(8) G.R. No.

211175
ATTY. REYES G. GEROMO, FLORENCIO BUENTIPO, JR., ERNALDO YAMBOT and LYDIA BUSTAMANTE, vs.
LA PAZ HOUSING AND DEVELOPMENT CORPORATION and GOVERNMENT SERVICE INSURANCE SYSTEM,

FACTS: Petitioners acquired individual housing units from La Paz thru GSIS financing. After 2 years of occupations, cracks started to
appear on the floor and walls of their houses. The petitioners requested La Paz, being the owner/developer, to take remedial action.
They collectively decided to construct a riprap/retaining wall along the old creek believing that water could be seeping underneath the
soil and weakening the foundation of their houses. La Paz decided to give the petitioners ₱3,000 each for expenses incurred in the
construction of the said riprap/retaining wall. The petitioners claimed that despite the retaining wall, the condition of their housing units
worsened as the years passed. When they asked La Paz to shoulder the repairs, it denied their request. The petitioners decided to
leave their housing units. Geromo filed a complaint for breach of contract with damages against La Paz and GSIS before the
HLURB. They all asserted that La Paz was liable for implied warranty against hidden defects and that it was negligent in building their
houses on unstable land.

ISSUE: Is La Paz liable for the defects? YES.

RULING: Under the Civil Code, the vendor shall be answerable for warranty against hidden defects on the thing sold under the
following circumstances:
Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render
it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been
aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for
patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of this trade
or profession, should have known them.

For the implied warranty against hidden defects to be applicable, the following conditions must be met:
a. Defect is Important or Serious
b. Defect is Hidden
c. Defect Exists at the time of the sale
d. Buyer gives Notice of the defect to the seller within reasonable time

Here, the petitioners observed big cracks on the walls and floors of their dwellings within two years from the time they purchased the
units. The damage in their respective houses was substantial and serious. They reported the condition of their houses to La Paz, but
the latter did not present a concrete plan of action to remedy their predicament. The structural cracks and water seepage were evident
indications that the soil underneath the said structures could be unstable. Verily, the condition of the soil would not be in the checklist
that a potential buyer would normally inquire about from the developer considering that it is the latter's prime obligation to ensure
suitability and stability of the ground.

The petitioners were justified in abandoning their dwellings as they were living therein under unsafe conditions. With the houses
uncared for, it was no surprise that, by the time the case was filed in 2004, they were in a worse condition.

Considering the nature of the damage sustained by the structures La Paz is still liable under the doctrine of res ipsa loquitur. The
concept of res ipsa loquitur has been explained in this wise:

While negligence is not ordinarily inferred or presumed, and while the mere happening of an accident or injury will not generally give
rise to an inference or presumption that it was due to negligence on defendants part, under the doctrine of res ipsa loquitur, which
means, literally, the thing or transaction speaks for itself, or in one jurisdiction, that the thing or instrumentality speaks for itself, the
facts or circumstances accompanying an injury may be such as to raise a presumption, or at least permit an inference of negligence
on the part of the defendant, or some other person who is charged with negligence.

In this case, the subdivision plan/layout was prepared and approved by La Paz. The actual excavation, filling and levelling of the
subdivision grounds were exclusively done under its supervision and control. There being no contributory fault on the part of the
petitioner, there can be no other conclusion except that it was the fault of La Paz for not properly compacting the soil, which used to
be an old creek.

GSIS not liable

There is no legal basis to juridically bind GSIS because it was never a party in the contracts between La Paz and the petitioners. The
housing loan agreements that the petitioners entered into with GSIS were separate and distinct from the purchase contracts they
executed with La Paz. GSIS merely agreed to pay the purchase price of the housing unit that each petitioner purchased from La Paz.
It was merely the lender, not the developer.

(9) G.R. No. 179965 February 20, 2013

NICOLAS P. DIEGO, vs.RODOLFO P. DIEGO and EDUARDO P. DIEGO

An agreement which stipulates that the seller shall execute a deed of sale only upon or after payment of the purchase price is
a contract to sell, not a contract of sale. "[w]here the vendor promises to execute a deed of absolute sale upon the completion
by the vendee of the payment of the price, the contract is only a contract to sell. The aforecited stipulation shows that the
vendors reserved title to the subject property until full payment of the purchase price."
FACTS: Petitioner and Rspondent entered into an oral contract to sell covering Nicolas share. It was agreed that the deed of
sale shall be executed upon payment of the remaining balance of ₱250,000.00. However, Rodolfo failed to pay the remaining balance.
The building was leased out to third parties, but Nicolas’s share in the rents were not remitted to him. Despite demands and
protestations by Nicolas, Rodolfo and Eduardo failed to render an accounting and remit his share in the rents and fruits of the building,
and Eduardo continued to hand them over to Rodolfo. Nicolas filed a Complaint against Rodolfo and Eduardo that Eduardo be ordered
to render an accounting of all the transactions over the Diego Building; that Eduardo and Rodolfo be ordered to deliver to Nicolas his
share in the rents; and that Eduardo and Rodolfo be held solidarily liable for attorney’s fees and litigation expenses.
ISSUE:

RULING:
The contract entered into by Nicolas and Rodolfo was a contract to sell.
a) The stipulation to execute a deed of sale upon full payment of the purchase price is a unique and distinguishing
characteristic of a contract to sell. It also shows that the vendor reserved title to the property until full payment.
b) The acknowledgement receipt signed by Nicolas as well as the contemporaneous acts of the parties show that they agreed
on a contract to sell, not of sale. The absence of a formal deed of conveyance is indicative of a contract to sell.
In the instant case, records show that Nicolas signed a mere receipt24 acknowledging partial payment of ₱250,000.00 from Rodolfo.

In the instant case, the parties were similarly embroiled in an impasse. The parties’ agreement was likewise embodied only in a receipt.
Also, Nicolas did not want to sign the deed of sale unless he is fully paid. On the other hand, Rodolfo did not want to pay unless a
deed of sale is duly executed in his favor.

In fine, "the need to execute a deed of absolute sale upon completion of payment of the price generally indicates that it is a
contract to sell, as it implies the reservation of title in the vendor until the vendee has completed the payment of the
price."36 In addition, "[a] stipulation reserving ownership in the vendor until full payment of the price is x x x typical in a contract to
sell."37 Thus, contrary to the pronouncements of the trial and appellate courts, the parties to this case only entered into a contract to
sell; as such title cannot legally pass to Rodolfo until he makes full payment of the agreed purchase price.
c) Nicolas did not surrender or deliver title or possession to Rodolfo.

It must be stressed that it is anathema in a contract to sell that the prospective seller should deliver title to the property to the
prospective buyer pending the latter’s payment of the price in full. It certainly is absurd to assume that in the absence of stipulation, a
buyer under a contract to sell is granted ownership of the property even when he has not paid the seller in full. ‘In other words, the full
payment of the purchase price partakes of a suspensive condition, the nonfulfillment of which prevents the obligation to sell from
arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer.’ It does not, by
itself, transfer ownership to the buyer.

The contract to sell is terminated or cancelled

The remedy of rescission is not available in contracts to sell.

In a contract to sell, the payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not
a mere breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory
force.

In a contract of sale, where non-payment of the price is a negative resolutory condition. The effects in law are not identical. In a
contract of sale, the vendor has lost ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set
aside. In a contract to sell, however, the vendor remains the owner.

When the petitioners in the instant case repossessed the disputed house and lot for failure of private respondents to pay the purchase
price in full, they were merely enforcing the contract and not rescinding it.

Here, Rodolfo failed to fully pay the purchase price, the contract to sell was deemed terminated or cancelled
The non-fulfillment of the condition prevents the obligation to sell from arising and ownership is retained by the seller
without further remedies by the buyer.
Without respondent’s full payment, there can be no breach of contract to speak of because petitioner has no obligation yet
to turn over the title.
Otherwise stated, Rodolfo has no right to compel Nicolas to transfer ownership to him because he failed to pay in full the purchase
price. Correlatively, Nicolas has no obligation to transfer his ownership over his share in the Diego Building to Rodolfo

Eduardo is solidarily liable with Rodolfo as regards the share of Nicolas in the rents.
Eduardo must be held solidarily liable with Rodolfo for all that Nicolas should be entitled to from 1993 up to the present,
(10) G.R. No. 109696 August 14, 1995
THELMA P. OLEA vs. COURT OF APPEALS, ELENA VDA. DE PACARDO, JESUS PALENCIA, ELIZABETH PALENCIA AND
MONSERRAT PACIENTE

Facts: spouses Filoteo Pacardo and Severa de Pacardo executed a deed of Sale Con Pacto de Retro in favor of Maura Palabrica,
predecessor in interest of petitioner. The contract of sale with right to repurchase was acknowledged by the vendors before Notary
Public Victorio Tagamolila on the same day the contract was executed in the Municipality of Passi, Province of Iloilo. The vendors
also delivered to the vendee their owner's copy of the title.

After the execution of the sale, the Pacardo spouses as vendors remained in possession of the land and continued the cultivation
thereof. For a period of about 40 years, the spouses delivered annually one-third (1/3) of the produce of the land to Maura Palabrica
and kept for themselves the remaining two-thirds (2/3).

Despite the lapse of three (3) years, the Pacardo spouses did not repurchase the land but faithfully continued to give 1/3 of the produce
to Maura Palabrica. Maura Palabrica caused the registration of the Sale Con Pacto de Retro with the Register of Deeds of Iloilo and
its annotation. Maura Palabrica sold Lot No. 767 for P40,000.00 to one of her daughters, petitioner Thelma Olea. Petitioner filed a
complaint against Elena Pacardo and the spouses Jesus and Elizabeth Palencia for recovery of possession with damages.

Issue:

Ruling: Art. 1602 of the New Civil Code provides that the contract of sale with right to repurchase shall be presumed to be an
equitable mortgage in any of the following cases:
(a) when the price of the sale is unusually inadequate;
(b) when the vendor remains in possession as lessee or otherwise;
(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;
(d) when the purchaser retains for himself a part of the purchase price;
(e) when the vendor binds himself to pay the taxes on the thing sold; and,
(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.

Being remedial in nature, Art. 1602 may be applied retroactively to cases prior to the effectivity of the New Civil Code 3 Hence it may
apply to the instant case where the deed of sale with right to repurchase was executed on 27 January 1947.

It has been held that a contract should be construed as a mortgage or a loan instead of a pacto de retro sale when its terms are
ambiguous or the circumstances surrounding its execution or its performance are incompatible or inconsistent with the theory that it
is a sale.4 Even when a document appears on its face to be a sale with pacto de retro the owner of the property may prove that the
contract is really a loan with mortgage by raising as an issue the fact that the document does not express the true intent and
agreement of the parties. In this case, 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. And upon proof of the truth of such allegations, the court will
enforce the agreement or understanding in consonance with the true intent of the parties at the time of execution of the
contract.5 This principle is applicable even if the purported Sale Con Pacto de Retro was registered in the name of the transferee
and a new certificate of title was issued in the name of the latter. 6

There is no dispute that when Maura Palabrica "bought" the land on 27 January 1947 the vendors, the Pacardo spouses, remained
in possession of the property and cultivated the same. Their son continued the cultivation when the spouses died, which cultivation
was continued later by his widow Elena Vda. de Pacardo and then by his sister Elizabeth Palencia.

The rule is settled that where in a contract of sale with pacto de retro the vendor remains in physical possession of the land sold as
lessee or otherwise, the contract should be considered an equitable mortgage. 9 The same presumption applies when the vendee
was given the right to appropriate the fruits thereof in lieu of receiving interest on the loan.

Where the contract contains a stipulation, as in this case, that upon payment by the vendor of the purchase price within a certain
period the document shall become null and void and have no legal force or effect, the purported sale should be considered a mortgage
contract. In pacto de retro sale the payment of the repurchase price does not merely render the document null and void but there is
the obligation on the part of the vendee to sell back the property.

In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.
Consequently, there was no valid sale to Maura Palabrica. Ownership over the property was not transferred to her for she was
merely a mortgagee. There being no title to the land that Palabrica acquired from the spouses Filoteo and Severa Pacardo, it follows
that Palabrica had no title to the same land which could be conveyed to petitioner. 15 Hence there is no legal basis for petitioner to
recover possession of the property.

Pacardo spouses or their successors in interest failed to pay the amount of the loan on 27 January 1950 as stipulated in the contract
although they continued to deliver the produce to Palabrica and petitioner until 1987 by way of interest on the loan. Art. 1142 of the
New Civil Code provides that a mortgage action prescribes after ten (10) years. Since 27 January 1950 when the Pacardo spouses
failed to pay the loan up to 1989 when the action for recovery of possession was filed, thirty-nine (39) years had already elapsed. As
a result, petitioner is not only barred by prescription from instituting her action; she is also guilty of estoppel by laches.
(11) G.R. No. 195975, September 05, 2016
TAINA MANIGQUE-STONE v. CATTLEYA LAND, INC., AND SPOUSES TROADIO B. TECSON AND ASUNCION ORTALIZ-
TECSON

Civil Law; Buyers in Good Faith; It bears stressing that if the deed of sale at all proclaimed that she (Taina) was the purchaser or buyer of the
subject property and this subject property was placed under her name, it was simply because she and Mike wanted to skirt or circumvent the
constitutional prohibition barring or outlawing foreigners or aliens from acquiring or purchasing lands in the Philippines.
—In the case at bench, Taina herself admitted that it was really Mike who paid with his own funds the subject lot; hence, Mike was its real
purchaser or buyer. More than that, it bears stressing that if the deed of sale at all proclaimed that she (Taina) was the purchaser or buyer of the
subject property and this subject property was placed under her name, it was simply because she and Mike wanted to skirt or circumvent the
constitutional prohibition barring or outlawing foreigners or aliens from acquiring or purchasing lands in the Philippines. Indeed, both the CA and
the RTC exposed and laid bare Taina’s posturing and pretense for what these really are: that in thetransaction in question, she was a mere
dummy, a spurious stand-in, for her erstwhile common-law husband, who was not a Filipino then, and never attempted to become a naturalized
Filipino citizen thereafter.

Same; Same; Double Sale; Given the fact that the sale by the Tecson spouses to Taina as Mike’s dummy was totally abhorrent and repugnant to
the Philippine Constitution, and is thus, void ab initio, it stands to reason that there can be no double sale to speak of here.
—It is axiomatic, of course, that this Court is not a trier of facts. Subject to well-known exceptions, none of which obtains in the instant case, this
Court is bound by the factual findings of the CA, especially where such factual findings, as in this case, accorded in the main with the RTC’s own
findings. Given the fact that the sale by the Tecson spouses to Taina as Mike’s dummy was totally abhorrent and repugnant to the Philippine
Constitution, and is thus, void ab initio, it stands to reason that there can be no double sale to speak of here