lands then was still in the names of the previous owners. Court of Appeals affirmed Lower Court Decision. as a result. Anacleto agreed to buy from the petitioners the parcels of land for 100. Semira vs. J. petitioners filed this complaint to seek recovery of the disputed land.defendant. Court of Appeals March 2. Further since the right to redeem the property is dependent upon the validity of the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 sale of the parcels of land. Anacleto. respondents in this case Petitioners contend that they are the owners of subject of land and that it bought the same from Conchita’s brothers. since they acted in good faith. Francisco and Victorino. Because of this another agreement was entered into by the parties. secured by real estate mortgage on the said parcels of land. That as part of their agreement (Conchita and Anacleto). Because they are in need of money. whereby respondents agreed to return the parcels of land at anytime when the petitioners have the necessary amount. the titles of two parcels of were transferred to Anacleto. The ownership of the lands was conveyed with DBP for being the highest bidder in the auction sale. 76031 Juana Guitierrez sold a parcel of land. brother of Conchita redeemed the foreclosed property with DBP. Lower court ruled in favor of the respondents.

377 square meters or the estimated 822.5 square meters and the boundaries of the lot. De Vera June 21. more or less. his nephew could not have transferred a bigger area to petitioner. The RTC rendered judgment approving the Compromise Agreement submitted by the parties.purporting to convey or affect registered land shall take effect as a conveyance or bind the land until its registration. hence. the buyer who in good faith presents the oldest title." that is. Issue: Is the sale of Lot 4221 includes the whole 1. 2004 154409First Division Panganiban . Gloria again sold the said lot to Romanda de Vera and a TCT was issued to her. mortgage.5 square meters. the boundaries of the land stated in the contract determine the effects and scope of the sale. the first possessor in good faith. Th are stated in the deed was an estimated area of 822. Gloria has a crtificate title of the lot. Section 51 of PD 1529 provides that no deed. as provided by the Civil Code. However. private respondent insists that he only sold 822. regardless of whether the real area should be greater or smaller than that recited in the deed. lease or other voluntary instrument -except a will -. Issue: Who between the petitioner and respondent has a better right to the property? Ruling: Denied. Petitioner claims that he owns the entire 2. 4 years after the 1st sale. The vendors are obligated to deliver all the land included within the boundaries.200 square meters since it is the size of Lot 4221 following its established boundaries. (2) then. This is particularly true where the area is described as "humigit kumulang.J.: Facts: Page 42 G.R.5 square meters? Ruling: Reversed and set aside. Facts: Gloria Villafania sold a house and lot to Rosenda Tigno-Salazar and Rosita Cave-Go Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Knowledge gained by the first buyer of the second sale cannot defeat the first buyer’s rights except where the second buyer registers in good faith the second sale ahead of the first. and (3) finally." that is. 1983. Gloria Villafania was given one year to buy back the house and lot which she failed to do so. 156973 . unknown to Rosenda and Rosita. not the area thereof. 2004 Second Division PUNO. Rosita and Rosenda then filed for the annulment of the documents and damages. this Court has consistently held as regards registered land that a purchaser in good faith acquires a good title as against all the transferees thereof whose rights are not recorded in the Registry of Deeds at the time of the sale. SPOUSES TOMAS OCCEÑA and SILVINA OCCEÑA vs. On the other hand. since such condition is noted on the face of the register or certificate of title.[36] Following this principle. Buenaventura An sold the said lot to his nephew who in turn sold the lot to petitioner with the very same boundaries mentioned in the deed of sale executed in his favor by his uncle Buenaventura An. No. Subsequently. Reinstating the decision of MCTC dated May 4. The law provides that a double sale of immovables transfers ownership to (1) the first registrant in good faith. This is particularly true where the area is described as "humigit kumulang. J. No. A person dealing with registered land is not required to go behind the registry to determine the condition of the property. LYDIA MORALES OBSIANA ESPONILLA June 4.to Buenaventura An by a deed of sale.R. which thereafter became a subject of a suit for annulment of documents. Abrigo vs. G. more or less. Where land is sold for a lump sum and not so much per unit of measure or number.

constructed a house on it and appointed a caretaker to oversee her property. but only has to rely on the title. Angela and Rosario. Article 1544 of the New Civil Code provides that in case an immovable property is sold to different vendees. and. Issue: Whether or not a purchaser of a registered land is obliged to make inquiries of any possible defect or adverse claim which does not appear on the Certificate of Title SPOUSES ISABELO and ERLINDA PAYONGAYONG. However. there be no inscription.R.. When the respondent heirs of Alberta learned of the sale. Indeed. Arnold did not return the OCT belonging to Alberta despite repeated requests. the ownership shall pertain to the person who in good faith was first in possession. without knowledge of any defect in the title of the property sold. modifications or cancellations. Hence the petition. i. to the person who presents the oldest title. 2004 Third Division G. Ruling: Petition dismissed. Lower court declared the Occeña spouses as buyers in good faith and ruled that the action of the heirs was time-barred. vs. However. HON. alleging bad faith since the Occeñas conducted ocular inspection of the area before the purchase and their caretaker warned them that Arnold is no longer the owner of the lot being sold. with damages. that they verified with the Antique Registry of Deeds that Arnold’s TCTs were clean and unencumbered. they filed a case for annulment of sale and cancellation of titles. 144576 Page 43 . (2) should Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 May 28. COURT OF APPEALS. Arnold borrowed the Original Certificate of Title (OCT) from Alberta covering the lot. It is the basic premise of the preferential rights granted to the one claiming ownership over an immovable. provided there is good faith. One who falls within the exception can neither be denominated an innocent purchaser for value nor a purchaser in good faith. the general rule is that one who deals with property registered under the Torrens system need not go beyond the same. (3) in the absence thereof. The heirs sold a part of the land to Alberta Morales. On the other hand. good faith is essential. No. the ownership shall belong: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property.Spouses Nicolas and Irene Tordesillas owned a piece of land which their children Harod. What is material is whether the second buyer first registers the second sale in good faith. The petition at bar presents a case of double sale of an immovable property. subdivided the entire lot into three sublots. and registered them all under his name. In all cases. He is charged with notice only of such burdens and claims as are annotated on the title. against the Occeña spouses. the Occeña spouses alleged that they were buyers in good faith as the titles to the subject lots were free from liens or encumbrances when they purchased them.e. with notice of a flaw. Morales possessed the lot as owner. Arnold used the OCT he borrowed from the vendee Alberta Morales. and grandchildren Arnold and Lilia de la Flor inherited. The defense of indefeasibility of a Torrens title does not extend to a transferee who takes the certificate of title in bad faith. this principle does not apply when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. Then. Arnold subsequently sold the land to spouses Tomas and Sylvina Occeña. he executed an Affidavit acknowledging receipt of the OCT in trust and undertook to return said title free from changes. Court of Appeals reversed the decision of the trial court.

Registry of Deeds of Quezon City if Mendoza was indeed the registered owner. they did not only rely upon Mendoza’s title. to the person who presents the oldest title. Article 1544 of the Civil Code so provides: Art. After 2 years. Mendoza executed a Deed of Sale with Assumption of Mortgage over the parcel of land in favor of spouses Payongayong. again to secure another loan.132677 Facts: The late Nieves Tolentino-Rivera and her husband.28 In respondents’ case. Nieves. He mortgaged the land to the Meralco Employees Savings and Loan Association (MESALA) to secure a loan. if it should be movable property. respondents did indeed purchase the property in good faith and accordingly acquired valid and indefeasible title thereto. Getting wind of the sale of the property to respondents.CARPIO MORALES. without the knowledge of petitioners. to the person who presents the oldest title. (2) in default thereof. Should there be no inscription. as the above-quoted provision instructs.R. Spouses Salvador had the lot registered in their name after ocular inspection and verification from the Register of Deeds. 2000 Second Division Ponente: Justice Mendoza G. The law is thus in respondents’ favor. Should it be immovable property. the ownership shall pertain to the person who in good faith was first in the possession. Mendoza executed a Deed of Absolute Sale over still the same property in favor of respondent spouses Clemente and Rosalia Salvador. Rosalia personally inspected the property and verified with the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Isabela Colleges. Otherwise. provided there is good faith. Mendoza. Second mortgage was annotated in Mendoza’s title. It is stated in the deed that petitioners bound themselves to assume payment of the balance of the mortgage indebtedness of Mendoza to MESALA.: Facts: Eduardo Mendoz is the registered owner of a parcel of land in Caloocan. still using her maiden name. the ownership shall be transferred to the person who may have first taken possession thereof in good faith. Hence the petition. the court cannot just disregard such rights. and (3) in default thereof. Given this factual backdrop. were married in 1921. Heirs of Nieves Tolentino–Rivera October 20. public confidence in the certificate of title. Trial Court ruled in favor of Mendoza and Salvador. mortgaged the same property to MESALA. provided there is good faith. Payongayong filed for annulment sale with damages against Mendoza and spouses Salvador. No. filed an Page 44 . Pablo Rivera. would be impaired. There being double sale of an immovable property. the Torrens system. Where innocent third persons rely upon the correctness of a certificate of title and acquire rights over the property. The mortgage was duly annotated on the title. and ultimately. Issue: Whether or not spouses Salvador are innocent purchasers for value Held: Petition denied. and. for everyone dealing with registered property would still have to inquire at every instance whether the title has been regularly or irregularly issued. J. 1544. to the person who in good faith was first in possession. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. CA affirmed. in the absence thereof. vs. ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of Property. If the same thing should have been sold to different vendees. Inc.

who were the parties in the ejectment suit. The intervenors. however. It is not necessary to prove that the property was acquired with conjugal funds. certain people entered the property of Isabela Colleges. In December 1976. Laches means the failure or neglect for an unreasonable and unexplained length of time to do that which. Isablela rendered a decision ordering the intruders to vacate the land in question. As the husband may validly sell or dispose of conjugal property even without the wife’s consent. render the deed of sale void. On September 30. Therefore. Issue 3: Nonetheless while it is true that a Torrens title is indefeasible and imprescriptible. other than its finding that Nieves was already in possession of the land and applied for a sales patent before she married Pablo Rivera. prompting the latter to bring an action for forcible entry. 2.5267hectare land in Cauayan. the trial court rendered its decision. Among the titles destroyed was that of the Isabela Colleges which was however administratively reconstituted in 1978. Indeed. Damages with Preliminary Injunction. could or should have been done earlier. Recovery of Ownership and Possession. but it did not immediately secure a separate title to the property. In January 1988. the Isabela Colleges asserted that the property in question had been sold to it with the knowledge and consent of Nieves who in fact signed the deed of sale.) laches cannot defeat that claim of a registered property owner despite the long delay of 41 years. On Appeal. 1970 when it secured a title to the land. the Court of Appeals cited no other evidence to prove that the land was her paraphernal property. Cancellation of Titles. Hence. Since 1950. Two complaints-in-intervention were allowed by the trial court. During the pendency of this case Nieves died and her heirs substituted her. Issue 1: Both the acquisition of the 13-hectare land and the sale of a portion thereof to petitioner in 1949 took place when the Spanish Civil Code was still in effect. the absence of the wife’s consent alone does not make the sale “in fraud” of her. Under Article 1407 of that code. It is Page 45 . herein petitioner contends that the complaint was barred by prescription and/or laches. Issue: Whether the Court of Appeals erred in ruling that: 1. the wife’s consent to the sale is not required. Ruling: Wherefore the decision of the Court of Appeals is REVERSED. which was thereafter immediately occupied by the petitioner and used the same as its new campus. the property of the spouses are deemed conjugal partnership property in the absence of proof that it belongs exclusively to one or the other spouse. 3. In 1991.) Nieves’ signature in the questioned deed of sale is forged. this petition. that her signature is a forgery is determinative only of Nieves’ lack of consent but not of the validity of the sale. the registered owner may lose his right to recover possession of his registered property by reason of laches. the evidence clearly shows that the land was acquires during her marriage with Pablo Rivera. On the contrary. by observance of due diligence. its decision was reversed. Deeds of Sale. Nieves brought the present suit against the Isabela Colleges for “Nullity of Titles. The land was conjugal property and under the Spanish Civil Code.application for a sales patent over a 13. the Office of the Register of Deeds of Isabela was burned. Moreover. Issue 2: The fact that Nieves Tolentino’s signature in the deed of sales is a forgery does not. Isabela. 1994. the Isabela Colleges declared the land for tax purposes. This presumption arises with respect to property acquired during the marriage. ruling in favor of Isabela Colleges.” In its Answer.) the subject property is paraphernal despite Nieves’ admission that it was purchased from Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 the government during her marriage with Pablo Rivera out of conjugal funds. Her application was approved and a sales patent was issued in the name of “Nieves Tolentino. married to Pablo Rivera”. It was only on January 13. claimed to be buyers in good faith or lessees of Nieves as to certain portions of the subject land. The Municipal Trial Court of Cauayan. The above said spouses sold to petitioner Isabela four hectares of their land.

negligence or omission to assert a right within a reasonable time. warranting the presumption that the party entitled to assert his right either has abandoned or declined to assert it. So it is in the present case where the complaint questioning the validity of the sale to petitioner Isabela Colleges was filed only after 42 years had lapsed. Respondents could not feign ignorance of the sale because petitioner had been in open. which it had used as its school campus since 1949. and continuous possession of the land.No. public.R. 2000 G. Bayoca vs. Nogales September 12.138201 Third Division Ponente: Justice Gonzaga-Reyes Facts: Gaudioso Nogales acquired ownership over the subject property on the basis of the Compromise Agreement and the Deed of Absolute Sale executed by Julia Deocareza who had acquired of said property from the Canino Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 46 .

If the same thing should have been sold to different vendees. the Appellants in the present recourse. and Florencia Page 47 . It has been held that in cases of double sale of immovables. Hence this petition. SPOUSES ELIGIO and LORENZA ECHAVEZ and the COURT OF APPEALS G. to the person who presents the oldest title. On account of the undisputed fact of registration by respondent Nogales as the first buyer. and merely rely on the fact that they declared the same in their name for taxation purposes. constitute evidence of ownership and cannot likewise prevail over the title of respondent Nograles. Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple sales. there is absent good faith in the registration of the sale by the petitioners Erwin Bayoca and the spouses Pio and Lourdes Dichoso for which they had been issued certificates of title in their names. who in turn bought the same from the Canino brothers and sisters. necessarily. without knowledge of any defect in the title of the property. 152407. However. Nonito Dichoso. the ownership shall be transferred to the person who may have first taken possession thereof in good faith. No. Suffice it to state. second paragraph. alleged that Preciosa Canino and her siblings acquired just title over the property when they executed their “Deed of Partition of Real Property” and conveyed titles to the vendees. and in the absence thereof. Spouses Albert Oguis. 21 September 2007. Preciosa Canino subsequently sold at different times portions of the subject property to herein petiitoners. by itself. The Appellee. the ownership shall pertain to the person who in good faith was first in possession.R. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second buyer registers such second sale in good faith. provided there is good faith. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Should it be immovable property. to merit the protection under Article 1544. as buyers in goof faith.brothers and sisters. the court of Appeals affirmed the RTC ruling. As for the petitioners Francisco Bayoca and Nonito Dichoso. that such fact. v. Issue: Who has the superior right to the parcel of land sold to different buyers at different times by its former owners? Ruling: Petition is hereby DENIED and the assailed DECISION of the Court of Appeals is AFFIRMED. that is. Thus. they failed to register the portions of the property sold to them. Francisco Bayoca. as follows: “Art. if it should be movable property. J.” He alleged in his complaint. does not. rely on the fact that they were the first to register the sales of the different portions of the property resulting in the issuance of new titles in their names.” Based on the foregoing. Erwin Bayoca. There is no question from the records that respondent Nogales was the first to buy the subject property from Julia. et al. and spouses Pio and Dolores Dichoso. filed complaint against the Appellants for “Accion Reinvindicatoria with Damages. The Regional Trial Court ruled in favor of Nogales and declared that the sales of portions of said property by Preciosa Canino were null and void. the second buyer must act in good faith in registering the deed. Should there be no inscription. SPOUSES FLORENDO DAUZ and HELEN DAUZ. 1544. that he purchased the said property from Julia Decareza and thus acquired ownership thereof and that the Appellants respectively purchased portions of said property in bad faith and through fraud. however. The Appellants. Petitioners. The trial court further declared further that petitioners were purchasers in bad faith. On appeal. SANDOVAL-GUTIERREZ. in their Answer to the complaint. Sr.

even if the latter is in actual possession of the immovable property Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 48 . also petitioners. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. a portion sold to them by Albert Oguis. Should it be immovable property. 1982. petitioners. The new title covers the entire property previously owned by spouses Oguis. a complaint for declaration of ownership. Petitioners. Sr. Spouses Oguis later on sold the remaining portion of the land to the same respondents. petitioners sold to spouses Ignacio and Francisca Reambonanza. the title in the names of spouses Oguis was cancelled and in lieu thereof. informed petitioners that he had sold only a portion to respondents. 1989. HELD: Petition DENIED. but the land was not registered. and Helen Oguis Valerio. Where both parties claim to have purchased the same property. and his two children. they sold to spouses Florendo and Helen Dauz. ISSUE: WHETHER THERE WAS BAD FAITH ON THE REGISTRATION OF THE LAND BY THE RESPONDENTS In April 1982. respondents caused the registration of the sale of the 1. RATIO: Article 1544 of the Civil Code is relevant. If the same thing should have been sold to different vendees. failed to cause the registration of the sale to them in the Registry of Deeds. executed a Deed of Extrajudicial Settlement of Estate. a new title was issued in respondents’ names. The Court of Appeals affirmed RTC’s decision. and his two children Albert Oguis. and. to the person who presents the oldest title. as in this case. the ownership shall be transferred to the person who may have first taken possession thereof in good faith. thus: Albert Oguis. The trial court dismissed the petition. in the absence thereof. Petitioners (spouses Dauz).616 square meters in the Registry of the Deeds. the one who registered the sale in his favor has a preferred right over the other who has not registered his title. Jr. Consequently. a portion of the land as shown by a Deed of Absolute Sale. on the other hand.Refuerzo Oguis sold a portion of the land to respondents spouses Eligio and Lorenza Echavez. then filed with the RTC. Article 1544. Article 1544 cited above provides that as between two purchasers. On April 1. Sr. they had the sale registered in the Registry of Deeds of Benguet. Albert Oguis. On the same date. T-13728. Sr. Meanwhile. provided there is good faith.295-square meter portion of the land. Petitioners then filed with the Regional Trial Court (RTC) of Baguio and Benguet a Petition for the Issuance of a New Duplicate Copy of TCT No. the sale of the remaining 7. Respondents had the sale to them of the remaining 7.616 square meters portion of the land registered in the same Registry of Deeds. Should there be no inscription. the ownership shall pertain to the person who in good faith was first in possession. if it should be movable property. and on January 25.

it was Albert Oguis. CHINA AIRLINES. California. Private respondents planned to travel to Los Angeles. himself who requested them not to cause the registration of the sale. They initially engaged Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 49 . 129988. v. ANTONIO S. Respondents did not immediately register the sale because they waited for spouses Oguis to repurchase the property. Ltd. 14 July 2003. LAO G. Court of Appeals. interest or ill will that partakes of the nature of fraud. In fact. we still perused the records and found that there is no evidence showing that respondents acted in bad faith. It means breach of a known duty through some motive. v. COURT OF APPEALS. J. we held that bad faith does not simply connote bad judgment or negligence. CARPIO. Sr. It imports a dishonest purpose or some moral obliquity and conscious doing of a wrong. These incidents or circumstances are not present here. SALVADOR and ROLANDO C. LTD.Nonetheless.R. In China Airlines. No.

The airline business is intended to serve the traveling public primarily and is thus imbued with public interest. Lao then called Amexco and gave the tire record locator number if booking reference that CAL had previously issued to Morelia when Morelia booked the reservations of the private respondents. Amexco called up CAL to finalize private respondents' reservation for CAL's 13 June 1990 flight. from boarding its airplane because their names were not in the passengers' manifest. Morelia cancelled the reservations of private respondents. who were then in possession of the confirmed tickets. Hence this petition. HELD: SPOUSES SALERA vs SPOUSES RODAJE G. In the afternoon of the same day. However. In this case. CAL cancelled the reservations when Morelia revoked the booking it had made for the private respondents.R. Thus. The confirmed tickets issued by Amexco to private respondents upon CAL's confirmation of the reservations are undeniable proof of the contract of carriage between CAL and private respondents. The law governing common carriers consequently imposes an exacting standard. it bound itself to transport private respondents on its flight on 13 June 1990. CAL confirmed the booking. No. All that he has to prove is the existence of the contract and the fact of its non-performance by the carrier. however. as the American Express Travel Service Philippines (Amexco) offers cheaper rates. and (2) a contract to transport passengers to their destination. when CAL confirmed the reservations. ISSUE: Whether the petitioner is liable despite the fact that such acts complained of were acts done by its employees destination. a contract of carriage arises. The land was bought from the heirs of Brigido Tonacio as Page 50 The nature of an airline's contract of carriage partakes of two types. Clearly. Amexco then issued to private respondents the confirmed tickets for the 13 June 1990 flight of CAL. CAL called up Morelia to reconfirm the reservations of private respondents. In Alitalia Airways v. CAL does not deny its confirmation of the reservations made by Amexco. CAL did not allow private respondents. 135900 RATIO: 17 August 2007 Petition DENIED. and engage the services of the latter. On the day of the flight. namely: (1) a contract to deliver a cargo or merchandise to its Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 . First Division Facts: Spouses Salera filed an action for quieting of title regarding a parcel of land in Brgy. we held that when an airline issues a ticket to a passenger confirmed for a particular flight on a certain date. CAL breached its contract of carriage with private respondents. Leyte. If he does not.. then the carrier opens itself to a suit for breach of contract of carriage. rule out bad faith by CAL. Ponente: Justice Sandoval – Gutierrez. On the same day. San Isidro. the aggrieved party does not have to prove that the common carrier was at fault or was negligent. private respondents decided to drop the services of Morelia. Amexco used the record locator number given by Lao in confirming the reservations of private respondents. We.the services of Morelia Travel Agency (Morelia). The passenger then has every right to expect that he would fly on that flight and on that date. in an action based on a breach of contract of carriage. the private respondents were not able to board the plane since their names were not on the passengers’ list. et al. Basud. which booked them with petitioner China Airlines Ltd (CAL). CA.

they are buyers in good faith. Bad faith was established in the RTC. They allege that they have been in possession of the property and the house they built thereon because they had paid the purchase price even before the execution of the deed of sale. RTC of Calubian. . The evidence submitted to the court. Catalino had no legal personality to sell the parcel of land. JR. not being the owner or possessor. 2408. Sale made by Catalino to spouses Rodaje is invalid. (Petition is GRANTED. by operation of the law on succession would be the heirs of Brigido and not his father. Tax Declaration No.. They paid a downpayment of P1. The court cited that the real owners of the land. The assailed Decision of the Court of Appeals is REVERSED and the Decision of the trial court is REINSTATED. Third Division Facts: The Velezes were the owners of the lot and commercial building in question located at Progreso and M. they are good indicia of possession in the concept of owner. The Court of Appeals reversed and set aside the decision of the RTC. they found that Tax Declaration No. The respondents proof of payment of realty tax from the period of 1974 to 1984 was paid in lump sum. it covers a situation where a Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 single vendor sold one and the same immovable property to two or more buyers. The certification presented by respondents clearly shows that the house is owned by Aida Salera and that respondents started paying the electric bills (in the name of Aida Salera) only in 1986. 115158 1997 Ponente: Justice Panganiban. Any lot buyer is expected to be vigilant. 2408 issued.000 when the sale was executed. The Court of Appeals is wrong. Spouses Rodaje claimed that they bought the land from Catalino Tonacio. 1544 does not apply in this case since the sale was made by Catalino and the heirs of Brigido. G. et al. Hence. Apart from being the first registrants. publicly. 1986.R. established that Spouses Rodaje knew beforehand that the property was declared in the name of Brigido Tonacao for taxation purposes. Art.evidenced by the Deed of Absolute Sale executed on June 23. They also claimed that they had a verbal contract with Catalino even before the execution of the sale since January 1984. When they asked the Provincial Assessor to declare the property under their names for taxation purposes. was issued in the names of Spouses Rodaje. for no one in his right mind would be paying taxes for a property that is not in his actual or at least constructive possession. vs CA and VELEZ. While tax declarations are not conclusive proofs of ownership. It based its decision on the Civil Code provision on double sale. Briones Streets in Cebu City. 1986 and that the sale was registered with the Register of Deeds and the Tax Declaration No. There is no indication from the record that Rodaje first determined the status of the lot. 2408 was issued in their name. Leyte declared Spouses Salera as the rightful and legal owners while declaring null and void the Deed of Absolute Sale between Catalino and herein respondents and ordering the cancellation of Tax Declaration No. More specifically.C. however. exercising utmost care in determining whether the seller is the true owner of the property and whether there are other claimants. father of Brigido on June 6. Issue: Which of the two contracts of sale is valid? Held: Sale made by the heirs of Brigido Tonacao to the spouses Salera is valid.) URACA. et al.000 and paid the balance of P4. 2994 (R-5) in the name of Brigido was already cancelled and another one. adversely and continuously. Article 1544 of the Civil Code contemplates a case of double sale or multiple sales by a single vendor. They allege that they been in exercising their right of ownership over the property and the building constructed thereon peacefully. The petitioners were its lessees. Catalino. Page 51 September 5. could not validly sell the lot to respondents. No.

It further held that such second agreement.050. . . through counsel. It should have been P1.000. (2) the agreement of all the parties to the new contract.000. On July 13. Petitoners filed an amended complaint impleading the Avenue Group as new defendants after about 4 years after the filing of the original complaint. however.00 and to reply within three days. the Avenue Group filed an ejectment case against petitioners ordering the latter to vacate the commercial building standing on the lot in question. the Velezes sold property to Avenue Merchandising Inc. thus making the price P1. 1985.00.On July 8. The registration of a later sale must be done in good faith to entitle the registrant to priority in ownership over the vendee in an earlier sale. it must be sufficiently established that a valid new agreement or obligation has extinguished or changed an existing one.) Was there a double sale of the real property involved? Held: On Novation Novation is never presumed. cancelled and rescinded by novation.050. CA added that. Since there was no agreement as to the 'second' price offered. 1985. even if there was agreement as to the price and a second contract was perfected.00.400. The Court of Appeals held that there was a Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 perfected contract of sale of the property for P1. 1985." Article 1231 of the same Code states that novation is one of the ways to wipe out an obligation. .4M instead of the original price of P1.00 between the Velezes and herein petitioners. Extinctive novation requires: (1) the existence of a previous valid obligation. the trial court held that "[d]ue to the unqualified acceptance by the plaintiffs within the period set by the Velezes. the later contract would be unenforceable under the Statute of Frauds. . 1985.00. no contract of sale was perfected. RTC found two perfected contracts of sale between the Velezes and the petitioners involving the real property in question.) Was there novation of the first contract? 2. On October 30. It added.000. It must be proven as a fact either Page 52 . 1985. It also held that the Avenue Group were buyers in bad faith.000 to be paid in 30 days. for P1. Uraca agreed to the new price to be payable in installments with a down payment of P1M and the balance of P400. Issues: 1.00. On July 31. However. the Velezes through Carmen Velez Ting wrote a letter to petitioners offering to sell the subject property for P1. Ting told her that there was a mistake in the price. constituted a mere promise to sell which was not binding for lack of acceptance or a separate consideration.000. In respect to the first sale. if there was one. Petitioners. petitioners filed the instant complaint against the Velezes. On August 1.000. Article 1600 of the Civil Code provides that "(s)ales are extinguished by the same causes as all other obligations. and (4) the validity of the new one. Novation is effected only when a new contract has extinguished an earlier contract between the same parties. The second sale merely constituted a mere modificatory novation which did not extinguish the first sale. that such perfected contract of sale was subsequently novated. (3) the extinguishment of the old obligation or contract. 1985. The certificate of title of the said property was clean and free of any annotation of adverse claims or lis pendens. The first sale was for P1.050. When Uraca went to Ting. Carmen Velez Ting did not accept the said counter-offer of Emilia Uraca although this fact is disputed by Uraca. No payment was made by to the Velezes on July 12 and 13.050.4M.000. there was no meeting of minds between the parties. and was therefore abandoned by the parties when Carmen Velez Ting raised the consideration of the contract by P350.050. there consequently came about a meeting of the minds of the parties not only as to the object certain but also as to the definite consideration or cause of the contract.00 and the second was for P1. it was mutually withdrawn.000. hence. accepted the offer. they also registered a notice of lis pendens over the property in question with the Office of the Register of Deeds.

Under this provision. 1990 is REVIVED with the following MODIFICATION — Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 the consideration to be paid under par. having been the property's lessees and possessors for decades prior to the sale. They had actual knowledge of the Velezes' prior sale of the same property to the petitioners. 100594 (219SCRA777) Third Division MELO.: March 10. there can be no novation of the latter.00. On Double Sale Prior registration of the disputed property by the second buyer does not by itself confer ownership or a better right over the property. No. the first sale of the property in controversy.by express stipulation of the parties or by implication derived from an irreconcilable incompatibility between old and new obligations or contracts. Knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale.000. the parties having failed to agree on the terms of the payment.R. Consequently. as provided by the Civil Code. Since the parties failed to enter into a new contract that could have extinguished their previously perfected contract of sale. The assailed Decision of the Court of Appeals is hereby SET ASIDE and the dispositive portion of the trial court's decision dated October 19. 2 of the disposition is P1. petitioners are entitled to the ownership of the property because they were first in actual possession. 1993 Page 53 .000. COURT OF APPEALS G. since such knowledge taints his prior registration with bad faith (Art.) BINALBAGAN TECH.00 and not P1. vs. The petitioners and the Velezes clearly did not perfect a new contract because the essential requisite of consent was absent.050. 1544). by the Velezes to petitioners for P1.400.050. (The petition is GRANTED. remained valid and existing. Hence. the third and not the second paragraph of Article 1544 should be applied to this case. Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights except where the second buyer registers in good faith the second sale ahead of the first. The Avenue Group was a buyer and registrants in bad faith. INC.00.. J.000. Article 1544 requires that such registration must be coupled with good faith.

CA issued a writ of preliminary injunction. Paras. this petition for review on certiorari wherein petitioners assign the following alleged errors of the Court of Appeals: Issue: Whether private respondents' cause of action in Civil Case No. 45 SCRA 314]. 1354 with the RTC in Himamaylan. 1191. Court of Appeals. Plaintiffs in the instant case on appeal filed their ThirdParty Claim based on an alleged Deed of Sale executed in their favor by spouses Jose and Lolita Lopez. said petitioner took possession of the lots and the building and improvements thereon. As petitioner Binalbagan failed to effect payment. CV No. through its president. Negros Occidental against petitioners for recovery of title and damages. defendant Puentevella was restored to the possession of the lots and buildings subject of this case. The intestate estate of the late Luis B. Binalbagan started operating a school on the property from 1967 when the titles and possession of the lots were transferred to it. 1354 is barred by prescription. Page 54 . mortgaging said lots in favor of the estate of Puentevella. brothers. in her capacity as Judicial Administrator of the intestate estate of Luis B. 48 Phil.509. Javellana having failed to pay the installments for a period of five years. Puentevella. There was a pending case involving the said property. willing and able to comply with his own obligations thereunder (Art. through Angelina P. Inc.Facts: On May 11. Petitioner Binalbagan transferred its school to another location. 1982 Civil Case No. private respondent Angelina Echaus demanded payment from petitioner Binalbagan for the subdivision lots. Echaus. executed a Contract to Sell and a Deed of Sale of 42 subdivision lots within the Phib-Khik Subdivision of the Puentevella family. A party to a contract cannot demand performance of the other party's obligations unless he is in a position to comply with his own obligations. conveying and transferring said lots to petitioner Binalbagan Tech. all payments therefore made and all improvements introduced on the property shall pertain to the promissor and shall be considered as rentals for the use and occupation thereof. Upon the transfer to Binalbagan of titles to the 42 subdivision lots. 581 [1926]. Echaus filed on October 8. thus Puentevella was constrained to assert physical possession of the premises to counteract the fictitious and unenforceable claim of herein plaintiffs. Private respondents appealed to the CA which reversed and set aside the appealed decision. 24635 is AFFIRMED. Echaus filed an amended complaint by including her mother.. Civil Code. Seva vs. Thus. Berwin. 1967. executed an Acknowledgment of Debt with Mortgage Agreement. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 When the Supreme Court dissolved the aforesaid injunction issued by the Court of Appeals. possession of the building and other property was taken from petitioner Binalbagan and given to the third-party claimants. the right to rescind a contract can be demanded only if a party thereto is ready. Ruling: Petition is DENIED and the decision of the Court of Appeals in CA-G. the de la Cruz spouses. Similarly. private respondents. In turn Binalbagan. enclosing in the letter of demand a statement of account as of September 1982 showing a total amount due of P367. Plaintiffs filed a petition for review with the Supreme Court which issued a restraining order against the sale of the properties claimed by the spouses-plaintiffs [in Abierra vs. thus. The trial court rendered a decision in favor of the defendants. Nava. Judgment was rendered in favor of Puentevella. representing the price of the land and accrued interest as of that date.R.93. petitioner Hermilo J. the case was filed by defendant Puentevella against him. and sisters as co-plaintiffs. Puentevella sold said lots to Raul Javellana with the condition that the vendeepromisee would not transfer his rights to said lots without the express consent of Puentevella and that in case of the cancellation of the contract by reason of the violation of any of the terms thereof. After petitioner Binalbagan was again placed in possession of the subdivision lots.

from the time ownership is passed. as well as warrant. Civil Code). the appellants themselves could not have restored unto the appellees the possession of the 42 subdivision lots precisely because of the preliminary injunction mentioned elsewhere. there is: (1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass. because from 1974 up to 1982. and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing. Vol. 1547. IV. the vendor is bound to transfer the ownership of and deliver.Civil Code of the Philippines. 200). Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 55 . Consequently. the thing which is the object of the sale (Art. have and enjoy the legal and peaceful possession of the thing Art. 1495. the appellants could not have prospered in any suit to compel performance or payment from the appellees-buyers. The period of prescription was interrupted. p. unless a contrary intention appears. 12th ed. he warrants that the buyer shall. In a contract of sale. because the appellants themselves were in no position to perform their own corresponding obligation to deliver to and maintain said buyers in possession of the lots subject matter of the sale. In a contract of sale.

No. defendants Lea Zulueta-Laforteza and Michael Z.000. plaintiff reiterated his request to tender payment of the balance. Laforteza had told him that the subject property was no longer for sale. On November 20. defendant heirs. however. 1989. A perusal of the MOA shows that the transaction between the petitioners and the respondent was one of sale and lease.000.00. plus rentals for the subject property. from liability for the payment of moral damages. Laforteza. 1998 . Laforteza. Motion for Reconsideration was denied but the Decision was modified so as to absolve Gonzalo Z. Facts: On August 2. the heirs of the late Francisco Q. entered into a Memorandum of Agreement (MOA[Contract to Sell]) with the plaintiff over the subject property for the sum of P630. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Issues: W the Memorandum of Agreement is a mere contract to sell. 1989. On September 18. On November 15. Dennis Z. June 16. 2000 (333SCRA643) Third Division GONZAGA_REYES. Both agency instruments contained a provision that in any document or paper to exercise authority granted. refused to accept the balance Defendant Roberto Z. Laforteza both executed a Special Power of Attorney (SPA) in favor of defendants Roberto and Gonzalo Z. naming both attorneys-in-fact for the purpose of selling the subject property and signing any document for the settlement of the estate of the late Francisco Q. through their counsel wrote a letter to the plaintiff furnishing the latter a copy of the reconstituted title to the subject property..00. However. Laforteza. insisted on the rescission of the MOA.000. as indicated in its title. 1989. 1998. Defendants. Jr. plaintiff sent the defendant heirs a letter requesting for an extension of the 30 DAYS.00 covered by United Coconut Planters Bank Managers Check. the defendants. 1988.00 under the Memorandum of Agreement which plaintiff received on the same date. plaintiff paid the earnest money of P30. Jr. Petitioners appealed to the Court of Appeals. plaintiff informed the defendant heirs. 137552. A year later. Laforteza for the purpose of selling the subject property. Laforteza executed an SPA in favor of defendant Roberto Z.ROBERTO Z. On October 18. that he already had the balance P600. 1988. Ruling: CA decision is AFFIRMED and the instant petition is hereby DENIED. Laforteza represented by Roberto Z. On October 27. defendants informed the plaintiff that they were canceling the MOA in view of the plaintiffs failure to comply with his contractual obligations. A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. which affirmed with modification the decision of the lower court. The lower court rendered judgment in favor of the plaintiff. through defendant Roberto Z. From that moment the parties may reciprocally demand performance subject to the provisions of the law Page 56 . Laforteza and Gonzalo Z.R. Jr. defendant Dennis Z. Plaintiff filed the instant action for specific performance. MACHUCA LAFORTEZA vs. Jr. Laforteza executed another SPA in favor of defendants Roberto and Gonzalo Laforteza. 1989. J. Thereafter. the signature of both attorneys-in-fact must be affixed. On January 20.000. ALONZO G. Hence this petition. Laforteza. On January 20. Laforteza. Laforteza. appointing both as her Attorneyin-fact authorizing them jointly to sell the subject property and sign any document for the settlement of the estate of the late Francisco Q. advising him that he had 30 days to produce the balance of P600.

00. was clearly not a period within which to exercise an option. there was a perfected agreement between the petitioners and the respondent whereby the petitioners obligated themselves to transfer the ownership of and deliver the house and lot and the respondent to pay the price amounting to P600. (2) determinate subject matter and (3) price certain in money or its equivalent. An option contract is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. the balance of the purchase price was to be paid only upon the issuance of the new certificate of title in lieu of the one in the name of the late Francisco Laforteza and upon the execution of an extrajudicial settlement of his estate.000.00." In the present case. The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds. In the case at bench. An option contract is governed by the second paragraph of Article 1479 of the Civil Code. The six-month period during which the respondent would be in possession of the property as lessee. the six-month period merely delayed the demandability of the contract of sale and did not determine its perfection for after the expiration of the six-month period. However. An option must be supported by consideration. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 57 . Prior to the issuance of the "reconstituted" title. the respondent was already placed in possession of the house and lot as lessee thereof for six months at a monthly rate of P3.500. All the elements of a contract of sale were thus present. “An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. there was an absolute obligation on the part of the petitioners and the respondent to comply with the terms of the sale. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price.governing the form of contracts.

Although petitioners asked respondents to make the necessary repairs. although the latter alleged that the repairs made were inadequate. For Art.00 as deposit for three months. their contemporaneous and subsequent acts should be principally considered. to make the necessary repairs on the leased premises as provided in Art. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Ruling: Decision of Court of Appeals affirmed with modification that the order for payment of unpaid rentals with interest to respondents is deleted.” Under Arts.000. 1988. 1654(2) of the Civil Code. the roof of the building leaked and the premises were flooded.Jon and Marissa De Ysasi vs. which are visible.00 as attorney's fees and P20. J. Consequently. No. as lessors. the decision was modified inasmuch as petitioners were ordered to pay P20.000.000. dismissed the complaint and ordered petitioners to pay respondents the sums of P5. Arceo caused certain repairs to be done on the leased premises at the request of petitioners. respondents cannot be held liable for the alleged warranty against hidden defects. The Court of Appeals held that under the contract of lease of the parties. and telephone bills from December 1988 up to the time they vacated the leased premises in June 1989. It appears that due to heavy rains. spouses Jon and Marissa de Ysasi leased from spouses Arturo and Estela Arceo. which in his opinion was caused by leaking water or termites. Hence. Yet. for specific performance or rescission of contract with damages. 1371 of the Civil Code provides that “In order to judge the intention of the contracting parties. he decided to go through with the lease agreement. however. Petitioners' motion for reconsideration was subsequently denied. On appeal to the Regional Trial Court.00 as balance of their rentals up to the time they vacated the premises. but he is not answerable for patent defects or those. Page 58 . with interest at the legal rate. On appeal to the Court of Appeals. Facts: On October 1. the lessor is responsible for warranty against hidden defects. The trial court. while ruling that petitioners were justified in suspending the payment of rent.000. 2001 Mendoza.00 as back rentals.00 as goodwill money and P15. petitioners stopped paying rent as well as their share of the electric. Petitioners paid P5. Second Division Issue: WON there was an implied waiver of repairs including repairs for hidden and unknown defects by the lessee. water. The records show that respondent Mrs. This fact indicates that there was no implied waiver of repairs on the part of the lessee. 136586 November 22. which they subsequently changed to a claim for damages in view of the expiration of the lease contract. Ratio: Petitioners anchor their complaint for damages on respondents' failure. In its decision. 1561 and 1653 of the Civil Code. During his inspection. Petitioner Jon de Ysasi admitted on cross-examination that he inspected the premises three or four times before signing the lease contract. Respondents in turn filed an ejectment suit against petitioners in the Metropolitan Trial Court. the latter's premises in order to carry on their business of hand painting and finishing services. the MeTC.R. he noticed the rotten plywood on the ceiling. there was an implied waiver of right to demand repairs to be made by the lessee. the latter repaired only a portion of the leased premises. as a result of which the schedule of the delivery of hand painted moldings to petitioners' customers was disrupted. Arturo and Estela Arceo G.000. ordered the deposits made by them to be applied to the payment of rentals up to June 1989 and directed them to pay them electric and water bills. Petitioners then filed a complaint in the Regional Trial Court. the decision was affirmed.

Under the law on obligations. but such liability may be regulated by the courts. 1565 and 1566. Responsibility arising from negligence is also demandable in any obligation. vs. Issue: WON the subsequent action for damages by the proprietress against the soft drinks manufacturer should be treated as one for breach of implied warranty against hidden defects or merchantability.e. and an action based thereon may be brought by the vendee.R. Inc. with damages eithercase. the acts which breaks the contract may also be a quasi-delict. 1993 Davide. She brought the said bottles to the Regional Health Office of the Department of Health at San Fernando. She demanded from the petitioner the payment of damages but was rebuffed by it.00 to P300. as a general rule. 1567. according to the circumstances. i. She received a letter from the Department of Health informing her that the samples she submitted "are adulterated. Geronimo was the proprietress of Kindergarten Wonderland Canteen in Dagupan City. her sales of soft drinks severely plummeted from the usual 10 cases per day to as low as 2 to 3 cases per day resulting in losses of from P200. While it may be true that the preexisting contract between the parties may. some parents of the students complained to her that the Coke and Sprite soft drinks sold by her contained fiber-like matter and other foreign substances or particles. Ruling: Petiton denied. She then went over her stock of softdrinks and discovered the presence of some fiber-like substances in the contents of some unopened Coke bottles and a plastic matter in the contents of an unopened Sprite bottle. The vendee may also ask for the annulment of the contract upon proof of error or fraud. the liability may itself be deemed to arise from quasi-delict..Coca-Cola Bottlers Philippines. La Union. No. and not long after that she had to lose shop on December 12 1989.00 per day. Lydia Geronimo G. 110295 October 18. bar the applicability of the law on quasi-delict." as a consequence of the discovery of the foreign substances in the beverages. Ratio: The vendee's remedies against a vendor with respect to the warranties against hidden Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 59 . The vendor could likewise be liable for quasidelict under Article 2176 of the Civil Code. Jr. or delay in the performance of their obligations and those who in any manner contravene the tenor thereof are liable for damages. the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price. First Division defects of or encumbrances upon the thing sold are not limited to those prescribed in Article 1567 of the Civil Code which provides: Art. 1564. 1562. Facts: Lydia L. J. On or about August 12 1989. responsibility arising from fraud is demandable in all obligations and any waiver of an action for future fraud is void. in which case the ordinary rule on obligations shall be applicable.. an enterprise engaged in the sale of soft drinks (including Coke and Sprite) and other goods to the students of Kindergarten Wonderland and to the public. she became jobless and destitute. for examination. negligence. The Honorable Court of Appeals and Ms. In the case of Articles 1561. Those guilty of fraud.

Respondent Sio sought recourse in the Court of Appeals.: FACTS: Petitioners spouses Dinoare engaged in the business of manufacturing and selling shirts.404. RTC ruled in favor of the petioners.00.Inocencio Yu Dino vs. the provisions on warranty of title against hidden defects in a contract of sale apply to the case at bar. whether the agreement between the parties was one of a contract of sale or a piece of work. Court of Appeals June 20. but only upon order of the petitioners and at the price agreed upon. the respondent court reversed its decision and dismissed petitioners' Complaint for having been filed beyond the prescriptive period.R.00 per piece in accordance with the sample approved by the petitioners. Respondent Sio did not ordinarily manufacture these products. the contract executed by and between the petitioners and the respondent was a contract for a piece of work. Respondent Sio delivered in several installments the 40. Petitioners filed action for collection of a sum of money. The appellate court affirmed the trial court decision. Page 60 . As respondent Sio refused to pay. Petitioner fully paid the agreed price. The contract between the petitioners and respondent stipulated that respondent would manufacture upon order of the petitioners 20. J.1 Respondent Sio is part owner and general manager of a manufacturing corporation doing business under the trade name "Universal Toy Master Manufacturing. 2001 359 SCRA 91 Whether the contract between the contracting parties is a contract of sale or a contract for a piece of work G.000 pieces of vinyl frogs and 20.000 pieces of vinyl mooseheads at P7. No. 113564 ISSUE: First Division Puno. Hence. Petitioners then demanded from the respondent a refund of the purchase price of the returned goods in the amount of P208. These frogs and mooseheads were to be attached to the shirts petitioners would manufacture and sell. On January 24.772 pieces of frogs and mooseheads for failing to comply with the approved sample. At any rate. 1994. petitioners returned to respondent 29. Subsequently. Clearly. this petition. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Whether the respondent is responsible for the warranty against hidden defects RULING: Petition is DENIED. Respondent then filed a Motion for Reconsideration and a Supplemental Motion for Reconsideration alleging therein that the petitioners' action for collection of sum of money based on a breach of warranty had already prescribed.000 pieces of frogs and mooseheads.000 pieces of vinyl frogs and 20.000 pieces of vinyl mooseheads according to the samples specified and approved by the petitioners." Petitioners and respondent Sio entered into a contract whereby the latter would manufacture for the petitioners 20. A hidden defect is one which is unknown or could not have been known to the vendee.

Wenceslao and/or Dominador Dayrit. to rule on whether the written agreement failed to express the true intent of the parties would entail having this Court reexamine the facts. 154106 Second Division QUISUMBING.M. that the extra condition being insisted upon by the petitioners is not found in the sales contract between the parties. J. WENCESLAO was bound to pay respondent a twenty percent (20%) downpayment. However. roll the asphalt. Under the contract.75. Vs. READYCON demanded that WENCESLAO pay the balance of the contract price. WENCESLAO also alleged that since the contract did not indicate this condition with respect to the period within which the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 balance must be paid. Under Article 1582 of the Civil Code. Ready Contrading and Construction Corp. WENCESLAO failed to heed the demand.75. Suffice it to say. it alleged that their contract was not merely one of sale but also of service. READYCON filed a complaint with the RTC of Pasig City for collection of a sum of money and damages. 2004 G.M Wenceslao and Associates. make the needed corrections on a prepared base at the jobsite. WENCESLAO prayed for the payment of damages caused by the filing of READYCON’s complaint and the issuance of the writ of attachment despite lack of cause. lay. Following the rule on interpretation of contracts. and if necessary. or P235. CA affirmed. however. the contract failed to reflect the true intention of the parties. RULING: Petition Denied.014. Hence it cannot be used to qualify the reckoning of the period for payment. WENCESLAO admitted that it owed READYCON P1.647. upon delivery of the materials contracted for. this Court may not review the findings of fact all over again.On May 30. 1991. No. WENCESLAO. the buyer is obliged to pay the price of the thing sold at the time stipulated in the contract.308. The balance of the contract price. The findings of the trial court as affirmed by the appellate court on this issue. 1991.: FACTS: WENCESLAO had a contract with the Public Estates Authority (PEA) for the improvement of the main expressway in the R-1 Toll Project along the Coastal Road in Parañaque City. In the proceedings below.178.45 indeed. namely. June 29. with prayer for writ of preliminary attachment against D. however. Inc.26 except when a party puts in issue in his pleading the failure of the written agreement to express the true intent of the parties.308. amounting to P942. Besides.D. was to be paid within fifteen (15) days thereof. however. It was further stipulated by the parties that respondent was to furnish. ISSUE: Was the obligation of WENCESLAO to pay READYCON already due and demandable as of May 30.178.661. bind us now. deliver. Hence this petition. no other evidence shall be admissible other than the original document itself. By way of counterclaim. ignored said demand. Both the RTC and the appellate court found that the parties’ contract stated that the buyer shall pay the manufacturer the amount of P1. WENCESLAO entered into a contract with READYCON.75. READYCON agreed to sell to WENCESLAO asphalt materials valued at P1. RTC ruled in favor of the petitioner. that respondent shall lay the asphalt in accordance with the specifications and standards imposed by and acceptable to the government. It did not even bother to reply to the demand letter. that the findings by the RTC.R. telling Page 61 . then affirmed by the CA. To fulfill its obligations to the PEA. For in a petition for certiorari under Rule 45 of the 1997 Rules of Civil Procedure.110. However. Again. the counsel for READYCON wrote a demand letter to WENCESLAO asking that it make good on the balance it owed. Fifteen (15) days after performance of said work.12 It alleged READYCON agreed that the balance in the payments would be settled only after the government had accepted READYCON’s work as to its quality in laying the asphalt.

despite the fact of the work’s acceptance by the government already Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 62 .against petitioner WENCESLAO is its failure still to pay the unpaid account.

.101. In its reply respondent alleged that subsequent to the enumerated purchase invoices in the original complaint. It deleted the award of P790.70. Clearly. 1978. representing the unpaid purchase price of printing paper bought by petitioner on credit. (respondent) executed on May 5. SInce that petitioner suffered a dislocation of business on account of loss of contracts and goodwill as a result of respondent's violation of its obligation. It alleged that respondent delivered only 1. for these materials. Inc.70 representing the value of printing paper delivered by respondent from June 5. ISSUE Whether or not the respondent violated the order agreement RULING PETITION DENIED.450 reams of printing paper. so that the performance of one is conditioned upon the simultaneous fulfillment of the other.875 reams. The transaction between the parties is a contract of sale whereby respondent (seller) obligates itself to deliver printing paper to petitioner (buyer) which. In the contract. The respondent did not violate the order agreement when the latter failed to deliver the balance of the printing paper on the dates agreed upon. petitioner could have sold books to Philacor and realized profit of P790. not for the failure or delay of respondent to deliver printing paper.324. an order agreement whereby respondent bound itself to deliver to petitioner 3. Respondent filed with the Regional Trial Court (RTC) a collection suit against petitioner for the sum of P766. binds itself to pay therefor a sum of money or its equivalent (price).30 as compensatory damages as well as the award of moral damages and attorney's fees.101. thus. for lack of factual and legal basis. reducing petitioner's indebtedness to P763. 2000.. Thus. In its counterclaim. in total disregard of their agreement and also failed to deliver the balance of the printing paper despite demand therefor. the petitioner denied the material allegations of the complaint. COURT OF APPEALS and FIL-ANCHOR PAPER CO. petitioner did not fulfill its side of the contract as its last payment in August 1981 could cover only materials covered by delivery invoices dated September and October 1980.: FACTS Integrated Packaging Corp (petitioner) and FilAnchor Paper Co.INTEGRATED vs. petitioner made additional purchases of printing paper on credit amounting to P94. The Court of Appeals (CA) reverse and set aside the jugdgment. hence. respondent undertakes to deliver printing paper of various quantities subject to petitioner's corresponding obligation to pay. Both parties concede that the order agreement gives rise to a reciprocal obligations such that the obligation of one is dependent upon the obligation of the other.101. on a maximum 90-day credit. the undertaking of respondent to deliver the materials is conditional upon payment by petitioner within the prescribed period.. 1980 to July 23. Reciprocal obligations are to be performed simultaneously. However it also found petitioner's counterclaim meritorious because if Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 63 . RTC ruled that petitioner should pay P763. June 8.00 which was applied to back accounts.R. INC. 1981. The materials were to be paid within a minimum of thirty days and maximum of ninety days from delivery.200.097 reams of printing paper which was short of 2. the former is entitled to moral damages. 115117.00 and that petitioner refused to pay its outstanding obligation although it made partial payments amounting to P97.324. petitioner suffered actual damages and failed to realize expected profits.70. hence. [G. Hence this petition.200. PACKAGING CORP.. No. petitioner is not even required to make any deposit. J. Second Division] QUISUMBING. in turn. down payment or advance payment.30 from the sale.

The agreement provides for the delivery of printing paper on different dates and a separate price has been agreed upon for each delivery. hence the respondent did not violate the order agreement. or the buyer neglects or refuses without just cause to take delivery of or pay for one or more installments. it was petitioner which breached the agreement as it failed to pay on time the materials delivered by respondent. Here. it depends in each case on the terms of the contract and the circumstances of the case. or whether the breach is severable. On the contrary. and the seller makes defective deliveries in respect of one or more installments. the respondent's suspension of its deliveries to petitioner whenever the latter failed to pay on time. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 64 . respondent has the right to cease making further delivery. Consequently. giving rise to a claim for compensation but not to a right to treat the whole contract as broken. whether the breach of contract is so material as to justify the injured party in refusing to proceed further and suing for damages for breach of the entire contract. is legally justified under the second paragraph of Article 1583 of the Civil Code which provides that: When there is a contract of sale of goods to be delivered by stated installments. which are to be separately paid for. petitioner's evidence failed to establish that it had paid for the printing paper covered by the delivery invoices on time. as in this case. It is also admitted that it is the standard practice of the parties that the materials be paid within a minimum period of thirty (30) days and a maximum of ninety (90) days from each delivery. Respondent appellate court correctly ruled that respondent did not violate the order agreement. Accordingly.

After a while. negotiations for the barter of the jewelry and the Tanay property ensued.GREGORIO FULE. Cruz declined the offer. Petitioner signed the deed. In the afternoon of October 23. 1984. No. Subsequently. at about 8:00 o'clock in the evening of the same day. Cruz to the petitioner as genuine. went near the electric light at the bank's lobby. The latter took the jewelry from the bag. Petitioner then made a bid to buy them but Dr. It so happens that at that time petitioner had shown interest in buying a pair of emerald-cut diamond earrings owned by Dr. The Attorney accordingly caused the preparation of a deed of absolute sale while petitioner and Dr.R. Belarmino (Dr. Cruz (who arrived later) and the cashier then opened the safety deposit box. 1984. NINEVETCH CRUZ and JUAN BELARMINO [G. The Civil Code provides that contracts are Page 65 . vs COURT OF APPEALS. a banker by profession and a jeweler at the same time.000. Having sketched the jewelry then gave them back to Dr. The two found Dr. Ninevetch Cruz (private respondent). RTC. He then used a tester to prove the alleged fakery. that the contract of sale over the Tanay property be declared null and void on the ground of fraud and deceit. petitioner met Atty. RULING PETITION DENIED. Cruz attended to the safekeeping of the jewelry. Cruz which he had seen when his mother examined and appraised them as genuine. Belarmino to finally execute a deed of absolute sale. together with Dichoso and Mendoza. Since the jewelry was appraised only at P160. J. "Okay na ba iyan?" Petitioner expressed his satisfaction by nodding his head.m. held the jewelry against the light and examined it for ten to fifteen minutes. 1998. arrived at the residence of Atty. Dr. the parties Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Later. The following day. arriving there at past 5:00 p. At that point former inspected said jewelry at the lobby of the Prudential Bank branch in San Pablo City and then made a sketch thereof. as affirmed by the Court of Appeals. Belarmino complaining that the jewelry given to him was fake. among other things. 112212 March 2. ISSUE Whether or not the deed of sale of the Tanay property is null and void.000. Hence this petition. Third Division] ROMERO. acquired a 10-hectare property in Tanay. On October 26.00. the former retrieving a cellophane bag with the jewelry inside and handing over the same to petitioner.00 would just be paid later in cash. Rizal (Tanay property). held the earrings uses as consideration for the sale was delivered by Dr. agreed that the balance of P40. Cruz had later agreed to the proposal. petitioner filed a complaint before the Regional Trial Court (RTC) against private respondents praying. asked Remelia Dichoso and Oliva Mendoza to look for a buyer who might be interested in the Tanay property.: FACTS Gregorio Fule (petitioner). The contract of barter or sale is valid. Cruz asked. petitioner. petitioner arrived at the residence of Atty. Petitioner. Dr. as corporate secretary of the bank. Cruz’s lawyer) at the latter's residence to prepare the documents of sale. Cruz. petitioner went to Prudential Bank once again to take a look at the jewelry. Thereafter the petitioner headed for the bank. When Dr.

perfected by mere consent. From this moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. Being consensual, a contract of sale has the force of law between the contracting parties and they are expected to abide in good faith by their respective contractual commitments. Article 1358 of the Civil Code which requires the embodiment of certain contracts in a public instrument, is only for convenience, and registration of the instrument only adversely affects third parties. Formal requirements are, therefore, for the benefit of third parties. Non-compliance therewith does not adversely affect the validity of the contract nor the contractual rights and obligations of the parties thereunder. It is evident from the facts of the case that there was a meeting of the minds between petitioner and Dr. Cruz. As such, they are bound by the contract unless there are reasons or circumstances that warrant its nullification. Hence, the problem that should be addressed in this case is whether or not under the facts duly established herein, the contract can be voided in accordance with law so as to compel the parties to restore to each other the things that have been the subject of the contract with their fruits, and the price with interest. Contracts that are voidable or annullable, even though there may have been no damage to the contracting parties are: (1) those where one of the parties is incapable of giving consent to a contract; and (2) those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. Accordingly, petitioner now stresses before this Court that he entered into the contract in the belief that the pair of emeraldcut diamond earrings was genuine. On the pretext that those pieces of jewelry turned out to be counterfeit, however, petitioner subsequently sought the nullification of said contract on the ground that it was, in fact, "tainted with fraud" such that his consent was vitiated. There is fraud when, through the insidious words or machinations of one of the contracting parties, the other is induced to enter into a
Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010

contract which, without them, he would not have agreed to. The records, however, are bare of any evidence manifesting that private respondents employed such insidious words or machinations to entice petitioner into entering the contract of barter. Neither is there any evidence showing that Dr. Cruz induced petitioner to sell his Tanay property or that she cajoled him to take the earrings in exchange for said property. On the contrary, Dr. Cruz did not initially accede to petitioner's proposal to buy the said jewelry. Rather, it appears that it was petitioner, through his agents, who led Dr. Cruz to believe that the Tanay property was worth exchanging for her jewelry as he represented that its value was P400,000.00 or more than double that of the jewelry which was valued only at P160,000.00. If indeed petitioner's property was truly worth that much, it was certainly contrary to the nature of a businessman-banker like him to have parted with his real estate for half its price. In short, it was in fact petitioner who resorted to machinations to convince Dr. Cruz to exchange her jewelry for the Tanay property. Moreover, petitioner did not clearly allege mistake as a ground for nullification of the contract of sale. Even assuming that he did, petitioner cannot successfully invoke the same. To invalidate a contract, mistake must "refer to the substance of the thing that is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract." An example of mistake as to the object of the contract is the substitution of a specific thing contemplated by the parties with another. In his allegations in the complaint, petitioner insinuated that an inferior one or one that had only Russian diamonds was substituted for the jewelry he wanted to exchange with his 10-hectare land. He, however, failed to prove the fact that prior to the delivery of the jewelry to him, private respondents endeavored to make such substitution. Likewise, the facts as proven do not support the allegation that petitioner himself could be excused for the "mistake." On account of his work as a banker-jeweler, it can be rightfully assumed that he was an expert on matters regarding gems. He had the intellectual capacity and the business acumen as a banker to take precautionary measures to avert such a mistake, considering the value of both the jewelry and his

Page 66

land. The fact that he had seen the jewelry before October 24, 1984 should not have precluded him from having its genuineness tested in the presence of Dr. Cruz. Had he done so, he could have avoided the present situation that he himself brought about. Indeed, the finger of suspicion of switching the genuine jewelry for a fake inevitably points to him. Such a mistake caused by manifest negligence cannot invalidate a juridical act. As the Civil Code provides, "(t)here is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract." Furthermore, petitioner was afforded the reasonable opportunity required in Article 1584 of the Civil Code within which to examine the jewelry as he in fact accepted them when asked by Dr. Cruz if he was satisfied with the same. 29 By taking the jewelry outside the bank, petitioner executed an act which was more consistent with his exercise of ownership over it. This gains credence when it is borne in mind that he himself had earlier delivered the Tanay property to Dr. Cruz by affixing his signature to the contract of sale. That after two hours he later claimed that the jewelry was not the one he intended in exchange for his Tanay property, could not sever the juridical tie that now bound him and Dr. Cruz. The nature and value of the thing he had taken preclude its return after that supervening period within which anything could have happened, not excluding the alteration of the jewelry or its being switched with an inferior kind. Both the trial and appellate courts, therefore, correctly ruled that there were no legal bases for the nullification of the contract of sale. Ownership over the parcel of land and the pair of emerald-cut diamond earrings had been transferred to Dr. Cruz and petitioner, respectively, upon the actual and constructive delivery thereof. Said contract of sale being absolute in nature, title passed to the vendee upon delivery of the thing sold since there was no stipulation in the contract that title to the property sold has been reserved in the seller until full payment of the price or that the vendor has the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Such stipulations are not manifest in the contract of sale. While it is true that the amount of P40,000.00
Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010

forming part of the consideration was still payable to petitioner, its nonpayment by Dr. Cruz is not a sufficient cause to invalidate the contract or bar the transfer of ownership and possession of the things exchanged considering the fact that their contract is silent as to when it becomes due and demandable. Neither may such failure to pay the balance of the purchase price result in the payment of interest thereon. Article 1589 of the Civil Code prescribes the payment of interest by the vendee "for the period between the delivery of the thing and the payment of the price" in the following cases: (1) Should it have been so stipulated; (2) Should the thing sold and delivered produce fruits or income; (3) Should he be in default, from the time of judicial or extrajudicial demand for the payment of the price. Not one of these cases obtains here. There is no stipulation for the payment of interest in the contract of sale nor proof that the Tanay property produced fruits or income. Neither did petitioner demand payment of the price as in fact he filed an action to nullify the contract of sale.

CENTRAL BANK OF THE PHILIPPINES vs.
Page 67

SPOUSES BICHARA

ALFONSO

and

ANACLETA

G.R. No. 131074 March 27, 2000 Second Division DE LEON, JR., J.: Facts: Respondent sold a parcel of land located in Legaspi City to Petitioner at the amount of 500 pesos per square meter or a total amount of 405 thousand pesos. The deed of sale contained that the payment is to be effected only after the Deed of Sale shall have been duly registered and a clean title issued in the name of VENDEE. Also, the VENDORS will 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. 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 of the lots cost petitioner P45,000.00. Petitioner deducted the said amount from the purchase price payable to respondents. Petitioner, however, still did not pay the respondents. Consequently, respondents commenced an action for rescission or specific performance with damages, against petitioner before the Regional Trial Court of Legazpi City. Respondents alleged that petitioner failed to pay the purchase price despite demand. They prayed for the rescission of the contract of sale and the return of the properties, or in the alternative that petitioner be compelled to pay the purchase price plus interest at the rate of 12% per annum from July 19, 1983, until fully paid, and to pay the capital gains and documentary stamp taxes with the Bureau of Internal Revenue and registration fees with the Register of Deeds. Petitioner tendered payment to respondents in the amount of P360,500.00. Respondents refused the tender, however, in view of their
Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010

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. First, petitioner alleged that respondents failed to deliver to the former free and legal possession of the two properties, in view of the encumbrances noted in the title, in addition to the presence of squatters who were not evicted by respondents. Second, it claimed that respondents did not fill up the lots with escombro free from waste materials, as agreed Trial court ordered specific performance of Central Bank to pay for the property plus interest. Court of Appeals on the other hand ordered the rescission of the contract of sale hence this petition.

Issues: Issue 1: Whether respondents are entitled to the remedy of rescission despite of their noncompliance to their obligations to Central Bank. Issue 2: Whether Central Bank is justified in withholding the payment of the purchase price. Held: Issue 1: Respondents should not be allowed to rescind the contract where they themselves did not perform their essential obligation thereunder which is to fill up the parcels of land with escombro. 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. Issue 2: Aside from the instances mentioned under Article 1590 of the civil code, the vendee is likewise entitled to withhold payment of the purchase price if the vendor fails to perform any essential obligation of the contract. Such right is premised not on the aforequoted article, but on general principles of reciprocal obligations. Since respondents failed to comply with their obligation, Central Bank is justified in withholding its payment of the purchase price.

ALBERT

R.

PADILLA

vs.

SPOUSES
Page 68

He also averred that he had already spent P190. upon private respondents' request. of which petitioner was formally informed. The trial court pointed out that private respondents themselves breached the contract when they requested and accepted installment payments from petitioner.000. where title remains in the vendor if the vendee fails to "comply with the condition precedent of making payment at the time specified in the contract. though not reduced into writing as required by the contract itself. had impliedly modified the contract. even before the land registration court ordered issuance of a decree of registration for the property. such that the failure of petitioner to fully pay at the time stipulated was a violation of the contract. and improving its rightof-way. this constituted modification of the contract. Private respondents refused the offer. The payments. But petitioner made several payments to private respondents. At that time. 124874 Second Division QUISUMBING. subdividing it. their acceptance of partial payments did not at all modify the terms of their agreement. According to private respondents. petitioner undertook to secure title to the property in private respondents' names. within five days from receipt of the letter. through counsel. alleging that he had already substantially complied with his obligation under the contract to sell. despite repeated demand. After the court ordered the issuance of a decree of land registration for the subject property. Padilla and Floresco and Adelina Paredes entered into a contract to sell involving a parcel of land in San Juan. the land was untitled although private respondents were paying taxes thereon. and the balance was to be paid within ten days from the issuance of a court order directing issuance of a decree of registration for the property. respondents then demanded payment of the balance of the purchase price. The Court of Appeals. No. petitioner was to pay a downpayment of P50.R. private respondents stated they would consider the contract rescinded. reversed the ruling of the trial court and confirmed private respondents' rescission of the contract to sell. The modification alleged by petitioner is not in writing. The lower court ruled in favor of petitioner. Of the P312. plus interest and attorney's fees. Acceptance of delayed payments estopped private respondents from exercising their right of rescission. however. they aver that this violation led to the rescission of the contract.FLORESCO PAREDES and ADELINA PAREDES. According to the Court of Appeals. Private respondents on the other hand claimed Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 March 17. Private respondents therefore are entitled to rescission under Article 1191 of the Civil Code. But the petitioner was not able to pay the balance in full. but with the obligation to return to petitioner the payments Page 69 . some even before the court issued an order for the issuance of a decree of registration. with interest and attorney's fees. J. if any existed. much less signed by the parties.: Facts: Albert R. Under the contract. In a letter.840. According to the trial court. Otherwise. La Union. however. The contract itself provides that no terms and conditions therein shall be modified unless such modification is in writing and duly signed by the parties. demanded payment of the remaining balance. Also. he offered to pay the balance in full for the entire property. Instead. it was only a casual and slight breach that did not warrant rescission of the contract.00 upon signing of the contract." Moreover Court of Appeals rejected petitioner's claim that there had been a novation of the contract when he tendered partial payments for the property even before payment was due.00 in obtaining title to the property. the issue of whether or not the breach of contract committed is slight or casual is irrelevant in the case of a contract to sell. were evidenced by receipts duly signed by private respondents. Moreover. and THE HONORABLE COURT OF APPEALS G.00 purchase price. Petitioner instituted an action for specific performance against private respondents. Petitioner did not accept private respondents' proposal. 2000 before the lower court that petitioner maliciously delayed payment of the balance of the purchase price.000. saying that even if petitioner indeed breached the contract to sell. He claimed that the several partial payments he had earlier made. private respondents made a timely objection to petitioner's partial payments when they offered to sell to petitioner only one-half of the property for such partial payments. private respondents.

in the present case. However. the contract entered into by the parties thus is a contract to sell. 1191 cannot be applied. but because their obligation thereunder did not arise. the contract therefore may be rescinded but the reason for this is not that private respondents have the power to rescind such contract. It speaks of obligations already existing. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 70 . hence this petition. which may be rescinded in case one of the obligors fails to comply with what is incumbent upon him. Held: Pertinent provisions of the contract signify that title to the property remains in the vendors until the vendee should have fully paid the purchase price. there is still no obligation to convey title of the land on the part of private respondents. There can be no rescission of an obligation that is non-existent. including expenses incurred in securing title to the property and in subdividing and improving it right of way. considering that the suspensive condition has not yet happened.the latter had made. Art. Since petitioner failed to comply with his obligation to pay the full purchase price within the stipulated period. Issues: Whether the appellants are entitled to rescission under Article 1191 of the Civil Code.

He also did not substantiate proof that he was ready and willing to pay. Facts: Private respondent Palao sold to petitioner Iringan an undivided portion of land to be paid in installments. The petitioner on the other hand. Simply put. Hence. Petition denied. Hence. Petitioner refused to formally execute an instrument showing their mutual agreement to rescind the contract of sale. Held: 1. 129107 September 26. this petition. 2001 Quisumbing party entitled to rescind should apply to the court for a decree of rescission. 2. Due to petitioner’s failure to pay the full amount on the second installment. Whether or not the award of moral and exemplary damages is proper. The letter written by the private respondent declaring hi intention to rescind did not operate validly. 2. The petitioner knew respondent’s reason for selling. The filing by Palao of Judicial Confirmation of Rescission of Contract and Damages satisfies the requirement of the law.Alfonso Iringan vs. no agreement between the parties was made. Article 1592 requires the rescinding party to serve judicial or notarial notice of his intent to resolve the contract. he argued that the contract is already consummated. the remedy should be for the collection of the balance of the purchase price and not rescission.R. On his answer. The Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 71 . Private respondent said that they are not amenable regarding to the reimbursements claimed. Court of Appeals G. This was brought to the Court of Appeals but the latter also affirmed the decision. The operative act which produces the resolution of contract is decree of court not the mere act of vendor. hence. did not oppose the revocation of the contract but only asked for the reimbursement of the initial payment made. on its reply. Issues: 1. private respondent considered the contract rescinded. RTC affirmed the rescission and ordered for the payment for damages to Palao. the awarding for damages is proper. Palao filed a complaint for Judicial Confirmation of Rescission of Contract and Damages against Iringan and his wife. Whether or not the contract of sale is validly rescinded. No.

The contract specifies payment provision wherein a deposit will be made at a time of the execution of the instrument. Concepcion then filed a complaint against her sister. Petition denied for lack of merit. he divided the property into 4 lots and gave two to Concepcion. This contract was however subject to the condition that a deposit shall be given at the time of the execution of the contract and the remaining amount shall be paid upon the delivery of the certificate of title to the vendee. CA G. Concepcion died and now represented by her successors as the petitioners in this instant case. The Court rendered judgment in favor of Concepcion. Issue: Whether or not the property was validly sold to Iluminada and Agapito Pacetes. Held: Facts: Concepcion Gil and sister Nieves Gil are co-owners of a parcel of land. No. The Sheriff was then ordered to execute but instead. Nieves appealed to the Court of Appeals but the latter also affirmed the assailed decision. The property was then sold to one Constancio Maglana and was again sold to the present possessor Emilio Magtulac who is constructing a building on said lot. Perla Gil vs. As a consequence of the death of Concepcion. vendee will pay the remaining amount. The certificate of title was not delivered. subsequent buyers are not purchasers Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 72 The Court ruled that the sale between Concepcion and Iluminada is a consummated contract of sale. They also argue that the consignation made by Iluminada did not produce legal effect. it is the heirs who have the duty to deliver such. Subsequently. Apparently. Then.in good faith.R. one of the two lots given to Concepcion was then sold by the latter to Agapito and Iluminada Pacetes. Nieves and husband constructed a two storey building on the said land. 127206 September 12. Therefore. The vendor within 120 days shall be delivered the certificate of title to the vendee. 2003 Callejo Sr. Iluminada’s act of paying the remaining amount only after so many years is still valid because after all she has no duty to pay until tile has been delivered to her. Petitioners are contending that Concepcion’s sale of the disputed property to Iluminada and Agapito Pacetes is merely a contract to sell because the full price was not paid by the latter to the former. . they were not able to deliver the certificate also. The Court issued a writ of execution but Nieves refused to execute the required deed. Lot 59 C1.

Baricuatro was informed by Galeos about the sale and was advised to pay the balance of the purchase price of the two lots directly to Amores. Amores was in good faith when he bought the subdivision. Under Art. He secured the transfer of the title to the same in his name. Amores ISSUE: 1. Nemenio spouses demanded from Baricuatro to vacate the said lots but the latter refused to do so. when he registered his title he already had knowledge of the previous sale. 105902 Buena. Afterwards. Jr. Constantino M. Baricuatro was informed through a letter by Amores about the impending sale of the two lots but the former failed to respond.Severino Baricuatro. on installments basis from Galeos on October 16. 1544. Such knowledge tainted his registration with bad faith.: RULING: FACTS: Issue 1 Baricuatro bought two lots. Issue 2 Nemenio spouses only visited the lots ten months after the sale which was evidenced Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 73 . to Amores. Mariano B. Whether the Nemenio spouses are purchasers in good faith? February 9.” This means that the good faith of the purchaser should be from the time of the perfection of the sale until up to the time that he be declared the sole and true owner of the property. the agreement to collect the balance of the purchase price of the disputed lots from Baricuatro which presupposes knowledge of the previous sale by Amores. the ownership of an immovable property shall belong to the purchaser who in good faith registers it first in the registry of property. declaring Nemenio spouses as the owners of the disputed lot. Court of Appeals affirmed in toto the judgment of the trial court. Whether the sale made to Amores by Galeos is valid? 2.R.. Nemenio and Felisa V. Amores took possession of the subdivision and developed the same for residential purposes. part of the Victoria Village. 2000 G. Trial court rendered a decision. however. J. Court of Appeals. Galeos sold the entire subdivision. Tenth Division. including the two lots. 1968. Nemenio. Two months from the date of the previous sale. he sold the two lots of the spouses Mariano and Felisa Nemenio. In addition. vs. (Uraca vs Ca) “The second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law. No. Prior to the sale. Galeos and Eugenio V.

Cecilia Amodia Vda.during the trial of the case. Veneranda Amodia. The registration made by the spouses were done in bad faith. And so. Decision of CA is REVERSED. Eutiquio Amodia and Go Kim Chuan Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 74 . they cannot claim to be purchasers in good faith when they registered the title. De Melencion. it amounted to no inscription at all. hence. Felipe Amodia.

The signatures of the Amodias were forged. 496. Villalba Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 75 . ISSUE: June 23. J. Honorable Court of Appeals and Aznar Brothers Realty Company. Should it be immovable property. the said deed did not convey anything in favor of Aznar. and it is sold and the sale is registered no under the Land Registration Act but under Act 3344. the Amodias conveying the property in favor of Go Kim Chuan and was reconstituted pursuant to RA No. 148846 1. CA’s decision: Aznar registered ahead in favor of Go Kim Chuan. In 1989. Go Kim Chuan exercised control and dominion over the subject property in an adverse and continuous manner in the concept of an owner. 26. such sale is not considered registered.: RULING: FACTS: Art. thus. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Petition for review is GRANTED.vs. thus. 1544 provides: A property in the name of Go Kim Chuan was originally owned by the Amodias and was brought under the operation of the Torrens System. and so the latter is deemed to be the owner of the property. RTC’s decision: Go Kim Chuan as the real owner of the property. Soliva vs. If the land is registered under Torrens Title. Aznar registered its title under Act 3344 while Go Kim Chuan registered it under Act No. 2001 G. the Amodias allegedly conveyed the property to Aznar and was registered under Act 344 as there was no title. In 1964.R. failed to show that Go Kim Chuan acquired the property in bad faith. the title was lost during the Second World War. The Intestate Estate of Marcelo M. pursuant to Art 1544. the former deed should be given preference over the latter. And Aznar. However. Who between Go Kim Chuan and Aznar has the better right over the subject property? Nachura. Thereafter. No.

respondent argued that the house and lot were sold to him on installment basis. Soliva. Court of Appeals affirmed this ruling. this petition. the court may not grant him a new term. Inc. vs. filed a complaint for recovery of ownership against respondent. Under the settled doctrine. The petitioner. over a parcel of land situated in Misamis Oriental.Date: December 8. even after the expiration of the period as long as no demand for rescission has been made upon him. The remedy of the unpaid seller is to sue for collection or rescind the contract. barred petitioner’s claim of ownership. RULING: SC affirmed CA’ s and ruled in favor of respondent.154017 Ponente: Justice Panganiban FACTS: Petitioner. She contended that the respondent failed to give full consideration for the house and lot purchased by the latter. Prescription. He also argued that no demands were made on him to vacate the property for a long a period of time. Trial Court ruled in favor of the respondent on the ground of laches. ISSUE: Whether or not the respondent’s nonpayment of the full consideration would invalidate the contract of sale. Villalba. Visayan Sawmill Company. On the other hand. 2003 Division: First Division G. Hence.R. No. therefore. nonpayment is a resolutory condition that extinguishes the transaction existing for a time and discharges the obligations created thereunder. the vendee may pay. Court of Appeals Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 76 . stressing that contrary to petitioner’s submission. After the demand. herein. and that partial payment thereof was given. she was already barred from recovering the property due to laches and prescription. Art 1592 provides that even though it may have been stipulated that upon failure to pay the price at the time agreed upon. Hence. the nonpayment of the full consideration did not invalidate the contract of sale. did not exercise her right to demand for rescission or specific performance. the recission of the contract shall of right take place. For the rescission of immovables.

the nonfulfillment could not even be considered a breach. On the other hand. 1983. 1993 Division: En banc Ponente: Justice Davide G. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 77 . however. vs. Conchita Nool. subject to the condition that the latter should open a letter of credit in favor of the former on or before May 15. among which was the opening of an irrevocable and unconditional letter of credit not later than May 15. which provides for automatic rescission upon failure to deliver or failure to pay movable properties. Subsequently. RULING: SC found merit on the petition stressing that the lower court erred in the appreciation of the nature of the transaction between petitioner-corporation and private respondent. what transpired between the parties was a contract or promise to sell and not a contract of sale. This implied delivery was manifested by the fact that the petitioner-corporation allowed the private respondent to dig and gather scrap iron from its premises. this condition was not fulfilled. Trial Court ruled in favor of the private respondent finding that Art 1593 of the Civil Code. petitionercorporation insisted that the cancellation of the contract was justified because of private respondent’s non-compliance with essential preconditions. could not be applied because implied delivery was already made in the case at bar. et al. However. 83851 ISSUE: Whether or not lower court erred in ruling that automatic rescission could not be applied in the instant case.Hence. Court of Appeals. petitioner-corporation sent a letter to the private respondent conveying its intention to discontinue with the sale due to the latter’s failure to comply with the essential preconditions of their con tract. 1983.R. FACTS: Petitioner-corporation entered into a sale involving scrap iron with private respondent. Accordingly. which was private respondent’s opening of an irrevocable and unconditional letter of credit. et al. No. Private respondent then started to dig and gather scrap iron. Private respondent prayed for judgment ordering the petitioner-corporation to comply with the contract by delivering to him the scrap iron subject thereof. but simply an event that prevented the obligation of the petitioner corporation to convey title from acquiring binding force. Date: March 3. Petitionercorporation’s obligation to sell is subject to a suspensive condition. the petition. In line with the foregoing. Court of Appeals affirmed the ruling.

plaintiffs were to regain possession which amounts defendant failed to pay. Plaintiffs asked the defendants to return the same but defendant refused. DBP gave the mortgagors one year redemption period but this was not exercised by them. Plaintiffs alleged that they are the owners of subject parcels of land and they bought the same from Conchita’s other brother. Since nothing was sold. impelling them to come to court for relief. Plaintiff spouses Conchita Nool seek recovery of the aforementioned parcels of land from defendants Anacleto Nool. 1997 Third Division None. RULING: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Sps. Undisputedly. titles of two parcels were transferred to Anacleto. Another agreement was entered where by defendants agreed to return to plaintiffs the land at anytime the latter have the necessary amount.000. ISSUE: Whether or not plaintiffs spouses has the right to repurchase the parcels of land to Anacleto. the alleged contract of repurchase was dependent on the validity of the contract of sale. they obtained a loan from Development Bank of the Philippines (DBP) secured by a real estate mortgage on said land which was still registered in the names of Victorino and Francisco. Anacleto acquired title to the property from DBP and not from the petitioners. the contract may be deemed to be inoperative. 116635.00. Because of this. No.R. ownership of the mortgaged lands was consolidated to DBP.000. the DBP. That within the period of redemption. It is clear that Conchita no longer had any title to the parcels of land at the time of sale because when the mortgaged parcels of land were foreclosed due to their non-payment of said loan. Page 78 . Victorino and Francisco.000. et al. For their failure to pay said loan. PANGANIBAN. J: FACTS: Two parcels of land are in dispute and litigated which was formerly owned by Victorino Nool and Francisco Nool. July 24.00. P30. Petition denied. A contract of repurchase arising out of a sale where the seller did not have any title to the property “sold” is not valid. so that DBP’s titles were cancelled and new certificates of title were issued to him. younger brother of Conchita. Thus. The right to repurchase presupposes a valid contract of sale between the same parties. then there is also nothing to repurchase. It is likewise clear that Conchita can no longer deliver the object of the sale to the Anacleto because he has already acquired title and delivery thereof from the rightful owner.00 of which was paid to Conchita and upon payment of the balance P14. Carlos and Eulalia Raymundo. Thereafter Anacleto succeeded in buying the same. vs. A void contract cannot give rise to a valid one. Since. Anacleto agreed to buy the land for P100. it is itself void. When they were in dire of money. the mortgage was foreclosed.G. plaintiff contacted defendant Anacleto to redeem it from DBP which the latter did.

she employed “biyaheros” whose primary task involved the procuring of large cattle with the financial capital provided by Eulalia and delivering the procured cattle to her for further diposal. The court of appeals reversed the RTC Decision and found that the transaction entered into by Dominador and Eulalia was not one of sale but an equitable mortgage. They alleged that there was no sale intended but only equitable mortgage for the purpose of securing the shortage incurred by Dominador while employed as “biyahero”. July 04. To secure the financial capital she advanced for the “biyaheros” Eulalia required them to surrender the Transfer Certificates of Title of their properties and to execute the corresponding Deeds of Sale in her favour. 171250. so that Eulalia has no right to subsequently transfer ownership of the subject property. J. 2. Their relationship is merely mortgagor and mortgagee rather than seller and buyer. Whether or not the transaction entered into by the parties was a contract of sale. By Eulalia’s own admission it was her customary business practice to require her “biyaheros” to deliver to her the titles to their real properties and to execute in her favour the corresponding deeds of sale over the said properties as security for the money she provided. Dominador and Eulalia never intended the transfer of ownership of the subject property but to burden the same with an encumbrance to secure the indebtedness incurred by Dominador on the occasion of his employment with Eulalia. Spouses Bandong instituted an action for annulment of sale before RTC against Eulalia and Jocelyn on the ground that their consent to the sale of the subject property was vitiated by Eulalia after they were served by Jocelyn’s counsel to vacate. RULING: Eulalia was engaged in the business of buying and selling large cattle. No. in consonance that nobody can dispose of what he does not have.R. Dominador had been working for Eulalia as one of her “biyaheros” for three decades so she no longer required him to post any security in the performance of his duties. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 ISSUE: CHICO-NAZARIO. Jocelyn is a grandniece of Eulalia which resides in the same locality where the latter lives and conducts her principal business. Whether or not Jocelyn is a buyer in Good Faith. said transaction is an equitable mortgage. Dominador and Rosalia Bandung G. Hence this petition. Therefore it is impossible for her not to Page 79 . However. No. Eulalia found that he incurred shortage in his cattle procurement operation so Dominador and his wife Rosalia Bandong executed a Deed of Sale in favour of Eulalia. The subject property was thereafter sold by Eulalia and her spouse Carlos Raymundo to Eulalia’s grandniece Jocelyn which was later registered in the name of Jocelyn and her husband Angelito Buenaobra. In executing the said Deed of Sale. No. The contention of petitioner that Dominador ceded his property to Eulalia as payment for his obligation for it is contrary to human experience because he would first look for means to settle his obligation and the selling of a property on which his house that shelters them stand would be his last resort.Sps. Hence. Jocelyn maintained that she was a buyer in good faith and for value. For this purpose. 2.: FACTS: 1. Spouses Buenaobra instituted before the MeTC an action for ejectment against Souses Bandong which they opposed on the ground that they are the rightful owners. 2007 Third Division 1.

2004 Page 80 . No. 156522 Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 May 28.R. Petition is denied. Likewise she admitted that she was aware that Dominador and Lourdes were in possession of the property.acquire knowledge of her grand aunt’s business practice of requiring her “biyaheros” to surrender the titles to their properties as security. A buyer who does not investigate the rights of one in possession can hardly be regarded as a buyer in good faith. A buyer of real property that is in possession of a person other than the seller must be wary. RUBEN LEE and LILIAN SISON G. This should put her on guard for any possible abuses that Eulalia may commit with the titles. ERLINDA SAN PEDRO vs.

or a total indebtedness of P150. which states that the petitioner is the true owner of a parcel of land located in Bulacan. Respondents.6 As security for this loan. the Court of Appeals reversed the trial court.000. and contains the following clause: The document bears two signatures above the typewritten words "ERLINDA SAN PEDRO.000.For the presumption of an equitable mortgage to arise under Article 1602. with interest of P45.00 therefor.: Issue: Facts: Whether the contract in question is an equitable mortgage or a deed of absolute sale. LEE. which is selling to the respondents for the amount of P150.00). From Lee and his wife Lilian Sison. and (2) that their intention was to secure an existing debt by way Page 81 . They thus negotiated for the purchase of the property. who introduced her to respondent. Pilipino. Petitioner claims that Atty. aking IPINAGBIBILI. two requisites must concur: (1) that the parties entered into a contract denominated as a sale.00. in consonance with the rule that the law favors the least transmission of property rights.FIRST DIVISION petitioner.00. she agreed to mortgage a parcel of agricultural land located in Bulacan. the dispositive portion of which reads: YNARES-SANTIAGO.000. Ruling: The document appears on its face to be a contract of sale. On appeal. ang lahat at boo [sic] kong karapatan at pagmamay-ari at pamumusesyon sa nabanggit na lagay ng lupa at mga kaunlaran o mejoras na dito ay makikita o nakatirik o matatagpuan sa nasabing RUBIN T. and rendered a decision in favor of respondents. which had an initial asking price of P200. on the other hand claim that the sale of the property in question was brokered by their mutual acquaintance and broker. ISINASALIN at INILILIPAT ng ganap at patuluyan at walang anumang pasusubali o pananagutan. San Pedro accepted their offer and agreed to sell the land. Karuhatan. LEE at sa kanyang mga tagapamana o kahalili. Salaping Pilipino. kasal kay Lilian Sison at naninirahan sa 230 MacArthur Highway. Nagbibili". Valenzuela.000.00.000.000. Metro Manila. may sapat na gulang. It contains the signatures of two witnesses. The trial court rendered a decision in favor of Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 It is well-settled that the presence of even one of the foregoing circumstances is sufficient to declare a contract as an equitable mortgage. Petitioner was able to secure a loan in the amount of P105. The parties in this case executed the "Kasulatan ng Ganap na Bilihan ng Lupa".21 and offered to pay P150. J. Petitioner claims that she approached one Philip dela Torre. Na dahil at alang-alang sa halagang ISANG DAAN AT LIMAMPUNG LIBONG PISO (P150.00. Philip dela Torre.000. Roxas and Lee coerced her to sign the "Kasulatan" and that the document was executed merely as written evidence of the loan and mortgage. na ngayong araw na ito ay ibinayad sa akin at tinanggap ko naman ng buong kasiyahang-loob bilang husto at ganap na kabayaran ni RUBIN T.

. premises considered. which dismissed the complaint filed by petitioner for lack of merit. No. WHEREFORE. is AFFIRMED Spouses Austria and Leonisa Hilario vs. Spouses Gonzalez G.R. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 82 . 147321 January 21. 2004 Second Division QUISUMBING. the decision of the Court of Appeals dated November 20. J. 2002.of a mortgage.

they failed to rebut the testimony of the Notary Public who testified in court that the petitioners as vendors of the properties personally appeared and acknowledged the sale documents before him. Gonzales requesting them to execute another antedated deed of sale.000. so as to reduce petitioners' taxes. 143868 November 14. Spouses Hilario failed to present any proof whatsoever that the fair market values of the real property in the area at the time of the transaction were much higher than the selling price of the parcels in question. providing for a decreased selling price. Note that in said letter Leonisa used the term "Kasulatan ng Bilihan" (Deed of Sale). No. The transaction is an absolute sale. RTC: ruled in favor of Spouses Hilario. possession in the premises. Lastly. 000 and the other at P240.R. it turned out that Spouses Gonzalez registered the disputed lots in their names through the use of fraud. It is not merely a loan. Thus. ISSUE: Whether the transaction is an absolute sale or equitable mortgage of real property. CA: REVERSED. and payment of realty taxes is not conclusive. Spouses Carlos and Narcisa Tarun G. Here. the true intent of the parties involves a contract of sale. misrepresentation and falsification. Spouses on the other hand contend that they bought the said lots from Spouses Hilario merely out of pity for them and that the Deed of Absolute Sale was notarized. which can only find relevance and necessity in a contract of sale and not in a contract of mortgage. 2002 Third Division Page 83 . As to the allegation that petitioners were in possession of the properties even after the sale. Moreover. The Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 existence and genuineness of the letter was never rebutted. She likewise made mention about capital gains tax and registration fees.FACTS: Spouses Hilario filed an action for Declaration of Nulity against Spouses Gonzales involving 3 parcels of lands which were the subject of 2 Deeds of Sale executed Leonisa Hilario in favor of the latter spouses. Said letter is written not in English but in Filipino in which petitioners are conversant. HELD: AFFIRMED. It may be rebutted by competent and satisfactory proof to the contrary. One lot was priced at P50. Petitioners cannot feign ignorance and illiteracy as to its contents.000. using the fictitious contracts of sale. it is obviated by the fact that they executed an undertaking promising to vacate the premises.g. e. Spouses Hilario claimed that the contract between them and Spouses Gonzalez were not of sale but loans for P260. capital gains tax. However. Leonisa Hilario sent a note to Mrs. much less an equitable mortgage Oscar Fernandez vs. The presumption of equitable mortgage when there is inadequacy of the selling price.

Antonio and Demetria Fernandez -. mortgage. a document is considered a contract of equitable mortgage when the circumstances enumerated in Article 1602 of the Civil Code are manifest. or some other act or contract. as follows: (a) when the price of the sale with the right to repurchase is unusually inadequate. The Spouses Tarun sought the partition of the property but Angel Fernandez refused. This involved the fishpond (1st) that was co-owned and another fishpond (2nd). it is important to note that he did not sell it to respondents. or that the parties really intended a donation. a sale is not set aside. RTC: in favor of petitioners. the said coowners executed a Deed of Extrajudicial Partition of two parcels of registered land with exchange of shares. however. Hence. although the inadequacy may indicate that there was a defect in the consent.PANGANIBAN. From that time on. and (b) when the vendor remains in possession as lessee or otherwise. unless the price is grossly inadequate or shocking to the conscience. it was Angel B. together with their uncle Armando. Angel B. However. The transaction is an absolute sale. Finally. ISSUE: Whether or not the transaction is one of absolute sale or equitable mortgage. Furthermore. Hence. mere alleged inadequacy of the price does not necessarily void a contract of sale. The sellers were his co-owners -. Fernandez exchanged his share in the 2nd fishpond to the shares of his co-owners on the remaining portion of the 1st fishpond. On its face. These sales were registered and annotated in the OCT. HELD: AFFIRMED. Spouses Tarun again sought the partition of the property but Angel Fernandez’s heirs [petitioner] again refused. De Guzman. J. They are entitled to redeem the property. this action for partition. For the presumption of an equitable mortgage to arise. Later. and that their intention was to secure an existing debt by way of mortgage.who. Fernandez and later on his heirs. When he died. Santiago. CA: REVERSED. Although it is undisputed that Angel Fernandez was in actual possession of the property. Demetria and Angel Fernandez. one must first satisfy the requirement that the parties entered into a Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 contract denominated as a contract of sale. are not claiming that the sale between them was an equitable mortgage. Antonio and Demetria sold their respective shares to Spouses Tarun. It was also stipulated in the deed that the parties recognize and respect the sale earlier made. In this case. they had been paying the realty taxes thereon. petitioners failed to establish the fair market value of the property when it was sold in 1967. Tolentino and Roño vs.: FACTS: A fishpond located in Arellano-Bani Dagupan City is co-owned by brothers Antonio. [petitioners]. CA. who remained in possession of the entire fishpond. there is no basis to conclude that the price was grossly inadequate or shocking to the conscience. Pongco and Baduria Page 84 .

SC said wrong. They obtained a loan from the Rehabilitation Finance Corporation (RFC). 2. Ruling: 1. Petition DENIED. But in the instant case.) Petitioners argue that Art. Petitioners then requested Sps. The trial court in rendering the decision considered foremost the real parties’ intent in entering into the transactions. J: Issues: 1. invoking Art. Furthermore.) Whether the action for declaration of nullity of the Deed of Absolute Sale is the proper remedy or cause of action. But before the expiry of the redemption period. These are badges of equitable mortgage. and executed a mortgage security therefor. 1605 that prohibits the institution of an action different from the one provided therein. respondents tried to settle the remaining balance of the loan. Consequently. 20248 T-105 and TCT No. De Guzman obtained another loan of P18. No. Facts: Sps. they asked again Sps. Upon the death of Pedro de Guzman in 1971. hence. Afterwards. It uses the word “may” and denotes discretion and cannot be construed as mandatory. this instant petition. 1602 of the Civil Code applies only when there is no express agreement or stipulation between the parties. the De Guzmans found that the title was already in the name of the petitioners. They failed to pay the obligation. The trial court. Armed with the Deed of Absolute Sale.G. 1602 and Art. but as security for the loan extended to the respondents. Pedro and Josefina De Guzman were the registered owners of a parcel of land covered by TCT No. 1602 that indicates it applies only in the absence of express agreement between the parties. respondents filed a complaint for declaration of sale as equitable mortgage and reconveyance of property with damages. There is nothing in Art. therefore inapplicable. It observed that the transactions indicated that petitioners did not intend to hold the property as owner. 2. 69164 was issued in their name.) SC held that well entrenched is the rule that litigants cannot raise an issue for the first time on appeal as this contravenes the basic rules of fair play and justice. Hence. there was an express agreement. Moreover. the respondents remained in possession of the property and continued to pay real estate taxes even after the execution of the Deed of Absolute Sale. Sps. Upon verification with the RD of QC. De Guzman to sign a Deed of Promise to Sell as security for the loan. 1602 (presumption of equitable mortgage) is inapplicable to the instant case. De Guzman to sign a Deed of Absolute Sale. The loan to RFC was paid and the mortgage was cancelled.) Whether Art. ruled that these were sufficient to raise the presumption that the contract was an equitable mortgage. 128759 August 1. now Development Bank of the Philippines (DBP). Thus. 1604 of the Civil Code. there is nothing in Art. petitioners secured the cancellation of TCT No. the mortgage was foreclosed. 20248 T-105 of the Register of Deeds of Quezon City (RD of QC). 2002 Second Division Quisumbing. Petitioners agreed to reconvey the property on the condition that respondents pay the actual market value obtaining in 1971. Both the trial court and CA ruled in favor of respondents.R. it is not obligatory for respondent to file an action for reformation of instruments. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 85 .000 from Raymundo Tolentino and Lorenza Roño (petitioners).

fruits. (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed. 2002 Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 86 . The contract shall be presumed to be an equitable mortgage. or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. (4) When the purchaser retains for himself a part of the purchase price. The provisions of article 1602 shall also apply to a contract purporting to be an absolute sale. No. Heirs of Rafael Medalla G. in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate. Georgina Hilado vs. 1602. any money. (2) When the vendor remains in possession as a lessee or otherwise. In any of the foregoing cases. (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.R. Art. (5) When the vendor binds himself to pay the taxes on the thing sold. 144227 February 15. 1604._______________________________________ Art.

. 1031 and 1. . (2) when the vendor remains possession as lessee or otherwise.460 and the consideration was only for P50. The first deed was for Lot No. Anita Macainan brought a suit against Hilado and Medalla for legal redemption.) Under Art.000 while the second was for the Lopez Jaena property for P25. purporting to sell his share to Georgina Hilado (petitioner). Berbonia’s sister. In 1984. (1) when the price of a sale .m. Hilado claims it was a deed of sale and not a loan agreement. the court was convinced that the intention was really to sell because all the formalities required for a valid and enforceable contract have been fully satisfied. In the instant case. Facts: Gorgonio Macainan was the owner of several properties in Bacolod City. Ruling: 1. In turn. Nevertheless. alleging that the Deed of Sale in 1979 was an equitable mortgage to secure a loan for P50. her children Rafael.Second Division Mendoza. Issues: 1. 1604 of the Civil Code.) Whether Art.197 sq. Page 87 . 1031 is P145. the CA reversed the trial court’s decision for the reason that the assessed value of Lot No. 1602 in relation to Art.000. Hence. surnamed Medalla succeeded to her inheritance. Petitioner now seeks a reversal of the said decision. 1031 and the Lopez Jaena property. 1031 for P50. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 The presence of these circumstances is sufficient for a contract to be presumed as an equitable mortgage. Hilado and Medalla executed three more contracts concerning Lot No. in the Lopez Jaena property. it can only conclude that it was grossly inadequate. Lourdes and Teresita.000 which he had received from Hilado. is unusually inadequate. Rafael executed a Deed of Absolute Sale.000. Over the next two years. As such. J: However.) Whether the contract of deed of absolute sale executed is the law between the parties. Medalla filed a cross-claim against Hilado. his estate was divided among his heirs. including Berbonia who had predeceased him. a contract purporting to be an absolute sale is presumed to be an equitable mortgage – In 1979 and 1981. stating that Medalla as a third year law proper when the deed was executed had full knowledge of the consequences when he affixed his signature. 2. in (6) in any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation The trial court dismissed Anita’s complaint and ruled in favor of petitioner. 1602 of the Civil Code is present in the instant case. Upon his death in 1966. Rafael Medalla’s share consisted of five hectares in Lot No. there was evidence showing that the price paid by petitioner was unusually inadequate as compared to the market value of the lands in the neighborhood.

NICANOR G. DE GUZMAN and ESTER DE GUZMAN.) The SC held that in view of the conclusions reached. petitioners. there has been an understanding between them that the same property will be resold to Medalla after the fulfillment of a resolutory condition. SPOUSES JAYME C. 2001 Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 88 . the owner of the property may prove that the contract is really a loan with mortgage and that the document does not express the true intent and agreement of the parties. In fact the CA held that “It is very unlikely for one person who had acquired a property for a certain price to sell the same property to the same person five years after for the same price rate. Moreover. Petition DENIED. it will suffice to say that even if a document appears on its face to be a sale. respondents. UY and EVELYN UY.R.Also. G.” 2. No. unless. THE HONORABLE COURT OF APPEALS and SPS. the series of transactions executed after the 1979 Deed of Absolute Sale indicated quite clearly that the real intention of the parties was to secure the loans of Medalla. considering that they are unrelated. Medalla remained in possession of the lot as corroborated by his tenant Ramon Nessia and also by Anita Macainan. 109197 June 21. vs.

San Juan. a 1.200 square meter residential house on two of the lots. however. 1987. 1602 of the New Civil Code provides: The contract shall be presumed to be an equitable mortgage. de Guzman also owed Siochi several debts. 1987 deed of sale. Sometime in April 1987. In 1987. as a sort of collateral. the latter affirmed the decision of the trial court holding that the sale disputed by the de Guzmans to Siochi was an equitable mortgage. the de Guzmans agreed with Siochi to have their 1. plaintiffs have Page 89 . Jr. J. No additional collateral was required." however. Salapantan. seeking the reformation of the April 10. On December 28. de Guzman’s campaign fund began to run dry and he was compelled to borrow P2. unable to obtain possession of the lots since the premises were occupied by the de Guzman spouses. the de Guzmans filed a complaint with the Regional Trial Court of Pasig against Siochi. De Guzman was able to obtain two more loans of P500. the "deed of sale" being more than sufficient to cover the original P2. Art. On June 20. the market value of the lots already ranged from P4. Jr. sold. Aside from these loans. and had new Torrens titles issued in his name. ISSUE : Whether or not the sale made by herein private respondents was indeed an equitable mortgage as held by both the trial court and the appellate court HELD: YES.00 each from Siochi.: Private respondents Nicanor de Guzman. they constructed. In 1971. Thereafter.(4) When the purchaser retains for himself a part of the purchase price. 1990. 1987 Deed of Absolute Sale to the end that the true intention of the parties therein be expressed.Second. The sale of the same amounted to P4. Siochi sold the two lots and the improvements thereon for P2. which had already been "sold" to Siochi under the April 10. the consideration of the sale of P2. Sometime in 1987.75 Million to herein petitioners Jayme and Evelyn Uy. Metro Manila. the proceeds of which were all retained by Siochi. a deed of sale dated April 10. The court was convinced and found that the questioned deed of sale is in reality a mere equitable mortgage and not an absolute sale in view of the following circumstances: First. (5) When the vendor binds himself to pay the taxes on the thing sold. to Siochi. Nicanor de Guzman.(6) In any other case where it may fairly be 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.MELO.(2) When the vendor remains in possession as lessee or otherwise. Consequently. the trial court rendered its decision in favor of the de Guzmans. the sale is an equitable mortgage.(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed. the de Guzmans remained in possession of the property. Aggrieved. and Ester de Guzman were the owners of three lots located in Greenhills Subdivision.5 Million from Mario Siochi. 1988. 1988 against the de Guzman spouses with the Metropolitan Trial Court of San Juan. On July 1.000 per square meter while the house was worth about P10 million. Salapantan Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 filed a complaint for ejectment on August 1. despite the alleged deed of sale.5 Million is grossly and unusually inadequate. On September 16. to repay these other loans. however. at a cost of P3 million. in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate. Despite the "deed of sale. Metro Manila. decided to run for the position of Representative of the Fourth District of Nueva Ecija. petitioners had Siochi’s titles over the lots cancelled and had new titles issued over the property. In the meantime and without the knowledge of the de Guzman spouses. 1987 whereby they purportedly sold 2 of the 3 lots along with the improvements thereon.411 square meter vacant lot. petitioners interposed an appeal with the Court of Appeals. 1987.000 to P5. Salapantan was. Siochi had the spouses TCT cancelled on the basis of the deed of sale executed by the spouses on April 10.000. and herein petitioners. 1988.8 Million. petitioners entered into a contract of lease with option to buy with Roberto Salapantan.5 million loan and the additional P1 million loan. The de Guzman spouses were required to sign.

" Being null and void.8 million derived from the sale of plaintiffs’ vacant lot. G. which is null and void. the de Guzmans. it indubitably shows that the alleged sale was indeed an equitable mortgage. Neither did it validate the sale made by Siochi to petitioners. RICARDO DELOS REYES and JOSEFINA CRUZ. the April 10. In fact. who are not innocent purchasers. hence. produced no legal effects whatsoever.R. the sale by Siochi of the questioned property to petitioners. SPOUSES OCTAVIO and EPIFANIA LORBES. No. additional loans in the total sum of P1 million were extended to plaintiffs by Siochi even after the execution of said sale without Siochi demanding for any additional security. COURT OF APPEALS.remained in actual and physical possession of the litigated property up to the present time.Third. 1987 deed of sale executed by the de Guzmans and Siochi was an equitable mortgage.: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 90 . 139884 February 15. J. the uncontradicted evidence is that plaintiffs were driven to obtain the emergency loan due to urgent necessity of obtaining funds and they signed the deed of sale knowing that it did not express their real intention. The issuance of a certificate of title in Siochi’s favor did not vest upon him ownership of the property. or dispose of them. In the following circumstances. the titles to the house and lots which were sold by Siochi to petitioners actually remained with the mortgagors. petitioners. Article 2088 of the Civil Code provides that the "the creditor cannot appropriate the things given by way of pledge or mortgage.Lastly. conformably with the wellestablished doctrine that the mortgagee does not become the owner of the mortgaged property because the ownership remains with the mortgagor. As found by both the trial court and appellate court. Siochi had retained for themselves the entire proceeds of P4. vs. 2001 GONZAGA-REYES. The circumstance that the original transaction was subsequently declared to be an equitable mortgage must mean that the title to the subject land which had been transferred to private respondents actually remained or is transferred back to petitioners herein as ownersmortgagors. respondents.

Affidavit of Waiver/Assignment dated August 14. considering that the price stated in the Deed of Absolute Sale was insufficient compared to the value of the property.2 On November 25. Receipt of Partial Advance Payment dated September 9. The Supreme Court held that the conditions which give way to a presumption of equitable mortgage. and petitioners had continued to pay the real estate taxes thereon after the execution of the said deed of sale. Sometime in 1993. petitioners are still in possession of the property. 1992. the Land Bank issued a letter of guarantee in favor of the Carloses. such as the Contract to Sell dated June 1992. Moreover. 165009 was cancelled and Transfer Certificate of Title No. petitioners filed on July 22. informing them that Cruz’s loan had been approved. ISSUE: Whether or not the alleged sale was an equitable mortgage HELD: YES. To the Court of Appeals.00 will be paid to the Carloses as mortgagees. and Transfer Certificate of Title No. 1992 did not reflect the true intention of the parties. Private respondent delos Reyes agreed to redeem the property but because he allegedly had no money then for the purpose he solicited the assistance of private respondent Josefina Cruz. The Court of Appeals reversed the above decision. Aggrieved. expenses for the cancellation of the mortgage to the Carloses. They alleged that the deed of sale did not reflect the true intention of the parties. and that the real intention of the parties in securing the loan was to apply the proceeds thereof for the payment of the mortgage obligation. 1992. 1992. using the subject property as collateral. and an such balance will be applied by petitioners for capital gains tax. P500. 1992. the monthly amortization on the housing loan which was supposed to be deducted from the salary of private respondent Cruz will be reimbursed by private respondent delos Reyes. apply with equal force to a contract purporting to be one of absolute sale. the trial court rendered judgment in favor of petitioners. herein private respondent Ricardo delos Reyes.00 and fearing foreclosure of the property. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 docketed as Civil Case No. the sale was indeed an equitable mortgage. 229891 issued in the name of private respondent Cruz. 1995. as set out in Article 1602 of the Civil Code. petitioners mortgaged this property to Florencio and Nestor Carlos in the amount of P150.000. finding that the transaction between petitioners and Cruz was one of absolute sale. About a year later. 1992. It was agreed that petitioners will sign a deed of sale conveying the mortgaged property in favor of private respondent Cruz and thereafter. transfer of title to Josefina Cruz. and not a Page 91 . the transaction was unmistakably a contract of sale. Transfer Certificate of Title No. Rizal covered by Transfer Certificate of Title No.Petitioners were the registered owners of a 225-square meter parcel of land located in Antipolo. not of equitable mortgage. On October 22. and that the transaction was not an absolute sale but an equitable mortgage. and registration of a mortgage in favor of Land Bank. Sometime in August 1991. and (2) the transaction entered into between petitioners and Cruz was not an absolute sale but an equitable mortgage.00.000. for help in redeeming their property. It was further agreed that out of the proceeds of the loan. Rizal. petitioners claimed that the deed was merely a formality to meet the requirements of the bank for the housing loan. as evidenced by the numerous supporting documents thereto. the presence of even one of the circumstances laid out in Article 1602. the mortgage obligation had increased to P500. upon finding that: (1) the Deed of Absolute Sale dated October 21. 229891 in the name of Josefina Cruz was issued in lieu thereof. 1994 a complaint for reformation of instrument and damages with the RTC of Antipolo. In the complaint. Moreover. On June 20.000. petitioners asked their son-in-law. petitioners notified private respondent delos Reyes that they were ready to redeem the property but the offer was refused. the mortgage was discharged. considering that the price of the sale was inadequate considering the market value of the subject property and because they continued paying the real estate taxes thereto even after the execution of the said deed of sale. 165009. a family friend of the delos Reyeses and an employee of the Land Bank of the Philippines. 94-3296. Cruz will apply for a housing loan with Land Bank. On September 29.

This is simply in consonance with the rule that the law favors the least transmission of property rights.. the Court is satisfied that enough of the circumstances set out in Article 1602 of the Civil Code are attendant in the instant case. the Court found that the true intention between the parties for executing the Deed of Absolute Sale was not to convey ownership of the property in question but merely to secure the housing loan of Cruz. On this basis. as to show that the true arrangement between petitioners and private respondent Cruz was an equitable mortgage. TOMAS SEE TUAZON vs. J. Cruz made no demand on petitioners to vacate the subject premises until March 19. COURT APPEALS and JOHN SIY LIM G.R. No. See Tiong Page 92 . (c) upon or after the expiration of the right of repurchase another instrument extending the period of redemption or granting a new period is executed.000.(a) the price of a sale with right to repurchase is unusually inadequate. suffices to construe a contract of sale to be one of equitable mortgage.concurrence of the circumstances therein enumerated. who was then the President and General Manager of Universal Rubber Products. under Article 1602 of the Civil Code.: OF FACTS: The case originated from a contract of mortgage constituted on the subject lot. 119794 October 3. the finding of respondent court that petitioners remained in possession of the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 property only because they refused to vacate on Cruz’s demand is not accurate because the records reflect that no such demand was made until more than a year since the purported sale of the property. a contract shall be presumed to be an equitable mortgage when --. (d) the purchaser retains for himself a part of the purchase price. 1994. together with the spouses. The facts further bear out that petitioners remained in possession of the disputed property after the execution of the Deed of Absolute Sale and the transfer of registered title to Cruz in October 1992. 2000 Third Division Ponente: PURISIMA. Understandably. Tomas See Tuazon. this was two days after petitioners signified their intention to redeem the property by paying the full amount of P600. (b) the vendor remains in possession as lessee or otherwise. and. in which petitioners had a direct interest since the proceeds thereof were to be immediately applied to their outstanding mortgage obligation to the Carloses. The sole purpose for preparing these documents was to satisfy Land Bank that the requirement of collateral relative to Cruz’s application for a housing loan was met. (f) 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. (e) the vendor binds himself to pay the taxes on the thing sold. interestingly. From the above.00. Inc. the Deed of Absolute Sale and its supporting documents do not reflect the true arrangement between the parties as to how the loan proceeds are to be actually applied because it was not the intention of the parties for these documents to do so. Thus. Applying the foregoing considerations to the instant case.

000. And for these provisions of law to apply. Lim.Cheng and Eng Tang Go See. the provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. Tuazon and Natividad S. The bank agreed to reduce the redemption price to One Million (P1. The Tuazons brought a Complaint for Reformation of Contract. On July 15. 161 and 163 existing thereon. del Mundo Street. Article 1602 of the Civil Code provides that a contact shall be presumed to be an equitable mortgage by the presence of any of the following: (1) When the price of a sale with right to repurchase is unusually inadequate. subject lot to the Philippine Bank of Commerce (PBCom). The Tuazon family remained in the premises sold to Lim. No. the mortgaged property was foreclosed and sold at public auction. 1987.000 would be a URPI loan where machineries worth P3 Million. 161 to a William Sze where Lim signed the contract of lease as the lessor ISSUE: Whether or not the deed of absolute sale is in fact an equitable mortgage RULING: Petition is denied. the following requisites must concur. The new title was to serve as security for the loan. inequitable conduct or accident. Both parties filed an MR. spouses Tomas S. When the mortgagors failed to pay the mortgage debt. to secure a loan of 4. Trial court rendered a decision declaring that the deed of absolute sale was an equitable mortgage. (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. and (3) the failure of the instrument to express the true intention of the parties is due to mistake. Quieting of Title with Damages against John Siy F. petitioner decided to transfer the title thereof to Lim. by way of chattel mortgage. Lim leased Apartment No.90 Pesos. petitioner has not shown or established the presence of the aforestated requirements for the Page 93 . Kaloocan City. would secure it.830.265. But Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 not in the concept of owner. suppliers and laborers of URPI from levying on subject property. Ruling of CA is affirmed. Lim filed hi s answer. Under Article 1604 of the New Civil Code. 7th Avenue. TCT in the name of the Tuazons was cancelled and in lieu thereof. In the exercise of his right as owner of the property. which was duly registered. two requisites must concur: 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. Petitioner Tuazon and his daughter persuaded him to redeem for himself the extrajudicially foreclosed property from PBCom because Tuazon was financially incapable. CA decided in favour of respondent. fraud.000. To keep the creditors. together with other properties. (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed. (5) When the vendor binds himself to pay the taxes on the thing sold. or P600.00) Pesos subject to the condition that petitioner surrendered in favor of PBCom his (petitioner) Producer's Bank stock certificates by way of dacion en pago. the Tuazons will pay the appropriate rentals for the continued use and occupation of the property. lawyer of the Tuazons. Crisostomo. The first year of Tuazons continued occupancy of Apt. (2) the instrument does not express the true intention of the parties. the respondent was willing to help them redeem the subject property by accommodating them with 1Million Pesos. Appellee proposed that: 60% of the P1 Million. mortgaged. drafted the Absolute Deed of Sale. (4) When the purchaser retains for himself a part of the purchase price. By virtue of the said deed. Tuazon sold to John Siy Lim (Lim) a 650 square meter conjugal lot along A. For an action for reformation of an instrument as provided for in Article 1359 to prosper. Atty. Here. (2) When the vendor remains in possession as lessee or otherwise. Trial court decided for the respondent. Lim theorizing that the real intention of the parties was to enter into a loan accommodation that their daughter Bernice told that her fiancé. and 40% of the P1 Million would be appellants personal loan. a TCT was issued in the name of John Siy F. theorizing that the Deed of Absolute Sale expressed the true intention of the parties. with a two-storey building and Apartment Units Nos. to wit: (1) there must have been a meeting of the minds of the parties to the contract. with PBCom itself as the highest bidder. 163 was at Lims graciousness with the understanding that after one year.

134166 August 25. Besides. Tomas See Tuazon. the voluntary. 2000 Second Division Ponente: Bellosillo.reformation of the deed in question.: FACTS: Two separate actions for specific performance was filed by Spouses Ramos agains Spouses Reyes and Spouses Victa to compel them to segregate a total of 3000 square meters of lot from each of their respective shares in the estate of the FLorentino Dominguez. John Siy Lim had no hand in its preparation. their father. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 94 . 1987 is couched in clear terms and conditions. SPOUSES MARIO REYES VS. written and unconditional acceptance of contractual commitments negate the theory of equitable mortgage. COURT OF APPEALS G. subject Deed of Absolute Sale executed on July 15.R. Prepared by the lawyer of the herein petitioner. No.J.

Art. insisting that the deeds did not reflect the true intention of the parties as their real intention was simple loans of money the payment of which was to be secured by mortgages. and where the amounts loaned to them presumably came from. Early 1991 Lot No. (d) when the purchaser retains for himself a part of the purchase price. CA: We have examined the instruments evidencing the transactions under consideration and found the language of each clearly and without ambiguity to be setting forth a contract of sale and purchase. Nilda Ramos further assured Concepcion and Araceli that the deeds would not be notarized nor would they be enforced against them. Concepcion Dominguez-Reyes. 4705. That however out of a total of eighteen (18) deeds of sale signed by Concepcion and Araceli. Araceli Dominguez-Victa and Fortunata Dominguez.00 Nilda would prepare a Deed of Absolute Sale and Transfer which purported to convey in her favor a portion of the undivided shares of Concepcion and Araceli in Lot No. They are in fact admitted x x x x In the mind of this court.The Ramoses contended that Conception Reyes and Araceli Vita sold 1. For the presumption of an equitable mortgage to arise under Art. 1602. which she owned. the contents of the writing constitute the sole repository of the terms of the contract between the parties x x x x ISSUE: The pivotal issue then is whether the parties intended the contested Deed(s) of Absolute Sale and Transfer to be bona fide absolute conveyances of parcels of land. Sometimes they were furnished by Nilda Ramos with duplicate copies of the corresponding receipts although in most instances only one (1) copy was prepared which Nilda retained. Concepcion D.340 square meters. it must be emphasized. To entice them to sign the deeds. The loans were released by Nilda to Concepcion and Araceli on a piecemeal basis. 1602 of the Civil Code enumerates the instances when a contract. are not disputed. Victa averred that between 1980 to 1985 they obtained individually various loans from Nilda Ramos which were covered by handwritten receipts prepared either by her or by her daughter Dinah Ramos and signed by Concepcion and Araceli. 4705 was finally subdivided into several smaller lots and partitioned extrajudicially among the five (5) heirs of Florentino Dominguez although the records only disclosed three (3) names. it appeared that three (3) were actually notarized. two (2) Page 95 . Trial court rendered a decision in favor of the Reyes and Victa spouses holding that "the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 alleged sales were not really sales but receipts of sums of money by way of loans.300 square meters of lot to them. Neither can they possibly be mistaken for receipts inasmuch as even their title – typewritten in capital letters and underlined – proclaims what each of the documents is all about x x x x When contracting minds have reduced their agreement into writing. Reyes and Araceli D. (c) 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. and.000. Upon learning of the partition. (b) when the vendor remains in possession as lessee or otherwise. Trial court decision is reinstated and affirmed. appellants have convincingly proven the reality of the sale of the parcels of land subject hereof x x x these pieces of evidence are not mere drafts of contracts since everything for the existence of a perfect contract of purchase and sale are present.700 and 1. Concepcion acquired a 2. (e) when the vendor binds himself to pay the taxes on the thing sold. may be presumed to be an equitable mortgage: (a) when the price of a sale with right to repurchase is unusually inadequate. and every time the loans reached an aggregate amount of P10. (f) 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. or merely equitable mortgages RULING: CA decision is inconsistent with law and equity. Concepcion and Araceli offered to settle their indebtedness but Nilda refused to accept payment.000. Finally. And the authenticity and due execution of these deeds.440-square meter lot while Araceli took possession of two (2) lots with a combined area of 2. regardless of its nomenclature.00 to P20. the Ramoses demanded that the petitioners make good their undertakings under the deed of sale executed beforehand but the latter refused. Nilda represented to them that the instruments were merely for purposes of complying with the formalities required by ARVI Finance Corporation." The Court of Appeals however disagreed and reversed the ruling of the trial court on appeal.

No. 1972. CA and Tupas G. 131520 January 28.230 square meter parcel of land located in Balabag. Page 96 Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 . is sufficient for a contract of sale to be presumed an equitable mortgage. if indeed the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. as in this case. 2000 Facts: • In April 30. The provision also applies even to a contract purporting to be an absolute sale.requisites must concur: (a) that the parties entered into a contract denominated as a contract of sale. Aguirre vs. Tupas entered into a Deed of Absolute Sale covering a 3.R. The facts and evidence decidedly show that the true intention of the parties was to secure the payment of the loans and not to convey ownership over the property in question. petitioner Estelita Aguirre and private respondent Teofista S. and (b) that their intention was to secure an existing debt by way of a mortgage. The existence of any one of the circumstances defined in the foregoing provision. not the concurrence nor an overwhelming number of such circumstances. The transactions were replete with veritable badges of equitable mortgage.

.. (5). It found that the contract between the parties was one of equitable mortgage and not of sale. (3). 1602. documentary and parol evidence may be submitted and admitted to prove such intentio. Art... regardless of its nomenclature..... actions and deeds prior to. (2). The contract shall be presumed to be an equitable mortgage.... (4). 1604. • Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 97 . The other private respondents then came in as intervenors. may be presumed to be an equitable mortgage. however. • Issue: Whether or not the transaction between the parties was not a sale but an equitable mortgage? Ruling: Petition Denied • In determining the nature of a contract.... during and immediately after executing the agreement. As such therefore... In any of the foregoing cases. in any of the following cases: (1). of the subject land.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." • Immediately thereafter. courts are not bound by the title or name given by the parties..When the purchaser retains for himself a part of the purchase price... Tupas.... the Regional Trial Court of Kalibo.In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. in what is more popularly known as Boracay Island. fruits or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws... petitioner took possession and occupied the said parcel of land.....When the price of a sale with right to repurchase is unusually inadequate. as shown not necessarily by the terminology used in the contract but by their conduct.. 1602 of the Civil Code enumerates the instances when a contract. Tupas. 1984.. claiming to have been disturbed in the possession of the subject land. On August 21. petitioner filed a Complaint for Quieting of Title and/or Recovery of Possession with Damages being coowners with their sister.’ x x x. Aklan rendered judgment dismissing the Complaint for lack of merit.against the spouses Privado Tupas and Teofista S. Teofista S.. as follows: ‘Art. any money. the foregoing provisions ‘shall also apply to a contract purporting to be an absolute sale.. (6).’ Lexj  uris By the terms of Art. 1991. The decisive factor in evaluating such agreement is the intention of the parties. words.. Aklan.When the vendor remains in possession as lessee or otherwise....Malay.When the vendor binds himself to pay the taxes on the thing sold. On August 15.

hence. per petitioner’s own account. To stress. However.R. it may be that the debt was given at the very moment of the mortgage transaction. predecessors-ininterest of the herein respondent heirs. or an overwhelming number of such circumstances.• As already stated above.Despite this bold possession. • • • Lumayag v. it is not disputed that private respondents spouses Tupas built two cottages on the subject land as well as operated a sari-sari store and grew banana plants on the same. such that. the same would show that the taxes for the years 1974-1980 were only made by petitioner on June 4. The presence of even one of the circumstances in Article 1602 is sufficient basis to declare a contract as one of equitable mortgage. In arguing that the transaction was one of sale. until the action below was filed in 1984.almost a year after she had already filed the suit below. That petitioner vacated the subject land after having occupied the same only underscores the fact that no sale took place between the parties. 162112 July 3. No. That period of time may well be deemed as the time allotted to the spouses Tupas. it cannot be held that the subject land was being used as security for a debt. we are convinced that it qualifies as an equitable mortgage under Article 1602(6). Otherwise. suffices to give rise to the presumption that the contract is an equitable mortgage • Article 1602(6). almost ½ half of the area had been occupied by them. On the other hand. as mortgagors. Court of Appeals G. not a concurrence. only to leave possession of the same to her vendor? It is also of record that private respondents had continued paying tax on the subject land even after the same had been supposedly "sold" to petitioner. why would she. Their possession remained undisturbed for years. while petitioner presented tax declarations in her favor. in relation to Article 1604 provides that a contract of sale is presumed to be an equitable mortgage in any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. the court find credibility in private respondents’ claim that the spouses Tupas gave petitioner a ten (10) year period to occupy the subject land as part of their mortgage agreement. • • Neither was rent ever collected from them for their occupancy of the land. After a careful review of the records of the case. • The explicit provision of Article 1602 that any of those circumstances would suffice to construe a contract of sale to be one of equitable mortgage is in consonance with the rule that the law favors the least transmission of property rights. as rightful owner. to pay their indebtedness to petitioner. This may be gleaned from the following circumstances surrounding the transaction First. 2007 Facts: • During their lifetime. the existence of any one of the conditions under Article 1602. abandon the property she already was in possession of. Article 1604 of the Civil Code provides that the provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. Coming now to the temporary possession of the subject land by petitioner. petitioner admits that no demand to vacate the land was ever made upon the spouses Tupas. the spouses Jacinto Nemeño and Dalmacia Dayangco-Nemeño. 1985. owned two (2) parcels of coconut land Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 98 . petitioner points out that private respondent Teofista Tupas was not a debtor at any time prior to the sale.

namely. the plaintiff heirs materially pointed out the following: (1) the grossly inadequate price of the subject lots considering that Lot No.000.00 and an assessed value of P15. 4035 C-4 with an area of 4. In an order dated December 20. joined by his five (5) children. the RTC resolved said petition by ordering the issuance of a new owner’s duplicate copy and its delivery to the heirs of Jacinto and Dalmacia. (3) the land title and tax declaration remained in the names of Jacinto Nemeño and Dalmacia Page 99 • • • • • Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 .000. 9407335-A. the spouses Domingo Lumayag and Felipa Nemeño-Lumayag filed with the RTC of Ozamiz City a petition for the reconstitution of the owner’s duplicate copy of one of the two lots subject of the earlier Deed of Sale with Pacto De Retro.420 square meters and covered by Tax Declaration No. • The heirs of Jacinto and Dalmacia.00 obtained from the defendant spouses in connection with the medication and hospitalization of the then ailing Jacinto Nemeño. Lumayag a complaint for Declaration of Contract as Equitable Mortgage. when it was burned in a fire on May 22. namely. Cebu.230. conveyed to his daughter Felipa and the latter’s husband Domingo Lumayag the aforementioned Lot.00. their children Meliton. Eleuteria. 01743 and Lot No. 13750 • In 1979. the administrator of the property.located in Manaca.760. The parcels are: Lot No. Justo.00) and that the vendors a retro have the right to repurchase the same lots within five (5) years from the date of the execution of the instrument on February 25. Jacinto. per Tax Declaration No. The instrument of conveyance is denominated as Deed of Sale with Pacto De Retro Thereunder. Jacinto. To support their claim that the contract in question was an equitable mortgage. Dalmacia died survived by her husband. Eleuteria. as shown by Tax Declaration No. 1996. 1996. with an area of five (5) hectares and covered by Original Certificate of Title (OCT) No. the Lumayags alleged that said owner’s duplicate copy of was in Domingo’s possession but the same • was lost when a typhoon hit and destroyed the couple’s house in Talisay. or on August 28. while Lot No. It was likewise agreed thereunder that in the event no purchase is effected within the said stipulated period of five (5) years “conveyance shall become absolute and irrevocable without the necessity of drawing up a new absolute deed of sale. 4035 C-4. On February 25. Saturnino (now deceased) and Felipa. consisting of 4. 1985. 4049. 94-07355-A. to wit: Meliton. Essentially. 1992. Eleuteria. Meliton.120. and their six (6) children. it was stipulated that the consideration for the alleged sale of the two (2) aforementioned lots was Twenty Thousand Pesos (P20.460. Ozamiz City. Timoteo. Justo and Saturnino. 4049 with an area of 5 hectares has a market value of P40.420 square meters has a market value of P4. In that petition.00 and an assessed value of P1. the complaint alleged that the subject Deed of Sale with Pacto De Retro was executed only for the purpose of securing the payment of a loan of P20. subject to the requirements of law regarding consolidation of ownership of real property. (2) their (plaintiffs’) continued payment of realty taxes. (hereinafter collectively referred to as the respondent heirs) filed against the spouses Domingo Lumayag and Felipa N. Timoteo.00. 1985. The petition was opposed by the other heirs of Jacinto and Dalmacia who claimed that the owner’s duplicate copy of the same OCT was actually in the possession and custody of their brother Meliton Nemeño. Accounting and Redemption with Damages. Timoteo and Justo and grandchildren Ricky and Daisy who are the heirs of Saturnino.” More than a decade later.

(4) their possession. Under a pacto de retro sale. The two (2) courts below unanimously found that the subject Deed of Sale with Pacto De Retro.000. there is no issue as regards the fact that the subject Deed of Sale with Pacto De Retro provided for a 5-year redemption period which expired on February 25. The law requires the presence of any one and not the concurrence of all of the circumstances enumerated under Article 1602. nevertheless reveals the intention of the parties to charge real property as security for a debt. An equitable mortgage has been defined “as one which although lacking in some formality. in case of doubt. more so when supported by the evidence. then.. • • Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 . the trial court adjudged the subject Deed of Sale with Pacto De Retro as an equitable mortgage and ordered the defendant spouses to reconvey the lot to the plaintiff heirs for P20. their appeal was dismissed. affirmed that of the trial court but with the modification that the mortgaged properties are subject to foreclosure should the respondents fail to redeem the same within thirty (30) days from finality of the decision. Unfortunately. But such consequence would only be true if the contract that was executed between the parties was indeed a pacto de retro sale and not an equitable mortgage.. to conclude that the transaction is one of equitable mortgage. or other requisites demanded by a statute. Hence this appeal. for failure of the plaintiff heirs to submit their appeal brief. • Eventually. Evidently.” Article 1604 of the Civil Code provides that the provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. the appellate court. • Here. a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. is in truth and in fact an equitable mortgage. and contains nothing impossible or contrary to law. leaving that of the defendant spouses As stated at the threshold hereof. and (5) the pactum commissorium stipulation in the subject contract. subject only to the resolutory condition that the vendor repurchases it within the stipulated period. or form or words. the CA correctly found the presence of not merely one but four (4) circumstances indicative of the true nature of the subject transaction as an equitable mortgage. Here. while purporting to be a sale. title to and ownership of property are immediately vested in the vendee a retro. Such factual finding. 1990. 1999. to wit: (a) gross inadequacy of the contract price of Page 100 • • • • • Issue: Whether or not the transaction between the parties was not a sale but an equitable mortgage? • Ruling: • • Petition denied. both parties appealed to the CA. particularly Justo Nemeño’s.00 Dissatisfied. The failure of the vendor a retro to repurchase the property vests upon the vendee a retro by operation of law the absolute title and ownership over the property sold. and. in a decision dated February 3. of the subject lots with the petitioner spouses only given two-thirds share of the harvest therefrom.Dayangco-Nemeño. as here commands is binding upon the court. the failure of the respondent heirs to redeem the properties within the stipulated period indubitably vested the absolute title to and ownership thereof to the petitioners.

as claimed by the petitioners. (c) said respondents’ payment of realty taxes.is considered a pactum commissorium. the aforementioned stipulation is a pactum commissorium because it enables the mortgagee to acquire ownership of the mortgaged properties without need of any foreclosure proceedings which is a nullity being contrary to the provisions of Article 2088 of the Civil Code.R.5 hectares. the inclusion of such stipulation in the deed shows the intention to mortgage rather than to sell. subject to the requirements of law regarding consolidation of ownership of real property. the stipulation in the subject deed reading: “if we fail to exercise our rights to repurchase as herein granted within the period stipulated. as here. respondent. subject only to the repurchase of a vendor a retro within the stipulated period. there are other circumstances convincing enough to support a conclusion that the transaction in question is really an equitable mortgage. evidence is wanting that petitioners ever enjoyed possession thereof. ownership of the property sold is immediately transferred to the vendee a retro upon execution of the sale. (b) respondent heirs remained in possession of the subject property even after the execution of the supposedly Deed of Sale with Pacto de Retro.000. and (d) the provision on pactum commissorium While the Supreme Court are not in full accord with the CA in its observation that the consideration of the sale with right to repurchase is grossly inadequate since the market value and assessed value of the two lots were not made on or before the date the subject contract was executed on February 25. PAPIO. such payment is coupled with continuous possession of the property. February 9. petitioner. • Lastly. vs. as vendors a retro. If the transaction was really a sale with right to repurchase. the contract should be treated as an equitable mortgage As well. Undoubtedly.” . the total area of which is almost 5.00 for two (2) parcels of land. that the parties intended to enter into an equitable mortgage is further accentuated by respondents’ continued payment of the real property taxes subsequent to the alleged sale. Payment of those taxes is a usual burden attached to ownership and when. Indeed. MARTIN B. remained in possession of the subject lots after the execution of the deed of sale with right to repurchase. still.• P20. it constitutes evidence of great weight that a person under whose name the realty taxes were declared has a valid and rightful claim over the land. Well-settled to the point of being elementary is the doctrine that where the vendor remains in physical possession of the land as lessee or otherwise. • • • • AMELIA S. Evidence is extant on record that the respondent heirs.No. then the latter should have asserted their rights for the immediate delivery of the lots to them instead of allowing some of the respondents to freely stay in the premises. In stark contrast. 1994. 1985 but only on June 8. then this conveyance shall become absolute and irrevocable without the necessity of drawing a new absolute Deed of Sale.166714 Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 101 . This stipulation is contrary to the nature of a true pacto de retro sale since in such sale. 2007 G. ROBERTS.

it is antithetical to an equitable mortgage. or other requisites demanded by a statute. Transfer Certificate of Title is now in the name of Amelia Roberts. In his Answer. that he had repurchased the property and consequently he obliged Roberts to execute a deed of absolute sale in his favor. The decisive factor is the intention of the parties. In PACTO DE RETRO SALE. However.000.000. Roberts agreed so he signed the Deed of Absolute Sale. SR.00. form or words. Metropolitan Trial Court ruled in favor of Roberts. Believing that she had made the offer for the purpose of retaining his ownership over the property.00 which is the reason why Roberts refused to execute the Deed of Absolute Sale in favor of Papio if Ventura would not pay the amount she misappropriated.00 and were evidenced by receipts signed by Ventura. Pursuant to the right to redeem given him.000. filed a petition for extrajudicial foreclosure. Roberts filed a petition for review assigning as error that petitioner did not alleged in his Answer the defense of equitable mortgage. the Corp. Papio appealed to RTC. However. He then believed that if he signed the deed.000. hence the Ca should not have discussed the same.000. contract of lease subject to renewal at the option of the lessor. Papio refused to pay and leave the premises. FACTS: Spouses Martin and Lucina Papio mortgage their residential lot in Makati in order to secure P59. Roberts and Papio executed a 2-yr. After 2yrs Papio failed to pay the monthly rentals but he and his family remained in the possession of the property for almost 13yrs.000. Papio alleged that when the Corp. He asked her to allow him to redeem the property anytime for a reasonable amount.THIRD DIVISION Ponente: CALLEJO. they executed a Deed of Absolute Sale over the property in favor of Amelia Roberts (his cousin) for P85. he accepted. Roberts demanded Papio to vacate the property in case he failed to settle his back rentals amounting to P410. ownership of the property sold is immediately transferred to the vendee a retro subject only to the right of the vendor a retro to repurchase the property upon Page 102 . In Papio’s Answer he stated that he was given the right of redemption at any time. Papio purchased the property for P250. ISSUE: whether the transaction entered into by the parties under the Deed of Absolute Sale and Contract of Lease is an equitable mortgage.00 loan from Amparo Investments Corporation.00.000.00 purchase price. An EQUITABLE MORTGAGE is one that although lacking in some formality. Since Roberts was already in USA. his cousin Roberts offered to redeem the property. Upon Papio’s failure to pay. nevertheless reveals the intention of the parties to change a real property as security for a debt and contain nothing impossible or contrary to law. and in its decision it affirmed the findings of MeTC. CA ruled in favor of Papio stating that what transpired is not a contract of absolute sale but an equitable mortgage and that Papio is entitled to possession of the property.00 out of P250. he was alarmed when Roberts had a Deed of Absolute Sale over the property prepared. Papio file a petiton for review in CA. filed a petition for extrajudicial foreclosure of the mortgage. Roberts would acquire ownership over the property. he remitted to her authorized representative Perlita Ventura the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 RULING: CA erred in finding that the transaction is an equitable mortgage.000. amount of P150. Ventura misappropriated P39. Roberts now filed a complaint for unlawful detainer and damages against Papio before Metropolitan Trial Court. To prevent foreclosure. With this claims.00 as partial payment and another P100.

The right of repurchase presupposes a valid contract of sale between the parties. by operation of law. respondent. the purchaser acquires the thing sold absolutely. Papio insisted that he repurchased the property thereby admitting that a deed of absolute sale was executed by him and petitioner and not an equitable mortgage. 2008 G. but a right reserved by the vendor in the same instrument of the sale as one of the stipulations of the contract. January 28.R. SALVADOR DELLOTA. When the sale is made without such agreement. leaving no doubt as to the intention of the drafters. No.143697 FIRST DIVISION Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 103 . Papio is barred from claiming otherwise. absolute title over the property.compliance with legal requirements for repurchase. One who repurchase a property means that the property was previously sold. petitioner vs. The right of repurchase is not a right granted the vendor by the vendee. the courts may not read into it any other intention that would contradict its plain import. When the language of the contract is explicit. DIONISIA DORADO VDA. Failure of the vendor a retro to exercise the right to repurchase within the agreed time vests upon the vendee a retro. DE DELFIN.

T.. 2008 Third Division There is gross inadequacy in price if a reasonable man will not agree to dispose of his property.00 as agreed upon by the parties was unreasonable. No. July 04.000 square meters in favor of Ildefonso Dellota and Patricia Delfin. They insist that the price of P5.Ponente: SANDOVAL-GUTIERREZ FACTS: Dionisia Dorado Delfin is the registered owner of Lot in Capiz with an area of 143. ramifications of her signing the Deed of Sale with Right of Redemption. Courts are not guardians of persons who are not legally incompetent.3000. Dionisia sold another portion to Gumersinda Deleña as evidenced by a notarized “Deed of Sale with Right of Redemption” thus. The court finds no cogent reason to conclude that the 1949 price of P5. this Court has no business extricating her from that bad bargain. R. Nor is there any showing that she was threatened. Unangst were arrested on February 02. form or words. Dionesia’s heirs now contend that the Deed of Sale with Right of redemption entered into by Dionisia and Gumersindo is an equitable mortgage. ISSUE: whether the transaction entered into by Dionisia is an equitable mortgage. or other requisites demanded by a statute. forced or defrauded into affixing her signature on the said contract.300. leaving an unsold area of more than 43. If the terms of the pacto de retro sale were unfavorable to Dionisia. J. Bautista vs. Unangst G. Reyes. Dionisia never redeemed this 50.000 square meters. 1997 for estafa and carnapping for the former’s failure to return Page 104 There is no evidence herein whatsoever to show that Dionisia did not understand the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 . 173002.: FACTS: Hamilton Salak and Shirley G. Dionisia executed an Escritura De Venta Con Pacto de Retro over 50. The decisive factor is the intention of the parties.R.935 square meters.000 square meter portion from Gumersindo.00 for 5 hectare portion is grossly inadequate. nevertheless reveals the intention of the parties to change a real property as security for a debt and contain nothing impossible or contrary to law. RULING: An EQUITABLE MORTGAGE is one that although lacking in some formality.

“Nel consensui tam contrarium est quam vis ataqui mtus” (Necessitous men are not. for consolidation of ownership. The petition is denied for lack of merit. for if otherwise.) (6. such must be construed in its literal sense. for respondent merely secured the payment of the unpaid car rentals and the amount advanced by petioner to Jojo Lee. the legal title to the property must be immediately transferred to the vendee. but to answer a present emergency will submit to any terms that the crafty may impose upon them). for sum of money. Furthermore. first. Upon the failure of the respondent to repurchase. hence this petition for review on certiorari. retention by the vendor of the possession is inconsistent with the vendee’s acquisition of the right of ownership under a true sale.) (3. 372. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 . arguing that respondent Unangst’s consent to the deed was procured under duress and assuming arguendo that the same was freely given the same partakes the nature of an equitable mortgage and not of sale. 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.) (5. Ergo. which the petitioner welcomed. Salak and the respondent proposed to sell to the petitioner a house & lot under the Unangst’s name to amicably settle the cases filed against them and their accounts with the same.00 as payment for car rental fees. 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 of the performance of any other obligation (4. other fees and incidental expenses in the retrieval of the car. petitioner filed a complaint for specific performance or recovery of possession. Following the principle. In this case it shall be presumed that it is an equitable mortgage. and that the respondents shall pay the taxes and utility bills related to the subject property. It Page 105 ISSUE: Whether the subject contract is that of sale or an equitable mortgage? HELD: The Deed of Sale with right to repurchase is that of an equitable mortgage.) (2. ergo. Second. the consent was taken in duress since it was signed by the respondent to be freed from police custody. The petitioner argues that the deed was clear and unequivocal. Provided for are the cases to presume a contract to be an equitable mortgage under Article 1602 (NCC): (1. petitioner agrees to pay the mortgage loan over the subject property to a certain Jojo Lee (as the property was then set to be publicly auctioned). respondent now argues before the CA to annul the deed.a car he rented from Benjamin Bautista. subject to the vendor’s right to redeem. They executed a deed of sale with right to repurchase within 30 days. petitioner allowed respondent Salak to retain the possession of the property despite the execution of the deed since the latter is not even bound to deliver the possession of the property to the former if they would pay him the amount he demanded. When the vendor binds himself to pay the taxes on the thing sold. RATIO DECIDENDI: The Deed of Sale with right to repurchase qualifies as an equitable mortgage under Article 1602. When the purchaser retains for himself a part of the purchase price.) When the price of the sale with right to repurchase is unusually inadequate. free men. and damages against the respondent. truly speaking.) In the case at bar. When the vendor remains in possession as lease or otherwise. Bautista demanded from Salak the sum of Php 232. After the RTC deciding in favor of the petitioner. The CA ruled in favor of the respondent.

said contract is firmly settled that whenever it is clearly shown that a deed of sale with pacto de retro. Rizal to Florencio and Nestor Carlos for Php 150. that is. 000.00 in a year. the purchase price stated in the deed was the amount of the indebtedness of both respondent and Salak to petitioner.) the alleged indebtedness of Salak to petitioner. it must be regarded as an equitable mortgage. Jojo Lee. regular on its face. February 15.00 that subsequently increased to Php 500.” Lorbes vs. Moreover. 2001 Octavio and Lorbes (petitioners) mortgaged their parcel of land in Antipolo. 000. It was agreed upon by the parties that: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 106 . Third. he solicited the help of his friend Josefina Cruz. a lack of interest in the property that belies the truthfulness of the sale a retro.R. for help in redeeming the subject property. a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. Apparently. on the other hand. the deed purports to be a sale a retro. the deed was executed by reason of: (01. since the same was executed in consideration of the aforesaid loans and/or indebtedness.) respondent’s own obligation to petitioner. in the alleged vendee.discloses. it is provided for in Article 1603 (NCC) that: “in case of doubt. petitioner asked their son-in-law. car rental payments. 139884. Fact is. No. reimbursement of what petitioner paid to the mortgagee. In fear of foreclosure. Court of Appeals G. a Land Bank of the Philippines (LBP) employee. Since the latter has no money for that purpose. delos Reyes (herein respondent). that is. and (02. is given as security for a loan.

LBP issued a letter of guarantee in favor of the Carloses.) the deed was merely a formality to meet the requirements of the bank for the housing loan. P500.) (6. and registration of a mortgage in favor of Land Bank. acts. considering that the price of the sale was inadequate considering the market value of the subject property and because they continued paying the real estate taxes thereto even after the execution of the said deed of sale HELD: The Deed of Absolute Sale is an equitable mortgage. as shown not necessarily by the terminology used in the contract but by all the surrounding circumstances. the petitioners notified delos Reyes that they are now capable of redeeming the subject property. The CA reversed the decision of the lower court. the negotiations between them leading to the deed. and the monthly amortization on the housing loan which was supposed to be deducted from the salary of private respondent Cruz will be reimbursed by private respondent delos Reyes.) (2. and that the transaction was not an absolute sale but an equitable mortgage. The CA decision is reversed and the RTC decision is reinstated. and any such balance will be applied by petitioners for capital gains tax. The lower court ruled in favor of the petitioners. This led the former to file an action for reformation of instrument plus damages. hence this petition for review on certiorari. using the subject property as collateral. expenses for the cancellation of the mortgage to the Carloses. ergo. such as the relative situation of the parties at that time. since the sale was executed in order to secure a loan from LBP to save the property from the danger of foreclosure and to use it as collateral thereof for bank loan purposes and that the same does not reflect the real intention of the parties in executing the said Deed of Sale. thus. the petitioners are still in possession of the subject property and had been paying the realty taxes thereon even after the execution of the deed.000. Furthermore. The private respondent (delos Reyes) was declared in default and the case proceeded in ex parte.00 will be paid to the Carloses as mortgagees.) (4. that the deed of sale did not reflect the true intention of the parties. it was further agreed that out of the proceeds of the loan. the attitude. informing them that Cruz’ loan has been approved. declarations of the parties. “the decisive decisive factor in evaluating such agreement is the intention of the parties. In 1993. Whether the Deed of Absolute Sale entered into by the parties was an equitable mortgage? RATIO DECIDENDI: There is no conclusive test to determine whether a deed of absolute sale on its face is really a simple loan accommodation secured by a mortgage. conduct.(1. but the latter refused.) Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 107 . and subsequently a new title in the name of Cruz was issued in lieu thereof.) (3. and thereafter Cruz will apply for a housing loan with Land Bank. (2. and that the petitioners were merely forced to enter into the said transaction out of the grave necessity of redeeming the subject property at that time. ISSUES: After which. transfer of title to Josefina Cruz. the mortgage was discharged. and that the real intention of the parties in securing the loan was to apply the proceeds thereof for the payment of the mortgage obligation.) they would sign a deed of sale conveying the mortgaged property in favor of private respondent Cruz. The petitioners argue that: (1.) (5.

) When the price of the sale with right to repurchase is unusually inadequate.) (5.) (2. The SC finds that the true intention between the parties for executing the Deed of Sale was not to convey ownership of the subject property but merely to secure the housing loan of Cruz. (4. Second.and generally. emergency. 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 of the performance of any other obligation. free men. “Necessitous men are not. the consent given by the petitioners where in duress following the principle. will submit to any terms that the crafty may impose upon them. the sole purpose of these documents was to satisfy LBP. truly speaking. but to answer a present Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 108 . Although this is not shown in the supporting documents of the principal transaction between the parties. and Cruz made no demand to the former to vacate the premises. the petitioners remained in possession of the subject property after the execution of the deed. Lastly. and not the concurrence of these circumstances. The presence of even one of these circumstances. documentary and parol evidence may be submitted and admitted to prove the intention of the parties. 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.” Provided for are the cases to presume a contract to be an equitable mortgage under Article 1602 (NCC): (1. suffices to construe a contract of sale to be one of equitable mortgage. When the purchaser retains for himself a part of the purchase price. in the petitioners had direct interest since the proceeds thereof was to be immediately applied to their outstanding mortgage obligation to the Carloses.) (6.” since the transaction was borne out of the impending foreclosure of the subject property.) And that the conditions herein set forth by the law which give way for the presumption of equitable mortgage apply with equal force to a contract purporting to be one of absolute sale.) (3. all pertinent facts having a tendency to fix and determine the real nature of their design and understanding. When the vendor binds himself to pay the taxes on the thing sold. When the vendor remains in possession as lease or otherwise. As such.

by virtue of which. The RTC ordered the cancellation by the Register of Deeds of the Province of lloilo. PHILIPPINE NATIONAL BANK. petitioner demanded the return of her certificate of title. Under said document. On April 16.R. 1969. respondents. Parangan was regularly extending loans in small amounts to petitioner to defray her daily expenses and to finance her daughter's education. recovery of possession and damages against Parangan and PNB in the Regional Trial Court of Iloilo City. petitioner signed a Deed of Pacto de Retro Sale in favor of Parangan which was superseded by the Deed of Definite Sale dated May 4. petitioner filed an action for cancellation of liens.00) Pesos. 1978 and the Deed of Definite Sale dated May 6. petitioner. Parangan was able to secure four (4) additional loans. ADORACION LUSTAN. the liens and encumbrances appearing in the Transfer Certificate of the land. 1970. NICOLAS PARANGAN and SOLEDAD PARANGAN. 1997] For fear that her property might be prejudiced by the continued borrowing of Parangan. On February 18. The last three loans were without the knowledge of herein petitioner and all the proceeds therefrom were used by Parangan for his own benefit. Declaring the Deed of Pacto de Retro Sale dated April 25. J. During the period of lease. 1979. a second Special Power of Attorney was executed by petitioner.000. No. Instead of complying with the request. 1972. On July 29. [G. quieting of title. These encumbrances were duly annotated on the certificate of title. Parangan asserted his rights over the property which allegedly had become his by virtue of the aforementioned Deed of Definite Sale. as null and void. both documents executed by Adoracion Lustan in favor of Nicolas Parangan over Lot 8069 in TCT No. On February 25. 1973. of the unauthorized loans. declaring the same to be Deeds of Equitable Mortgage. 111924. COURT OF APPEALS. January 27. petitioner Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Aggrieved. petitioner leased the land to private respondent Nicolas Parangan for a term of ten (10) years and an annual rent of One Thousand (P1.executed a Special Power of Attorney in favor of Parangan to secure an agricultural loan from private respondent Philippine National Bank (PNB) with the aforesaid lot as collateral. 1979 which petitioner signed upon Parangan's representation that the same merely evidences the loans extended by him unto the former. petitioner conveyed the subject property and all the improvements thereon unto Parangan absolutely for and in consideration of the sum of Seventy Five Thousand Pesos. T561 of the Register of Deeds of lloilo. vs. It also ordered defendant Nicolas Parangan to pay all the loans he Page 109 .: FACTS Petitioner Adoracion Lustan is the registered owner of a parcel of land. THIRD DIVISION FRANCISCO.

" ISSUE Whether or not the Deed of Definite Sale is in reality an equitable mortgage. 1602 be present. "Art.000. not a concurrence nor an overwhelming number of such circumstances. And upon proof of the truth of such allegations. More particularly. suffices to give rise to the presumption that the contract is an equitable mortgage. respondent court reversed the trial court's decision. Ordering defendant Nicolas Parangan to return possession of the land in question to the plaintiff upon payment of the sum of P75. The existence of any of the circumstances therein. the evidence is sufficient to warrant a finding that petitioner and Parangan merely intended to consolidate the former's indebtedness to the latter in a single instrument and to secure the same with the subject property. In this case. Upon appeal to the Court of Appeals (CA). T-561 of plaintiff and defendant PNB to return TCT No. In the case at bench. RULING The Deed of Definite Sale is in reality an equitable mortgage as it was shown beyond doubt that the intention of the parties was one of a loan secured by petitioner's land. we must first satisfy two requisites namely: 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. Also. Under Art. A contract is perfected by mere consent. 1604. 1602. This meeting of the minds speaks of the intent of the parties in entering into the contract respecting the subject matter and the consideration thereof. the court will enforce the agreement or understanding in consonance with the true intent of the parties at the time of the execution of the contract. the owner of the property may prove that the contract is really a loan with mortgage by raising Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 For a presumption of an equitable mortgage to arise. T-561 to plaintiff. in relation to Art 1604 provides that a contract of sale is presumed to be an equitable mortgage 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. as an issue the fact that the document does not express the true intent of the parties. 1604 of the Civil Code. the latter shall prevail over the former. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale.00 by plaintiff to defendant Parangan which payment by plaintiff must be made within ninety (90) days from receipt of this decision. Art. parol evidence then becomes competent and admissible to prove that the instrument was in truth and in fact given merely as a security for the repayment of a loan. a contract purporting to be an absolute sale shall be presumed to be an equitable mortgage should any of the conditions in Art. That the case clearly falls under this category can be inferred from the circumstances surrounding the transaction as herein set forth: Petitioner had no knowledge that the contract she signed is a deed of sale. Even when a document appears on its face to be a sale. (6). If the words of the contract appear to be contrary to the evident intention of the parties. The contents of the same were not read nor explained to her so that she may intelligibly formulate in her mind the consequences of her conduct and the nature Page 110 .secured from defendant PNB using thereto as security TCT No. otherwise. sale of the land will be ordered by the court to satisfy payment of the amount. a 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.

January 21.of the rights she was ceding in favor of Parangan. or if the contract is in a language not understood by him. and VERONICA GONZALES. and mistake or fraud is alleged. The evidence speaks clearly of the nature of the agreement — it was one executed to secure some loans. The contract of definite sale. this burden has not been satisfactorily discharged. We do not find the testimony of Parangan and Delia Cabial that the contract was duly read and explained to petitioner worthy of credit. 2004 ] SECOND DIVISION QUISUMBING. where petitioner purportedly ceded all her rights to the subject lot in favor of Parangan. When one of the contracting parties is unable to read.. To our mind. Settled is the rule that where a party to a contract is illiterate or cannot read or cannot understand the language in which the contract is written. did not embody the true intention of the parties. the burden is on the party interested in enforcing the contract to prove that the terms thereof are fully explained to the former in a language understood by him. [G. vs. the person enforcing the contract must show that the terms thereof have been fully explained to the former. J. JR. SPOUSES CRISPIN AUSTRIA and LEONISA HILARIO. respondents. Petitioner is illiterate and her condition constrained her to merely rely on Parangan's assurance that the contract only evidences her indebtedness to the latter. 147321. petitioners. SPOUSES DANILO GONZALES.: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 111 . The presumption of equitable mortgage prevails. No.R. The assessment by the trial court of the credibility of witnesses is entitled to great respect and weight for having had the opportunity of observing the conduct and demeanor of the witnesses while testifying.

Bulacan. In their Complaint. Bulacan. That suit was decided by the municipal court in respondents' favor. To secure the loan.000. with moral damages and attorney's fees. and Veronica Gonzales. 1991 . they used this amount to redeem some mortgaged properties from the Rural Bank of Pandi. misrepresentation and falsification.000. requested for the execution of another Deed of Absolute Sale indicating a price of P50. 1983 . Jr. Jr. Bulacan. the titles of said lots were transferred to them. 1981 priced at P240.000. according to respondents. Page 112 .FACTS On September 4. 1983. Respondent Veronica Gonzales agreed to buy the same out of pity for petitioners. According to petitioners. respondents thereafter registered the disputed properties in their own names through the use of fraud. The original amount in the Deed of Absolute Sale was P240. the RTC of Malolos decided Civil Case No.000 for the 3 lots was executed and notarized before Notary Public Jose Ramos. priced at P50. Said parcels became the subject of two (2) Deeds of Absolute Sale.. petitioners alleged that they are the owners and possessors of three (3) parcels of land. petitioners Crispin Austria and Leonisa Hilario filed a civil action for Declaration of Nullity of Document and Reconveyance before the RTC of Malolos. Their failure to vacate and turn over the purchased lots prompted respondents to send a final demand letter asking petitioners to vacate the premises but petitioners still refused. As a result. After respondents wrote petitioners on June 20. Both deeds were executed by petitioner Leonisa Hilario in favor of respondents. petitioner Leonisa Hilario in a letter dated July 20. Hilario sold to them the three lots in question. But petitioners claimed that the transactions entered between petitioners and respondents were not actually sales. petitioner Leonisa Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 On August 11.the other seven belonged to their relatives. petitioners sought the reconveyance of the three parcels from respondents. According to respondents. Hence the petitioners elevated their case to the Regional Trial Court of Malolos. before the properties were registered. Three of these certificates covered the petitioners' properties subject of the present case. The transaction was embodied in a Deed of Absolute Sale and notarized before Notary Public Protacio Cortez. 1983. an UNDERTAKING5 promising to vacate and surrender possession of the properties on or about December 15. 1991 . however. one dated July 21. 1995 . Petitioners alleged that they came to know of said acts of respondents only when they were served with a notice dated May 22. said respondents were forced to file an ejectment suit before the Municipal Trial Court of Pandi. respondents insisted in their Answer that on October 1981. from respondents' counsel to vacate said lots. all in the name of petitioner Leonisa Hilario. According to petitioners. after trial on the merits.000. petitioners sent respondents on July 28. using the fictitious contracts of sale. whose several properties had earlier been foreclosed by the bank. Petitioners admitted that their debts to respondent spouses remained unpaid due to business reverses. purportedly to lessen the taxes and fees that they will be paying as the vendors. Shortly afterwards. a new Deed of Absolute Sale indicating a selling price of P50. 1983. However. 552M-91 against respondents and in favor of herein petitioners. Thus.000 and the other dated October 23. while .6 against petitioners. respondents required petitioners to furnish them with ten (10) TCTs. against herein respondents Danilo Gonzales. For their part. without further extension. But then petitioners failed to vacate as promised on said date. asking them to vacate the disputed properties. but merely loans in the amount of P260. 1979 .

It may be rebutted by competent and satisfactory proof to the contrary. Petitioners failed. nor could they testify as to its details. Petitioners' allegation that the insufficiency of the selling price creates the presumption that the transaction is an equitable mortgage is unsupported by the evidence on record. considering that the owner of a thing has the right to exclude any person from the enjoyment and disposal thereof and may. to present a copy of said contract in the proceedings before the RTC. and (3) payment of realty taxes. It reversed the trial court's decision. such presumption of equitable Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Petitioners insist that they entered into a contract only to obtain a loan with respondents and nothing more. to wit: (1) inadequacy of the selling price. When all these improvements were being undertaken. petitioners' claim that the selling price of the lots in question was inadequate needs closer scrutiny. But they repeatedly delayed honoring it. for this purpose. Petitioners failed to present any proof whatsoever that the fair market values of the real property in the area at the time of the transaction were much higher than the selling price of the parcels in question. plaintiffs were aware thereof but did not object to any of the work done on the subject premises. The latter introduced permanent improvements thereon and had in fact converted the pigpens. (2) possession in the premises. Petitioners surely cannot now pretend to be ignorant of the real nature of Page 113 . (Article 429. However. There is no conclusive test to determine whether a deed absolute on its face is really a simple loan accommodation secured by a mortgage. which used to belong to plaintiff Austria . without more. In the instant case. Petitioners point out that the requirements of an equitable mortgage have been satisfied by the following circumstances. (b) petitioners paid the realty taxes for the years 1982 and 1983. Such inaction is contrary to their claim of ownership over the subject properties. does not make a case favorable to petitioners. Respondents seasonably appealed the decision to the Court of Appeals. however.000. The records also show that they did not object when improvements were made on the premises by respondents. Civil Code). Mere allegation that the price paid by respondents was inadequate. it is obviated by the fact that they executed an undertaking promising to vacate the premises. into a fishpond.Applying Article 1604 of the Civil Code in relation to Article 1602. ISSUE WHETHER OR NOT THE COURT OF APPEALS IS CORRECT IN HOLDING THAT THE CONTRACT BETWEEN PETITIONERS AND RESPONDENTS WAS A SALE AND NOT AN EQUITABLE MORTGAGE OF REAL PROPERTY RULING Decisive for the proper determination of the true nature of the transaction between the parties is the intent of the parties. use such force as may be reasonably necessary to repel or prevent an actual or threatened unlawful physical invasion or usurpation of his property.the RTC observed that: (a) petitioners as the vendor remained in physical possession of the lots even after the execution of the deed of sale. As to the allegation that petitioners were in possession of the properties even after the sale. mortgage is not conclusive.00 was unusually inadequate by any standard for realties. and (c) the purchase price of P50.

1999 as well as its resolution dated February 28. He sought a renewal of the loan and issued 2 postdated checks. the petition is DENIED. secured by a real estate mortgage over two parcels of land. CARLOS ANG GOBONSENG. one for P10k and the other for P690k. much less an equitable mortgage. he failed to rebut the testimony of the Notary Public who testified in court that the petitioners as vendors of the properties personally appeared and acknowledged the sale documents before him. For this was not the first time they dealt with each other. 146651 Respondent (Gobonseng) contracted a loan from petitioner in the sum of P550k. we are constrained to find that indeed the true intent of the parties involves a contract of sale. representing the full amount of his obligation. which had reached the amount of P700k. 2002 G. August 6. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 114 . JR. 2001 . WHEREFORE. is AFFIRMED.R. covered by TCT Nos. MOREOVER. 13607 and 13535. Thus. ABILLA vs. Respondent defaulted in the payment of the loan. RONALDO P.their transaction with respondents. It is not merely a loan. and the decision of the Court of Appeals dated February 23. No.

that the agreement was in reality a mortgage. de Macoy. In his answer. upon a careful review and analysis of the antecedent facts. the parties executed an Option to Buy whereby respondent was allowed to repurchase the lots within a period of 6 months. However. 1999. v. we rendered the assailed Decision reversing the Order of the RTC. the latter threatened to sue him for Estafa. the decision became final on February 8. His petition filed with SC was also. the Court of Appeals affirmed the decision of the trial court. Hence. but merely to give it as security for a loan or other obligation. It must appear that there was a belief on his part.(it was equitable mortgage) held as a mere On January 17. founded on facts attendant upon the execution of the sale with pacto de retro. CA. RTC of Dumaguete rendered judgment in favor of petitioner and ruled that the Option to Buy was rendered null and void by respondent's failure to exercise the option within the period of six months. Hence. Thus. However. petitioners instituted an action for specific performance xxx pursuant to the deed of absolute sale. 2002. we held: The application of the third paragraph of Article 1606 is predicated upon the bona fides of the vendor a retro. Subsequently. the application of the rule is meet and proper. respondent filed with the court of origin a motion to repurchase the lots with tender of payment. honestly and sincerely entertained. Orias. On the same day. Despite approval of the loan. Inc." Gabonseng’s MR was denied. In our Decision. which was denied. in effect denying respondent the right to repurchase the subject lots. Consequently. Respondent failed to repurchase the lots within the stipulated period. Thus. we ruled that Article 1606 of the Civil Code does not apply to the case at bar because the transaction between the parties was a pacto de retro sale. On appeal. de Macoy v. but further declared that "the deed of sale and option to buy actually constitute a pacto de retro sale. respondent failed to make good on his promise to pay his outstanding obligation to petitioner. 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. Sr. 1999. we are convinced that the right granted under the third paragraph of Article 1606 may be invoked by respondent. the said lending institution required a collateral for which reason respondent borrowed from petitioner the two titles so he can mortgage the same. petitioner Abilla instant petition for review. one not intended to affect the title to the property ostensibly sold. citing the case of Vda. respondent interposed the defense that the transaction was in reality an equitable mortgage. Respondent's claim of the right to repurchase the lots is anchored on the third paragraph of Article 1606 of the Civil Code. On February 27. the trial court issued an Order granting respondent's motion for reconsideration and allowing him to repurchase the lots within thirty days from finality thereof.. Respondent promised to pay petitioner the sum of P690k upon approval of his pending loan application with the State Investment House. HELD: NO. that the vendor a retro Page 115 Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 .The second check was dishonoured xxx. petitioner cancelled the mortgage in his favor and delivered the two titles to respondent. which states: However. citing the earlier ruling in Felicen. brought the ISSUE: Whether or not the contract between the parties was an absolute sale with pacto de retro. In that event. Respondent thus executed a deed of absolute sale over his17 lots in Dumaguete in favor of petitioner. if the matter of the real nature of the contract is submitted for judicial resolution. In Vda.

HEIRS OF SPS. together with the option to buy executed on the same day. When petitioner lent the two titles to respondent. PHILADELPHIA AGAN vs.m.R. by simply instituting an action to reform the contract — known to him to be in truth a sale with pacto de retro — into an equitable mortgage. the said article applies and he can still repurchase the property within thirty days from finality of the judgment declaring the transaction as a sale with pacto de retro. Thus. 25370 and registered in the name of Spouses Andres and Diosdada Nueva. but accompanied by a reservation to the vendor of the right to repurchase the property — and there are no circumstances that may reasonably be accepted as generating some honest doubt as to the parties' intention. sold under a pacto de retro. 2003 G.) situated in Cagayan de Oro City to Agan for P21k. respondent may avail of the third paragraph of Article 1606 of the Civil Code and repurchase the lots affected by the deed of absolute sale and option to buy. xxx xxx xxx. Parenthetically. ANDRES NUEVA and DIOSDADO NUEVA December 11. As such. founded on facts attendant upon the execution of the sale with pacto de Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 retro. Said obligation would have been satisfied had respondent exercised the option to buy within the stipulated period. These circumstances. 1988. Naturally. that the agreement was in reality a mortgage. make this case fall squarely within the situation contemplated in the above-quoted doctrine – that there was a belief on the part of the vendor a retro. Conversely.The property is covered by TCT No. but merely to give it as security for a loan or other obligation. Therefore. it may well be that the deed of sale. was meant to serve as security for the indebtedness of respondent which had become long overdue. the proviso is inapplicable. The reason is quite obvious. if it should appear that the parties' agreement was really one of sale — transferring ownership to the vendee. If he honestly believed that the transaction was an equitable mortgage. it matters not what the vendee intended the transaction to be. the loan he extended to respondent became unsecured.033 sq. i. Consistently therewith. No. there was a need to secure respondent's obligation after he reneged on his promise to pay the same out of the loan proceeds from State Investment House. a parcel of land (2. Page 116 .e. Diosdada Nueva.. with marital consent. the applicability of Article 1606 rests on the bona fide intent of the vendor a retro. peculiar to the case at bar.be allowed to repurchase the property sold within 30 days from rendition of final judgment declaring the contract to be a true sale with right to repurchase. it would be within the power of every vendor a retro to set at naught a pacto de retro. one not intended to affect the title to the property ostensibly sold. If the rule were otherwise. 155018 FACTS: On April 13. respondent has maintained throughout the proceedings that transaction between him and petitioner was really an equitable mortgage. honestly and sincerely entertained. Gabonseng in this case. or resurrect an expired right of repurchase.

She argued that she did not find it necessary to file an appeal from the said decision considering that the grant of the thirdday period to redeem the property is a mere surplusage and hence. title was reconstituted and subsequently transferred and registered in the name of Ann and Lou Nueva. Petitioners failed to repurchase the property within the stipulated period. Since the title to the property was allegedly lost during the fire that razed the property on March 19. the decision of August 4. 2000. In their answer to the petition for consolidation filed on October 22. within six (6) months for the same consideration.00 as redemption price. 1992. hence it acted within its authority under Article 1606 of the Civil Code in giving the petitioners thirty days as redemption period. unenforceable and illegal in view of the court’s order consolidating ownership of the property in her favor. 2000. However. On August 3. In its Decision. petitioners raised the defense that the transaction between the parties was actually an equitable mortgage. 2000. the consideration for the sale being only P21k as against its Fair Market Value of P81k pursuant to Tax Declaration. The lower court. Hence. 2000 decision. Philadelphia filed a petition for consolidation of ownership against Spouses Nuevas with RTC of Cagayan de Oro City xxx In their answer filed on the Nuevas alleged that the pacto de retro sale was actually an equitable mortgage. The dispositive portion of the decision reads: “WHEREFORE. ruled that the transaction is one of sale under a pacto de retro. The parties agreed that the Nuevas are granted the right to repurchase the property sold. more or less. upon the death of Diosdada Nueva. the Nuevas were constrained to consign the amount Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 with the court. 1991.033 square meters. However. based on the evidence presented. Page 117 .The agreement is evidenced by a public instrument entitled “Deed of Sale under a Pacto de Retro” executed and duly signed by the late Diosdada and Philadelphia. the CA reversed the Order of the RTC and rendered judgment in favor of respondent heirs. On July 5. 2000 decision. We do not agree with the contention of the private respondent that Article 1606 of the Civil Code does not apply in the instant case.080.” Nuevas’ MR was denied by the court. [“]SO ORDERED. Philadelphia filed a petition for relief from the August 3. 2000 is hereby amended by deleting the second paragraph of the disposition thereof. [“]SO ORDERED. the judgment consolidating ownership over the disputed property in favor of Philadelphia was rendered by RTC. petitioner filed this presentaction with the SC. the vendors can still exercise the right to repurchase said property within thirty (30) days from receipt of this decision pursuant to Article 1606 and 1607 of the New Civil Code. On October 9. 1998. the trial court rendered its questioned Order. considering that they remained in possession of the subject property and continued to pay the real taxes thereon. the ownership in the vendee is hereby consolidated by virtue of the failure of the vendors to redeem the property described in the Deed of Sale under Pacto de Retro xxx consisting of an area of 2. thus: “WHEREFORE. the property was extrajudicially partitioned where Andres sold his interest in the land in question to his daughter Ann and son Lou.” Because of the refusal of Agan to accept the amount of P52. On September 12. contending that the RTC gravely abused its discretion in granting the petition for relief. in its August 3. the second paragraph of the dispositive portion gave the vendors a period of 30 days from receipt of the decision within which to redeem the property. Respondent Agan prayed for the court to delete the said portion of the decision. The CA held that: Further. 1990 where Diosdada died. On June 19. Respondent heirs filed a petition for certiorari before the CA.

125233 March 9. appears inconsistent. Experience has demonstrated too often that many sales with right to repurchase have been devised only to circumvent or ignore our usury laws and for this reason. Moreover. The legislative intent behind this Article. ELEUTERIO LEIS. and that their predecessor continued to pay the loan under which the mortgage was constituted. If at all. a provision not found in the old Civil Code." Page 118 . vs. which accounts for the RTC Decision’s utter silence on the matter. was subsequently annulled. on one hand. Respondents also averred that they remained in possession of the subject property and paid the real taxes thereon. Respondents even reconstituted their title over the property. Such title. 2000 Facts: Adriano and Gertrudes were married. Article 1606 grants the vendor a retro thirty (30) days “from the time final judgment was rendered. however. the dispositive portion of the RTC Decision declaring the consolidation of ownership of the property in petitioner. The dispositive portion. ANASTACIO L. which was P21k was inadequate. after which respondents purchased the latter’s share and caused the issuance of a TCT in their name. The law presumes good faith and. The seller. must entertain a good faith belief that the contract is an equitable mortgage. is “to accord the vendor a retro the maximum safeguards for the protection of his legal rights under the true agreement of the parties. 43100 was issued in the name of "Gertrudes Isidro. the grant of the right to repurchase to respondents is in accordance with the third paragraph of Article 1606. respondents. The Deed of Sale described Gertrudes as a widow. The RTC in this case made no finding in its Decision that respondents’ defense that the pacto de retro sale was an equitable mortgage was not made in good faith. At any rate. respondents are entitled to the right to redeem the property pursuant to the third paragraph of Article 1606 of the New Civil Code. G. Spouses ALEXANDER CRUZ and ADELAIDA CRUZ. At first blush. in the absence of a contrary finding by the RTC in its Decision. RAYMUNDO LEIS. the ambiguity is merely ostensible. HELD: YES. LAGDANO.” Article 1606 is intended to cover suits where the seller claims that the real intention was a loan with equitable mortgage but decides otherwise." who was also referred to therein as a "widow. The Court has construed “final judgment” to mean one that has become final and executory. however. Indeed. TCT No. however. LORETA L. Gertrudes acquired from the then Department of Agriculture and Natural Resources (DANR) a parcel of land.R. on the other. CAYONDA and the HONORABLE COURT OF APPEALS. No. respondents alleged in their answer that the consideration for the alleged sale. and granting respondents thirty (30) days to repurchase the property.ISSUE: Whether the transaction between the parties in the case at bar was an equitable mortgage. and partitioned the property with the other heirs.” not from the defendant’s receipt of the judgment. also makes reference to the third paragraph of Article 1606 of the New Civil Code. considering that the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 fair market value of the property was P81k. Taken together. it does not appear that petitioner even attempted to prove bad faith on the part of respondents during the trial. petitioners. the law looks upon then with disfavor. it becomes obvious that the consolidation of the property in petitioner is subject to the suspensive condition of respondents’ failure to repurchase within the thirty-day period. along with Articles 1602-1605 and 1607 of the same Code. The Court also notes that the RTC erred in allowing petitioners the right to repurchase said property within thirty (30) days from receipt of the RTC Decision. There is no ambiguity at all in the decision that would warrant clarification. By express provision.

When Adriano died It did not appear that he executed a will before his death." For failure of Gertrudes to repurchase the property. On the basis of the foregoing facts. as a rule. 1514. also noted that petitioner did not comply with the provisions of Article 1607 of the Civil Code. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Petitioners are now before this Court seeking the reversal of the decision of the Court of Appeals. received demands to vacate the premises from petitioners. herein private respondents. a co-owner such as Gertrudes could only dispose of her share in the property owned in common. It does not provide for a mode of terminating a co-ownership. art. In other words. 489). Art. Failure on the part of all the co-owners to redeem it entitles the vendee a retro to retain the property and consolidate title thereto in his name (Supra. art. 1612. There is no doubt that redemption of property entails a necessary expense. that did not make him the owner of all of it. widow. He relies on the provisions of Article 1515 of the old Civil Code. the same was presumed to be conjugal property under Article 160 of the Civil Code. in the amount of P15. Gertrudes could only sell to petitioner spouses her one-half share in the property. ownership thereof was consolidated in the name of Alexander Cruz. Article 1613 of the present Code. 1607).).00. The first is denominated as "Kasunduan" which the parties concede is a pacto de retro sale. Unable to pay her outstanding obligation. however. Private respondents responded by filing a complaint. forming past of the Page 119 ." a Deed of Absolute Sale covering the same property for the price of P39. The result is that the property remains to be in a condition of co-ownership. the spouses Alexander and Adelaida Cruz. however. While a vendee a retro. it is the petitioner's contention that the property subject of dispute devolved upon him upon the failure of his co-heirs to join him in its redemption within the period required by law. 43100 solely in the name of "Gertrudes Isidro.000. it did not put to end the existing state of coownership (Supra. CIVIL CODE (1889). When Gertrudes Isidro died. payable on or before 5 February 1986. The appellate court." the redemption by one co-heir or co-owner of the property in its totality does not vest in him ownership over it. art. Petitioners appealed to the Court of Appeals in vain. The right of repurchase may be exercised by a co-owner with respect to his share alone (CIVL CODE. While the records show that petitioner redeemed the property in its entirety. The second is a "Kasunduan ng Tuwirang Bilihan. failed to pay the loan on the due date. The RTC held that the land was conjugal property since the evidence presented by private respondents disclosed that the same was acquired during the marriage of the spouses and that Adriano contributed money for the purchase of the property.00 at 5% interest. the RTC rendered a decision in favor of private respondents. granting Gertrudes one year within which to repurchase the property. Unfortunately for private respondents. The Court of Appeals affirmed the decision of the Regional Trial Court. The loan was secured by a mortgage over the property covered by TCT No. the new owners of the property. But the provision does not give to the redeeming co-owner the right to the entire property.083. Gertrudes then obtained a loan from petitioners. Gertrudes executed two contracts in favor of petitioner Alexander Cruz. holding that since the property was acquired during the marriage of Gertrudes to Adriano. Issue: whether or not a co-owner may acquire exclusive ownership over the property held in common? Held: Essentially. "may not be compelled to consent to a partial redemption. It is conceded that. the court concluded. her heirs. the same amount stipulated in the "Kasunduan. There is no merit in this petition. Gertrudes. 43100. shouldering the expenses therefor. like the trial court. Thus. the property was registered in TCT No. under Article 1613 of the Code." Where a parcel of land. giving the vendee a retro the right to demand redemption of the entire property.

141974 CORONA. Cruz. to repurchase the same within the period stipulated. In case of real property. SPS. JANUARIO ANTONIO VELOSO AND NATIVIDAD VELOSO G.undistributed properties of the dissolved conjugal partnership of gains. after the vendor has been duly heard. No. A judicial order is necessary in order to determine the true nature of the transaction and to prevent the interposition of buyers in good faith while the determination is being made.300. The aforequoted article is intended to minimize the evils which the pacto de retro sale has caused in the hands of usurers. August 9. The loan was secured by a deed of mortgage over three parcels of lands owned by the spouses. 1607. is hereby ordered CANCELLED. He is only charged with notice of the burdens on the property which are noted on the face of the register or the certificate of title. INC. issued solely in the name of the widow. which was issued without judicial order. 130584. 10 WHEREFORE. The rationale for this rule is that "a person dealing with registered land is not required to go behind the register to determine the condition of the property. 43100 in the name of Gertrudes Isidro is ordered REINSTATED. it still ruled against petitioners by affirming the Regional Trial Court's decision on the premise that there was no compliance with Article 1607 of the Civil Code requiring a judicial hearing before registration of the property in the name of petitioners. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 without prejudice to compliance by petitioners with the provisions of Article 1607 of the Civil Code BPI FAMILY SAVINGS BANK. the decision of the Court of Appeals is MODIFIED in that the petitioners are deemed owners of the property by reason of the failure of the vendor.000 from Family Bank and Trust Company. the consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with the provisions of article 1616 shall not be recorded in the Registry of Property without a judicial order. v. To require him to do more is to defeat one of the primary objects of the Torrens system. Gertrudes Isidro. Transfer Certificate of Title No." 9 As gleaned from the foregoing discussion. J. This provision states: Art. and Transfer Certificate of Title No. However. 2004 Page 120 .: Facts: Respondent spouses Januario Antonio Veloso and Natividad Veloso obtained a loan of P1. the purchaser acquires a valid title to the land even as against the heirs of the deceased spouse.R. despite the Court of Appeals' finding and conclusion that Gertrudes as well as private respondents failed to repurchase the property within the period stipulated and has lost all their rights to it. is sold by a widow to a purchaser who merely relied on the face of the certificate of title thereto. in the name of Alexander M.

554.140. the trial court ordered the release to the respondents of P1.400. Therefore.500.000 representing the redemption price. herein petitioner. Being so. In a real estate mortgage. The trial court rendered a decision declaring the validity of the extra-judicial foreclosure of the mortgaged properties of respondents but allowed the redemption of the same at a redemption price of P2.678. the Court of Appeals affirmed the trial court’s decision subject to the modification declaring P2. The complaint filed by respondent spouses is hereby dismissed. Upon appeal by the petitioner. foreclosure was proper. wrote to petitioners offering to redeem the foreclosed properties for P1. when the principal obligation is not paid when due. they filed with the RTC of Quezon City. A bona fide redemption necessarily implies a reasonable and valid tender of the entire repurchase price.When the respondents defaulted in the monthly installments due on their loan. otherwise.000 of the consigned amount. Decision: Respondents.000 is to take the place of the injunction bond to answer for whatever damages petitioner might suffer because of the issuance of the preliminary injunction previously issued by a different branch of RTC and then later lifted. Issue: Subsequently. The Supreme Court found no reason to question the validity of the extra-judicial foreclosure. a complaint for annulment of foreclosure and thereafter were ordered by the latter to deposit with the clerk of court the sum of P1. The balance of P100. Hence. As regards the second issue. Family Bank assigned all its rights and interests in the foreclosed properties to BPI Family Bank.639. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 121 . The appealed decision of the Court of Appeals is hereby REVERSED and SET ASIDE. Family Bank instituted an extra-judicial foreclosure proceeding on the respondents’ mortgaged properties and was sold at public auction with Family Bank as the highest bidder for P2. the offer to redeem is ineffectual. 1. Inc. Ratio Decidendi: Despite the opposition of petitioner.66. the instant petition.000. due to the default of the respondents to pay their obligation. Whether the extra-judicial foreclosure confirmed by both the trial court and the court of appeals is valid.872. the mortgagee has the right to foreclose on the mortgage and have the property seized and sold to apply the proceeds to the obligation. otherwise the rule on the redemption period fixed by law can easily be circumvented.935 but were however rejected by the latter. Whether the respondent spouses complied with all the requirements for the redemption of the subject properties.80 as the redemption price.782. the general rule on redemption is that the statement of intention to exercise the right to repurchase must be accompanied by an actual and simultaneous tender of payment. 2.

On April 30. But in so granting.000 while made within the redemption period was ineffective because the amount offered and actually consigned not only excluded the interest but was lower than the P2. the judgment debtor must pay the purchaser the redemption price composed of the following: (1) the price which the purchaser paid for the property.: GR No. sale bet. Originally the property was coowned by Ruben Jacinto to the extent of onesixth and the Bascara’s and Ernesto Jacinto who collectively owned the remaining five-sixths. The law on equity as defense. the offer by respondents to redeem the foreclosed properties for P1. the P1. applies only in the absence of. the offer was not a legal and effective exercise of the right of redemption contemplated under the law. LEE CHUY REALTY CORPORATION vs. Moreover. J.935 and the subsequent consignation in court of P1. would have been equivalent to requiring petitioner to accept payment by installments making it necessary to indefinitely extend the redemption period which is contrary to the policy of the law. COURT OF APPEALS and MARC REALTY AND DEVELOPMENT CORPORATION December 4.000 consigned by respondents and then subsequently withdrawn by them. Court of Appeals that in order to effect a redemption.872. the law intended that the offer to redeem be valid and effective.66 paid by the highest bidder/purchaser of the properties during the auction sale.The Supreme Court held in the case of Bodiongan vs. 104114 The law grants the right of redemption. accompanied by an actual tender of the redemption price. Ruben Jacinto. leaving only P100. and Marc Realty.400.782. hence. Article 1616 of the Civil Code provides that the vendor cannot avail himself of the right to repurchase without returning to the vendee the price of the sale. (2) interest of 1% per month on the purchase price. The fixing of a definite term within which the property should be redeemed is meant to avoid prolonged economic uncertainty over the ownership of the thing sold. 1995 Bellosillo. refusal of the offer by petitioner was completely justified.500. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 FACTS: A piece of land is disputed by Lee Chuy Corp. Furthermore. statutory law or judicial rules of procedure. In the instant case. In the case at bar.000 as injunction bond. and (4) interest of 1% per month on such assessments and taxes.554. of Page 122 . (3) the amount of any assessments or taxes which the purchaser may have paid on the property after the purchase. 1981. and never against.

The trial court ruled in favour of Lee Chuy and decreed that neither a separate offer to redeem nor a formal notice of consignation are necessary for the reason that the filing of the action itself. Primary Structures Corp.The redemption of extrajudicially foreclosed properties. If the price of the alienation is grossly excessive. and Lee Chuy was duly registered. The Bascara’s and E. In its Amended Answer with Counterclaim with Motion to Dismiss. On 13 November 1989 LEE CHUY REALTY filed a complaint for legal redemption against MARC REALTY and consigned in court a manager's check for 614. A co-owner of a thing may exercise the right of redemption in case the shares of all the other coowners or of any of them are sold to a third person. is exercisable within one (1) year from the date of the auction sale as provided for in Act No. ISSUE: W/N THE FILING OF THE ACTION ITSELF IS EQUIVALENT TO A FORMAL OFFER TO REDEEM RULING: Petition Granted. 3135. 1989. J. Art.150060 Facts: Petitioner is a private corporation based in Cebu City and the registered owner of Lot 4523 situated in Liloan. or by filing a complaint in court coupled with consignation of the redemption price within the prescribed period. Valencia August 19. the redemptioner shall pay only a reasonable one. The same was registered on Oct. CA reversed trial court’s judgment and decreed in contrary that a prior tender or offer of redemption is a prerequisite or precondition to the filing of an action for legal redemption. 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. In respondents appeal to CA. 1623.his one-sixth pro-indiviso share. Hence. or by the vendor. GR No. vs. Anthony and Susan T. 1620 and 1623 of the Civil Code on legal redemption provide: Art. Under the free patent or homestead provisions of the Public Land Act a period of five (5) years from the date of conveyance is provided. Arts. the five-year period to be reckoned from the date of the sale and not from the date of registration in the office of the Register of Deeds. on the other hand. 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. Sps. Cebu. Marc Realty claims it was verbally informed and was given a copy of the deed of sale. within the period of redemption. 2003 First Division Ponente: Vitug. Jacinto sold theirs to Marc Realty. Hence. 1620. with an area of Page 123 Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 . it can either be through a formal tender with consignation. SC sustains LEE CHUY REALTY. The right of legal preemption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor. There is actually no prescribed form for an offer to redeem to be properly effected.400. A co-owner desirous of exercising his right of legal redemption is given a period of thirty (30) days from notice of the sale within which to avail of the right to redeem. the petition. 16. as the case may be. is equivalent to a formal offer to redeem. Lee Chuy claims it was never informed of the other sale.

1623.22. The deed of sale shall not be recorded in the Registry of Property. and Lot 4529 with a total combined area of 3. invoking the provisions of Articles 1621 and 1623. In stressing the mandatory character of the requirement. ART. or by the vendor. is alienated unless the grantee does not own any rural land. aforenumbered. as the case may be. 4820. 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. identified to be Lot 4527. 1996. Thereupon. the one who first requested the redemption. Issue: Interpretation of Articles 1621 and 1623 of the Civil Code Article 1621 of the Civil Code expresses that the right of redemption it grants to an adjoining owner of the property conveyed may be defeated if it can be shown that the buyer or grantee does not own any other rural land. unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners. Article 1621 and Article 1623 of the Civil Code. nor respondents gave formal or even just a verbal notice of the sale of the lots as so required by Article 1623 of the Civil Code. both parties appealed the decision of the trial court to the Court of Appeals. Petitioner learned of the sale of the lots only in January. The right of redemption of co-owners excludes that of adjoining owners. Lot 4528. Adjacent to the lot of petitioner are parcels of land. This right is not applicable to adjacent lands which are separated by brooks. in response. Petitioner claimed that neither Mendoza. Held: Petition Granted Article 1623 of the Civil Code provides that the right of legal pre-emption or redemption shall not be exercised except within thirty days from notice in writing by the prospective vendor. on 30 January 1996. Forthwith. The three lots. a parcel also adjacent to Lot 4523 belonging to the latter.214 square meters. which read: ART. ravines. the owner of the adjoining land of smaller area shall be preferred. the area of which does not exceed Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 124 .751 square meters. roads and other apparent servitudes for the benefit of other estates. After trial. The appellate court affirmed the assailed decision. the law states that the deed of sale shall not be recorded in the Registry of Property unless the same is accompanied by an affidavit of the vendor that he has given notice thereof to all possible redemptioners. petitioner sent another letter to respondents tendering payment of the price paid to Mendoza by respondents for the lots. Respondents. 1621. have been sold by Hermogenes Mendoza to respondent spouses sometime in December 1994. it sent a letter to respondents. signifying its intention to redeem the three lots. when Hermogenes Mendoza sold to petitioner Lot No. petitioner filed an action against respondents to compel the latter to allow the legal redemption. one hectare. the Regional Trial Court of Cebu dismissed petitioners complaint and respondents' counterclaim. The owners of adjoining lands shall also have the right of redemption when a piece of rural land. drains. On 30 May 1996. and should both lands have the same area. informed petitioner that they had no intention of selling the parcels. If two or more adjoining owners desire to exercise the right of redemption at the same time. or by the vendor. the previous owner. as the case may be.

The written notice of sale is mandatory. The contract required the lessee to construct a commercial building on the property which shall become the property of Sofia upoon expiration of the lease.R. she leased the lots to Yu Siong. This Court has long established the rule that notwithstanding actual knowledge of a co-owner. as being the written affirmation under oath. as well as the evidence. that the required written notice to petitioner under Article 1623 has been met. overlook the fact that petitioner is not a party to the deed of sale between respondents and Mendoza and has had no hand in the preparation and execution of the deed of sale. the latter is still entitled to a written notice from the selling co-owner in order to remove all uncertainties about the sale. No. Martinez was the registered owner of two (2) parcels of land in Tacloban City. Sofia then sold the lot and Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 125 .The Court of Appeals has equated the statement in the deed of sale to the effect that the vendors have complied with the provisions of Article 1623 of the Civil Code. vs. father of petitioner for a period of ten (10) years. Facts: Sofia P. the contract was renewed with explicit stipulation that the new owner of the building is Sofia. like the appellate court. On 1973. On 1961. It could not thus be considered a binding equivalent of the obligatory written notice prescribed by the Code. Jr. its terms and conditions. Sen Po Ek Marketing Corp. 134117 325 SCRA 210 SECOND DIVISION Ponente: De Leon. Respondents. Martinez G. as well as its efficacy and status.

Also. Corrompido for P 2. Court of Appeals rendered a decision reversing the trial court. the other heirs Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 of Sofia executed a “Confirmation of Sale of Land and Improvements”. Court of Appeals. --The following month or on August 18. Sofia continued to receive the rentals until her death. Martinez. Teodora sold the property to respondent Tiu Uyping. However.000 with right to repurchase within eight years. The siblings divided the proceeds of the sale among them. Since Teodora is one of the co-heirs she can only her undivided portion since her coheirs did not give her authority. The petitioner sought to purchase the property. 714 square meter parcel of land to his wife and children . Jesus Feliano and Anunciano Feliano August 31. 1971. 1971. This was established by several badges of simulation proving that the sale was not intended to have any legal effect between them. HTP. Futhermore. as lawful owner of the leased premises. the sale can be subject to ratification. Petitioner continued posession and regulary paid monthly rentals to Sofia until her death. Thus. However. it was no longer renewed by the party. After the new lease contract expired. Neither any law nor any contract grants it preference in the purchase of leased premises. to sell the same to private respondent Tiu Uypin brothers. private respondent sent a letter to petitioner informing him of her intention to sell the premises to one Mrs. Petilla which the petitioner only received a month after.building to her daughter. 2007 GR No. but there is none in the present case. private respondent Teodora P. the sale is considered valid and binding. The Petitioner does not have a right of first refusal to assert against the private respondents. 2. Page 126 . 1966 and left a 5. However.On July 26. Petitioner prays for the nullity of the second sale. the sale between Teodora and the Tiu Uyping is valid. Petitioner filed a verified complaint against Teodora for the annulment of the Deed of Sale by her mother in her favor stating that they have preferential right over the land. Issues: Whether the CA erred in declaring the sale between Sofia and Teodora valid? Whether Petitioner has the right of first refusal to assert against the private respondent? Rulings: 1.J. Facts: . 162421 First Division Puno C. On 1989. the sale between her and her mother was void for being fictitious. After her death the rentals were paid to Teodora. In this case. brothers and co owners sold the property to Dr. Teodora never asserted her alleged right of ownership over the leased premises.Rufino Cabales died on July 4. Some evidence of simulation is the late notarization and Teodora’s signature not as an owner but merely as an instrumental witness. Trial court rendered decision in favor of the petitioner. Such grant of right of first refusal must be clearly embodied in a written contract. Nonetheless. Teodora Martinez had the right. Nelson Cabales and Rito Cabales v.

-On January 12.Alberto secured a note (“vale”) from Dr.e. Held: Petition denied.00. petitioners filed before the Regional Trial Court of Maasin. of the sale of subject property. CA decision affirmed with modification. Corrompido only released the document of sale with pacto de retro after Saturnina paid for the share of her deceased son.00 from respondent Jesus Feliano.143. P666. No amicable settlement was reached at pretrial.00. . . the surviving spouse has in the succession the same share as that of each of the children. Southern Leyte.000. Trial ensued and on August 11. . 17035 over the purchased land in the names of respondents-spouses. 1985. contending that they could not have sold their respective shares in subject property when they were minors. the trial court ruled against petitioners On appeal. within the eight-year redemption period.00. -in their answer. Saturnina and her four (4) children executed an affidavit to the effect that petitioner Nelson would only receive the amount of P176. and (2) not recognizing petitioner Rito Cabales as co-owner of subject land with similar right of legal redemption. But Dr. Francisco and Leonora sold the subject parcel of land to respondents-spouses Jesus and Anunciacion Feliano for P8.. In 1993.34 from respondents-spouses when he reaches the age of 21 considering that Saturnina paid Dr. 2000. Corrompido P966. Petitioner Rito and Alberto. Page 127 Petitioner Nelson.286. including his “vale” of P300. Saturnina and her four (4) children Bonifacio. Bonifacio and Albino tendered their payment of P666. petitioner Rito. -On December 30. CA modified tha decision of the trial court Issue: Whether CA erred in (1) recognizing petitioner Nelson Cabales as co-owner of subject land but denied him the right of legal redemption. respondents-spouses maintained that petitioners were estopped from claiming any right over subject property considering that (1) petitioner Rito had already received the amount corresponding to his share of the proceeds of the sale of subject property. On December 18. 1986. thus: It is hereby declared and understood that the amount of TWO THOUSAND TWO HUNDRED EIGHTY SIX PESOS (P2. On even date.” -Verily. Alberto died leaving his wife and son. he signified his intention to redeem the subject land during a barangay conciliation process that he initiated. the seven (7) heirs inherited equally on subject property. the Register of Deeds of Southern Leyte issued Original Certificate of Title No. he learned from his uncle. 24-year old petitioner Rito Cabales acknowledged receipt of the sum of P1. and (2) that petitioner Nelson failed to consign to the court the total amount of the redemption price necessary for legal redemption.On December 17. That same year.66 for the obligation of petitioner Nelson’s late father Alberto. 1985. his wife Saturnina and his six (6) children survived and succeeded him. a complaint for redemption of the subject land plus damages. 1975. Corrompido in the amount of P300.66 for his share in the redemption of the sale with pacto de retro as well as his “vale” of P300. Article 996 of the New Civil Code provides that “[i]f a widow or widower and legitimate children or descendants are left. went back to his father’s hometown in Southern Leyte. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 then residing in Manila. The Deed of Sale provided in its last paragraph.66 each to Dr. -In 1988.00. i. Ratio: -When Rufino Cabales died intestate. 1995. They prayed for the dismissal of the case on the grounds of laches and prescription. representing the former’s share in the proceeds of the sale of subject property.On July 24. petitioner Nelson. Saturnina died. Corrompido. Albino. In 1972.00) corresponding and belonging to the Heirs of Alberto Cabales and to Rito Cabales who are still minors upon the execution of this instrument are held in trust by the VENDEE and to be paid and delivered only to them upon reaching the age of 21. Alberto.

petitioner Nelson’s father, inherited in their own rights and with equal shares as the others. -But before partition of subject land was effected, Alberto died. By operation of law, his rights and obligations to one-seventh of subject land were transferred to his legal heirs – his wife and his son petitioner Nelson. -The first sale with pacto de retro to Dr. Corrompido by the brothers and co-owners Bonifacio, Albino and Alberto was valid but only as to their pro-indiviso shares to the land. When Alberto died prior to repurchasing his share, his rights and obligations were transferred to and assumed by his heirs, namely his wife and his son, petitioner Nelson. But the records show that it was Saturnina, Alberto’s mother, and not his heirs, who repurchased for him. As correctly ruled by the Court of Appeals, Saturnina was not subrogated to Alberto’s or his heirs’ rights to the property when she repurchased the share. -Upon redemption from Dr. Corrompido, the subject property was resold to respondentsspouses by the co-owners. Petitioners Rito and Nelson were then minors and as indicated in the Deed of Sale, their shares in the proceeds were held in trust by respondents-spouses to be paid and delivered to them upon reaching the age of majority. -the father, or, in his absence, the mother, is considered legal administrator of the property pertaining to the child under his or her parental authority without need of giving a bond in case the amount of the property of the child does not exceed two thousand pesos. Corollary to this, Rule 93, Section 7 of the Revised Rules of Court of 1964, applicable to this case, automatically designates the parent as legal guardian of the child without need of any judicial appointment in case the latter’s property does not exceed two thousand pesos Saturnina was clearly petitioner Rito’s legal guardian without necessity of court appointment considering that the amount of his property or one-seventh of subject property was P1,143.00, which is less than two thousand pesos. However, Rule 96, Sec. 1 provides that: Section 1. To what guardianship shall extend. – A guardian appointed shall have the care and custody of the person of his ward, and the management of his estate, or the management of the estate
Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010

only, as the case may be. The guardian of the estate of a nonresident shall have the management of all the estate of the ward within the Philippines, and no court other than that in which such guardian was appointed shall have jurisdiction over the guardianship Indeed, the legal guardian only has the plenary power of administration of the minor’s property. It does not include the power of alienation which needs judicial authority. Thus, when Saturnina, as legal guardian of petitioner Rito, sold the latter’s pro-indiviso share in subject land, she did not have the legal authority to do so. Accordingly, the contract of sale as to the proindiviso share of petitioner Rito was unenforceable. However, when he acknowledged receipt of the proceeds of the sale on July 24, 1986, petitioner Rito effectively ratified it. This act of ratification rendered the sale valid and binding as to him. With respect to petitioner Nelson, on the other hand, the contract of sale was void. He was a minor at the time of the sale. Saturnina or any and all the other co-owners were not his legal guardians with judicial authority to alienate or encumber his property. It was his mother who was his legal guardian and, if duly authorized by the courts, could validly sell his undivided share to the property. She did not. Necessarily, when Saturnina and the others sold the subject property in its entirety to respondents-spouses, they only sold and transferred title to their proindiviso shares and not that part which pertained to petitioner Nelson and his mother. Consequently, petitioner Nelson and his mother retained ownership over their undivided share of subject property. -As to whether the petitioners can redeem the land from respondent spouses, it is clear that legal redemption may only be exercised by the co-owner or co-owners who did not part with his or their pro-indiviso share in the property held in common. As demonstrated, the sale as to the undivided share of petitioner Rito became valid and binding upon his ratification on July 24, 1986. As a result, he lost his right to redeem subject property. -In the face of the established facts, petitioner

Page 128

Nelson cannot feign ignorance of the sale of subject property in 1978. To require strict proof of written notice of the sale would be to countenance an obvious false claim of lack of knowledge thereof, thus commending the letter of the law over its purpose, i.e., the notification of redemptioners.

G.R. No. 150060

August 19, 2003

PRIMARY STRUCTURES CORP. represented herein by its President ENGR. WILLIAM C. LIU, petitioner, vs. SPS. ANTHONY S. VALENCIA and SUSAN T. VALENCIA, respondents. 409 SCRA 371 Ponente: VITUG, J. (FIRST DIVISION)

Facts: Petitioner is a private corporation in
Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010

Page 129

Cebu City and the registered owner of Lot situated in Liloan, Cebu. Adjacent to the lot of petitioner are 3 parcels of land. The 3 lots have been sold by Hermogenes Mendoza to respondent spouses. Petitioner learned of the sale of the lots then it sent a letter to respondents signifying its intention to redeem the three lots. Petitioner sent another letter to respondents tendering payment of the price paid to Mendoza by respondents for the lots. Respondents, in response, informed petitioner that they had no intention of selling the parcels. Invoking the provisions of Articles 1621 and 1623, petitioner filed an action against respondents to compel the latter to allow the legal redemption. Petitioner claimed that neither Mendoza, the previous owner, nor respondents gave formal or even just a verbal notice of the sale of the lots as so required by Article 1623 of the Civil Code. Regional Trial Court of Cebu dismissed petitioner’s complaint and respondents' counterclaim. Both parties appealed the decision of the trial court to the Court of Appeals. The appellate court affirmed the assailed decision. Issue: Whether or not petitioner Primary Structures Corporation has the right of redemption over the three parcels of land. Ruling: Article 1621 of the Civil Code expresses that the right of redemption it grants to an adjoining owner of the property conveyed may be defeated if it can be shown that the buyer does not own any other rural land. The appellate court, sustaining the trial court, has said that there has been no evidence to show that respondents are not themselves owners of rural lands for the exclusionary clause of the law to apply. Article 1623 of the Civil Code provides that the right of legal pre-emption or redemption shall not be exercised except within thirty days from notice in writing by the prospective vendor, or by the vendor, as the case may be. In stressing the mandatory character of the requirement, the law states that the deed of sale shall not be recorded in the Registry of Property unless it is accompanied by an affidavit of the vendor that he has given notice to all possible redemptioners.
Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010

The Court of Appeals has equated the statement in the deed of sale to the effect that the vendors have complied with the provisions of Article 1623 of the Civil Code, as being the written affirmation under oath, as well as the evidence that the required written notice to petitioner under Article 1623 has been met. Respondents overlook the fact that petitioner is not a party to the deed of sale between respondents and Mendoza and has had no hand in the preparation and execution of the deed of sale. It could not thus be considered a binding equivalent of the obligatory written notice prescribed by the Code. The written notice of sale is mandatory. This Court has long established the rule that notwithstanding actual knowledge of a co-owner, the latter is still entitled to a written notice from the selling co-owner in order to remove all uncertainties about the sale, its terms and conditions, as well as its efficacy and status. WHEREFORE, the instant petition is GRANTED, and the assailed decision of the Court of Appeals is REVERSED and SET ASIDE. Petitioner is hereby given a period of thirty days from finality of this decision within which to exercise its right of legal redemption.

Ledonio v. Capitol Development Corporation Chico-Nazario, G.R. No. 149040 July 4, 2007

Facts: Edgar Ledonio obtained from Patrocinio S. Picache two loans with the amount of P60,000.00, and covered by promissory notes duly signed by him. Later on, Picache transferred his due

Page 130

to Capitol Development However. transfers that credit and its accessory rights to another who is the assignee. petitioner. REGALADO. He alleged that when he made the promissory notes. they were only used by Picache by taking advantage of his signature. No. J. He blamed the MRMC for not notifying him with the unpaid bills but he failed to obtain any of his claims. by a legal cause . defendant Security Bank and Trust Company issued 280 certificates of time deposit in favor of Angel dela Cruz who deposited of time deposit therein the aggregate Page 131 . Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 G. ISSUE: whether the assignment of debt by Picache. Ledonio failed to pay any of the loans covered by the promissory notes when they became due. to the same extent as the assignor could have enforced it against the debtor. He denied that he made such promissory notes in favor of Picache and he further alleged that he only signed the promissory notes as a result of intimidation and fraud.from Ledonio Corporation . the debtor is bound by it. requires his consent being the debtor. The RTC ruled in favor of the respondent corporation finding its version of the facts more credible.such as sale. Prior to the case. dation in payment or exchange or donation – and without need of the debtor’s consent. to another party such as the CDC. An assignment of credit has been defined as an agreement by virtue of which the owner of a credit known as the assignor. COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY. The Court of Appeals affirmed the same. INC. Even if the debtor had not been notified. respondents. This made foreign investors to desist transacting with him. 97753 August 10. 1992 CALTEX (PHILIPPINES). who acquires the power to enforce it. The law does not require any formal notice to bind the debtor to the assignee. The transaction between Picache and CDC was an assignment of credit and does not require petitioner’s consent as debtor for its validity and enforceability.R. vs. the creditor. RULING: Petition is denied for lack of merit. Ledonio was engaged in a garment business where he leased a real property from Mission Realty and Management Corporation. but came to know of the assignment by whatever means.: Facts: On various dates. The corporation demanded payment from him but refused to do so. An incident happened where a group of Meralco employees cut-off the power supply of the plant of Ledonio due to nonpayment of electric bills. all that the law requires is knowledge of the assignment..

dela Cruz negotiated and obtained a loan from defendant bank in the amount of Eight Hundred Seventy-Five Thousand Pesos (P875. among others. 1983. Thereafter.amount of P1. Sonny Lo. 2003 First Division Justice Ynares-Santiago Facts: Respondent KJS ECO_FORMWORK System Phil.000. the latter has definitely the better right over the CTDs in question. assignee or lien holder of the CTDs.80 from respondent and paid a downpayment of P150.. whether as purchaser. therefore.000. right or action shall produce no effect as against third persons. Plaintiff filed the instant complaint. Art. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Lo vs. The balance was Page 132 ..120.00 plus accrued interest and compounded interest therein at 16% per annum Issue: whether or not Caltex Philippines has a better right over the Certificate of time deposits? Held: Security Bank has a better right because the assignment of the CTDs made by Angel de la Cruz in favor of respondent bank was embodied in a public instrument. Angel dela Cruz delivered said certificate of time deposit to plaintiff-petitioner Caltex in connection with his purchase of fuel products from the latter. 425. Necessarily. The petitioner ordered scaffolding equipments worth P540. Respondent bank duly complied with this statutory requirement.00). the latter set-off and applied the time deposits in question to the payment of the matured loan. praying that defendant bank be ordered to pay it the aggregate value of the certificates of time deposit of P1.000. said depositor executed a notarized Deed of Assignment of Time Deposit which stated. 1625. Soon after said grants.00. Inc.120. as between petitioner and respondent bank. set-off and “apply the said time deposit to the payment of whatever amounts may be due” on the loan upon it maturity.000. An assignment of credit. the loan of Angel dela Cruz with the defendant bank matured and fell due and on August 5. or the instrument is recorded in the Registry of Property in case the assignment involves real property. petitioner. dela Cruz informed defendant Bank that he lost all the certificates of deposit and ask for the replacement of said last CTP where it was granted by the bank. KJS Eco-Formwork System Phil. unless it appears in a public instrument. that he surrendered to defendant bank “full control of the indicated time deposits from and after date” of the assignment and further authorizes said bank to preterminate. Contrarily. October 8. neither proved the amount of its credit or the extent of its lien nor the execution of any public instrument which could affect or bind private respondent. On the same date. Inc. is a corporation engaged in the sale of steel scaffoldings. on the other hand is a building contractor.

pp 186-188). petitioner vs. the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. respondents.14 is AFFIRMED with MODIFICATION. produced the effects of a dation in payment which may extinguish the obligation.. petitioner should be deemed to have ensured the performance thereof in case the same is later found to be inexistent. pp 186-188) An Assignment of Credit is an agreement by virtue of which the owner of a credit. and without the consent of the debtor . KJS Eco-Formwork System Phil. SANYU CHEMICAL CORPORATION. by a legal cause. Hence. is bound to warrant the existence and legality of the credit at the time of the sale or assignment.. as in any other contract of sale. the petitioner and respondent executed a Deed of Assignment whereby the petitioner assigned to respondent his receivables in the amount of P335. The respondent appealed the decision to the Court of Appeals and the said court reverses the appealed decision. which is in the nature of a sale of personal property. transfers his credit and accessory rights to another. such as sale. ARRIETA. 80078 May 18. No. it behooved on petitioner to make good its warranty and paid the obligation. KJS Eco-Formwork System Phil. respondent alleged the non-existence of the credit and asserted its claim to petitioner’s warranty under assignment. known as the assignee. He should be held liable to pay to respondent the amount of his indebtedness(Lo vs.. G. Despite the situation. Ratio: (Lo vs. Issue: Whether or not the Deed of Assignment that was executed extinguished the obligation of the petitioner. as a special mode of Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 payment. When Jomero claimed that it was no longer indebted to petitioner since the latter also had an unpaid obligation to it. COURT OF APPEALS. Ruling: The decision of the Court of Appeals ordering petitioner to pay the respondent the sum of P335. In other words. The respondent filed an action for recovery of a sum of money before the RTC of Makati. it may be well settled that the assignment of credit. Jomero Realty Corporation refused to honor the Deed of Assignment because it claimed that petitioner was also indebted to it. 462. When the respondent tried to collect the said credit from the corporation.made payable in ten monthly installments. dacion en pago. exchange or donation. Therefore. as vendor or assignor.R. known as the assignor. Indeed by warranting the existence of the credit. it essentially meant that its obligation to petitioner has been extinguished by compensation. NENITA B. 462. ATOK FINANCE CORPORATION. who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor. J. 1993 FELICIANO. the vendor is bound by certain warranties.80 from Jomero Realty Corporation.The trial court dismissed the complaint on the ground that the assignment of credit extinguished the obligation when they executed the Deed of Assignment. However. petitioner. ARRIETA.: FACTS: Private respondents Sanyu Chemical corporation ("Sanyu Chemical") as principal and Page 133 . Inc. PABLITO BERMUNDO and LEOPOLDO HALILI. From the provision of the civil code(Article 1628). DANILO E. The respondent delivered the equipments to petitioner but Sonny Lo was only able to pay the first two monthly installments because his business encountered financial difficulties. Inc.. In dacion en Pago.

the Arrieta spouses. the SC ruled that such legal proposition is not. 240. obligations and liabilities of Principal or any one or more of them. faithful and prompt payment and discharge of any and all indebtedness of private respondent to the Creditor Atok.00. Pablito Bermundo and Leopoldo Halili before the Regional Trial Court of Manila to collect the sum of P120. like most legal principles. Court of Appeals Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 reversed the decision of the trial court. to be read in an absolute and literal manner and carried to the limit of its logic. Thus. Atok Finance commenced action against Sanyu Chemical. The word "indebtedness" is used herein in its most comprehensive sense and includes any and all advances. The private respondents on the other hand seek for the dismissal of the complaint for lack of cause of action and contended that the Continuing Suretyship Agreement. any more that there would be in saying that obligations which are subject to a condition precedent are valid and binding before the occurrence of the condition precedent. with such surety agreement. It is also true that Article 2052 of the Civil Code states that "a guarantee cannot exist without a valid obligation. at the time of its execution.00. this petition. was null and void since. to Atok Finance in consideration of receipt from Atok Finance of the amount of P105. additional trade receivables were assigned by Sanyu Chemical to Atok Finance with a total face value of P100.Upon appeal. ISSUES: Whether the individual private respondents may be held solidarily liable with Sanyu Chemical under the provisions of the Continuing Suretyship Agreement? Whether or not the continuing suretyship agreement must be held null and void as having been executed without consideration and without a pre-existing principal obligation to sustain it. there would be no need to execute a separate surety contract or Page 134 . Atok Finance alleged that Sanyu Chemical had failed to collect and remit the amount due under the trade receivables. RULING: The Supreme Court granted the petition of Petitioner Atok Finance and sustains the decision of trial court finding in favor of petitioner Atok Finance. namely.03 for every peso due and payable for each month starting from 1 September 1983. executed in the continuing Suretyship Agreement in favor of Atok Finance as creditor. it appeared.Hence. ruling in favor of the private respondents. 871. This is clear from Article 2052 of the Civil Code itself. Sanyu Chemical had no pre-existing obligation due to Atok Finance. being an accessory contract. A surety is not bound under any particular principal obligation until that principal obligation is born. It is true that a serious guaranty or a suretyship agreement is an accessory contract in the sense that it is entered into for the purpose of securing the performance of another obligation which is denominated as the principal obligation.45. contesting that it ran counter to the provision that guaranty cannot exist independently because by nature it is merely an accessory contract." However. Under this Agreement. 378. that the standard commercial practice was to grant an extension up to one hundred twenty (120) days without penalties. Later. On 27 November 1981. 000. private respondent spouses Danilo E. Sanyu Chemical assigned its trade receivables outstanding as of 27 November 1981 with a total face value of P125. By executing such an agreement. however.Sanyu Trading Corporation ("Sanyu Trading") along with individual private stockholders of Sanyu Chemical. The SC held that Court of Appeals here was in serious error. The trial court rendered a decision in favor of Atok Finance. Halili and Pablico Bermundo as sureties. On 13 January 1984.00 plus penalty charges amounting to P0. the principal places itself in a position to enter into the projected series of transactions with its creditor. debts. But there is no theoretical or doctrinal difficulty inherent in saying that the suretyship agreement itself is valid and binding even before the principal obligation intended to be secured thereby is born. Sanyu Trading and the individual private respondents who were officers and stockholders of Sanyu Chemical did jointly and severally unconditionally guarantee to ATOK FINANCE CORPORATION the full. The contention of private appellants that the suretyship agreement is null and void because it is not in consonance with the laws on guaranty and security on the ground that the agreement was entered into by the parties two years before the Deed of Assignment was executed. The assigned receivables carried a standard term of thirty (30) days.

under the terms of the Deed of Assignment. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 135 . Pablito Bermundo and Leopoldo Halili). It is an activity or operation that permits the assignee to monetize or realize the value of the receivables before the maturity thereof. on the receivables thereby assigned. The liability of Sanyu Chemical to Atok Finance rest on the breach of ex contractu (contractual obligation). along with the principal debtor Sanyu Chemical.bond for each financing or credit accommodation extended to the principal debtor. became solidarily liable for that obligation of Sanyu Chemical. the effect of non-payment by the original trade debtors was breach of warranty of solvency by Sanyu Chemical. The Deed of Assignment was valid and binding upon Sanyu Chemical. Under the Deed of Assignment. Sanyu Chemical received from Atok Finance the value of its trade receivables it had assigned. SC held that private respondents are liable with respect to the deed they executed in favor of creditor Atok Finance. whether private respondents are liable under the Deed of Assignment which they. the assignor Sanyu Chemical becomes a solidary debtor under the terms of the receivables covered and transferred by virtue of the Deed of Assignment. that is. executed in favor of petitioner. In other words. With respect to the second issue. Sanyu Chemical obviously benefitted from the assignment. the other private respondents (the Arrieta spouses. And because assignor Sanyu Chemical became. solidary obligor under each of the assigned receivables. by virtue of the operation of the Continuing Suretyship Agreement. resulting in turn in the assumption of solidary liability by the assignor under the receivables assigned. In other words.