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Clarin was the owner of a 10 hectare land in Carmen, Bohol. The same was said to be his share from
the other co-owners. In 1959, he executed a Contract of Sale with Rulona as he was selling his 10 hectare
land. It was agreed that the purchase price would be P2500.00. Down payment would be P1000.00 and the
remaining balance would be paid monthly at P100.00 per month. Rulona paid the down payment as well as
the 1stinstallment but then later on Clarin returned the P1100.00 against Rulona͛s will. Clarin said he could
not convince the other co- owners about the selling of his share. Clarin also said there was no perfected
sale between him and Rulona as he said that the sale was subject to the condition that the other co-owners
should give their consent to the sale.

Whether or not there was a perfected contract of sale.

Yes there is. During trial there were 3 documents shown. Exhibit A shows that upon payment of
P800.00 by Rulona, a survey of the land was authorized. Exhibit B shows that P200.00, part of the down
payment was paid to Clarin and that the 1stinstallment of P100.00 was also made. Though these exhibits
are not the Contract of Sale, they show that there was a contract of sale between Rulona and Clarin.

Construing Exhibits A and B together, it can be seen that the Clarin agreed to sell and Rulona
agreed to buy a definite object, that is, 10 hectares of land which is part and parcel of Lot 20 PLD No. 4,
owned in common by the Clarin and his sisters although the boundaries of the 10 hectares would be
delineated at a later date. The parties also agreed on a definite price which is P2,500.00. Exhibit B further
shows that Clarin has received from Rulona as initial payment, the amount of P800.00. Hence, it cannot be
denied that there was a perfected contract of sale between the parties and that such contract was already
partially executed when the petitioner received the initial payment of P800.00. The latter's acceptance of
the payment clearly showed his consent to the contract thereby precluding him from rejecting its binding

Further, Clarin͛s letter to Rulona marked Exhibit C stated;

"My dear Mr. Rulona:
Replying to your letter of recent date, I deeply regret to inform you that my daughter, Alice, who is now in
Manila, could not be convinced by me to sell the land in question, that is, the ten (10) hectares of land
referred to in our tentative agreement. It is for this reason that I hereby authorize the bearer, Mr. Paciano Parmisano,
to return to you in person the sum of One Thousand and One Hundred (P1,100.00) Pesos which you have paid in
advance for the proposed sale of the land in question."

The reasons given by the Clarin cannot operate against the validity of the contract in question. A
contract is valid even though one of the parties entered into it against his better judgment.
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Spouses Francisco and Rosario Cervantes are the owners of Lot 3, 15, and 16 located at 245
Buendia Avenue Makati Rizal with a total area of 3,500 square meters. The lots were mortgaged to the DBP
on April 21, 1`959 as security for a loan of P441, 000.00 which was fully paid on July 10, 1969.Cervantes is
the president of Bormaheco a dealer and importer of industrial and machinery. The entire 3 lots are
occupied by the building machinery and equipment of Bormaheco Inc. and are adjacent to the property of
VIllonco Realty Company situated at 219 Buendia Avenue.There were negotiations for the sale o the said lot
and the improvement thereon between Villonco and Bormaheco Inc. as represented by Romeo Villonco of
Villonco Realty and Francisco Cervantes of Bormaheco Inc. through the intervention of Edith Perez de Tagle
as a real estate broker.
During the negotiations Villonco Realty Company assumed that the lots belonged to Bormaheco
Inc. and that Cervantes was duly authorized to sell the same. Cervantes did not disclose to the broker and
Villonco that the lots were mortgaged to the DBP. Negotiations between Villonco and Cervantes prosper
and on March 4, 1964, the Villonco made a counter offer to his original offer for the purchase of the
property which was accepted by Cervantes. However after 26 days from the signing of the contract of sale,
Cervantes returned the earnest money with interest to the Villonco citing as an excuse the circumstance
that despite the lapse of 45 days there is no certainty yet for the acquisition of the Punta property. Villonco
refused to accept the checks of Bormaheco Inc. Cervantes in his reply to Miss Tagle͛s letter alleged that the
45 day period had already expired and the sale to the Bormaheco Inc. of the Punta property had been
consummated. Cervantes manifested in his letter that they were no longer interested to sell the Buendia
Avenue to Villonco Realty Company.

Villonco filed a complaint for Specific Performance against Bormaheco. Bormaheco in his answers
pleaded the defense that the perfection of the contract of sale was subject to the conditions (a) that final
acceptance or not shall be made after 45 days (b) and that Bormaheco Inc. acquires the Sta. Ana property
.During the pendency of the case, the NASCO Acting General wrote to Bormaheco Inc. advising it that the
Board of Directors and the Economic coordinator had approved the sale of the Punta property to
Bormaheco then the deed of sale for the Punta was executed. In view of that Bormaheco,s amended
answer that the 3 lots were registered in the name of the spouses and not in the name of the Bormaheco.
Villonco filed their amended complaint impleading the spouses as defendants. After the trial, the trial court
rendered a decision ordering Cervantes spouses to execute in favor of Bormaheco Inc. a deed of
reconveyance for the 3 lots to Villonco Realty Company. Bormaheco and spouses appealed the case
contending that the contract of sale was perfected because Cervantes made a supposedly qualified
acceptance or the revised offer which acceptance amounted to a counter offer and because that
Bormaheco would acquire the Punta property within 45 day period was not fulfilled.

Whether or not there was a contract of sale made between Bormaheco Inc. and VIllonco Realty.

The contact of sale is perfected at the moment there is a meeting of minds upon the thing which is
the object of the contract and upon the price. From that moment, the parties may reciprocally demand
performance subject to the provisions of the law governing the form of the contracts. Consent is
manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the acceptance constitutes a counter offer. An
acceptance may b e implied or express.

Bormaheco͛s acceptance of Villonco Realty Company͛s counter offer to purchase the Buendia
Avenue property, indubitably proves that their was a meeting of mind upon the subject matter and
consideration of the sale. Therefore on that date the sale was perfected. Bormaheco͛s acceptance of the
part payment of P100,000 .00 shows that the sale was conditionally consummated or partly executed
subject to the purchase by Bormaheco of the Punta property. The non consummation of that purchase
would be a negative resolutory condition
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The Petition before us has its roots in a Complaint for Specific Performance to compel herein
petitioners (except the last named Catalina B. Mabanag) to consummate the sale of a parcel of land with its
improvement located along Roosevelt avenue in Quezon City entered into by the parties sometime in
January 1985 for the price of P1,240,000.00.

Romulo Coronel et-al executed a Conditional sale with Ramona Alcaraz within which the latter
made a down payment of P50,000 to the former and a Receipt of Down payment was given to the latter.
Subsequently, it was transferred under the names of the former under TCT No. 327043. Furthermore, the
Coronels sold the property covered by TCT No. 327043 to intervenor - appellant Catalina Mabanag for a
higher amount. For this reason, Coronel canceled and rescinded the contract with Ramona Alcaraz by
depositng the down payment thru bank in trust for Ramona Alcaraz .A Complaint for Specific Performance
against the Coronels was filed by Conception Alcaraz-mother of Ramona Alcaraz . In the course of the
proceedings, judgment was rendered against the petitioners Coronel(here in private respondents). They
filed a motion for reconsideration but the same was denied. Furthermore, appeal was taken by the
petitioners but unfortunately it was denied.

Legality of the Receipt of Down payment

A contract to sell may not even be considered as a conditional contract of sale because in a
conditional contract of sale, the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may not occur.

A contract to sell as defined here in above, may not even be considered as a conditional contract of
sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a
suspensive condition, because in a conditional contract of sale, the first element of consent is present,
although it is conditioned upon the happening of a contingent event which may or not occur if the
suspensive condition is not fulfilled, the perfection of the contract to sale is completely abated. Upon the
other hand, if fulfilled deemed perfected.

There is contract to sell between the petitioner and the respondent where the ownership or title is
retained by the seller and is not passed until the full payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach, casual or serious but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding force petition dismissed.

In this case, there was a clear intent to transfer title to the buyer. Wherefore Petition is dismissed.
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Deogracias Queriza was the original owner of a parcel of unregistered residential land to which he
executed a Deed of Pacto de Retro sale over said land in favor of his niece, private respondent Quirimit with
the express stipulation that the vendor a retro may exercise the right to repurchase within 5 years from the
execution of these presents and upon failure to take advantage of the right herein granted him, then the
contract shall acquire the character of absolute, irrevocable and consummated sale. It appeared
subsequently that Queriza mortgaged same land to the Manaoag Rural Bank which was allegedly redeemed
on his behalf by his nephew Miguel Querisa. Miguel Querisa sold the land to petitioners De Guzman,
executed a Deed of Sale and tax declaration placed under their names. Petitioners sent Private respondent
written notice to vacate but refused to do. Court rendered judgment declaring petitioner͛s owners of the
land in question and ordering private respondent to vacate the premises. It ruled that the Pacto de retro
sale was only a mortgage and that the Deed of Donation in favor of Miguel Queriza was valid.

Whether or not the transaction between the parties was a pacto de retro or an equitable mortgage.

The transaction between Deogrcias Queriza and private respondent was a true pacto de retro sale.
The essence of a pacto de retro sale is that title and ownership of the property sold are immediately vested
in the vendee a retro , subject to the resolutory condition of repurchase by the vendor a retro within the
stipulated period. Failure thus of the vendor a retro to perform said resolutory condition vests upon the
vendee by operation of law absolute title and ownership over the property sold and failure of the vendee a
retro to consolidate his title under Article 1607 does not impair such title or ownership for the method
prescribe there under is merely for the purpose of registering the consolidated title.

In the case at bar, absolute ownership of the land in question was vested on private respondent in
1962 upon failure of Deogracias Queriza to repurchase said land. Thus, in 1967when he allegedly donated
the same to Miguel Queriza, he was no longer the owner thereof. Settled is the rule that a donor cannot
lawfully convey what is not his property.
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[Petitioner] Leonora Emparado Ceballos is the registered owner of a certain parcel of land situated
in Bato, Badian, Cebu, consisting of 53,301 square meters. Sometime in October 1980, [petitioner] was
introduced to Emigdio Mercado for the purpose of obtaining a loan as the latter was also known to be in
the business of lending money. [Petitioner] was able to borrow the amount of P12,000.00 payable in two
(2) months and to secure said loan, she executed in favor of Emigdio Mercado a ͚Deed of Real Estate
Mortgage͛ over the subject property. The said mortgage deed was not registered by the mortgagee.
[Petitioner] was not able to pay her mortgage indebtedness to Emigdio Mercado within the stipulated
period. On February 13, 1982, a ͚Deed of Absolute Sale͛ was executed whereby the mortgaged property
was sold to Emigdio Mercado for the price of P16,500.00. Said instrument contained the signatures of
[petitioner] and her husband Narciso Ceballos and notarized by Atty. Elias V. Ortiz. It appears that
sometime in 1990, [petitioner] offered to buy back the property from Emigdio Mercado for the price of
P30,000.00 but the latter͛s wife refused since the same was already transferred in their names under TCT
No. TF-3252 issued on June 1, 1987. Emigdio Mercado died on January 12, 1991 and a petition for the
issuance of letters of administration over his intestate estate was filed by her daughter Thelma M. Aranas
before the RTC-Cebu City, Branch 11.
On August 18, 1990, [petitioner] instituted the present suit against the Intestate Estate of the Late
Emigdio Mercado, Teresita Mercado as the Administrator, and/or the Heirs of the Late Emigdio Mercado.
The Complaint alleged that the Absolute Deed of Sale,among others, be considered as Equitable Mortgag.
She contends that the Contract should be declared as an equitable mortgage, because (1) the original
transaction was a loan; and, (2) for a titled property with an area of more than fifty-three thousand square
meters in a tourist area, the contract price of P16,500 was ridiculously low. The instances when a contract --
regardless of its nomenclature -- may be presumed to be an equitable mortgage are enumerated in the Civil
Code as follows:

"Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following

(1) When the price 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.

"In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as
rent or otherwise shall be considered as interest which shall be subject to the usury laws."

"Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute

Should the Absolute Deed of Sale be considered Equitable Mortgage?

In this case, both the trial and the appellate courts found none of the above-enumerated
circumstances. We find no cogent reason to reverse their factual finding.

Concededly, the original transaction was a loan. Petitioner failed to pay the loan; consequently, the
parties entered into another agreement -- the assailed, duly notarized Deed of Absolute Sale, which
superseded the loan document. Petitioner had the burden of proving that she did not intend to sell the
property; that Emigdio Mercado did not intend to buy it; and that the new agreement did not embody the
true intention of the parties.

We find no basis for disturbing the CA͛s finding that she had failed to discharge this burden.
Harping on the alleged unconscionably low selling price of the subject land, petitioner points out that it is
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located in a tourist area and golf haven in Cebu. Notably, she has failed to prove that on February 13, 1982,
the date of the sale, the area was already the tourist spot and golf haven that she describes it to be. In
1990, the property might have been worth ten million pesos, as she claimed; however, at the time of the
sale, the area was still undeveloped. Hence, her contention that the selling price was unconscionably low
lacks sufficient substantiation.

Petitioner also argues that Mercado͛s delay in registering the Deed of Absolute Sale and
transferring the land title shows that the real agreement was an equitable mortgage.

An equitable mortgage is one that -- although lacking in some formality, form or words, or other
requisites demanded by a statute -- nevertheless reveals the intention of the parties to charge a real
property as security for a debt and contains nothing impossible or contrary to law. Delay in transferring title
is not one of the instances enumerated by law -- instances in which an equitable mortgage can be
presumed. Moreover, throughout the testimony of petitioner before the trial court, she never claimed that
after the Deed of Absolute Sale had been executed in February 13, 1982, the land continued to be intended
merely to secure payment of the P12,000 loan taken on December 31, 1980.

This Court has held that a document acknowledged before a notary public enjoys the presumption
of regularity. It is a prima facie evidence of the facts therein stated. To overcome this presumption, there
must be presented evidence which is clear and convincing. Absent such evidence, the presumption must be
In this case, petitioner failed to present clear and convincing evidence to overcome the presumption of
validity of the notarized Deed conveying the land to private respondents. Her testimony denying the
validity of the sale, having been "made by a party who has an interest in the outcome of the case, is not as
reliable as written or documentary evidence. Moreover, self-serving statements are inadequate to establish
one͛s claims. Proof must be presented to support the same."
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The Navarra͛s obtained a loan of P1, 200,000.00 from Planters Bank and, by way of security, they
executed a deed of mortgage over their five (5) parcels of land which are the subject of this controversy.
Hence, Planters Bank foreclosed on the mortgage and mortgaged assets were sold to it for P 1,341,850.00,
it being the highest bidder in the auction sale. The one-year redemption period expired without the
Navarra͛s having redeemed the foreclosed properties.

On the other hand, co-petitioner RRRC is a real estate company owned by the parents of Carmelita
Navarra. RRRC itself obtained a loan from Planters Bank secured by a mortgage over another set of
properties owned by RRRC. The loan having been similarly unpaid the bank foreclosed the mortgaged
assets of RRRC. Unlike the Navarras, RRRC was able to negotiate its foreclosed properties by way of a
concession. The foreclosed properties were sold to third persons whose payments were directly made to
the bank and in excess by P 300, 000.00 for the redemption price. On July 18, 1985, Jorge Navarra sent a
letter to the Planters Bank, proposing to repurchase the five (5) lots, with a request that he be given until
August 31, 1985 to pay the downpayment of P 300,000.00. In response, Planters Bank agreed to the
request. Jorge Navarra also requeted that the excess payment of P300, 000.00 in connection with the
redemption made by the RRRC be applied as downpayment for their foreclosed properties. Because the
amount of P300,000.00 was sourced from a different transaction between RRRC and Planters Bank and
involved different debtors, the Bank required Navarra to submit a board resolution from RRRC authorizing
him to negotiate for and its behalf and empowering him to apply the excess amount as down payment. The
Navarras, however, failed to comply with Planters Bank͛s request. Thus, the bank sent a notice demanding
the Navarras to surrender and vacate the properties in question for their failure to exercise their right of

The Navarras filed their complaint in the RTC of Makati City for specific Performance with Injunction
against Planters Bank. In their complaint they alleged that a perfected contract of sale was made between
them and the Planters Bank whereby they would repurchase the subject properties for P 1, 800, 000.00
with a down payment of P 300,000.00. The Planters Bank asserted on the other hand that there was no
perfected contract of sale because the terms and conditions for the repurchase have not yet been agreed
upon. I a decision, the trial court ruled that there was a perfected contract of sale. Therefrom the
respondents went on appeal to the CA. The appellate court in its decision reversed that of the trial court
and ruled that there was no perfected contract of sale between the parties.

Whether or not there was no perfected contract to repurchase the foreclosed properties between
the Navarras and Planters Bank?

The Supreme Court held that there was no perfected contract of sale between the Navarras and
Planters Bank.

In this case the Navarras assert that the exchange of correspondence between them and Planters
bank constitute the offer and acceptance. The Supreme Court said that the offer and acceptance is not
certain and absolute so as to engender a meeting of the minds between the parties. While the letters
indicate the amount of P300, 000.00 as down payment, they are however, completely silent as to how the
succeeding installments shall be made. At most, the letter merely acknowledges that the down payment of
P 300, 000.00 was agreed upon by the parties. However, this fact cannot lead to the conclusion that the
contract of sale was perfected. This Court held before a valid and binding contract of sale can exist, the
manner of payment of the purchase price must be established since the agreement on the manner of
payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure
to agree on the price.

Clearly, then, the lack of a definite offer on the part of the spouses could not possibly serve as the
basis of their claim that the sale/repurchase of their foreclosed properties was perfected. The reason is
obvious: one essential element of a contract of sale is wanting: the price certain. There can be no contract
of sale unless the following elements concur: (a) consent or meeting of the minds; (b) determinate subject
matter; and (c) price certain in money or its equivalent. Such contract is born or perfected from the
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moment there is a meeting of minds upon the thing which is the object of the contract and upon the
price. Here, what is dramatically clear is that there was no meeting of minds vis-a-vis the price, expressly or
impliedly, directly or indirectly. Further, the tenor of Planters Banks letter-reply negates the contention of
the Navarras that the Bank fully accepted their offer. The letter specifically stated that there is a need to
negotiate on the other details of the transaction before the sale may be formalized. Such statement in the
Banks letter clearly manifests lack of agreement between the parties as to the terms of the purported
contract of sale/repurchase, particularly the mode of payment of the purchase price and the period for its
payment. The law requires acceptance to be absolute and unqualified. As it is, the Banks letter is not the
kind which would constitute acceptance as contemplated by law for it does not evince any categorical and
unequivocal undertaking on the part of the Bank to sell the subject properties to the Navarras.

The failure of the spouses to submit the required board resolution precludes the perfection of a
contract of sale/repurchase between the parties. As earlier mentioned, contracts are perfected when there
is concurrence of the parties wills, manifested by the acceptance by one of the offer made by the
other. Here, there was no concurrence of the offer and acceptance as would result in a perfected contract
of sale.
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The respondents Pedro Revilla and Maria Reyes obtained from the La Previsora Filipina sometime
before November 18, 1939 a loan of P6,500; and with the money, they the price of a lot, with
improvements, which they paid had previously purchased from the Archibishop of Manila. And they
mortgaged the property to La Previsora for the purpose of guaranteeing repayment of the debt in
installments with interest at 12 per cent per annum.

It turned out later that Monte de Piedad y Caja de Ahorros had obtained a judgment against Pedro
Revilla for the sum of P45,000 and had levied execution therefor upon the property and its rentals.
Apprised of this development, the La Previsora started foreclosure proceedings, alleging non-payment of its
credit by the mortgagors. The conflicting interests were later the object of amicable settlement among the
parties, as a result of which the herein respondents notarized the deed Exhibit E whereby in satisfaction of
their obligations to La Previsora (then amounting to P8,204.60) they ceded the property to the said
institutions, reserving the right to repurchase for P8,204.60 within sixty days. The deed was acknowledged
on November 3, 1941.

It seems that La Previsora at the same time, or immediately thereafter conveyed the property to
petitioner Canuto Martin, who then executed the document undertaking to allow respondents to
repurchase the property within sixty days from October 31, 1941, but at the price of P14,000. This
document was signed by Maria Reyes signifying her assent. At the trial she pleaded that the document,
without embodying their true agreement, had been obtained thru deceit and abuse of confidence.
However, her assertions were not credited by the Court of Appeals. Nevertheless, that court declared the
document void for the only reasons that it had been signed by Canuto Martin before acquiring ownership
of the property by the cession of Maria Reyes and Pedro Revilla to the La Previsora, and from the latter to
them. The Court noted that whereas Exhibit E was acknowledged before the notary on November 3, 1941,
bore the date October 30, 1941, a few days before.


Property or goods which, at the time of the sale, are not owned by the seller, but which are
thereafter to be acquired by him, cannot be the subject of an executed sale, but may be the subject of a
contract for the future sale and delivery thereof, and it has been held that even though the contract is in
the form of the present sale it will not pass the title, after the goods have been acquired, until the seller has
done some act appropriating them to the contract. Such a contract of the future sale and delivery of goods,
which the seller has not in possession but which he intends to acquire by producing, manufacturing, or
purchasing before the day of delivery, is valid as an executory contract to be fulfilled by acquiring and
delivering the goods specified in the contract, even though the acquisition of the goods by the seller
depends upon a contingency which may or may not happen.

It is not unusual for persons to agree to convey by a certain time, notwithstanding they have no title
to the land at the time of the contract, and the validity of such agreement is upheld. In such cases, the
vendor assume the risk of acquiring the title and making the conveyance, or responding in damages for the
vendee's loss of his bargain, One having an option to purchase real estate has a legal right to enter into an
executory contract to sell the property. A fortiori, it is not necessary that the vendor be the absolute owner
of the property at the time he enters into agreement of sale because the owner of the land, is as much the
subject of sale as is the land itself, and whenever one is so suited with reference to a tract of land that he
can acquire the title thereto, either by the voluntary act of the parties holding the title, or by proceeding at
law or in equity, he is in a position to make a valid agreement for the sale thereof, without disclosing the
nature of his title.
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The petitioner seeks a reversal of the Court of Appeals decision dated December 13, 1974 affirming
the Trial Court's judgment convicting her of estafa. We denied the petition initially but granted a motion for
reconsideration and gave the petition due course.

As found by the trial court and the Court of Appeals, Rosalinda Cruz, the private offended party, and
accused Victoria Vallarta are long time friends and business acquaintances. On November 20, 1968, Cruz
entrusted to Victoria Vallarta seven pieces of jewelry. In December of the same year, Vallarta decided to
buy some items, exchanged one item with another, and issued a post-dated check in the amount of P5,000
dated January 30, 1969. Rosalinda Cruz deposited said check with the bank. However, upon presentment,
the check was dishonored and Cruz was informed that Vallarta's account had been closed. Cruz apprised
Vallarta of the dishonor and the latter promised to give another check. Later, Vallarta pleaded for more
time. Still later, she started avoiding Cruz. Hence, this criminal action was instituted.


In seeking acquittal, petitioner stresses that the transaction between her and Cruz was a "sale or
return," perfected and consummated on November 20, 1968 when the seven pieces of jewelry were
delivered. The check issued in December 1968 was therefore in payment of a pre-existing obligation. Thus,
even if it was dishonored, petitioner claims that she can only be held civilly liable, but not criminally liable
under Art. 315 (2) (d), Revised Penal Code. She also argues that at any rate, what prompted Cruz to deliver
the jewelry was the social standing of petitioner Vallarta and not the postdated check.

In order to arrive at the proper characterization of the transaction between Vallarta and Cruz, that is,
whether it was a "sale or return" or some other transaction, it is necessary to determine the intention of
the parties.

Note that Vallarta changed the ruby ring because it was not acceptable to her, and chose another
ring. Likewise, the price to be paid for the jewelry was finally agreed upon only in December 1968. Thus,
there was a meeting of the minds between the parties as to the object of the contract and the
consideration therefore only in December 1968, the same time that the check was issued. The delivery
made on November 20, 1968 was only for the purpose of enabling Vallarta to select what jewelry she

Properly, then, the transaction entered into by Cruz and Vallarta was not a "sale or return." Rather, it
was a "sale on approval " (also called " sale on acceptance, " "sale on trial." or "sale on satisfaction". In a
"sale or return," the ownership passes to the buyer on delivery. The subsequent return of the goods reverts
ownership in the seller. Delivery, or tradition. as a mode of acquiring ownership must be in consequence of
a contract.

If there was no meeting of the minds on November 20, 1968, then, as of that date, there was yet no
contract of sale which could be the basis of delivery or tradition. Thus, the delivery made on November 20,
1968 was not a delivery for purposes of transferring ownership, the prestation incumbent on the vendor. If
ownership over the jewelry was not transmitted on that date, then it could have been transmitted only in
December 1968, the date when the check was issued. In which case, it was a "sale on approval" since
ownership passed to the buyer. Vallarta, only when she signified her approval or acceptance to the seller,
Cruz, and the price was agreed upon.
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%0 petitioners, vs. Ô

  . 0 respondents.
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The Dignos spouses owned a parcel of land, which was sold to plaintiff- appellant Jabil for the sum
of P28,000 payable in two installments. Meanwhile, the Dignos spouses sold the same land to Cabigas
spouses. As the Dignos spouses refused to accept the second payment and upon discovery of the second
sale, Jabil brought this suit.

Petitioners contend that the Deed of Sale is a mere contract to sell and not an absolute sale; that
the same is subject to two positive conditions. It is further contended that in said contract, title or
ownership over the property was expressly reserved in the vendor until the suspensive condition of full and
punctual payment of the balance of the purchase price shall have been met. Thus, there is no actual sale
until full payment is made.


YES. By and large, the issues in this case have already been settled by this Court in analogous cases.

Thus, it has been held that a deed of sale is absolute in nature although denominated as a "Deed of
Conditional Sale" where nowhere in the contract in question is a proviso or stipulation to the effect that
title to the property sold is reserved in the vendor until full payment of the purchase price, nor is there a
stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to
pay within a fixed period Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime
Building Co., Inc., 86 SCRA 305).

A careful examination of the contract shows that there is no such stipulation reserving the title of the
property on the vendors nor does it give them the right to unilaterally rescind the contract upon non-
payment of the balance thereof within a fixed period.

On the contrary, all the elements of a valid contract of sale under Article 1458 of the Civil Code, are
present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain
in money or its equivalent. In addition, Article 1477 of the same Code provides that "The ownership of the
thing sold shall be transferred to the vendee upon actual or constructive delivery thereof." As applied in the
case of Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA 276), this Court held that in the absence of
stipulation to the contrary, the ownership of the thing sold passes to the vendee upon actual or
constructive delivery thereof.

While it may be conceded that there was no constructive delivery of the land sold in the case at bar,
as subject Deed of Sale is a private instrument, it is beyond question that there was actual delivery thereof.
As found by the trial court, the Dignos spouses delivered the possession of the land in question to Jabil as
early as March 27,1965 so that the latter constructed thereon Sally's Beach Resort also known as Jabil's
Beach Resort in March, 1965; Mactan White Beach Resort on January 15,1966 and Bevirlyn's Beach Resort
on September 1, 1965. Such facts were admitted by petitioner spouses.
ca  P a g e

 %  Petitioner+,+) 
 % "Respondents.
{ #

The spouses Gaspar Prila and Maria Beldad, owned parcel of land in Camarines Sur. Upon the death
of Maria Beldad, the eastern half thereof was given to Vivencia Prila, their only daughter, and when Gaspar
Prila died, the 1/2 portion pertaining to him was divided into three: as reflected in the Extra-judicial
Settlement of Estate. Under the terms of said settlement, 4/6 of the entire land or 11.2477 hectares was
adjudicated to Vivencia, 1/6 or 2.8119 hectares to Asuncion Pacamara and another 1/6 or 2.8119 hectares
to Custodio Parcia. This stipulation was reiterated by both Vivencia and Pacamara in an agreement duly
registered with the ROD and was furthermore confirmed judicially by the CFI of Camarines Sur. Vivencia
then sold her 4/6 portion to Dichoso who had been, ever since, in actual physical possession thereof,
exercising various acts of ownership thereon.
On the other hand, in a Deed of Sale, Pacamara sold to the wife of Teodolfo Ramos her 1/6 share,
but the deed mentions the area of the lot sold as 4.1250 hectares; obviously in excess of Pacamara's 1/6
share in the property of 2.8119 hectares. Hence, aforesaid 4.1250 hectares which Ramos claims to have
possessed, is now the land in question. Dichoso claims that the disputed land is inside his property.
Ramos filed a complaint for quieting of title before the CFI of Camarines Sur. A commissioner was
appointed by the Court to determine the area and boundaries of the respective claims of the parties in
accordance with their monuments of title. He submitted his report which was approved by the Court in its
The CFI rendered its decision in favor of Ramos. On appeal, the CA affirmed the decision of the trial

Should the boundaries or the statement as to its area control in a sale of land?

It is undisputed that the land in question is part of the bigger mass of land originally owned by the
spouses Gaspar Prila and Maria Beldad, and that this mass of land was adjudicated among the heirs in the
proportion aforementioned. And that Dichoso derived his title from Vivencia Prila while Ramos acquired his
title from Asuncion Pacamara.
The striking similarities in the boundaries between the parcel of land in dispute and the property of
Ramos' wife, particularly the boundaries on the North, which is the dam, and on the East, which is the
Cagmanaba River, and the fact that the deed of sale in favor of Ramos' wife was executed and registered
ahead of that of Dichoso's deed of sale, led the trial court to conclude that the property in dispute tallies
with the land bought by Ramos' wife. It must be pointed out, however, that the deed of sale in favor of
Ramos' wife explicitly described the property as being bounded "on the South (by) heirs of Gaspar Prila and
Mariano Rodriguez, limited by an irrigation ditch, measuring 200 meters; on the West (by) heirs of Gaspar
Prila, limited by a big stone, measuring 350 meters." The commissioner's report identified the land claimed
by Ramos and indicated in the sketch as the portion surrounded by a red line inside Lot-3, the portion
pertaining to Dichoso. As indicated in the said sketch the land of Dichoso is labeled as Lots-1 and 3 and the
portion labeled as Lot-2 is the land of Ramos. A further scrutiny of the commissioner͛s report shows that
the area being claimed by Ramos, which was enclosed by a red line, went beyond the irrigation ditch. This is
contrary to the technical description in the deed of sale in favor of Ramos' wife as to the boundary on the
southern portion of the property.
The SC has held that in cases of conflict between areas and boundaries, it is the latter which should
prevail. What really defines a piece of ground is not the area, calculated with more or less certainty,
mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its
limits. In a contract of sale of land in a mass, it is well established that the specific boundaries stated in the
contract must control over any statement with respect to the area contained within its boundaries. It is not
of vital consequence that a deed or contract of sale of land should disclose the area with mathematical
accuracy. It is sufficient if its extent is objectively indicated with sufficient precision to enable one to
identify it. An error as to the superficial area is immaterial.
PREMISES CONSIDERED, the decision appealed from was SET ASIDE.
c  P a g e

0 Plaintiff , vs. 
0 -efendant. cc
{ !"  '(-  '

Luis Asiain agreed to sell his land to Benjamin Jalandoni as embodied in a Memorandum of
Agreement (MOA).

As contained in the MOA, Jalandoni shall purchase the land valued at Php 55,000.00, containing an
area of 25 hectares more or less and producing sugar cane crops estimated at 2000 piculs (1 picul= 60
kilograms). It further states that Asiain, as the vendor is under the obligation to take care of the plantation
until the planting is finished and in case the crops exceed 2000 piculs, the exceeds will belong to him. The
expense for taking care of the plantation until planting is completely finished shall be borne by Asiain who
will vacate the property afterwards.

The MOA also goes on to describe the boundaries of the land as follows:
͞The adjacent landowner on the north and the west is the vendor himself, on the east, B. Jalandoni, and on
the south, B. Jalandoni and the widow of Abdon Ferrer.͟

Once in possession of the land, Jalandoni had the sugar cane ground which gave an output of 800
piculs of centrifugal sugar and not 2000 piculs as claimed by Asiain. He also asked a surveyor to survey the
land and according to his survey, the parcel in question contained an area of 18 hectares, and not 25

On the purchase price of Php55,000.00 agreed upon, Jalandoni only paid Php30,000.00. To recover
the balance of Php25,000.00 Asiain filed an action with the CFI. The CFI declared the purchase document
(MOA) as null, ordered the return of the Php30,000.00 down payment and the turnover of the subject land
back to the vendor.

Whether the boundaries or the statement as to its size controls in case of a sale of land in lump

If, in a contract of sale the quantity of the realty to be conveyed is indicated by a unit of area, as by
the acre, a marked excess or deficiency in the quantity stipulated for is a ground for avoiding the contract.
Since it is very difficult, if not impossible, to ascertain the quality of a tract with perfect accuracy, a slight
excess or deficiency does not affect the validity of the contract.

Where, however, the contract is not for the sale of a specific quantity of land, but for the sale of
particular tract, or designated lot or parcel, by name or description, for a sum in gross, and the transaction
is bona fide, a mutual mistake as to quantity, but not as to boundaries, will not generally entitle the
purchaser to compensation, and is not ground for rescission. But it is well settled that a purchaser of land,
when it is sold in gross, or with the description, "more or less" or "about," does not thereby ipso facto take
all risk of quantity in the tract. If the difference between the real and the represented quantity is very great,
both parties act obviously under a mistake which it is the duty of a court of equity to correct. And relief will
be granted when the mistake is so material if the truth had been known to the parties the sale would not
have been made.

The ultimate result then is to put the parties back in exactly their respective positions before they
became involved in the negotiations and before accomplishment of the agreement. This was the decision of
the trial judge and the SC thinks that decision conforms to the facts, the law, and the principles of equity
cë  P a g e

." %"0 petitioner    1% " 

0 respondents ca
{  #

Jojo Consunji purportedly purchased for his father 2 brand new motor vehicles (an Isuzu Gemini
and a Holden Premier models) from Citiwide Motors, Inc. Said purchases were evidenced by invoices.
Citiwide delivered the motor vehicles to the person who represented himself as Jojo Consunji.. Consunji, in
turn, issued to Citiwide Manager͛s check as full payment for the said vehicles.

When Citiwide deposited the said checks, it was dishonored by the bank on the ground that it was
tampered with, the correct amount of Php 101.00 having been raised to Php101, 000.00. Citiwide reported
to the Philippine Constabulary the crime committed and in the course of the investigation, it was learned
that the real identity of Consunji is Armando Suarez who has a long line of criminal cases against him for
estafa using the same modus operandi.

Citiwide was able to recover the Holden Premier vehicle which was abandoned somewhere in
Quezon City while the Isuzu Gemini was transferred to Jaime Ledesma. Citiwide then instituted an action
for Replevin.

In his defense, Ledesma claimed that he purchased the subject vehicle in good faith from its
registered owner, one Pedro Neyra, as evidenced by a Land Transportation Commission Registration

The lower court rendered a decision in favor of Ledesma but was reversed by the CA.

Whether or not Citiwide was unlawfully deprived of possession and should recover the property.

Ledesma successfully proved that he acquired the car from his vendor in good faith and for valuable
consideration. Citiwide͛s evidence was not persuasive enough to establish that Ledesma had knowledge
that the car was the object of a fraud and a swindle and it did not rebut or contradict that the acquisition
was done for valuable consideration.

Under Article 559 of the Civil Code, it is quite clear that a party who (a) has lost any movable or (b)
has been unlawfully deprived thereof can recover the same from the present possessor even if the latter
acquired it in good faith and has, therefore, title thereto. There are 3 requisites to make possession of
movable property equivalent to title, namely: a) the possession should be in good faith; b) the owner
voluntarily parted with the possession of the thing; and c) the possession is in the concept of the owner.

Undoubtedly, one who has lost a movable or has been unlawfully deprived of it cannot be said to
have voluntarily parted with the possession thereof. The basic issue then is whether Citiwide was
unlawfully deprived of the cars.

There was a perfected unconditional contract of sale between Citiwide and the original Vendee
(Consunji). Citiwide voluntarily caused the transfer of the Certificate of Registration of the vehicle in the
name of Consunji- even if the said vendee was represented by someone who used a fictitious name. Title
thereto was forthwith transferred to the vendee. The subsequent dishonor of the check because of the
alteration merely amounted to a failure of consideration which does not render the contract of sale void,
but merely allows the prejudiced party to sue for specific performance or rescission of the contract, and to
prosecute the person for estafa.

It was therefore erroneous for the Ca to declare that Citiwide was illegally deprived of the car
simply because the check bounced. Ledesma was a buyer in good faith who paid valuable consideration
therefore and should not be deprived of possession.

WHEREFORE the decision of the CA is SET ASIDE and the decision of the trial court is REINSTATED.
c'  P a g e

0 vs. c


Vicente Pingol is the owner of Lot, with an area of 549 square meters. He executed a "DEED OF
Francisco N. Donasco. Pursuant to the contract, Donasco paid P2,000.00 to Pingol. The one-half portion,
designated as Lot No. 3223-A, was then segregated from the mother lot, Francisco immediately took
possession of the subject lot and constructed a house thereon. In January 1970, he started paying the
monthly installments but was able to pay only up to 1972.On 13 July 1984, Francisco Donasco died. At the
time of his demise, he had paid P8,369.00, plus the P2,000.00 advance payment, leaving a balance of
P10,161.00 on the contract price. Lot No. 3223-A remained in the possession of Donasco's heirs.

On 19 October 1988, the heirs of Francisco Donasco filed an action for "Specific Performance and
Damages, with Prayer for Writ of Preliminary Injunction" against the spouses Vicente and Lourdes Pingol
(petitioners herein. In their complaint, (+) plaintiffs (private respondents herein) averred that after the
death of their father, they offered to pay the balance of P10,161.00 plus the stipulated legal rate of interest
thereon to Vicente Pingol but the latter rebuffed their offer and has "been demanding for a bigger and
unreasonable amount, in complete variance to what is lawfully due and payable."

In their answer with counterclaim, defendants admitted the execution of the aforementioned deed
of sale, the segregation of the portion sold and the preparation and approval of the subdivision plan, but
set up the following special and affirmative defenses (1) when Francisco died, he had not fully paid the total
consideration agreed upon; and (2) considering the breach by Francisco of his contractual obligation way
back in 1976, the sale was deemed to have been cancelled and the continuous occupancy of Francisco after
1976 and by his heirs thereafter was by mere tolerance of Vicente Pingol. They then asked that the
plaintiffs be ordered to vacate the premises and to pay them attorney's fees and a reasonable
compensation for the use of the land.
In their Reply and Answer to Counterclaim, (+) plaintiffs pointed out that there is no provision in the deed
of sale for its cancellation in case of default in the payment of the monthly installments. The trial court
rendered a decision , 2, ,3 the complaint. Plaintiffs elevated the case to the Court of Appeals. The CA
decided in favor of the heirs of Donasco.

Whether or not a vendee in an oral contract of sale of land may bring suit to clear his title.

Although the private respondents' complaint before the trial court was denominated as one for
specific performance, it is in effect an action to quiet title. In this regard, the following excerpt from uucton
vs. Gabar ; ͞The real and ultimate basis of petitioners' action is their ownership of one- half of the lot
coupled with their possession thereof, which entitles them to a conveyance of the property͟. In Sapto, et
al. v. Fabiana [103 Phil. 683, 686-87 (1958)], the SC, explained that under the circumstances, no
enforcement of the contract is needed, since the delivery of possession of the land sold had consummated
the sale and transferred title to the purchaser, and that, actually, the action for conveyance is one to quiet
title, i.e., to remove the cloud upon the appellee's ownership by the refusal of the appellants to recognize
the sale made by their predecessors.

That a cloud has been cast on the title of the private respondents is indubitable. Despite the fact
that the title had been transferred to them by the execution of the deed of sale and the delivery of the
object of the contract, the petitioners adamantly refused to accept the tender of payment by the private
respondents and steadfastly insisted that their obligation to transfer title had been rendered ineffective.

A vendee in an oral contract to convey land who had made part payment thereof, entered upon the
land and had made valuable improvements thereon, is entitled to bring suit to clear his title against the
vendor who had refused to transfer the title to him. It is not necessary that the vendee has an absolute
title, an equitable title being sufficient to clothe him with personality to bring an action to quiet title.
Prescription thus cannot be invoked against the private respondents for it is aphoristic that an action to
quiet title to property in one's possession is imprescriptible.
c  P a g e


% / 
0  cë
! % "


On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by Ang Yu
Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional
Trial Court, Branch 31, Manila in Civil Case No. 87-41058, alleging, among others, that plaintiffs are tenants
or lessees of residential and commercial spaces owned by defendants described as Nos. 630-638 Ongpin
Street, Binondo, Manila; that they have occupied said spaces since 1935 and have been religiously paying
the rental and complying with all the conditions of the lease contract; that on several occasions before
October 9, 1986, defendants informed plaintiffs that they are offering to sell the premises and are giving
them priority to acquire the same; that during the negotiations, Bobby Cu Unjieng offered a price of P6-
million while plaintiffs made a counter offer of P5-million; that plaintiffs thereafter asked the defendants to
put their offer in writing to which request defendants acceded; that in reply to defendant's letter, plaintiffs
wrote them on October 24, 1986 asking that they specify the terms and conditions of the offer to sell; that
when plaintiffs did not receive any reply, they sent another letter dated January 28, 1987 with the same
request; that since defendants failed to specify the terms and conditions of the offer to sell and because of
information received that defendants were about to sell the property, plaintiffs were compelled to file the
complaint to compel defendants to sell the property to them.

Defendants filed their answer denying the material allegations of the complaint and interposing a
special defense of lack of cause of action. After the issues were joined, defendants filed a motion for
summary judgment which was granted by the lower court. The trial court found that defendants' offer to
sell was never accepted by the plaintiffs for the reason that the parties did not agree upon the terms and
conditions of the proposed sale, hence, there was no contract of sale at all.

The plaintiffs appealed and in a decision promulgated on September 21, 1990 the Court affirmed
with modification the lower court's judgment. The decision of this Court was brought to the Supreme Court
by petition for review on certiorari but the Supreme Court denied the appeal for insufficiency in form and
substances.On November 15, 1990, while CA-G.R. CV No. 21123 was pending, the Cu Unjieng spouses
executed a Deed of Sale transferring the property in question to herein petitioner Buen Realty and
Development Corporation. As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu
Unjieng spouses was cancelled and, in lieu thereof, TCT No. 195816 was issued in the name of petitioner on
December 3, 1990. On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to
the lessees demanding that the latter vacate the premises. On July 16, 1991, the lessees wrote a reply to
petitioner stating that petitioner bought the property subject to the notice of lis pendens regarding Civil
Case No. 87-41058 annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs.

The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil Case No. 87-
41058 as modified by the Court of Appeals in CA-G.R. CV No. 21123. On August 30, 1991, respondent Judge
issued an order ordering the defendants to execute the necessary Deed of Sale of the property in litigation
in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15 Million pesos in
recognition of plaintiffs' right of first refusal and that a new Transfer Certificate of Title be issued in favor of
the buyer. All previous transactions involving the same property notwithstanding the issuance of another
title to Buen Realty Corporation, is hereby set aside as having been executed in bad faith. On September 22,
1991 respondent Judge issued another order that a writ of execution be issued and on the same day,
September 27, 1991 the corresponding writ of execution was issued.

The appellate court, on appeal to it by private respondent, set aside and declared without force and
effect the above questioned orders of the court a quo hence, this petition for review.

Whether or not Buen Realty can be held bound by the writ of execution by virtue of the notice of lis
pendens carried over on TCT No. 195816 issued in the name of the corporation at the time it purchased the

c  P a g e

The final judgment in Civil Case No. 87-41058 has merely accorded a "right of first refusal" in favor
of petitioners. The consequence of such a declaration entails no more than what has heretofore been said.
The petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the
remedy is not a writ of execution on the judgment, since there is none to execute, but an action for
damages in a proper forum for the purpose.

In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless
to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither
can the right of first refusal, understood in its normal concept, per se be brought within the purview of an
option under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 Ô
of the same Code. An option or an offer would require, among other things, c a clear certainty on both the
object and the cause or consideration of the envisioned contract. In a right of first refusal, while the object
might be made determinate, the exercise of the right, however, would be dependent not only on the
grantor's eventual intention to enter into a binding juridical relation with another but also on terms,
including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described
as merely belonging to a class of preparatory juridical relations governed not by contracts (since the
essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among
other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct.

Furthermore, whether private respondent Buen Realty Development Corporation, the alleged
purchaser of the property, has acted in good faith or bad faith and whether or not it should, in any case, be
considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058 are matters that
must be independently addressed in appropriate proceedings. Buen Realty, not having been impleaded in
Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent Judge, let
alone ousted from the ownership and possession of the property, without first being duly afforded its day
in court.
c  P a g e


{  #

The subject of the controversy is a parcel of land with two buildings constructed thereon, belonging
to the Intestate Estate of Jose L. Reynoso. This property was leased to Raoul S. Bonnevie and Christopher
Bonnevie by the administratrix, Africa Valdez de Reynoso, for a period of one year, at a monthly rental. The
Contract of lease contained the following stipulation:

V In case the LESSOR desire or decides to sell the lease property, the LESSEES shall be given a first priority to
purchase the same, all things and considerations being equal.͟

On November 3, 1976 Reynoso notified the private respondents by registered mail that she was
selling the leased premises and was giving them 30 days from receipt of the letter within which to exercise
their right of first priority to purchase the subject property.

On January 20, 1977, Reynoso sent another letter to private respondents advising them that in view
of their failure to exercise their right of first priority, she had already sold the property. Upon receipt of this
letter, the private respondents wrote Reynoso informing her that neither of them had received her letter
dated November 3, 1976; that they had advised her agent to inform them officially should she decide to sell
the property so negotiations could be initiated; and that they were "constrained to refuse (her) request for
the termination of the lease.

On March 7, 1977, the leased premises were formally sold to petitioner Guzman, Bocaling & Co.
On April 12, 1977, Reynoso wrote a letter to the private respondents demanding that they vacate the
premises within 15 days for their failure to pay the rentals for four months. When they refuse, Reynoso
filed a complaint for ejectment against them in the then City Court of Manila.

On April 29, 1980, while the ejectment case was pending in the City Court, the private respondents
filed an action for annulment of the sale between Reynoso and herein petitioner Guzman, Bocaling & Co.
and cancellation of the transfer certificate of title in the name of the latter.

What is the remedy of private respondent Raoul Bonnievie?

Rescission is a remedy granted by law to the contracting parties and even to third persons, to
secure reparation 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. It is a relief
allowed for the protection of one of the contracting parties and even third persons from all injury and
damage the contract may cause, or to protect some incompatible and preferent right created by the
contract. Recission implies a contract which, even if initially valid, produces a lesion or pecuniary damage
to someone that justifies its invalidation for reasons of equity.

It is true that the acquisition by a third person of the property subject of the contract is an obstacle
to the action for its rescission where it is shown that such third person is in lawful possession of the subject
of the contract and that he did not act in bad faith. However, this rule is not applicable in the case at bar
because the petitioner is not considered a third party in relation to the Contract of Sale nor may its
possession of the subject property be regarded as acquired lawfully and in good faith.
cÔ  P a g e

    %     c


cÔÔ   cc4

Basilio also known as Cecilio Claudel acquired from the Bureau of Lands Lot No.1230 of the
Muntinlupa Estate Subdivision, located in poblacion Muntinlupa, Rizal with an area of 10107 square meters,
he secured TCT No. 7471 issued by the Registry of Deeds of Rizal in 1023, he also declared the lot in his
name as evidence by a tax declaration no. 5795. He dutifully paid the real taxes thereon and was continued
by his wife Basilia and later her son Jose.
The same land purchased by Cecilio becomes the subject of protracted litigation 39 years after his
death between his heirs and his siblings. In 1972, the heirs of Cecilio partitioned this lot among them and
obtained the corresponding TCT thereof. Four years later the siblings of Cecilio filed a complaint for
cancellation of Titles and Reconveyance with Damages alleging that 46 years earlier their parents had
purchased from the late Cecilio several portions of the lot. They admitted that the transaction was verbal.
How ever a proof of sale, siblings of Cecilio presented a subdivision plan indicated the portion sold to the
siblings of Cecilio. The CFI of Rizal dismissed the complaint disregarding the above sole evidence of the
sibling of Cecilio.

The case was elevated to the CA, which reversed the decision of the trial court. The CA cancelled
the TCT issued in the name of the heirs of Cecilio and corollrily ordered the execution of the Deeds of
Reconveyance to the siblings of Cecilio.

Whether or not contract of sale of land may be proven orally.

The rule is that a sale of land once consummated is valid regardless of the form it may have been
entered into. For nowhere does law or jurisprudence prescribe that the contract of sale be put in writing
before such contract can validly cede or transmit rights over a certain real property between the parties
themselves. However in the event that a third party, as in the case disputes the ownership of the property
the person whom against that claim is brought cannot present any proof of such sale and hence has no
means to enforce the contract.

Thus, the statute of frauds was precisely devised to protect the parties in the contract of sale of real
property so that no such contract is enforceable unless certain requisites for purpose of proof are met. The
purpose of statute of frauds is to prevent fraud and perjury in the enforcement of obligations depending for
their evidence upon the unassisted memory of witness by requiring certain enumerated contracts and
transaction to be evidenced in writing.
a  P a g e


On June 28,1476 dependant spouses Restituto Nonato and Ester Nonato purchase one (1) unit
Volkswagen S akbayan from the People's Car. Inc., on installment basis. To secure complete payment, the
defendants executed a promissory note and a Chattel mortgage in favor of People's Car Inc. Peoples Car Inc
assigned its rights and interests over the note and mortgage in favor of plaintiff Investors Finance Corp
(FNCB Finance). For failure of defendants to pay two or more installments, despite demands, the car was
repossessed by plaintiff on March 20, 1978.

Despite repossession, plaintiff demanded from defendants that they pay the balance of the price of
the car. Finally on June 9,1978. plaintiff filed before the CFI of Negros Occidental the present complaint
against defendants for the latter to pay the balance of the price of the car, with damages and attorney͛s
fees. In there answer Spouses Nonato, alleged by way of defenses that when the company repossessed the
vehicle, it had by that act, effectively cancelled the sale of the vehicle. It is therefore barred from exacting
recovery of the unpaid balance of the purchase price as mandated by the provisions of art 1484 of the Civil

After due hearing, the trial court rendered a decision in favor of the IFC and against the Nonatos.
On appeal the respondent appellate affirmed the judgment. Hence this petition for review on certiorari.

Whether a vendor or his assignee, who had called the sale of a motor vehicle for failure of the
buyer to pay two or more of the stipulated installments, may also demand payments of the balance of the
purchase price.

Article 1484 of the Civil Code-Remedies of a seller where the buyer fails to pay personal property in
installments is alternative not cumulative, that the exercise of one would bar the exercise on the others.
The vendor or seller has the option to avail any of these three remedies, either to exact fulfillment by the
purchaser of the obligation or to cancel the sale, or to foreclose the mortgage on the purchased personal
property, if one was constituted.

The acts of the respondent Corp in repossessing the vehicle for appraisal are wholly consistent with
the conclusion that it had opted to cancel the contract of sale of the vehicle. It is thus barred from exacting
payment from petitioners of the balance of the price of the vehicle which it had already repossessed.
Judgment by the appellate court is set aside; the complaint by IFC against petitioner is dismissed.
ac  P a g e

{''   c

Respondents Dumaraog filed an action against petitioner Guanzon for the redemption of a parcel
of rice land which their mother had mortgaged to defendant and to recover damages. They prayed that the
purported pacto de retro sale be declared a mortgage and that Guanzon be ordered to execute an
instrument of reconveyance after payment by Dumaraog of the loan.

Guanzon denied the allegations of the complaint and alleged that the document executed by Flores
was in fact a pacto de retro sale and that her title as vendee had been consolidated. After trial, the lower
court rendered judgment declaring the document involved to be one of equitable mortgage, and orderd
Guanzon to execute an instrument of reconveyance in favor of Dumaraog. Dumaraog filed with the lower
court a bill of cost for its approval which Guanzon opposed on the ground that she could be liable for costs
only if Dumaraog paid her P1, 500.00 within twenty days from the finality of the decision. Respondent
judge by order approved the said bill of costs and issued an execution of the same.

Whether or not a creditor (Ines Flores) on its own can appropriate the rice land by way of
Whether or not the appropriation of the subject land by way of mortgage is valid?

In no way can the judgment at bar be construed to mean that should the Dumaraog͛s fail to pay
the money within the specified period then the property would be conveyed by the Sheriff to Guanzon.
Any interpretation in that sense would contradict the declaration made in the same judgment that the
contract between the parties was in fact a mortgage and not a pacto de retro sale. The only right of a
mortgagee in case of nonpayment of a debt secured by mortgage would be to foreclose the mortgage and
have the encumbered property sold to satisfy the outstanding indebtedness. The mortgagor͛s default does
not operate to vest in the mortgagee the ownership of the encumbered property, for any such effect is
against public policy as enunciated by Article 2088 of the Civil Code. The Court cannot be presumed to have
adjudged what would be contrary to law, unless it be plain and inescapable from its final judgment Hence,
the order of the Court were in conformity with the original decision that had become final and executor.
Cost against the Petitioner.
aa  P a g e



{ !"' #$%3  

Plaintiffs purchased from the Supreme Sales and Development Corporation two brand new Ford
Consul Sedans payable in 24 monthly installsments. To secure payments, plaintiff executed on the same
date a promissory note covering the purchase price and a deed of chattel mortgage not only on the two
vehicles purchased but also on another car and plaintiffs'franchise or certificate of public convenience for
the operation of a taxe fleet. Then, with the conformity of the plaintiffs, the vendor assigned its rights, title
and interest to the above-mentioned promissory note and chattel mortgage to defendant Filipinas
Investment and Finance Corporation.

Due to the failure of the plaintiffs to pay their monthly installments as per promissory note, the
defendant corporation foreclosed the chattel mortgaged extrajudicially, and at the public auction sale of
the two Ford Consul cars, of which the plaintiffs were not notified, the defendant corporation was the
highest bidder and purchaser. Another auction sale was held involving the remaininng properties subject of
the deed of chattel mortgage since plaintiffs' obligation was not fully satisfied by the sale of the aforesaid
vehicles, and at the public aution sale, the franchise of plaintiffs to operate five units of taxicab to the
highest bidder, herein defendant corporation.

Plaintiffs filed an action for annulment of contract before the CFI of Rizal. The court rendered the
chattel mortgaged null and void in so far as the taxicab franchise and the used Chervolet car of plaintiffs.
Defendants appealed to the CA,then eventually to the SC.

Whether or not the auction sale of the other properties is correct?

Under Art. 1484, of the Civil Code, the vendor may exercise any of the following remedies:

1. Exact fulfillment of the obligation, should the vendee fail to pay;

2. Cancel the sale, should the vendee's failure to pay cover two or more installments;
3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendee's failure to pay cover two or more installment.

In the case at bar, the vendor had already foreclosed the chattel morgaged extrajudicially, thus, he
is limited to the foreclosure of the items sold only and not to other items not subject of the sale although
also given as additional security. In allowing him to do so, would be contrary to public policy and the very
spirit and purpose of the law.
a  P a g e

 %  0    a
{ !"' *  

Before the war with Japan, Francisco Militante filed an application for registration of the parcel of
land in question located in the barrio of General Luna, municipality of Barotac Viejo, province of Iloilo. After
the war, the petition was heard and denied. Pending appeal, Militante sold the land to plaintiff, his son-in-
law and at the same time his counsel in the Land Registration Case. Plaintiff filed an action for forcible entry
against defendant. Defendant, who was the present occupant of the land in question claims that the
complaint of the plaintiff does not state a cause of action, the truth of the matter being that he and his
predecessors-in-interest have always been in actual, open and continuous possession since time
immemorial under claim of ownership of the portions of the lot in question.

Whether or not the contract of sale between plaintiff and his father-in-law was void because it was
made when plaintiff was the counsel of his father-in-law in a land registration case involving the property in

The Supreme Court held that the contract of sale between Francisco Militante and the plaintiff was
inexistent and void from the very beginning.
The stipulated facts and exhibits of record indisputably established plaintiff's lack of cause of action
and justified the outright dismissal of the complaint. Plaintiff's claim of ownership to the land in question
was predicated on the sale thereof made by his father-in- law in his favor, at a time when Militante's
application for registration thereof had already been dismissed by the Iloilo land registration court and was
pending appeal in the Court of Appeals.

Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six
paragraphs certain persons, by reason of the relation of trust or their peculiar control over the property,
from acquiring such property in their trust or control either directly or indirectly and "even at a public or
judicial auction," as follows: (1) guardians; (2) agents; (3) administrators; (4) public officers and employees;
judicial officers and employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by
law. Fundamental consideration of public policy render void and inexistent such expressly prohibited
purchase (e.g. by public officers and employees of government property entrusted to them and by justices,
judges, fiscals and lawyers of property and rights in litigation and submitted to or handled by them, under
Article 1491, paragraphs (4) and (5) of our Civil Code) has been adopted in a new article of our Civil Code,
viz, Article 1409 declaring such prohibited contracts as "inexistent and void from the beginning." Indeed,
the nullity of such prohibited contracts is definite and permanent and cannot be cured by ratification.

The public interest and public policy remain paramount and do not permit of compromise or
ratification. In his aspect, the permanent disqualification of public and judicial officers and lawyers
grounded on public policy differs from the first three 5 ) # 36-, 0 3)(  2,, (-(- 7-(,58)
cëÔc0 , ,8 )90  ( :+ ) (- 5(, ,( + ;)) <,) (+( (+)= 2= ;) >-(,#,)> ;= 2) #
 , >(+) #-2 #  ): 5(-5(0 , :+,5+ 5 ) ,( 8,,(= +88 ;) )()-2,) 8= ;= (+)
5,-562 (5) ( (+) (,2) (+) )?)56(, # 65+ ): 5(-5( +) 56 ) # 688,(= :+,5+ + ) 5) ) (
)?, ( 5( ,2<,- (+) 8,,(= # (+) ): 5(-5( +6 0 (+) ;@)5( :+,5+ : ,88)38 ( (+) (,2) # (+)
#,- ( 5(-5(0 2= + ) 8-)= ;)52) 8:#68 ( (+) (,2) # (+) -(,#,5(, - )5 5(-5(A - (+)
)- ,5) :+,5+ : ,2< ,;8) 2= + ) ;)52) < ,;8)A - (+) ,()(, :+,5+ 568 ( ;)  5)-(,)
2= + ) ;)) 58-,#,) ;= (+) <-(,)  +) -(,#,5(, - )5 5(-5( :68 (+) ;) +&456 )4-,
7(-4 3A +:) )-0 ,( ) ( -)(-5( ( (+) () # (+) #,- ( 5(-5(>
aë  P a g e

"  "

B vs. ! "   ac
{*  '8,-'

In1961, Villegas was retained as counsel of record for Felix Leong, who was appointed as
administrator of the Testate Estate of the Felomina Zerna. A lease contract dated August 13, 1963 was
executed between Felix Leong and the "Heirs of Jose Villegas" involving, among others, sugar lands of the

In 1965, the formal partnership of HIJOS DE JOSE VILLEGAS was formed amongst the heirs of Jose
Villegas, of which Atty. Villegas was a member. In 1968, Atty. Villegas was appointed manager of HIJOS DE
JOSE VILLEGAS by the majority of partners. Renewals of the lease contract were executed between Felix
Leong and HIJOS DE JOSE VILLEGAS on January 13, 1975 and on December 4, 1978, with respondent signing
therein as representative of the lessee.

Mananquil alleges that over a period of 20 years, Villegas allowed lease contracts to be executed
between his client Felix Leong and a partnership, HIJOS DE JOSE VILLEGAS, of which he (Villegas) is one of
the partners, covering several parcels of land of the estate under iniquitous terms and conditions.
Moreover, Mananquil charges that these contracts were made without the approval of the probate court
and in violation of Articles 1491 and 1646 of the new Civil Code.

The Sol. Gen. found that Villegas committed a breach in the performance of his duties as counsel of
administrator Felix Leong when he allowed the renewal of contracts of lease for properties involved in the
testate proceedings to be undertaken in favor of HIJOS DE JOSE VILLEGAS without notifying and securing
the approval of the probate court. However, the Solicitor General opined that there was no sufficient
evidence to warrant a finding that Villegas had allowed the properties to be leased in favor of his family
partnership at a very low rental or in violation of Articles 1491 and 1646 of the new Civil Code. Thus, the
Sol. Gen recommended his suspension from the practice of law for a period of THREE (3) months with a
warning that future misconduct on respondent's part will be more severely dealt with.

Whether or not a lawyer may be a lessee of a property belonging to his client.

Pursuant to Section 3 of Rule 84 of the Revised Rules of Court, a judicial executor or administrator
has the right to the possession and management of the real as well as the personal estate of the deceased
so long as it is necessary for the payment of the debts and the expenses of administration. He may,
therefore, exercise acts of administration without special authority from the court having jurisdiction of the
estate. For instance, it has long been settled that an administrator has the power to enter into lease
contracts involving the properties of the estate even without prior judicial authority and approval. Thus,
Villegas validly executed the contracts.

Nevertheless, contrary to the opinion of the Solicitor General, the SC finds sufficient evidence to
hold Villegas subject to disciplinary sanction for having, as counsel of record for the administrator in Special
Proceedings No. 460, participated in the execution in 1975 and 1978 of renewals of the lease agreement
involving properties of the estate in favor of the partnership HIJOS DE JOSE VILLEGAS, of which Villegas is a
member and in 1968 was appointed managing partner.

By virtue of Article 1646 of the new Civil Code, the persons referred to in Article 1491 are
prohibited from leasing, either in person or through the mediation of another, the properties or things
mentioned in that article, to wit:
xxx xxx xxx
(1) The guardian, the property of the person or persons who may be under his guardianship;
(2) Agents, the property whose administration or sale may have been intrusted to them, unless the consent
of the principal have been given;
(3) Executors and administrators, the property of the estate under administration
(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any
government owned or controlled corporation, or institution, the administration of which has been entrusted
to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take
part in the sale;
a'  P a g e

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and
employees connected with the administration of justice, the property or rights in litigation or levied upon on
execution before the court within whose jurisdiction or territory they exercise their respective functions; this
prohibition includes the act of acquiring by assignment and ,/&& ..&  -  &9 , 94-/ ,.(- -  -/
 . .-  35 48/-, 9/4(/ )   -/ :(- 6 3  &4-48-4 3 43 9/4(/ -/  )  -; .-   +4- 6
 -/4. 6,,4 3
(6) Any others specially disqualified by law

+) ; ) , C68,#,5(, ,2< )  <6;8,5  @6,5,8 ##,5)-  8:=)- , 3-6) 
<6;8,5 <8,5= 5 ,)-(, :+,5+ , 88: (+) (- 5(, )()-) ,( ;= (+)20 :+)(+)- ,-)5(8= -
,,-)5(8=0 , ,): # (+) #,65,-= -)8(, +,< , 8 )0 - (+) <)568,- 5(-8 )?)-5, ) ;= (+) )
,, ,68  )- (+) <-<)-(,) - -,3+( 5 )-)

) ) 5(-5( -) 5 )-) ;= (+) <-+,;,(, 3, ( = 5C6, ,(, - 8) ) ;=  8:=)- #
<-<)-(,) , 8 ) , 8,(,3(, , :+,5+ +) (D) <-( The Court cannot ignore the obvious implication
that respondent as one of the heirs of Jose Villegas and partner, later manager of, in HIJOS DE JOSE
VILLEGAS stands to benefit from the contractual relationship created between his client Felix Leong and his
family partnership over properties involved in the ongoing testate proceedings.

+) <-+,;,(, -)#)--) ( , -(,58) cëÔc  cë # (+) ): , ,8 )0  #-  8:=)- -)
55)-)0 , ,()) ( 56-(,8 = 66) ,#86)5) # (+) 8:=)- 6< +, 58,)(  556( # +,
#,65,-=  5#,)(,8  5,(, +6 0 (+) 8: 2D) (+) <-+,;,(, ; 86()  <)-2)(

Accordingly, the Court must reiterate the rule that the claim of good faith is no defense to a lawyer
who has failed to adhere faithfully to the legal disqualifications imposed upon him, designed to protect the
interests of his client. Considering thus the nature of the acts of misconduct committed by respondent, and
the facts and circumstances of the case, the Court finds sufficient grounds to suspend respondent from the
practice of law for a period of three (3) months.
a  P a g e

% E "
{ ##


It appears on record that respondent LPJ Enterprises, Inc. had a contract to supply 300,000 bags of
cement per year to Atlas Consolidated Mining and Development Corporation (Atlas for short).The cement
was delivered packed in kraft paper bags, then as now, in common use.

Sometime in October, 1970, Cesar Campos, a Vice-President of petitioner Industrial Textile

Manufacturing Company of the Philippines (Itemcop), asked Lauro Panganiban, Jr., President of LPJ, if he
would like to cooperate in an experiment to develop plastic cement bags. Panganiban acquiesced,
principally because Itemcop is a sister corporation of Atlas, LPJ's major client. A few weeks later,
Panganiban accompanied Paulino Ugarte, another Vice-President of Itemcop, to the factory of LPJ's
supplier, to test fifty (50) pieces of plastic cement bags. The experiment, however, was unsuccessful.The
second batch of plastic bags subjected to trial was likewise a failure. Finally, with three hundred (300)
"improved bags", the seepage was substantially reduced. Ugarte then asked Panganiban to send 180 bags
of cement to Atlas via commercial shipping. Consequently, Panganiban agreed to use the plastic cement
bags. Four purchase orders were thereafter issued.

Itemcop delivered the above orders consecutively.LPJ, on the other hand, remitted the amounts of
P1,640.00, P2,480.00. and P13,230.00 respectively, thereby leaving a balance of P84,123.80. No other
payments were made, thus prompting A. Soriano y Cia of Itemcop͛s Legal Department to send demand
letters to LPJ. A collection suit was filed when the demands remained unheeded.

At the trial on the merits, LPJ admitted its liability for the 53,800 polypropylene lime bags covered
by the first purchase order. With respect to the second, third, and fourth purchase orders, LPJ, however,
denied full responsibility there for. LPJ said that it will pay, as it did pay for, only the 15,000 plastic bags it
actually used in packing cement. As for the remaining 47,000 bags, the workers strongly objected to the use
thereof due to the serious health hazards posed by the continued seepage of cement dust. LPJt was,
therefore, constrained to revert to the use of kraft paper bags in packing cement. Thereafter, Itemcop was
asked to take back the unused plastic bags. Considering however, that the bags were in the cement factory
of LPJ's supplier, Itemcop maintained that it was LPJ's obligation to return the bags to them. Apparently,
this was not done and so Itemcop demanded payment for the said bags.

The trial court rendered its decision against LPJ. An appeal was made to the Ca which reversed the
trial court͛s decision. Hence, the present recourse.

Whether or not respondent may be held liable for the 47,000 plastic bags which were not actually
used for packing cement as originally intend.

The SC finds that Article 1502 of the Civil Code, invoked by both parties herein, has no application
at all to this case. The provision in the Uniform Sales Act and the Uniform Commercial Code from which
Article 1502 was taken, clearly requires an express written agreement to make a sales contract either a
"sale or return" or a "sale on approval".

Parol or extrinsic testimony could not be admitted for the purpose of showing that an invoice or bill
of sale that was complete in every aspect and purporting to embody a sale without condition or restriction
constituted a contract of sale or return. If the purchaser desired to incorporate a stipulation securing to him
the right of return, he should have done so at the time the contract was made. On the other hand, the
buyer cannot accept part and reject the rest of the goods since this falls outside the normal intent of the
parties in the "on approval" situation.

In the light of these principles, the SC held that the transaction between respondent and petitioner
constituted an absolute sale. Accordingly, respondent is liable for the plastic bags delivered to it by
petitioner. The decision appealed from is SET ASIDE and the decision of the trial court REINSTATED.
a  P a g e

% "   

Isidro Palanay sold a one hectare portion of his land to Francisca Cardente, Grandmother of Ignacio
Cardente in 1956. which they took possession after the sale, planted crops and trees thereon. However,
without registering the said sale.

On August 18, 1960 Isidro Palanay sold the entire property including the one-hectare portion sold to
Cardente to private respondents Ruperto and Primitiva Rubin. The Deed of Sale was registered and the new
title was issued on their favor.

On December 9, 1972, Isidro Palanay executed Deed of Sale in favor of petitioner Ignacio Cardente.
The deed of confirmation states that the subsequent vendee, Rubin, was informed of the first sale of the
one hectare to Cardente.

On February 18, 1977, the house of the Cardente was burned. The Cardente filed an arson case
against the Rubin.

On March 31, 1977, the Rubin filed a complaint of Quieting of Title against the Cardente.
The trial court ruled in favor of the Cardente and ordered the Rubins͛ to convey the one hectare to the
Cardentes͛. On appeal the IAC reversed the decision of the RTC, hence this appeal.


The heart of the problem is whether or not the private respondents acted in good faith when they
registered the deed of sale dated August 18, 1960 more than six months later, on March 7, 1961.
Inextricably, the inquiry must be directed on the knowledge, or lack of it, of the previous sale of the one-
hectare portion on the part of the second buyers at the time of registration. The trial court found that the
second vendees had knowledge.

DOUBLE SALE: Mere registration of the sale not enough, good faith must concur with registration, bad faith
renders the registration futile.

It is undisputed that the private respondents, the second vendees, registered the sale in their favor
whereas the petitioners, the first buyers, did not. But mere registration of the sale is not enough. Good
faith must concur with registration. Bad faith renders the registration nothing but an exercise in futility. The
law and jurisprudence are very clear on this score.

It is true that good faith is always presumed while bad faith must be proven by the party alleging it.
In this case, however, viewed in the light of the circumstances obtaining, we have no doubt that the private
respondents͛ presumed good faith has been sufficiently overcome and their bad faith amply established.

A buyer of real property in the possession of persons other than the seller must be wary and should
investigate the rights of those in possession.
a  P a g e

 * " 

{  #$%3  

Pursuant to the contract between Engineering &Machinery Corporation (EMC) and Ponciano
Almeda in 1962, the former undertook to fabricate, furnish and install the air-conditioning system in the
latter's building in consideration of P210,000.00. The system was completed in 1963 and accepted by
private respondent, who paid in full the contract price. In 1971, he learned of the defects of the air-
conditioning system of the building.

With the help of an engineer, Almeda found out that the air conditioning system was "not capable
of maintaining the desired room temperature of 76ºF - 2ºF. He then filed an action for damages. The
complaint alleged that the air-conditioning system installed by EMC did not comply with the agreed plans
and specifications. Hence, Almeda prayed for the amount of P210,000.00 representing the rectification
cost, P100,000.00 as damages and P15,000.00 as attorney's fees.

EMC moved to dismiss the complaint, alleging that the prescriptive period of six months had set in
pursuant to Articles 1566 and 1567, in relation to Article 1571 of the Civil Code, regarding the responsibility
of a vendor for any hidden faults or defects in the thing sold.

Almeda countered that the contract was not a contract for sale but a contract for a piece of work
under Article 1713 of the Civil Code. Thus, in accordance with Article 1144 (1) of the same Code, the
complaint was timely brought within the ten-year prescriptive period.

In due course, the trial court rendered a decision in favor of Almeda. Petitioner appealed to the
Court of Appeals, which affirmed the decision of the trial court.

Whether or not the contract is one for a contract of sale or a contract for piece of wok.

Article 1713 of the Civil Code defines a contract for a piece of work thus:
uy the contract for a piece of work the 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.

A contract for a piece of work, labor and materials may be distinguished from a contract of sale by
the inquiry as to whether the thing transferred is one not in existence and which would never have existed
but for the order, of the person desiring it . In such case, the contract is one for a piece of work, not a sale.
On the other hand, if the thing subject of the contract would have existed and been the subject of a sale to
some other person even if the order had not been given, then the contract is one of sale.

The distinction between the two contracts depends on the intention of the parties. Thus, if the
parties intended that at some future date an object has to be delivered, without considering the work or
labor of the party bound to deliver, the contract is one of sale. But if one of the parties accepts the
undertaking on the basis of some plan, taking into account the work he will employ personally or through
another, there is a contract for a piece of work.

Clearly, the contract in question is one for a piece of work. It is not EMC͛s 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. Naturally, the price or compensation for the
system manufactured and installed will depend greatly on the particular plans and specifications agreed
upon with the customers.

The obligations of a contractor for a piece of work are set forth in Articles 1714 and 1715 of the
Civil Code, which provide:
Art. 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver the
thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the
aÔ  P a g e

following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the
payment of price in a contract of sale.

Art. 1715. The contractor shall execute the work in such a manner that it has the qualities agreed upon and
has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work
be not of such quality, the employer may require that the contractor remove the defect or execute another
work. If the contractor fails or refuses to comply with this obligation, the employer may have the defect
removed or another work executed, at the contractor's cost.

The provisions on warranty against hidden defects, referred to in Art. 1714 above-quoted, are
found in Articles 1561 and 1566, which read as follows:

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 his trade or
profession, should have known them.
xxx xxx xxx
Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even
though he was not aware thereof.
This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden
faults or defects in the thing sold.

The 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 manoris),
with damages in either case.

While it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months
for a redhibitory action, that said rule may be applied only in case of implied warranties; and where there is
an express warranty in the contract, as in the case at bench, the prescriptive period is the one specified in
the express warranty, and in the absence of such period, the general rule on rescission of contract, which is
four years (Article 1389, Civil Code) shall apply.

Hence, 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 air-conditioning system.
However, a close scrutiny of the complaint filed in the trial court reveals that the original action is not really
for enforcement of the warranties against hidden defects, but one for breach of the contract itself.

Having concluded that the original complaint is one for damages arising from breach of a written
contract - and not a suit to enforce warranties against hidden defects - we here - with declare that the
governing law is Article 1715 (supra). However, inasmuch as this provision does not contain a specific
prescriptive period, the general law on prescription, which is Article 1144 of the Civil Code, will apply. Said
provision states, inter alia, that actions "upon a written contract" prescribe in ten (10) years. Since the
governing contract was executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is
clear that the action has not prescribed.

WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED.

  P a g e

" %0 /  " % .-  % 



Petitioners are heirs of Perla N. Mercado (Perla). Perla, during her lifetime, owned several pieces of
real property situated in different provinces of the Philippines. Respondent, ABC on the other hand, is a
banking institution duly authorized as such under the Philippine laws.

Perla executed a Special Power of Attorney (SPA) in favor of her husband, Julian D. Mercado (Julian)
over several pieces of real property registered under her name. With the strength of the aforesaid SPA,
Julian, obtained a loan from ABC secured by real estate mortgage constituted on TCT No. RT-18206
(106338) which covers a parcel of land registered with the Registry of Deeds of Quezon City (subject

It appears, however, that there was no property identified in the SPA as TCT No. RT 18206 (106338)
and registered with the Registry of Deeds of Quezon City. What was identified in the SPA instead was the
property covered by TCT No. RT-106338 registered with the Registry of Deeds of Pasig.

Subsequently, Julian defaulted on the payment of his loan obligations. Thus, ABC initiated extra-
judicial foreclosure proceedings over the subject property which was subsequently sold at public auction
wherein ABC was declared as the highest bidder as shown in the Sheriffs Certificate of Sale.

Petitioners initiated with the RTC an action for the annulment of REM constituted over the subject
property on the ground that the same was not covered by the SPA and that the said SPA, at the time the
loan obligations were contracted, no longer had force and effect since it was previously revoked by Perla, as
evidenced by the Revocation of SPA signed by the latter. Petitioners likewise alleged that together with the
copy of the Revocation of SPA, Perla, in a Letter, notified the Registry of Deeds of Quezon City that any
attempt to mortgage or sell the subject property must be with her full consent documented in the form of
an SPA duly authenticated before the Philippine Consulate General in New York.

RTC rendered a Decision declaring the REM constituted over the subject property null and void, for
Julian was not authorized by the terms of the SPA to mortgage the same.

The Court of Appeals reversed the RTC Decision and upheld the validity of the REM constituted over
the subject property on the strength of the SPA. T
Whether or not there was a valid mortgage constituted over the subject property.
Whether or not the Allied Banking Corporation (ABC) was a mortgagee- in- good faith.

‘‘ For a mortgage to be valid, Article 2085 of the Civil Code enumerates the following essential
Art. 2085. The following requisites are essential to the contracts of pledge and mortgage:
(1)That they be constituted to secure the fulfillment of a principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the
absence thereof, that they be legally authorized for the purpose.

In the case at bar, it was Julian who obtained the loan obligations from respondent which he
secured with the mortgage of the subject property. The property mortgaged was owned by his wife, Perla,
considered a third party to the loan obligations between Julian and ABC. It was, thus, a situation recognized
by the last paragraph of Article 2085 of the Civil Code afore-quoted.

In the SPA executed by Perla in favor of Julian, the latter was conferred with the authority to sell,
alienate, mortgage, lease and deal otherwise the different pieces of real and personal property registered
in Perlas name. Likewise, the existence and due execution of this SPA by Perla was not denied or challenged
by petitioners.
c  P a g e

There is no question therefore that Julian was vested with the power to mortgage the pieces of
property identified in the SPA. However, as to whether the subject property was among those identified in
the SPA, so as to render Julian͛s mortgage of the same valid, is a question that must be resolved.
After an examination of the literal terms of the SPA, the SC found that the subject property was not
among those enumerated therein. There is no obvious reference to the subject property covered by TCT
No. RT-18206 (106338) registered with the Registry of Deeds of Quezon City. There was also nothing in the
language of the SPA from which we could deduce the intention of Perla to include the subject property
therein. The SC cannot attribute such alleged intention to Perla who executed the SPA when the language
of the instrument is bare of any indication suggestive of such intention.

In cases where the terms of the contract are clear as to leave no room for interpretation, resort to
circumstantial evidence to ascertain the true intent of the parties, is not countenanced.
Having arrived at the conclusion that Julian was not conferred by Perla with the authority to
mortgage the subject property under the terms of the SPA; the real estate mortgages Julian executed over
the said property are therefore unenforceable.

Assuming arguendo that the subject property was indeed included in the SPA executed by Perla in
favor of Julian, the said SPA was revoked by virtue of a public instrument executed by Perla. Moreover, an
agency is extinguished, among others, by its revocation (Article 1999, New Civil Code of the Philippines).The
principal may revoke the agency at will, and compel the agent to return the document evidencing the
agency.Such revocation may be express or implied (Article 1920, supra).

The Register of Deeds of Quezon City was even notified that any attempt to mortgage or sell the
subject property must have the full consent documented in the form of a special power of attorney duly
authenticated at the Philippine Consulate General, New York City, N.Y., U.S.A.

Settled is the rule in Arrofo vs. Quio that a person dealing with registered lands is not required to
inquire further than what the Torrens title on its face indicates. This rule, however, is not absolute but
admits of exceptions. Thus, while its is true, x x x that a person dealing with registered lands need not go
beyond the certificate of title, it is likewise a well-settled rule that a purchaser or mortgagee cannot close his
eyes to facts which should put a reasonable man on 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 or mortgagor. His mere refusal to face up
the fact that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect
in the vendors or mortgagors title, will not make him an innocent purchaser for value, if it afterwards
develops that the title was in fact defective, and it appears that he had such notice of the defect as would
have led to its discovery had he acted with the measure of precaution which may be required of a prudent
man in a like situation.

By putting blinders on its eyes, and by refusing to see the patent defect in the scope of Julians
authority, easily discernable from the plain terms of the SPA, ABC cannot now claim to be an innocent

This principle is applied more strenuously when the mortgagee is a bank or a banking institution.
Thus, in the case of Cruz v. uancom Finance Corporation, we ruled:

Respondent, however, is not an ordinary mortgagee; it is a mortgagee-bank. As such, unlike private

individuals, it is expected to exercise greater care and prudence in its dealings, including those involving registered
lands .A banking institution is expected to exercise due diligence before entering into a mortgage contract. The
ascertainment of the status or condition of a property offered to it as security for a loan must be a standard and
indispensable part of its operations

Hence, considering that the property being mortgaged by Julian was not his, and there are
additional doubts or suspicions as to the real identity of the same, ABC should have proceeded with its
transactions with Julian only with utmost caution. As a bank, ABC must subject all its transactions to the
most rigid scrutiny, since its business is impressed with public interest and its fiduciary character requires
high standards of integrity and performance. Where ABC acted in undue haste in granting the mortgage
loans in favor of Julian and disregarding the apparent defects in the latter͛s authority as agent, it failed to
discharge the degree of diligence required of it as a banking corporation.
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Zenaida Manero purchased a parcel of land covered by TCT No. 33912 from Manolita G. Suntay. At
the time of the sale, the certificate of title was free from encumbrances. The deed of sale was registered
and the said certificate of title was cancelled and in lieu thereof TCT No. 55932 was issued in the name of
Manero. Subsequently, however, the G.S.I.S. filed an affidavit of adverse claim which was annotated on
Manero' s title, on the basis of its interest as mortgagee of said property, which was offered as security to
the still outstanding loan GSIS issued in favor of Suntay, from whom Manero purchased subject land.

Manero filed a petition for cancellation of the GSIS's adverse claim annotated on Transfer
Certificate of Title No. 55932. Said petition stated among others that the adverse claim was improperly
annotated on Manero's title because the GSIS mortgage lien as it appears on the face of TCT No. 33912 was
already cancelled and that consequently, her purchase of the lot in question was done in good faith; that as
a buyer in good faith and for value, there cannot exist any privity with GSIS and, therefore, its claim cannot
be properly annotated on her title.

The petition was heard on both documentary and testimonial evidence. Atty. Jose Castañeda, as
the attorney-in-fact of private respondent Manero, testified as the latter's sole witness stating that he and
Manero approached Suntay and in the course of their negotiation, Atty. Castañeda asked Suntay whether
the property was still mortgaged to oppositor GSIS. Suntay assured them that she had paid her loan with
oppositor GSIS as shown by the payments embodied in Receipts. The payments were supported by the
marks of the validating machine appearing on said receipts.

GSIS narrated that after unearthing some anomalies in its office, it discovered that the titles of
Suntay covering properties in Manila, Rizal, Tagaytay City and Bataan used as collaterals to secure a loan
were missing from its storage rooms. Consequently, it filed a petition for the issuance of owner's duplicate
copy of the certificate of title covering the property' situated in Bataan. But upon being informed by the
Office of the ROD of Bataan that the land covered by TCT No. 33912 in the name of Suntay was already
transferred to Manero under TCT No. 55932, it withdrew its petition for issuance of another owner's
duplicate copy and instead, filed an affidavit of adverse claim with the Office of the ROD which affidavit
was, subsequently, annotated on TCT No. 55932. The trial court found in favor of Manero. On appeal, the
CA affirmed the decision of the trial court.

Whether or not Zenaida Manero was an innocent purchaser in good faith and for value.

The position of the GSIS unsustainable. It does not appear to be a real and genuine issue. GSIS
accuses Manero of being a buyer in bad faith, being fully aware of the existing mortgage over the land in
question executed in its favor by mortgagee Suntay.

A purchaser in good faith and for value is one who buys 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 claims or interest of some other person in the
property. Contrary to the allegations of the GSIS that Manero is not a purchaser in good faith and for value,
it will be noted that when Manero bought the land in question from Suntay the annotation of mortgage lien
in favor of GSIS at the back of Transfer Certificate of Title No. 33912 has already been cancelled by the deed
of release of mortgage issued by petitioner GSIS and, therefore, the title is already free from all liens and
encumbrances. The allegation of petitioner GSIS that the said deed of release of mortgage was fraudulent is
untenable since there was no showing or proof that Manero had any knowledge thereof or was a party to
the alleged forgery. Even the fact that Manero and Suntay were friends and that the former was an
employee of the latter are not sufficient to overthrow the presumption of good faith absent any clear and
convincing proof that would show that Manero had knowledge of any flaw in the title of Suntay.

Under the established principles of land registration law, the person dealing with registered land
may generally rely on the correctness of its certificate of title and the law will in no way oblige him to go
beyond the certificate to determine the condition of the property. WHEREFORE, the petition is hereby
DENIED and the decision of respondent Court of Appeals AFFIRMED.
  P a g e

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Pedro Calapine was the registered owner of a parcel of land with an area of 12,199 square meters,
as evidenced by Original Certificate of Title No. P-2129. On April 26, 1984, he executed a deed entitled
Pagbibigay-Pala ceding one-half portion thereof to his niece Helen S. Doria.

On July 26, 1984, another deed identically entitled was purportedly executed by Pedro Calapine
ceding unto Helen S. Doria the whole of the parcel of land covered by OCT No. P-2129 (Exhibits C and D), on
the basis of which said original certificate was cancelled and in lieu thereof Transfer Certificate of Title No.
T-23205 was issued in her name .

On February 26, 1986, Helen S. Doria donated a portion of 157 square meters of the parcel of land
covered by TCT No. T-23205 to the Calauan Christian Reformed Church, Inc. on the basis of which said
transfer certificate of title was cancelled and TCT No. T-24444 was issued in its name covering 157 square
meters and TCT No. T-24445, in the name of Helen S. Doria covering the remaining portion of 12,042
square meters.
On March 25, 1988, Helen S. Doria sold, transferred and conveyed unto the spouses Romulo and Sally
Eduarte the parcel of land covered by TCT No. T-24445, save the portion of 700 square meters on which the
vendors house had been erected ), on the basis of which TCT No. 24445 was cancelled and in lieu thereof
TCT No. T-27434, issued in the name of the vendees.

Claiming that his signature to the deed of donation (Exhibits C and D) was a forgery and that, she
was unworthy of his liberality, Pedro Calapine brought suit against Helen S. Doria, the Calauan Christian
Reformed Church, Inc. and the spouses Romulo and Sally Eduarte to revoke the donation made in favor of
Helen S. Doria , to declare null and void the deeds of donation and sale that she had executed in favor of
the Calauan Christian Reformed Church, Inc. and the spouses Romulo and Sally Eduarte and to cancel TCT
Nos. T-24444, 24445 and T-27434.

The RTC rendered judgment in favor of plaintiff and against defendant Eduartes which was affirmed
by the Court of appeals. Hence this appeal.

Whether or not a forged or fraudulent document may vest title under the Torrens System.

Although generally a forged or fraudulent deed is a nullity and conveys no title, however there are
instances when such a fraudulent document may become the root of a valid title. One such instance is
where the certificate of title was already transferred from the name of the true owner to the forger, and
while it remained that way, the land was subsequently sold to an innocent purchaser. For then, the vendee
had the right to rely upon what appeared in the certificate.

Where there was nothing in the certificate of title to indicate any cloud or vice in the ownership of
the property, or any encumbrance thereon, the purchaser is not required to explore further than what the
Torrens Title upon its face indicates in quest for any hidden defect or inchoate right that may subsequently
defeat his right thereto. If the rule were otherwise, the efficacy and conclusiveness of the certificate of title
which the Torrens System seeks to insure would entirely be futile and nugatory."

The established rule being that the rights of an innocent purchaser for value must be respected
and protected notwithstanding the fraud employed by the seller in securing his title.

!n this regard, it has been held that the proper recourse of the true owner of the property who was
prejudiced and fraudulently dispossessed of the same is to bring an action for damages against those who
caused or employed the fraud.
ë  P a g e

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On September 6, 1968, Chu Kim Kit, represented by his uncle, Chu Tong U , filed in the Court of First
Instance of Leyte against Felisa Boyano an action for cancellation of the latter's Certificate of Title No. T-
1439. The complaint alleged that Chu Kim Kit, a Chinese national and son of defendant Boyano, is the
absolute owner of a commercial lot and building in Rizal Avenue, Tacloban City, registered in his name
under TCT No. T-1412 of the Registry of Deeds of Tacloban City. In 1945, Chu Kim Kit went to mainland
China and he was prevented from returning to the Philippines when the Communists took over mainland
China. Through letters, he requested Chu Tong U to take care of his aforementioned property. Although
defendant Boyano was aware that her son was still alive, she executed an affidavit adjudicating to herself as
his sole heir the above-described property and by means of which, she was able to obtain Transfer
Certificate of Title No. T-1439 in her name. Thereafter, she mortgaged the property to the Philippine
National Bank, Tacloban Branch, to secure a loan of P25,000 and she is about to dispose of the property.

On October 11, 1968, the defendant filed her answer, admitting that Chu Kim Kit was still alive but
she alleged that she signed the affidavit of adjudication without having read its contents, the same being
written in English which she does not understand. As affirmative defense, she alleged that plaintiff Chu
Tong U is not the real party in interest, being only an uncle of Chu Kim Kit and co-heir to his estate. Lucy
Perez and the Philippine National Bank, as mortgagees, were allowed by the trial court to intervene in the
action. On February 27, 1970, the trial court rendered a decision in favor of the plaintiff. Both intervenors,
appealed the decision to the Court of Appeals. On February 27, 1976, the Court of Appeals rendered
judgment affirming the trial court's decision. It ruled among others that the plaintiff is Chu Kim Kit, the real
party in interest. Granting, arguendo, that the intervenors are mortgagees in good faith, as between them
and the innocent owner, the latter is entitled to first consideration. The PNB elevated the case before the
Supreme Court seeking a review of the Court of Appeals' decision.

Whether or not PNB is an innocent mortgagee in good faith and for value.

There is no question that the petitioner PNB is a mortgagee in good faith and for value. At the time
the mortgage was constituted on the property on October 30, 1963, it was covered by TCT No. T-1439 in
the name of Felisa Boyano.The title carried no annotation, defect or flaw that would have aroused
suspicion as to its authenticity. "The certificate of title was in the name of the mortgagor when the land was
mortgaged to the PNB. Such being the case, petitioner PNB had the right to rely on what appeared on the
certificate of title, and in the absence of anything to excite suspicion, it was under no obligation to look
beyond the certificate and investigate the title of the mortgagor appearing on the face of the certificate.

Where innocent third persons relying on the correctness of the certificate of title issued, acquire
rights over the property, the court cannot disregard such rights and order the total cancellation of the
certificate for that would impair public confidence in the certificate of title; otherwise everyone dealing
with property registered under the Torrens System would have to inquire in every instance as to whether
the title had been regularly or irregularly issued by the court. Indeed, this is contrary to the evident purpose
of the law. Every person dealing with registered land may safely rely on the correctness of the certificate of
title issued therefor and the law will in no way oblige him to go behind the certificate to determine the
condition of the property. Stated differently, an innocent purchaser for value relying on a torrens title
issued is protected. A mortgagee has the right to rely on what appears in the certificate of title and, in the
absence of anything to excite suspicion, he is under no obligation to look beyond the certificate and
investigate the title of the mortgagor appearing on the face of said certificate.

The right or lien of an innocent mortgagee for value upon the land mortgaged must be respected
and protected, even if the mortgagor obtained his title through fraud. The remedy of the persons
prejudiced is to bring an action for damages against those who caused the fraud, and if the latter are
insolvent, an action against the Treasurer of the Philippines may be filed for recovery of damages against
the Assurance Fund. The complaint is dismissed. The real estate mortgages in favor of the Philippine
National Bank and Lucy Perez are declared valid, legal and enforceable, without prejudice to the right of the
property owner, Chu Kim Kit to exercise the mortgagor's right of redemption and to claim reimbursement
with damages from the mortgagor, Felisa Boyano. Costs against the private respondent.