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TITLE Adelfa Properties, Inc. vs.

CA, Rosario JimenezCastaneda & Salud Jimenez January 25, 1995 #1

FACTS Private respondents, along w/ their brothers Jose & Dominador, were the registered owners of a parcel of land. Jose & Dominador sold their share consisting of ½ of the land, specifically the eastern portion thereof, to petitioner. Subsequently, an extrajudicial partition was executed among the siblings and the eastern portion was adjudicated to Jose & Dominador, while the western portion went to the private respondents. Thereafter, petitioner expressed interest in buying the western portion of the land from private respondents and an exclusive option to purchase was executed between them. The agreement provided that a downpayment given by petitioner would be “credited as partial payment” upon the consummation of the sale. But in one part of the agreement, the payment was denominated as “option money”. Before petitioner could make final payment, it received summons filed by the nephews & nieces of private respondents against Jose & Dominador, & petitioner, for annulment of the deed of sale of the eastern portion in favor of a 3rd party. As a consequence of this, petitioner informed private respondents that it would hold payment of the full of the purchase price and suggested that the latter settle the case 1st w/ their nephews & nieces. Respondents refused to heed this suggestion by petitioner and attributed the suspension of payment of the purchase price to “lack of word of honor”. Petitioner then caused to be annotated on the title of the lot its option contract w/ respondents, and its contract of sale w/ Jose & Dominador. The respondents cancelled the transaction w/ petitioners & then subsequently, they executed a conditional sale of the western portion in favor of Emylene Chua. Respondents also tried to return a part of the option money as agreed upon. Private respondents filed a case for annulment of contract against petitioner. TC held that the agreement entered into by the parties was merely an option contract, & that the suspension of payment by petitioner constituted a counter-offer, w/c therefore was tantamount to a rejection of the option. It likewise ruled that petitioner could not validly suspend payment in favor of private respondents on the ground that the action filed by the latter’s kin did not involve the western portion of the land but the eastern portion thereof, w/c was not the one subject of the transaction between petitioner & respondents. The TC

ISSUE What was the contract entered into between the parties, a K to sell, an option K, or a K of sale? WON there was a valid suspension of payment of the purchase price by petitioner & the legal consequences thereof.

HELD It was a K to sell. Not a K of sale because: 1. There was no intention to transfer ownership to petitioner except upon full payment of the purchase price. There was an absence of a stipulation that petitioner was obliged to return possession or ownership of the property as a consequence of non-payment, w/c just means that there was no transfer to begin with. In effect, there was an implied agreement that ownership shall not pass to the purchaser until he has fully paid the price. Hence, it was not a K of sale. 2. The deed of absolute sale would have been issued only upon the payment of the balance of the purchase price. 3. It has not been shown that there was delivery of the property, actual or constructive, made to petitioner. Although after the reconstitution of the respondents’ title, it remained in the possession of petitioner’s counsel, still, this is not equivalent to a constructive delivery since there was really no intention on respondents’ part to deliver. • Not a K to sell because: 1. The fact that the document was entitled exclusive option to purchase is not controlling where the text thereof shows that it is a K to sell. The title of a K does not necessarily determine its true nature. 2. It is not an option K because such kind is not really a K but a mere “unaccepted offer”. In this case, there was already a concurrence of petitioner’s offer to buy and private respondents’ acceptance thereof. 3. The alleged “option money” was actually earnest money w/c was intended to form part of the purchase price. It was not distinct from the cause or consideration for the sale of the property, but was itself a part thereof. • Art. 1478 of the CC does not require that a stipulation that ownership will not pass to the buyer until full payment of the price be expressly made. An implied stipulation to that effect is valid and binding between the parties. A contract w/c contains this kind of stipulation is a K to sell. • • • YES, the petitioner was justified in suspending payment of the balance of the purchase price by reason of the vindicatory action filed against it. Although in the vindicatory action only the eastern portion of the land was included, the plaintiffs therein (nephews & nieces) were claiming to be co-owners of the entire parcel of land and not only of a portion thereof, nor did their claim pertain exclusively to the eastern half adjudicated to Jose & Dominador. So in effect, the western part, subject of the transaction between the parties in this case, was also included in the vindicatory action. • Under Art. 1590, the vendee is not justified in suspending payment if the vendor gives security for the return of the price in a proper case.

Quiroz, Ramos & Ramos Law Firm 2004-2005


and even assuming that it was.g. • Furthermore. mere tender of payment. legal redemption. August 18. would indemnify Maritime for whatever labor claims it would pay to Luzon Brokerage. a tender alone is not a mode of extinguishing obligations. 1592 of the CC w/c requires rescission either by judicial action or by notarial act is not applicable to a K to sell (because there’s no K of sale yet w/c could be rescinded). not against Myers Co. However. Inc. • NO. in spite of the refusal to the request. unless followed by consignation. Maritime still went on and suspended payments to Myers Co. fraud or malice. 1234 of the CC w/c states that an obligation substantially performed in good faith is equivalent to payment. It also provided that upon default of the vendee. basing its act on the agreement that FH Myers is indebted to it. The claim was against the person of FH Myers. and not merely negligence. The K provided that title to the properties remains w/ the vendor and shall be passed to the vendee only upon full payment of the purchase price.1504 of the CC applicable in this case? WON Maritime’s failure to pay constitutes a mere casual breach. Luzon Brokerage Co. vs. Could their compliance (in the form of offering to deposit in trust the missing amounts) be considered as substantial performance that is equivalent to payment? Was Art. must be unconditional. In such cases. • Art.H. however. Inc. is sufficient to preserve the exercise of the right or privilege. in this case. 2. Maritime Building Co. • However. Maritime bought a building from Myers Company. & Myers Bldg Co. it was already barred because no contingent claim was filed before the closure of the estate proceedings of FH Myers’ estate after he died. the mere assurance made by respondents that petitioner did not have to worry about the case because it was pure & simple harassment is not the kind of guaranty contemplated under the exceptive clause in the article above. Myers sold the Luzon Brokerage to Maritime. judicial action for rescission of a K is not necessary where the K provides for automatic rescission in case of breach. • The mere sending of a letter by the vendee expressing the intention to pay. a/ an agreement that F. sale w/ right to repurchase). Art. it was tainted w/ dolo. wherein the vendee is still bound to make payment even w/ the existence of a vindicatory action. w/o consignation. then. Thereafter. The fact that the contract to sell had been validly rescinded by private respondents. 2.H. is not considered a valid tender of payment. • Since the non-payment was intentional and deliberate (even if it was based on something w/c was later on proven to be not a true claim) designed to force Myers Co to grant the moratorium originally solicited and rejected. There must also have been a consignation of the money tendered because there was an obligation to pay. the deed of conditional sale would automatically and w/o any further formality. But. w/o the accompanying payment. • • NO. • Moreover. Inc. the vendor. However. become null & void. CA affirmed in toto.• then directed the cancellation of the exclusive option to purchase & declared the sale to Chua valid. Ramos & Ramos Law Firm 2004-2005 2 . 1972 #9 • • • • F. to be valid. WON Maritime was justified in suspending its payments to Myers Co. option K. is not applicable in Maritime’s case since it was not in good faith. • The rule is different. The claim was not proven to be real. It was turned down. Petitioner’s failure to duly effect the consignation of the purchase price after the disturbance had ceased. A tender. petitioner cannot anymore compel respondents to sell the property to it for 2 reasons: 1. and even then. Maritime requested a suspension of payments from Myers Company. due to its lack of money in the meantime. in contracts wherein there is no obligation to pay yet (e. it was not justified for the ff reasons: 1. Quiroz.

Article 1504 requiring demand by suit or notarial act in case the vendor wants to rescind does not apply to a K to sell or a promise to sell. UP also obtained an order for preliminary injunction restraining ALUMCO from continuing its logging operations in the land grant. where title remains w/ the vendor until fulfillment of a positive suspensive condition. It was stipulated in the K that “should petitioner violate. but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. 1970 #10 • • • • • • WON the payment to and the acceptance of the PHHC of the P1. Inc. However. refuse or fail to comply w/ the terms & conditions of the K. it was valid because UP & ALUMCO had expressly stipulated that upon default by the latter. the act of a party in treating a K as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional. instead of the rescinder. The deposit was made only after a judgment was rendered against the petitioner to pay PHHC certain sums of money. Clara to refrain from exercising logging rights. or default in the payment of 3 monthly installments. UP then filed a complaint against ALUMCO for the collection of the unpaid balance the latter owes it. such as full payment of the price. where ownership is retained by the seller and is not to pass until the full payment of the price.000 revived the K. so UP informed ALUMCO that it had rescinded the logging agreement between them. The petitioner defaulted in his payments.1177. the failure of w/c is not a breach. • • Torralba vs. before the issuance of the preliminary injunction. PHHC notified it in writing of the cancellation of the conditional K to sell but gave petitioner 30 days w/in w/c to revive the K by paying in cash all installments due. where non-payment is a resolutory condition. PHHC entered into a conditional K to sell a parcel of land w/ petitioner Torralba. In the meantime. the deposit was apparently made in partial satisfaction of the judgment. It was not made in compliance w/ the requirements for the revival of the K. 2nd declared UP in contempt of court & directing Sta. in accordance w/ art. UP has “the right and the power to consider the Logging Agreement as rescinded w/o the necessity of any judicial suit”. WON PHHC should have resorted to a judicial decree rescinding the K to sell before awarding the lot to Florencia San Juan. the contract expressly provided that the K shall be deemed annulled and cancelled & the PHHC shall be at liberty to dispose the same to any other person upon default of the petitioner. • Hence. When there’s an express stipulation. having been made after the rendition of the judgment. UP & ALUMCO entered into a logging agreement under w/c the latter was granted exclusive authority to cut. TC then issued orders. Further. there was no K to rescind in court because from the Quiroz. De los Angeles September 29. w/c is not the case. • • • UP vs. When can rescission be made extrajudicially? 1. such payment is a positive suspensive condition. YES. NO. WON UP’s unilateral rescission of the logging K was valid. • • • • A land grant was segregated from the public domain and given as endowment to UP. in the same manner as if the K has never been made”. In K to sell. In reciprocal K under art. To argue that it was a breach is to proceed from the assumption that the K is one of absolute sale. ALUMCO defaulted in payment of royalties & other fees to UP twice. 1980 #12 • • • NO. 1191. as a result. a resolution of reciprocal or synallagmatic K may be made extrajudicially unless successfully impugned in court. UP awarded the concession to Sta. NO. being ever subject to scrutiny and review by the proper court. De los Angeles February 14. even w/o court intervention. casual or serious. It is not always necessary for the injured party to resort to court for rescission of the K. OR 2. and more than 90 days after the cancellation of the K. There is nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the K would cause cancellation thereof. it did not revive the K. 1st enjoining UP from awarding the concession to any other party. Clara Lumber Co. collect and remove timber from the land grant in consideration of payment to UP of royalties.• • NO. The practical effect of such kind of a stipulation is that it transfers to the defaulter the initiative of instituting suit. Ramos & Ramos Law Firm 2004-2005 3 . the K shall be deemed annulled and cancelled & the PHHC shall be at liberty to dispose the property to any person. In fact. even w/o express provision conferring the power of cancellation upon one contracting party.

Whether the palay that Almeda was entitled to was all that would be harvested from the palay planted in June 1957. under a pacto de retro sale. Sec. Hamada May 31. Quiroz. the purchaser not being entitle to its possession. w/c payment was accepted by said official. The TC then granted PHHC’s motion for the issuance of an order of demolition against the petitioner. w/c Daluro appropriated only to themselves. It was stipulated that the parties would share 5050 in the harvest of the palay planted in June 1957. 1957. it is only then that the purchaser is entitled to receive its rents or the reasonable value of its use & occupation. 1960. In such a case.• • Reyes vs. a second harvest of the same planted palay was realized. He is entitled to all that would be harvested from the palay that was planted on June 1957. Then. Ramos & Ramos Law Firm 2004-2005 4 . certain real properties of the spouses Hamada were sold at public auction on February 11. 1961 (the last day of redemption). At 10pm of February 10. Whether the pendency of the 1st case (for declaration of ownership) precluded the institution of another action for the recovery of rentals receivable from the same properties. on the ground that Reyes was the one entitled to such rentals paid during & after the period of redemption. the first case is a bar to the second case. 30 of Rule 39: If during the period of redemption the judgment-debtor is in possession of the property sold. Because the right to the rentals during the period of redemption and thereafter is necessarily included in the issue of the timeliness and adequacy of the redemption made or exercised by the mortgagors. to possession of the same. a parcel of land. do not belong to the latter but still pertain to the debtor or mortgagor. 1977 #5 • • Daluro sold to Almeda. refused to recognize the validity of such redemption. Subsequently. Before the expiration of the 1-year period w/in w/c the judgment debtor or mortgagor may redeem the property. the purchaser is accountable for the amount thus received to the judgment-debtor when he effects the redemption. During the pendency of the case. However. as a matter of right. the BOD of PHHC adopted a resolution awarding the disputed parcel of land to respondent Florencia San Juan. • • YES. Daluro October 5. although they may be collected by the purchaser during the redemption period. As a result of an extrajudicial foreclosure proceeding. & thereafter the PHHC executed a deed of sale in her favor. moment petitioner defaulted in the timely payment of the installments. Daluro redeemed the property from Almeda wherein the parties also agreed upon the manner in w/c they will share in the harvest of the standing palay crop. it would go to the purchaser (Reyes). after this. PHHC again notified petitioner in writing of the definite annulment & cancellation of the K. not giving Almeda a share in it. he is entitled to retain it and to receive its fruits. w/c was divided equally between the parties. Thereafter. 1957. the K between the parties were deemed ipso facto rescinded. The phrase “sometime in September 1957” was not meant to limit the right of the plaintiffs to participate in the harvest of the crop planted in June. TC upheld the cancellation and ordered petitioner to pay PHHC the amounts it still owes. petitioner deposited an amount of P1. Reyes filed a complaint for the recovery of the rentals paid by the tenants to the defendants Hamada. 1965 #4 • Petitioner failed to make payment.000 w/ the PHHC. only that w/c will be harvested on September 1957. however. Afterwards. or. the purchaser thereof is not entitled. otherwise. Reyes. If the redemption was valid. It applies only when the parties have not provided for their sharing arrangement w/ respect to the fruits existing at the time of redemption. Article 1617 of the CC is not applicable. harvest of w/c will take place sometime in September. • • • • • Almeda vs. then the rentals would pertain to the mortgagors (Hamada). Reyes then filed a case for declaration of ownership & right to possession of the said properties by reason of his purchase thereof at the auction sale. and awarded to Arsenio Reyes as the highest bidder. the payment of the redemption amount and the consequent return to him of his properties sold at public auction. the mortgagors delivered to the sheriff checks covering the redemption amount. The rational is to secure for the benefit of the debtor or mortgagor. BUT if the property is in the possession of a tenant. There was an initial harvest of the palay in September 30. The rentals receivable from tenants.

Aurelio gave the vendor. the agreement would be considered for all legal purposes a deed of absolute and definite sale. Olimpia then commenced suit for recovery of ownership & possession of the subject land against Aurelio & Isauro. Ramos & Ramos Law Firm 2004-2005 5 . applies only in a K w/ a debtor-creditor relationship. On February 1962 (about 2 yrs after the deadline of May 1960) Olimpia desired to purchase the land. • Further. Conventional redemption takes place when the vendor reserves the right to repurchase the thing sold. What was the nature of the transaction between Olimpia & Aurelio. Aurelio then caused the annotation of a notice of lis pendens in the title. with the obligation to comply w/ the provisions of Aft. As stated in Adelfa Properties vs. Aurelio again approached Maximino for the same purpose of obtaining the CT. Quiroz. the option to repurchase the property at anytime after May 1958 but not later that May 1960. don’t construe this to mean that consignation is required in order to preserve the exercise of the right to redeem. in the document embodying their transaction. Olimpia was not a debtor but a vendor. This agreement was registered in the office of the RD.• • • • Vda. In fact. and declared Isauro the lawful & absolute owner of the lot in question. 1616 and other stipulations w/c may have been agreed upon. De Zulueta vs. was not registered. Olimpia did not accept the offer alleging that she had no money at that time to buy back the land. however. CA. 4 mos later. However. The option was given by Aurelio and not reserved by Olimpia. an absolute sale or a sale w/ right to repurchase? Could Olimpia validly repurchase the property? • • It was an absolute sale. (However. • The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument. only around 2 years after the stipulated period of redemption. the latter refused to deliver the CT to Aurelio for the reason that it was deposited w/ the PNB. there was no reservation made by the vendor. it was not made in the instrument itself but was made in a separate document. Octaviano March 28. Olimpia. • Neither can the K be a “pactum commissorium” for such a K. 1983 #6 • • • • Petitioner Olimpia was the registered owner of a Riceland w/c was sold to Respondent Aurelio. This document. TC ruled in favor of Olimpia. 2. It was also agreed that upon the redemption of the land. • In a K of sale w/ right to repurchase. • NO. w/c the latter again refused unless Aurelio would pay him the “pagare” receipts representing additional sums that Olimpia borrowed from Maximino. Once the instrument of absolute sale is executed. for the ff. As has been stated. w/c is void. the redemptioner who may offer to make the repurchase on the option date of redemption should deposit the full amount in court… To effectively exercise the right to repurchase. the vendor can no longer reserve the right to repurchase. On a separate document. It also declared Isauro’s CT null & void. To avoid further trouble. and any right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like an option to buy. reasons: Olimpia exercised the right of redemption. but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. assuming there was such a right. • In this case. and ordered the brothers to execute the sale of the property in Olimpia’s favor. Aurelio offered Olimpia the option to repurchase the property. Isauro refused to allow repurchase of it. Olimpia even suggested to Aurelio that he better sell the land to anybody and simply disregard the option to purchase. However. the vendor a retro must make an actual and simultaneous tender of payment or consignation. Neither did Olimpia make a judicial consignation of the repurchase price w/in the agreed period. Isauro. Aurelio sold the property to his brother. w/c amounts were not included in the obligation of Olimpia assumed by Aurelio. only tender of payment is required in order to preserve this right. CA reversed and ruled that the transaction between Olimpia & Aurelio was an absolute sale. Olimpia. It was agreed that Aurelio would pay to a certain Maximino Gumayan an amount representing the redemption price of the Riceland that was first sold to Maximino under a pacto de retro sale. Aurelio paid the amounts agreed upon to Maximino. • Neither is the K one of equitable mortgage for there was nothing in the document from w/c it could be inferred that the property was being utilized as security for a debt. Relying on this.) 1.