Professional Documents
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Law On Sales Digested Cases
Law On Sales Digested Cases
Held:
ZIGA) and SALVACION S. TRIA, petitioners,
vs. VICENTE RODRIGUEZ, respondent. Civil Code provides that By the contract of sale
one of the contracting parties obligates himself
G.R. No. 135634 May 31, 2000 to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor
Facts: a price certain in money or its equivalent.
Juan andres was the owner of the lot A contract of sale may be absolute or
situated in liboton, naga city. The sale was conditional.
evidenced by a deed of sale. Upon the death of
juan andres, ramon san andres was appointed As thus defined, the essential elements of sale
as administrator of the estate, and hired are the following:
geodetic engineer. Jose panero prepared a
consolidated plan of the estate and also a) Consent or meeting of the minds, that is,
prepared a sketch plan of the lot sold to consent to transfer ownership in exchange for
respondent. It was found out that respondent the price;
had enlarged the area which he purchased from
juan. The administrator sent a letter to the b) Determinate subject matter; and,
respoindent to vacate the said portion in which
the latter refused to do. 12
c) Price certain in money or its equivalent.
Respondent alleged that apart from the original
lot, which had been sold to him, the latter As shown in the receipt, dated September 29,
likewise sold to him the following day the 1964, the late Juan San Andres received
remaining portion of the lot. He alleged that the P500.00 from respondent as "advance payment
payment for such would be affected in 5 years for the residential lot adjoining his previously
from the eecution of the formal deed of sale after paid lot on three sides excepting on the
a survey is conducted. He also alleged that frontage; the agreed purchase price was P15.00
under the consent of juan, he took possession of per square meter; and the full amount of the
the same and introduced improvements thereon. purchase price was to be based on the results of
a survey and would be due and payable in five
(5) years from the execution of a deed of sale.
Respondent deposited in court the balance of
the purchase price amounting to P7,035.00 for
the aforesaid 509-square meter lot. Petitioner's contention is without merit. There is
no dispute that respondent purchased a portion
of Lot 1914-B-2 consisting of 345 square
On September 20, 1994, the trial court rendered meters. This portion is located in the middle of
judgment in favor of petitioner. It ruled that there Lot 1914-B-2, which has a total area of 854
was no contract of sale to speak of for lack of a square meters, and is clearly what was referred
valid object because there was no sufficient to in the receipt as the "previously paid lot."
indication to identify the property subject of the Since the lot subsequently sold to respondent is
sale, hence, the need to execute a new contract. said to adjoin the "previously paid lot" on three
sides thereof, the subject lot is capable of being
Respondent appealed to the Court of Appeals, determined without the need of any new
which on April 21, 1998 rendered a decision contract. The fact that the exact area of these
reversing the decision of the trial court. The adjoining residential lots is subject to the result
appellate court held that the object of the of a survey does not detract from the fact that
contract was determinable, and that there was a they are determinate or determinable. As the
conditional sale with the balance of the purchase Court of Appeals explained: 15
price payable within five years from the
execution of the deed of sale. Concomitantly, the object of the sale is certain
and determinate. Under Article 1460 of the New
Issue: whether or not there was a valid sale. Civil Code, a thing sold is determinate if at the
time the contract is entered into, the thing is
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capable of being determinate without necessity parties is absolute, not conditional. There is no
of a new or further agreement between the reservation of ownership nor a stipulation
parties. Here, this definition finds realization. providing for a unilateral rescission by either
party. In fact, the sale was consummated upon
Thus, all of the essential elements of a contract the delivery of the lot to respondent. 20 Thus, Art.
of sale are present, i.e., that there was a 1477 provides that the ownership of the thing
meeting of the minds between the parties, by sold shall be transferred to the vendee upon the
virtue of which the late Juan San Andres actual or constructive delivery thereof.
undertook to transfer ownership of and to deliver
a determinate thing for a price certain in money. The stipulation that the "payment of the full
As Art. 1475 of the Civil Code provides: consideration based on a survey shall be due
and payable in five (5) years from the execution
The contract of sale is perfected at the moment of a formal deed of sale" is not a condition which
there is a meeting of minds upon the thing which affects the efficacy of the contract of sale. It
is the object of the contract and upon the price. . merely provides the manner by which the full
. .That the contract of sale is perfected was consideration is to be computed and the time
confirmed by the former administrator of the within which the same is to be paid. But it does
estates, Ramon San Andres, who wrote a letter not affect in any manner the effectivity of the
to respondent on March 30, 1966 asking for contract. Consequently, the contention that the
P300.00 as partial payment for the subject lot. absence of a formal deed of sale stipulated in
As the Court of Appeals observed: the receipt prevents the happening of a sale has
no merit.
Without any doubt, the receipt profoundly
speaks of a meeting of the mind between San The claim of petitioners that the price of
Andres and Rodriguez for the sale. Evidently, P7,035.00 is iniquitous is untenable. The
this is a perfected contract of sale on a deferred amount is based on the agreement of the parties
payment of the purchase price. All the pre- as evidenced by the receipt (Exh. 2). Time and
requisite elements for a valid purchase again, we have stressed the rule that a contract
transaction are present. is the law between the parties, and courts have
no choice but to enforce such contract so long
as they are not contrary to law, morals, good
There is a need, however, to clarify what the
customs or public policy. Otherwise, court would
Court of Appeals said is a conditional contract of
be interfering with the freedom of contract of the
sale. Apparently, the appellate court considered
parties. Simply put, courts cannot stipulate for
as a "condition" the stipulation of the parties that
the parties nor amend the latter's agreement, for
the full consideration, based on a survey of the
to do so would be to alter the real intentions of
lot, would be due and payable within five (5)
the contracting parties when the contrary
years from the execution of a formal deed of
function of courts is to give force and effect to
sale. It is evident from the stipulations in the
the intentions of the parties.
receipt that the vendor Juan San Andres sold
the residential lot in question to respondent and
undertook to transfer the ownership thereof to The decision of the Court of Appeals is
respondent without any qualification, reservation AFFIRMED with the modification that
or condition. respondent is ORDERED to reimburse
petitioners for the expenses of the survey.
A deed of sale is considered absolute in nature
where there is neither a stipulation in the deed
that title to the property sold is reserved in the
seller until full payment of the price, nor one
giving the vendor the right to unilaterally resolve
the contract the moment the buyer fails to pay
within a fixed period.
Facts: Also worth noting is the fact that in the case filed
by Severino's tenant against Severino and
petitioner in 1989, assailing the validity of the
Severino sold his property to henry. Henry
sale made to petitioner, Severino explicitly
applied for a loan with philam life. As It was
asserted in his sworn answer to the complaint
already approved pending the submission of
that the sale was a legitimate transaction. He
certain documents such as the owners duplicate
further alleged that the ejectment case filed by
of transfer certificate of title which is in
petitioner against the tenant was a legitimate
possession of severino.
action by an owner against one who refuses to
turn over possession of his property.
Henry already took possession of the property in
question after ejectment of the lessees. He also
It should be emphasized that the non-
paid an ernest money of 300,000 under the
appearance of the parties before the notary
premise that it shall be forfeited in favor of
public who notarized the deed does not
severino in case of nonpayment.
necessarily nullify nor render the parties'
transaction void ab initio. We have held
Severino now claims ownership over the previously that the provision of Article 1358 of
property claiming that henry did not pay for the the New Civil Code on the necessity of a public
property, therefore there was no sale to speak document is only for convenience, not for validity
of. or enforceability. Failure to follow the proper
form does not invalidate a contract. Where a
Issue: whether or not there is a contract of sale contract is not in the form prescribed by law, the
perfected in this case. parties can merely compel each other to
observe that form, once the contract has been
Held: there was a perfected contract of sale due perfected.35 This is consistent with the basic
to the second deed of sale. principle that contracts are obligatory in
whatever form they may have been entered into,
The basic characteristic of an absolutely provided all essential requisites are present.3
simulated or fictitious contract is that the
apparent contract is not really desired or The elements of a valid contract of sale under
intended to produce legal effects or alter the Art. 1458 of the Civil Code are: (1) consent or
juridical situation of the parties in any way. 30 meeting of the minds; (2) determinate subject
However, in this case, the parties already matter; and (3) price certain in money or its
undertook certain acts which were directed equivalent.37 In the instant case, the second
towards fulfillment of their respective covenants deed reflects the presence of all these elements
under the second deed, indicating that they and as such, there is already a perfected
intended to give effect to their agreement. contract of sale.
Further, the fact that Severino executed the two The non-payment of the contract price merely
deeds in question, primarily so that petitioner results in a breach of contract for non-
could eject the tenant and enter into a performance and warrants an action for
loan/mortgage contract with Philam Life, is to rescission or specific performance under Article
our mind, a strong indication that he intended to 1191 of the Civil Code.
transfer ownership of the property to petitioner.
For why else would he authorize the latter to sue Be that as it may, we agree with petitioner that
the tenant for ejectment under a claim of although the law allows rescission as a remedy
ownership, if he truly did not intend to sell the for breach of contract, the same may not be
property to petitioner in the first place? Needless availed of by respondents in this case. To begin
to state, it does not make sense for Severino to with, it was Severino who prevented full
allow petitioner to pursue the ejectment case, in payment of the stipulated price when he refused
petitioner's own name, with petitioner arguing to deliver the owner's original duplicate title to
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Philam Life. His refusal to cooperate was
unjustified, because as Severino himself
admitted, he signed the deed precisely to enable
petitioner to acquire the loan. He also knew that
the property was to be given as security
therefor. Thus, it cannot be said that petitioner
breached his obligation towards Severino since
the former has always been willing to and could
comply with what was incumbent upon him.
PEOPLE OF THE PHILIPPINES v. ELIZABETH Whether the trial court erred in finding
GANGUSO that the prosecution has fully met the test of
moral certainty as to the guilt of the accused on
G.R. No. 115430 November 23, 1995 both charges of violation of section 15, Article III
of the Dangerous Drugs Act of 1972 and of
DAVIDE, JR., J.: illegal possession of firearms.
Facts: Decision:
Major Juvenile Sulapas, Officer-in- The instant appeal is partly granted, and
charge, Dangerous Drugs Enforcement Section, the challenged decision of the Regional Trial
Pasay City Police Station, received a Court of Pasay City is modified. As modified,
confidential report from an informant about the accused-appellant Beth is acquitted for the
rampant trafficking of drugs by Elizabeth charge of illegal possession of firearms on
Ganguso y Decena a.k.a. "Beth Tomboy". ground of reasonable doubt. The penalty
imposed on her for the violation of section 15,
A buy-bust operation was planned with Article III of the Dangerous Drugs Act of 1972 is
Dennis Vermug acting as poseur-buyer, backed- reduced to an indeterminate sentence of three
up by SPO1 Lumapat, SPO1 Gabutin, PO3s months of arresto mayor, as minimum, to three
Mendoza and Garcia with SPO3 Fucanan as years of prision correccional, as maximum.
team leader.
Ratio Decidendi:
The operation was carried out and they
were successful in arresting Beth for the Supreme Court held that the
violation of Dangerous Drugs Act of 1972. At elements of a contract of sale were present.
the same time, they were able to recover a .38 Beth is presumed to have given her consent
caliber Paltik revolver from the suspect. by not inquiring as to the meaning of “S”
when the officer posed to buy “Php 500
Several documentary exhibits were worth of S”. Therefore, there was a meeting
presented as evidence to the crime. Beth made of minds upon a definite object and upon the
statements in her testimony different to that of price.
the police’s: policemen barged into her house,
searched the premises and her person without a Though she was not in possession of
warrant and; denied the revolver recovered from the object of sale, Article 1459 merely
her. requires that the vendor must have the right
to transfer ownership of the object sold at
At the trial, defense presented two the time of delivery. In the case at bar,
witnesses who also claimed that no buy bust though Beth is not the owner, she had the
operation took place and no revolver was in the right to dispose of the prohibited drug.
possession of the suspect. Ownership was thereafter acquired upon her
delivery to the men in the alley after her
Nevertheless, the Regional Trial Court payment of the price.
of Pasay convicted her of both charges. She
was sentenced to suffer the penalty of life Supreme Court also held that failure to
imprisonment and to pay a fine plus costs for the conduct prior surveillance and absence of
crime involving drugs. She was also sentenced marked money does not affect the evidence of
to an indeterminate penalty of ten years and one the prosecution. It is sufficient that the members
day of prision mayor, as minimum, to twelve of the operation were accompanied by the
years and one day, as maximum, with fine and informant to the scene; the sale was adequately
costs for the crime of illegal possession of proven and; the drug subject was presented
firearms. before the court.
RULING:
Ruling:
1. The petitioneres had a cause of action to
institute an ejectment suit against the lessee
with the City Court thus the city court (now
MTC) has jurisdiction over it. The filing of
lessor of a suit with the RTC did not divest
Rulings:
1. There is a valid Contract of Sale
because all the essential elements are
present. In herein case, petitioner’s
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LAGRIMAS A. BOY, petitioner, ABUSED ITS DISCRETION IN NOT
vs. INTERPRETING THAT THE
COURT OF APPEALS, ISAGANI P. RAMOS "KASUNDUAN" EXECUTED BY AND
and ERLINDA GASINGAN RAMOS, BETWEEN PETITIONER
respondents. (DEFENDANT) AND PRIVATE
RESPONDENT (PLAINTIFF)
April 14, 2004 G.R. No. 125088 SUPERSEDES THE DEED OF SALE
WHICH HAS NOT BEEN
CONSUMMATED. NO.
FIRST DIVISION
Ruling:
AZCUNA, J.:
In their Answer with Counterclaim, VISAYAN The trial court ruled, however, and the public
SAWMILL insisted that the cancellation of the respondent was in agreement, that there had
contract was justified because of Hibionada’s been an implied delivery in this case of the
non-compliance with essential preconditions, subject scrap iron because on 17 May 1983,
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private respondent's men started digging up and
gathering scrap iron within the petitioner's
premises. The entry of these men was upon the
private respondent's request.
Held:
It is expressly provided by law that the thing sold
shall be understood as delivered, when it is
placed in the control and possession of the
vendee. Where there is no express provision
that title shall not pass until payment of the
price, and the thing gold has been delivered, title
passes from the moment the thing sold is placed
SPOUSES CAMILO L. SABIO, and MA.
in the possession and control of the buyer.
MARLENE A. LEDONIO-SABIO, petitioners,
Delivery produces its natural effects in law, the
vs. THE INTERNATIONAL CORPORATE
principal and most important of which being the
BANK, INC. (now UNION BANK OF THE
conveyance of ownership, without prejudice to
PHILIPPINES), GOLDENROD, INC., PAL
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EMPLOYEES SAVINGS AND LOAN sufficient since actual possession, control and
ASSOCIATION, INC., AYALA CORPORATION, enjoyment is a main attribute to ownership.
LAS PINAS VENTURES, INC., FILIPINAS LIFE
ASSURANCE COMPANY(now AYALA LIFE Held:
ASSURANCE, INC.), AYALA PROPERTY
VENTURES CORPORATION, and AYALA Under Article 1498 of the Civil Code,
LAND, INC., respondents. “when the sale is made through a public
instrument, the execution thereof shall be
G.R. No. 132709. September 4, 2001. equivalent to the delivery of the object of the
contract , if from the deed the contrary does not
YNARES-SANTIAGO, J.: appear or cannot be inferred.” Possession is
also transferred, along with ownership thereof,
Facts: to the petitioners by virtue of the deed of
conveyance. Petitioner’s contention that
The object of the controversy is a respondents “never acquired ownership over the
portion of a vast tract of land located at Tindig subject property since the latter was never in
na Manga, Almanza, Las Pinas City. The possession of the subject property nor was the
spouses Gerardo and Emma Ledonio, assigned property ever delivered” is totally without merit.
to the spouses Camilo and Ma. Marlene Sabio The mere execution of the deed of conveyance
(herein petitioners) all their rights, interests, title in a public document is equivalent to the delivery
and participation over a contiguous portion of of the property. Since the execution of the deed
the subject property measuring 119,429 square of conveyance is deemed equivalent to delivery,
meters. Similarly, while the subject property prior physical delivery or possession is not
was still the object of several pending cases, the legally required. The deed operates as a formal
International Corporate Bank, Inc. (or Interbank) or symbolic delivery of the property sold and
acquired from the Trans-Resource Management authorizes the buyer or transferee to use the
and Development Corporation all of the latter’s document as proof of ownership. Nothing more
rights to the subject property by virtue of a deed is required.
of assignment executed between them.
Issue:
July 8, 1991
Third Division
Justice Gutierrez, Jr.
Meanwhile a civil case entitled ‘”Gelac Trading, The sale of the object tractor was consummated
Inc v. Wilfredo Dy was pending in another court upon the execution of the public instrument. At
in Cebu regarding a collection case to recover a this time constructive delivery was already
sum. Through an alias writ of execution, the effected. Hence, the subject tractor was no
sheriff was able to seize and levy on the tractor longer owned by Wilfredo Dy when it was levied
which was in the premises of Libra in Carmen, upon by the sheriff(Dy, Jr. vs. Court of Appeals).
Cebu. The tractor was subsequently sold at
public auction. The property was sold to Antonio
Gonzales. It was only when the check was
cleared that Perfecto learned about Gelac
having already taken custody of the subject
tractor.
Petitoner delivered the orders consecutively but Therefore, we hold that the transaction between
the respondent only remitted a part of the total the respondent and petitioner constituted an
amount leaving a balance of P84, 123.80 Thus, absolute sale. Accordingly, respondent is liable
the legal department of the petitioner sent for the plastic bags delivered to it by
demand letters to respondent corporation petitioner(Industrial Textile Manufacturing
Company of the Phils. v. LPJ Enterprises, Inc,
On the trial, the respondent admitted its liability pp 326-327).
covered by the first purchase. With respect to
the second, third, fourth purchase orders,
respondent, however, denied full responsibility.
Respondent said that it will pay for, only the
plastic bags actually used in packing cement.
Issue:
Whether or not respondent may be held liable
for the plastic bags which were not actually
used for packaging cement as originally
intended.
HELD:
Facts: Spouses Salera filed an action for The Court of Appeals is wrong. Article 1544 of
quieting of title regarding a parcel of land in the Civil Code contemplates a case of double
Brgy. Basud, San Isidro, Leyte. The land was sale or multiple sales by a single vendor.
bought from the heirs of Brigido Tonacio as More specifically, it covers a situation where a
evidenced by the Deed of Absolute Sale single vendor sold one and the same immovable
executed on June 23, 1986. They allege that property to two or more buyers. Art. 1544 does
they have been in possession of the property not apply in this case since the sale was made
and the house they built thereon because they by Catalino and the heirs of Brigido.
had paid the purchase price even before the
execution of the deed of sale. When they asked Bad faith was established in the RTC. The
the Provincial Assessor to declare the property evidence submitted to the court, established that
under their names for taxation purposes, they Spouses Rodaje knew beforehand that the
found that Tax Declaration No. 2994 (R-5) in property was declared in the name of Brigido
the name of Brigido was already cancelled and Tonacao for taxation purposes. Any lot buyer is
another one, Tax Declaration No. 2408, was expected to be vigilant, exercising utmost care in
issued in the names of Spouses Rodaje. determining whether the seller is the true owner
of the property and whether there are other
Spouses Rodaje claimed that they bought the claimants. There is no indication from the
land from Catalino Tonacio, father of Brigido on record that Rodaje first determined the status of
June 6, 1986 and that the sale was registered the lot.
with the Register of Deeds and the Tax
Declaration No. 2408 was issued in their name. While tax declarations are not conclusive proofs
They also claimed that they had a verbal of ownership, however, they are good indicia of
contract with Catalino even before the execution possession in the concept of owner, for no one
of the sale since January 1984. They paid a in his right mind would be paying taxes for a
downpayment of P1,000 and paid the balance of property that is not in his actual or at least
P4,000 when the sale was executed. They constructive possession. Hence, Catalino, not
allege that they been in exercising their right of being the owner or possessor, could not validly
ownership over the property and the building sell the lot to respondents.
constructed thereon peacefully, publicly,
adversely and continuously. Apart from being The certification presented by respondents
the first registrants, they are buyers in good clearly shows that the house is owned by Aida
faith. Salera and that respondents started paying the
electric bills (in the name of Aida Salera) only in
RTC of Calubian, Leyte declared Spouses 1986. The respondents proof of payment of
Salera as the rightful and legal owners while realty tax from the period of 1974 to 1984 was
declaring null and void the Deed of Absolute paid in lump sum.
Sale between Catalino and herein respondents
and ordering the cancellation of Tax Declaration (Petition is GRANTED. The assailed Decision
No. 2408 issued. The court cited that the real of the Court of Appeals is REVERSED and the
owners of the land, by operation of the law on Decision of the trial court is REINSTATED.)
succession would be the heirs of Brigido and not
his father. Catalino had no legal personality to
sell the parcel of land.
Held:
On October 30, 1985, the Avenue Group filed an
ejectment case against petitioners ordering the
latter to vacate the commercial building standing On Novation
on the lot in question.
Novation is never presumed; it must be
Petitoners filed an amended complaint sufficiently established that a valid new
impleading the Avenue Group as new agreement or obligation has extinguished or
defendants after about 4 years after the filing of changed an existing one. The registration of a
the original complaint. later sale must be done in good faith to entitle
the registrant to priority in ownership over the
vendee in an earlier sale.
RTC found two perfected contracts of sale
between the Velezes and the petitioners
involving the real property in question. The first Article 1600 of the Civil Code provides that
sale was for P1,050,000.00 and the second was "(s)ales are extinguished by the same causes as
for P1,400,000.00. In respect to the first sale, all other obligations, . . . ." Article 1231 of the
On Double Sale
G.R. No. 110295 October 18, 1993 Art. 1567. In the case of Articles 1561, 1562,
1564, 1565 and 1566, the vendee may elect
Davide, Jr., J, First Division between withdrawing from the contract and
demanding a proportionate reduction of the
price, with damages eithercase.
Facts: Lydia L. Geronimo was the proprietress of
Kindergarten Wonderland Canteen in Dagupan The vendee may also ask for the annulment of
City, an enterprise engaged in the sale of soft the contract upon proof of error or fraud, in
drinks (including Coke and Sprite) and other which case the ordinary rule on obligations shall
goods to the students of Kindergarten be applicable. Under the law on obligations,
Wonderland and to the public. On or about responsibility arising from fraud is demandable
August 12 1989, some parents of the students in all obligations and any waiver of an action for
complained to her that the Coke and Sprite soft future fraud is void. Responsibility arising from
drinks sold by her contained fiber-like matter and negligence is also demandable in any obligation,
other foreign substances or particles. She then but such liability may be regulated by the courts,
went over her stock of softdrinks and discovered according to the circumstances. Those guilty of
the presence of some fiber-like substances in fraud, negligence, or delay in the performance of
the contents of some unopened Coke bottles their obligations and those who in any manner
and a plastic matter in the contents of an contravene the tenor thereof are liable for
unopened Sprite bottle. She brought the said damages.
bottles to the Regional Health Office of the
Department of Health at San Fernando, La The vendor could likewise be liable for quasi-
Union, for examination. She received a letter delict under Article 2176 of the Civil Code, and
from the Department of Health informing her that an action based thereon may be brought by the
the samples she submitted "are adulterated;" as vendee. While it may be true that the pre-
a consequence of the discovery of the foreign existing contract between the parties may, as a
substances in the beverages, her sales of soft general rule, bar the applicability of the law on
drinks severely plummeted from the usual 10 quasi-delict, the liability may itself be deemed to
cases per day to as low as 2 to 3 cases per day arise from quasi-delict, i.e., the acts which
resulting in losses of from P200.00 to P300.00 breaks the contract may also be a quasi-delict.
per day, and not long after that she had to lose
shop on December 12 1989, she became
jobless and destitute. She demanded from the
petitioner the payment of damages but was
rebuffed by it.
359 SCRA 91
Puno, J.:
Subsequently, negotiations for the barter of the RTC, as affirmed by the Court of Appeals, held
jewelry and the Tanay property ensued. When the earrings uses as consideration for the sale
Dr. Cruz had later agreed to the proposal, was delivered by Dr. Cruz to the petitioner as
petitioner went to Prudential Bank once again to genuine.
take a look at the jewelry.
Hence this petition.
In the afternoon of October 23, 1984, petitioner
met Atty. Belarmino (Dr. Cruz’s lawyer) at the ISSUE
latter's residence to prepare the documents of
sale. The Attorney accordingly caused the Whether or not the deed of sale of the Tanay
preparation of a deed of absolute sale while property is null and void.
petitioner and Dr. Cruz attended to the
safekeeping of the jewelry.
RULING
Issues:
Issues:
Held:
vs.
Court of Appeals, Tenth Division, Mariano B. 1. Whether the sale made to Amores by
Nemenio and Felisa V. Nemenio, Constantino Galeos is valid?
M. Galeos and Eugenio V. Amores
2. Whether the Nemenio spouses are
purchasers in good faith?
February 9, 2000 G.R. No. 105902
FACTS: Issue 1
Baricuatro bought two lots, part of the Victoria Amores was in good faith when he bought the
Village, on installments basis from Galeos on subdivision, however, when he registered his
October 16, 1968. title he already had knowledge of the previous
sale. Such knowledge tainted his registration
with bad faith. In addition, the agreement to
collect the balance of the purchase price of the
Two months from the date of the previous sale, disputed lots from Baricuatro which presupposes
Galeos sold the entire subdivision, including the knowledge of the previous sale by Amores.
two lots, to Amores. Baricuatro was informed by
Galeos about the sale and was advised to pay
the balance of the purchase price of the two lots
directly to Amores. Under Art. 1544, the ownership of an immovable
property shall belong to the purchaser who in
good faith registers it first in the registry of
property.
Amores took possession of the subdivision and
developed the same for residential purposes. He
secured the transfer of the title to the same in
his name. Afterwards, he sold the two lots of the (Uraca vs Ca) “The second buyer must show
spouses Mariano and Felisa Nemenio. Prior to continuing good faith and innocence or lack of
the sale, Baricuatro was informed through a knowledge of the first sale until his contract
letter by Amores about the impending sale of the ripens into full ownership through prior
two lots but the former failed to respond. registration as provided by law.” This means that
Nemenio spouses demanded from Baricuatro to the good faith of the purchaser should be from
vacate the said lots but the latter refused to do the time of the perfection of the sale until up to
so. the time that he be declared the sole and true
owner of the property.
Decision of CA is REVERSED.
vs.
ISSUE:
Honorable Court of Appeals and Aznar
Brothers Realty Company.
Nachura, J.:
RULING:
FACTS:
Art. 1544 provides:
Division: En banc
ISSUE: Whether or not lower court erred in
Ponente: Justice Davide ruling that automatic rescission could not be
applied in the instant case.
Third Division
None.
PANGANIBAN, J:
A contract of repurchase arising out of a sale
where the seller did not have any title to the
property “sold” is not valid. Since nothing was
FACTS: sold, then there is also nothing to repurchase. It
is clear that Conchita no longer had any title to
the parcels of land at the time of sale because
when the mortgaged parcels of land were
Two parcels of land are in dispute and litigated foreclosed due to their non-payment of said
which was formerly owned by Victorino Nool and loan, ownership of the mortgaged lands was
Francisco Nool. Plaintiff spouses Conchita Nool consolidated to DBP. DBP gave the mortgagors
seek recovery of the aforementioned parcels of one year redemption period but this was not
land from defendants Anacleto Nool, younger exercised by them. Thereafter Anacleto
brother of Conchita. Plaintiffs alleged that they succeeded in buying the same, so that DBP’s
are the owners of subject parcels of land and titles were cancelled and new certificates of title
they bought the same from Conchita’s other were issued to him. Since, the alleged contract
brother, Victorino and Francisco. When they of repurchase was dependent on the validity of
were in dire of money, they obtained a loan from the contract of sale, it is itself void. A void
Development Bank of the Philippines (DBP) contract cannot give rise to a valid one. It is
secured by a real estate mortgage on said land likewise clear that Conchita can no longer
which was still registered in the names of deliver the object of the sale to the Anacleto
Victorino and Francisco. For their failure to pay because he has already acquired title and
said loan, the mortgage was foreclosed. That delivery thereof from the rightful owner, the
within the period of redemption, plaintiff DBP. Thus, the contract may be deemed to be
contacted defendant Anacleto to redeem it from inoperative. The right to repurchase
DBP which the latter did. Because of this, titles presupposes a valid contract of sale between
of two parcels were transferred to Anacleto. the same parties. Undisputedly, Anacleto
Anacleto agreed to buy the land for acquired title to the property from DBP and not
P100,000.00, P30,000.00 of which was paid to from the petitioners. Petition denied.
Conchita and upon payment of the balance
P14,000.00, plaintiffs were to regain possession
which amounts defendant failed to pay. Another
agreement was entered where by defendants
agreed to return to plaintiffs the land at anytime
the latter have the necessary amount. Plaintiffs
asked the defendants to return the same but
defendant refused, impelling them to come to
court for relief.
ISSUE:
RULING:
Eulalia was engaged in the business of buying
and selling large cattle. For this purpose, she
employed “biyaheros” whose primary task 1. No.
involved the procuring of large cattle with the In executing the said Deed of
financial capital provided by Eulalia and Sale, Dominador and Eulalia never
delivering the procured cattle to her for further intended the transfer of ownership of the
diposal. To secure the financial capital she subject property but to burden the same
advanced for the “biyaheros” Eulalia required with an encumbrance to secure the
them to surrender the Transfer Certificates of indebtedness incurred by Dominador on
Title of their properties and to execute the the occasion of his employment with
corresponding Deeds of Sale in her favour. Eulalia. By Eulalia’s own admission it
Dominador had been working for Eulalia as one was her customary business practice to
of her “biyaheros” for three decades so she no require her “biyaheros” to deliver to her
longer required him to post any security in the the titles to their real properties and to
performance of his duties. However, Eulalia execute in her favour the corresponding
found that he incurred shortage in his cattle deeds of sale over the said properties
procurement operation so Dominador and his as security for the money she provided.
wife Rosalia Bandong executed a Deed of Sale Hence, said transaction is an equitable
in favour of Eulalia. The subject property was mortgage, so that Eulalia has no right to
thereafter sold by Eulalia and her spouse Carlos subsequently transfer ownership of the
Raymundo to Eulalia’s grandniece Jocelyn subject property, in consonance that
which was later registered in the name of nobody can dispose of what he does not
Jocelyn and her husband Angelito Buenaobra. have. Their relationship is merely
Spouses Buenaobra instituted before the MeTC mortgagor and mortgagee rather than
an action for ejectment against Souses Bandong seller and buyer. The contention of
which they opposed on the ground that they are petitioner that Dominador ceded his
the rightful owners. Spouses Bandong instituted property to Eulalia as payment for his
an action for annulment of sale before RTC obligation for it is contrary to human
against Eulalia and Jocelyn on the ground that experience because he would first look
their consent to the sale of the subject property for means to settle his obligation and the
was vitiated by Eulalia after they were served by selling of a property on which his house
Jocelyn’s counsel to vacate. They alleged that that shelters them stand would be his
there was no sale intended but only equitable last resort.
mortgage for the purpose of securing the
shortage incurred by Dominador while employed
as “biyahero”. Jocelyn maintained that she was
a buyer in good faith and for value. The court of 2. No.
appeals reversed the RTC Decision and found
Petition is denied.
YNARES-SANTIAGO, J.:
Issue:
CA: REVERSED.
HELD: AFFIRMED.
CA: REVERSED.
HELD: AFFIRMED.
Petition DENIED.
_______________________________________
Petition DENIED.
ISSUE:
HELD:
FACTS:
The Deed of Sale with right to
Hamilton Salak and Shirley G. Unangst repurchase is that of an equitable mortgage.
were arrested on February 02, 1997 for estafa The petition is denied for lack of merit.
and carnapping for the former’s failure to return
a car he rented from Benjamin Bautista.
Bautista demanded from Salak the sum of Php
232, 372.00 as payment for car rental fees, RATIO DECIDENDI:
other fees and incidental expenses in the
retrieval of the car. The Deed of Sale with right to
repurchase qualifies as an equitable mortgage
Salak and the respondent proposed to under Article 1602, for respondent merely
sell to the petitioner a house & lot under the secured the payment of the unpaid car rentals
Unangst’s name to amicably settle the cases and the amount advanced by petioner to Jojo
filed against them and their accounts with the Lee.
same, which the petitioner welcomed.
Furthermore, petitioner agrees to pay the Provided for are the cases to presume a
mortgage loan over the subject property to a contract to be an equitable mortgage under
certain Jojo Lee (as the property was then set to Article 1602 (NCC):
be publicly auctioned).
(1.) When the price of the sale with right to
They executed a deed of sale with right repurchase is unusually inadequate;
to repurchase within 30 days, and that the (2.) When the vendor remains in possession
respondents shall pay the taxes and utility bills as lease or otherwise;
related to the subject property. (3.) When upon or after the expiration of the
right to repurchase another instrument
Upon the failure of the respondent to extending the period of redemption or
repurchase, petitioner filed a complaint for granting a new period is executed;
specific performance or recovery of possession, (4.) When the purchaser retains for himself a
for sum of money, for consolidation of part of the purchase price;
ownership, and damages against the (5.) When the vendor binds himself to pay the
respondent. taxes on the thing sold;
(6.) In any other case where it may be fairly
After the RTC deciding in favor of the inferred that the real intention of the
petitioner, respondent now argues before the CA parties is that the transaction shall secure
to annul the deed, arguing that respondent the payment of a debt of the performance
Unangst’s consent to the deed was procured of any other obligation
under duress and assuming arguendo that the
same was freely given the same partakes the
nature of an equitable mortgage and not of sale. In the case at bar, first, the consent was
The CA ruled in favor of the respondent; hence taken in duress since it was signed by the
this petition for review on certiorari. respondent to be freed from police custody.
Following the principle, “Nel consensui tam
The petitioner argues that the deed was contrarium est quam vis ataqui mtus”
clear and unequivocal, ergo; such must be (Necessitous men are not, truly speaking, free
construed in its literal sense. men; but to answer a present emergency will
After which, LBP issued a letter of Whether the Deed of Absolute Sale
guarantee in favor of the Carloses, informing entered into by the parties was an equitable
them that Cruz’ loan has been approved, and mortgage?
subsequently a new title in the name of Cruz
was issued in lieu thereof; thus, the mortgage
was discharged.
THIRD DIVISION
FRANCISCO, J.:
Aggrieved, petitioner filed an action for
cancellation of liens, quieting of title, recovery of
possession and damages against Parangan and
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PNB in the Regional Trial Court of Iloilo City. speaks of the intent of the parties in entering into
The RTC ordered the cancellation by the the contract respecting the subject matter and
Register of Deeds of the Province of lloilo, of the the consideration thereof. If the words of the
unauthorized loans, the liens and encumbrances contract appear to be contrary to the evident
appearing in the Transfer Certificate of the land. intention of the parties, the latter shall prevail
Declaring the Deed of Pacto de Retro Sale over the former. In the case at bench, the
dated April 25, 1978 and the Deed of Definite evidence is sufficient to warrant a finding that
Sale dated May 6, 1979, both documents petitioner and Parangan merely intended to
executed by Adoracion Lustan in favor of consolidate the former's indebtedness to the
Nicolas Parangan over Lot 8069 in TCT No. T- latter in a single instrument and to secure the
561 of the Register of Deeds of lloilo, as null and same with the subject property. Even when a
void, declaring the same to be Deeds of document appears on its face to be a sale, the
Equitable Mortgage. It also ordered defendant owner of the property may prove that the
Nicolas Parangan to pay all the loans he contract is really a loan with mortgage by raising
secured from defendant PNB using thereto as as an issue the fact that the document does not
security TCT No. T-561 of plaintiff and express the true intent of the parties. In this
defendant PNB to return TCT No. T-561 to case, parol evidence then becomes competent
plaintiff. Also, Ordering defendant Nicolas and admissible to prove that the instrument was
Parangan to return possession of the land in in truth and in fact given merely as a security for
question to the plaintiff upon payment of the sum the repayment of a loan. And upon proof of the
of P75,000.00 by plaintiff to defendant Parangan truth of such allegations, the court will enforce
which payment by plaintiff must be made within the agreement or understanding in consonance
ninety (90) days from receipt of this decision; with the true intent of the parties at the time of
otherwise, sale of the land will be ordered by the the execution of the contract.
court to satisfy payment of the amount;
QUISUMBING, J.:
For their part, respondents insisted in their
Answer that on October 1981, petitioner Leonisa
Hilario sold to them the three lots in question.
FACTS Respondent Veronica Gonzales agreed to buy
the same out of pity for petitioners, whose
several properties had earlier been foreclosed
by the bank. The transaction was embodied in a
On September 4, 1991 , petitioners Crispin Deed of Absolute Sale and notarized before
Austria and Leonisa Hilario filed a civil action for Notary Public Protacio Cortez, Jr. The original
Declaration of Nullity of Document and amount in the Deed of Absolute Sale was
Reconveyance before the RTC of Malolos, P240,000. However, before the properties were
Bulacan, against herein respondents Danilo registered, petitioner Leonisa Hilario in a letter
Gonzales, Jr., and Veronica Gonzales. In their dated July 20, 1983 , requested for the
Complaint, petitioners alleged that they are the execution of another Deed of Absolute Sale
owners and possessors of three (3) parcels of indicating a price of P50,000, purportedly to
land, all in the name of petitioner Leonisa lessen the taxes and fees that they will be
Hilario. paying as the vendors.
ISSUE
As to the allegation that petitioners were in
possession of the properties even after the sale,
it is obviated by the fact that they executed an
WHETHER OR NOT THE COURT OF undertaking promising to vacate the premises.
APPEALS IS CORRECT IN HOLDING THAT But they repeatedly delayed honoring it. The
THE CONTRACT BETWEEN PETITIONERS records also show that they did not object when
AND RESPONDENTS WAS A SALE AND NOT improvements were made on the premises by
AN EQUITABLE MORTGAGE OF REAL respondents. The latter introduced permanent
PROPERTY improvements thereon and had in fact converted
the pigpens, which used to belong to plaintiff
Austria , into a fishpond. When all these
improvements were being undertaken, plaintiffs
were aware thereof but did not object to any of
the work done on the subject premises. Such
inaction is contrary to their claim of ownership
over the subject properties, considering that the
RULING
owner of a thing has the right to exclude any
person from the enjoyment and disposal thereof
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and may, for this purpose, use such force as
may be reasonably necessary to repel or
prevent an actual or threatened unlawful
physical invasion or usurpation of his property.
(Article 429, Civil Code).
G.R. No. 125233 March 9, 2000 Petitioners appealed to the Court of Appeals in
vain. The Court of Appeals affirmed the decision
Facts: Adriano and Gertrudes were married. of the Regional Trial Court, holding that since
Gertrudes acquired from the then Department of the property was acquired during the marriage of
Agriculture and Natural Resources (DANR) a Gertrudes to Adriano, the same was presumed
parcel of land. The Deed of Sale described to be conjugal property under Article 160 of the
Gertrudes as a widow. TCT No. 43100 was Civil Code. The appellate court, like the trial
issued in the name of "Gertrudes Isidro," who court, also noted that petitioner did not comply
was also referred to therein as a "widow." with the provisions of Article 1607 of the Civil
Code.
When Adriano died It did not appear that he
executed a will before his death. Petitioners are now before this Court seeking
the reversal of the decision of the Court of
Appeals.
Gertrudes then obtained a loan from petitioners,
the spouses Alexander and Adelaida Cruz, in
the amount of P15,000.00 at 5% interest, Issue: whether or not a co-owner may acquire
payable on or before 5 February 1986. The loan exclusive ownership over the property held in
was secured by a mortgage over the property common?
covered by TCT No. 43100. Gertrudes,
however, failed to pay the loan on the due date. Held: Essentially, it is the petitioner's contention
that the property subject of dispute devolved
Unable to pay her outstanding obligation, upon him upon the failure of his co-heirs to join
Gertrudes executed two contracts in favor of him in its redemption within the period required
petitioner Alexander Cruz. The first is by law. He relies on the provisions of Article
denominated as "Kasunduan" which the parties 1515 of the old Civil Code, Article 1613 of the
concede is a pacto de retro sale, granting present Code, giving the vendee a retro the right
Gertrudes one year within which to repurchase to demand redemption of the entire property.
the property. The second is a "Kasunduan ng
Tuwirang Bilihan," a Deed of Absolute Sale There is no merit in this petition.
covering the same property for the price of
P39,083.00, the same amount stipulated in the The right of repurchase may be exercised by a
"Kasunduan." For failure of Gertrudes to co-owner with respect to his share alone (CIVL
repurchase the property, ownership thereof was CODE, art. 1612; CIVIL CODE (1889), art.
consolidated in the name of Alexander Cruz. 1514.). While the records show that petitioner
redeemed the property in its entirety,
When Gertrudes Isidro died, her heirs, herein shouldering the expenses therefor, that did not
private respondents, received demands to make him the owner of all of it. In other words, it
vacate the premises from petitioners, the new did not put to end the existing state of co-
owners of the property. Private respondents ownership (Supra, Art. 489). There is no doubt
responded by filing a complaint. that redemption of property entails a necessary
expense.
On the basis of the foregoing facts, the RTC
rendered a decision in favor of private The result is that the property remains to be in a
respondents. condition of co-ownership. While a vendee a
retro, under Article 1613 of the Code, "may not
The RTC held that the land was conjugal be compelled to consent to a partial
property since the evidence presented by private redemption," the redemption by one co-heir or
The Supreme Court held in the case of In the instant case, the offer was not a
Bodiongan vs. Court of Appeals that in order to legal and effective exercise of the right of
effect a redemption, the judgment debtor must redemption contemplated under the law, hence,
pay the purchaser the redemption price refusal of the offer by petitioner was completely
composed of the following: (1) the price which justified. The law on equity as defense, applies
the purchaser paid for the property; (2) interest only in the absence of, and never against,
of 1% per month on the purchase price; (3) the statutory law or judicial rules of procedure.
amount of any assessments or taxes which the
purchaser may have paid on the property after
the purchase; and (4) interest of 1% per month
on such assessments and taxes.
First Division Article 1621 and Article 1623 of the Civil Code,
which read:
Ponente: Vitug, J.
HTP.
Issues:
Issue:
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Whether CA erred in authority without need of giving a bond in case
(1) recognizing petitioner Nelson Cabales the amount of the property of the child does not
as co-owner of subject land but denied exceed two thousand pesos. Corollary to this,
him the right of legal redemption, and Rule 93, Section 7 of the Revised Rules of Court
(2) not recognizing petitioner Rito Cabales of 1964, applicable to this case, automatically
as co-owner of subject land with similar designates the parent as legal guardian of the
right of legal redemption. child without need of any judicial appointment in
case the latter’s property does not exceed two
Held: thousand pesos
Petition denied, CA decision affirmed with Saturnina was clearly petitioner Rito’s legal
modification. guardian without necessity of court appointment
considering that the amount of his property or
Ratio: one-seventh of subject property was P1,143.00,
-When Rufino Cabales died intestate, his wife which is less than two thousand pesos.
Saturnina and his six (6) children survived and However, Rule 96, Sec. 1 provides that:
succeeded him. Article 996 of the New Civil
Code provides that “[i]f a widow or widower and Section 1. To what
legitimate children or descendants are left, the guardianship shall extend. – A
surviving spouse has in the succession the guardian appointed shall have
same share as that of each of the children.” the care and custody of the
person of his ward, and the
-Verily, the seven (7) heirs inherited equally on management of his estate, or
subject property. Petitioner Rito and Alberto, the management of the estate
petitioner Nelson’s father, inherited in their own only, as the case may be. The
rights and with equal shares as the others. guardian of the estate of a
nonresident shall have the
-But before partition of subject land was management of all the estate of
effected, Alberto died. By operation of law, his the ward within the Philippines,
rights and obligations to one-seventh of subject and no court other than that in
land were transferred to his legal heirs – his wife which such guardian was
and his son petitioner Nelson. appointed shall have jurisdiction
over the guardianship
-The first sale with pacto de retro to Dr.
Corrompido by the brothers and co-owners Indeed, the legal guardian only has the plenary
Bonifacio, Albino and Alberto was valid but only power of administration of the minor’s property.
as to their pro-indiviso shares to the land. When It does not include the power of alienation which
Alberto died prior to repurchasing his share, his needs judicial authority. Thus, when Saturnina,
rights and obligations were transferred to and as legal guardian of petitioner Rito, sold the
assumed by his heirs, namely his wife and his latter’s pro-indiviso share in subject land, she did
son, petitioner Nelson. But the records show not have the legal authority to do so.
that it was Saturnina, Alberto’s mother, and not
his heirs, who repurchased for him. As correctly Accordingly, the contract of sale as to the pro-
ruled by the Court of Appeals, Saturnina was not indiviso share of petitioner Rito was
subrogated to Alberto’s or his heirs’ rights to the unenforceable. However, when he
property when she repurchased the share. acknowledged receipt of the proceeds of the
-Upon redemption from Dr. Corrompido, the sale on July 24, 1986, petitioner Rito effectively
subject property was resold to respondents- ratified it. This act of ratification rendered the
spouses by the co-owners. Petitioners Rito and sale valid and binding as to him.
Nelson were then minors and as indicated in the
Deed of Sale, their shares in the proceeds were With respect to petitioner Nelson, on the other
held in trust by respondents-spouses to be paid hand, the contract of sale was void. He was a
and delivered to them upon reaching the age of minor at the time of the sale. Saturnina or any
majority. and all the other co-owners were not his legal
-the father, or, in his absence, the mother, is guardians with judicial authority to alienate or
considered legal administrator of the property encumber his property. It was his mother who
pertaining to the child under his or her parental was his legal guardian and, if duly authorized by
Issue:
Whether or not petitioner Primary
Structures Corporation has the right of
redemption over the three parcels of land.
Held:
Security Bank has a better right because the
assignment of the CTDs made by Angel de la
Cruz in favor of respondent bank was embodied
in a public instrument. Art. 1625. An assignment
of credit, right or action shall produce no effect
G.R. No. 97753 August 10, 1992
as against third persons, unless it appears in a
public instrument, or the instrument is recorded
CALTEX (PHILIPPINES), INC., petitioner, in the Registry of Property in case the
vs. assignment involves real property.
COURT OF APPEALS and SECURITY BANK
AND TRUST COMPANY, respondents. Respondent bank duly complied with this
statutory requirement. Contrarily, petitioner,
REGALADO, J.: whether as purchaser, assignee or lien holder of
the CTDs, neither proved the amount of its credit
Facts: or the extent of its lien nor the execution of any
On various dates, defendant Security Bank and public instrument which could affect or bind
Trust Company issued 280 certificates of time private respondent. Necessarily, therefore, as
deposit in favor of Angel dela Cruz who between petitioner and respondent bank, the
deposited of time deposit therein the aggregate latter has definitely the better right over the
amount of P1,120,000.00. Angel dela Cruz CTDs in question.
delivered said certificate of time deposit to
plaintiff-petitioner Caltex in connection with his
purchase of fuel products from the latter.
Thereafter, dela Cruz informed defendant Bank
that he lost all the certificates of deposit and ask
for the replacement of said last CTP where it
was granted by the bank. Soon after said grants,
dela Cruz negotiated and obtained a loan from
defendant bank in the amount of Eight Hundred
Seventy-Five Thousand Pesos (P875,000.00).
On the same date, said depositor executed a
notarized Deed of Assignment of Time Deposit
which stated, among others, that he surrendered
to defendant bank “full control of the indicated
time deposits from and after date” of the
assignment and further authorizes said bank to
preterminate, set-off and “apply the said time
deposit to the payment of whatever amounts
may be due” on the loan upon it maturity. the
loan of Angel dela Cruz with the defendant bank
matured and fell due and on August 5, 1983, the
latter set-off and applied the time deposits in
question to the payment of the matured loan.
Plaintiff filed the instant complaint, praying that
defendant bank be ordered to pay it the
aggregate value of the certificates of time
deposit of P1,120,000.00 plus accrued interest
and compounded interest therein at 16% per
annum
Issue:
Ruling:
The decision of the Court of Appeals ordering
petitioner to pay the respondent the sum of
P335, 462.14 is AFFIRMED with
MODIFICATION.
Lo vs. KJS Eco-Formwork System Phil., Inc.
When the respondent tried to collect the said From the provision of the civil code(Article
credit from the corporation. Jomero Realty 1628), petitioner, as vendor or assignor, is
Corporation refused to honor the Deed of bound to warrant the existence and legality of
Assignment because it claimed that petitioner the credit at the time of the sale or assignment.
was also indebted to it. When Jomero claimed that it was no longer
indebted to petitioner since the latter also had
The respondent filed an action for recovery of a an unpaid obligation to it, it essentially meant
sum of money before the RTC of Makati.The that its obligation to petitioner has been
trial court dismissed the complaint on the ground extinguished by compensation. In other words,
that the assignment of credit extinguished the respondent alleged the non-existence of the
obligation when they executed the Deed of credit and asserted its claim to petitioner’s
Assignment. warranty under assignment. Therefore, it
behooved on petitioner to make good its
The respondent appealed the decision to the warranty and paid the obligation.
Court of Appeals and the said court reverses the
appealed decision. Indeed by warranting the existence of the credit,
petitioner should be deemed to have ensured
Issue: the performance thereof in case the same is
later found to be inexistent. He should be held
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liable to pay to respondent the amount of his Sanyu Chemical to Atok Finance with a total
indebtedness(Lo vs. KJS Eco-Formwork System face value of P100, 378.45.
Phil., Inc., pp 186-188).
On 13 January 1984, Atok Finance commenced
action against Sanyu Chemical, the Arrieta
spouses, Pablito Bermundo and Leopoldo Halili
before the Regional Trial Court of Manila to
collect the sum of P120, 240.00 plus penalty
charges amounting to P0.03 for every peso due
and payable for each month starting from 1
September 1983. Atok Finance alleged that
ATOK FINANCE CORPORATION, Sanyu Chemical had failed to collect and remit
petitioner vs. COURT OF APPEALS, SANYU the amount due under the trade receivables.
CHEMICAL CORPORATION, DANILO E.
ARRIETA, NENITA B. ARRIETA, PABLITO The private respondents on the other hand seek
BERMUNDO and LEOPOLDO HALILI, for the dismissal of the complaint for lack of
respondents. cause of action and contended that the
Continuing Suretyship Agreement, being an
G.R. No. 80078 May 18, 1993 accessory contract, was null and void since, at
the time of its execution, Sanyu Chemical had
FELICIANO, J.: no pre-existing obligation due to Atok Finance.
FACTS: Private respondents Sanyu Chemical The trial court rendered a decision in favor of
corporation ("Sanyu Chemical") as principal and Atok Finance.Upon appeal; Court of Appeals
Sanyu Trading Corporation ("Sanyu Trading") reversed the decision of the trial court, ruling in
along with individual private stockholders of favor of the private respondents.Hence, this
Sanyu Chemical, namely, private respondent petition.
spouses Danilo E. Halili and Pablico Bermundo
as sureties, executed in the continuing ISSUES: Whether the individual private
Suretyship Agreement in favor of Atok Finance respondents may be held solidarily liable with
as creditor. Under this Agreement, Sanyu Sanyu Chemical under the provisions of the
Trading and the individual private respondents Continuing Suretyship Agreement? Whether or
who were officers and stockholders of Sanyu not the continuing suretyship agreement must
Chemical did jointly and severally be held null and void as having been executed
unconditionally guarantee to ATOK FINANCE without consideration and without a pre-existing
CORPORATION the full, faithful and prompt principal obligation to sustain it.
payment and discharge of any and all
indebtedness of private respondent to the RULING: The Supreme Court granted the
Creditor Atok. The word "indebtedness" is used petition of Petitioner Atok Finance and sustains
herein in its most comprehensive sense and the decision of trial court finding in favor of
includes any and all advances, debts, petitioner Atok Finance.
obligations and liabilities of Principal or any one The contention of private appellants that the
or more of them. suretyship agreement is null and void because it
is not in consonance with the laws on guaranty
On 27 November 1981, Sanyu Chemical and security on the ground that the agreement
assigned its trade receivables outstanding as of was entered into by the parties two years before
27 November 1981 with a total face value of the Deed of Assignment was executed.
P125, 871.00, to Atok Finance in consideration Thus, contesting that it ran counter to the
of receipt from Atok Finance of the amount of provision that guaranty cannot exist
P105, 000.00. The assigned receivables carried independently because by nature it is merely an
a standard term of thirty (30) days; it appeared, accessory contract. The SC held that Court of
however, that the standard commercial practice Appeals here was in serious error. It is true that
was to grant an extension up to one hundred a serious guaranty or a suretyship agreement is
twenty (120) days without penalties. Later, an accessory contract in the sense that it is
additional trade receivables were assigned by entered into for the purpose of securing the
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performance of another obligation which is Sanyu Chemical became, under the terms of the
denominated as the principal obligation. It is also Deed of Assignment, solidary obligor under each
true that Article 2052 of the Civil Code states of the assigned receivables, the other private
that "a guarantee cannot exist without a valid respondents (the Arrieta spouses, Pablito
obligation." However, the SC ruled that such Bermundo and Leopoldo Halili), became
legal proposition is not, like most legal solidarily liable for that obligation of Sanyu
principles, to be read in an absolute and literal Chemical, by virtue of the operation of the
manner and carried to the limit of its logic. This Continuing Suretyship Agreement.
is clear from Article 2052 of the Civil Code itself.
A surety is not bound under any particular
principal obligation until that principal obligation
is born. But there is no theoretical or doctrinal
difficulty inherent in saying that the suretyship
agreement itself is valid and binding even before
the principal obligation intended to be secured
thereby is born, any more that there would be in
saying that obligations which are subject to a
condition precedent are valid and binding before
the occurrence of the condition precedent. By
executing such an agreement, the principal
places itself in a position to enter into the
projected series of transactions with its creditor;
with such surety agreement, there would be no
need to execute a separate surety contract or
bond for each financing or credit
accommodation extended to the principal
debtor.