ARTICLES 1536 TO 1547

1544 double sales

if the same thing should have been sold to different vendees, the ownership shall be transferred to the
person who may have first taken the possession in good faith (movable)
if immovable, to the person, acquiring it, who in good faith first recorded it in RP
if no inscription, to the person who in good faith was first in possession;
if none, who has oldest title in good faith
-

Conditions and warranties

1545 (conditions not performed) refuse to proceed or waive performance; if theres promise
treat it as breach of warranty
ownership hasnt passed buyer treat the fulfillment of obli by seller to deliver as condition in
order for the buyer to perform his promise to pay/accept
express warranty affirmation of fact to the effect that the buyer is induced to purchase
implied warranty 1. Seller has right to sell
2. maintains the buyer the legal and peaceful possession
3. free from any hidden faults or defects

W of E: stipulation as to exemption from vendors obli to answer for eviction VOID

: vendee renounced, eviction takes place Vendor to pay the value of thing sold at the time of
eviction
: vendee waives, with knowledge of risk vendor NOT liable
Liability of seller:
1. to return value at time of eviction
2. income/fruits if vendee was ordered to deliver it to the prevailing party
3. costs of suit
4. expenses of the contract
5. damages and interests sale was in bad faith
PARTIAL EVICTION: vendee may demand rescission but with obli to return thing without encumbrances
OR enforce vendors liability for eviction
There has to be a judicial order/final judgment rendered before enforcement of W of E.
Warranty against non-apparent burden or serviture vendee may ask for rescission unless he preferred
appropriate indemnity. If such non-apparent burden is registered (unless theres express warranty) not
applicable
Within 1 yr from exec of deed may ask for rescission + damages
After lapse of 1 yr only action for damages within equal period counted from date on which he
discovered burden
W of HD:
- goods shall be reasonably fit
- goods shall be of merchantable quality (bought by description)
contract of sale by sample seller is dealer of goods W from any defects rendering them
unmerchantable
vendor is responsible for any HD in thing sold EVEN THOUGH HEs NOT AWARE not appicable if
theres stipulation to the contrary and vendor is not aware
R: Vendee may withdraw the contract + damages or demand reduction of price + damages

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LOST as result of HD vendor aware he shall bear the loss + return price+expenses+damages
- vendor NOT aware return price+ interest+ reimburse contract expenses
HD at time of sale LOST by fortuitous event / vendees fault Vendee may demand price he paid less
value which thing had when it was lost
6 MONTHS
OBLI of VENDEE
Buyer not bound to accept delivery in installments
Buyer not deemed to have accepted such if no oppportunity of examination
Buyer deemed to have accepted goods when he 1. Intimates to seller his acceptance; 2. does any act
inconsistent with ownership of seller; 3. Retains the goods without telling to seller he rejected such
Acceptance of goods shall not discharge seller from liability in damages/warranty
Buyer not bound to return the goods delivered to him, which he refused (having right to do so)
- no right to refuse title passes to him from moment of disposal
Buyer owers interest bet. Delivery and payment if 1. Stipulated; 2. Theres fruits and income; 3. In default
Buyer may suspend payment of price until vendor ceases the cause of disturbance
-mere act of trespass not authorize
IMMOVABLE: Buyer may still pay the vendor after expiration of period in agreement if theres no judicial
demand for rescission by the vendor
MOVABLE: Buyer must pay it outright unless otherwise provided, OTHERWISE, vendor may rescind
ACTIONS FOR BREACH OF CONTRACT
both may rescind the contract
breach of warranty by seller:
1. accept and set up against seller by way of recoupment in diminution or extinction of price
2. accept and maintain action for damages
3. refuse and maintain action for damages
4. rescind and refuse to receive or return and recover price
if buyer knew when he accepted the breach without protest or notification to seller or fails to return in
good condition, CANNOT rescind
EXTINGUISHMENT OF SALE
PAymentLOssREmissionMErgerCOmpensationNOvation
Conventional redemption when vendor reserves right to repurchase thing sold upon compliance to pay
contract expenses + necessary and useful expenses
PREIOD:
4 yrs no agreement
10 yrs- limit if theres one
30 days civil action on basis that such contract was a true sale with right to repurchase
Equitable mortgage
Priceisinadequate
Remainsinpossession
Extension
Purchaserretainspart
Bindstopaytaxes
Othercase- fairly inferred to secure payment
Incase of doubt
REAL prop there must be a judicial order before registration in RD
Vendor may bring his action against every possessor whose right is derived from vendee
Creditor of vendor cannot use right of redemption against buyer (unless exhausted)

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Legal redemption right to be subrogated upon same terms and conditions, stipulated in the contract, in
the place of one who acquires the thing by purchase or dation in payment, or by any other transaction
whereby ownership is transmitted by onerous title
- coowner
- rural: not exceed one hectare, adjoining land, unless grantee does not own any rural land; if two
or more = smaller, if equal = first requested
- urban land: small, situated that major portion cant be used for practical purpose within reasonable
time, bought merely for speculation; if 2 or more = intended use is best justified
pre-emption / LR 30 days from notice in writing by prospective VENDOR; deed of sale cant be
registered without affidavite stating that he has given notice to all possible redemptioners
co-owners prevail over adjoiners
CARBONELL VS CA
From Atty Busmentes discussion: What should be registered is the right to the property not deed of
sale per se.
CONTRACTS; PURCHASE AND SALE OF REALTY; REGISTRATION; EFFECT OF GOOD FAITH ON
DOUBLE SALES. The buyer of realty must act in good faith in registering his deed of sale to merit the
protection of the second paragraph of Article 1544 of the New Civil Code. Unlike the first and third
paragraphs of said Article which accords preference to the one who first takes possession in good faith
of personal or real property, the second paragraph directs that ownership of immovable property should
be recognized in favor of one "who in good faith recorded" his right. Under the first and third paragraphs,
good faith must characterize prior possession. Under the second paragraph, good faith must characterize
the act of anterior registration. If there is no inscription, what is decisive is prior possession in good faith. If
there is inscription, prior registration in good faith is a pre-condition to support title.
DOUBLE SALE; FIRST BUYER IN GOOD FAITH WITH SUPERIOR RIGHT OVER PROPERTY.
Where the first buyer was not aware - and could not have been aware - of any sale to another person as
there was no such sale, the buyer's prior purchase of the land was made in good faith. Her good faith
subsisted and continued to exist when she recorded her adverse claim four days prior to the registration
of the second buyer's deed of sale. The first buyer's good faith did not cease after the seller told her of his
second sale of the same lot to the second buyer. By reason thereof, she has superior right to the land in
question.
A private document is a valid contract of sale between the parties, since sale is a consensual contract and
is perfected by mere consent.
Quick Case Recap: Double sales. Sale #1 Poncio to Carbonnel private memorandum of sale. Sale
#2: 4 days later, Poncio to Infante - private memorandum bound himself to sell, thereafter executed a
formal registrable deed of sale. When Carbonell asked for formal signature of Poncio on Deed of Sale,
Poncio declined as he already formalized contract of sale with Infante. Carbonell did next best thing to
protect her legal rights and registered with RD her adverse claim as first buyer entitled to property, before
Infante registered the sale. Plus 2nd buyer here showed to be in bad faith.
DAGUPAN TRADING COMPANY VS MACAM
G.R. No. L-18497. May 31, 1965
ONE SALE BEFORE REGISTRATION OF LAND AND THE OTHER AN EXECUTION SALE AFTER
REGISTRATION OF LAND; LAW GOVERNING. Where one of two conflicting sales of a piece of land
was executed before the land was registered, while the other was an execution sale in favor of the
judgment creditor of the owner made after the same property had been registered, what should determine
the issue are the provisions of the last paragraph of Section 35, Rule 39 of the Rules of Court to the

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effect that, upon the execution and delivery of the final certificate of sale in favor of the purchaser of land
sold in an execution sale, such purchaser "shall be substituted to and acquire all the rights, title, interest
and claim of the judgment debtor to the property as of the time of the levy".
UNREGISTERED SALE CANNOT BE DEFEATED BY SUBSEQUENT EXECUTION SALE AND
REGISTRATION OF LATTER. Where for a considerable time prior to the levy on execution the interest
of the owner of the land levied upon had already been conveyed to another who took possession thereof
and introduced improvements therein, the aforesaid levy is void. The prior sale, albeit unregistered,
cannot be deemed automatically cancelled upon the subsequent issuance of the Torrens title over the
land.
Quick Case Recap: Sale #1 - Sammy Maron to appellee-defendant Macam pending application for
registration, Maron acquired OCT after free from lien. Sale #2 Interest of Maron on property was levied
by final judgment, sold at public auction and cert of sale awarded to the judgment debtor, Manila Trading
and Supply Co. who later sold it to appellant-petitioner Dagupan Trading Co.
DAVID VS BANDIN
GR L-48322, April 8, 1987
SALES; UNREGISTERED LAND; DEFENSE OF BUYER IN GOOD FAITH CANNOT BE AVAILED IN
PURCHASES OF UNREGISTERED LAND; CASE AT BAR. As the record shows, petitioners bought
the property when it was still unregistered land. The defense of having purchased the property in good
faith may be availed of only where registered land is involved and the buyer had relied in good faith
on the clear title of the registered owner. One who purchases an unregistered land does so at his peril.
His claim of having bought the land in good faith, i.e. without notice that some other person has a right to,
or interest in, the property, would not protect him if it turns out that the seller does not actually own the
property. This is what happened in the case at bar.
CONVERSELY, PROTECTION ACCORDED TO PURCHASES IN GOOD FAITH WHERE SUBJECT OF
SALE IS REGISTERED LAND; NOT THE SITUATION AT BAR. The appellate court held that Jose
Ramirez and his father Sotero Ramirez were not purchasers in good faith, not having made diligent
investigation of the true ownership of the properties they bought, but relied merely on the tax declaration
shown to them by the seller, Rufino Miranda. We have no reason to disturb the foregoing findings of the
respondent appellate court. Besides, as mentioned earlier, the issue of good faith or bad faith of the
buyer is relevant only where the subject of the sale is registered land and the purchaser is buying
the same from the registered owner, whose title to the land is clean. In such case, the purchaser
who relies on the clean title of the registered owner is protected if he is a purchaser in good faith for
value. However, this is not the situation before us in the instant case. What petitioners bought were
unregistered lands.
REGISTERED LAND; PURCHASER IN GOOD FAITH FOR VALUE PROTECTED BY THE LAW;
ABSENT ANY SHOWING OF ACTUAL NOTICE OF DEFECT IN TITLE, SALE AND TITLE CANNOT BE
CANCELLED; CASE AT BAR. The case of Magno de la Cruz stands on different footing from the other
petitions. The property purchased by him from Victoria Martin and Maximina Martin were registered
lands, covered by Torrens title. Being a purchaser in good faith for value, Magno de la Cruz is
protected by the law. In the absence of a showing that he had actual notice of the defect in the title
of the vendors or that he is a buyer in bad faith, the deed of sale in his favor and the corresponding
certificate of title issued in his name cannot be nullified and cancelled. Hence, it was error for the
respondent court to invalidate the sale made by Victoria and Maximina Martin in favor of Magno de la
Cruz to the extent that it prejudiced the two-third (2/3) pro-indiviso share of respondents in the property
and to order petitioner to reconvey said share to respondents. The petition of Magno de la Cruz is
meritorious, and the decision appealed from should be modified accordingly.
OLIVARES VS GONZALES

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G.R. No. L-34500. March 18, 1988

REMEDIAL LAW; CIVIL PROCEDURE; BAR BY PRIOR JUDGMENT; NOT APPLIED IN THE INTEREST
OF SUBSTANTIAL JUSTICE. It would be more in keeping with substantial justice if the controversy
between the parties be resolved on the merits rather than on a procedural technicality in the light of the
express mandate of the Rules that they be "liberally construed in order to promote their object and to
assist the parties in obtaining just, speedy and inexpensive determination of every action and
proceeding." In this case, the dismissal of the Quieting of Title Case for failure to prosecute does not bar
the institution of a subsequent suit by the same plaintiffs against the same defendants on the same cause
of action.
Quick Case Recap:: Sale #1 1955 Tuvillas to Tumabini, sale not recorded in Registry of Property. Sale
#2 1959 Tuvillas to Olivareses, saled recorded in Registry of Property and Olivareses has been in
possession since 1959. 1967 Tumabini filed Consolidation Case where Olivareses where not included as
parties and acquired favourable judgment. A Writ of Execution, property sold at public auction, and Writ of
Possession issued in his favor. 1968 Olivareses filed Quieting of Title, which RTC dismissed in 1970.
CARAM VS LAURETA
G.R. No. L-28740. February 24, 1981
In the instant case, Irespe and Aportadera had knowledge of circumstances which ought to have put them
on inquiry. The rule of caveat emptor requires the purchaser to be aware of the supposed title of the
vendor and one who buys without checking the vendor's title takes all the risks and losses consequent to
such failure.
The principle that a person dealing with the owner of the registered land is not bound to go behind the
certificate and inquire into transactions the existence of which is not there intimated should not apply in
this case. It was of common knowledge that at the time the soldiers of Laureta took the documents from
Mata, the civil government of Tagum was not yet established and that there were no officials to ratify
contracts of sale and make them registrable. Obviously, Aportadera and Irespe knew that even if Mata
previously had sold the disputed property such sale could not have been registered.
There is no doubt then that Irespe and Aportadera, acting as agents of Caram, purchased the property of
Mata in bad faith. Applying the principle of agency, Caram, as principal, should also be deemed to have
acted in bad faith.
CRUZ VS CABANA
G.R. No. 56232. June 22, 1984
KNOWLEDGE OF PRIOR SALE TAINTS SECOND PURCHASER'S PRIOR REGISTRATION WITH BAD
FAITH; CASE AT BAR. When petitioner Cruz succeeded in registering the later sale in his favor, he
knew and was informed of the prior sale in favor of respondents-spouses. Respondents appellate court
correctly held that such "knowledge of a prior transfer of a registered property by a subsequent
purchasers makes him a purchaser in bad faith and his knowledge of such transfer vitiates his title
acquired by virtue of the latter instruments of conveyance with creates no right as against the first
purchaser."
SALES; DOUBLE SALE OF REAL PROPERTY; OWNERSHIP OF PROPERTY ACQUIRED BY VENDEE
WHO FIRST REGISTERS SALE IN GOOD FAITH. The governing principle here is prius tempore, potior
jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat
the first buyer's right except only as provided by the Civil Code and that is where the second buyer first
registers in good faith the second sale ahead of the first. Such knowledge of the first buyer does not bar
her from availing of her rights under the law, among them to register first her purchase as against the
second buyer.

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IN THIS CASE But in converso knowledge gained by the second buyer of the first sale defeats his rights
even if he is first to register the second sale, since such knowledge taints his prior registration with bad
faith. This is the price exacted by Article 1544 of the Civil Code of the second buyer being able to displace
the first buyer; that before the second buyer can obtain priority over the first, he must show that he acted
in good faith throughout (i.e. in ignorance of the first sale and of the first buyer's rights) from the time of
acquisition until the title is transferred to him by registration or failing registration, by delivery of
possession. 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."
ARTICLES 1545 TO 1570
MOLES vs IAC (2nd hand item)

IMPLIED WARRANTY:
o there is no implied warranty in the sale of secondhand articles (as to the condition,
adaptation, fitness, or suitability for the purpose for which made, or the quality, of an
article sold)
o HOWEVER, in case at bar, there was a certification by the seller that the linotype
machine bought is in A1 condition (considered as an express warranty), making him
bound by such execution.
HIDDEN DEFECTS:
o hidden defects in the machine is sufficient to warrant a rescission of the contract between
the parties
o 1561: A redhibitory defect must be an imperfection or defect of such nature as to
engender a certain degree of importance.
PRESCRIPTION:
o 1571: six months prescriptive period only applies in cases of implied warranties
o The present case involves one with an express warranty. Consequently, the general rule
on rescission of contract, which is four years shall apply. Considering that the original
case for rescission was filed only one year after the delivery of the subject machine, the
same is well within the prescriptive period.

ENGINEERING AND MACHINERY CORP vs CA

PRESCRIPTION:
o it would appear that this suit is barred by prescription because the complaint was filed
more than four years after the execution of the contract and the completion of the airconditioning system; HOWEVER, the original action is not really for enforcement of the
warranties against hidden defects, but one for breach of the contract itself - Art. 1715 will
apply. Since this provision does not contain a specific prescriptive period, the general law
on prescription, which is Article 1144 of the Civil Code, will apply 10 years.
PIECE OF WORK
o the contract is one for a piece of work - contractor binds himself to execute a piece of
work for the employer, in consideration of a certain price or compensation. The contractor
may either employ only his labor or skill, or also furnish the material; NOT A SALE
It is not petitioners line of business to manufacture air-conditioning systems to be
sold off-the-shelf. Its business and particular field of expertise is the fabrication
and installation of such systems as ordered by customers and in accordance with
the particular plans and specifications provided by the customers.
HIDDEN DEFECTS

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o remedy against violations of the warranty against hidden defects is either to withdraw
from the contract (redhibitory action) or to demand a proportionate reduction of the
price(accion quanti minoris), with damages in either case.[
CATUNGAL vs. RODRIGUEZ (Right of Way Acquisition)

failure to comply with the condition imposed merely on the performance of an obligation merely
gives the other party the option to either refuse to proceed with the sale or to waive the condition Art. 1545.
From the provisions of the Conditional Deed of Sale subject matter of this case, it was the vendee
(Rodriguez) that had the obligation to successfully negotiate and secure the road right of way.
However, in the decision of the trial court, which was affirmed by the Court of Appeals, it was
found that respondent Rodriguez diligently exerted efforts to secure the road right of way but the
spouses Catungal, in bad faith, contributed to the collapse of the negotiations for said road right
of way.
Rodriguezs option to rescind the contract is not purely potestative but rather also subject to the
same mixed condition as his obligation to pay the balance of the purchase price i.e., the
negotiation of a road right of way. In the event the condition is fulfilled (or the negotiation is
successful), Rodriguez must pay the balance of the purchase price. In the event the condition is
not fulfilled (or the negotiation fails), Rodriguez has the choice either (a) to not proceed with the
sale and demand return of his downpayment or (b) considering that the condition was imposed
for his benefit, to waive the condition and still pay the purchase price despite the lack of road
access.

J.M. TUASON vs CA

WARRANTY AGAINST EVICTION

o private respondents were lacking in good faith for knowing beforehand, at the time of the
sale, the presence of an obstacle to their taking over the possession of the land, which, in
effect, would amount to eviction from said land, and still they bought the land without first
removing that obstacle.
o One who purchases real estate with knowledge of a defect or lack of title in his vendor
cannot claim that he has acquired title thereto in good faith, as against the true owner of
the land or of an interest therein; and the same rule must be applied to one who has
knowledge of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of
his vendor. A purchaser cannot close his eyes to facts which should put a
reasonable man upon his guard and then claim that he acted in good faith under
the belief that there was no defect in the title of the vendor
o Without being shown to be vendees in good faith, herein respondents are not entitled to
the warranty against eviction nor are they On titled to recover damages (Article 1555 of
the Civil Code).
ARTICLES 1600 TO 1618

RAMOS vs CA (1602)

The purported deed of sale con pacto de retro are equitable mortgages; the two deeds were
executed by reason of the loan and that the purchase price stated was the amount of load itself.

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The true intention of the parties being that the transaction shall secure the payment of the debt, it
shall be presumed to be an equitable mortgage; existence of one circumstance is enough to
create the presumption
Sales with a right to repurchase are not favored. Whenever it is clearly shown that a deed of sale
with pacto de retro, regular on its face, is given as security for a loan, it must be regarded as an
equitable mortgage.

DE LEON vs SALVADOR (REDEMPTION PRICE)

While in ordinary sales for reasons of equity, a transaction may be invalidated on the ground of
inadequacy of price, or when such inadequacy shocks one conscience as to justify the courts to
interfere, such does not follow when the law gives to the owner the right to redeem.
In auction sale, THE LESSER THE VALUE (REDEMPTION PRICE), MORE ADVANTAGEOUS
TO THE REDEMPTIONER
When there is a right to redeem, inadequacy of price should not be material, because the
judgment debtor may reacquire the property or also sell his right to redeem and thus recover the
loss he claims to have suffered by reason of the price obtained at the auction sale.

FLORES V. SO, 162 SCRA 117

It is provided in Article 1509 thereof that if the vendor does not comply with the provisions of Article 1518,
(i.e. to return the price, plus expenses) the vendee shall acquire irrevocably the ownership of the thing
sold. Under the old Civil Code, the ownership was consolidated in the vendee a retro by operation of law.
Accordingly, upon the failure of Valentin Gallano, as the vendor a retro, to redeem the property subject of
the pacto de retro sale within the period agreed upon, the vendee a retro, Alfonso Flores, became the
absolute owner of the subject property.
ALONZO V. IAC, 150 SCRA 259
We are not abandoning the De Conejero and Buttle doctrines. What we are doing simply is adopting an
exception to the general rule, in view of the peculiar circumstances of this case. The co-heirs in this case
were undeniably informed of the sales although no notice in writing was given them. And there is no doubt
either that the 30-day period began and ended during the 14 years between the sales in question and the
filing of the complaint for redemption in 1977, without the co-heirs exercising their right of redemption.
These are the justifications for this exception.
LAO V. CA, 275 SCRA 237
In determining the nature of a contract, the Court looks at the intent of the parties and not the
nomenclature used to describe it. Pivotal to deciding this issue is the true aim and purpose of the
contracting parties as shown by the terminology used in the covenant, as well as "by their conduct, words,
actions and deeds prior to, during and immediately after executing the agreement."
EQUITABLE MORTGAGE, WHEN PRESUMED. The law enumerates when a contract may be
presumed to be an equitable mortgage: "(1) When theprice of a sale with right to repurchase is unusually
inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after
the expiration of the right to repurchase another instrument extending the period of redemption or granting
a new period is executed; (4) When the purchaser retains for himself a part of the purchase price; (5)
When the vendor binds himself to pay the taxes on the thing sold; (6) In any other case where it may be
fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt
or the performance of any other obligation. . ." The foregoing presumption applies also to a "contract
purporting to be an absolute sale."
CASE AT BAR. Applying the preceding principles to the factual milieu of this case, we find the
agreement between the private respondent and N. Domingo Realty & Housing Corporation, as
represented by petitioner,manifestly one of equitable mortgage. First , possession of the property

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remained with Petitioner Manuel Lao who was the beneficial owner of the property, before, during and
after the alleged sale. Second, the option given to Manuel Lao to purchase the property in controversy
had been extended twice through documents executed by Mr. Tan Bun Uy, President and Chairman of the
Board of Better Homes Realty & Housing Corporation. The wording of the first extension is a refreshing
revelation that indeed the parties really intended to be bound by a loan with mortgage, not by a pacto de
retro. Third, unquestionably, Manuel Lao, and his brother were in such "dire need of money" that they
mortgaged their townhouse units registered under the name of N. Domingo Realty Corporation, the family
corporation put up by their parents, to Private Respondent Better Homes Realty & Housing Corporation.
In retrospect, it is easy to blame Petitioner Manuel Lao for not demanding a reformation of the contract to
reflect the true intent of the parties. But this seeming inaction is sufficiently explained by the Lao brothers'
desperate need for money, compelling them to sign the document purporting to be a sale after they were
told that the same was just for "formality." Based on the conduct of the petitioner and private respondent
and even the terminology of the second option to purchase, we rule that the intent and agreement
between them was undoubtedly one of equitable mortgage and not of sale. IN CASE OF AMBIGUITY, A
CONTRACT IS DEEMED TO BE ONE WHICH INVOLVES A LESSER TRANSMISSION OF RIGHTS
AND INTEREST.
LANUZA V. DE LEON, 20 SCRA 269
Between an unrecorded sale of a prior date and a recorded mortgage of a later date, the former is
preferred to the latter for the reason that if the original owner had parted with his ownership of thing sold
then he no longer had the ownership and free disposal of that thing so as to be able to mortgage it again.
Registration of the mortgage under Act No. 3344 would, in such case, be of no moment since it is
understood to be without prejudice to the better right of third parties. Nor would it avail the mortgagee for
the execution of the conveyance in a public instrument earlier was equivalent to the delivery of the thing
sold to the vendee. (Civil Code, Article 1948)
The stipulation in deed denominated by the parties as a "Deed of Sale With Right to Repurchase" to
the effect that if the vendor fails to pay the amount agreed upon within the stipulated period, his right to
repurchase the property shall be forfeited and the ownership over the same would automatically pass to
the vendee without need of court intervention, is contrary to the nature of a true pacto de retro sale, under
which a vendee acquires ownership of the thing sold immediately upon execution of the sale, subject only
to the vendor's right of redemption. Indeed, the stipulation which enables the mortgagee to acquire
ownership of the mortgaged property without need of foreclosure proceedings establishes a pactum
commissorium , and, being contrary to the provisions of Article 2080 of the Civil Code, is a nullity. Its
insertion in the contract is an avowal of an intention to mortgage rather than to sell.
Between the unrecorded deed of Reyes and Navarro which we hold to be an equitable mortgage, and
the registered mortgage of De Leon, the latter must be preferred. Preference of mortgage credits is
determined by the priority of registration of the mortgages, following the maxim "Prior tempore potior jure".
CAPULONG V. CA, 130 SCRA 245
Where any of the circumstances defined in Article 1602 of the Civil Code is present, a contract of sale
with right to repurchase is presumed to be an equitable mortgage. In practically all of the so-called
contracts of sale with right of repurchase, the real intention of the parties is that the pretended purchase
price is money loaned and in order to secure the payment of the loan, a contract purporting to be a sale
with pacts de retro is drawn up.
In the case at bar, the records show that over a six month period, the mother of petitioners borrowed
money on no less than ten separate occasions from Delfin G. Tolentino. The evidence presented by Mrs.
Jovita Ponce Vda. de Capulong alleged that her total borrowing of P13,000.00 were added to what she
claims were serious interests amounting to P3,250.00, the kited total of P16,250.00 was made to appear
as P21,300.00 purchase price for the lot when actually no money outside of the ten earlier loan
transactions was exchanged between the parties. The added fact that Jovita Capulong remained in actual
possession of the land and enjoyed the fruits thereof confirms the real intention of the parties to secure
payment of the loans with the land as security. The records show that the private respondents waited for
the period of redemption to expire before taking possession of the land. Had the petitioner's mother really
executed anabsolute sale in favor of respondent Delfin Tolentino the land which is the subject of the
transaction should have been delivered to Tolentino and he would assume immediate possession after

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the execution of the questioned deed of sale.The deed of sale taken together with the companion "right to
redeem" contract is only an equitable mortgage.
SOLID HOMES INC V. CA, G.R. NO. 117501, 8 JULY 1997
In a contract of sale with pacto de retro, the vendee has a right to the immediate possession of the
property sold, unless otherwise agreed upon. It is basic that in pacto de retro sale, the title and ownership
of the property sold are immediately vested in the vendee a retro, subject only to the resolutory condition
of repurchase by the vendor a retro within the stipulated period.
Petitioner is right in its observation that the Court of Appeals' inclusion of registration fees, real estate
and documentary stamp taxes and other incidental expenses incurred by State Financing in the transfer
and registration of its ownership (of the subject properties) via dacion en pago was vague, if not
erroneous, considering that such transfer and issuance of the new titles were null and void. Thus, the
redemption price shall include only those expenses relating to the registration of the dacion en pago, but
not the registration and other expenses incurred in the issuance of new certificates of title in the name of
State Financing.
PRIMARY STRUCTURES CORP V. VALENCIA, G.R. NO. 150060, 19 AUG 2003
Whenever a piece of rural land not exceeding one hectare is alienated, the law grants to the adjoining
owners a right of redemption except when the grantee or buyer does not own any other rural land. In
order that the right may arise, the land sought to be redeemed and the adjacent property belonging to the
person exercising the right of redemption must both be rural lands. If one or both are urban lands, the
right cannot be invoked. Here, the one or both are urban lands, the right cannot be invoked. Here, the trial
court found the lots involved to be rural lands and respondents did not dispute it before the Court of
Appeals.
Article 1621 of the Civil Code expresses that the right of redemption it grants to an adjoining owner of
the property conveyed may be defeated if it can be shown that the buyer or grantee does not own any
other rural land. The appellate court, sustaining the trial court, has said that there has been no evidence
proffered to show that respondents are not themselves owners of rural lands for the exclusionary clause
of the law to apply.
Article 1623 of the Civil Code provides that the right of legal pre-emption or redemption shall not be
exercised except within thirty days from notice in writing by the prospective vendor, or by the vendor, as
the case may be. In stressing the mandatory character of the requirement, the law states that the deed of
sale shall not be recorded in the Registry of Property unless the same is accompanied by an affidavit of
the vendor that he has given notice thereof to all possible redemptioners. The 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, like the appellate
court, 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.
LEASE CASES
GUZMAN, BOCALING & CO. vs BONNEVIE
G.R. No. 86150. March 2, 1992
*Right of First Priority
SALE; PURCHASER IN GOOD FAITH AND FOR VALUE; CONSTRUED IN CASE AT BAR. A purchaser
in good faith and for value is one who buys the property of another without notice that some other person
has a right to or interest in such property and pays a full and fair price for the same at the time of such
purchase or before he has notice of the claim or interest of some other person in the property. Good faith
connotes an honest intention to abstain from taking unconscientious advantage of another.

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IN THIS CASE Petitioner cannot tenably claim to be a buyer in good faith as it had notice of the
lease of the property by the Bonnevies and such knowledge should have cautioned it to look deeper into
the agreement to determine if it involved stipulations that would prejudice its own interests. The petitioner
insists that it was not aware of the right of first priority granted by the Contract of Lease. Assuming this to
be true, we nevertheless agree with the observation of the respondent court that: If Guzman-Bocaling
failed to inquire about the terms of the Lease Contract, which includes Par. 20 on priority right given to the
Bonnevies, it had only itself to blame. Having known that the property it was buying was under lease, it
behooved has a prudent person to have required Reynoso or the broker to show to it the Contract of
Lease in which Par. 20 is contained.
Quick Case Recap:: 2 buildings on parcel of land of land owned intestate by Reynoso, leased to
Bonnevie brothers with Par 20 of agreement specifying right of first priority given to lessee Bonnevie
should lessor Reynoso decide to sell all things and consideration being equal. Reynoso offered to sell to
them through a letter the subject property for 600k in cash less mortgage loan of 100k, they failed to
exercise right of first priority (they later rebutted they didnt receive the notification letters). Reynoso
offered same property to petitioner GBC for 137.5k in cash with balance 262.5k to be paid when premises
are vacated. Leased premises were formally sold to petitioner. (Hence, there was NO IDENTITY OF THE
TERMS AND CONDITIONS OFFERED to the Bonnevies and other prospective buyers.)
Even if the Bonnevies could not buy it at the price quoted, Reynoso could not sell it to another for a lower
price and under more favorable terms and conditions. Only if the Bonnevies failed to exercise their right of
first priority could Reynoso lawfully sell the subject property to others, and at that only under the same
terms and conditions offered to the Bonnevies.

YEK SENG CO. VS CA

G.R. No. 87415. January 23, 1992
RULE WHEN RENTAL WAS PAID MONTHLY AND THE TERM HAD NOT BEEN EXPRESSLY AGREED
UPON; CASE AT BAR. We hold that as the rental in the case at bar was paid monthly and the term
had not been expressly agreed upon, the lease was understood under Article 1687 to be terminable from
month to month. At the time the petitioner was asked to vacate the leased premises, the lease contract
had already expired and therefore, could no longer be extended.
GENERAL RULE: POWER OF THE COURT TO EXTEND THEREOF; MERELY A MINISTERIAL DUTY. If
the contract of lease had not yet expired, its extension would still be subject to the sound discretion of the
court and was by no means obligatory upon it as a merely ministerial duty.
LAW; SPECIAL CONTRACTS; LEASE; EXTENSION OF THE LEASE CONTRACT; MATTERS TO BE
CONSIDERED IN ALLOWING THEREOF; DIVINO v. MARCOS (4 SCRA 186) CITED. In extending the
lease contract it was considered important in the case of Divino v. Marcos (4 SCRA 186) that: 1) the
plaintiff had been occupying the leased premises for more than twenty years; 2) he was assured by the
defendants that he could remain in the house as long as he continued paying the rentals; and 3) he made
improvements on the house costing P20,000.00 with the consent of the defendants.
IN THIS CASE The petitioner in the case at bar has not pointed to similar circumstances other than the
claim that it has been occupying the subject premises for more than twenty years.

UNITED REALTY CORP vs CA

lease agreement is for a definite period, per the stipulation that the agreement would be
terminated when either party gives a notice in five (5) days in writing. Since the lease agreement

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in question is for a definite period it follows that petitioner has a right to judicially eject private
respondent from the premises as an exception to the general rule provided for in Section 4 of P.D.
No. 20 which provides as follows:
o Except when the lease is for a definite period, the provisions of paragraph (1) of Article
1673 of the Civil Code of the Philippines insofar as they refer to dwelling unit or land on
which another's dwelling is located shall be suspended until otherwise provided; but other
provisions of the Civil Code and the Rules of Court of the Philippines on lease contracts
insofar as they are not in conflict with the provisions of this Act, shall apply.
Moreover, under Section of 5(f) of B.P. Blg. 25 one of the grounds for ejectment is the expiration
of the period of a written lease contract. In this case, because of the failure of the private
respondent to pay the increased rental demanded by petitioner, petitioner elected to terminate the
contract and asked the private respondent to vacate the premises. A lease contract may be
terminated at the end of any month, which shall be deemed terminated upon the refusal to pay
the increased monthly rental demanded by the petitioner, provided the same is not exorbitant.

LEGAR MANAGEMENT & REALTY CORPORATION VS CA

Lease; Actions; Ejectment; Rent Control Law; The lessee of a residential property covered by the Rent
Control Law can be ejected on the basis alone of the expiration of the verbal lease contract.The issue is
whether the lessee of a residential property covered by the Rent Control Law can be ejected on the basis
alone of the expiration of the verbal lease contract under which rentals are paid monthly. We resolved this
issue in the affirmative in the case of Acab vs. Court of Appeals, G.R. No. 112285, February 21, 1995, 241
SCRA 546. We held: Section 6 of Batas Pambansa Blg. 877, which is exactly the same as Section 6 of
Batas Pambansa Blg. 25, provides that: x x x. In a long line of cases, x x x beginning with Rivera vs.
Florendo, 143 SCRA 278 (1986), this Court has held that said provision does not suspend the effects of
Article 1687 of the New Civil Code x x x. Thus, we have held that lease agreements with no specified
period, but in which rentals are paid monthly, are considered to be on a month-to-month basis. x x x They
are for a definite period and expire after the last day of any given thirty-day period, upon proper demand
and notice by the lessor to vacate. x x x In the case at bench, it was found by all three lower courts that
the lease over the subject property was on a month-to-month basis, and that there was proper notice of
non-renewal of contract and

DOCTRINES IN SALES & LEASE

I.
1)

Ramos vs. CA

2)

EXTINGUISHMENT OF SALES

The true intention of the parties being that the transaction shall secure the payment of the
debt, it shall be presumed to be an equitable mortgage. The existence of one circumstance
under Art. 1602 is enough to create the presumption. Parol evidence shall be considered in
determining the true intention of the parties.

De leon vs. Salvador

While in ordinary sales for reasons of equity a transaction may be invalidated on the ground
of inadequacy of price, or when such inadequacy shocks ones conscience as to justify the
courts to interfere, such does not follow when the law gives to the owner the right to
redeem, as when a sale is made at public auction, upon the theory that the lesser the price,
the easier it is for the owner to effect the redemption. And so it was aptly said that when
there is the right to redeem, inadequacy of price should not be material, because the

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judgment debtor may reacquire the property or also sell his right to redeem and thus
recover the loss he claims to have suffered by reason of the price obtained at the auction
sale.
3)

4)

Flores vs. So

Under the Old Civil Code, ownership is consolidated by operation of law. A right of
ownership vested way back from the time the Old Civil Code was still in effect cannot be
defeated by the application of Articles 1606 and 1607 of the New Civil Code.

In a pacto de retro sale, ownership over a thing sold is transferred to the vendee upon
execution of the contract subject only to the resolutory condition that the vendee exercise
his right of repurchase within the period agree upon.

Alonzo vs. IAC

5)

6)

Lao vs. CA

A person who is in dire need of money may be compelled to sign a document purporting to
be a sale but in fact a mortgage. Such presumption arises from a statement in a deed of
sale with the right to repurchase that the vendor borrowed from the vendee the money used
in buying the property from the original owner. (de Leon book)

In determining the nature of the contract whether it is a pacto de retro sale or an equitable
mortgage, the Court looks at the intent of the parties and not at the nomenclature used to
describe it. Hence, parol evidence becomes admissible to prove the intent and agreement
of the parties.

Lanuza vs. de leon

7)

Where co-heirs filed action for redemption of co-heirs sold share only after 13 years had
elapsed from the sale, they are deemed to have been actually informed thereof sometime
during those years although no written notice of sale was given to them. From the day the
first complaint for redemption was filed, it shall be deemed that the co-heirs were actually
informed of the sale and that thereafter the 30-day period started running.

The stipulation in pacto de retro sale that the ownership over the property sold would
automatically pass to the vendee in case no redemption was effected within the stipulated
period, is contrary to the nature of a true pacto de retro sale under which the vendee
acquires ownership of the thing sold immediately upon the execution of the sale, subject
only the vendors right of redemption. The said stipulation is pactum commissorium which
enables the mortgagee to acquire ownership of the mortgaged property without foreclosure.
It is void. (de Leon book)

Capulong vs. CA

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8)

9)

The deed of sale and deed of option to purchase the property are in reality an equitable
mortgage, as they were signed on the same day. A subsequent sale of the property to a
vendee-a-retro and its registration on the same day indicate said sale is not a pacto de
retro sale.

The existence of equitable mortgage can be shown by the fact that a series of loan were
obtained by a vendor from a vendee.

Solid Homes Inc vs. CA

In a contract of sale with pacto de retro, the vendee has a right to the immediate
possession of the property sold, unless otherwise agreed upon. It is basic that in a pacto de
retro sale, the title and ownership of the property sold are immediately vested in the vendee
a retro,, subject only to the resolutory condition of repurchase by the vendor a retro within
the stipulated period.

The Court ruled that Article 1616 of the Civil Code is not restrictive or exclusive, barring
additional amounts that the parties may agree upon. Said provision should be construed
together with Article 1601 of the same code requiring the vendor to comply with the
provisions of Article 1616 and other stipulations agreed upon by the parties.

Lee Chuy Realty Corp vs. CA

Bona fide tender of the redemption price, within the prescribed period is only essential to
preserve the right of redemption for future enforcement beyond such period of redemption
and within the period prescribed for the action by the statute of limitations. Where the right
to redeem is exercised through judicial action within the reglementary period, the offer to
redeem, accompanied by a bona fide tender of the redemption price, while proper, may be
unessential.
II.

10)

LEASE

Guzman Bocaling vs. Bonnevie

A lease with a proviso granting the lessee the right of first priority all things and conditions
being equal meant that there should be identity of the terms and conditions to be offered to
the lessee and all other prospective buyers, with the lessee to enjoy the right of first
priority. A deed of sale executed in favor of a third party who cannot be deemed a
purchaser in good faith, and which is in violation of a right of first refusal granted to the
lessee is not voidable under the Statute of Frauds but rescissible under Articles 1380 to
1381 (3) of the New Civil Code.

Contract of Sale was not voidable but rescissible. Under Article 1380 to 1381 (3) of the
Civil Code, a contract otherwise valid may nonetheless be subsequently rescinded by
reason of injury to third persons, like creditors. The status of creditors could be validly
accorded the Bonnevies for they had substantial interest that were prejudiced by the sale of
the property to the petitioner without recognizing their right of first priority under the

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Contract of Lease. According to Tolentino, rescission is a remedy granted by law to the

contracting parties and even to third persons, to secure reparations for damages caused to
them by a contract, even if this should be valid, by means of the restoration of things to
their condition at the moment prior to the celebration of said contract.
11)

12)

13)

Yek Seng Co vs. CA

The circumstance that the lessee has paid its rentals religiously during the past twenty (20)
years is also not sufficient to justify the extension that it demands. Neither are the
substantial improvements it allegedly made on the leased premises nor the difficulty of
finding another place of business, on which it has not submitted any evidence at all.

If the rental was paid monthly and term had not been expressly agreed upon, the lease was
understood under Art.1687 to be terminable from month to month.

Sps. Clutario vs. CA

Acceptance in rentals in arrears does not constitute waiver of default in payment of rentals.

Non-payment of rentals is a ground for judicial ejectment under CC and BP22.

Yap vs. Cruz

14)

15)

In the absence of notice or demand to vacate, the lease of a lessee continues to be in force
and cannot be deemed to have expired as of the end of the month automatically.

United Realty Corp. vs. CA

The lease agreement in question being for a definite period, the lessors right to judicially
eject the lessee is an exception to the general provided for in Sec. 4 of PD No. 20 (Except
when the lease is for a definite period, the provisions of par.1 of Art.1673 of CC insofar as
they refer to dwelling unit or land on which anothers dwelling is located shall be suspended
until otherwise provided; but other provisions of the CC and Rules of Court on lease
contracts insofar as they are not in conflict with the provisions of this Act, shall apply)

One of the grounds for ejectment under Sec.5 of BP25 is the expiration of the period of a
written lease contract.

The lease agreement does not fall within the protective mantle of the provisions of PD20
and BP25 which covers only dwelling units.

Lease on a month to month basis expires after the last day of the 30 th day period.

Legar Mgt & Realty Corp. vs. CA

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The lessee of a residential property covered by the Rent Control Law can be ejected on the
basis alone of the expiration of the verbal lease contract.

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