HOMEWORK NO.

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1. DIGNOS VS. CA, 158 SCRA 375

FACTS:

The spouses Silvestre and Isabel Dignos were owners of a parcel of land in Opon,
Lapu-Lapu City. On June 7, 1965, appellants, herein petitioners Dignos spouses sold
the said parcel of land to respondent Atilano J. Jabil for the sum of P28,000.00,
payable in two installments, with an assumption of indebtedness with the First
Insular Bank of Cebu in the sum of P12,000.00 [encumbrance], which was paid and
acknowledged by the vendors in the deed of sale executed in favor of
plaintiff-appellant, and the next installment in the sum of P4,000.00 to be paid on or
before September 15, 1965.

On November 25, 1965 the Dignos spouses sold the same land in favor of defendants
spouses, Luciano Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for
the price of P35,000.00. A deed of absolute sale was executed by the Dignos spouses
in favor of the Cabigas spouses, and which was registered in the Office of the
Register of Deeds pursuant to the provisions of Act No. 3344. As the Dignos spouses
refused to accept from plaintiff-appellant the balance of the purchase price of the
land, and as plaintiff- appellant discovered the second sale made by
defendants-appellants to the Cabigas spouses, plaintiff-appellant brought the
present suit.

ISSUES:

1 . Whether or not there was an absolute contract of sale.

2. Whether or not the contract of sale was already rescinded when the Dignos
spouses sold the land to Cabigas

HELD:

1. Yes. 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. 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. 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, J 966 and Bevirlyn’s Beach Resort on September 1, 1965.
Petitioner spouses admitted the facts.

2. No. The contract of sale being absolute in nature is governed by Article 1592 of the
Civil Code. It is undisputed that petitioners never notified private respondents Jabil
by notarial act that they were rescinding the contract, and neither did they file a suit
in court to rescind the sale. There is no showing that Amistad was properly
authorized by Jabil to make such extra-judicial rescission for the latter that, on the
contrary, vigorously denied having sent Amistad to tell petitioners that he was
already waiving his rights to the land in question. Under Article 1358 of the Civil
Code, it is required that acts and contracts which have for their object
extinguishment of real rights over immovable property must appear in a public
document. Petitioners laid considerable emphasis on the fact that private respondent
Jabil had no money on the stipulated date of payment on September 15,1965 and was
able to raise the necessary amount only by mid-October 1965. It has been ruled,
however, that where time is not of the essence of the agreement, a slight delay on the
part of one party in the performance of his obligation is not a sufficient ground for
the rescission of the agreement. Considering that private respondent has only a
balance of P4, 000.00 and was delayed in payment only for one month, equity and
justice mandate as in the afore cited case that Jabil be given an additional period
within which to complete payment of the purchase price.

2. TAN VS. BENORILAO, G.R. No. 153820, October 16, 2009

FACTS:

Spouses Lamberto and Erlinda Benolirao and the Spouses Reynaldo and Norma
Taningco were the coowners of a parcel of land located in Tagaytay City. On October
6, 1992, the co-owners executed a Deed of Conditional Sale over the property in favor
of Tan for the price of P1,378,000.00. The deed stated:

a) An initial down-payment of TWO HUNDRED (P200,000.00) THOUSAND PESOS,

upon signing of the contract; then the remaining balance of ONE MILLION ONE
HUNDRED SEVENTY EIGHT THOUSAND (P1,178,000.00) PESOS, shall be payable
within a period of one hundred fifty (150) days from date hereof without interest;
b) That for any reason, BUYER fails to pay the remaining balance within above
mentioned period, the BUYER shall have a grace period of sixty (60) days within
which to make the payment, provided that there shall be an interest of 15% per
annum on the balance amount due from the SELLERS;

c) That should in case (sic) the BUYER fails to comply with the terms and conditions
within the above stated grace period, then the SELLERS shall have the right to forfeit
the down payment, and to rescind this conditional sale without need of judicial
action;

d) That in case, BUYER have complied with the terms and conditions of this contract,
then the SELLERS shall execute and deliver to the BUYER the appropriate Deed of
Absolute Sale; Tan issued and delivered to the co-owners/vendors check for
P200,000 as down payment for the property, respective receipt issued by vendors.

On November 6, 1992, Lamberto Benolirao died intestate. The heirs of the deceased
executed an extrajudicial settlement of Lamberto’s estate on January 20, 1993. A new
certificate of title over the property was issued on March 26, 1993 in the names of the
Spouses Reynaldo and Norma Taningco and Erlinda Benolirao and her children. As
stated in the Deed of Conditional Sale, Tan had until March 15, 1993 to pay the
balance of the purchase price. This period was extended by two months as agreed by
the parties, Tan had until May 15, 1993 to pay the balance. Tan failed to pay and
another extension was granted by the vendors. Tan still failed to pay the remaining
balance due on May 21, 1993. The vendors demanded payment of the balance of the
purchase price within five (5) days from notice; otherwise, they would declare the
rescission of the conditional sale and the forfeiture of his down payment based on
the terms of the contract. Tan refused to comply with the vendors’ demand and
instead wrote them a letter dated May 28, 1993 claiming that the annotation on the
title constituted an encumbrance on the property that would prevent the vendors
from delivering a clean title to him.

Thus, he alleged that he could no longer be required to pay the balance of the
purchase price and demanded the return of his down payment. The vendors refused
to refund the down payment, Tan, through counsel, sent another demand letter to the
vendors on June 18, 1993. The vendors still refused to heed Tan’s demand,
prompting Tan to file on June 19, 1993 a complaint with the RTC for specific
performance against the vendors. Tan alleged that there was a novation of the Deed
of Conditional Sale done without his consent since the annotation on the title created
an encumbrance over the property.

Tan prayed for the refund of the down payment and the rescission of the contract. On
August 9, 1993, Tan amended his Complaint, contending that if the respondents
insist on forfeiting the down payment, he would be willing to pay the balance of the
purchase price provided there is reformation of the Deed of Conditional Sale. In the
meantime, Tan caused the annotation on the title of a notice of lis pendens. On
August 21, 1993, the respondents the property to Hector de Guzman (de Guzman) for
P689,000. The respondents moved for the cancellation of the notice of lis pendens on
the ground that it was inappropriate since the case that Tan filed was a personal
action which did not involve either title to, or possession of, real property.

The RTC issued an order dated October 22, 1993 granting the respondents’ motion to
cancel the lis pendens annotation on the title. Meanwhile, based on the Deed of
Absolute Sale in his favor, de Guzman registered the property and TCT No. 28104
was issued in his name. Tan then filed a motion to carry over the lis pendens
annotation to TCT No. 28104 registered in de Guzman’s name, but the RTC denied the
motion. On September 8, 1995, after due proceedings, the RTC rendered judgment
ruling that the respondents’ forfeiture of Tan’s down payment was proper in
accordance with the terms and conditions of the contract between the parties.

The RTC ordered Tan to pay the respondents the amount of P30,000.00, plus
P1,000.00 per court appearance, as attorney’s fees, and to pay the cost of suit. On
appeal, the CA dismissed the petition and affirmed the ruling of the trial court in toto.
Hence, the petition.

ISSUE: Whether the contract between the parties is a contract of sale or a contract to
sell.

RULING: The petition is granted. The contract between the parties was merely a
contract to sell where the vendors retained title and ownership to the property until
Tan had fully paid the purchase price. Since Tan had no claim of ownership or title to
the property yet, he obviously had no right to ask for the annotation of a lis pendens
notice on the title of the property. A contract is what the law defines it to be, taking
into consideration its essential elements, and not what the contracting parties call it
as stated by Article 1485 of the Civil Code

The very essence of a contract of sale is the transfer of ownership in exchange for a
price paid or promised. In contrast, a contract to sell is defined as a bilateral contract
whereby the prospective seller, while expressly reserving the ownership of the
property despite delivery thereof to the prospective buyer, binds himself to sell the
property exclusively to the prospective buyer upon fulfilment of the condition agreed,
i.e., full payment of the purchase price. A contract to sell 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 fulfilment 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 may not occur.
Jurisprudence has established that where the seller promises to execute a deed of
absolute sale upon the completion by the buyer of the payment of the price, the
contract is only a contract to sell.12 Thus, while the contract is denominated as a
Deed of Conditional Sale, the presence of the above-quoted provision identifies the
contract as being a mere contract to sell. Contract to sell is not rescinded but
terminated What then happens to the contract? We have held in numerous cases that
the remedy of rescission under Article 1191 cannot apply to mere contracts to sell.

We explained the reason for this in Santos v. Court of Appeals,19 where we said: [I]n
a contract to sell, title remains with the vendor and does not pass on to the vendee
until the purchase price is paid in full. Thus, in a contract to sell, the payment of the
purchase price is a positive suspensive condition. Failure to pay the price agreed
upon is not a mere breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an obligatory force. This is
entirely different from the situation in a contract of sale, where non-payment of the
price is a negative resolutory condition.

We, therefore, hold that the contract to sell was terminated when the vendors could
no longer legally compel Tan to pay the balance of the purchase price as a result of
the legal encumbrance which attached to the title of the property. Since Tan’s refusal
to pay was due to the supervening event of a legal encumbrance on the property and
not through his own fault or negligence, we find and so hold that the forfeiture of
Tan’s down payment was clearly unwarranted.

3. ARTATES VS. URBI, G.R. No. L-29421. January 30, 1971.

LINO ARTATES & MANUELA POJAS, PLAINTIFF-APPELLANTS, VS. DANIEL URBI,

DEFENDANTS-APPELLEES.

FACTS:

In Sept. 1952, the proper land authorities issued in favor of Lino Artates and Manuela
Pojas, a homestead which is covered by a Patent and is duly registered in their
names.

In October 1955, Lino Artates inflicted injuries upon herein defendant, Daniel Urbi
who then filed a civil case against him.

The Justice of the Peace of Court of the CFI of Camilaniugan, Cagayan awarded
damages in favor of Urbi in the amount of P1,476.35, so in June 1962, the Provincial
Sheriff of Cagayan made a public sale of the homestead to satisfy the said judgment.

The Spouses Artes alleged that the sale of the homestead to satisfy Lino’s
indebtedness accrued in October 1955 violated the provision of the Public Land Law
exempting said property from execution for any debt contracted within 5 years from
the date of the issuance of the patent, and that Urbi executed a deed of sale of the
same parcel of land in Jun 1961 for the sum of P2,676.35 to herein defendant
Crisanto Soliven, who was a minor, to defraud them.

In March 1953, CFI of Camilaniugan, Cagayan, upheld the execution made by the
provincial sheriff upon the homestead, and at the declared null and void the sale of
the land between Urbi and Soliven.

ISSUE: Whether or not sps Artates possess absolute ownership over the

HELD: No, the sale is NOT VALID, for the following reasons:

1. The provision applies both to voluntary sales and involuntary sales such as in this
case, because the purpose of the law is to make the homesteader a property owner, a
contented and useful member of society; and

2. The term “contracted” must be understood to have been used in the term
INCURRED (see Webster’s Dictionary), thus, applicable to both contractual and extra
contractual debts considering the protective policy of the law.

The execution sale in this case being null and void, the possession of the land
should be returned to the owners, the herein appellants. There would even be no
need to order appellee Urbi to execute a deed of reconveyance thereof to the owners.
It appears that what was issued here to the judgment creditor/purchaser was only the
sheriff's provisional certificate, under which he derived no definite title or right until
the period for redemption has expired, without a redemption having been made, or
issuance of a final deed or certificate of sale. In other words, the purchaser herein
has not acquired an absolute ownership or title in fee over the land that would
necessitate a deed of reconveyance to revert ownership back to the appellant
spouses. As things now stand, title to the property covered by OCT No. P-572
remains with the appellants, but Lino Artates shall continue to be under obligation to
satisfy the judgment debt to Daniel Urbi in the sum of P1,476.35, with legal interest
thereon accruing from the date the writ of execution was first returned unsatisfied. It
appearing also that appellee Daniel Urbi paid to the Philippine National Bank the sum
of P783.45 to release the mortgage on the land, appellants should reimburse him of
said amount or of whatever amount appellants have actually been benefited by the
said payment.

4. HEIRS OF ENRIQUE ZAMBALES VS. CA, 120 SCRA 897

Facts:
Petitioners were homestead patentees of a parcel of land in the municipality of Del
Pilar, Roxas, Palawan covered by an Original Certificate Title issued pursuant to
Homestead Patent No. V-59501 dated September 6, 1955. A civil case claiming
damages was filed by said petitioners against respondent Nin Bay Mining Corp.
claiming that the latter has removed silica sand from their land destroying the plants
and other improvements thereon. A Compromise Agreement was then entered into
by the parties on October 29, 1959 with petitioners duly assisted by their counsel
containing, among other things, that a rental of P 20 per hectare be paid to
petitioners as full payment and indemnity for all damages to the property; that they
bind themselves to sell, transfer, and convey the property and that the respondent
agrees to purchase and pay for the same; and that petitioners irrevocably appoint
respondent as their attorney-in-fact with full power and authority to sell, transfer and
convey the same on September 10, 1960 or anytime thereafter. Thereafter,
respondent Corporation, as attorney-in-fact, sold the property to Preysler with a
corresponding Transfer Certificate Title issued with the approval of the Scretary of
Agriculture and Natural Resources. Ten years after the trial court’s decision based on
the Compromise Agreement and nine years after the sale to Preysler, petitioners filed
for the annulment of the aforementioned sale and recovery of the property with
damages alleging that they were unschooled and that there was fraud, deceit, and
manipulation employed by their lawyer and respondent Corporation. The lower court
ruled in favor of petitioners but the appellate court reversed after finding that the
alleged fraud and misrepresentation in the Compromise Agreement has not been
substantiated by evidence. Hence, this petition.

Issue: WON the Compromise Agreement and the subsequent Deed of Sale are valid?

Held: The general rule is that whoever alleges fraud or mistake must substantiate his
allegation, since the presumption is that a person takes ordinary care of his concerns
and that private transactions have been fair and regular. The rule admits of an
exception in Article 1332 of the Civil Code, which provides: “When one of the parties
is unable to read, or if the contract is in a language not understood by him, and
mistake or fraud is alleged, the person enforcing the contract must show that the
terms thereof have been fully explained to the former.”

For the proper application of said provision, it has first to be established

convincingly that the illiterate or the party at a disadvantage could not read or
understand the language in which the contract was written. The burden of proof,
therefore, shifted to the Corporation to show that the compromise agreement had
been fully explained to the plaintiffs.

However, the Court is not convinced that indeed appellees were victims of a
fraudulent scheme employed upon them by their former counsel by reason of their
alleged illiteracy and ignorance. The evidence discloses that appellees, although
unschooled, are intelligent, well-informed and intelligent people. They could not have
been misled by their former counsel into signing the compromise agreement, taking
into account as well the acts of the appellees and their children subsequent to the
execution of the compromise agreement.

Although the petitioners were not misled into signing the Compromise Agreement,
the Court held that there has been violation of the Public Land Act. The sale of a
homestead lot within the five-year prohibitory period is illegal and void. The law does
not distinguish between executory and consummated sales.

The bilateral promise to buy and sell, and the agency to sell, entered into within five
years from the date of the homestead patent, was in violation of section 118 of the
Public Land Law, although the executed sale was deferred until after the expiration of
the five-year prohibitory period.

As the contract is void from the beginning, for being expressly prohibited by law, the
action for the declaration of its inexistence does not prescribe. Being absolutely
void, it is entitled to no authority or respect, the sale may be impeached in a
collateral proceeding by any one with whose rights and interest it conflicts. There is
no presumption of its validity. The approval of the sale by the Secretary of
Agriculture and Natural Resources after the lapse of five years from the date of the
patent would neither legalize the sale.

5. QUIROGA VS. PARSONS, 38 PHIL. 501

Facts:

A contract was entered into by herein plaintiff Quiroga and defendant J. Parsons
wherein the former granted the latter with the exclusive right to sale Quiroga beds in
the Visayan Islands subject to conditions. A complaint was filed by plaintiff averring
that defendant violated the ff. obligations: not to sell the beds at higher prices than
those of the invoices; to have an open establishment in Iloilo; itself to conduct the
agency; to keep the beds on public exhibition, and to pay for the advertisement
expenses for the same; and to order the beds by the dozen and in no other manner.
With the exception of the obligation on the part of the defendant to order the beds by
the dozen and in no other manner, none of the obligations imputed to the defendant
in the are expressly set forth in the contract. Plaintiff alleged that the defendant was
his agent for the sale of his beds in Iloilo, and that said obligations are implied in a
contract of commercial agency.

Issue: WON the defendant, by reason of the contract, was a purchaser or an agent of
the plaintiff for the sale of his beds.
Held: The contract contains the essential features of a contract of purchase and sale.
There was the obligation on the part of the plaintiff to supply the beds, and, on the
part of the defendant, to pay their price. These features exclude the legal conception
of an agency or order to sell whereby the mandatory or agent received the thing to
sell it, and does not pay its price, but delivers to the principal the price he obtains
from the sale of the thing to a third person, and if he does not succeed in selling it,
he returns it. I By virtue of the contract between the plaintiff and the defendant, the
latter, on receiving the beds, was necessarily obliged to pay their price within the
term fixed, without any other consideration and regardless as to whether he had or
had not sold the beds.

Not a single one of these clauses necessarily conveys the idea of an agency. The
words commission on sales used in clause (A) of article 1 mean nothing else, as
stated in the contract itself, than a mere discount on the invoice price. The word
agency, also used in articles 2 and 3, only expresses that the defendant was the only
one that could sell the plaintiff’s beds in the Visayan Islands. It must be understood
that a contract is what the law defines it to be, and not what it is called by the
contracting parties.

Only the acts of the contracting parties, subsequent to, and in connection with, the
execution of the contract, must be considered for the purpose of interpreting the
contract, when such interpretation is necessary, but not when, as in the instant case,
its essential agreements are clearly set forth and plainly show that the contract
belongs to a certain kind and not to another.

6. CONCRETE AGGREGATES INC. VS. CTA, 185 SCRA 461

Facts: Petitioner Concrete Aggregates, Inc. is a domestic corporation which

maintains and operates a plant at Longos, Quezon City for the production of
ready-mixed concrete and plant-mixed hot asphalt and an aggregate plant at
Montalban, Rizal which processes rock aggregates mined by it from private lands. An
investigation of petitioner’s tax liabilities was conducted by agents of respondent
commissioner who demanded payment from petitioner P 244,002.76 as sales and ad
valorem taxes inclusive of surcharges. Petitioner disputed the assessment in its
letter sent to respondent commissioner to which another demand letter was sent by
the latter. Instead of paying, petitioner appealed to respondent court which handed
an adverse judgment hence, this petition for review which was granted by the Court
after a second motion for reconsideration.

Issue: WON petitioner is a contractor subject to the 3% contractor’s tax under

Section 191 of the 1968 National Internal Revenue Code or manufacturer subject to
the 7% sales tax under Section 186 of the same Code.
Held: Petitioner is a manufacturer as defined by Section 194(x), now Section 187(x) of
the Tax Code. Petitioner’s raw materials are processed under a prescribed formula
and thereby changed by means of machinery into a finished product, altering their
quality, transforming them into marketable state or preparing them for any of the
specific uses of industry. Thus, the raw materials become a distinct class of
merchandise or “finished products for the purpose of their sales or distribution to
others and not for his own use or consumption.”

In a case involving the making of ready-mixed concrete, it was held that concrete is a
product resulting from a combination of sand or gravel or broken bits of limestones
with water and cement: a combination which requires the use of skill and most
generally of machinery. Concrete in forms designed for use and supplied to others
for buildings, bridges and other structures is a distinct article of commerce and the
making of them would be manufacturing by the corporation doing so.

Selling or distribution is an essential ingredient of manufacturing. The sale of a

manufactured product is properly incident to manufacture. The power to sell is an
indispensable adjunct to a manufacturing business. Petitioner, as a manufacturer,
not only manufactures the finished articles but also sells or distributes them to
others. This is inferable from the testimonial evidence of petitioner’s witness that, in
the marketing of its products, the company has marketing personnel who visit the
client, whether he is a regular or a prospective customer, and that it is the customer
who specifies the requirement according to his needs by filling up a purchase order,
after which a job order is issued. This is followed by the delivery of the finished
product to the job site.

A contract to make is a contract of sale if the article is already substantially in

existence at the time of the order and merely requires some alteration, modification
or adaptation to the buyer’s wishes or purposes. A contract for the sale of an article
which the vendor in the ordinary course of his business manufactures or procures
for the general market, whether the same is on hand at the time or not is a contract
for the sale of goods.

7. PEOPLE’S HOMESITE & HOUSING CORP. VS. CA, 133 SCRA 777

Facts:

Resolution №.513 of the People’s Homesite & Housing Corp. (PHHC) board of
directors awarded to respondent Spouses Rizalino and Adelaida Mendoza, subject to
the Quezon City Council’s approval of the Consolidation Subdivison Plan, Lot 4,
containing 4, 182.2 sq.m. at a price of P 21 per sq.m. and that such award is subject
to the approval of the OEC (PHHC) Valuation COmmittee and higher authorities. The
city council disapproved the plan with due notice sent to the respondents. A revised
plan which included Lot 4 with reduced area of 2,608.7 was, however,approved by the
same. The PHHC board recalled all awards of lots to persons who failed to pay
deposit or downpayment including the respondents. The board’s Resolution №. 218
officially withdrew the tentative award of Lot 4 from the respondents and reawarded
said lot jointly and in equal shares to 5 awardees who all made the initial deposit.
Corresponding deeds of sale were executed in their favor and the subdivision was
approved by the city council and Bureau of Lands. Respondents filed the instant
action for specific performance and damages for the reconsideration of the
withdrawal and cancellation of the re-award. The trial court sustained the withdrawal
while the public respondent Court of Appeals reversed hence, this petition.

Issue: WON there was a perfected sale of Lot 4, with the reduced area, to the
respondents which they can enforce against PHHC via action for specific
performance.

Held: The Court held in the negative. There was no perfected sale of Lot 4 as it was
conditionally or contingently awarded to the respondents subject to the approvals of
the city council and valuation committee and higher authorities.

When the plan with the area of Lot 4 reduced to 2,608.7 square meters was approved,
the Mendozas should have manifested in writing their acceptance of the award for
the purchase of Lot 4 just to show that they were still interested in its purchase
although the area was reduced and to obviate any doubt on the matter. They did not
do so. The PHHC board of directors acted within its rights in withdrawing the
tentative award.

“The contract 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 law governing the form
of contracts.” (Art. 1475, Civil Code).

Under the facts of this case, we cannot say there was a meeting of minds on the
purchase of Lot 4 with an area of 2,608.7 square meters at P 21 a square meter.
Decision reversed.

8. TOYOTA SHAW, INC. VS CA, 244 SCRA 320

Facts:

Private respondent Luna Sosa wanted to purchase a Toyota Lite Ace and had
difficulty finding a dealer selling an available unit. He was able to contact petitioner
Toyota Shaw, Inc. and was told they had an available unit. Popong Bernardo, a sales
representative of petitioner company, entered into an Agreement with private
respondent in consideration of the latter’s request to have the unit ready not later
than 17 June 1898 which he will use to go to his home province for his birthday
celebration. It was also agreed upon that the balance will be paid by credit financing
through B.A. Finance. The next day, a Vehicle Sales Proposal (VSP) was
accomplished by Bernardo in lieu of the delivery of the P 100,000 downpayment
containing the aforementioned manner of payment and was approved by the sales
supervisor. On 17 June 1898, the private vehicle was not delivered as agreed upon
because, as Bernardo told private respondent, “nasulot ang unit ng ibang malakas.”
Private respondent then asked for the refund of his P 100,000 downpayment which
the petitioner did so on the same day by issuing a check then signed by the former
with reservation as to future claims for damages. Thereafter, petitioner refused to
accede to the demands contained in private respondent’s two letters, prompting the
latter to file a complaint. The trial court resolved in favor of the latter and was
subsequently affirmed by public respondent Court of Appeals in toto hence the
instant case.

Issue: WON the Agreement, executed and signed by petitioner’s sales representative,
a perfected contract of sale, binding upon the petitioner?

Held: The Court resolved in the negative. This Court had already ruled that a definite
agreement on the manner of payment of the price is an essential element in the
formation of a binding and enforceable contract of sale. This is so because the
agreement as to 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.

There was no obligation on the part of Toyota to transfer ownership of a determinate

thing to Sosa and no correlative obligation on the part of the latter to pay therefor a
price certain appears in the Agreement. The provision on the downpayment made no
specific reference to a sale of a vehicle. If it was intended for a contract of sale, it
could only refer to a sale on installment basis, as the VSP executed the following day
confirmed.

Moreover, there was absence of a meeting of minds between Toyota and Sosa.
Knowing that Bernardo was only a sales representative, hence a mere agent of
petitioner, it was incumbent upon Sosa to act with ordinary prudence and reasonable
diligence to know the extent of Bernardo’s authority in respect of contracts to sell
Toyota’s vehicles. A person dealing with an agent is put upon inquiry and must
discover upon his peril the authority of the agent.

Accordingly, in a sale on installment basis which is financed by a financing company,

the financing company is subrogated in the place of the seller, as the creditor of the
installment buyer. Since B.A. Finance did not approve Sosa’s application, there was
then no meeting of minds on the sale on installment basis.
The VSP was a mere proposal which was aborted in lieu of subsequent events. It
follows that the VSP created no demandable right in favor of Sosa for the delivery of
the vehicle to him, and its non-delivery did not cause any legally indemnifiable injury.

9. Sampaguita Pictures vs. Jalwindor Manufacturers, Inc., 93 SCRA 420

Facts:

Plaintiff-appellant Sampaguita Pictures, Inc. leased the roofdeck of their Sampaguita

Pictures Building to Capitol 300 Inc. and agreed that the premises shall be used for social
purposes exclusively for the club’s members and guests; that all permanent improvements
made by lessee on the premises shall belong to the lessor without any obligation to
reimburse; that these be considered as part of the consideration of the monthly rental; and
any remodeling, alteration and or addition be at the expense of lessee. Glass and wooden
jalousies were then purchased by Capitol from defendant-appellee Jalwindor Manufacturers
Inc. which were delivered and installed in the premises. Capitol failed to pay the purchases
prompting defendant-appellee to file an action for the collection of a sum of money with
petition for preliminary attachment.

The parties submitted a Compromise Agreement to the trial court wherein Capitol
acknowledged its indebtedness and pending liquidation, the materials purchased will be
considered as security. Thereafter, Capitol not only failed to comply with the Compromise
Agreement but also failed to pay rentals to plaintiff-appellant, causing their ejectment with
damages paid to the latter. When the Sheriff of Quezon City levied upon the materials,
plaintiff-appelant filed a third-party claim alleging that it is the owner of the same however,
defendant-appellee filed an indemnity bond in favor of the Sheriff and the public auction
pushed through with the latter as the highest bidder. Plaintiff-appellant sought to nullify the
sale in an action filed with the Court of First Instance and for the issuance of a writ of
preliminary injuction against defendant-appellee from detaching the materials. Based on the
Stipulation of Facts submitted, the lower court dismissed the complaint. The subsequent
motion for reconsideration was likewise denied hence the instant petition.

Issue: WON the lower court erred in holding that there was no legal transfer of ownership of
the glass and wooden jalousies from Capitol 300 Inc. to plaintiff-appellant?

Held: Court held in the affirmative. When the glass and wooden jalousies in question were
delivered and installed in the leased premises, Capitol became the owner thereof.
Ownership is not transferred by perfection of the contract but by delivery, either actual or
constructive. This is true even if the purchase has been made on credit, as in the case at
bar. Payment of the purchase price is not essential to the transfer of ownership as long as
the property sold has been delivered. Ownership is acquired from the moment the thing sold
was delivered to vendee, as when it is placed in his control and possession.
Capitol entered into a lease contract with Sampaguita in 1964, and the latter became the
owner of the items in question by virtue of the agreement in said contract. When levy or said
items was made on July 31, 1965, Capitol, the judgment debtor, was no longer the owner
thereof.

The items in question were illegally levied upon since they do not belong to the judgment
debtor. The power of the Court in execution of judgment extends only to properties
unquestionably belonging to the judgment debtor. Execution sales affect the rights of
judgment debtor only, and the purchaser in the auction sale acquires only the right as the
debtor has at the time of sale. Since the items already belong to Sampaguita and not to
Capitol, the judgment debtor, the levy and auction sale are, accordingly, null and void.
Decision reversed.

HOMEWORK NO. 2
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1. Limson vs. CA, 357 SCRA 209; San Miguel Properties vs. Huang, 336 SCRA 2000

DOCTRINE: An option, as used in the law of sales, is a continuing offer or contract

by which the owner stipulates with another that the latter shall have the right to
buy the property at a fixed price within a time certain, or under, or in compliance
with, certain terms and conditions, or which gives to the owner of the property the
right to sell or demand a sale.|

FACTS:

● Petitioner Lourdes Ong Limson filed a complaint before before the trial court,
alleged that respondents sps Lorenzo de Vera and Asuncion Santos-de Vera,
through their agent Marcosa Sanchez, offered to sell her a parcel of land consisting
of 48, 260 sq m, situated in Barrio San Dionisio, Parañaque, Metro Manila
● On July 31, 1978 she agreed to buy the property for P34.oo per sq m and gave a
sum of P20,000.00 to respondent sps as “earnest money”. Thereafter, respondent
sps signed a receipt and gave her a 10-day option period to purchase the property
● Lorenzo de Vera later on informed her that the property was mortgaged to Emilio
and Isidro Ramos and he still asked her to pay the balance of the purchase price to
enable him and his wife to settle their obligation with the Ramoses.
● Petitioner agreed and met with sps de Vera and the Ramoses at the Office of the
Registry of Deeds of Makati to consummate the transaction, however no
transaction was formalized because the respondents and the ramoses failed to
appear.
 ● In their second meeting, she claimed that she was willing and ready to pay the
balance but the transaction again did not materialize as respondent spouses failed
to pay the back taxes of subject property.
● Petitioner gave respondent Lorenzo de Vera 3 checks in the amount of 36, 170 for
the settlement of the back taxes and for the payment of the quitclaims of the 3
tenants. (The amount was considered part of the purchase price and receipts were
signed by lorenzo)
● Petitioner was surprised to learn from the agent of the respondents that the
property was the subject of a negotiation for the sale to SUNVAR REALTY
DEVELOPMENT CORP (SUNVAR) - she then filed an Affidavit of Adverse Claim
with RD of Makati and claimed that she informed respondent Cuenca of her
“contract” to purchase the property.
● Petitioner claimed that when respondent spouses sold the property in dispute to
SUNVAR, her valid and legal right to purchase it was ignored if not violated.
Moreover, she maintained that SUNVAR was in bad faith as it knew of her
"contract" to purchase the subject property from respondent spouses - she also
claimed that the Deed of Sale should be annulled in the name of SUNVAR and
insisted that Deed of Sale between her and respondent sps be executed upon her
payment of the purchase price agreed upon.
● Respondents SUNVAR and Cuenca, alleged that petitioner was not the proper
party and had no cause of action. That even if she is the proper party, she could
only be entitled to the return of any amount received by the respondents. They also
argued that she lost her option to buy the property for failure to comply with the
terms and conditions of the agreement embodied in their receipt.

ISSUE: Whether or not there was a perfected contract to sell between petitioner and
respondent spouses

RULING: A scrutiny of the facts as well as the evidence of the parties overwhelmingly
leads to the conclusion that the agreement between the parties was a contract of option
and not a contract to sell.
An option, as used in the law of sales, is a continuing offer or contract by which the
owner stipulates with another that the latter shall have the right to buy the property
at a fixed price within a time certain, or under, or in compliance with, certain terms
and conditions, or which gives to the owner of the property the right to sell or
demand a sale. It is also sometimes called an "unaccepted offer." An option is not of
itself a purchase, but merely secures the privilege to buy. It is not a sale of property
but a sale of the right to purchase. It is simply a contract by which the owner of property
agrees with another person that he shall have the right to buy his property at a fixed price
within a certain time. He does not sell his land; he does not then agree to sell it; but he
does sell something, i.e., the right or privilege to buy at the election or option of the other
party. Its distinguishing characteristic is that it imposes no binding obligation on the person
holding the option, aside from the consideration for the offer. Until acceptance it is not,
properly speaking, a contract, and does not vest, transfer, or agree to transfer, any title to,
or any interest or right in the subject matter, but is merely a contract by which the owner of
the property gives the optionee the right or privilege of accepting the offer and buying the
property on certain terms.

● The consideration of P20,000 paid by the petitioner was referred as the earnest
money. However, money is not earnest money but option money.
● Earnest money is a part of the purchase price while option money is the
money given as a distinct consideration for an option contract.
● Earnest money is given only where there is already a sale, while option
money applies to a sale not yet perfected
● When earnest money is given, the buyer is bound to pay the balance, while
when the buyer gives option money, he is not required to buy, but may even
forfeit it depending on the terms of the option. - THERE IS NOTHING IN THE
RECEIPT THAT INDICATES THAT P20,000 WAS PART OF THE PURCHASE
PRICE.
● No perfected sale between the parties.
- Aug. 11, 1978 the option period expired and the exclusive right of the
petitioner to buy the property of the respondents ceased.
- Subsequent meetings (Aug. 11 and 23, 1978) showed the desire of sps to
sell their property to petitioner.
- Sept. 14, 1978, respondent sent a telegram reminding petitioner of the full
payment showed inclination to give her preference to buy the property.
- Commencement of negotiations between respondent and SUNVAR
manifested that their offer to sell the property to petitioner was no
longer exclusive to her. The option period having expired and
acceptance was not effectively made by petitioner, the purchase of
subject property by respondent SUNVAR was perfectly valid and
entered into in good faith.

2.San Miguel Properties Phils. Inc. vs Sps Alfredo and Grace Huang

Nature of the Case: A petition for review for a decision of the Court of Appeals
which reversed the decision of the RTC dismissing the complaint brought by the Huangs
against San Miguel Properties for enforcement of a contract of sale.
Facts: San Miguel Properties offered two parcels of land for sale and the offer was made
to an agent of the respondents. An “earnest-deposit” of P1 million was offered by the
respondents and was accepted by the petitioner’s authorized officer subject to certain
terms.

1. We will be given the exclusive option to purchase the property within the 30 days from
date of your acceptance of this offer.

2. During said period, we will negotiate on the terms and conditions of the purchase; SMPPI
will secure the necessary Management and Board approvals; and we initiate the
documentation if there is mutual agreement between us.

3. In the event that we do not come to an agreement on this transaction, the said amount of
P1,000,000.00 shall be refundable to us in full upon demand

Petitioner, through its executive officer, wrote the respondent’s lawyer that because the
parties failed to agree on the terms and conditions of the sale despite the extension granted
by the petitioner, the latter was returning the “earnest-deposit”.

The respondents demanded execution of a deed of sale covering the properties and
attempted to return the “earnest-deposit” but petitioner refused on the ground that the option
to purchase had already expired.

A complaint for specific performance was filed against the petitioner and the latter filed a
motion to dismiss the complaint because the alleged “exclusive option” of the respondents
lacked a consideration separate and distinct from the purchase price and was thus
unenforceable; the complaint did not allege a cause of action because there was no
“meeting of the mind” between the parties and therefore the contact of sale was not
perfected.

The trial court granted the petitioner’s motion and dismissed the action. The respondents
filed a motion for reconsideration but were denied by the trial court. The respondents
elevated the matter to the Court of Appeals and the latter reversed the decision of the trial
court and held that a valid contract of sale had been complied with.

Petitioner filed a motion for reconsideration but was denied.

Issue: WON there was a perfected contract of sale between the parties - No.

Ruling: The decision of the appellate court was reversed and the respondents’ complaint
was dismissed.
Ratio Decidendi: It is not the giving of earnest money , but the proof of the
concurrence of all the essential elements of the contract of sale which establishes
the existence of a perfected sale.

The P1 million “earnest-deposit” could not have been given as earnest money because at
the time when petitioner accepted the terms of respondents’ offer, their contract had not yet
been perfected. This is evident from the following conditions attached by respondents to
their letter.

The first condition for an option period of 30 days sufficiently shows that a sale was never
perfected. As petitioner correctly points out, acceptance of this condition did not give rise to
a perfected sale but merely to an option or an accepted unilateral promise on the part of
respondents to buy the subject properties within 30 days from the date of acceptance of the
offer. Such option giving respondents the exclusive right to buy the properties within the
period agreed upon is separate and distinct from the contract of sale which the parties may
enter. All that respondents had was just the option to buy the properties which privilege was
not, however, exercised by them because there was a failure to agree on the terms of
payment. No contract of sale may thus be enforced by respondents.

Even the option secured by respondents from petitioner was fatally defective. Under the
second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate
thing for a price certain is binding upon the promisor only if the promise is supported by a
distinct consideration. Consideration in an option contract may be anything of value, unlike
in sale where it must be the price certain in money or its equivalent. There is no showing
here of any consideration for the option. Lacking any proof of such consideration, the option
is unenforceable.

Equally compelling as proof of the absence of a perfected sale is the second condition that,
during the option period, the parties would negotiate the terms and conditions of the
purchase. The stages of a contract of sale are as follows: (1) negotiation, covering the
period from the time the prospective contracting parties indicate interest in the contract to
the time the contract is perfected; (2) perfection, which takes place upon the concurrence of
the essential elements of the sale which are the meeting of the minds of the parties as to
the object of the contract and upon the price; and (3) consummation, which begins when the
parties perform their respective undertakings under the contract of sale, culminating in the
extinguishment thereof.

In the present case, the parties never got past the negotiation stage. The alleged
“indubitable evidence” of a perfected sale cited by the appellate court was nothing more
than offers and counter-offers which did not amount to any final arrangement containing the
essential elements of a contract of sale. While the parties already agreed on the real
properties which were the objects of the sale and on the purchase price, the fact remains
that they failed to arrive at mutually acceptable terms of payment, despite the 45-day
extension given by petitioner.

3. Atkins, Kroll & Co. vs. Cua Hian Tek, 102 Phil 948

DOCTRINE: If the option is given without consideration, it is a mere offer of a

contract of sale, which is not binding until accepted. If, however, accepted is made
before a withdrawal, it constitutes a binding contract of sale even though the
option was not supported by a sufficient consideration. ||

FACTS:

● On September 13, 1951, petitioner Atkins Kroll & Co. (Atkins) sent a letter to
respondent B. Cu Hian Tek (Hian Tek) offering (a) 400 cartons of Luneta brand
Sardines in Tomato Sauce 48 / 15-oz. Ovals at $8.25 per carton, (b) 300 cartons of
Luneta brand Sardines Natural 48/15 oz. talls at $6.25 per carton, and (c) 300
cartons of Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 per
carton, with all of the offers subject to reply by September 23, 1951. Hian Tek
unconditionally accepted the said offer through a letter delivered on September 21,
1951, but Atkins failed to deliver the commodities due to the shortage of catch of
sardines by the packers in California.
● Hian Tek, therefore, filed an action for damages in the CFI of Manila which granted
the same in his favor. Upon Atkins’ appeal, the Court of Appeals affirmed said
decision but reduced the damages to P3,240.15 representing unrealized profits.
Atkins herein contends that there was no such contract of sale but only an option to
buy, which was not enforceable for lack of consideration because it is provided
under the 2nd paragraph of Article 1479 of the New Civil Code that "an accepted
unilateral promise to buy or to sell a determinate thing for a price certain is binding
upon the promisor if the promise is supported by a consideration distinct from the
price.” Atkins also insisted that the offer was a mere offer of option, because the
"firm offer" was a continuing offer to sell until September 23.

ISSUE: Whether or not there is a perfected contract of sale between the parties

RULING: YES. The Supreme Court held that there was a contract of sale between the
parties. Petitioner’s argument assumed that only a unilateral promise arose when the
respondent accepted the offer, which is incorrect because a bilateral contract to sell and to
buy was created upon respondent’s acceptance. Had B. Cua Hian Tek backed out after
accepting, by refusing to get the sardines and / or to pay for their price, he could also be
sued. But his letter-reply to Atkins indicated that he accepted "the firm offer for the sale"
and that "the undersigned buyer has immediately filed an application for import license.”
After accepting the promise and before he exercises his option, the holder of the option is
not bound to buy. In this case at bar, however, upon respondent’s acceptance of herein
petitioner's offer, a bilateral promise to sell and to buy ensued, and the respondent had
immediately assumed the obligations of a purchaser.
 4. Bible Baptist Church and Pastor Reuben Belmonte, petitioners, vs. Court of
Appels and Mr. & Mrs. Elmer Tito Medina Villanueva, respondents
AZCUNA, J:
FACTS:

Petitioner entered into a contract of lease with Respondent Spouses VIllanueva. The latter
are the registered owners of a property located at Leon Guinto St., Malate, Manila. The
pertinent stipulations in the lease contract were:

4. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the
sum of Eighty Four Thousand Pesos (P84,000.00) Philippine Currency. Said
sum is to be paid directly to the Rural Bank, Valenzuela, Bulacan for the
purpose of redemption of said property which is mortgaged by the LESSOR.
5. That the title will remain in the safe keeping of the Bible Baptist Church,
Malate, Metro Manila until the expiration of the lease agreement or the leased
premises be purchased by the LESSEE, whichever comes first. In the event
that the said title will be lost or destroyed while in the possession of the
LESSEE, the LESSEE agrees to pay all costs involved for the re-issuance of
the title.
6. That the leased premises may be renovated by the LESSEE, to the
satisfaction of the LESSEE to be fit and usable as a Church.
8. That the LESSEE has the option to buy the leased premises during the
Fifteen (15) years of the lease. If the LESSEE decides to purchase the
premises the terms will be:
A) A selling Price of One Million Eight Hundred Thousand Pesos (P1.8
million), Philippine Currency.
B) A down payment agreed upon by both parties.
C) The balance of the selling price may be paid at the rate of One
Hundred Twenty Thousand Pesos (P120,000.00), Philippine Currency,
per year.

ISSUE/S:

(1) W/N the option to buy given to the Baptist Church is founded upon a
consideration
(2) W/N by the terms of the lease agreement, a price certain for the purchase of
the land had been fixed
(3) W/N the Baptist Church is entitled to an award for attorney’s fees

RULING:
The Court agrees with the Court of Appeals which affirmed the findings of the RTC, that
such claims be dismissed for lack of factual and legal basis. For an option contract to be
valid and enforceable the promisor, there must be a separate and distinct consideration
that supports it. Petitioners cannot insist that the Php 84,000 they paid in order to release
the property from the mortgage should be deemed the separate consideration to support
the contract of option. They were in fact apportioned monthly rentals for the year 1985.
They posit that their act of advancing the money to rescue the property from mortgage and
impending foreclosure, should be enough consideration to support the option. The Court
cannot find that the petitioner parted with anything of value, aside from the amount of PHp
84,000 which was in fact eventually utilized as rental payments. Second, there is no
document that contains an agreement between the parties that petitioner's supposed
rescue of the mortgaged property was the consideration which the parties contemplated in
support of the option clause in the contract. WHEREFORE, the decision and resolution of
the Court of Appeals subject of the petition are hereby affirmed.

5. Osmeña III vs. Power Sector Assets and Liabilities Management Corporation,
771 SCRA 559, G.R. No. 212686 September 28, 2015

A right to top is a variation of the right of first refusal often incorporated in lease
contracts. When a lease contract contains a right of first refusal, the lessor is under a
legal duty to the lessee not to sell to anybody at any price until after he has made an
offer to sell to the latter at a certain price and the lessee has failed to accept it. The
lessee has a right that the lessor's first offer shall be in his favor.

In a direct recourse to this Court, Senator Sergio R. Osmeña III (petitioner) seeks to
enjoin the sale of the Naga Power Plant Complex (NPPC) to respondent SPC Power
Corporation (SPC) resulting from the latter's exercise of the right to top the winning
bid of respondent Therma Power Visayas, Inc. (TPVI), and to declare such stipulation
in the Lease Agreement as void for being contrary to public policy.

FACTS:

Respondent Power Sector Assets and Liabilities Management Corporation (PSALM) is a

government-owned and controlled corporation created by virtue of Republic Act (R.A.) No.
9136, otherwise known as the Electric Power Industry Reform Act (EPIRA) of 2001. Its
principal purpose is to manage the orderly sale, disposition, and privatization of the National
Power Corporation's (NPC's) generation assets, real estate and other disposable assets,
and Independent Power Producer (IPP) contracts, with the objective of liquidating all NPC
financial obligations and stranded contract costs in an optimal manner.
SPC is a joint venture corporation between Salcon Power Corporation and Korea Power
Corporation (Kepco). TPVI is a subsidiary of AboitizPower, the power generation company
of the Aboitiz Group.

On October 16, 2009, PSALM privatized the 55-MW Naga Power Plant (LBGT) by way of
negotiated sale after a failed bidding in accordance with the LBGT Bidding Procedures. The
land underlying the LBGT was also leased out for a period of 10 years. This bidding
resulted in SPC's acquisition of the LBGT through an Asset Purchase Agreement
(LBGT-APA) and lease of the land under a Land Lease Agreement (LBGT-LLA). The
LBGT-LLA would expire on January 29, 2020. The LBGT-LLA contained a provision for
SPC's right to top in the event of lease or sale of property which is not part of the leased
premises.

On December 27, 2013, the Board of Directors of PSALM approved the commencement of
the 3rd Round of Bidding for the sale of the 153.1-MW NPPC. Only SPC and TPVI
submitted bids. On March 31, 2014, TPVI was declared as the highest bidder.
Consequently, a Notice of Award was issued to TPVI on April 30, 2014, subject to SPC's
right under Section 3.02 of the LBGT-LLA, as previously stated in Section 1B-20 of the
Bidding Procedures.

In a letter dated April 29, 2014, PSALM notified SPC of TPVI's winning bid which covers the
purchase of the NPPC and lease of the land. It also advised SPC that under the terms of
LBGT-LLA (Sections 2.01 and 3.02), the lease of the land (as governed by the LBGT-LLA)
will likewise expire on January 29, 2020.8 In a letter-reply dated May 7, 2014, SPC
confirmed that it is exercising the right to top the winning bid of TPVI and will pay the
amount of Php1,143,240,000.00 on the understanding that the term of the lease is 25 years
from Closing Date.

PSALM then wrote the Office of the Government Corporate Counsel (OGCC) requesting for
legal opinion or confirmation of its position that the term of the lease of the NPPC upon
SPC's exercise of its right to top would be for the remaining period of the lease of the land
of the Naga LBGT Power Plant, which will expire in 2020.

On May 21, 2014, the OGCC rendered Opinion No. 098, Series of 2014 which upheld
PSALM's position that SPC may exercise the right to top under the LBGT-LLA provisions,
the source of such right.

On August 11, 2014, petitioner filed a Supplemental Petition with Motion for Early
Resolution of the Application for Temporary Restraining Order and/or Writ of Preliminary
Injunction. According to petitioner, the transfer and possession to SPC of the NPPC and of
the land on which it is built should be deferred until after this Court has ruled on his petition
due to the following reasons: (1) there seems to be no urgency for PSALM to rush the
award of the NPPC; (2) by the execution of the subject NPPC-APA and LLA in favor of
SPC, PSALM has invalidly awarded a government property without the requisite public
bidding; and (3) there are practical difficulties and expense that will be incurred in order to
reverse acts that are committed before any provisional or preventive relief is issued, such
as transfer of ownership and/or possession of the properties in SPC's name or to third
parties, and potential liability of the Government under suit for damages to be filed by any
interested party.

On November 11, 2014, PSALM filed a Manifestation in Lieu of Comment to the

Supplemental Petition, stating that: (1) PSALM's Board of Directors, in a meeting held on
July 25, 2014, taking into consideration the OGCC's letter dated June 13, 2014 and the
DOJ's opinion-letter dated June 23, 2014, declared SPC as the winning bidder for the sale
of 153.1-MW NPPC; (2) PSALM issued on July 28, 2014 the Notice of Award and
Certificate of Effectivity in favor of SPC; (3) the NPPC-APA and LLA were already signed
and delivered to SPC; and (4) PSALM turned over the properties to SPC last September 25,
2014.

ISSUE: Whether right to top provisions in the land lease agreements entered into by
PSALM contravene public policy on competitive bidding?

RULING: Yes, In this case, all potential bidders were aware of the existence of SPC's right
to top as duly disclosed in the Bidding Procedures for the 3rd Round of Bidding for the
NPPC. TPVI did not question the said right to top and participated in the bidding where
SPC was also a bidder. Emerging as the winning bidder, TPVI nevertheless knew that the
acceptance of its bid was subject to SPC's exercise of the right to top by confirming its
exercise of the right of first refusal and paying the amount of the winning bid plus five
percent (5%).

Notwithstanding compliance with the conduct of bidding and procedures, the Court held
that SPC's right to top under the LBGT-LLA is void for lack of a valid interest or right
to the object over which the right of first refusal is to be exercised. First, the property
subject of the right of first refusal is outside the leased premises covered by the
LBGT-LLA. Second, the right of first refusal refers not only to land but to any property
within the vicinity of the leased premises, as in this case, an entire power plant complex
(NPPC) and the land on which it is built. And third, while SPC cited concerns regarding
security, right of way or other operational requirements, these are clearly not analogous to
a lessee's legitimate interest on the property being leased. Indeed, acquisition of a three
coal-fired thermal plants with far greater generating capacity than the gas turbine plant
currently owned by SPC will not be merely for purposes of the latter's reasonable access,
security or present operational needs. Besides, no such right or interest may be invoked
by SPC because, as confirmed by PSALM itself, SPC never operated the Naga LBGT.
The Court held that the grant of right to top to SPC under the LBGT-LLA is void as it
is not founded on the said lessee's legitimate interest over the leased premises.
SPC's argument that the privatization of NPPC was even more advantageous to the
Government, simply because it resulted in a higher price (Php54 million more) than
TPVI's winning bid, is likewise untenable. Whatever initial gain from the higher price
obtained for the NPPC compared to the original bid price of TPVI is negated by the
fact that SPC's right to top had discouraged more potential buyers from submitting
their bids, knowing that even their most reasonable bid can be defeated by SPC's
exercise of its right to top. In fact, only SPC and TPVI participated in the 3rd Round of
Bidding. Attracting as many bidders to participate in the bidding for public assets is
still the better means to secure the best bid for the Government, and achieve the
objective under the EPIRA to private NPC's assets in the most optimal manner.

6. Ayala Land, Inc., petitioner vs. ASB Realty Corporation and E.M. Ramos & Sons,
Inc., Respondents G.R. No. 210043, September 26, 2018

Del Castillo, J.:

DOCTRINE: Under the DOCTRINE OF APPARENT AUTHORITY, the question in

every case is whether the principal has by his voluntary act places the agent in
such a situation that a person of ordinary prudence, conversant with business
usages and the nature of the particular business, is justified in presuming that
such agent has authority to perform the particular act in question.

FACTS:
ALI and ASBRC are domestic corporations engaged in real estate development.On the
other hand, EMRASON is a domestic corporation principally organized to manage property
located in Dasmariñas, Cavite. ALI claimed that EMRASON's brokers sent a proposal for a
joint venture agreement (JVA) between ALI and EMRASON for the development of
EMRASON's Dasmariñas Property. Then EMRASON's President and Chairman, wrote to
ALI and therein acknowledged that Ramos, Jr. and Antonio were fully authorized to
represent EMRASON in the JVA. ALI and the Ramos children subsequently entered into a
Contract to Sell under which ALI agreed to purchase the Dasmariñas Property.

ALI alleged that it came to know that a Letter-Agreement and a Real Estate Mortgage
respecting the Dasmariñas Property had been executed by Ramos, Sr. and Antonio for and
in behalf of EMRASON, on one hand, and ASBRC on the other. It also alleged that the
Ramos children wrote to Luke C. Roxas, ASBRC's President, informing the latter of the
Contract to Sell between ALI and EMRASON. After ASBRC learned about the Contract to
Sell executed between ALI and the Ramos children and the annotation of the Contract to
Sell on the transfer certificate of title covering the Dasmariñas Property, ASBRC and
EMRASON filed a complaint for the nullification of Contract to Sell and the cancellation of
the annotatino in the TCTs over the Dasmariñas property.

ISSUE:
Whether or not the contract to Sell entered into by and between ALI and Ramos children is
valid.
RULING:
No. The Court held that a juridical entity, like EMRASON, "cannot act except through its
board of directors as a collective body, which is vested with the power and responsibility to
decide whether the corporation should enter in a contract that will bind the corporation,
subject to the articles incorporation, by- laws, or relevant provisions of law." Although the
general rule is that "no person, not even its officers, can validly bind a corporation " without
the authority of the corporation's board of directors, this Court has recognized instances
where third persons' actions bound a corporation under the doctrine of apparent authority
or ostensible agency...The doctrine of apparent authority or ostensible agency, which is
actually a species of the doctrine of estoppel, thus – The doctrine of apparent authority is a
species of the doctrine of estoppel. Article 1431 of the Civil Code provides that through
estoppel, an admission or representation is rendered conclusive upon the person making
it, and cannot be denied or disproved as against the person relying thereon.' Estoppel
rests on this rule: 'Whenever a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing true, and to act upon
such belief, he cannot, in any litigation arising out of such declaration, act or omission, be
permitted to falsify it.'..."A contract is void if one of the essential requisites of contracts
under Article 1318 of the New Civil Code is lacking."

7. Norkis Distributors, Inc. v. Court of Appeals, G.R. No. 91029, [February 7, 1991],
271 PHIL 726-732)

DOCTRINE: The issuance of a sales invoice does not prove transfer of ownership
of the thing sold to the buyer. An invoice is nothing more than a detailed
statement of the nature, quantity and cost of the thing sold and has been
considered not a bill of sale. The critical factor in the different modes of effecting
delivery, which give legal effect to the act, is the actual intention of the vendor to
deliver, and its acceptance by the vendee. Without that intention, there is no
tradition.

FACTS: Petitioner Norkis is a distributor of Yamaha Motors in Negros. The private

respondent Nepales, bought a brand new motorcycle from the Norkis-Bacolod Branch.
The price of P7500 was payable by means of a Letter of Guaranty from the Development
Bank of The Philippines. As security for the loan, Nepales would execute a chattel
mortgage on the motorcycle in favor of DBP. The branch manager then issued a Sales
Invoice showing that the Contract of Sale of the motorcycle had been perfected. Nepales
signed the Sales Invoice to signify his conformity with the terms of the sale. In the
meantime, however, the motorcycle remained in Norkis’ possession. The motorcycle was
registered in the Land Transportation Commission. The motorcycle was then delivered to a
certain Julian Nepales who was allegedly the agent of Alberto Nepales but the latter
denies it. The unit was presented to a DBP Appraiser-Investigator. Eventually, the
motorcycle met with an accident and the unit was a total wreck. It was returned and stored
inside Norkis’ warehouse.

DBP released the motorcycle loan to Norkis. Nepales them, paid the difference and
demanded the delivery of the motorcycle. When Norkis could not deliver, he filed an action
for specific performance with damages against Norkis. He alleged that Norkis failed to
deliver the motorcycle which he purchased, thereby causing him damages. Norkis
answered that the motorcycle had already been delivered to a private respondent before
the accident, hence, the risk of loss or damage had to be borne by him as the wonder of
the unit.

The RTC ruled in favor of the Nepales, ordering Norkis to pay Nepales the value of
the motorcycle or to deliver another motorcycle of the same brand, kind and quality.
It also awarded damages. The CA, affirmed with modification as to the award of
damages. The Supreme Court affirmed.

ISSUE: WON Norkis or Nepales should bear the loss.

RULING: The answer to this question would depend on whether there had already been a
transfer of ownership of the motorcycle to a private respondent at the time it was
destroyed. Norkis should bear the loss.

Norkis concedes that there was no “actual delivery” of the vehicle. However, it insists that
there was constructive delivery upon: (1) the issuance of the Sales Invoice in the name of
the private respondent and the affixing of his signature; (2) the registration of the vehicle
with the Land Transportation Commission in private respondent’s name; and (3) issuance
of the official receipt for payment of registration fees.

The Court held that the issuance of a sales invoice does not prove transfer of ownership of
the thing sold to the buyer. An invoice is nothing more than a detailed statement of the
nature, quantity, cost of the thing sold and has been considered not a bill of sale. In all
forms of delivery, it is necessary that the act of delivery, whether constructive or actual, be
coupled with the intention of delivering the thing. The act, without intention, is insufficient.

In the present case, when the motorcycle was registered by Norkis in the name of the
private respondent, Noris did not intend yet to transfer the title or ownership to Nepales. It
was merely to facilitate the execution of a chattel mortgage in favor of DBP for the release
of the buyer’s motorcycle loan. The Letter of Guarantee issued by DBP reveals that the
execution in its favor of a chattel mortgage over the purchased vehicle is a prerequisite for
the approval of the buyer’s loan. If Norkis would not accede to that arrangement, DBP
would not approve the private respondent’s loan and application, and consequently, there
would be no sale.

8. Equatorial Realty Development v. Mayfair Theater, Inc.,G.R. No. 136221. May 12,
2000

DOCTRINE: An option is a contract granting a privilege to buy or sell within an

agreed time and at a determined price. It is a separate and distinct contract from
that which the parties may enter into upon the consummation of the option. It
must be supported by consideration. In the instant case, the right of first refusal is
an integral part of the contracts of lease. The consideration is built into the
reciprocal obligations of the parties.

FACTS: Carmelo is the owner of a parcel of land. He entered into a contract of lease with
Mayfair for the lease of a portion of his property. Mayfair constructed on the leased
property, a movie house. Subsequently, Mayfair entered into another contract of lease with
Carmelo for another portion of the latter’s property, also for use as a movie theatre. Both
contained the following stipulation: “that if a LESSOR should desire to sell the leased
premises, the LESSEE shall be given a 30-day exclusive option to purchase the same… In
the event that the leased premises is sold to someone other than the LESSEE, the lessor
is bound to stipulate in the Deed of Sale that the purchaser shall recognize this lease..”

Later on, Carmelo informed Mayfair that he desires to sell the entire property and that one
Araneta was offering to buy the whole property. Days later, Mayfair replied through a letter
reiterating the terms of their contract regarding the “30-day exclusive option to purchase”.
Mayfair sent another letter to Carmelo expressing his interest in acquiring not only the
leased premises but the entire building. 4 years later, Carmelo sold its entire property to
Equatorial.
Mayfair filed an action for specific performance and annulment of the sale of the leased
premises to Equatorial. Carmelo contends inter alia that the option to purchase invoked by
Mayfair is null and void for lack of consideration. RTC ruled in favor of Carmelo on the
grounds of lack of consideration. Upon appeal, the CA reversed the RTC decision and
concluded that there is no option contract but there is a right of first refusal.

ISSUE: WON the “30-day exclusive option to purchase” is an option contract or a right of
first refusal

RULING: RIGHT OF FIRST REFUSAL. Under the law, an option is a contract granting a
privilege to buy and sell within an agreed period of time for a determined price and must
be supported by consideration distinct from the price. Whereas, right of first refusal is part
of the entire contract of lease. In this case, the right of first refusal is an integral part of the
lease contract between Carmelo and Mayfair and no separate consideration shall be
needed to be binding. Therefore, the sale is rescissible because both Carmelo and
Equatorial acted in bad faith knowing that a right of first refusal was agreed upon in the
lease contract and Mayfair was an interested buyer of the property.

9. Fullido vs. Grilli, 785 SCRA 278, G.R. No. 215014 February 29, 2016

DOCTRINE: The argument that no document was executed for the sale is negated
by the CA finding that there was a notarized deed of conveyance executed
between Anastacio and the spouses Molina, as annotated on the OCT of the
disputed property. Prevailing jurisprudence uniformly holds that findings of facts
of the trial court, particularly when affirmed by the Court of Appeals, are binding
upon this Court.

FACTS:

● Sometime in 1994, Grilli, an Italian national, met Fullido

● in Bohol and courted her.
● In 1995, Grilli decided to build a residential house where he and Fullido would to
stay whenever he would be vacationing in the country.
● Grilli financially assisted Fullido in procuring a lot located in Biking I, Dauis, Bohol,
from her parents which was registered in her name under Transfer Certificate of
Title.
 ● On the said property, they constructed a house, which was funded by Grilli.
● Upon completion, they maintained a common-law relationship and lived there
whenever Grilli was on vacation in the Philippines twice a year.
● In 1998, Grilli and Fullido executed a contract of lease, a memorandum of
agreement (MOA) and a special power of attorney (SPA), to define their respective
rights over the house and lot.
● The lease contract stipulated, among others, that Grilli as the lessee, would rent the
lot, registered in the name of Fullido, for a period of fifty (50) years, to be
automatically renewed for another fifty (50) years upon its expiration in the amount
of P10,000.00 for the whole term of the lease contract; and that Fullido as the
lessor, was prohibited from selling, donating, or encumbering the said lot without
the written consent of Grilli.
● The said lease contract was duly registered in the Register of Deeds of Bohol.
● The MOA, on the other hand, stated, among others, that Grilli paid for the purchase
price of the house and lot; that ownership of the house and lot was to reside with
him; and that should the common-law relationship be terminated, Fullido could only
sell the house and lot to whomever Grilli so desired.Lastly, the SPA allowed Grilli to
administer, manage, and transfer the house and lot on behalf of Fullido.
● Initially, their relationship was harmonious, but it turned sour after 16 years of living
together.
● Both charged each other with infidelity.
● They could not agree who should leave the common property, and Grilli sent formal
letters to Fullido demanding that she vacate the property, but these were unheeded.
● On September 8, 2010, Grilli filed a complaint for unlawful detainer with prayer for
issuance of preliminary injunction against Fullido before the MCTC.

Grill’s Position: The complaint stated that the common-law relationship between Grilli and
Fullido began smoothly, until Grilli discovered that Fullido was pregnant when he arrived in
the Philippines in 2002. After the delivery of the child, it became apparent that the child
was not his because of the discrepancy between the child's date of birth and his physical
presence in the country. Grilli verbally asked Fullido to move out of his house because they
were not getting along anymore, but she refused. He could no longer tolerate the hostile
attitude shown to him by Fullido and her family, thus, he filed the complaint.

Fullido's Position: Fullido filed a petition for Temporary Protection Order and Permanent
Protection Order (TPO) against him under the Republic Act (R.A.) No. 9262. Fullido
claimed that Grilli threatened and physically hurt her by hitting her on the head and
choking her when she refused to leave their home. The RTC ruled in favor of Fullido and
ordered Grilli to be excluded from their house.
The MCTC Ruling: The MCTC dismissed the case against Fullido, finding that she was a
co-owner of the house and could not be ejected from their lot. The court respected the
TPO issued by RTC-Branch 3 directed that Grilli be removed from Fullido's residence.
Not in conformity, Grilli elevated the matter before the RTC.

The RTC Ruling: The RTC reversed and set aside the MCTC decision. The RTC was of
the view that Grilli had the exclusive right to possess the house and lot. Since the period of
lease had not yet expired, Fullido had the obligation to respect the peaceful enjoyment of
the premises by Grilli as lessee.

The CA Ruling: The Court of Arbitration for Trinidad and Tobago (CA) has upheld the
decision of the RTC-Branch 3 that gave Grilli the possession and use of the house and lot.
The CA stressed that, if Fullido would insist that the documents were voidable as her
consent was vitiated, then she should institute a separate action for annulment of
contracts.

ISSUE: May patently null and void contracts be a basis of an ejectment order?

(MGA SIZ, KUNG ANO LANG HINIGHLIGHT KO AYUN LANG YUNG CONNECTED SA
CASE HA. PERO DI KO IDDELETE YUNG IBA PARA MA GETS NO YUNG KASO AND
BAKA MATANONG DIN NI ATTY YUNG ABOUT SA CONSTI EH? HEHE)

RULING: A void contract cannot be the source of any right; it cannot be utilized in an
ejectment suit.

A void or inexistent contract may be defined as one which lacks, absolutely either in fact or
in law, one or some of the elements which are essential for its validity. It is one which has
no force and effect from the very beginning, as if it had never been entered into; it
produces no effect whatsoever either against or in favor of anyone. Quod nullum est
nullum producit effectum. Article 1409 of the New Civil Code explicitly states that void
contracts also cannot be ratified; neither can the right to set up the defense of illegality be
waived. Accordingly, there is no need for an action to set aside a void or inexistent
contract. A review of the relevant jurisprudence reveals that the Court did not hesitate to
set aside a void contract even in an action for unlawful detainer.

In Spouses Alcantara v. Nido, which involves an action for unlawful detainer, the
petitioners therein raised a defense that the subject land was already sold to them by the
agent of the owner. The Court rejected their defense and held that the contract of sale was
void because the agent did not have the written authority of the owner to sell the subject
land.

Similarly, in Roberts v. Papio, a case of unlawful detainer, the Court declared that the
defense of ownership by the respondent therein was untenable. The contract of sale
invoked by the latter was void because the agent did not have the written authority of the
owner. A void contract produces no effect either against or in favor of anyone.

In Ballesteros v. Abion, which also involves an action for unlawful detainer, the Court
disallowed the defense of ownership of the respondent therein because the seller in
their contract of sale was not the owner of the subject property. For lacking an
object, the said contract of sale was void ab initio. Clearly, contracts may be
declared void even in a summary action for unlawful detainer because, precisely,
void contracts do not produce legal effect and cannot be the source of any rights.
To emphasize, void contracts may not be invoked as a valid action or defense in any
court proceeding, including an ejectment suit. The next issue that must be resolved
by the Court is whether the assailed lease contract and MOA are null and void.

The lease contract and the MOA circumvent the constitutional restraint against foreign
ownership of lands.

The prohibition on the transfer of lands to aliens was adopted in the present 1987
Constitution, under Sections 2, 3 and 7 of Article XII thereof. Agricultural lands, whether
public or private, include residential, commercial and industrial lands. The purpose of
prohibiting the transfer of lands to foreigners is to uphold the conservation of our national
patrimony and ensure that agricultural resources remain in the hands of Filipino citizens.
The prohibition, however, is not limited to the sale of lands to foreigners. It also covers
leases of lands amounting to the transfer of all or substantially all the rights of dominion. In
the landmark case of Philippine Banking Corporation v. Lui She, 28 the Court struck down
a lease contract of a parcel of land in favor of a foreigner for a period of ninety-nine (99)
years with an option to buy the land for fifty (50) years.

Where a scheme to circumvent the Constitutional prohibition against the transfer of lands
to aliens is readily revealed as the purpose for the contracts, then the illicit purpose
becomes the illegal cause rendering the contracts void. Thus, if an alien is given not only a
lease of, but also an option to buy, a piece of land by virtue of which the Filipino owner
cannot sell or otherwise dispose of his property, this to last for 50 years, then it becomes
clear that the arrangement is a virtual transfer of ownership whereby the owner divests
himself in stages not only of the right to enjoy the land but also of the right to dispose of it
— rights which constitute ownership. If this can be done, then the Constitutional ban
against alien landholding in the Philippines, is indeed in grave peril.

In Llantino v. Co Liong Chong, however, the Court clarified that a lease contract in favor
of aliens for a reasonable period was valid as long as it did not have any scheme to
circumvent the constitutional prohibition, such as depriving the lessors of their right to
dispose of the land. The Court explained that "[a]liens are not completely excluded by the
Constitution from use of lands for residential purposes. Since their residence in the
Philippines is temporary, they may be granted temporary rights such as a lease contract
which is not forbidden by the Constitution. Should they desire to remain here forever and
share our fortune and misfortune, Filipino citizenship is not impossible to acquire." The
lessee-foreigner therein eventually acquired Filipino citizenship.

Consequently, Presidential Decree (P.D.) No. 471 was enacted to regulate the lease of
lands to aliens. It provides that the maximum period allowable for the duration of leases of
private lands to aliens or alien-owned corporations, associations, or entities not qualified to
acquire private lands in the Philippines shall be twenty-five (25) years, renewable for
another period of twenty-five (25) years upon mutual agreement of both lessor and
lessee. It also provides that any contract or agreement made or executed in
violation thereof shall be null and void ab initio. Based on the above-cited
constitutional, legal and jurisprudential limitations, the Court finds that the lease
contract and the MOA in the present case are null and void for virtually transferring
the reigns of the land to a foreigner.

As can be gleaned from the contract, the lease in favor of Grilli was for a period of fifty (50)
years, automatically extended for another fifty (50) years upon the expiration of the original
period. Moreover, it strictly prohibited Fullido from selling, donating, or encumbering her
land to anyone without the written consent of Grilli. For a measly consideration of
P10,000.00, Grilli would be able to absolutely occupy the land of Fullido for 100 years, and
she is powerless to dispose of the same. The terms of lease practically deprived
Fullido of her property rights and effectively transferred the same to Grilli.

Evidently, the lease contract and the MOA operated hand-in-hand to strip Fullido of
any dignified right over her own property. The term of lease for 100 years was
obviously in excess of the allowable periods under P.D. No. 471. Even Grilli admitted
that "this is a case of an otherwise valid contract of lease that went beyond the
period of what is legally permissible." Grilli had been empowered to deprive Fullido
of her land's possession, control, disposition and even its ownership. The jus
possidendi, jus utendi, jus fruendi, jus abutendi and, more importantly, the jus disponendi
— the sum of rights which composes ownership — of the property were effectively
transferred to Grilli who would safely enjoy the same for over a century. The said contracts
attempted to guise themselves as a lease, but a closer scrutiny of the same revealed that
they were intended to transfer the dominion of a land to a foreigner in violation of Section
7, Article XII of the 1987 Constitution. Even if Fullido voluntarily executed the same, no
amount of consent from the parties could legalize an unconstitutional agreement.
The lease contract and the MOA do not deserve an iota of validity and must be
rightfully struck down as null and void for being repugnant to the fundamental law.
These void documents cannot be the source of rights and must be treated as mere
scraps of paper.

10. Melecio Domingo v. Spouses Genaro Molina and Elena Molina, substituted by
Ester Molina, G.R. No. 200274, April 20, 2016

FACTS: In June 15, 1951, the spouses Anastacio and Flora Domingo bought a property in
Camiling, Tarlac, consisting of a one-half undivided portion over an 18,164 square meter
parcel of land. The sale was annotated on the Original Certificate of Title (OCT) covering
the subject property. During his lifetime, Anastacio borrowed money from the respondent
spouses Genaro and Elena Molina (spouses Molina). On September 10, 1978 or 10 years
after Flora's death,Anastacio sold his interest over the land to the spouses Molina to
answer for his debts. The sale to the spouses Molina was annotated at the OCT of the
subject property. In 1986, Anastacio died.

In May 19, 1995, the sale of Anastacio's interest was registered under Transfer Certificate
of Title (TCT) No. 272967 7 and transferred the entire one-half undivided portion of the
land to the spouses Molina.

Melecio, one of the children of Anastacio and Flora, learned of the transfer and filed a
Complaint for Annulment of Title and Recovery of Ownership (Complaint) against the
spouses Molina on May 17, 1999.Melecio claims that Anastacio gave the subject property
to the spouses Molina to serve as collateral for the money that Anastacio borrowed.
Anastacio could not have validly sold the interest over the subject property without Flora's
consent, as Flora was already dead at the time of the sale. Melecio also claims that
Genaro Molina must have falsified the document transferring Anastacio and Flora's
one-half undivided interest over the land. Finally, Melecio asserts that he occupied the
subject property from the time of Anastacio's death up to the time he filed the Complaint.

The Records Officer testified that he could not locate the instrument that documents the
transfer of the subject property ownership from Anastacio to the spouses Molina. The
Records Officer also testified that the alleged sale was annotated at the time when Genaro
Molina's brother was the Register of Deeds for Camiling, Tarlac
RTC: dismissed 15 the case because Melecio failed to establish his claim that Anastacio
did not sell the property to the spouses Molina. The RTC also held that Anastacio could
dispose of conjugal property without Flora's consent since the sale was necessary to
answer for conjugal liabilities.

CA: the CA affirmed the RTC ruling in toto. The CA held that Melecio failed to prove by
preponderant evidence that there was fraud in the conveyance of the property to the
spouses Molina. The CA gave credence to the OCT annotation of the disputed property
sale. The CA also held that Flora's death is immaterial because Anastacio only sold his
rights, excluding Flora's interest, over the lot to the spouses Molina. The CA explained that
"[t]here is no prohibition against the sale by the widower of real property formerly
belonging to the conjugal partnership of gains".

Melecio filed the present petition for review on certiorari to challenge the CA ruling.

ISSUE: 1. whether the sale of a conjugal property to the spouses Molina without Flora's
consent is valid and legal;and (2) whether fraud attended the transfer of the subject
property to the spouses Molina.

RULING:
The Court denied the instant petition. Melecio argues that the sale of the disputed
property to the spouses Molina is void without Flora's consent. We do not find Melecio's
argument meritorious.

1.The conjugal partnership of Anastacio and Flora was dissolved when Flora died in 1968,
pursuant to Article 175 (1) of the Civil Code22 (now Article 126 (1) of the Family Code).
Article 130 of the Family Code requires the liquidation of the conjugal partnership upon
death of a spouse and prohibits any disposition or encumbrance of the conjugal property
prior to the conjugal partnership liquidation,While Article 130 of the Family Code provides
that any disposition involving the conjugal property without prior liquidation of the
partnership shall be void, this rule does not apply since the provisions of the Family Code
shall be "without prejudice to vested rights already acquired in accordance with the Civil
Code or other laws."

The OCT annotation of the sale to the spouses Molina reads that" [o]nly the rights,
interests and participation of Anastacio Domingo, married to Flora Dela Cruz, is hereby
sold, transferred, and conveyed unto the said vendees for the sum of ONE THOUSAND
PESOS (P1,000.00) which pertains to an undivided one-half (1/2) portion and subject to all
other conditions specified in the document . . ." 25 (emphases supplied). At the time of the
sale, Anastacio's undivided interest in the conjugal properties consisted of: (1) one-half of
the entire conjugal properties; and (2) his share as Flora's heir on the conjugal properties.
ATICcS Anastacio, as a co-owner, had the right to freely sell and dispose of his undivided
interest, but not the interest of his co-owners. Consequently, Anastacio's sale to the
spouses Molina without the consent of the other coowners was not totally void, for
Anastacio's rights or a portion thereof were thereby effectively transferred, making the
spouses Molina a co-owner of the subject property to the extent of Anastacio's interest.
This result conforms with the well-established principle that the binding force of a
contract must be recognized as far as it is legally possible to do so (quando res non
valet ut ago, valeat quantum valere potest).

"it is now settled that the appropriate recourse of co-owners in cases where their consent
were not secured in a sale of the entire property as well as in a sale merely of the
undivided shares of some of the co-owners is an action for PARTITION under Rule 69 of
the Revised Rules of Court."

The sale of the subject property to the spouses Molina was not attended with fraud.
On the issue of fraud, the lower courts found that there was no fraud in the sale of the
disputed property to the spouses Molina. The issue of fraud would require the Court to
inquire into the weight of evidentiary matters to determine the merits of the petition and is
essentially factual in nature. It is basic that factual questions cannot be cannot be
entertained in a Rule 45 petition, unless it falls under any of the recognized exceptions 29
found in jurisprudence. The present petition does not show that it falls under any of the
exceptions allowing factual review. The CA and RTC conclusion that there is no fraud in
the sale is supported by the evidence on record.
Melecio's argument that no document was executed for the sale is negated by the CA
finding that there was a notarized deed of conveyance executed between Anastacio and
the spouses Molina, as annotated on the OCT of the disputed property. Furthermore,
Melecio's belief that Anastacio could not have sold the property without his knowledge
cannot be considered as proof of fraud to invalidate the spouses Molina's registered title
over the subject property. 30 Prevailing jurisprudence uniformly holds that findings of facts
of the trial court, particularly when affirmed by the Court of Appeals, are binding upon this
Court.

HOMEWORK NO. 3
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 1. EDCA Publishing vs Sps Leonor and Gerardo Santos, doing business under
the name and style if “SANTOS BOOKSTORE”, 184 SCRA 614 - RAECHELLE

DOCTRINE:Possession of movable property acquired in good faith is equivalent to

title. There is no need to produce a receipt.

FACTS:

● Oct. 5, 1981, Jose Cruz placed an order by telephone with EDCA Publishing, 406
books, payable on delivery.
● EDCA prepared the corresponding invoice and delivered the books as order, Cruz
issued a personal check covering the purchase price of P8,995.65
● Oct. 7, 1981, Cruz sold 120 of the books to private respondent Leonor Santos who
paid him P1,700.
● EDCA, having become suspicious over a second order placed by Cruz even before
clearing of his first check, made inquiries with the De la Salle College where he had
claimed to be a dean and was informed that there was no such person in its
employ. Further verification revealed that Cruz had no more account or deposit with
the Philippine Amanah Bank, against which he had drawn the payment check.
● EDCA then went to the police, which set a trap and arrested Cruz on October 7,
1981. Investigation disclosed his real name as Tomas de la Peña and his sale of
120 of the books he had ordered from EDCA to the private respondents.
- EDCA sought assistance of the police, which forced their way into the store
of the private respondents and threatened Leonor Santos with prosecution
for buying stolen property. They seized the 120 books without warrant,
loading them in a van belonging to EDCA, and thereafter turned them over
to the petitioner.
● Private Respondents sued for recovery of the books after demand for their return
was rejected by EDCA.

ISSUE: Whether EDCA was unlawfully deprived of the books because the check
issued by Jose Cruz a.k.a Tomas Dela Peña in payment was dishonored

RULING: NO. EDCA contends that there was no transference of ownership from
them to Cruz.

● Art.1477 and Art. 1488 provides for the rule that in a contract of sale, ownership
shall pass from the vendor to the vendee upon actual/constructive delivery even if
purchase price hasn’t been given yet unless there is a stipulation to the contrary.
ART. 1477. The ownership of the thing sold shall be transferred to the vendee upon
the actual or constructive delivery thereof.

ART. 1478. The parties may stipulate that ownership in the thing shall not pass to
the purchaser until he has fully paid the price.

● Hence, Cruz became the rightful owner of the books.

- In case of non-payment, the valid remedies are:
- right to rescission,
- right to demand payment or
- right to sue in case of bouncing checks.
● The unlawful deprivation EDCA claims is not within the scope of Art 559 which
states: “Nevertheless, one who has lost any movable or has been unlawfully
deprived thereof, may recover it from the person in possession of the same.”
- He was not “unlawfully deprived” as stated in Art 559 because in fact,
by virtue of the contracts of sale and deliverance, there was a valid
transference of ownership to Cruz. Cruz could have done whatever he
wanted with the books. Cruz’s non-payment did not bring this case
under the purview of Art 559. EDCA’s remedy is not against Leonor but
against Cruz/de la Peña.

2. Phil Suburban Development Corp. vs. Auditor General, 63 SCRA 397 -

REGINE

Doctrine: Under the civil law, delivery(tradition) as a mode of transmission of ownership

may be actual (real tradition) or constructive (constructive tradition). When the sale of real
property is made in a public instrument, the execution thereof is equivalent to the delivery
of the object of the contract, if from the deed the contrary does not appear or cannot
clearly be inferred. And, in the case at bar, where the vendor had actually placed the
vendee in possession and control over the thing sold even before the date of the sale, the
non-payment of the purchase price of the goods did not preclude the transmission of the
title upon execution of the deed of sale, since payment of the purchase price is not a
condition precedent to the transfer of title to the buyer.

FACTS: On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines
(Garcia), acting on the reports of the Committee created to survey suitable lots for
relocating squatters in Manila and suburbs, and of the Social Welfare Administrator
together with the recommendation of the Manager of the Government Service Insurance
System, approved in principle the acquisition by the People's Homesite and Housing
Corporation of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan
for relocating the squatters who desire to settle north of Manila, and of another area either
in Las Piñas or Parañaque, Rizal, or Bacoor, Cavite for those who desire to settle south of
Manila. The project was to be financed through the flotation of bonds under the charter of
the PHHC in the amount of P4.5 million, the same to be absorbed by the Government
Service Insurance System. The President, through the Executive Secretary, informed the
PHHC of such approval by letter

The PHHC Board of Directors approved the purchase of the unoccupied portion of the
Sapang Palay Estate for P0.45 per square meter. Petitioner Philippine Suburban
Development Corporation, as owner of the unoccupied portion of the Sapang Palay
Estate, and the People's Homesite and Housing Corporation entered into a contract
embodied in a public instrument entitled "Deed of Absolute Sale" in which the PSDC
conveyed two parcels of land to the latter after an exchange of communications.

The said document was not registered in the Office of the Register of Deeds until March
14, 1961, according to petitioner, because the PHHC was unable to immediately advance
the funds required for registration expenses. It appears that the PHHC acquired
possession of the property with the consent of petitioner as early as the first week of June
1960, prior to the signing of the deed by the parties, to enable the said PHHC to proceed
immediately with the construction of roads in the new settlement and to resettle the
squatters and flood victims in Manila who were rendered homeless by the floods or ejected
from squatter camps.

It is now claimed in this appeal that the Auditor General erred in disallowing the refund of
the real estate tax in the amount of P30,460.90 because aside from the presumptive
delivery of the property by the execution of the deed of sale on December 29, 1960, the
possession of the property was actually delivered to the vendee prior to the sale, and,
therefore, by the transmission of ownership to the vendee, petitioner has ceased to be the
owner of the property involved, and, consequently, under no obligation to pay the real
property tax for the year 1961.

ISSUE:
WON there was already a valid transfer of ownership between the parties.
[Yes. In a contract of sale – the non-payment of the purchase price will not preclude the
transfer of ownership upon the actual or constructive delivery by the seller to the buyer.
Absence to the stipulation to the contrary. Payment of the purchase price is not a condition
precedent to the transfer of title to the buyer.]

RULING:
On review, the Supreme Court held that since the delivery of possession coupled with the
execution of the Deed of Absolute Sale had consummated the sale and transferred the title
to the purchaser, the payment of the real estate tax after such transfer is the responsibility
of the purchaser.

The Court ruled, however, that in the case at bar, the purchaser PHHC is a government
entity and therefore NOT subject to real property tax.

Under the civil law, delivery (tradition) as a mode of transmission of ownership may be
i. actual (real tradition) or
ii. constructive (constructive tradition).

When the sale of real property is made in a public instrument, the execution thereof is
equivalent to the delivery of the thing object of the contract, if from the deed the contrary
does not appear or cannot clearly be inferred.

And, in the case at bar where the vendor had actually placed the vendee in possession
and control over the thing sold even before the date of the sale.
The non-payment of the purchase price of the goods did not preclude the transmission of
the title upon execution of the deed of sale, since payment of the purchase price is not a
condition precedent to the transfer of title to the buyer.
Payment of real estate taxes is the responsibility of the purchaser after the consummation
of the sale and transfer of title.

3. Skunac Corporation vs. Sylianteng, 723 SCRA 625, G.R. No. 205879 April 23,
2014 - RAECHELLE

FACTS:

● This case involves 2 parcels of land Lot 1 (1,250 sq m) and Lot 2 (990 sq m),
found in Greenhills, San Juan City which are portions of a parcel of land previously
registered in the name of Luis Pujalte
- Covered by a TCT of the RD for the City of Manila.
 ● Plaintiffs Roberto and Caesar Sylianteng base their claim of ownership over the
subject lots a Deed of Absolute Sale executed in their favor by their mother,
Emerenciana Sylianteng on June 27, 1983.
● They further alleged that Emerenciana acquired the lots from the late Luis Pujalte
through a Deed of Sale dated June 20, 1958 which was annotated on the covering
TCT. Then, when she sold the lot to the appellants a TCT was issued in their
names.
● Skunac Corporation and Alfonso F. Enriquez, on the other hand, claim that a certain
Romeo Pujalte who was declared by the RTC of Pasig City, Branch 151 in Special
Proceedings as the sole heir of Luis Pujalte, caused the reconstitution of the
Mother Title resulting to its cancellation and the issuance of TCT in his favor.
● Romeo Pujalte then allegedly sold the lots to Skunac and Enriquez in 1992.
- TCT for Lot 1 was issued in the name of Skunac
- TCT for Lot 2 was issued in the name of Enriquez

Respondents contention: Petitioners contention:

Respondents contend that they have a Petitioners, for their part, maintain that
better right to the lots in question because respondents acquired the lots under
the transactions conveying the same to questionable circumstances; it appearing
them preceded those claimed by petitioners that there was no copy of the Deed of Sale,
as source of the latter's titles. Respondents between Emerenciana and Luis Pujalte, on
further assert that petitioners could not be file with the Office of the Register of Deeds.
considered as innocent purchasers in good
faith and for value because they had prior
notice of the previous transactions as
stated in the memorandum of
encumbrances annotated on the titles
covering the subject lots.

RTC: Rendered judgment in favor of petitioners. Declared TCT in the name of Emerciana
Syliantend as null and void.

CA: rendered in favor of plaintiffs-appellants Roberto S. Sylianteng and Caesar S.

Sylianteng. The CA upheld the validity of TCT in the name of Emerciana Sylianteng and
the TCT in the names of Roberto and Caesar Sylianteng. Declared TCT in the name of
Skunac Corporation and Alfonso Enriquez as null and void.

ISSUE: Whether Emerciana validly acquired the subject lots from Luis? Whether
respondents validly acquired the same lots from Emerciana?
RULING: YES.

● Emerenciana's acquisition of the subject lots from Luis and her subsequent sale of
the same to respondents are valid and lawful. Petitioners dispute such findings. To
prove their contention, they assail the authenticity and due execution of the deed of
sale between Luis and Emerenciana.
● In any case, going to the matter of authenticity and due execution of the assailed
document, petitioners do not dispute that the copy of the deed of sale that
respondents submitted as part of their evidence is a duplicate of the original
deed of sale dated June 20, 1958. It is settled that a signed carbon copy or
duplicate of a document executed at the same time as the original is known as a
duplicate original and maybe introduced in evidence without accounting for the
non-production of the original.
● In the present case, petitioners failed to present convincing evidence to prove that
the notarization of the subject deed was irregular as to strip it of its public character.
On the contrary, a certified copy of page 26 of the notarial register of the notary
public who notarized the subject deed of sale, which was issued by the Records
Management and Archives Office of Manila, shows that the sale of the subject lots
by Luis to Emerenciana was indeed regularly notarized.

First, the disputed lots were already sold by Luis during his lifetime. Thus, these
parcels of land no longer formed part of his estate when he died. Second, even
granting that the subject lots formed part of the estate of Luis, it was subsequently
proven in a separate case that Romeo is not his heir. Indeed, not being an heir of Luis,
Romeo never acquired any right whatsoever over the subject lots, even if he was able to
subsequently obtain a title in his name.

- It is a well-settled principle that no one can give what one does not have,
nemo dat quod non habet. One can sell only what one owns or is authorized
to sell, and the buyer can acquire no more right than what the seller can
transfer legally. Since Romeo has no right to the subject lots, petitioners, who
simply stepped into the shoes of Romeo, in turn, acquired no rights to the same.
- Stretching petitioners' contention a bit further, granting that both petitioners and
respondents bought the disputed lots in good faith by simply relying on the
certificates of the sellers, and subsequently, acquiring titles in their own names,
respondents' title shall still prevail.
- It is a settled rule that when two certificates of title are issued to different
persons covering the same land in whole or in part, the earlier in date must
prevail, and, in case of successive registrations where more than one
certificate is issued over the land, the person holding a prior certificate is
entitled to the land as against a person who relies on a subsequent
 certificate. The titles of respondents, having emanated from an older title, should
thus be upheld.

4. Manigque-Stone vs. Cattleya Land, Inc. 802 SCRA 173

DOCTRINE: The sale of the Philippine land to an alien or foreigner, even if titled in
the name of his Filipino spouse, violates the Constitution and is void. There is no
double sale to speak of. Art. 1544 of the C, which provides the rule on double sale,
applies only to a situation where the same property is validly sold to different
vendees. In this case, there is only one sale to advert to, that between the spouses
Tecson and respondent.

5. Spring Homes Subdivision Co., Inc. vs. Tablada, Jr. 815 SCRA 114, G.R. No.
200009, January 23, 2017 - ANNA

SPRING HOMES SUBDIVISION CO., INC., SPOUSES PEDRO L. LUMBRES AND

REBECCA T. ROARING, Petitioners,
v.
SPOUSES PEDRO TABLADA, JR. AND ZENAIDA TABLADA, Respondent.

FACTS:

Petitioners (Spouses Lumbres) entered into a Joint Venture Agreement with Spring Homes
Subdivision Co., Inc., through its chairman, the late Mr. Rolando B. Pasic, for the
development of several parcels of land. The Spouses Lumbres transferred the titles to the
parcels of land in the name of Spring Homes.

Spring Homes entered into a Contract to Sell with respondents, Spouses Tablada for the
sale of a parcel of land. The Spouses Lumbres filed with the RTC of Calamba City a
complaint for Collection of Sum of Money, Specific Performance and Damages with prayer
for the issuance of a Writ of Preliminary Attachment against Spring Homes for its alleged
failure to comply with the terms of the Joint Venture Agreement. Unaware of the pending
action, the Spouses Tablada began constructing their house on the subject lot and
thereafter occupied the same. Spring Homes executed a Deed of Absolute Sale in favor of
the Spouses Tablada, who paid Spring Homes a total of P179,500.00, more than the
P157,500.00 purchase price as indicated in the Deed of Absolute Sale.

The title over the subject property, however, remained with Spring Homes for its failure to
cause the cancellation of the TCT and the issuance of a new one in favor of the Spouses
Tablada, who only received a photocopy of said title.

The Spouses Lumbres and Spring Homes entered into a Compromise Agreement wherein
Spring Homes conveyed the subject property, as well as several others, to the Spouses
Lumbres. The Spouses Lumbres started collecting deficiency payments from the
subdivision lot buyers. When no payment was received, the Spouses Lumbres caused the
cancellation of the Contract to Sell previously executed by Spring Homes in favor of the
Spouses Tablada. the Spouses Lumbres and Spring Homes executed a Deed of Absolute
Sale over the subject property, and as a result, a new title was issued in the name of the
Spouses Lumbres.

In the instant case, the Spouses Tablada prayed that the Deed of Absolute Sale executed
by Spring Homes in favor of the Spouses Lumbres be declared null and void and that
Spring Homes be ordered to deliver the owner's duplicate certificate of title covering the
subject lot.

CA upheld that the first sale between Spring Homes and the Spouses Tablada must still be
upheld as valid, contrary to the contention of the Spouses Lumbres that the same was not
validly consummated due to the Spouses Tablada's failure to pay the full purchase price of
P409,500.00. Hence, this appeal.

ISSUE:

Whether or not the first sale between Spring Homes and Spouses Tablada is valid.

HELD:

Yes. The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of a double sale of immovable property. Thus, the Court has
consistently ruled that ownership of an immovable property which is the subject of a double
sale shall be transferred: (1) to the person acquiring it who in good faith first recorded it in
the Registry of Property; (2) in default thereof, to the person who in good faith was first in
possession; and (3) in default thereof, to the person who presents the oldest title, provided
there is good faith.54 The requirement of the law then is two-fold: acquisition in good faith
and registration in good faith.

Here, the first buyers of the subject property, the Spouses Tablada, were able to take said
property into possession but failed to register the same because of Spring Homes'
unjustified failure to deliver the owner's copy of the title whereas the second buyers, the
Spouses Lumbres, were able to register the property in their names. But while the Spouses
Lumbres successfully caused the transfer of the title in their names, the same was done in
bad faith.
As correctly observed by the Court in Spouses Lumbres v. Spouses Tablada, the Spouses
Lumbres cannot claim good faith since at the time of the execution of their Compromise
Agreement with Spring Homes, they were indisputably and reasonably informed that the
subject lot was previously sold to the Spouses Tablada and the same was occupied by the
latter.

6. Edu vs Gomez, 129 SCRA 601 - DONN

ROMEO F. EDU vs. AMADOR E. GOMEZ

FACTS:

The subject matter of this case is a 1968 model Volkswagen, bantam car, allegedly owned
by Lt. Walter A. Bala of Clark Airbase, Angeles City, under whose name the car was
allegedly registered on May 19, 1970 at the Angeles City Land Transportation Commission
Agency

The 1968 model Volkswagen, was reported to the Office of the Commission on Land
Transportation as stolen on June 29, 1970 from the residence of Lt. Bala. Upon receipt of
such information the agents of Anti-Carnapping Unit (ANCAR) of the Philippine
Constabulary, on detail with the Land Transportation Commission recognized subject car on
2 February 1971 in the possession of LUCILA ABELLO and immediately seized and
impounded the car as stolen property.

Romeo F. Edu, then Commissioner of Land Transportation, seized the car pursuant to
Section 60 of Republic Act 4136 which empowers him to seize the motor vehicle for
delinquent registration aside from his implicit power deducible from Sec. 4(5), Sec. 5 and 31
of said Code, "to seize motor vehicles fraudulently or otherwise not properly registered.”

Lucia Abello filed a complaint for replevin with damages in the Court of First Instance of
Manila. CFI ruled in favor of ABELLO. CFI found that the car was acquired by ABELLO by
purchase from its registered owner Marcelino Guansing for P9,000 and that she has been in
possession thereof since then until when the car was seized from her by ANCAR who acted
in belief that the car was stolen from Lt. Bala

ISSUE:

Whether or not the seizure of the car by the officials are valid.

RULING:
NO. There is no merit in the petition considering that the acquirer or the purchaser in good
faith of a chattel of movable property is entitled to be respected and protected in his
possession as if he were the true owner thereof until a competent court rules otherwise.

In the meantime, as the true owner, the possessor in good faith cannot be compelled to
surrender possession nor to be required to institute an action for the recovery of the chattel,
whether or not an indemnity bond is issued in his favor. The filing of an information charging
that the chattel was illegally obtained through estafa from its true owner by the transferor of
the bona fide possessor does not warrant disturbing the possession of the chattel against
the will of the possessor.

Finally, the claim of petitioners that the Commission has the right to seize and impound the
car under Section 60 of Republic Act 4136 which reads:

Sec. 60. The lien upon motor vehicles. Any balance of fees for registration,
re-registration or delinquent registration of a motor vehicle, remaining unpaid and all
fines imposed upon any vehicle owner, shall constitute a first lien upon the motor
vehicle concerned.

is untenable. It is clear from the provision of said Section 60 of Republic Act 4136 that the
Commissioner's right to seize and impound subject property is only good for the proper
enforcement of lien upon motor vehicles. The Land Transportation Commission may issue a
warrant of constructive or actual distraint against motor vehicle for collection of unpaid fees
for registration, re-registration or delinquent registration of vehicles.

7. Sps Manlan vs Sps Beltran, G.R. No. 222530, October 16, 2019 - DONN

G.R. No. 222530, October 16, 2019

MR. AND MRS. ERNESTO MANLAN, PETITIONERS, v. MR. AND MRS. RICARDO
BELTRAN, RESPONDENTS.

FACTS:

The present case involves the conflicting claims of two sets of buyers over a parcel of land.
One group avers of having bought the property from one of its co-owners and building their
house thereon in good faith. Meanwhile, the other group claims to have bought the same
land from all the co-owners and registered it in good faith.

Specifically, the subject matter here is a 1,214 square meter (sq.m.) land situated in
Barangay Calindagan, Dumaguete City forming part of Lot 1366-E and originally owned in
common by Serbio, Anfiano, Engracia, Carmela, Manuel, Teresito, Corazon, Segundina,
and Leonardo, all surnamed Orbeta (collectively referred as "the Orbetas").

On May 5, 1983, Spouses Ernesto and Rosita Manlan (petitioners) bought a 500 sq.m.
portion of the subject property from Manuel Orbeta for P30,000.00. After receiving the
advance payment of P15,000.00, Manuel Orbeta allowed petitioners to occupy it.

On October 21, 1986, the Orbetas (except for Manuel Orbeta who was already deceased;
thus, represented by his wife Emiliana Villamil Orbeta) executed a Deed of Absolute Sale
(DOAS) conveying the 714 sq.m. portion of the same property to Spouses Ricardo and
Zosima Beltran (respondents). On November 20, 1990, respondents bought the remaining
500 sq.m. from the Orbetas,6 as evidenced by another DOAS.7 Consequently, on January
28, 1991, the subject property was registered in respondents' name under Transfer
Certificate of Title (TCT) No. 20152.

Thereafter, respondents demanded from petitioners to vacate the property in dispute, but to
no avail.

respondents filed an action for quieting of title and recovery of possession of the 500 sq.m.
portion of the subject land.

In the Complaint, respondents claimed to be the absolute owners of the subject property
having bought it from the Orbetas.

In their Answer, petitioners alleged that they bought the 500 sq.m. portion of the disputed
land from Serbio and Manuel Orbeta in 1983.

As counterclaim, they contended that the DOAS dated November 20, 1990, executed by
respondents and the Orbetas, was fictitious, having been procured by means of falsification
and insidious scheme and machination because at the time it was notarized, one of the
co­owners, Serbio, was already dead. Accordingly, the deed could not be a source of
respondents' right over the contested land.

ISSUE(S):

I. Whether the rules on double sale are applicable.

II. whether the defective notarization affects the legality of sale

RULING:

I. No, Double sale is not applicable. Petitioners' reliance on Article 1544 of

the New Civil Code is misplaced.

Article 1544 of the New Civil Code provides:

“Art. 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good faith,
if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.”

Double sale exists when the same thing is sold to different vendees by a single vendor.
Article 1544 has no application in cases where the sales involved were initiated not just by
one vendor but by several vendors

Here, MALAN and BELTRAN acquired the subject property from different transferors. The
Deed of Absolute Sale (November 20, 1990) shows that all of the original co-owners
(except for Manuel and Serbio, who are already deceased) sold the subject lot to
BELTRAN. While, the Receipt and Promissory Note both dated May 5, 1983, reveal that
only Manuel sold the lot to MALAN, but was not duly authorized by the other co-owners to
sell the subject property in 1983.

Cheng v. Genato enumerated the requisites in order for Article 1544 to apply;

(a) The two (or more) sales transactions in issue must pertain to exactly the same subject
matter, and must be valid sales transactions.

(b) The two (or more) buyers at odds over the rightful ownership of the subject matter must
each represent conflicting interests; and

(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must
each have bought from the very same seller.

II. Sale of a real property that is not consigned in a public instrument is valid
and binding among the parties.

This is in accord with verbal contract of sale of real estate produces legal effects between
the parties, where contracts are obligatory, in whatever form they may have been entered
into, provided all the essential requisites for their validity are present. Following these
principles, the defective notarization of the DOAS dated November 20, 1990 does not affect
the validity of the transaction between the Orbetas and BELTRAN. It has no effect on the
transfer of rights over the subject property from the Orbetas to BELTRAN.

A defective notarization will merely strip the document of its public character and
reduce it to a private instrument.
In the instant case, Ricardo Beltran (Ricardo) positively testified that he personally went to
the Orbetas and that he was actually present when the Orbetas signed the contract. He
likewise testified that while the deed of sale was not signed by the Orbetas before the
notary public, they appeared before the latter and affirmed that their signatures therein were
authentic. Ricardo has personal knowledge of the fact that the Orbetas signed the
questioned deed of sale. Beyond doubt, respondents proved, by preponderant evidence,
that they are the rightful owners of the subject property.

Moreover, the non-appearance of the parties before the notary public who notarized the
document neither nullifies nor renders the parties' transaction void ab initio. The failure of
the Orbetas to appear before the notary public when they signed the questioned deed of
sale does not nullify the parties' transaction.

8. Ten Forty Realty & Dev’t Corp. vs. Cruz, G.R. No. 151212 , September 10, 2003
- ANNA

DOCTRINE: The execution of public instrument gives rise only to a prima facie presumption
of delivery, presumption is destroyed when the delivery is not effected because of a legal
impediment of failure to take actual possession of the property sold.

FACTS:

An ejectment suit was filed by petitioner Ten Forty against Marina Cruz alleging that the
former is the true and absolute owner of a parcel of land and residential house located in
Olongapo City with an area of 324 square meters having acquired said property from
Barbara Galino by virtue of Deed of Absolute Sale.

After a few years, petitioner Ten Forty learned that the same property was sold to Cruz who
immediately occupied the property. Failure to arrive at an amicable settlement, a demand
letter was sent to respondent Cruz to vacate and pay a reasonable amount for the
occupation of the same, however, Cruz refused to vacate the premises. A counterclaim was
submitted by respondent contending that petitioner is not qualified to the property being a
public land, that Galino did not sell the property to petitioner but merely obtained a loan from
Veronica Lorenzana, president of the corporation, no allegation as to the prior possession of
petitioner of the subject land wherein Galino was the actual possessor when it was sold and
vacated the premises in favor of the respondent. MTCC ruled in favor of petitioner and
ordered respondent to vacate the property and surrender the possession thereof to Ten
Forty. RTC reversed MTCC’s decision and ruled that the execution of Deed of Absolute
Sale in favor of petitioner Ten Forty without actual transfer of the physical possession did
not have the effect of making the petitioner the owner of the property because there was no
delivery of the object of the sale. An appeal was submitted to the Court of Appeals which
sustained the ruling of RTC.

ISSUE:

Whether or not delivery occurred upon the execution of Deed of Sale to warrant possession
over the subject land.

HELD:

Art. 1498 lays down the rule that an execution of a public instrument shall be equivalent to
the delivery of the thing that is the object of the contract if, from the deed, the contrary does
not appear or cannot be clearly inferred. Ownership is transferred not by contract but by
actual delivery, Civil Code did not indicate that the execution of Deed of Sale is a conclusive
presumption of delivery of possession of real estate. The Supreme Court held that the
execution of public instrument is a prima facie presumption of delivery and may be
destroyed when actual delivery is not effected because of a legal impediment. Petitioner
Ten Forty never acquired the property from the time it was sold to the corporation since
Galino remained in possession of the subject land and later vacated it after the second sale
to Cruz, hence, it remained under the control and possession of Galino and was never
transferred to petitioner. Tax declarations of Galino and Cruz represented an adverse claim
over the unregistered property and derogated its claim of control and possession of the
subject land.

9. Sps Tomas and Silvina Occena vs. Esponilla, G.R. No. 156973,6-4-2004 -
RAECHELLE

FACTS:

● Spouses Nicolas and Irene Tordesillas owned a piece of land which their children
Harod, Angela and Rosario, and grandchildren Arnold and Lilia de la Flor inherited.
The heirs sold a part of the land to Alberta Morales.
● Morales possessed the lot as owner, constructed a house on it and appointed a
caretaker to oversee her property. Arnold borrowed the Original Certificate of Title
(OCT) from Alberta covering the lot.
● Then, he executed an Affidavit acknowledging receipt of the OCT in trust and
undertook to return said title free from changes, modifications or cancellations.
However, Arnold used the OCT he borrowed from the vendee Alberta Morales,
subdivided the entire lot into three sublots, and registered them all under his name.
 ● Arnold did not return the OCT belonging to Alberta despite repeated requests.
Arnold subsequently sold the land to spouses Tomas and Sylvina Occeña.
● When the respondent heirs of Alberta learned of the sale, they filed a case for
annulment of sale and cancellation of titles, with damages, against the Occeña
spouses, alleging bad faith since the Occeñas conducted ocular inspection of the
area before the purchase and their caretaker warned them that Arnold is no longer
the owner of the lot being sold.
● On the other hand, the Occeña spouses alleged that they were buyers in good faith
as the titles to the subject lots were free from liens or encumbrances when they
purchased them, that they verified with the Antique Registry of Deeds that Arnold’s
TCTs were clean and unencumbered.
● Lower court declared the Occeña spouses as buyers in good faith and ruled that the
action of the heirs was time-barred.
● Court of Appeals reversed the decision of the trial court. Hence the petition.

ISSUE: Whether or not a purchaser of a registered land is obliged to make inquiries

of any possible defect or adverse claim which does not appear on the Certificate of
Title

RULING: NO.

The petition at bar presents a case of double sale of an immovable property.

Article 1544 of the New Civil Code provides that in case an immovable property is
sold to different vendees, the ownership shall belong:

(1) to the person acquiring it who in good faith first recorded it in the Registry
of Property;

(2) should there be no inscription, the ownership shall pertain to the person
who in good faith was first in possession; and,

(3) in the absence thereof, to the person who presents the oldest title, provided
there is good faith.

In all cases, good faith is essential. It is the basic premise of the preferential
rights granted to the one claiming ownership over an immovable. What is material is
whether the second buyer first registers the second sale in good faith, i.e., without
knowledge of any defect in the title of the property sold. The defense of
indefeasibility of a Torrens title does not extend to a transferee who takes the
certificate of title in bad faith, with notice of a flaw.

Indeed, the general rule is that one who deals with property registered under
the Torrens system need not go beyond the same, but only has to rely on the title. He
is charged with notice only of such burdens and claims as are annotated on the title.
However, this principle does not apply when the party has actual knowledge of facts
and circumstances that would impel a reasonably cautious man to make such inquiry
or when the purchaser has knowledge of a defect or the lack of title in his vendor or
of sufficient facts to induce a reasonably prudent man to inquire into the status of the
title of the property in litigation. One who falls within the exception can neither be
denominated an innocent purchaser for value nor a purchaser in good faith.

HOMEWORK NO. 4
AAAAAAAAAAAAAAAAAAAAA

1. J.M. TUASON & CO., INC. vs. HON. COURT OF APPEALS, ALFONSO DE LEON and
ROSARIO G. DE LEON, 94 SCRA 413 - Raechelle

"Good faith consists in an honest intention to abstain from taking any

unconscientious advantage of another. Good faith is an opposite of fraud and of
bad faith and its non-existence must be established by competent proof."

Facts:

● On January 31, 1952, Petitioner, J.M. Tuason & Co., Inc. executed, in favor of
Ricardo De Leon, a contract to sell Lot No. 15, Block 460 of the Sta. Mesa Heights
Subdivision containing an area of 1,703.6 square meters with the agreed price of
P24.60 per square meter or a total of P41,908.56.
● At the execution of the contract, Ricardo de Leon paid the down-payment of
P4,190.86 and agreed to pay the balance in the monthly installment of P498.63
including the agreed annual interest of 10%. Meanwhile, on April 10, 1953, petitioner
signed a compromise agreement with the Deudors.
● At the time of the execution of the contract to sell, the contracting parties
knew that a portion of the lot in question was actually occupied by Ramon
Rivera. However, it was their understanding that the latter will be ejected by the
petitioner from the premises
● On May 13, 1958, herein petitioner filed a complaint of ejectment against Ramon
Rivera before the CFI of Rizal and later petitioner Ricardo de Leon and respondents
Alfonso and Rosario de Leon as necessary parties.

DECISION OF LOWER COURT: Dismissed and ordered the plaintiff to enter into an
agreement with Ramon Rivera allowing the defendant to purchase 1,050 sq. m to land
covered by Lot 15 (P60.00/sq.m)

CA: affirmed the decision. Sept. 1971 - De Leons were evicted from the premises.
Issue: Whether or not respondents De Leon are entitled to the vendor's warranty
against eviction and damages

Ruling: NO. it was shown that they were vendees in good faith and thus being
entitled to warranty against eviction.

● The appellate court, in this action of warranty against eviction, found that petitioner
J.M. Tuason & Co., Inc. failed to comply with its obligation to transfer ownership over
the lot to the De Leons due to the compromise agreement it entered with the
Deudors, and that petitioner is guilty of "wilful deception, intentional forsaking of one
to whom defendant was bound in a contract to convey, and worse yet, even at that,
after the compromise, defendant still continued to collect installments from buyer
● The prior right of Ramon Rivera to purchase the lot in litigation was based more on
his prior occupancy to the same since 1949, about which fact respondents De Leon
were informed by petitioner at the time of the execution of the contract to sell. The
execution of the compromise agreement merely recognized this prior right, under the
condition as stipulated in said agreement, that it was possible to do so.
● If petitioner continued the collection of the outstanding monthly after the execution of
the compromise agreement on April 10,1953 pursuant to the agreements embodied
in the contract to sell (Exhibit A), its act only proved its honest belief that it found no
barrier against the enforceability of the contract to sell, the terms of which have the
force of law between the parties and must be complied with in good faith
● The subsequent execution of a deed of sale upon the total payment of the purchase
price in favor of herein respondents on August 5, 1965 in lieu of the previous
contract to sell made in favor of Ricardo de Leon, through which deed of sale the
respondents acquired a transfer certificate of title over the questioned lot, is further
evidence of the honesty and good faith of petitioner in dealing with private
respondents. Petitioner owns vast tracts of land, with the lot in question possibly put
an insignificant part in terms of value, and it would be much too difficult to make the
serious imputations made to petitioner.

2. MARIA LUISA DE LEON ESCALER and ERNESTO ESCALER, CECILIA J. ROXAS

and PEDRO ROXAS vs. COURT OF APPEALS, JOSE L. REYNOSO, now deceased, to
be substituted by his heirs or legal representatives and AFRICA V. REYNOSO, 138
SCRA 1; Moles vs. IAC, 169 SCRA 777 - Nona

Facts:

Spouses Africa V. Reynoso and Jose L. Reynoso sold to petitioners several others, a parcel
of land. The Deed of Sale contained a covenant against eviction. On April 21, 1961, the
Register of Deeds of Rizal and A. Doronilla Resources Development, Inc. filed a case
before the CFI of Rizal for the cancellation of the OCT issued in the name of Angelina
Reynoso (predecessor-in-interest of private respondents-vendors) on the ground that
the property covered by said title is already previously registered under a TCT issued
in the name of A. Doronilla Development, Inc. In that case, an order was issued
declaring the OCT null and void.

Petitioners, spouses Maria de Leon Escaler and Ernesto Escaler and spouses Cecilia J.
Roxas and Pedro Roxas, filed a civil case against their vendors, herein private
respondents, spouses Jose L. Reynoso and Africa Reynoso for the recovery of the
value of the property sold to them plus damages on the ground that the latter have
violated the vendors’ “warranty against eviction.”

The CFI rendered a judgment ordering the return to the plaintiffs Maria Luisa de Leon
Escaler and Ernesto Escaler, Cecilia J. Roxas and Pedro Roxas, the value of the property
sold to them at the time of eviction. The CA reversed this decision and ruled that petitioners,
as vendees, had not given private respondents-vendors, formal notice of the eviction case
as mandated by Arts. 1558 and 1559 of the New Civil Code.

Issue:

Whether or not a vendor‘s liability for eviction may be enforced in the case at bar.

Ruling:

No. Article 1548, in relation to Articles 1558. and 1559 of the New Civil Code reads as
follows:

Art. 1548, Eviction shall take place whenever by a final judgment based on a right prior to
the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part
of the thing purchased.

The vendor shall answer for the eviction even though nothing has been said in the contract
on the subject.

The contracting parties, however, may increase, diminish, or suppress this legal obligation
of the vendor.

Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is
summoned in the suit for eviction at the instance of the vendee. (emphasis supplied)

Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for
answering the complaint that the vendor be made as co-defendant.

In order that a vendor’s liability for eviction may be enforced, the following requisites must
concur—a) there must be a final judgment; b) the purchaser has been deprived of the whole
or part of the thing sold; c) said deprivation was by virtue of a right prior to the sale made by
the vendor; and d) the vendor has been summoned and made co-defendant in the suit for
eviction at the instance of the vendee.

In the case at bar, the fourth requisite—that of being summoned in the suit for eviction
(Case No. 4252) at the instance of the vendee—is not present. All that the petitioners did,
per their very admission, was to furnish respondents, by registered mail, with a copy of the
opposition they (petitioners filed in the eviction suit. Decidedly, this is not the kind of notice
prescribed by the aforequoted Articles 1558 and 1559 of the New Civil Code. The term
“unless he is summoned in the suit for eviction at the instance of the vendee” means that
the respondents as vendor/s should be made parties to the suit at the instance of
petitioners-vendees, either by way of asking that the former be made a co-defendant or by
the filing of a third-party complaint against said vendors. Nothing of that sort appeared to
have been done by the petitioners in the instant case.

3. Nutrimix Feeds Corporation, Petitioner, v. Court of Appeals and Sps. Evangelista,

G.R. 152219, October 25, 2004. - Anna Elaine

Facts:

● Sps. Evangelista started to directly procure various kinds of animal feeds from
Nutrimix. Nutrimix gave the respondents a credit period of 30 to 45 days to
post-date checks to be issued in payment for the delivery of the feeds. The
accommodation was made apparently because of the company president's
close friendship with the brother of the respondent.
● Initially, the respondents were good paying customers. In some instances,
however, they failed to issue checks despite the deliveries of animal feeds
which were appropriately covered by sales invoices. Consequently, the respondents
incurred an aggregate unsettled account with the petitioner in the amount of
P766,151.00.
● Respondents issued 9 checks worth Php 490,520 as payment. The checks were
deposited by petitioner but were consequently dishonored because respondent
already closed the account. Petitioner then made several demands for the
respondents payment but the latter refused to pay their unpaid obligations with
petitioner.
● Petitioner filed an action for a sum of money against petitioners with the RTC.
● Respondents admitted their unpaid obligations but impugned their liability as the
9 checks were made to guarantee respondents payment which was previously
determined to be procured from the expected proceeds in the sale of their broilers
and hogs. Respondent spouses contend that the massive death of their animals was
caused by petitioner’s contaminated feeds thus giving them a just and legal ground
for their non-payment which lead to the former to lodge a complaint against the latter.
● A joint trial thereafter ensued.
 ● During the hearing, the petitioner presented Arenas, Nutrimix Assistant Manager,
as its lone witness. He testified that Nutrimix President met the respondents to
discuss the possible settlement of their unpaid account. The said respondents still
pleaded to the petitioner to continue to supply them with animal feeds because their
livestock were supposedly suffering from a disease.
● Petitioner delivered the feeds to respondent. But despite respondents claiming that
the death of their chickens was due to the feeds supplied by petitioner, the former
still continued to use the feeds in question. Petitioner’s president disavowed liability
thereon and, thereafter, filed a case against the respondents.

Issue:

Whether Nutrimix is guilty of breach of warranty due to hidden defects

Ruling:

No. The provisions on warranty against hidden defects can be found in Arts. 1561 and 1566
of the NCC. A hidden defect is one which is unknown or could not have been known to the
vendee. Under the law, the requisites to recover on account of hidden defects are as
follows:

(a) the defect must be hidden;

(b) the defect must exist at the time the sale was made;

(c) the defect must ordinarily have been excluded from the contract;

(d) the defect, must be important (renders thing UNFIT or considerably decreases
FITNESS);

(e) the action must be instituted within the statute of limitations

In the sale of animal feeds, there is an implied warranty that it is reasonably fit and suitable
to be used for the purpose which both parties contemplated. To be able to prove liability on
the basis of breach of implied warranty, three things must be established by the
respondents. The first is that they sustained injury because of the product; the second is
that the injury occurred because the product was defective or unreasonably unsafe; and
finally, the defect existed when the product left the hands of the petitioner. A manufacturer
or seller of a product cannot be held liable for any damage allegedly caused by the product
in the absence of any proof that the product in question was defective. Tracing the defect to
the petitioner requires some evidence that there was no tampering with, or changing of the
animal feeds. The nature of the animal feeds makes it necessarily difficult for the
respondents to prove that the defect was existing when the product left the premises of the
petitioner.
A review of the facts of the case would reveal that the petitioner delivered the animal feeds,
allegedly containing rat poison, on July 26, 1993 but it is astonishing that the respondents
had the animal feeds examined three months after their broilers and hogs had died. In a
span of three months, the feeds could have already been contaminated by outside factors
and subjected to many conditions unquestionably beyond the control of the petitioner.
Likewise, there was evidence tending to show that the respondents combined different
kinds of animal feeds and that the mixture was given to the animals. Even more surprising
is the fact that during the meeting with Nutrimix President, the respondents claimed that
their animals were plagued by disease, and that they needed more time to settle their
obligations with the petitioner. It was only after a few months that the respondents changed
their justification for not paying their unsettled accounts, claiming that their animals were
poisoned with the animal feeds supplied by the petitioner. In essence, respondents failed to
prove that the petitioner is guilty of breach of warranty due to hidden defects.

It must be stressed, however, that the remedy against violations of warranty against
hidden defects is either to withdraw from the contract (accion redhibitoria) or to demand a
proportionate reduction of the price (accion quanti minoris), with damages in either case. In
any case, the respondents have already admitted, both in their testimonies and pleadings
submitted, that they are indeed indebted to the petitioner for the unpaid animal feeds
delivered to them. For this reason alone, they should be held liable for their unsettled
obligations to the petitioner.

4. Philippine Steel Coating Corp. vs. Quinones, G.R. No. 194533, February 15, 2017 -
Donn

Facts:

This case arose from a Complaint for damages filed by respondent Quiñones (owner of
Amianan Motors) against petitioner PhilSteel. The Complaint alleged that in early 1994,
Richard Lopez, a sales engineer of PhilSteel, offered Quiñones their new product:
primer-coated, long-span, rolled galvanized iron (G.I.) sheets. The latter showed interest,
but asked Lopez if the primer-coated sheets were compatible with the Guilder acrylic paint
process used by Amianan Motors in the finishing of its assembled buses. Uncertain, Lopez
referred the query to his immediate superior, Ferdinand Angbengco, PhilSteel's sales
manager.

Angbengco assured Quiñones that the quality of their new product was superior to that of
the non-primer coated G.I. sheets being used by the latter in his business. Quiñones
expressed reservations, as the new product might not be compatible with the paint process
used by Amianan Motors.
Angbengco further guaranteed that a laboratory test had in fact been conducted by
PhilSteel, and that the results proved that the two products were compatible; hence,
Quiñones was induced to purchase the product and use it in the manufacture of bus units.

However, sometime in 1995, Quiñones received several complaints from customers who
had bought bus units, claiming that the paint or finish used on the purchased vehicles was
breaking and peeling off. Quiñones then sent a letter-complaint to PhilSteel invoking the
warranties given by the latter. According to respondent, the damage to the vehicles was
attributable to the hidden defects of the primer-coated sheets and/or their incompatibility
with the Guilder acrylic paint process used by Amianan Motors, contrary to the prior
evaluations and assurances of PhilSteel. Because of the barrage of complaints, Quiñones
was forced to repair the damaged buses.

PhilSteel counters that Quifiones himself offered to purchase the subject product directly
from the former without being induced by any of PhilSteel's representatives. According to its
own investigation, PhilSteel discovered that the breaking and peeling off of the paint was
caused by the erroneous painting application done by Quiñones.

The RTC rendered a Decision in favor of Quiñones and ordered PhilSteel to pay damages.
The CA affirmed the ruling of the RTC in toto.

Issue:

1. Whether vague oral statements made by sel1er on the characteristics of a generic

good can be considered warranties that may be invoked to warrant payment of
damages;

2. Whether general warranties on the suitability of products sold prescribe in six (6)
months under Article 1571 of the Civil Code;

3. Whether non-payment of price is justified on allegations of breach of warranty.

Ruling:

1. Yes. An express warranty can be oral when it is a positive affirmation of a fact that
the buyer relied on.

Article 1546 of the Civil Code provides that any affirmation of fact or any promise by the
seller relating to the thing is an express warranty if the natural tendency of such affirmation
or promise if to induce the buyer to purchase the same, and if the buyer purchases the thing
relying thereon. As held in Carrascoso, Jr. vs. CA, the following requisites must be
established in order to prove that there is an express warranty in a contract of sale: (1) the
express warranty must be an affirmation of fact or any promise by the seller relating to the
subject matter of the sale; (2) the natural effect of the affirmation or promise is to induce the
buyer to purchase the thing; and (3) the buyer purchases the thing relying on that
affirmation or promise. Here, the oral statements of Angbengco created an express
warranty. hey were positive affirmations of fact that the buyer relied on, and that induced
him to buy petitioner’s primer-coated G.I. sheets. Seller is expert in the eyes of the buyer.

2. The prescription period of the express warranty applies to the instant case. There
being an express warranty, this Court holds that the prescription period applicable to the
instant case is that prescribed for breach of an express warranty. The applicable
prescription period is therefore that which is specified in the contract; in its absence, that
period shall be based on the general rule on the rescission of contracts: four years. In this
case, no prescription period specified in the contract between the parties has been put
forward. Quiñones filed the instant case on 6 September 1996 or several months after the
last delivery of the thing sold.His filing of the suit was well within the prescriptive period of
four years; hence, his action has not prescribed.

3. The nonpayment of the unpaid purchase price was justified, since a breach of
warranty was proven.

Since what was proven was express warranty the remedy which would be applied would be
under Article 1599 which reads:

“Where there is a breach of warranty by the seller, the buyer may, at his election:

1. Accept or keep the goods and set up against the seller, the breach of warranty by
way of recoupment in diminution or extinction of the price”

The above provisions define the remedy of recoupment in the diminution or extinction of
price in case of a seller's breach of warranty. According to the provision, recoupment refers
to the reduction or extinction of the price of the same item, unit, transaction or contract upon
which a plaintiff's claim is founded.

In the case at bar, Quiñones refused to pay the unpaid balance of the purchase price of the
primer-coated G.I. sheets PhilSteel had delivered to him. He took this action after
complaints piled up from his customers regarding the blistering and peeling-off of the paints
applied to the bus bodies they had purchased from his Amianan Motors. The unpaid
balance of the purchase price covers the same G.I. sheets. Further, both the CA and the
RTC concurred in their finding that the seller's breach of express warranty had been
established. Therefore, this Court finds that respondent has legitimately defended his claim
for reduction in price and is no longer liable for the unpaid balance of the purchase price of
P448,041.50.
5. Spouses Batalla vs. Prudential Bank, G.R. No. 200676, March 25, 2019 - Regine
Mariecute

Facts: In March 1998, petitioner Spouses Luis G. Batalla and Salvacion Batalla (Spouses
Batalla) purchased a brand new Honda Civic from respondent Honda Cars San Pablo,
Inc. (Honda). Respondent Alicia Rantael (Rantael), then acting manager of Pilipinas
Bank, now merged with respondent Prudential Bank (Prudential), brokered the deal.

The deal was brokered by Prudential. Spouses Batalla applied for a Prudential car loan to
pay for the vehicle. On March 23, 1998, they signed a P292,200.00 promissory note due in
36 months. This agreement was approved on May 29, 1998. As a result, Prudential issued
a Manager's Check payable to Honda. Spouses Batalla paid the remaining P214,000.00 for
the Honda Civic. Their delivery and installation costs were P11,000,000.00, while insurance
was P28,333.56. On April 21, 1998, Rantael informed Spouses Batalla that the car was
parked near Prudential. But after three days, the car's right rear door broke. Jojo Sanchez
(Sanchez) told The Spouses Batalla that the power lock on the rear right door was defective
and that the car wasn't brand new because the roof paint was only retouched.

On May 3, 1998, Spouses Batalla wrote to Prudential's manager, informing him of the
defects and demanding an immediate replacement. On August 27, 1998, they took the car
to the Auto Body Shop for an inspection.

The vehicle's roof was no longer shiny, according to Arturo Villanueva (Villanueva). The
Prudential manager and two Honda representatives then met Spouses Batalla and offered
to repair the vehicle. The Batallas refused it because they wanted a brand new car with no
hidden flaws. Unable to obtain a brand new car to replace the allegedly defective vehicle,
Spouses Batalla sued Prudential and Honda for breach of contract and damages.

RTC: The RTC dismissed the Spouses Batalla's case. the car sold to Spouses Batalla was
brand new, and any defects could not be attributed to Honda. It stated that Spouses Batalla
failed to prove that the car door defects were caused by Honda and that the car was simply
repainted to appear brand new. The RTC also stated that the defects were minor and did
not affect the car's suitability for its intended use.

CA: affirmed with modification the RTC decision. The appellate court ruled that Spouses
Batalla cannot rescind the promissory note and car loan agreement on account of the car's
alleged defects because they are distinct from the contract of sale entered into with Honda.

Issue: 1. WHETHER THE MOTOR VEHICLE DELIVERED BY HONDA HAD HIDDEN

DEFECTS; AND (NO)

2. WHETHER SPOUSES BATALLA MAY RESCIND THE CONTRACT OF SALE, CAR

LOAN AGREEMENT AND PROMISSORY NOTE DUE TO THE DEFECTS OF THE
MOTOR VEHICLE SOLD. (NO)
Spouses Batalla argued that the Prudential car loan was for a brand new vehicle. They
complained that the vehicle was defective, despite Honda's offer to repair it. spouses
Batalla claimed the implied warranty against hidden defects had been breached.

Ruling:The petition is without merit.

Spouses Batalla anchored their complaint for rescission of contract against Prudential and
Honda on the allegation that the car delivered to them was not brand new and that it
contained hidden defects. In support of their allegations, they presented Villanueva who
testified that the car was no longer brand new because the roof was no longer shiny and
appeared to be only repainte

With regard to the condition of the roof painting, the RTC did not believe Villanueva's
testimony that the car delivered to Spouses Batalla was brand new. According to the trial
court, Villanueva had only limited formal training in painting and only assessed the condition
of the car paint visually.

Even assuming that the car delivered to Spouses Batalla had a defective car door, they still
do not have any grounds for rescinding the contract of sale. Article 1561 of the Civil Code
provides for an implied warranty against hidden defects in that the vendor shall be
responsible for any hidden defects which render the thing sold 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. In an implied warranty against hidden defects, vendors cannot raise the
defense of ignorance as they are responsible to the vendee for any hidden defects
even if they were not aware of its existence.

In order for the implied warranty against hidden defects to be applicable, the
following conditions must be met:

a. Defect is Important or Serious

i. The thing sold is unfit for the use which it is intended

ii. Diminishes its fitness for such use or to such an extent that the buyer would
not have acquired it had he been aware thereof

b. Defect is Hidden

c. Defect Exists at the time of the sale

d. Buyer gives Notice of the defect to the seller within reasonable time.

In case of a breach of an implied warranty against hidden defects, the buyer may either
elect between withdrawing from the contract and demanding a proportionate reduction of
the price, with damages in either case. Here, Spouses Batalla opted to withdraw from the
contract of sale after their demand for a replacement car was not granted. As can be seen,
the redhibitory action pursued by Spouses Batalla was without basis. For one, it was not
sufficiently proven that the defects of the car door were important or serious. The hidden
defect contemplated under Article 1561 of the Civil Code is an imperfection or defect
of such nature as to engender a certain degree of importance and not merely one of
little consequence. Spouses Batalla failed to prove that such defect had severely
diminished the roadworthiness of the motor vehicle. In fact, they admitted that they had no
problem as to the road worthiness of the car.

A remote control door mechanism was immediately installed after the car was delivered to
Spouses Batalla. The modification made to the motor vehicle raises the possibility that the
defect could have been caused or occurred after the installation of the door system. No
other evidence was presented to establish the severity of the said defects and whether they
persisted at the time of the sale.

Loan agreement independent of the contract of sale

A contract of loan is one where one of the parties delivers money or other consumable
things upon the condition that the same amount of the same kind and quality shall be paid.
It is perfected upon delivery of the object of the contract. On the other hand, a contract of
sale is a special contract whereby the seller obligates himself to deliver a determinate thing
and to transfer its ownership to the buyer. The same is perfected by mere consent of the
parties.

In a loan, the object certain is the money or consumable thing borrowed by the obligor,
while in a sale the object is a determinate thing to be sold to the vendee for a consideration.
In addition, a loan agreement is perfected only upon the delivery of the object i.e., money or
another consumable thing, while a contract of sale is perfected by mere consent of the
parties.

The transactions of Spouses Batalla with Prudential and Honda are distinct and separate
from each other. From the time Spouses Batalla accepted the loan proceeds from
Prudential, the loan agreement had been perfected. As such, they were bound to comply
with their obligations under the loan agreement regardless of the outcome of the contract of
sale with Honda. Even assuming that the car that Spouses Batalla received was not brand
new or had hidden defects, they could not renege on their obligation of paying Prudential
the loan amount. Spouses Batalla's recourse in case of defects in the motor vehicle
delivered to them was limited against Honda and does not extend to Prudential as it merely
lent the money to purchase the car

6. Jurado vs. Spouses Chai, G.R. No. 236516, March 25, 2019 - Ruth
Facts: Petitioners Asuncion and Catalina claimed to be the registered owners, together with
their deceased brother Fernando Zamora (collectively,the Zamoras),of a parcel of land (Lot
4900) which they inherited from their father, Dominador. Dominador held the same under
TCT No. T-2291 after acquiring it from the original owners, Spouses Pariñas.

They discovered that respondents unlawfully caused the subdivision of Lot 4900 into
several parcels of land under four certificates of title (derivative titles). This prompted the
Zamoras to file an annulment case against respondents, Chai, et al. They claimed that the
titles of Chai, et al. proceeded from a fake Original Certificate of Title (OCT) No. 3429 that
was reconstituted judicially and administratively without notice to all concerned parties, and
without following the prescribed procedure.

Respondents raised the defense of denial, and claimed that a portion of Lot 4900, which
was originally registered under OCT No. 3429 in the names of Spouses Pariñas (Pariñas
OCT 3429), was transferred to them through an Extrajudicial Settlement of Estate with
Simultaneous Sale executed by the Heirs of Spouses Pariñas who gave them a photocopy
of Pariñas OCT 3429. They alleged that they inspected Lot 4900 and inquired its status
from the adjoining owners, who informed them that the same was owned by Spouses
Pariñas. After the ocular inspection, they instructed a certain Ms. Masa to verify the
existence and genuineness of Pariñas OCT 3429 with the RD-Ilagan which issued a
Certification stating that the subject lot is free from any liens and encumbrances. Masa
likewise went to the Office of the Municipal Assessor of Santiago, Isabela and found that the
same was declared for taxation purposes in the name of Spouses Pariñas. Thereafter,
respondents purchased the said land.

Issue: Whether or not respondents are purchasers in good faith

Ruling: No. Respondents only relied on a mere plain photocopy of Pariñas OCT 3429 when
they purchased Lot 4900. Aside from instructing Ms. Masa to verify the existence and
genuineness of the said title with the RD-Ilagan, who claimed that she was shown the
original copy thereof, respondents had not conducted any other inquiry or investigation to
acquaint themselves with the defects of the said title. They had not even secured a certified
true copy thereof, and merely relied on the RD-Ilagan Certification

Subsequently, it turned out that there is no Pariñas OCT 3429 on file with the RD-Santiago.
While the mere fact that the RD does not have the original of a certificate of title does not
necessarily mean that such title never existed, the inexistence of Pariñas OCT 3429 was
sufficiently established with the express admission by the RD-Santiago that what was
transmitted to it by the RD-Ilagan that is now on file with it is the Calma OCT over a
9,155-sq. m. parcel of land located in Barrio Marasat Grande, San Mateo, Isabela, issued
pursuant to Decree No. N-167495 in Cadastral Case No. 23, LRC Cadastral Record No.
1474, and registered on November 7, 1977 at 11:30 am. Between the above admission
from the government office responsible for safeguarding the OCTs and TCTs in its
possession, and respondents' RD-Ilagan Certification which does not bear the seal of office
of the RD-Ilagan nor indicate that the required documentary stamp, as well as the
certification fee had been paid, the admission of the RD-Santiago should prevail.

Considering the foregoing, it is therefore apparent that Spouses Pariñas were not issued
Pariñas OCT 3429, and said title is totally inexistent. That it was reconstituted is of no
moment because an administrative reconstitution of title is merely a restoration or
replacement of a lost or destroyed title in its original form at the time of the loss or
destruction. The issuance of a reconstituted title vests no new rights and determines no
ownership issues, and shall always be without prejudice to any party whose right or interest
in the property was duly noted in the original, at the time it was lost or destroyed, but entry
or notation of which has not been made on the reconstituted certificate of title, as expressly
provided under Section 7 of RA 26, which was duly noted on the reconstituted Pariñas OCT
3429. Consequently, this Court finds respondents not to be innocent purchasers for value,
and as such, acquired no better title to Lot 4900 than what their predecessors-in-interest
had, and which is without prejudice to the rights of another person who may prove a better
right thereto than their transferors.

7. ENGINEERING AND MACHINERY CORP. VS. CA, G.R. NO. 52267, JAN. 24, 1996 -
Denise

Facts: ​Pursuant to a contract, petitioner undertook to install an air conditioning system in

the private respondent’s building. The system was completed in 1963 and accepted by a
private respondent, who paid in full the contract price. The building was later sold to the
National Investment and Development Corporation which took possession of it. Upon
NIDC’s failure to comply with certain conditions, the sale was rescinded.

NIDC reported to the respondent that there were certain defects in the air conditioning
system. Respondent filed a complaint against petitioner for non-compliance with the agreed
plans and specifications. Petitioner moved to dismiss the complaint on the ground of the
6-month prescription of warranty against hidden defects. Private respondent averred that
the contract was not a contract of sale but for a piece of work, the action for damages of
which prescribes after 10 years.

The RTC denied the motion to dismiss. Petitioner appealed to the Court of Appeals, which
affirmed the decision of the trial court. Hence, it instituted the instant petition.

Issues:

1. Is a contract for the fabrication and installation of a central air-conditioning system in a

building, one of "sale" or "for a piece of work"?
2. What is the prescriptive period for filing actions for breach of the terms of such contract?
3. Was the suit already barred by prescription?
4. Whether the private respondent's acceptance of the work and his payment of the
contract price extinguished any liability with respect to the defects in the air-conditioning
system.

Ruling:

1. It is one for piece of work. It is not petitioner's 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.
2. Article 1571 of the Civil Code provides for a prescriptive period of six months for a
redhibitory action, in case of implied warranties. Where there is an express warranty in
the contract, 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.
3. NO. 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. Not only had the defendant failed to install items and parts
provided for in the specifications of the air-conditioning system be installed, like face and
by-pass dampers and modulating thermostat and many others, but also that there are
items, parts and accessories which were used and installed on the air-conditioning
system which were not in full accord with contract specifications. Therefore, Art. 1715
shall apply, since the 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 that actions "upon a written contract" prescribe in ten (10) years.
4. NO. The mere fact that the private respondent accepted the work does not, ipso facto,
relieve the petitioner from liability for deviations from and violations of the written
contract. It is evident that the defect in the installation was not apparent at the time of
the delivery and acceptance of the work, considering further that plaintiff is not an expert
to recognize the same.
ASSIGNMENT NO. 5 HAS NO CASES
HOMEWORK NO. 6
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1. Arra Realty Corporation vs. Spouse Arguelles, 20 September 2004 - Donn

DOCTRINE:

FACTS:Arra Realty Corporation (ARC) was the owner of a parcel of land covered by TCT
No. 112269. Through its president, Architect Arguelles, the ARC decided to construct a
five-story building on its property and engaged the services of Engr. Peñaloza as project
and structural engineer. Peñaloza and the ARC, through Arguelles, agreed that Peñaloza
would share the purchase price of one floor of the building payable within 60 days from Nov
20, 1982, and the balance payable in 20 equal quarterly installments. They agreed that the
payments of Peñaloza would be credited to her account in partial payment of her stock
subscription in the ARC’s capital stock. Peñaloza took possession of the one-half portion of
the second floor, where she put up her office and operated the St. Michael International
Institute of Technology. Unknown to her, ARC had executed a real estate mortgage over the
lot and the entire building in favor of the China Banking Corp. as security for a loan. From
Feb 23, 1983 to May 31, 1984, Peñaloza paid but stopped paying the installments after
learning that the property had been mortgaged to the China Banking Corp. in July 1984.

Peñaloza wrote the China Banking Corp. that the ARC had conveyed a portion of the
second floor of the building to her, and that she had paid P1,175,124.59 out of the total
price ofP3,105,838. She offered to open an account with the bank in her name and to make
monthly deposits to serve as payments of the equivalent loan of the ARC upon the
execution of the appropriate documents. She proposed for the bank to assist her in
requesting the ARC to execute a deed of absolute sale over the portion of the second floor
she had purchased and the issuance of the title in her name upon the payment of the
purchase price. The bank rejected her proposal. She wrote the ARC informing it of China
Banking Corp.’s rejection of her offer. Peñaloza sent a copy of a deed of absolute sale with
assumption of mortgage for the ARC’s consideration, and informed the latter that, in the
meantime, she was withholding installment payments. Peñaloza transferred the school to
another building she had purchased, but retained her office therein. She discovered that her
office had been padlocked. She had the office reopened and continued holding office
thereat. She executed an affidavit of adverse claim over the property which was annotated
at the dorsal portion of TCT No. 112269. However, the adverse claim was cancelled.

The ARC failed to pay its loan to China Banking Corp., so the property was foreclosed
extrajudicially and sold at public auction to China Banking Corp. The ARC and the
Guarantee Development Corp. and Insurance Agency executed a deed of conditional sale
covering the building and the lot part of which was to be used to redeem the property from
China Banking Corporation. The property was redeemed. The ARC executed a deed of
absolute sale over the lot and building in favor of the GDCIA. The ARC obliged itself to
deliver possession of the property without any occupants therein. The Register of Deeds
issued TCT No. 147846 in favor of GDCIA over the property without any liens or
encumbrances. Peñaloza filed a complaint against the ARC, the GDCIA, and the Spouses
Arguelles, with the RTC for "specific performance or damages" with a prayer for a writ of
preliminary injunction. The trial court rendered judgment in favor of Peñaloza and the
GDCIA, and ordered the ARC and Spouses Arguelles to pay Peñaloza P1,444,124.59 with
interest of 12% per annum. However, the case for specific performance and prayer for
preliminary injunction was dismissed. The CA affirmed with modification the appealed
decision. The Register of Deeds of Makati City is hereby ordered to cancel the Notice of Lis
Pendens annotated on Transfer Certificate of Title No. 147845 registered in the name of
GDCIA.

ISSUE:

Whether no contract of sale over the property was perfected between the ARC and
Peñaloza because the latter failed to pay the balance of the total purchase price of a portion
of the second floor of the building as provided in their November 18, 1982 agreement.

RULING:

As gleaned from the agreement, the ARC, as vendor, and Peñaloza, as vendee, entered
into a contract of sale over a portion of the second floor of the building yet to be constructed
for P3,105,838 payable in installments, the first installment of P901,738 to be paid within 60
days from Nov 20, 1982 or on or before Jan 20, 1983, and the balance payable in 20 equal
quarterly payments of P110,205. As soon as the second floor was constructed within 5
months, Peñaloza would take possession of the property, and title thereto would be
transferred to her name. The parties had agreed on the three elements of subject matter,
price, and terms of payment. Hence, the contract of sale was perfected, it being consensual
in nature, perfected by mere consent, which, in turn, was manifested the moment there was
a meeting of the minds as to the offer and the acceptance thereof. The perfection of the
sale is not negated by the fact that the property subject of the sale was not yet in existence.
What the law requires is that the seller has the right to transfer ownership at the time the
thing is delivered. Perfection per se does not transfer ownership which occurs upon the
actual or constructive delivery of the thing sold.

Peñaloza took possession of a portion of the second floor of the building sold to her. She
put up her office and operated the St. Michael International Institute of Technology.
Thenceforth, she became the owner of the property, conformably to Article 1477 of the New
Civil Code “The ownership of the thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof.”

In a contract of sale, until and unless the contract is resolved or rescinded in accordance
with law, the vendor cannot recover the thing sold even if the vendee failed to pay in full the
initial payment for the property. The failure of the buyer to pay the purchase price within the
stipulated period does not by itself bar the transfer of ownership or possession of the
property sold, nor ipso facto rescind the contract. Such failure will merely give the vendor
the option to rescind the contract of sale judicially or by notarial demand as provided for by
Article 1592 of the New Civil Code “In the sale of immovable property, even though it may
have been stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may pay, even after the
expiration of the period, as long as no demand for rescission of the contract has been made
upon him either judicially or by a notarial act. After the demand, the court may not grant him
a new term.”

Peñaloza failed to pay the downpayment on time. But then, the ARC accepted, without any
objections her delayed payments; hence, as provided in Article 1235 of the New Civil Code,
the obligation of the respondent is deemed complied with: Art. 1235. When the obligee
accepts the performance, knowing its incompleteness or irregularity, and without expressing
any protest or objection, the obligation is deemed fully complied with.

Penaloza cannot be blamed for suspending further remittances of payment to the petitioner
ARC because when she pushed for the issuance of her title to the property after taking
possession thereof, the ARC failed to comply. She was aghast when she discovered that
even before she took possession of the property, the ARC had already mortgaged the lot
and the building to the China Banking Corporation; when she offered to pay the balance of
the purchase price of the property to enable her to secure her title thereon, the ARC
ignored her offer. Under Article 1590 of the New Civil Code, a vendee may suspend the
payment of the price of the property sold:

Art. 1590. Should the vendee be disturbed in the possession or ownership of the
thing acquired, or should he have reasonable grounds to fear such disturbance, by a
vindicatory action or a foreclosure of mortgage, he may suspend the payment of the
price until the vendor has caused the disturbance or danger to cease, unless the
latter gives security for the return of the price in a proper case, or it has been
stipulated that, notwithstanding any such contingency, the vendee shall be bound to
make the payment. A mere act of trespass shall not authorize the suspension of the
payment of the price.

Peñaloza was impelled to cause the annotation of an adverse claim at the dorsal portion of
TCT No. 112269. She did not waive her right to enforce the letter-agreement or abandon
the property she had purchased from the ARC. While she transferred the school to another
location, she maintained her office in the property, only to discover that the ARC had had
her office padlocked. Nevertheless, she had her office reopened and continued holding
office thereat for a year or so, thereafter.

Peñaloza turned over the possession of the property to the ARC shortly thereafter, filed her
complaint against the ARC. The bare fact that she filed her complaint shortly after vacating
the property is evidence of her determination to pursue her claims against the petitioners.

In view of the failure of the petitioner ARC to transfer the title of the property to her name
because of the mortgage thereof to China Banking Corporation and the subsequent sale
thereof to the GDCIA, Peñaloza is entitled to the refund of the amount she paid to the ARC,
conformably to Article 1398 of the New Civil Code –

“An obligation having been annulled, the contracting parties shall restore to each other the
things which have been the subject matter of the contract, with their fruits, and the price with
its interest, except in cases provided by law. In obligations to render service, the value
thereof shall be the basis for damages.”

Therefore, a contract of sale over the property was perfected between the ARC and
Peñaloza. Peñaloza is entitled to the refund of the amount she paid to the ARC.

2. Laforteza vs. Machuca, 333 SCRA 643- Donn

DOCTRINE:

FACTS: On August 2, 1988, Lea Zulueta-Laforteza executed a Special Power of Attorney in

favor of defendants Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr., appointing both as
her Attorney-in-fact authorizing them jointly to sell the subject house and lot property and
sign any document for the settlement of the estate of the late Francisco Q. Laforteza.
Likewise on the same day, Michael Z. Laforteza executed a Special Power of Attorney in
favor of Roberto and Gonzalo Jr., likewise, granting the same authority. Both agency
instruments contained a provision that in any document or paper to exercise authority
granted, the signature of both attorneys-in-fact must be affixed. Dennis Laforteza also
executed Special Power of Attorneys on different dates.

In the exercise of the above authority, on January 20, 1989, the heirs of the late
Francisco Q. Laforteza represented by Roberto and Gonzalo entered into a Memorandum
of Agreement (Contract to Sell) with Alonzo Machuca over the subject property for the sum
of Six Hundred Thirty Thousand Only (P630,000.00) to be payable as stipulated: P30,000
upon signing the agreement and the remaining P600,000 upon issuance of the new
certificate of title in the name of the late Francisco Q. Laforteza and upon execution of an
extra-judicial settlement of the decedent’s estate with sale in favor of the plaintiff. On June
20, 1989, the defendant was able to pay P30,000 as stipulated in the agreement. On
September 18, 1989, defendants sent letter informing the defendant his obligation to pay
the remaining balance to be due after thirty (30) days, and the reconstituted title, which the
defendant received on the same date, of which on October 18, 1983, asked for an
extension until November 15, 1989. Roberto, assisted by a lawyer, was the one who
affirmed said request, but not Gonzalo.

On November 20, 1989, defendant informed the heirs that Roberto had the payment
for the balance, but said heirs refused to accept said payment. Roberto declared the
property not for sale for failure to comply with the contractual obligations, and the
agreement rescinded by the plaintiff-heirs. Defendant insisted tender of payment but when
the defendants refused to accept such, an action for specific performance was filed in court.
The trial court ruled in favor of the defendant. When the petitioner-heirs appealed this to the
Court of Appeals, the decision was rendered against them. So, an appeal to the Supreme
Court was made.

ISSUE:

Whether or not the rescission of the agreement for failure by the private respondent
to fulfill his obligations was validly done.

RULING:

The issuance of the new certificate of title in the name of the late Francisco
Laforteza and the execution of an extrajudicial settlement of his estate was not a condition
which determined the perfection of the contract of sale. Petitioners’ contention that since
the condition was not met, they no longer had an obligation to proceed with the sale of the
house and lot is unconvincing. The petitioners fail to distinguish between a condition
imposed upon the perfection of the contract and a condition imposed on the performance of
an obligation. Failure to comply with the first condition results in the failure of a contract,
while the failure to comply with the second condition only gives the other party the option
either to refuse to proceed with the sale or to waive the condition. Thus, Art. 1545 of the
Civil Code states: "Art. 1545. Where the obligation of either party to a contract of sale is
subject to any condition which is not performed, such party may refuse to proceed with the
contract or he may waive performance of the condition. If the other party has promised that
the condition should happen or be performed, such first mentioned party may also treat the
non-performance of the condition as a breach of warranty. Where the ownership in the
things has not passed, the buyer may treat the fulfillment by the seller of his obligation to
deliver the same as described and as warranted expressly or by implication in the contract
of sale as a condition of the obligation of the buyer to perform his promise to accept and pay
for the thing."
 In the case at bar, there was already a perfected contract. The condition was
imposed only on the performance of the obligations contained therein. Considering
however that the title was eventually "reconstituted" and that the petitioners admit their
ability to execute the extrajudicial settlement of their father’s estate, the respondent had a
right to demand fulfillment of the petitioners’ obligation to deliver and transfer ownership of
the house and lot.

The Supreme Court did not subscribe to the petitioners’ view that the Memorandum
Agreement was a contract to sell. There is nothing contained in the MOA from which it can
reasonably be deduced that the parties intended to enter into a contract to sell, i.e. one
whereby the prospective seller would explicitly reserve the transfer of title to the prospective
buyer, meaning, the prospective seller does not as yet agree or consent to transfer
ownership of the property subject of the contract to sell until the full payment of the price,
such payment being a positive suspensive condition, the failure of which is not considered a
breach, casual or serious, but simply an event which prevented the obligation from
acquiring any obligatory force.

There is clearly no express reservation of title made by the petitioners over the
property, or any provision which would impose non-payment of the price as a condition for
the contract’s entering into force. Although the memorandum agreement was also
denominated as a "Contract to Sell", it held that the parties contemplated a contract of sale.
A deed of sale is absolute in nature although denominated a conditional sale in the absence
of a stipulation reserving title in the petitioners until full payment of the purchase price. In
such cases, ownership of the thing sold passes to the vendee upon actual or constructive
delivery thereof. The mere fact that the obligation of the respondent to pay the balance of
the purchase price was made subject to the condition that the petitioners first deliver the
reconstituted title of the house and lot does not make the contract a contract to sell for such
condition is not inconsistent with a contract of sale.

The property in dispute, being an immovable property, is governed by Article 1592 of

the NCC, which needs the judicial or notarial act for its rescission. It is not disputed that the
petitioners did not make a judicial or notarial demand for rescission. The November 20,
1989 letter of the petitioners informing the respondent of the automatic rescission of the
agreement did not amount to a demand for rescission, as it was not notarized. It was also
made five days after the respondent’s attempt to make the payment of the purchase price.
This offer to pay prior to the demand for rescission is sufficient to defeat the petitioners’ right
under article 1592 of the Civil Code.

Besides, the Memorandum Agreement between the parties did not contain a clause
expressly authorizing the automatic cancellation of the contract without court intervention in
the event that the terms thereof were violated. A seller cannot unilaterally and
extrajudicially rescind a contract of sale where there is no express stipulation authorizing
him to extrajudicially rescind. Neither was there a judicial demand for the rescission
thereof.

Thus, when the respondent filed his complaint for specific performance, the
agreement was still in force inasmuch as the contract was not yet rescinded.

At any rate, considering that the six-month period was merely an approximation of
the time it would take to reconstitute the lost title and was not a condition imposed on the
perfection of the contract and considering further that the delay in payment was only thirty
days which was caused by the respondents justified but mistaken belief that an extension to
pay was granted to him, the Court agreed with the CA’s ruling that the delay of one month in
payment was a mere casual breach that would not entitle the respondents to rescind the
contract. RESCISSION of a contract will not be permitted for a slight or casual breach, but
only such substantial and fundamental breach as would defeat the very object of the parties
in making the agreement.

3. Fidella Vda. De Mistica vs. Naguiat, 418 SCRA 73 - Raechelle

DOCTRINE:In a contract of sale, the remedy of an unpaid seller is either specific
performance or rescission. Under Article 1191 of the Civil Code, the right to rescind
an obligation is predicated on the violation of the reciprocity between parties,
brought about by a breach of faith by one of them.Rescission, however, is allowed
only where the breach is substantial and fundamental to the fulfillment of the
obligation.
FACTS:
● Eulalio Mistica, is the owner of a parcel of land in Bulacan.
● A portion was leased to respondent, Bernardino Naguiat sometime in 1970.
● April 5, 1979, Eulalio Mistica entered into a contract to sell with herein
respondent.
- Area: 200 sq m.
● Pursuant to their agreement respondent gave a downpayment of of ₱2,000.00
and made another partial payment of ₱1,000.00. However, he failed to make
any payments thereafter.
● Eulalio Mistica died sometime in October 1986.
● On December 4, 1991, petitioner filed a complaint for rescission alleging:
- That the failure and refusal of respondents to pay the balance of the
purchase price constitutes a violation of the contract which entitles her
to rescind the same.
- That respondents have been in possession of the portion and they
should be ordered to vacate and surrender possession of the same to
the petitioner
 - That the reasonable amount of rental for the subject land is ₱200.00 a
month
● Respondents contended that the contract cannot be rescinded on the ground
that it clearly stipulates that in case of failure to pay the balance as stipulated,
a yearly interest of 12% is to be paid.
● He also alleged that during the wake of Eulalio Mistica he offered to pay the
remaining balance to petitioner however he refused and hence, there is no
breach or violation committed by them and no damages could yet be incurred
by the late Eulalio Mistica, his heirs or assigns pursuant to the said document.
- that he is presently the owner in fee simple of the subject lot having
acquired the same by virtue of a Free Patent Title duly awarded to him
by the Bureau of Lands; and
- that his title and ownership had already become indefeasible and
incontrovertible.
RTC: Dismissed the complaint
CA: held that respondents did not breach the Contract of Sale. It explained that the
conclusion of the ten-year period was not a resolutory term, because the Contract
had stipulated that payment -- with interest of 12 percent -- could still be made if
respondents failed to pay within the period. According to the appellate court,
petitioner did not disprove the allegation of respondents that they had tendered
payment of the balance of the purchase price during her husband’s funeral, which
was well within the ten-year period.

ISSUE:WHETHER OR NOT THERE IS A BREACH OF OBLIGATION THAT WARRANTS

RESCISSION UNDER ART. 1191

RULING: NO.
● The transaction between Eulalio and Naguiats, as evidenced by the Kasulatan,
was clearly a Contract of Sale.
● A deed of sale is considered absolute in nature when there is neither a
stipulation in the deed that title to the property sold is reserved to the seller
until the full payment of the price; nor a stipulation giving the vendor the right
to unilaterally resolve the contract the moment the buyer fails to pay within a
fixed period. o In a contract of sale, the remedy of an unpaid seller is either
specific performance or rescission.
● Under A1191, the right to rescind an obligation is predicated on the violation of
the reciprocity between parties, brought about by a breach of faith by one of
them. Rescission, however, is allowed only where the breach is substantial
and fundamental to the fulfillment of the obligation. o Naguiats’ failure to pay
the balance of the purchase price within 10 years from the execution of the
Deed did not amount to a substantial breach.
 ● In the Kasulatan, it was stipulated that payment could be made even after ten
years from the execution of the Contract, provided the vendee paid 12 percent
interest. The stipulations of the contract constitute the law between the
parties; thus, courts have no alternative but to enforce them as agreed upon
and written. o Moreover, it is undisputed that during the ten-year period, Fidela
and her deceased husband never made any demand for the balance of the
purchase price. Fidela even refused the payment tendered by Naguiats during
her husband's funeral, thus showing that she was not exactly blameless for
the lapse of the ten-year period. Had she accepted the tender, payment would
have been made well within the agreed period.

4. Malabanan vs. Spouses Montano, G.R. No. 187225, March 6, 2019 - Nona
DOCTRINE: A person is a buyer in good faith or an "innocent purchaser for value" when
he or she purchases and pays the fair price for a property, absent any notice that another
has a right over it. If the property is covered by a certificate of title, the buyer may rely on
it and is not obliged to go beyond its four (4) corners.

Exceptions: [T]his rule shall not apply when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry or when
the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient
facts to induce a reasonably prudent man to inquire into the status of the title of the
property in litigation.
To justify good faith in merely relying on the certificate of title, the following must be
present:
1. [F]irst, the seller is the registered owner of the land;
2. second, the latter is in possession thereof; an
3. third, at the time of the sale, the buyer was not aware of any claim or interest of some
other person in the property, or of any defect or restriction in the title of the seller or in his
capacity to convey title to the property.

Here, the land has always been possessed by petitioner, and not respondent Ramon
Malabanan who sold it. Respondent Dominador, should have inquired about this before
he purchased the property.

FACTS: Jose and Melinda acquired a 310-sqm lot (subject property; TCT No. T-188590) in
Tanza Cavite. They built a house there, which they have owned since 1984. Melinda worked
in Libya in 1984, and Jose was murdered in 1985, so she went home but returned to Libya
again and only came home in 1991, which was when she discovered that TCT No.
T-188590 had long been canceled through different transactions, and that the property was
registered under the name of Spouses Montano.
There was an SPA executed by Jose, her husband, authorizing her father-in-law Francisco
Malabanan, Jr. to mortgage, lease, or sell their property covered by TCT No. T-188590. It
was sold to different people like Lopez and Ramon (Malabanan Spouses) and eventually to
Spouses Montano. Melinda filed a complaint stating that the SPA was void as her signature
in it was forged, and that she and Jose remained the real owners of the property. Also, she
averred that she spent her earnings as an overseas worker in Libya to remodel their family
home, all of which Francisco and the Malabanan Spouses had fully known. She prayed for
the nullification of the documents, which she claimed to have been illegally executed to
dispossess her of her property.

Francisco and the Malabanan Spouses countered that Francisco and Adelfina bought the
property for their son, Jose, and Melinda as an advance on Jose's legitime.

Francisco paid for the construction of the house on the property. They contended that
Melinda consented when Francisco reacquired the property upon his son's death.

RTC ruled in favor of Melinda. It found that she has proved her ownership over the property,
which was fraudulently transferred through Francisco's clever scheme. CA set aside the trial
court's ruling and ordered the Complaint's dismissal. It gave weight to Francisco's claim that
the property was an advance on Jose's legitime. In sum, Melinda's claim rests on the Deed
of Absolute Sale her husband Jose executed with Rodriguez, as well as TCT No. T-188590
issued during their marriage. On the other hand, respondent Francisco maintained that he
paid for the land and the house construction on the property. CA’s finding that the property
was exclusively owned by Jose was premised on: (1) the Deed of Conditional Sale between
Jose and Rodriguez, which do not appear on record; and (2) Jose's statement in the
Special Power of Attorney.

ISSUE: WON the property formerly covered by Transfer Certificate of Title No. T-188590
was conjugal, and thus, rendering its sale without the wife's consent void.

RULING: The Court held YES, for the following reasons:

- The property is conjugal, which means the sale of conjugal property by a spouse
without the other's consent is void. All subsequent transferees of the conjugal
property acquire no rights whatsoever from the conjugal property's unauthorized
sale.
- A certificate of title is the best evidence of ownership of a property. Respondents
neither alleged fraud nor assailed the issuance of the title in Jose's favor. This
certificate of title, when taken with the Deed of Absolute Sale between Jose and
Rodriguez, as well as the tax declarations in petitioner's name, weigh more heavily
than respondents' bare claims in establishing petitioner and Jose's ownership of the
property.
 - SPA was declared void by the Court: an expert witness from the National Bureau of
Investigation testified during trial that petitioner's signature in the SPA was forged,
and the petitioner was in Libya when the SPA was executed.
- Montano Spouses were not buyers in good faith. *recite the doctrine*

5.PABLO UY, substituted by his heirs, namely: MYLENE D. UY, PAUL D. UY, and
PAMELA UY DACUMA, petitioners, vs. HEIRS OF JULITA UY-RENALES, represented
by: JESSICA R. ROSERO, JOSELITO RENALES and JANET U. RENALES; JOVITO
ROSERO and MARILYN RENALES, respondents., G.R. No. 227460, December 5, 2019-
Anna Elaine
DOCTRINE:

FACTS:
The controversy is centered on a lot situated in Samar. The lot is covered by a TCT
registered in the name of petitioner Uy's mother, Labnao. The relationship of the parties is
as follows: Labnao had two children, petitioner Uy and Julita. Julita produced three
children, the respondents Heirs of Julita. Hence, petitioner Uy is the uncle of the
respondents Heirs of Julita. Julita died intestate.
In his complaint, petitioner Uy maintains that upon the death of Labnao and as the
surviving child, he became the owner of ½ of the subject lot and building owned by his
deceased mother, with the other half pertaining to the respondents.
However, petitioner discovered that the lot was allegedly fraudulently sold by Labnao in
favor of the respondents through a Deed of Absolute purportedly executed by Labnao.
Petitioner Uy asserted that the signature of Labnao in the Deed of Absolute Sale was
forged as shown by the PNP Crime Laboratory. Upon discovery of the falsification,
petitioner Uy confronted his nieces and nephew for a possible settlement of the matter,
but the latter refused.
Petitioner Uy also noted that the lot and subject have been subject of a prior action for
Interpleader filed by the lessee of the building, who filed the said action in order to
determine who between petitioner and the respondents should collect the lease rentals.
Respondents claimed that their mother allegedly constructed the building on the lot. That
as surviving heirs of Julita, they became the rightful and exclusive owners of the building
by operation of law. Hence, the respondents Heirs of Julita maintain that their claim of
ownership over the subject lot and the subject building is now absolute and that petitioner
Uy's demand for reconveyance constituted a cloud obscuring their title and thus should be
quashed.
RTC: Ruled in favor of respondents. There was a valid contract of sale but ordered to give
petitioner ½ of the present value of the building by way of inheritance from his mother,
Labanao.
CA: Affirmed the RTC’s decision. The Deed of Absolute Sale conveyed and transferred
the ownership of the subject land to the respondents, being duly acknowledged before a
Notary Public, has in its favor the presumption of regularity and is conclusive as to the
truthfulness of its contents. Further, the CA explained that forgery cannot be presumed. It
must be proved by clear, positive and convincing evidence. The burden of proof lies in the
party alleging forgery.

ISSUE:
Whether there was a contract of sale that was entered into between Labnao, and the
respondents Heirs of Julita, transferring ownership over the subject lot in the latter's favor

RULING:

No.

The Deed of Absolute Sale was not properly notarized

The Court disagrees with the CA’s finding that the Deed of Absolute Sale was properly
notarized. According to the notarial law applicable during the time of the notarization of the
Deed of Absolute Sale, the presentation of competent evidence of identity is required where
a document is acknowledged before a notary public "to ascertain the identity/identities of
the person/s appearing before him and to avoid impostors." The notary public, in the case
at bar, admitted that he did not ask from Labnao any competent evidence of her identity
and merely asked if she was the one who signed the document. On cross-examination, he
admitted that he "no longer verified the identity of the old woman”. Because the Deed
of Absolute Sale was not properly notarized it cannot be presumed to have been regularly
executed.
The existence of an alleged notarized deed of sale is not decisive as to the
existence and validity of a contract of sale
A contract is a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service.
Article 1458 of the Civil Code defines a sale as a contract whereby one of the contracting
parties obligates himself/herself to transfer the ownership and to deliver a determinate
thing, and the other party obligates himself to pay a price certain in money or its
equivalent.
A contract of sale is a consensual contract. Even if there is a document that purports to be
a contract of sale, if there is strong countervailing evidence establishing the want of
consent or meeting of the minds, there is no contract of sale. In Spouses Salonga v.
Spouses Concepcion, it was held that the notarization of a document does not guarantee
its validity because it is not the function of the notary public to validate an instrument that
was never intended by the parties to have any binding legal effect. the existence, veracity,
and authenticity of a notarized written deed of sale do not conclusively determine whether
all the essential requisites of a contract are present.
The sole witness presented by the respondents Heirs of Julita to prove the existence of
the contract of sale actually testified that there was never any agreement on the part of
the respondents Heirs of Julita to purchase the subject lot from their grandmother and that
they were even surprised that the Deed of Absolute Sale even existed in the first place. To
the mind of the Court, therefore, there was no valid contract of sale in the instant case.
Aside from the foregoing, it also does not escape the Court's attention that the purported
Deed of Absolute Sale was never registered with the Registry of Deeds. Nor was the
Deed of Absolute Sale annotated on the subject TCT.
Void Donation of an Immovable Property
What the Court deduces from the facts on record is that Labnao's intention was
to ensure that her grandchildren — the respondents Heirs of Julita — would exclusively
receive the subject lot. Thus, instead of simply donating the property, Labnao opted to
simply simulate a contract of sale.
Unfortunately, even as a transfer of the subject lot to the respondents Heirs of
Julita, the Deed of Absolute Sale cannot be considered a valid donation.
According to Article 749 of the Civil Code, in order for a donation of an
immovable property to be considered valid, the donation must be made in a public
document, specifying therein the property donated and the value of the charges which
the donee must satisfy. In the instant case, as already explained, the Deed of Absolute
Sale was not properly notarized, making it a private document. Hence, there was no
donation made in a public document.

6. Villamil vs. Spouses Erguiza, G. R. No. 195999, June 20, 2018 - Nona

DOCTRINE: Contract to sell is defined as a bilateral contract whereby the prospective

seller, while expressly reserving the ownership of the subject property despite delivery
thereof to the prospective buyer, binds himself to sell the said property exclusively to the
latter upon his fulfillment of the conditions agreed upon, i.e., the full payment of the
purchase price and/or compliance with the other obligations stated in the contract to sell.
Given its contingent nature, the failure of the prospective buyer to make full payment
and/or abide by his commitments stated in the contract to sell prevents the obligation of
the prospective seller to execute the corresponding deed of sale to effect the transfer of
 ownership to the buyer from arising.

FACTS: Lily Villamil filed a Complaint for recovery of possession and damages against
respondent-spouses Juanito and Mila Erguiza before the MTC. The complaint alleges that
they entered into an agreement with Juanito Erguiza for the purpose of selling the property
to the latter subject to the condition that plaintiff and her siblings would file a petition to
secure authorization for minor children from the proper courts. Likewise, that in case of
failure of the plaintiff and her siblings to obtain said authority, the partial payment made by
the defendant shall be applied as rent for twenty (20) of the premises.

After the lapse of twenty (20) years lease, plaintiff demanded from the defendants to return
the possession of the property but the latter failed and refused to return the possession of
the property. Plaintiff again demanded from the defendants through a formal letter but after
a period of 30 days, no agreement has been enforced. Hence, the defendants have lost
whatever rights they have under said agreement. Defendants denied the allegations and
according to them a sale even if conditional transfers ownership to the vendee.

ISSUE: WON the contract executed by Villamil and Spouses Erguiza is a Contract to Sell.
RULING: YES.

A contract to sell is defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property exclusively to the latter upon his
fulfillment of the conditions agreed upon, i.e., the full payment of the purchase price and/or
compliance with the other obligations stated in the contract to sell. Given its contingent
nature, the failure of the prospective buyer to make full payment and/or abide by his
commitments stated in the contract to sell prevents the obligation of the prospective seller to
execute the corresponding deed of sale to effect the transfer of ownership to the buyer from
arising. A contract to sell is akin to a conditional sale where the efficacy or obligatory force
of the vendor's obligation to transfer title is subordinated to the happening of a future and
uncertain event, so that if the suspensive condition does not take place, the parties would
stand as if the conditional obligation had never existed. In a contract to sell, the fulfillment of
the suspensive condition will not automatically transfer ownership to the buyer although the
property may have been previously delivered to him. The prospective seller still has to
convey title to the prospective buyer by entering into a contract of absolute sale. On the
other hand, in a conditional contract of sale, the fulfillment of the suspensive condition
renders the sale absolute and the previous delivery of the property has the effect of
automatically transferring the seller's ownership or title to the property to the buyer.

What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject
property when the entire amount of the purchase price is delivered to him. In other words
the full payment of the purchase price partakes of a suspensive condition, the
non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is
retained by the prospective seller without further remedies by the prospective buyer.

We hold that the contract between the petitioner and the respondent was a contract to sell
where the ownership or title is retained by the seller and is not to pass 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.

Stated positively, upon the fulfillment of the suspensive condition which is the full payment
of the purchase price, the prospective seller's obligation to sell the subject property by
entering into a contract of sale with the prospective buyer becomes demandable as
provided in Article 1479 of the Civil Code.

7. Layug vs. IAC, 167 SCRA 627 - Denise

DOCTRINE: Where there is an adequate remedy at law available to the parties,
equity should not come into play.

FACTS: In this case, there is a contract for the purchase on installments by Antonio
Layug of twelve (12) lots owned by Rodrigo Gabuya, situated at Barrio Bara-as, Iligan
City. The contract, entered into on October 4, 1978, set the price for the lots at
P120,000.00 payable in three (3) yearly installments.

Layug paid the first two annual installments, totalling P80,000.00. But he failed to pay
the last installment of P40,000.00, which fell due on October 5, 1980. Gabuya made
several informal demands for payment; and when all these proved unavailing, he made a
formal written demand 6 months after the due date of the last installment. When this, too,
went unheeded, Gabuya finally brought suit in the Court of First Instance of Lanao del Norte
for the annulment of his contract with Layug and for the recovery of damages.

The petitioner claims that he is entitled to a conveyance of at least eight (8) of the 12 lots
subject of the conditional sale, on the theory that since the total price of the 12 lots was
P120,000, each lot then had a value of P10,000 and, therefore, with his P80,000.00, he had
paid in full the price for the 8 lots. In support of his claim, he invokes earlier rulings in
Legarda Hermanos vs. Saldaña and Calasanz vs. Angeles.

ISSUE: Whether the court may resort to principles of equity and the general
provisions of the Civil Code in resolution of the controversy.
RULING: NO. The rulings in Legarda Hermanos and Calasanz cannot be applied to the
case at bar because, at the time, no statute specifically governing the situation. Here, at the
time of the execution of the contract in question, and the breach thereof, there was a
statute already in force and applicable thereto, Republic Act No. 6552

R.A. 6552 governs sales of real estate on installments. It recognizes the vendor's right to
cancel such contracts upon failure of the vendee to comply with the terms of the
sale, but imposes, chiefly for the latter's protection, certain conditions thereon.

The law provides inter alia that "in all transactions or contracts involving the sale or
financing of real estate on installment payments, including residential condominium
apartments, where the buyer has paid at least two years of installments, the buyer is
entitled to the following rights in case he defaults in the payment of succeeding installments:

[Grace Period]

(a) To pay, without additional interest, the unpaid installments due within the total
grace period earned by him which is hereby fixed at the rate of one month grace
period for every year of installment payments made: Provided, That this right shall be
exercised by the buyer only once in every five years of the life of the contract and its
extensions, if any;

[Refund of "Cash Surrender Value"]

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender
value of the payments on the property equivalent to 50% of the total payments made
and, after five (5) years of installments, an additional 5% every year but not to
exceed 90% of the total payments made; Provided, That the actual cancellation of
the contract shall take place after thirty days from receipt by the buyer of the notice
of cancellation or the demand for rescission of the contract by a notarial act and
upon full payment of the cash surrender value to the buyer.

In the case at bar, Layug had paid two (2) annual installments of P40,000.00 each. He
therefore had a grace period of two (2) months from October 5, 1980 within which to
pay the final installment. Since he did not pay, he is left only with the right to a refund
of the "cash surrender value of the payments on the property equivalent to fifty
percent of the total payments made," or P40,000.00. Such refund will be the operative
act to make effective the cancellation of the contract by Gabuya, conformably with
the terms of the law.

8. Odyssey Park Inc. vs. CA, G.R. No. 107992, October 8, 1997 - Raechelle
DOCTRINE: It is a familiar doctrine in the law on contracts that the parties are
bound by the stipulations, clauses, terms and conditions they have agreed to, the
only limitation being that these stipulations, clauses, terms and conditions are not
contrary to law, morals, public order or public policy. Not being repugnant to any
legal proscription, the agreement entered into by the parties herein involved must
be respected and held to be the law between them.

FACTS:
● Nov. 4 1981, Bancom Development Corporation and Odyssey Park, Inc.,
entered into a Contract to Sell, whereby the former agreed to sell to the latter
the parcel of land in Baguio City and the structure constructed thereon
identified as the Europa Clubhouse.
● Subsequently on Feb. 11, 1982, in a document entitled “Separate Deed of
Conveyance”, Bancom confirmed and acknowledged that it has ceded,
transferred and conveyed in favor of defendant Union Bank all the rights, title
and interest it has over the property.
● The purchase price of P3,500,000.00 was (per Sec. 2 of the Contract to Sell),
agreed to be paid as follows:
➔ P700,00.00 as downpayment, to be paid by Odyssey as follows
(a) P100,000.00 upon signing of this Contract
(b) P200,000.00, 60 days from and after the date of this contract
(c) P400,000.00, 90 days from and after the date of this contract.
➔ The balance of P2.8Million shall be paid by Odyssey to Bancom within a period
of 3 days by 12 quarterly amortizations of P298,346.08 each, inclusive of the
interest and service charge set forth (in Sec. 3 of the contract)
● They also agreed (Sec. 5) that in the event this Contract is cancelled and
rescinded, all the amounts which the Odyssey may have paid to Bancom
pursuant to and in accordance with this Contract shall be forfeited in favor of
Bancom as rentals for the use and occupancy of the Property and as penalty
for the breach and violation of this Contract. Furthermore, all the
improvements which Odyssey may have introduced on the Property shall form
part thereof and belong to Bancom without right of reimbursements to
Odyssey; Provided, that Bancom may at its absolute discretion instead require
Odyssey to remove such improvements from the Property at expense of
Odyssey.
● Twenty-two (22) days after the execution of the contract plaintiff paid the
amount of P100,000.00. Other payments, also beyond the stipulated period, in
the total sum of P110,000.00 were made.
● On December 23, 1981, Mr. Vicente A. Araneta, President of Europa
Condominium Villas, Inc., wrote defendant Union Bank, a letter, stating that the
 Europa Center was reported to prospective buyers as well as government
authorities as part of common areas and amenities under the condominium
concept of selling to the public and for that reason wants to make it of record
that Europa Condominium Villas, Inc., questions the propriety of the contract
to sell.
● On January 4, 1982, plaintiff Odyssey Park, Inc., through its Chairman of the
Board, Mr. Carmelito A. Montano, wrote Bancom Development Corp. a letter,
stating that it acknowledges receipt of a copy of the letter-protest from the
Europa Condominium Villas, Inc., and that in the meantime that there is a
question on the propriety of the sale, it is stopping/withholding payments of
the amortization.
● On the same date, January 4, 1982, Bancom, through its Senior Vice-President,
wrote Europa Condominium Villas, Inc. a letter explaining that the Europa
Center and the parcel of land on which it is built are not part of the Europa
Condominium Villas, Inc.
● On March 29, 1983, defendant-appellee Union Bank wrote plaintiff Odyssey
Park, Inc., a letter demanding payment of the overdue account of
P2,193,720.91, inclusive of interest and service charges, otherwise the contract
to sell would be cancelled and rescinded
● On April 12, 1983, plaintiff Odyssey wrote defendant Union Bank a letter
proposing a manner of settlement which defendant Union Bank answered
asking for more details of the proposal. The series of communications led to
the drafting of a Memorandum of Agreement which was not, however, signed
by the parties.
● On January 6, 1984, defendantUnion Bank, through counsel, wrote plaintiff
Odyssey Park, Inc., a letter formally rescinding and/or cancelling the contract
to sell and demanding that plaintiff vacate and peaceably surrender
possession of the premises.
● On or about August 20, 1984, for failure of plaintiff to vacate, defendant filed a
case for illegal detainer and damages. On July 5, 1988, plaintiff filed this case
for ‘Declaration of the Nullity of the Rescission of the Contract to Sell With
Damages’.

LOWER COURT: rendered judgment in favor of private respondent, declaring the

Contract to Sell of 04 November 1981 to have been properly rescinded

ISSUE: Whether or not the rescission of the contract to sell by private respondent
accords with the requirements of Republic Act ("R.A.") No. 6552, also known as "An
Act to Protect Buyers of Real Estate on Installment Payments”

RULING: NO.
 ● This law, which normally applies to the sale or financing of real estate on
installment payments, excludes "industrial lots, commercial buildings, and
sales to tenants under R.A. No. 3844."
● The property subject of the contract to sell is not a residential condominium
apartment. Even on the basis of the letter of Mr. Vicente A. Araneta, the
building is merely ‘part of common areas and amenities under the
Condominium concept of selling to the public’. The property subject of the
contract to sell is more of a commercial building.
● In a contract to sell, the payment of the purchase price is a positive
suspensive condition, the failure of which is not a breach, casual or serious,
but a situation that prevents the obligation of the vendor to convey title from
acquiring an obligatory force. The breach contemplated in Article 1191 of the
Code is the obligor’s failure to comply with an obligation already extant, not a
failure of a condition to render binding that obligation. In any event, the failure
of petitioner to even complete the downpayment stipulated in the contract to
sell puts petitioner corporation far from good stead in urging that there has
been substantial compliance with the contract to sell within the meaning of
Article 1191 of the Code.
➔ Article 1592 of the Civil Code be held inapplicable, as the provisions (Art. 1191
and 1592) contemplate neither a conditional sale nor a contract to sell but an
absolute sale.

9. Moldex Realty vs. Saberon, G.R. No. 176289, April 8, 2013- REGINE
DOCTRINE:

FACTS:
Flora A. Saberon (Flora) requested Moldex, the developer, to reserve a
180-square-meter lot known as Lot 2, Block 1 of Metrogate Subdivision in Dasmarias,
Cavite. It costs P396,000.00 to buy the land outright, but it costs P583,498.20 to pay in
five years with monthly amortizations of P8,140.97 and a 5% surcharge for every
month late. Flora chose to pay over time and made periodic payments totaling
P375,295.49.

Moldex reminded Flora to update her account in April, August, and October 1996.
Flora was shocked to learn that she owed Moldex P247,969.10 as of July 1996. In
November 1996, it hit P491,265.91. Moldex advised Flora to sign a written
authorization for the sale of the subject lot to a new buyer and a written request for
refund. Flora never requested a refund in writing. Amount due: P576,569.89 Moldex
calculated in April 1997.
To cancel the reservation application or contract to sell, it sent Flora a Notarized
Notice. 9 Moldex's license to sell was revoked and Flora sued the Housing and Land
Use Regulatory Board (HLURB) Regional Field Office IV. Flora claimed that the
contract to sell between her and Moldex was void from the start, blaming Moldex for
escalating her unpaid balance. Flora claims Moldex sold her the subject lot on April
11, 1992, before receiving a license to sell on September 8, 1992. Flora also claimed
Moldex broke Section 17 of the same law by failing to register the sale contract with
the Registry of Deeds. Moldex argued that Flora could only pay P228,201.03 and then
defaulted from April 1994 to May 1997. In this way, Flora's late payments were
applied.

Moldex explained that the alleged bloating was due to Flora's non-payment of
monthly installments, which resulted in arrears and surcharges. The reservation
Agreement/Contract to Sell was cancelled and all payments were forfeited due to
Flora's inability to pay. Finally, Moldex claimed that because Flora was at fault, she
could not raise the issue of Moldex's lack of license or demand relief.

Ruling of HLURB (Regional field office IV)

Moldex lacked the required license to sell at the time of the contract's perfection, in
violation of Section 5 of PD 957. Moldex was ordered to refund everything Flora had
paid, plus legal interest, and to pay attorney's fees. Moldex was also ordered to pay a
fine for its violation of PD 957, in accordance with Section 38 16 of the said law.
HLURB Arbiter declared the subject Contract to Sell null and void on June 2, 1998.

HLURB (Commissioner):
HLURB Board of Commissioners declared Moldex's contract invalid and ordered
refund of Flora's payments. Moldex argued that the absence of license at the time of
the contract's perfection does not render it void. It also claimed that it was slapped
with administrative fine without due process. But HLURB dismissed the petition and
affirmed in toto the Arbiter's Decision.

Ruling of Office of President:

The OP also found that Section 38 of PD 957 does not require the filing of an
administrative complaint before a fine may be imposed. Also, the requirement of
notice and hearing is not a condition sine qua non in the HLURB's exercise of its
administrative power. And the OP agreed with the award of attorney's fees to Flora as
she was compelled to litigate.

Ruling of CA:
Moldex's non-observance of the provision of Section 5 of PD 957 rendered the
contract to sell void, notwithstanding Flora's payments and her knowledge that
Moldex did not have the requisite license to sell. The CA also affirmed the imposition
of administrative fine, holding Moldex was never denied due process.

ISSUE: Moldex only raises the matter of the validity of the contract to sell it
entered with Flora, contending that the same remains valid and binding.
RULING: The SC granted the petition. The intrinsic validity of the contract to sell is
not affected by the developer's violation of Section 5 of PD 957.

In Spouses Co Chien v. Sta. Lucia Realty and Development Corporation Inc., this
Court ruled that a subdivision developer's lack of a certificate of registration and a
license to sell does not nullify or invalidate the contract entered into with a buyer.
The sale contract is still valid. In that case, the Court upheld the contract despite the
developer's violations of PD 957. We held that PD 957 does not nullify a valid contract
due to a provision being violated, such as the lack of a license to sell.
Thus: While P.D. 957 penalizes the sale of subdivision lots and condominium units
without an HLURB Certificate of Registration and License to Sell, it does not provide
that the absence of such a certificate renders a valid contract void. The decree's
penalty is the general penalty for any violation of its provisions. The clear language
of the law shall prevail in this jurisdiction. This principle enjoins strict compliance
with penal provisions of law or when a penalty is provided for their violation. P.D. 957
does not provide for the nullification of a sale contract if the seller did not have a
certificate of registration and a license to sell at the time of the sale. If the questioned
provisions (Secs. 4 and 5) are not specifically sanctioned, the general penalties of the
law apply. Sections 38 and 39 outline the general penalties for violating any of P.D.
957's provisions. As shown in the cited provisions, the same do not include the
nullification of otherwise valid contracts.

Thus, the sale contract between Flora and Moldex remains valid despite Moldex's
lack of a sales license at the time of the sale.

And Flora says Moldex didn't register the contract to sell/document of conveyance
with the Register of Deeds, as required by PD 957 Section 17 30.

The developer's or Moldex's failure to register the contract to sell or conveyance with
the Register of Deeds resulted in nullification or invalidity of the contract or deed.
Using the ratio decidendi in Co Chien, non-registration of a conveyance does not
affect the validity of a sale contract. It will remain valid and binding between the
parties as per PD 1529 or the Property Registration Decree.

Respondent is nevertheless entitled to a 50% refund under the Maceda Law.

For a defaulting buyer who has paid at least two years of installments, the Maceda
Law allows him to choose between two options: the grace period to pay or the cash
surrender value.

When purchasing real estate on installments, the buyer is entitled to the following
rights in accordance with Republic Act No. 3844, as amended by Republic Act No.
6318, where the buyer has paid at least two years of installments.
A) Pay all unpaid installments due within the grace period earned by him, which is
set at one month for every year of installment payments made. So long as the buyer
does not exercise this right more than once every five years.

A cash surrender value equal to 50% of the total payments made, plus 5% per year
for five years up to a maximum cash surrender value of 90% of the total payments
made, is refundable if the contract is cancelled. But only after the buyer has received
the cancellation notice or demand for rescinding the contract and has paid the full
cash surrender value.

The total number of installment payments includes down payments, deposits, and
contract options.

For over two years (from March 11, 1992 to July 19, 1996), Flora had paid
P375,295.49.32 in installments. Her last payment was 19 July 1996. Flora has also
missed payments in the past. Moldex then tried unsuccessfully to contact Flora to
update her account. Section 3 (a) of the Maceda Law, which allows her to pay back
unpaid installments within the grace period, was no longer an option for her. Moldex
has also mailed Flora a Notarized Notice of Cancellation of Reservation Application
and/or Sale Contract. In this case, Moldex, the seller, must refund to Flora 50% of the
total payments made (P187.75), which is Section 3(b)(iii).

Resolutions of the Court of Appeals in CA are hereby ANNULLED and SET ASIDE.
The contract to sell between petitioner Moldex Realty, Inc. and respondent Flora A.
Saberon is declared CANCELLED and petitioner Moldex Realty, Inc. is ordered to
REFUND to respondent Flora A. Saberon the cash surrender value of the
amortizations she made equivalent to P187,647.75 pursuant to Section 3 (b) of
Republic Act No. 6552 within 15 days from date of finality of this Decision.

10.Fedman Development Corporation vs. Agcaoili, G. R. No. 165025; August 31, 2011
- Ruth

DOCTRINE: The policy of the Maceda Law, as embodied in its title, is to provide
protection to buyers of real estate on installment payments. As clearly specified in Section
 3, the declared public policy espoused by Republic Act No. 6552 is to protect buyers of
real estate on installment payments against onerous and oppressive conditions. Thus, in
order for FDC to have validly cancelled the existing contract to sell, it must have first
complied with Section 3 (b) of RA 6552. FDC should have refund the appellee the cash
surrender value of the payments on the property equivalent to fifty percent of the total
payments made.

FACTS:
FDC was the owner and developer of a condominium project known as Fedman Suites
Building (FSB) located on Salcedo Street, Legazpi Village, Makati City.

On June 18, 1975, Interchem Laboratories Incorporated (Interchem) purchased FSBs Unit
411 under a contract to sell.

On October 10, 1980, Interchem, with FDCs consent, transferred all its rights in Unit 411 to
respondent Federico Agcaoili (Agcaoili), a practicing attorney.

As consideration for the transfer, Agcaoili agreed:

(a) to pay Interchem ₱150,000.00 upon signing of the deed of transfer; (b) to update the
account by paying to FDC the amount of ₱15,473.17 through a 90 day-postdated check;
and (c) to deliver to FDC the balance of ₱137,286.83 in 135 equal monthly installments of
₱1,857.24 effective October 1980, inclusive of 12% interest per annum on the diminishing
balance.
The obligations Agcaoili assumed totaled ₱302,760.00.

In December 1983, air-conditioning unit of FSBs fourth floor broke down. Agcaoili, being
thereby adversely affected, wrote to Eduardo X. Genato , vice-president and board member
of FSCC, demanding the repair of the air-conditioning unit. Not getting any immediate
response, Agcaoili sent follow-up letters. the letters went unheeded. He then informed FDC
and FSCC that he was suspending the payment of his condominium dues and monthly
amortizations.

On August 30, 1984, FDC cancelled the contract to sell involving Unit 411 and cut off the
electric supply to the unit. Agcaoili was thus prompted to sue FDC and FSCC in the RTC,
Makati City, Branch 144 for injunction and damages. The parties later executed a
compromise agreement that the RTC approved through its decision of August 26, 1985.
FDC reinstated the contract to sell and allowed Agcaoili to temporarily install two
window-type air-conditioners in Unit 411. On April 22, 1986, FDC again disconnected the
electric supply of Unit 411. On March 6, 1987, Agcaoili lodged a complaint for damages
against FDC and FSCC in the RTC.
He alleged that the disconnection of the electric supply. had unjustly deprived him of the use
and enjoyment of the unit; that the disconnection had seriously affected his law practice and
had caused him sufferings, inconvenience and embarrassment; that FDC and FSCC
violated the compromise agreement; that he was entitled to actual damages. RTC ruled in
Favor of Agcaoili and CA AFFIRMED the decision of the RTC.

FSCC filed an answer, admitting that the electric supply of Unit 411 was disconnected for
the second time on April 22, 1986, but averring that the disconnection was justified because
of Agcaoilis failure to pay the monthly amortizations and condominium dues despite
repeated demands. Electric supply of Unit 411 could not be restored until Agcaoili paid his
condominium dues totaling ₱14,701.16 as of April 1987.

ISSUE:

WON FDC had a right to cancel the contract to sell.

RULING: No

Increase in interest rate imposed by defendant-appellant FDC is not valid and therefore
cannot be given legal effect.

FDC failed to show by evidence that it incurred loans and /or other financial
accommodations to pay interest for its loans in developing the property. The increased
interest rates said defendant is imposing on plaintiff is not justified, and to allow the same is
tantamount to unilaterally altering the terms of the contract which the law proscribes. Article
1308 of the Civil Code provides:

Art. 1308 The contract must bind both contracting parties; its validity or compliance cannot
be left to the will of one of them.

For this reason, the court sees no valid reason for defendant FDC to cancel the contract to
sell on ground of default or non-payment of monthly amortizations.

It was also a grave error on the part of the FDC to cancel the contract to sell for
non-payment of the monthly amortizations without taking into consideration Republic Act
6552, otherwise known as the Maceda Law. The policy of law, as embodied in its title, is to
provide protection to buyers of real estate on installment payments. As clearly specified in
Section 3, the declared public policy espoused by Republic Act No. 6552 is to protect
buyers of real estate on installment payments against onerous and oppressive conditions.
Thus, in order for FDC to have validly cancelled the existing contract to sell, it must have
first complied with Section 3 (b) of RA 6552. FDC should have refund the appellee the cash
surrender value of the payments on the property equivalent to fifty percent of the total
payments made.

There is nothing in the record to show that the aforementioned requisites for a valid
cancellation of a contract where complied with by defendant FDC. Hence, the contract to
sell which defendant FDC cancelled as per its letter dated August 17, 1987 remains valid
and subsisting.

HOMEWORK NO. 7
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1. Levi Hermanos, Inc. vs. Gervacio, 69 Phil 52 - Raechelle
DOCTRINE: The contract in this case, while a sale of personal property, is not,
however, one on installments, but on straight term, in which the balance, after
payment of the initial sum, should be paid in its totality at the time specified in the
promissory note. The transaction is not, therefore, the one contemplated in Article
1454-A and accordingly the mortgagee is not bound by the prohibition therein
contained as to the right to the recovery of the unpaid balance.
FACTS:
● Levy Hermanos, Inc., sold to defendant Lazaro Blas Gervacio, a Packard car.
● Defendant Lazaro Gervacio, after making the initial payment, executed a
promissory note for the balance of P2,400, payable on or before June 15, 1937,
with interest at 12 per cent per annum, to secure the payment of the note, he
mortgaged the car to the plaintiff.
● Defendant failed to pay the note in its maturity. Wherefore, plaintiff foreclosed
the mortgage and the car was sold at public auction, at which plaintiff was the
highest bidder for P1,800.
LOWER COURT: applied the provisions of Act. no 4122, inserted as Articles 1454-A of
the Civil Code and rendered judgment in favor of the defendant.

ISSUE: Whether or not the contract of sale is payable on installments

RULING: NO. Straight term.

● The law is aimed at those sales where the price is payable in several
installments, for generally, it is in these cases that partial payments consist in
relatively small amounts, constituting thus a great temptation for improvident
purchasers to buy beyond their means.
For Art. 1454-A to apply, two requisites must concur:
1. that there was a contract for the sale of personal property payable in
installments; and
2. that there has been a failure to pay two or more installments.
Thus, it does not fall within the coverage of Art. 1454-A.
 ● There is no such temptation where the price is to be paid in cash, or, as in the
instant case, partly in cash and partly in one term, for, in the latter case, the
partial payments are not so small as to place purchasers off their guard and
delude them to a miscalculation of their ability to pay.
● A cash payment cannot be considered as a payment by installment, and even
if it can be so considered, still the law does not apply, for it requires
non-payment of two or more installments in order that its provisions may be
invoked. Here, only one installment was unpaid.

2. Zayas vs. Luneta Motor Company, 117 SCRA 726 - NONA

DOCTRINE: The established rule is to the effect that the foreclosure and actual sale
of a mortgaged chattel bars further recovery by the vendor of any balance on the
purchaser’s outstanding obligation not so satisfied by the sale.
FACTS: This is a petition for review by certiorari filed by Eutropio Zayas, Jr. to secure a
reversal of the respondent court’s orders which remanded Civil Case No. 74381 for
further proceedings instead of affirming the City Court’s order of dismissal.

The petitioner Eutropio Zayas, Jr. purchased on installment basis a motor vehicle described
as One (1) Unit Ford Thames Freighter with PUJ Body, Engine No. 400E-127738 and
Chassis No. 400E-127738 from Mr. Roque Escaño Enterprises in Cagayan de Oro City,
dealer of respondent Luneta Motor Company.

The motor vehicle was delivered to the petitioner who

(1) paid the initial payment in the amount of P1,006.82; and
(2) executed a promissory note in the amount of P7,920.00, the balance of the total
selling price in favor of respondent Luneta Motor Company.

The promissory note stated the amounts and dates of payment of twenty-six installments
covering the P7, 920.00 debts. Simultaneously with the execution of the promissory note
and to secure its payment, the petitioner executed a chattel mortgage on the subject motor
vehicle in favor of the respondent. After paying a total amount of P3, 148.03, the petitioner
was unable to pay further monthly installments prompting the respondent Luneta Motor
Company to extra-judicially foreclose the chattel mortgage. The motor vehicle was sold at
public auction with the respondent Luneta Motor Company who was the highest bidder in
the amount of P5,000.00 realized from the foreclose of the chattel mortgage which could not
cover the total amount of the promissory note executed by the petitioner in favor of the
respondent, the latter filed Civil Case No. 165263 with the City Court of Manila for the
recovery of the balance of P1, 551.74 plus interest.

The City Court of Manila dismissed the case on the ground that the defendant is no longer
liable for the deficiency judgment in as much as the chattel mortgage has been foreclosed,
with the plaintiff as the highest bidder thereof, citing the case of Ruperto G. Crus vs.
Filipinas Investment, decided on May 27, 1968, G.R. No. L-24772 in connection with Article
1484 of the Civil Code, and finding the same well taken. Luneta Motor Company filed an
“Urgent Motion for Reconsideration” reiterating its stand that Article 1484 of the New Civil
Code on sale of personal property by installment was not applicable and the contract
involving the parties was a mere case of an ordinary loan secured by a mortgage.

The court denied the motion of reconsideration for lack of merit, hence, Luneta Motor
Company appealed the case to the Court of First Instance of Manila, where the latter is of
the impression that the case at bar may not be decided merely as the City Court had done,
on the question of law since the presentation of evidence is necessary to adjudicate the
questions involved.

ISSUE: Whether or not a deficiency amount after the motor vehicle, subject of the chattel
mortgage, has been sold at the public auction can still be recovered by respondent
company.

RULING: No. Article 1484 of the New Civil Code provides:

Article 1484. In a contract of sale of personal property, the price of which is payable in
installments, the vendor may exercise any of the following remedies:

(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 installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of the price. Any agreement to
the contrary shall be void.

In the instant case, respondent Luneta Motor Company maintains that the contract between
the company and the petitioner was only an ordinary loan removed from the coverage of
Article 1484 of the New Civil Code on the ground that the role of Luneta Motor Company
was only to finance the purchase price of the motor vehicle and it has distinct and different
identity of the Escaño Enterprises, Cagayan de Oro from which the petitioner Eutoprio
Zayas, Jr. purchased the subject vehicle. The respondent’s arguments have no merit.
Escaño Enterprises, a dealer of respondent Luneta Motor Company, was merely a
collecting-agent as far as the purchase of the subject motor vehicle was concerned. The
principal and agent relationship is clear. The established rule is to the effect that the
foreclosure and actual sale of a mortgaged chattel bars further recovery by the vendor of
any balance on the purchaser’s outstanding obligation not so satisfied by the sale.

Wherefore, the instant petition is hereby granted.

3. Tajanlangit vs. Southern Motors, Inc. 101 Phil 606- REGINE

 DOCTRINE: Article 1484 paragraph 3 does not apply in execution sale and the
acceptance of the purchased good pursuant to the execution of the Sheriff does
not cancel the original sale.
FACTS: Amador Tajanlangit and wife (buyers) bought two tractors and a thresher
from Southern Motors Inc. (seller) for P24k, payable in installments; a mortgage was
also instituted on the machineries. They executed a promissory note which states
that in case of default, the principal sum shall be demandable. The buyers defaulted
in two or more installments, so the seller brought an action for collection of the P24k
on the note for which the seller obtained a favorable judgment. The farm implements
bought were then levied and sold at public auction for P10k; the seller being the
highest bidder. The seller also obtained an alias writ of execution for the balance; as
such, the sheriff levied the buyers’ rights and interests in certain real properties for
another execution sale.

Thus, the buyers filed an action seeking to annul the said alias writ of execution.
They argued, among others, that they were relieved from further responsibility under
the Recto Law since the seller already repossessed the machines purchased on
installment. They cited Art. 1484(3) whereby the seller is precluded from recovering
the deficiency in case the chattel mortgage on the property sold was foreclosed. The
CFI judge upheld the writ of execution. The SC affirmed.

ISSUE: Was the seller precluded from making further collection against the buyer in
view of the sale of the subject properties under Art. 1484(3) of the Civil Code?

RULING:NO.
Appellants would invoke the last paragraph, but there has been no foreclosure of the
chattel mortgage nor a foreclosure sale. Therefore the prohibition against further
collection does not apply. While there is indeed a chattel mortgage on the purchased
goods, the seller elected to sue on the note exclusively, i.e. to exact fulfillment of the
obligation to pay. The seller had the right to choose among the three remedies
provided for under Art. 1484. In choosing to sue on the note, it is then not limited to
the proceeds of the sale of the mortgaged goods.

4. Cruz vs. Filipinas Investment & Finance Corp., 23 SCRA 791 - REGINE
DOCTRINE: ABOUT ART 1484. should the vendee or purchaser of a personal
property default in the payment of two or more of the agreed installments, the
vendor or seller has the option to avail of any one 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.
These remedies have been recognized as alternative, not cumulative, that the
exercise of one would bar the exercise of the orders.
FACTS: Ruperto G. Cruz and Felicidad V. Vda de Reyes filed a case in the Court of
First Instance of Rizal seeking the cancellation of a real estate mortgage on their land
in favor of defendant Filipinas Investment & Finance Corporation (assignee of Far
East Motor Corporation).
● A unit of Isuzu Diesel Bus, described in the complaint, for P44,616.24,
payable in thirty (30) monthly installments of P1,487.20 beginning October
22, 1963, with 12% interest per annum until fully paid. Plaintiff Cruz
executed and delivered to Far East Motor Corporation a negotiable
promissory in the sum of P44,616.24.
● To secure the payment of the promissory note, Cruz executed a chattel
mortgage over the vehicle in favor of the seller Far East Motor Corporation.
● The seller, Far East Motor Corporation, required and Cruz agreed to give
additional security for his obligation besides the chattel mortgage, that
said additional security was given by plaintiff Felicidad Vda. de Reyes in
the form of SECOND MORTGAGE on a parcel of land owned by her, with
the building and improvements thereon, in San Miguel, Bulacan.
● It was mortgaged to the Development Bank of the Philippines to secure a
loan of P2,600.00 obtained by Mrs. Reyes from that bank.
● On July 15, 1963, Far East Motor Corporation received the promissory note
and assigned all rights and interests in the Deeds of Chattel Mortgage and
Real Estate Mortgage to the defendant, Filipinas Investment & Finance
Corporation, with notice to the plaintiffs.
● That plaintiff Cruz defaulted in the payment of the promissory note; that,
despite defendant's demands, Cruz made no payment on any of the
installments stipulated in the promissory note;
● Due to Cruz's default, the defendant took steps to foreclose the chattel
mortgage on the bus, which was damaged in an accident while in plaintiff
Cruz's possession.
● at the foreclosure sale held on January 31, 1964 by the Sheriff of Manila, the
defendant was the highest bidder,
● That the proceeds of the sale of the bus were insufficient to fully discharge
plaintiff Cruz's debt to defendant;
INSHORT:
It is here agreed that plaintiff Cruz failed to pay several installments as provided in
the contract; that there was extrajudicial foreclosure of the chattel mortgage on the
said motor vehicle; and that defendant-appellant itself bought it at the public auction
duly held thereafter, for a sum less than the purchaser's outstanding obligation.
Defendant-appellant, however, sought to collect the supposed deficiency by going
against the real estate mortgage which was admittedly constituted on the land of
plaintiff Reyes as additional security to guarantee the performance of Cruz'
obligation, claiming that what is being withheld from the vendor, by the proviso of
Article 1484 of the Civil Code, is only the right to recover "against the purchaser" and
not a recourse to the additional security put up, not by the purchaser himself, but by
a third person.

ISSUE: Whether defendant, having already extrajudicially foreclosed the buyer's

chattel mortgage on the bus sold to him in installments, may also extrajudicially
foreclose the buyer's real estate mortgage on her own land, as additional security, for
the payment of Cruz' remaining obligation.

RULING:
There is no controversy that, involving as it does a sale of personal
property on installments, the pertinent legal provision in this case is Article
1484 of the Civil Code of the Philippines, 2 which reads:
"ART. 1484. In a contract of sale of personal property the
price of which is payable in installments, 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 installments. In this case, he shall have no further action against
the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void."
The aforequoted provision is clear and simple: should the vendee or purchaser of a
personal property default in the payment of two or more of the agreed installments,
the vendor or seller has the option to avail of any one 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. These remedies have been recognized as alternative, not cumulative,
that the exercise of one would bar the exercise of the orders.

It may also be stated that the established rule is to the effect that the foreclosure and
actual sale of a mortgage chattel bars further recovery by the vendor of any balance
on the purchaser's outstanding obligation not so satisfied by the sale.

There is no merit in this contention. To sustain appellant's argument is to overlook

the fact that if the guarantor should be compelled to pay the balance of the purchaser
price, the guarantor will in turn be entitled to recover what she has paid from the
debtor vendee (Art. 2066, Civil Code); so that ultimately, it will be the vendee who will
be made to bear the payment of the balance of the price, despite the earlier
foreclosure of the chattel mortgage given by him.
Thus, the protection given by Article 1484 would be indirectly subverted, and public
policy overturned. Neither is there validity to the appellant's allegation that since the
law speaks of "action", the restriction should be confined only to the bringing of
judicial suits or proceedings in court.

The word "action" is without a definite or exclusive meaning.Considering the

purpose for which the prohibition contained in Article 1484 was intended, the word
"action" used therein may be construed as referring to any judicial or extrajudicial
proceeding by virtue of which the vendor may lawfully be enabled to exact recovery
of the supposed unsatisfied balance of the purchase price from the purchaser or his
privy. Certainly, an extrajudicial foreclosure of a real estate mortgage is one such
proceeding.

The provision of law and jurisprudence on the matter being explicit so that this
litigation could have been avoided, the award by the lower court of attorney's fees to
the plaintiffs in the sum of P200.00 is reasonable and in order.

However, we find merit in appellant's complaint against the trial court's failure to
order the reimbursement by appellant Vda. de Reyes of the amount which the former
paid to the Development Bank of the Philippines, for the release of the first mortgage
on the land of said appellee. To the extent that She was benefited by such payment,
plaintiff-appellee Vda. de Reyes should have been required to reimburse the
appellant.

WHEREFORE, the decision appealed from is modified, by ordering plaintiff-appellee

Felicidad Vda. de Reyes to reimburse to defendant appellant Filipinas Investment &
Finance Corporation the sum of P2,148.07, with legal interest thereon from the finality
of this decision until it is fully paid.

5. PCI Leasing and Finance, Inc. vs. Giraffe-X Creative Imaging, Inc., 527 SCRA 405,
G.R. No. 142618 July 12, 2007 - RUTH
DOCTRINE: The remedies provided for in Article 1484 of the Civil Code are alternative,
not cumulative. The exercise of one bars the exercise of the others. This limitation applies
to contracts purporting to be leases of personal property with option to buy by virtue of the
same Article 1485. The condition that the lessor has deprived the lessee of possession or
enjoyment of the thing for the purpose of applying Article 1485 was fulfilled in this case by
the filing by petitioner of the complaint for a sum of money with prayer for replevin to
recover possession of the office equipment. By virtue of the writ of seizure issued by the
trial court, the petitioner has effectively deprived respondent of their use, a situation
which, by force of the Recto Law, in turn precludes the former from maintaining an action
for recovery of "accrued rentals" or the recovery of the balance of the purchase price plus
interest.
FACTS:
Petitioner PCI Leasing and respondent Giraffe-X Creative Imagining, Inc. entered into a
lease agreement, whereby the former leased out to the latter one (1) set of Silicon High
Impact Graphics and accessories worth P3,900.00 abd one (1) unit of Oxberry Cinescan
6400-10 worth P6,500.00. By the terms, too, of the Lease Agreement, Giraffe undertook to
remit the amount of P3,120,000.00 by way of “guaranty deposit,” a sorry of performance
and compliance bond for the two equipment. Furthermore, the same agreement embodied a
standard acceleration clause, operative in the event Giraffe fails to pay any rental and/or
other accounts due.

A year into the life of the lease agreement, Giraffe defaulted in its monthly rental payment
obligations. And following a three-month default, PCI Leasing, through one Atty. Florecita R.
Gonzales, addressed a formal pay-or-surrender-equipment type of demand letter to Giraffe.
However, the demand went unheeded thus PCI instituted the instant case and prayed for
the issuance for the writ of replevin. The trial court issued a writ of replevin. Giraffe filed a
motion to dismiss arguing that PCI was barred from pursuing any other claim since the
seizure of the 2 leased equipment because the contract was in reality a lease with option to
buy.

The RTC granted the motion to dismiss, ruling that it was akin to a contract covered by
article 1485 and hence, can no longer pursue its claim. Petitioner foists the argument that
the Recto Law, i.e., the Civil Code provisions on installment sales of movable property, does
not apply to financial leasing agreement because such agreement, by definition, does not
confer on the lessee the option to buy the property subject of the financial lease. To the
petitioner, the absence of an option-to-buy stipulation in a financial leasing agreement, as
understood under R.A. No. 8556, prevents the application thereto of Articles 1484 and 1485
of the Civil Code.

ISSUE:
Whether or not the contract was covered by Article 1484 and 1485 of the Civil Code.

RULING:
Yes. The Court can allow that the underlying lease agreement has the earmarks or made to
appear as a financial leasing, a term defined in Section 3(d) of R.A. No. 8556 as - a mode of
extending credit through a non-cancelable lease contract under which the lessor purchases
or acquires, at the instance of the lessee, machinery, equipment, … office machines, and
other movable or immovable property in consideration of the periodic payment by the lessee
of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase
price or acquisition cost, including any incidental expenses and a margin of profit over an
obligatory period of not less than two (2) years during which the lessee has the right to hold
and use the leased property … but with no obligation or option on his part to purchase the
leased property from the owner-lessor at the end of the lease contract.

In its previous holdings, however, the Court, taking into account the following mix: the
imperatives of equity, the contractual stipulations in question and the actuations of parties
vis-à-vis their contract, treated disguised transactions technically tagged as financing lease,
like here, as creating a different contractual relationship. Notable among the Court’s
decisions because of its parallelism with this case is BA Finance Corporation v. Court of
Appeals which involved a motor vehicle. Thereat, the Court has treated a purported
financial lease as actually a sale of a movable property on installments and prevented
recovery beyond the buyer’s arrearages. Wrote the Court in BA Finance:

A financial lease is one where a financing company would, in effect, initially purchase a
mobile equipment and turn around to lease it to a client who gets, in addition, an option to
purchase the property at the expiry of the lease period.

In the case at bar, PCI acquired the office equipment for their subsequent lease to Giraffe,
with the latter undertaking to pay a monthly fixed rental for the whole 36 months. Giraffe
made a guaranty deposit. Their agreement was that in case Giraffe fails to pay any rental
due, PCI will have cumulative remedies, such as, to recover all rentals for the remaining
term of the lease and recover all amounts advanced for Giraffe’s account. When PCI
demanded payment of the balance, it made a demand for either of the choices. Either to
pay the balance hence Giraffe can keep the equipment or surrender them if he cannot. The
so-called monthly rentals were in fact monthly amortizations of the price of the leased office
equipment. The imperatives of equity, the contractual stipulations and the actuations of the
parties, the SC has treated a purported financial lease as actually a sale of movable
property on installments and prevented recovery.

On the whole, then, we rule, as did the trial court, that the PCI LEASING- GIRAFFE lease
agreement is in reality a lease with an option to purchase the equipment. This has been
made manifest by the actions of the petitioner itself, foremost of which is the declarations
made in its demand letter to the respondent. There could be no other explanation than that
if the respondent paid the balance, then it could keep the equipment for its own; if not, then
it should return them. This is clearly an option to purchase given to the respondent.
Being so, Article 1485 of the Civil Code should apply.

The present case reflects a situation where the financing company can withhold and
conceal - up to the last moment - its intention to sell the property subject of the finance
lease, in order that the provisions of the Recto Law may be circumvented. It may be, as
petitioner pointed out, that the basic "lease agreement" does not contain a "purchase
option" clause. The absence, however, does not necessarily argue against the idea that
what the parties are into is not a straight lease, but a lease with option to purchase. This
Court has, to be sure, long been aware of the practice of vendors of personal property of
denominating a contract of sale on installment as one of lease to prevent the ownership of
the object of the sale from passing to the vendee until and unless the price is fully paid.
Being leases of personal property with option to purchase as contemplated in the above
article, the contracts in question are subject to the provision that when the lessor in such
case "has chosen to deprive the lessee of the enjoyment of such personal property," "he
shall have no further action" against the lessee "for the recovery of any unpaid balance"
owing by the latter, "agreement to the contrary being null and void."

In choosing, through replevin, to deprive the respondent of possession of the leased

equipment, the petitioner waived its right to bring an action to recover unpaid rentals
on the said leased items. Paragraph (3), Article 1484 in relation to Article 1485 of the
Civil Code, which we are hereunder re-reproducing, cannot be any clearer.

ART. 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies:

(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 installments. In this case, he
shall have no further action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be void.

ART. 1485. The preceding article shall be applied to contracts purporting to be leases
of personal property with option to buy, when the lessor has deprived the lessee of
the possession or enjoyment of the thing.

As we articulated in Elisco Tool Manufacturing Corp. v. Court of Appeals, the remedies

provided for in Article 1484 of the Civil Code are alternative, not cumulative. The
exercise of one bars the exercise of the others. This limitation applies to contracts
purporting to be leases of personal property with option to buy by virtue of the same
Article 1485. The condition that the lessor has deprived the lessee of possession or
enjoyment of the thing for the purpose of applying Article 1485 was fulfilled in this case by
the filing by petitioner of the complaint for a sum of money with prayer for replevin to
recover possession of the office equipment. By virtue of the writ of seizure issued by the
trial court, the petitioner has effectively deprived respondent of their use, a situation
which, by force of the Recto Law, in turn precludes the former from maintaining an
action for recovery of "accrued rentals" or the recovery of the balance of the
purchase price plus interest.

The imperatives of honest dealings given prominence in the Civil Code under the heading:
Human Relations, provide another reason why we must hold the petitioner to its word as
embodied in its demand letter. The Recto Law was precisely enacted to prevent this kind of
aberration. Moreover, due to considerations of equity, public policy and justice, we cannot
allow this to happen. Not only to the respondent, but those similarly situated who may fall
prey to a similar scheme.
6. Ridad vs. Filipinas Investments, 120 SCRA 246 - DENISE
DOCTRINE: Vendor of personal property sold is precluded, after foreclosing the
chattel mortgage on the thing sold, from having any recourse against the additional
security put up by a third party.
FACTS: Plaintiffs, Luis Ridad and Lourdes Ridad, purchased from Supreme Sales
and Development Corporation (SSDC) two brand new Ford Consul sedans payable in
installments. Plaintiffs, executed a promissory note and a deed of chattel mortgage
covering not only the two new cars but also an old car (Chevrolet) and his certificate
of public convenience for the operation of a taxicab fleet. With the conformity of
plaintiffs, SSDC assigned its rights to the note and the mortgage to defendant
Filipinas Investment and Finance Corporation (FIFC).

Due to the failure of plaintiffs to pay the installments, FIFC foreclosed the chattel
mortgage extra-judicially where FIFC was the highest bidder and purchaser. Another
auction sale was held because the plaintiff's obligation was not fully satisfied by the
sale of the vehicles. At the second sale, the franchise to operate the taxicab service
was sold to FIFC which subsequently sold and conveyed the same to herein
defendant Jose D. Sebastian.

Plaintiffs filed an action for annulment of the contract of mortgage. The trial court
held the chattel mortgage was null and void insofar as the taxi-cab franchise and the
old car were concerned.

Defendants appealed to the Court of Appeals which certified the appeal to the
Supreme Court.

ISSUE: Is the chattel mortgage valid insofar as the franchise and the subsequent sale
thereof are concerned?

RULING: NO. The resolution of said issue is unquestionably governed by the

provisions of Article 1484 of the Civil Code. Under the article, the vendor of personal
property the purchase price of which is payable in installments, has the right, should
the vendee default in the payment of two or more of the agreed installments, 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. Whichever
right the vendor elects, he cannot avail of the other, these remedies being alternative,
not cumulative. Furthermore, if the vendor avails himself of the right to foreclose his
mortgage, the law prohibits him from further bringing an action against the vendee
for the purpose of recovering whatever balance of the debt secured not satisfied by
the foreclosure sale.
Consequently, the lower court rightly declared the nullity of the chattel mortgage in
question insofar as the taxicab franchise and the used car of plaintiffs are concerned.
FIFC has to content himself with the proceeds of the sale at the public auction of the
two cars which were sold on installment and mortgaged to SSDC, his assignor. To
allow the sale of other properties would be equivalent to obtaining a writ of execution
against plaintiffs concerning said properties which are separate and distinct from
those which were sold on installment. This would be contrary to public policy and the
very spirit and purpose of the law limiting the vendor’s right to foreclose the chattel
mortgage only on the thing sold.

7. Borbon II vs. Servicewide Specialist, Inc., 258 SCRA 634, 1996 - ANNA ELAINE
DOCTRINE: The remedies under Art. 1484 of the CC are not cumulative but alternative
and exclusive. When the assignee forecloses on the mortgage, there can be no further
recovery of the deficiency, and the seller-mortgagee is deemed to have renounced any
right thereto.
FACTS:

● December 7, 1984 - Petitioners signed a promissory note which states the ff:
- I/We promised to pay Pangasinan Auto Mart the sum PhP122,856.00, to be
payable without notice or demand,
- In installments – PhP10,238 monthly for 12 months and payable on the 7th day
of each month starting January 1985,
- Provided that a late payment charge of 3% per month shall be added on each
unpaid installment.
- Upon default, an additional 25% of the total sum due shall be paid to the holder
for attorney’s fees
- Plus an additional 25 % of the total sum due for liquidated damages.
● To secure the promissory note, the petitioners executed a Chattel Mortgage on one
Isuzu Crew Cab.
● December 10, 1984 - The rights of Pangasinan Auto Mart was assigned to Filinvest
Credit Corp.
● March 21, 1985 - Filinvest Credit Corp. then assigned all its rights, interests and title
over the Promissory Note and chattel mortgage to herein respondent, Servicewide
Specialist.
● Petitioners failed to comply with their obligation, so the respondent sent a demand
letter to the petitioners for them to pay the entire obligation for a total of
PhP185,257.80.
● As a defense, petitioners claim that they are not in default of their obligation because
Pangasinan Auto Mart was first guilty of not fulfilling its obligation in the contract.
 - Petitioners originally intended to buy a jeepney type Isuzu but Pangasinan Auto
Mart delivered an Isuzu Crew Cab (minus a rear body) as it was the only
available stock in the warehouse.
- Pangasinan Auto Mart failed to replace the delivered vehicle until the court
seized the said vehicle.
● Petitioners claim that neither party incurs in delay if the other party does not comply
with his obligation.
RTC – ruled in favor of service wide; confirmed the disputed possession of a motor vehicle
in favor of Servicewide; ordered petitioners to pay liquidated damages and attorney’s fees.
CA – sustained RTC decision; petitioners could not avoid liability under the promissory note
and chattel mortgage that secured it since the private respondent took the note for value
and in good faith.

ISSUE: Whether the award for liquidated damages and attorney’s fees in favor private
respondent is proper

RULING:
The award of liquidated damages is not correct.
In this case, the parties concede that the action for replevin has been instituted for the
foreclosure of the vehicle in question.
The Petitioner’s argued that:
Under Art. 1484, the vendor-mortgagee or its assignees loses any right “to recover any
unpaid balance of the price” and any “agreement to the contrary”.
The SC ruled that this argument is correct.
The remedies under Art. 1484 of the CC are not cumulative but alternative and exclusive.
This means that should the vendee or purchaser of a personal property default in the
payment of two or more of the agreed installments, the vendor or seller has the option to
avail of any of the three remedies and the exercise of one would bar the exercise of the
others.
When the seller assigns his credit to another person, the latter is likewise bound by the
same law. Hence, when the assignee forecloses on the mortgage, there can be no further
recovery of the deficiency (we learned this in Credit!); or when he seeks the enforcement of
the additional mortgages, guarantees or other security arrangements, he must then be held
to have lost by waiver or non-choice his lien on the chattel mortgage of the personal
property.
In ordinary alternative obligations, a mere choice categorically and unequivocally made and
then communicated by the person entitled to exercise the option concludes the parties. (In
other words, a choice made by the vendor/assignee and communicated to the vendee
concludes the relation bet. The parties)
The creditor may not thereafter exercise any other option unless the chosen alternative
proves to be ineffectual or unavailing due to no fault on his part. This rule, in essence, is the
difference between alternative obligations and alternative remedies, as in the latter case,
the choice generally becomes conclusive only upon the exercise of the remedy. Ex. A mere
demand to surrender the object which is not heeded by the mortgagor will not amount to a
foreclosure, but the repossession thereof by the vendor-mortgagee would have the effect of
foreclosure.
Following Macondray & Co. vs. Eustaquio, “any unpaid balance” means a deficiency
judgment to which the mortgagee may be entitled to when the proceeds from the auction
sale are insufficient to cover the full amount of the secured obligations.
Nonetheless, the grant of Atty’s fees is reasonable.
WHEREFORE, the appealed decision is MODIFIES by deleting therefrom the award for
liquidated damages’ in all other respects, the judgment of the appellate court is AFFIRMED.

8. Rogelio S. Nolasco, Nicanora N. Guevara, Leonarda N. Elpedes, The Heirs of

Arnulfo S. Nolasco, and Remedios M. Nolasco represented by ELENITA M. NOLASCO
vs. Celerino S. Cuerpo, Joselito Encabo, Joseph Ascuita, and Domilo Lucenario, G.R.
No. 210215, December 9, 2015- ANNA ELAINE
DOCTRINE:
FACTS:
- Petitioners and respondents entered into a Contract to Sell over a parcel of land
located in Rodriguez, Rizal. The contract provides that:
- The consideration for the sale is Php 33,155,000 payable as follows:
- Php 11,604,250 inclusive of the Php 2M previously paid by respondent
as earnest money/reservation fee and the remaining balance payable
in 36 monthly installments each in the amount of Php 598,632 through
PDCs
- In case of any of the checks dishonored, the amounts already paid
shall be forfeited in petitioners’ favor and the latter shall be entitled to
cancel the contract without judicial recourse in addition to other
appropriate legal action
- Respondents are not entitled to possess the land until full payment
- Petitioner shall transfer the title over the subject land from Edilberta
Santos to petitioners’ names and should they fail to do so respondents
may cause the said transfer and charge the costs incurred against the
monthly amortizations
- Upon full payment, petitioners shall transfer the title over to
respondents
 - Respondents sent petitioners a letter seeking to rescind the contract on the ground
of financial difficulties
- Respondents sought the return of the Php 12,202,882 they had paid to petitioners.
The letter was unheeded and respondents filed the instant complaint for rescission of
the contract with the RTC.
- Petitioners countered that respondent’s act is unilateral cancellation of the contract
as the former did not consent to it also stating the financial difficulties is not among
the grounds provided by law to effect a valid rescission.
- RTC: Ruled in favor respondents
- CA: Affirmed RTCs decision

ISSUE:
Whether the CA correctly affirmed the recission of the contract and the return of the
amounts already paid by respondents to petitioner as well as the remaining PDCs issued by
Cuerpo representing the remaining monthly amortizations

RULING:
No. In reciprocal obligations, either party may rescind the contract upon the other party's
substantial breach of the obligation/s he had assumed thereunder (Art. 1191). A plain
reading of paragraph 7 of the subject contract reveals that RTC and CA erred in concluding
that such failure constituted a substantial breach that would entitle respondents to rescind
the subject contract. It cannot be said that petitioners' failure to undertake their obligation
under paragraph 7 defeats the object of the parties in entering into the subject contract,
considering that the same paragraph provides respondents contractual recourse in the
event of petitioners' non-performance of the aforesaid obligation, that is, to cause such
transfer themselves in behalf and at the expense of petitioners. For a contracting party to be
entitled to rescission, the other contracting party must be in substantial breach of the terms
and conditions of their contract. A substantial breach of a contract, unlike slight and casual
breaches thereof, is a fundamental breach that defeats the object of the parties in entering
into an agreement.

9. Heirs of Macalalad vs. Rural Bank of Pola, Inc. G.R. No. 200899, June 20, 2018 -
DONN
DOCTRINE:
FACTS:

FACTS
On September 26, 2003, herein petitioners' predecessor-in-interest, Paz Macalalad (Paz)
filed, with the RTC of Calapan City a Complaint for "Declaration of Nullity of TCT No.
T-117484" alleging that: she is the sole surviving legal heir of one Leopoldo Constantino, Jr.
(Leopoldo) who died intestate and without any issue; during his lifetime, Leopoldo owned a
parcel of land which is located at Oriental Mindoro.

After the death of Leopoldo, it was made to appear that the latter sold the subject lot to the
spouses Pimentel in whose names a new TCT (No. T-96953) was issued; thereafter, the
Spouses Pimentel obtained a loan from herein respondent Rural Bank of Pola, Inc.
(respondent bank) and gave the subject parcel of land as collateral for the said loan, as
evidenced by a contract of mortgage executed by the Spouses Pimentel in favor of
respondent bank.

Subsequently, the Spouses Pimentel failed to pay their loan leading respondent bank to
foreclose the mortgage over the subject property where it emerged as the highest bidder;
consequently, respondent bank obtained ownership of the disputed lot; and the TCT in the
name of the Spouses Pimentel was cancelled and a new one (TCT No. T-117484) was
issued in the respondent bank's name.

Paz contended that respondent bank be made to suffer the ill effects of its negligent acts by
praying that TCT No. T-117484 be cancelled and a new one be issued in the name of
Leopoldo, the original owner.

Petitioners contend that the Deed of Sale from which the respondent bank supposedly
derived its title to the property is a complete nullity considering that the said Deed, bearing
Leopoldo's signature, was executed in favor of the Spouses Pimentel in 1998, in spite of the
fact that Leopoldo died three years earlier, in 1995.

Petitioners insist that respondent bank acted in bad faith, when it approved the loan of the
Spouses Pimentel as secured by the disputed property, because it (respondent bank) was
remiss in its obligation to verify the alleged ownership of the said spouses over the subject
property.

In its Answer, respondent bank denied the material averments in Paz's complaint and
claimed, in its affirmative defense, that: it is a mortgagee and purchaser in good faith; and it
gave full faith and credit to the duly registered TCT given by the Spouses Pimentel as
evidence of their ownership of the mortgaged property. Respondent bank also argued that a
title procured through fraud and misrepresentation can still be the source of a completely
valid and legal title if the same is in the hands of an innocent purchaser for value.

Pending resolution of the case, Paz died on December 7, 2006. Hence, herein petitioners
were substituted as party-plaintiffs.
The RTC rendered its Decision dismissing petitioners' complaint for lack of merit.
Aggrieved, petitioners filed an appeal with the CA. The CA promulgated its assailed
Decision affirming the Decision of the RTC. The CA echoed the ruling of the RTC by holding
that the "appellee bank was not remiss in its duty to conduct an ocular inspection on the
subject premises and to investigate as to the validity of the title of the property. Petitioners
filed a Motion for Reconsideration, but the CA denied it. Hence, the present petition for
review on certiorari.

ISSUE:

Whether or not respondent bank is a mortgagee and a subsequent purchaser of the subject
lot in good faith.

RULING:

YES. The SC ruled that the petition lacks merit. The SC reiterates the settled principle that
no one can give what one does not have. However, there is an exception to the rule that a
forged deed cannot be the root of a valid title - that is when an innocent purchaser for value
intervenes. Indeed, a forged deed can legally be the root of a valid title when an innocent
purchaser for value intervenes.

It is, likewise, settled that 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 beyond the certificate to determine the condition of the property.

In the present case, the respondent 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.

Where the mortgagee is a bank, it cannot rely merely on the certificate of title offered by the
mortgagor in ascertaining the status of mortgaged properties. Since its business is
impressed with public interest, the mortgagee-bank is duty-bound to be more cautious even
in dealing with registered lands. Indeed, the rule that a person dealing with registered lands
can rely solely on the certificate of title does not apply to banks. Thus, before approving a
loan application, it is a standard operating practice for these institutions to conduct an ocular
inspection of the property and to verify the genuineness of the title to determine the real
owners thereof.

In this case, the Court finds that the respondent was able to discharge its burden of proving
its status as a mortgagor and subsequent purchaser in good faith, as records would show,
that respondent bank sent a representative/appraiser (Mr. Ronnie Marcial) to conduct an
ocular inspection of the subject property. The said representative/appraiser was able to
ascertain the owner thereof, the nature of the subject property, its location and area, its
assessed value and its annual yield.

Thus, respondent bank is justified in believing that the title of the Spouses Pimentel is
neither invalid nor defective.

The SC, finds no sufficient evidence to reverse the findings of both the RTC and the CA.

WHEREFORE, the instant petition for review on certiorari is DENIED.

10. Mendoza vs. Spouses Palugod, G. R. No. 220517, June 20, 2018 - NONA
DOCTRINE:
FACTS: Petitioner Lolita Espiritu Santo Mendoza and Jasminia Palugod were close friends.
In 1991, Lolita and Jasminia bought the subject lot in installments for one year until they
decided to pay the balance in full. In 1995, Jasminia became afflicted with breast cancer.
Sometime in 1996, Lolita and Jasminia constructed a residential house on the subject lot.
Although Lolita has no receipts, she shared in the cost of the construction of the house from
her income in the catering business and selling of various products. On May 11, 2004,
Jasminia executed a Deed of Absolute Sale in favor of Lolita, who eventually mortgaged the
subject property to Elizabeth Gutierrez as a security for a loan in the amount of
Php800,000.00.

On the other hand, respondent spouses Palugod alleged that their daughter, the late
Jasminia, acquired the property located in Sagana Homes, Habay, Bacoor, Cavite. Prior to
and after the said acquisition of the subject property, Jasminia was living with Lolita, a
lesbian. Unfortunately, Jasminia was afflicted with Stage IV breast cancer. When she was
nearing her death, she told her mother, respondent Natividad Palugod, that her house and
lot shall go to her brother Ramonito Palugod, but petitioner shall be allowed to stay therein
Meanwhile, Lolita, taking advantage of her relationship with Jasminia, caused the latter to
sign a Deed of Absolute Sale in her favor. Upon learning from the Office of the Registry of
Deeds that Jasminia's certificate of title has been cancelled, respondents executed an
Affidavit of Adverse Claim of their right and interest over the property as the only
compulsory and legitimate heirs of Jasminia. However, Lolita, knowing fully well of the
impending suit, made it appear that she mortgaged the property to Spouses Gutierrez as a
security for a loan amounting to Php800,000.00.

Thus, respondents filed a complaint for the Declaration of Nullity of the Deed of Absolute
Sale and the Deed of Real Estate Mortgage with the RTC. The RTC declared that there can
be no contract unless the following concur: (a) consent; (2) object certain; and (3) cause of
the obligation. It held that the respondents were able to prove by preponderance of
evidence that the Deed of Sale involved no actual monetary consideration. CA affirmed.
Hence, the present Petition.

ISSUE: Whether the conveyance was void for lack of monetary consideration.

RULING: No. The Petition is meritorious. Both the RTC and the CA declared the DAS void
on the ground that it was fictitious or simulated on account of lack of consideration. While
petitioner Lolita concedes that she did not pay the consideration for the purchase of the
subject property before Notary Public Atty. Jesus Bongon, she asserts that the payment
was made prior to the notarization of the DAS as shown in her testimony taken on February
23, 2010. The lower courts failed to properly consider the foregoing argument and evidence
that petitioner Lolita raised and adduced. The outcome of the case would have been
different had the lower courts given them the due consideration they deserved.

As correctly pointed out by petitioner Lolita, the DAS is itself the proof that the sale of the
property is supported by sufficient consideration. This is anchored on the disputable
presumption of consideration inherent in every contract. Thus, Article 1354 of the Civil Code
provides: "Although the cause is not stated in the contract, it is presumed that it exists and
is lawful, unless the debtor proves the contrary.” Petitioners stand to benefit from the
disputable presumption of consideration with the presentation of the DAS.

With the presumption in favor of petitioner Lolita who is the vendee, it became incumbent
upon respondents to present preponderant evidence to prove lack of consideration.
Respondents' mere assertion that the DAS has no consideration is inadequate.

As mentioned earlier, respondents relied solely on the testimony of respondent Natividad to

prove the lack of consideration. Respondent Natividad simply reiterated the allegations in
the Affidavit of Adverse Claim that she and her husband, respondent Ramon, executed. On
the other hand, petitioner Lolita disputed the assertion that she has no income and means
of livelihood, and presented documents in support thereof. The testimony of petitioner Lolita
and the documentary evidence in support thereof show that she had income and the means
to pay the consideration stated in the DAS. It is evident to the Court that petitioner Lolita's
proof of payment of the DAS' consideration was her sworn testimony. Testimony, given
under oath, and subjected to cross examination is proof. Unfortunately, both the CA and the
RTC brushed this aside only because the RTC zeroed in on the lack of receipts.

Since the evidence of the parties are mainly testimonial, the Court is called upon to weigh
the version of respondents against that of petitioners. Before the narrations of respondent
Natividad and petitioner Lolita are pitted against each other to determine which one
preponderates over the other, the Court notes the glaring inconsistencies in respondent
Natividad's testimony. Given the significant inconsistencies in the testimony of respondent
Natividad, the credibility of her testimony is, to the Court, doubtful. To be sure, a witness'
credibility is determined by the probability or improbability of his testimony. The improbability
of respondent Natividad's assertions is demonstrated by the evidence, both documentary
and testimonial, that petitioner Lolita adduced to rebut the same. The RTC and the CA also
did not even mention the glaring inconsistencies noted above, which if properly considered,
would have seriously affected the outcome of the case.

Given the foregoing, contrary to the findings of the CA and the RTC, which evidently arose
from their misapprehension and non-consideration of relevant facts, respondents have not
discharged their burden of proof to rebut either the presumption of sufficient consideration
of the DAS or the evidence of petitioner Lolita. In fine, respondents failed to establish their
cause of action by preponderance of evidence. Consequently, the DAS executed by
Jasminia in favor of petitioner Lolita over the subject property is valid, the presumption that
it has sufficient consideration not having been rebutted. The same holds true regarding the
Real Estate Mortgage between petitioner Lolita and petitioners spouses Alexander and
Elizabeth Gutierrez.

HOMEWORK NO. 8
AAAAAAAAAAAAAAAAAAAAA
1. Cebu State College of Science and Technology (CSCST) vs. Misterio, 759 SCRA 1,
G.R. No. 179025 June 17, 2015
DOCTRINE: When the exercise of the right to redeem of a vendor-a-retro is subject
to a suspensive condition, the period for the exercise shall be:
1. Four (4) years from the happening of the condition, if the parties have NOT
agreed upon a specific period; or
2. Within the period agreed upon provided that the period shall not exceed ten
(10) years from the execution of the contract of sale.
However, if the four (4)-year period would extend the life of the contract beyond ten
(10) years, the vendor a retro will only have the remainder of the said ten (10)-year
period to redeem the property.

FACTS: On Dec 31, 1956, Asuncion Sadaya (seller) sold her registered land to Sudlon
Agricultural High School or SAHS (buyer), subject to the seller’s right of repurchase after
SAHS shall have ceased to exist, or shall have transferred its school site elsewhere. The
right to repurchase was annotated on SAHS title.

On June 10, 1983, B.P. No. 412 took effect consolidating SAHS with Cebu State College of
Science and Technology (CSCST), and transferring its properties thereon. On Aug 19,
1988, [32 years] the heirs of Sadaya sought to repurchase the subject property, notifying the
governor of the Province of Cebu on the ground that SAHS ceased to exist. CSCST refused
saying SAHS still existed.
Thus, the heirs filed a complaint for Nullity of Sale and/or Redemption against CSCST. The
RTC ruled in favor of Sadaya heirs, nullifying the contract of sale. The CA reversed the
decision on the ground of prescription, it said that the seller’s right to repurchase had
expired four years from the effectivity of B.P. Blg. 412.

Pending their appeal to the SC, they filed another complaint essentially alleging that
pursuant to petitioner’s transfer of its school site, their right of redemption on said condition
became operative. In support thereof, respondents claim the existence of newspaper
reports stating that SAHS will be transferred to Barili, Cebu. RTC dismissed this complaint
stating that it is barred by litis pendentia. The CA reversed the decision of the RTC.

ISSUE: Were the Sadaya heirs still entitled to exercise its right of redemption over the
subject property?

RULING: NO. In a pacto de retro sale, the property subject of the sale may be redeemed
only within the limits prescribed by the Art. 1606. Under the said provision, the period for
redemption shall not exceed 4 years from the date of the execution of the contract of sale, if
there is no agreement as to the period; and if there is such agreement, it must not exceed
10 years.

If the period for exercise is not agreed upon, but the same is suspended or made
conditional, as in this case, the four-year prescriptive period shall be counted from the
happening of the condition, PROVIDED that the said exercise shall not exceed 10 years
from the execution of the contract. In other words, where a condition was imposed on the
right of the seller-a-retro to repurchase the property, it must be exercised within 4 years
from the happening of the condition, or 10 years from the execution of the contract,
whichever comes first.

On the second complaint based on the petitioner’s transfer of its school site, the SC said
that while the occurrence of the second suspensive condition may give rise to a separate
cause of action, the same must always be taken in conjunction with the periods prescribed
by law. Indubitably, it would be rather absurd to permit respondents to repurchase the
subject property upon the occurrence of the second suspensive condition, particularly, the
relocation of SAHS on October 3, 1997, the time when petitioner ceded the property to the
Province of Cebu, which is nearly forty-one (41) years after the execution of the Deed of
Sale on December 31, 1956.

2. Catangcatang vs. Legayada, 84 SCRA 51

DOCTRINE: In the exercise of the right to repurchase, it is not sufficient that the
vendor a retro manifests his desire to repurchase. This statement of intention must
be accompanied with an actual and simultaneous tender of payment which
constitutes the legal exercise of the right to repurchase. While consignation of the
 redemption price is not necessary in order to allow the repurchase within the time
provided by law or by contract, a mere tender being enough, said tender does not
relieve the vendor from the obligation of paying the price. In case of absence of the
vendee a retro, the right of redemption may still be exercised, as a vendor who
decides to redeem a property sold with pacto de retro stands as the debtor and the
vendee as the creditor of the purchase price. The vendor could and should have
exercised his right of redemption against the vendee by filing a suit against him
and making a consignation with the court of the amount due for the redemption.
FACTS:

Respondent executed in favor of petitioner a deed of sale with pacto de retro, with a
five-year period of redemption, over a parcel of land with a stated area of 8.8272
hectares more or less, for a specified consideration of P1,400.00. Of the total consideration,
the amount of P1,200.00 was paid upon the execution of the deed and the balance of
P200.00, covered by a promissory note, was agreed to be payable at a later date.

Subsequently, petitioner found that the area of the land actually delivered to her was only
5.0779 hectares. Thus, she instituted Civil Case No. 2635 against respondent, seeking the
recovery of the area allegedly withheld. In his answer to the complaint in said case,
respondent filed a counterclaim asking for rescission of the Deed of Sale with Right of
Repurchase because of failure of plaintiff to pay the balance of P200.00 of the purchase
price on the due date.

During the pendency of the aforementioned case, respondent forcibly took back the
possession of the land from petitioner.

On May 19, 1957, the period for the repurchase of the land expired, allegedly without
respondent having availed himself of his right to repurchase the same.

The Court of First Instance dismissed the complaint, in the same decision, the counterclaim
of the respondent was likewise dismissed. The decision of the Court of First Instance
became final, neither party having appealed therefrom.

Petitioner instituted the present petition for consolidation of title and restoration of
possession (Civil Case No. 4464). In his answer, respondent Paulino Legayada admitted
that he, as vendor, executed a Deed of Sale with Right of Repurchase in favor of petitioner
but denied that he failed to repurchase the property on or before May 19, 1957 because on
May 10, 1957 he took possession of the property "because the redemption amount is
already deposited in the hands of undersigned counsel to be paid" to petitioner Salvacion
Catangcatang.

The Court of First Instance, finding that respondent was not able to effect the repurchase
within the period stipulated, rendered judgment declaring title over the land consolidated in
the name of petitioner and ordering respondent to deliver the possession of the same to her.
From the said decision, respondent appealed to the Court of Appeals, which in turn
reversed the decision of the trial court. It held that the failure to pay the full purchase price
suspends the running of the period of redemption. The stipulated five-year period of
redemption did not expire on May 19, 1957 or five years from the execution of the deed of
sale since said period never commenced to run.

ISSUES:

1. Whether or not the non-payment of the P200.00 suspended the running of the
period to repurchase.

2. Whether or not respondent was able to effect redemption of the property in

question within the period stipulated in the contract

RULING:

1. No. The sale was consummated upon the execution of the document and the delivery
of the land subject matter thereof to the vendee, petitioner herein. It was a perfectly valid
agreement, and the non- payment of the balance of the purchase price could not have the
effect of suspending the efficacy of the provisions thereof. Failure to pay part of the
consideration of the contract. 1 The sale under consideration was perfected from the
moment Legayada consented to sell the land in question and Catangcatang agreed to
purchase it for the sum of P1,400.00 and the latter had partially complied with his obligation
by paying the sum of P1,200.00 and the former by delivering possession of the land to the
vendee. Moreover, there was nothing whatsoever in the deed of sale to indicate that the
agreement of the parties was to suspend the running of the period of redemption until full
payment of the purchase price. On the contrary, said period was agreed to be five (5) years
from the date of the execution of the deed.

2. No. Pursuant to Article 1616 of the Civil Code, "the vendor cannot avail himself of the
right of repurchase without returning to the vendee the price of the sale, and in addition: (1)
the expenses of the contract, and any other legitimate payments made by reason of the
sale; (2) the necessary and useful expenses made on the thing sold."

The records reveal that on May 10, 1957, respondent, without the knowledge of petitioner,
took possession of the subject property. It is claimed that on the same date, respondent's
counsel wrote a letter to petitioner, informing her that the redemption money was already in
his (counsel's) possession. This letter never reached the petitioner, and was allegedly
returned to said counsel. The reason given by respondent for the non-delivery of the letter is
that petitioner could not be found. This was found by the trial court to be unworthy of
credence. Apart from this letter, no further effort to effect redemption was made.
Respondent could have deposited the amount for the redemption with the court, but this he
did not do. In the exercise of the right to repurchase, it is not sufficient that the vendor a
retro manifests his desire to repurchase. This statement of intention must be accompanied
with an actual and simultaneous tender of payment which constitutes the legal exercise of
the right to repurchase. While consignation of the redemption price is not necessary in
order to allow the repurchase within the time provided by law or by contract, a mere tender
being enough, said tender does not relieve the vendor from the obligation of paying the
price. In case of absence of the vendee a retro, the right of redemption may still be
exercised, as a vendor who decides to redeem a property sold with pacto de retro stands as
the debtor and the vendee as the creditor of the purchase price. The vendor could and
should have exercised his right of redemption against the vendee by filing a suit against him
and making a consignation with the court of the amount due for the redemption. In
Rumbaoa v. Arzaga, this Court held that "... the plaintiff should have deposited the full
amount in court ...; not that deposit or consignation was legally essential to preserve his
reserved right of redemption or repurchase, but because the full amount was already due
and payable to his creditors. Under the circumstances, he should be regarded as having
done that which he said he wanted to do, or should have done, to fulfill his obligation and to
terminate the rights of the defendants over the property." The period for redemption having
lapsed without respondent having validly effected redemption, petitioner is entitled to
consolidation of ownership over the property sold.

3. Alonzo vs. IAC, 150 SCRA 259; REGINE

DOCTRINE:

● PACTO DE RETRO SALE, EXCEPTION TO THE GENERAL RULE ADOPTED

IN CASE AT BAR. — The SC deviated from the strict letter of the law, which
the respondent court understandably applied pursuant to existing
jurisprudence.
Adopting an exception to the general rule, in view of the peculiar circumstances of
this case. The co heirs in this case were undeniably informed of the sales although
no notice in writing was given to them. And there is no doubt either that the 30-day
period began and ended during the 14 years between the sales in question and the
filing of the complaint for redemption in 1977, without the co-heirs exercising their
right of redemption. These are the justifications for this exception.
● whether we are a court of law or a court of justice. Do we apply
the law even if it is unjust or do we administer justice even against the law?
The answer is that we do neither because we are a court both of law and of justice.
We apply the law with justice for that is our mission and purpose in the scheme of
our Republic.
FACTS:
 ● Five brothers and sisters inherited in equal pro indiviso shares a parcel of land
registered in the mane of their deceased parents under OCT.
● On March 15, 1963, Celestino Padua sold his undivided share of the petitioners
for P550.00. 2 On April 22, 1964, Eustaquia Padua, his sister, sold her own
share to the same vendees in an instrument denominated "Con Pacto de Retro
Sale, for P440.00.
● As a result of these agreements, the petitioners occupied an area equal to
two-fifths of the lot sold to them. The vendees then fenced it in. On a portion of
the enclosed area, their son Eduardo Alonzo and his wife built a semi-concrete
house in 1975.
● On February 25, 1976, Mariano Padua, one of the five co-heirs, filed a claim to
reclaim the land sold to the spouses Alonzo, but his claim was dismissed due
to his apparent US citizenship. Tecla Padua, another co-heir, filed a lawsuit
claiming the same right of redemption as her brother.
● The trial court * dismissed this complaint as well, citing the lapse of the right
to object to the sales within thirty days from notice of the sales in 1963 and
1964. Despite the lack of written notice, actual knowledge of the sales by the
co-heirs satisfied the requirement of the law.
● In reality, the co-heirs' actual notice cannot be denied. In addition to Tecla
Padua, the other co-heirs lived on the same 604 square meter lot sold to the
petitioners. 8 Eustaquia, who had sold her share, shared a house with Tecla,
who later claimed redemption. Both parties were friends and neighbors whose
kids went to the same school.
● It is highly unlikely that the other co-heirs were unaware of the sales and
believed that the petitioners' land had only been mortgaged by Celestino and
Eustaquia.

● In the circumstances described above, it was impossible for Tecla to miss the
petitioners' purchase of the other co-heirs' land. Notable was the erection of
the permanent semi-concrete structure by the petitioners' son, without her or
the other co-heirs' consent.
○ ISSUE before the RTC The only real question in this case, therefore, is
the correct interpretation and application of the pertinent law as
invoked, interestingly enough, by both the petitioners and the private
respondents. This is Article 1088 of the Civil Code, providing as follows:

"Art. 1088. Should any of the heirs sell his hereditary rights to
a stranger before the partition, any or all of the co-heirs may be
subrogated to the rights of the purchaser by reimbursing him for the
price of the sale, provided they do so within the period of one month
from the time they were notified in writing of the sale by the vendor."
To reverse the trial court, the respondent court(IAC) declared that the article required
written notice, and that actual notice was not sufficient. Deriving its reasoning from a
similar rule in Article 1623, the respondent court held that written notice was required
even though no specific form was required.

ISSUE: Was there a valid notice.

RULING:
Yes.The right of redemption of co-owners excludes that of adjoining owners.Under
Article 1623, when a vendor sells real property, he must notify in writing his
co-owners who may redeem the same within thirty (30) days from notice.

The general rule is that written notice of the sale to all possible redemptioners is
indispensable. The 30 day period which is a condition precedent to the exercise of
the right of legal redemption is counted from the written notice., In the case at bar the
Court held that as an exception to the general rule the co-heirs who lived with the
vendors in the same lot are deemed to have received actual notice of the sale. The
co-heirs are deemed to have received actual notice of the sale since the co-heirs,
including Tecla Padua, lived on the same lot, which consisted of only 604 square
meters, including the portions sold to the petitioners .

Eustaquia herself, who had sold her portion, was staying in the same house with her
sister Tecla, who later claimed a redemption petition. Moreover, the petitioners and
the private respondents were close friends and neighbors whose children went to
school together. The co-heirs in this case were undeniably informed of the sales
although no notice in writing was given to them. And there is no doubt either that the
30-day period began and ended during the 14 years between the sales in question
and the filing of the complaint for redemption in 1977, without the co-heirs exercising
their right of redemption. These are the justifications for this exception. Hence, they
may no longer exercise their right of redemption.

--------------------END NA NG DIGEST----------------

This part is Important lang for me from full text.

But as has also been aptly observed, we test a law by its results; and likewise, we
may add, by its purposes. It is a cardinal rule that, in seeking the meaning of the law,
the first concern of the judge should be to discovermin its provisions the intent of
the lawmaker. Unquestionably, the law should never be interpreted in such a way as
to cause injustice as this is never within the legislative intent. And part of that intent,
in fact, for we presume the good motives of the legislature, is to render justice.
Thus, we interpret and apply the law not independently of but in consonance with
justice. Law and justice are inseparable, and we must keep them so. To be sure, there
are some laws that, while generally valid, may seem arbitrary when applied in a
particular case because of its peculiar circumstances. In such a situation, we are not
bound, because only of our nature and functions, to apply them just the same, in
slavish obedience to their language. What we do instead is find a balance between
the word and the will, that justice may be done even as the law is obeyed.

"The spirit, rather than the letter of a statute determines its construction,
hence, a statute must be read according to its spirit or intent. For what is within the
spirit is within the statute although it is not within the letter thereof, and that which is
within the letter but not within the spirit is not within the statute.

In requiring written notice, Article 1088 seeks to ensure that the redemptioner is
properly notified of the sale and to indicate the date of such notice as the starting
time of the 30-day period of redemption. Considering the shortness of the period, it is
really necessary, as a general rule, to pinpoint the precise date it is supposed to
begin, to obviate any problem of alleged delays, sometimes consisting of only a day
or two. The instant case presents no such problem because the right of redemption
was invoked not days but years after the sales were made in 1963 and 1964. The
complaint was filed by Tecla Padua in 1977, thirteen years after the first sale and
fourteen years after the second sale. The delay invoked by the petitioners extends to
more than a decade, assuming of course that there was a valid notice that tolled the
running of the period of redemption.
Was there a valid notice?

Granting that the law requires the notice to be written, would such notice be
necessary in this case? Assuming there was a valid notice although it was not in
writing, would there be any question that the 30-day period for redemption had
expired long before the complaint was filed in 1977?

In the face of the established facts, we cannot accept the private respondents'
pretense that they were unaware of the sales made by their brother and sister in 1963
and 1964. By requiring written proof of such notice, we would be closing our eyes to
the obvious truth in favor of their palpably false claim of ignorance, thus exalting the
letter of the law over its purpose. The purpose is clear enough: to make sure that the
redemptioners are duly notified. We are satisfied that in this case the other brothers
and sisters were actually informed, although not in writing, of the sales made in 1963
and 1964, and that such notice was sufficient.
Now, when did the 30-day period of redemption begin? While we do not here declare
that this period started from the dates of such sales in 1963 and 1964, we do say that
sometime between those years and 1976, when the first complaint for redemption
was filed, the other co heirs were actually informed of the sale and that thereafter the
30-day period started running and ultimately expired. This could have happened any
time during the interval of thirteen years, when none of the co-heirs made a move to
redeem the properties sold. By 1977, in other words, when Tecla Padua filed her
complaint, the right of redemption had already been extinguished because the period
for its exercise had already expired.

It was the perfectly natural thing for the co-heirs to wonder why the spouses Alonzo,
who were not among them, should enclose a portion of the inherited lot build
thereon a house of strong materials. This definitely was not the act of a temporary
possessor or a mere mortgagee. This certainly looked like an act of ownership. Yet,
given this unseemly situation, none of the co-heirs saw fit to object or at least
inquire, to ascertain the facts, which were readily available. It took all of thirteen
years before one of them chose to claim the right of redemption, but then it was
already too late.

We realize that in arriving at our conclusion today, we are deviating from the strict
letter of the law, which the respondent court understandably applied pursuant to
existing jurisprudence. The said court acted properly as it had no competence to
reverse the doctrines laid down by this Court in the above-cited cases. In fact, and
this should be clearly stressed, we ourselves are not abandoning the De Conejero
and Buttle doctrines. What we are doing simply is adopting an exception to the
general rule, in view of the peculiar circumstances of this case.

The co-heirs in this case were undeniably informed of the sales although no notice in
writing was given to them. And there is no doubt either that the 30-day period began
and ended during the 14 years between the sales in question and the filing of the
complaint for redemption in 1977, without the co-heirs exercising their right of
redemption. These are the justifications for this exception.

More than twenty centuries ago, Justinian defined justice "as the constant and
perpetual wish to render every one his due." 16 That wish continues to motivate this
Court when it assesses the facts and the law in every case brought to it for decision.
Justice is always an essential ingredient of its decisions. Thus when the facts
warrants, we interpret the law in a way that will render justice, presuming that it was
the intention of the lawmaker, to begin with, that the law be dispensed with justice.
So we have done this in this case.

WHEREFORE, the petition is granted. The decision of the respondent court is

REVERSED and that of the trial court is reinstated, without any pronouncement as to
costs. It is so ordered.
4. Lee Chuy Realty Corporation vs. Court of Appeals, December 4, 1995 - NONA
DOCTRINE: There is actually no prescribed form for an offer to redeem to be
properly effected. Hence, it can either be through a formal tender with
consignation, or by filing a complaint in court coupled with consignation of the
redemption price within the prescribed period. What condition is precedent to a
valid exercise of the right of legal redemption is either the formal tender with
consignation or the filing of a complaint in court. What is paramount is the
availment of the fixed and definite period within which to exercise the right of legal
redemption.
FACTS:
A valuable piece of land in Malhacan, Meycauayan, Bulacan, with an area of 24,576 square
meters and covered by OCT No. 0-5290 is disputed by petitioner Lee Chuy Realty
Corporation (LEE CHUY REALTY) and private respondent Marc Realty and Development
Corporation (MARC REALTY). Originally the property was co-owned by Ruben Jacinto to
the extent of one-sixth and Dominador, Arsenio, Liwayway, all surnamed Bascara, and
Ernesto Jacinto who collectively owned the remaining five-sixths.

On 4 February 1981 Ruben Jacinto sold his one-sixth pro-indiviso share to LEE CHUY
REALTY. The sale was registered on 30 April 1981. On 5 May 1989 the Bascaras and
Ernesto Jacinto also sold their share to MARC REALTY. The sale was registered on 16
October 1989.

LEE CHUY REALTY claims that it was never informed of the existence of the sale between
MARC REALTY on one hand and the Bascaras and Jacinto on the other, and that on the
contrary it was only upon inquiry from the Register of Deeds of Bulacan that the sale was
brought to its attention. MARC REALTY contends otherwise. It insists that LEE CHUY
REALTY was verbally notified of the sale and was in fact given a copy of the deed of sale.

On 13 November 1989 LEE CHUY REALTY filed a complaint for legal redemption against
MARC REALTY and consigned in court a manager’s check for 614,400. In its Amended
Answer with Counterclaim with Motion to Dismiss, MARC REALTY insisted that the
complaint be dismissed for failure to state a cause of action there being no allegation of
prior valid tender of payment nor a prior valid notice of consignation.

TRIAL COURT: ruled in favor of LEE CHUY REALTY holding that there was a prior valid
tender of payment and consignation. It further decreed that" (n)either a separate offer to
redeem nor a formal notice of consignation are (sic) necessary for the reason that the filing
of the action itself, within the period of redemption, is equivalent to a formal offer to
redeem."

CA: Reversed RTC ruling, stating that "a prior tender or offer of redemption is a prerequisite
or precondition to the filing of an action for legal redemption." It further ruled that "there
must be tender of the redemption price within the required period . . . because the policy of
the law is not to leave the purchaser’s title in uncertainty beyond the established 30-day
period." LEE CHUY REALTY filed a motion for reconsideration but it was denied hence the
present petition.

MARC REALTY contends that prior tender of payment is a condition precedent to the filing
of an action in court in order to validly exercise the right of legal redemption. LEE CHUY
REALTY however argues that the filing of the action itself is equivalent to a formal offer to
redeem, which is a condition precedent to the valid exercise of the right of legal redemption.

ISSUE: Whether or not LEE CHUY REALTY was correct in its contention that the filing of
the action itself is equivalent to a formal offer to redeem, which is a condition precedent to
the valid exercise of the right of legal redemption.

RULING:

YES.

Art. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of
all the other co-owners or of any of them are sold to a third person. If the price of the
alienation is grossly excessive, the redemptioner shall pay only a reasonable one.

Art. 1623. The right of legal preemption or redemption shall not be exercised except within
thirty days from the notice in writing by the prospective vendor, or by the vendor, as the
case may be. The deed of sale shall not be recorded in the Registry of Property unless
accompanied by an affidavit of the vendor that he has given written notice thereof to all
possible redemptioners.

The Court of Appeals erroneously concluded that a prior tender or offer of redemption is a
prerequisite or precondition to the filing of the action for legal redemption. To avail of the
right of redemption what is essential is to make an offer to redeem within the prescribed
period.

There is actually no prescribed form for an offer to redeem to be properly effected. Hence, it
can either be through a formal tender with consignation, or by filing a complaint in court
coupled with consignation of the redemption price within the prescribed period. What
condition is precedent to a valid exercise of the right of legal redemption is either the formal
tender with consignation or the filing of a complaint in court. What is paramount is the
availment of the fixed and definite period within which to exercise the right of legal
redemption.
The formal offer to redeem is not a distinct step or condition sine qua non to the filing of the
action in Court for the valid exercise of the right of legal redemption. What constitutes a
condition precedent is either a formal offer to redeem or the filing of an action in court
together with the consignation of the redemption price within the reglementary period.

Public policy favors redemption regardless of whether the redemptioner is a co-owner or

mortgagor, although perhaps with unequal force and effect since each is given a fixed but
different period. A co-owner desirous of exercising his right of legal redemption is given a
period of thirty (30) days from notice of the sale within which to avail of the right to redeem.

5.ANECITA GREGORIO, Petitioner, v. MARIA CRISOLOGO VDA. DE CULIG, THRU

HER ATTORN EY-IN-FACT ALFREDO CULIG, JR., Respondent., G.R. No. 180559;
January 20, 2016.
DOCTRINE: Art 1616 only speaks of the amount to be tendered when exercising the
right to repurchase, but it does not state the procedure to be followed in exercising the
right||| (Gregorio v. Vda. de Culig, G.R. No. 180559, [January 20, 2016], 778 PHIL
722-734)

FACTS:
Alfredo Culig was granted a homestead patent under the Public Land Act over a 54,730 sq.
m. parcel of land in Nuangan, Kidapawan, North Cotabato. He died in 1971 and in 1974, his
heirs executed an extrajudicial settlement of estate with simultaneous sale of the property in
favour of spouses Seguritan and Gregorio in the amount of P25,000.

In 1979, 5 years after the sale, respondent filed a complaint demanding the repurchase of
the property under the provisions of the PLA. She alleged that she personally offered to pay
the spouses the amount of the purchase price but they refused. On the other hand, the
spouses argue that respondent had no right to repurchase the property since they only
wanted to redeem it in order for them to be able to sell it at a higher price and that the
formal offer or the filing of the case alone, not coupled with consignation, within the
prescribed period of 5 years, does not constitute a valid offer to redeem. The RTC
dismissed the complaint of the respondents but the CA granted their appeal.

ISSUE:
Whether the tender of payment or consignation of the purchase price is a necessary
element in order to validly redeem the subject lot

RULING:
No, the filing of a judicial action within the period of redemption is enough to constitute a
valid redemption. In Hulganza v. Court of Appeals, we held that the bona fide tender of the
redemption price or its equivalent—consignation of said price in court is not essential or
necessary where the filing of the action itself is equivalent to a formal offer to redeem. As
explained in the said case,

“The formal offer to redeem, accompanied by a bona fide tender of the redemption price,
within the period of redemption prescribed by law, is only essential to preserve the right of
redemption for future enforcement beyond such period of redemption and within the period
prescribed for the action by the statute of limitations. Where, as in the instant case, the right
to redeem is exercised thru the filing of judicial action within the period of redemption
prescribed by the law, the formal offer to redeem, accompanied by a bona fide tender of the
redemption price, might be proper, but is not essential. The filing of the action itself, within
the period of redemption, is equivalent to a formal offer to redeem.

The case of Vda. de Panaligan v. Court of Appeals further clarified that tender of payment of
the repurchase price is not among the requisites, and thus unnecessary for redemption
under the Public Land Act. Citing Philippine National Bank v. De los Reyes, we ruled that it
is not even necessary for the preservation of the right of redemption to make an offer to
redeem or tender of payment of purchase price within five years. The filing of an action to
redeem within that period is equivalent to a formal offer to redeem, and that there is even no
need for consignation of the redemption price. Thus, even in the case before us, it is
immaterial that the repurchase price was not deposited with the Clerk of Court.

We also do not agree with petitioner’s insistence that Article 1616 of the Civil Code applies
in this case. As found by the CA, the provision only speaks of the amount to be tendered
when exercising the right to repurchase, but it does not state the procedure to be followed in
exercising the right. In fact, in Peralta v. Alipio, we rejected the argument that the provisions
on conventional redemption apply as supplementary law to the Public Land Act, and
clarified that:

xxx. The Public Land Law does not fix the form and manner in which reconveyance
may be enforced, nor prescribe the method and manner in which demand therefor should
be made; any act which should amount to a demand for reconveyance should, therefore, be
sufficient.

6. Solid Homes, Inc. vs. CA, G.R. No. 117501, July 8, 1997
DOCTRINE:
FACTS:
Solid Homes executed in favor of State Financing (Center, Inc.) a Real Estate Mortgage on
its properties in order to secure the payment of a loan of P10,000,000.00 which the former
obtained from the latter. A year after, Solid Homes applied for and was granted an additional
loan of P1,511,270.03 by State Financing, and to secure its payment, Solid Homes
executed the Amendment to Real Estate Mortgage. Sometime thereafter, Solid Homes
obtained additional credits and financing facilities from State Financing in the sum of
P1,499,811,97, and to secure its payment, Solid Homes executed in favor of State
Financing the Amendment to Real Estate Mortgage.

When the loan obligations abovementioned became due and payable, State Financing
made repeated demands upon Solid Homes for the payment thereof, but the latter failed
to do so. So State Financing filed a petition for extrajudicial foreclosure of the mortgages
abovementioned with the Provincial Sheriff of Rizal, who, in pursuance of the petition,
issued a Notice of Sheriff's Sale, whereby the mortgaged properties of Solid Homes and
the improvements existing thereon, were set for public auction sale in order to satisfy the
full amount of Solid Homes' mortgage indebtedness, the interest thereon, and the fees
and expenses incidental to the foreclosure proceedings.

Before the scheduled public auction sale, the Solid Homes made representations and
induced State Financing to forego with the foreclosure of the real estate mortgages. By
reason thereof, State Financing agreed to suspend the foreclosure of the mortgaged
properties, subject to the terms and conditions they agreed upon, and in pursuance of
their said agreement, they executed a document entitled MEMORANDUM OF
AGREEMENT/DACION EN
PAGO ("Memorandum").

Among the terms and conditions that said parties agreed upon was (State Financing)
hereby grants (Solid Homes) the right to repurchase the aforesaid real properties,
including the condominium units and other improvements thereon, within ten (10) months
counted from and after the one hundred eighty (180) days from date of signing hereof.
However, a day before the expiry date of its right to repurchase the properties involved in
the (Memorandum) on June 27, 1984, Solid Homes filed the present action against
defendants State Financing and the Register of Deeds for Metro Manila District II
(Pasig), seeking the annulment of said (Memorandum) and the consequent
reinstatement of the mortgages over the same properties

Solid Homes raised a lone question contesting the denial of its claim for damages. Such
damages allegedly resulted from the bad faith and malice of State Financing in
deliberately failing to annotate Solid Homes' right to repurchase the subject properties in
the former's consolidated titles thereto. As a result of the non-annotation, Solid Homes
claimed to have been prevented from generating funds from prospective buyers to enable
it to comply with the Agreement and to redeem the subject properties.

ISSUE:
Whether the failure to annotate the vendor a retro's right of repurchase in the certificates
of title of the real estate properties damages?

RULING:

The trial court found, and the Court of Appeals affirmed, that petitioner's claim for actual
damages was baseless. Solid Homes utterly failed to prove that respondent corporation
had maliciously and in bad faith caused the non- annotation of petitioner's right of
repurchase so as to prevent the latter from exercising such right. On the contrary, it is
admitted by both parties that State Financing informed petitioner of the registration with
the Register of Deeds of Pasig of their Memorandum of Agreement/Dacion en Pago and
the issuance of new certificates of title in the name of the respondent corporation.
Petitioner exchanged communications and held conferences with private respondent in
order to draw a mutually acceptable payment arrangement for the former's repurchase of
the subject properties. A written offer from another corporation alleging willingness to
avail itself of petitioner's right of repurchase was even

attached to one of these communications. Clearly, petitioner was not prejudiced by the
non-annotation of such right in the certificates of titles issued in the name of State
Financing. Besides, as the Court of Appeals noted, it was not the function of respondent
corporation for cause said annotation. It was equally the responsibility of petitioner to
protect its own rights by making sure that its right of repurchase was indeed annotated in
the consolidated titles of private respondent.

The only legal transgression of State Financing was its failure to observe the proper
procedure in effecting the consolidation of the titles in its name. But this does not
automatically entitle the petitioner to damages absent convincing proof of malice and bad
faith on the part of private respondent and actual damages suffered by petitioner as a
direct and probable consequence thereof. In fact, the evidence proffered by petitioner
consist of mere conjectures and speculations with no factual moorings. Furthermore,
such transgression was addressed by the lower courts when they nullified the
consolidated of ownership over the subject properties in the name of respondent
corporation, because it had been effected in contravention of the provisions of Article
1607 of the Civil Code. Such rulings are consistent with law and jurisprudence.

Neither can moral damages be awarded to petitioner. Time and again, we have held that
a corporation — being an artificial person which has no feelings, emotions or senses, and
which cannot experience physical suffering or mental anguish — is not entitled to moral
damages.
 While the amount of exemplary damages need not be proved, petitioner must show that
he is entitled to moral or actual damages; but the converse obtains in the instant case.
Award of attorney's fees is likewise not warranted when moral and exemplary damages
are eliminated and entitlement thereto is not demonstrated by the claimant.

Lastly, "(n)ominal damages are adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not for
the purpose of indemnifying the plaintiff for any loss suffered by him." As elaborated
above and in the decisions of the two lower courts, no right of petitioner was violated or
invaded by respondent corporation.

7. Lao Vs. CA, 275 SCRA 237 - RAECHELLE

DOCTRINE:The law enumerates when a contract may be presumed to be an
equitable mortgage:
"(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.”
FACTS:

● Private Respondent Better Homes Realty and Housing Corporation filed with
the Metropolitan Trial Court of Quezon City, a complaint for unlawful detainer
on the ground that private respondent is the owner of the premises situated at
Unit I, No. 21 and that Petitioner Manuel Lao occupied the property without
rent, but on private respondent's pure liberality with the understanding that he
would vacate the property upon demand, but despite demand to vacate made
by letter received by (herein petitioner) on February 5, 1992, the (herein
petitioner) refused to vacate the premises.
● Petitioner claimed that he is the true owner of the house and lot and that the
herein private respondent purchased the same from N. Domingo Realty and
Development Corporation but the agreement was actually a loan secured by
mortgage; and that plaintiff's cause of action is for accion publiciana outside
the jurisdiction of an inferior court.
MTC – ordered the petitioner to vacate the premises

RTC – reversed the decision of the MTC and ordered the dismissal of the complaint
of private respondent.

● RTC held that the subject property was acquired by private respondent from N.
Domingo Realty and Development Corporation, by a deed of sale, and private
respondent is now the registered owner but in truth the petitioner is the
beneficial owner of the property because the real transaction over the subject
property was not a sale but a loan secured by a mortgage thereon.

ISSUE: WHETHER OR NOT THE SALE IS AN ABSOLUTE SALE

RULING: NO.
● Private Respondent Better Homes Realty and Housing Corporation anchored
its right in the ejectment suit on a contract of sale in which petitioner (through
their family corporation) transferred the title of the property in question.
Petitioner contends, however, that their transaction was not an absolute sale,
but an equitable mortgage.
● Pivotal to deciding this issue is the true aim and purpose of the contracting
parties as shown by the terminology used in the covenant, as well as "by their
conduct, words, actions and deeds prior to, during and immediately after
executing the agreement."
➔ In this regard, parol evidence becomes admissible to prove the true
intent and agreement of the parties which the Court will enforce even if
the title of the property in question has already been registered and a
new transfer certificate of title issued in the name of the transferee.
● The agreement between the private respondent and N. Domingo Realty &
Housing Corporation, as represented by petitioner, manifestly one of equitable
mortgage.
➔ First, possession of the property in the controversy, remained with
Petitioner Manuel Lao who was the beneficial owner of the property,
before, during and after the alleged sale. It is settled that a "pacto de
retro sale should be treated as a mortgage where the (property) sold
never left the possession of the vendors."
➔ Second, the option given to Manuel Lao to purchase the property in
controversy had been extended twice through documents executed by
Mr. Tan Bun Uy, President and Chairman of the Board of Better Homes
Realty & Housing Corporation.
➔ Third, unquestionably, Manuel Lao and his brother were in such "dire
need of money" that they mortgaged their townhouse units registered
under the name of N. Domingo Realty Corporation, the family
corporation put up by their parents, to Private Respondent Better
Homes Realty & Housing Corporation.
 ASSIGNMENT NO. 9
1. FLORITA LIAM, Petitioner, v. UNITED COCONUT PLANTERS BANK, Respondent.,
793 SCRA 383, G.R. No. 194664 June 15, 2016- Regine
DOCTRINE: The crucial distinction between assignment and subrogation actually deals
with the necessity of the consent of the debtor in the original transaction. In an
assignment of credit, the consent of the debtor is not necessary in order that the
assignment may fully produce legal effects. What the law requires in an assignment of
credit is not the consent of the debtor but merely notice to him as the assignment takes
effect only from the time he has knowledge thereof.

FACTS:
● Liam entered into a contract with developer Primetown Property Group, Inc. (PPGI)
to purchase a Condominium Unit, in the Hongkong Tower, of the latter's Makati
Prime City (MPC) condominium project in San Antonio Village for P2.6 million. The
parties also agreed that the unit would be delivered no later than 35 months after
construction started.
● PPGI obtained a loan from UCPB to build the condominium project. PPGI
partially repaid its loan by transferring to UCPB its right to collect all collectibles from
condominium buyers, including Liam.
○ For this purpose, PPGI and UCPB executed a Memorandum of Agreement
(MOA) and a document denominated as Sale of Receivables and Assignment
of Rights and Interests (Deed of Sale/Assignment)
● PPGI informed Liam of the sale to UCPB. PPGI instructed her to pay the remaining
balance to UCPB. They added that "the payment arrangement shall not cause any
amendment to [the] terms and conditions or cancellation of [her] contract with PPGI."
● Liam took notice and promptly paid UCPB. However, on March 9, 1999, Liam wrote
UCPB to request a delay in her amortization payments until the unit was ready for
delivery.
● After that, Liam stopped paying. On February 28, 2001, Liam wrote UCPB again,
complaining about the unit's delay and stating that she will only resume
payments once the unit is delivered. Liam also asked for a waiver of interest and
penalties prior to UCPB taking over her amortization payments.
● But her requests went unanswered. So, Liam demanded a refund of all payments
she made because PPGI failed to deliver the unit on time.
● Liam saw an ad in the newspaper from UCPB offering ready for occupancy' units in
the Palm Tower of MPC condominium project for a much lower price.
● Liam asked UCPB to postpone the loan restructuring and instead downgrade her
two-bedroom condominium unit to one worth P1,223,000.00.
○ Her requests, however, remained unheeded
○ Liam sued PPGI and UCPB in HLURB for specific performance. The
complaint alleged that UCPB promised to deliver the unit within six months.
 ● In its response, PPGI denied receiving any demand from Liam and stated that she is
barred from suing PPGI because she agreed to UCPB's substitution of PPGI.
● UCPB averred that it had no legal obligation to deliver the unit to Liam because it is
not the developer of the condominium project.
● UCPB claimed it is merely PPGI's creditor. UCPB said it only bought PPGI's right to
collect from Liam and other condo buyers.
● UCPB refused to give a completion date for Liam's unit because the developer,
PPGI, was in charge of that.

Ruling of the HLURB: in favor of Liam.

Liam and PPGI have long agreed on the purchase price before the lower price of the other
units was even advertised. Liam was, however, held entitled to a refund because the unit
was not completed within the period stipulated in the contract.

Ruling of the Office of the President (OP)

● UCPB thereafter appealed to the (OP) arguing that it should not be obligated to
refund Liam's alleged total installment payments because it did not step into the
shoes of PPGI.
● The OP held that the Deed of Sale/Assignment between UCPB and PPGI covered
all the rights and interests arising from or out of the contract to sell between Liam
and PPGI.
○ OP stressed that since PPGI assigned all its rights and interests to UCPB, the
latter is deemed subrogated to and bound by exactly the same conditions to
which PPGI was bound under the contract to sell. Thus, UCPB is obligated to
return the payments of Liam after the project was not completed on time.

Ruling of the CA-In favor of UCPB

● UCPB sought recourse before the CA contending that it was merely an agent of
PPGI in collecting the receivables and was never a party to the contract to sell.
Hence, it cannot be made to assume the liabilities of PPGI as owner, developer or
project manager of the condominium unit. Even assuming that UCPB is liable, its
liability must be limited to the amount it actually received from Liam on behalf of
PPGI.
● The CA ruled that Liam had no right to demand for specific performance from UCPB
because it was not a privy to the contract to sell. The obligations of PPGI to Liam
remained subsisting and it continued to be Liam's obligor with respect to the
delivery of the condominium units even after the assignment. Thus, UCPB
cannot be held liable for PPGI's breach of its obligation to Liam. The CA concluded
that UCPB was wrongly impleaded in the complaint for specific performance.

ISSUE: Whether the CA erred in reversing and setting aside the decisions of Offices a
quo.- NO
RULING:- NO, as a result, the court denied Liam's petition (the petitioner)

The transaction between UCPB and PPGI was an assignment of credit and not
subrogation.
"An assignment of credit is an agreement by virtue of which the owner of a credit, known as
the assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and
without the consent of the debtor, transfers his credit and accessory rights to another,
known as the assignee, who acquires the power to enforce it to the same extent as the
assignor could enforce it against the debtor. It may be in the form of sale, but at times it
may constitute a dation in payment, such as when a debtor, in order to obtain a
release from his debt, assigns to his creditor a credit he has against a third person."

Simply, an assignment of credit is the process of transferring the right of the assignor to
the assignee who would then have the right to proceed against the debtor. The assignment
may be done either gratuitously or onerously, in which case, the assignment has an effect
similar to that of a sale.

On the other hand, subrogation is a process by which the third party pays the obligation of
the debtor to the creditor with the latter's consent. As a consequence, the paying third party
steps into the shoes of the original creditor as subrogee of the latter. It results in a
subjective novation of the contract in that a third person is subrogated to the rights of the
creditor.

The crucial distinction between assignment and subrogation actually deals with the
necessity of the consent of the debtor in the original transaction. In an assignment of credit,
the consent of the debtor is not necessary in order that the assignment may fully produce
legal effects. What the law requires in an assignment of credit is not the consent of the
debtor but merely notice to him as the assignment takes effect only from the time he has
knowledge thereof. A creditor may, therefore, validly assign his credit and its accessories
without the debtor's consent.

Meanwhile, subrogation requires an agreement among the three parties concerned — the
original creditor, the debtor, and the new creditor. It is a new contractual relation based on
mutual agreement among all the necessary parties.

The terms of the MOA and Deed of Sale/Assignment between PPGI and UCPB
unequivocally show that the parties intended an assignment of PPGI's.

"The primary consideration in determining the true nature of a contract is the intention of the
parties. If the words of a contract appear to contravene the evident intention of the parties,
the latter shall prevail. Such intention is determined not only from the express terms of their
agreement, but also from the contemporaneous and subsequent acts of the parties."
However, if the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control.

The provisions of the foregoing agreements between PPGI and UCPB are clear, explicit and
unambiguous as to leave no doubt about their objective of executing an assignment of
credit instead of subrogation. The MOA and the Deed of Sale/Assignment clearly state that
UCPB became an assignee of PPGI's outstanding receivables of its condominium buyers.

The absence of Liam's consent to the transactions between PPGI and UCPB affirms their
nature as assignment of credit. The consent of the debtor is not essential in assignment of
credit. What the law requires is merely notice to him. A creditor may, therefore, validly
assign his credit and its accessories without the debtor's consent. The purpose of the notice
is only to inform the debtor that from the date of the assignment, payment should be made
to the assignee and not to the original creditor.

The last paragraph of the letter also confirms that UCPB's acquisition of PPGI's receivables
did not alter the terms of the Contract to Sell between PPGI and Liam. No novation by
subrogation could have occurred.

The CA was therefore correct in ruling that the agreement between PPGI and UCPB was an
assignment of credit. UCPB acquired PPGI's right to demand, collect and receive Liam's
outstanding balance; UCPB was not subrogated into PPGI's place as developer under the
Contract to Sell.

UCPB was improperly impleaded in Liam's complaint.

The CA is correct when it concluded that as a mere assignee, UCPB cannot be impleaded
in Liam's complaint for specific performance. It is clear that the intention of the parties was
merely to assign the receivables, and therefore, there is no ground to hold UCPB solidarily
liable with PPGI.

2. SONNY LO, Petitioner, v. KJS ECO-FORMWORK SYSTEM PHIL., INC., G.R. No.
149420 October 8, 2003-Regine
DOCTRINE:

FACTS:
● Respondent KJS ECO-FORMWORK System Phil., Inc. is a corporation engaged in
the sale of steel scaffoldings, while petitioner Sonny L. Lo, doing business under the
name and style of San's Enterprises, is a building contractor.
● petitioner ordered scaffolding equipments from respondent worth P540K
 ● He paid a downpayment in the amount of P150K The balance was made payable in
10 monthly installments.
● Respondent delivered the scaffoldings to the petitioner.
● Petitioner was able to pay the first two monthly installments. His business,
however, encountered financial difficulties and he was unable to settle his
obligation to respondent despite oral and written demands made against him.
● When petitioner failed to settle his obligation to respondent, he executed a Deed of
Assignment in favor of respondent assigning to the latter his receivables in the
amount of P335K from Jomero Realty Corporation.
● When respondent tried to collect the said credit from Jomero Realty Corporation, the
latter refused to honor the Assignment of Credit because it claimed that petitioner
had an outstanding indebtedness to it.
● When asked to settle his obligation, petitioner refused to pay claiming that his
obligation had been extinguished when they executed the Deed of Assignment of
Credit.
● Consequently, the respondent filed an action for recovery of a sum of money before
the RTC of Makati. The trial court ruled in favor of the petitioner.
○ RTC dismissed the complaint on the ground that the assignment of credit
extinguished the obligation
● On appeal, the Court of Appeals reversed the decision of the trial court. Hence, this
petition for review.

ISSUE: Whether the CA ERRED IN HOLDING THAT THE DEED OF ASSIGNMENT DID
NOT EXTINGUISH PETITIONER'S OBLIGATION

RULING: NO. The petition is without merit.

An assignment of credit is an agreement by virtue of which the owner of a credit, known
as the assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and
without the consent of the debtor, transfers his credit and accessory rights to another,
known as the assignee, who acquires the power to enforce it to the same extent as the
assignor could enforce it against the debtor.

In dacion en pago, as a special mode of payment, the debtor offers another thing to
the creditor who accepts it as equivalent to payment of an outstanding debt.

In order that there be a valid dation in payment, the following are the requisites:

(1) There must be the performance of the prestation in lieu of payment (animo solvendi)
which may consist in the delivery of a corporeal thing or a real right or a credit against the
third person;
(2) There must be some difference between the prestation due and that which is given in
substitution (aliud pro alio);

(3) There must be an agreement between the creditor and debtor that the obligation is
immediately extinguished by reason of the performance of a prestation different from that
due.

The undertaking resembles a sale in one sense, in that the creditor is purchasing the
debtor's thing or property, the payment for which will be charged against the debtor's debt.
As a result, in specified circumstances, the vendor in good faith is responsible for the
existence and legality of the credit at the time of the sale but not for the debtor's solvency.

Hence, it may well be that the assignment of credit, which is in the nature of a sale of
personal property, produced the effects of a dation in payment which may extinguish the
obligation. However, as in any other contract of sale, the vendor or assignor is bound by
certain warranties. More specifically, the first paragraph of Article 1628 of the Civil Code
provides:

“The vendor in good faith shall be responsible for the existence: and legality
of the credit at the time of the sale, unless it should have been sold as doubtful; but
not for the solvency of the debtor, unless it has been so expressly stipulated or
unless the insolvency was prior to the sale and of common knowledge.”

Petitioner, as vendor or assignor, is bound to warrant the existence and legality of the credit
at the time of the sale or assignment. When Jomero claimed that it was no longer indebted
to petitioner since the latter also had an unpaid obligation to it, it essentially meant that its
obligation to petitioner has been extinguished by compensation. In other words, respondent
alleged the non-existence of the credit and asserted its claim to petitioner's warranty under
the assignment. Therefore, it behooved the petitioner to make good its warranty and paid
the obligation.

Indeed, by warranting the existence of the credit, petitioner should be deemed to have
ensured the performance thereof in case the same is later found to be inexistent. He should
be held liable to pay to respondent the amount of his indebtedness. Hence, the court
affirmed the decision of the Court of Appeals ordering petitioner to pay respondent the sum
of P335,462.14 with legal interest thereon.

ASSIGNMENT NO. 9
ASSIGNMENT NO. 10 - LEASE
1. CHUA TEE DEE, doing business under the name and style of PIONEER
ENTERPRISES, petitioner, vs. COURT OF APPEALS and J.C. AGRICOM
DEVELOPMENT CORPORATION, INC., respondents. , GR 135721, 27 May 2004
 DOCTRINE: Article 1554 provides that the lessor is obliged to maintain the lessee
in the peaceful enjoyment of the lease during all the time covered by the contract.
FACTS:
This is a case for collection of back rentals plus interest and attorney’s fees
filed by Agricom against Chua Tee Dee, doing business as Pioneer Enterprises.

On May 22, 1985, Agricom and Dee entered into a 15-year lease contract
over the rubber plantation owned by the former. Among the stipulations in the
contract was the payment of deposit in the amount of P135,000.00 and payment of
back rentals in case of non-payment of rentals for three months. The contract also
stipulated that Agricom had the duty to maintain Dee in the quiet peaceful
possession and enjoyment of the leased premises.

However, sometime in 1986, a labor case for illegal dismissal and unfair labor
practice was filed against Agricom, Amado Dee (Chua Tee Dee’s husband) and
Pioneer. This case arose from the fact that some of the plantation laborers were
dismissed from work due to the contract of lease with Dee. The labor case dragged
on for a number of years. In addition, Dee also complained of being pestered by
some individuals who claimed portions of the plantation as their own property.

Later on, Pioneer defaulted in its monthly payments, prompting Agricom to file
a complaint for a sum of money. In its Answer, Dee asserted that Agricom committed
breach of contract for its failure to maintain her in peaceful possession and
enjoyment of the leased premises. The breach, in turn, entitled her to suspend
payment of rentals.

While the case was pending, Dee extended a personal loan of P30,000 to
Lillian Carreido. When judgment was finally rendered, the complaint was dismissed
and the lease contract terminated, the court stating that it was Agricom’s duty as
lessor to maintain the lessee in peaceful possession and enjoyment of the leased
premises.

Upon motion for recommendation, the lower court reversed its own ruling,
ordering Dee to pay Agricom back rentals and rentals for the first three years of the
lease already paid for. The CA affirmed the order.

Hence this appeal.

ISSUE:
Whether Agricom failed to maintain Chua Tee Dee in a quiet and peaceful enjoyment
of the leased premises?

RULING:
No. As lessor, Agricom had the duty to maintain Chua Tee Dee in the peaceful
and adequate enjoyment of the leased premises which was part of the contract
of lease. Even if it had not been so, the lessor is still duty-bound under Art.1654 of
the Civil Code. The duty “to maintain the lessee in the peaceful and adequate
 enjoyment of the lease for the duration of the contract” is merely a warranty that
the lessee shall not be disturbed in his legal, and not physical, possession.

In the case at bar, Chua Tee Dee claims that several people presented tax
declarations to her and claimed some portions of the leased premises. However, no
case was filed by any of the said claimants against her or her lessor during the
time she occupied the premises.

When Chua Tee Dee’s representative saw that a portion of the leased
premises was being fenced by the claimants, she had all the right to sue the
intruders who had disturbed her physical possession as provided for in Article 1654
of the New Civil Code. Chua Tee Dee failed to prove that she suffered any loss from
the labor case that was filed by them. True, the labor case was instituted during the
effectivity of the lease contract until the case was finally resolved on August 22, 1986
however, during pendency, appellant regularly paid the monthly rentals for the years
1985 to 1989. It was after the labor case has been resolved that appellant started to
fail to pay her rentals which indicates that the labor case has not dampened her
peaceful and adequate possession of the leased premises.

2. Spouses Ricardo and Elena C. Golez v. Meliton Nemeño, G.R. No. 178317,
September 23, 2015
DOCTRINE: Destruction of the building should not in any way be made a basis to
exempt lessees from paying rent for the period they made use of the leased
property, otherwise this would be a clear case of unjust enrichment.
FACTS:
Respondent entered into a Lease Contract over a portion of Lot No. 7728 in
Zamboanga del Sur with petitioners as “lessees.” The latter bound themselves to
construct a commercial building worth P143,823 on the leased lot. As per contract,
instead of paying the rent in the form of money, petitioners would withhold such
payment and apply the accumulated rent to the cost of the building they built on the
leased property.

However, the building subject of the lease contract was burned down.
Because of the destruction of the building, respondent sent a letter to petitioners
demanding the accumulated rentals for the leased property from March 17, 1989 to
June 17, 1992 totaling P78,000.00. As the demand was left unheeded, respondent
filed a complaint for collection of rentals plus damages before the Molave RTC.

ISSUE:
Whether petitioners are liable to pay respondents for back rentals?

RULING:
This Court finds no reason to depart from the ruling of the courts a quo that
petitioners should pay respondent for back rentals. There is no dispute that the
 contract entered into by the parties is one of lease. True, it had some modifications
such that instead of paying the rent in the form of money, petitioners will withhold
such payment and will apply the accumulated rent to the cost of the building they
built on the leased property.

Thereafter, at the end of the lease period or until such time the cost of the
building has been fully covered by the rent accumulated, petitioners, as lessees will
transfer the ownership of said building to respondent. Unfortunately, the subject
building was gutted down by fire. However, the destruction of the building should not
in any way be made a basis to exempt petitioners from paying rent for the period
they made use of the leased property. Otherwise, this will be a clear case of unjust
enrichment.

In the instant case, there is no dispute that petitioners used the property for
several years for their own benefit having operated a restaurant thereon. Therefore,
it would be the height of injustice to deprive respondent of compensation due him on
the use of his property by petitioners. The fact that the parties agreed to a different
mode of payment – in this case, a building – does not in any way exempt petitioners
from paying compensation due to respondent for the use of the latter’s property
because the building was destroyed.

Petitioners should only be liable for rent during the period within which they
were in possession of the leased property. Respondent himself testified that
petitioner Ricardo stayed in the building on the leased premises just before it was
burned down. There was no evidence submitted to prove that petitioners were in
possession of the leased property after the fire.

Therefore, petitioners should be made to pay rent until that time only. To order
petitioners to pay for back rentals equivalent to the cost of the building is in the same
way, unjust enrichment this time on the part of respondent considering that the rent
due for the period petitioners occupied the leased premises is way below the cost of
the building.

3. D.M. Ragasa Enterprises, Inc. vs. Banco de Oro, Inc., G.R. No. 190512, June 20,
2018
DOCTRINE: Entitlement to rentals after the termination of the lease pursuant to
an automatic rescission or termination clause is possible in the case where the
lessor invokes the clause and the lessee refuses to vacate the premises.
FACTS:
Ragasa and then Equitable Banking Corporation (Equitable Bank) executed a
Contract of Lease, as lessor and lessee, respectively, over a commercial building for
a period of five years. Pursuant to the lease contract, Equitable Bank paid amounts
representing three months advance rentals and another three months rentals as
security deposit.
Equitable Bank entered into a merger with Philippine International Bank
 thereby forming Equitable PCI Bank, Inc., which eventually, pending the present
case, merge with Banco de Oro, Inc. to form the respondent bank.
As a result of this merger, the bank closed and joined branches of its
constituents which were in close proximity, including the branch located in the
subject premises. The bank sent notice, informing Ragasa that the former was
pre-terminating their lease contract. Ragasa responded with a demand letter for
payment of monthly rentals of the remaining term of the lease contract, inasmuch as
there is no express provision allowing pre-termination. The bank countered that its
only liability is the forfeiture of its security deposit pursuant to the provision in their
contract, and thereafter vacated the subject premises.
Ragasa filed with the RTC for the collection of the sum and damages, arguing
that the forfeiture of the bank’s security deposit did not exempt it from payment of
rentals of the remaining term of the lease because the act of pre-terminating was a
major breach of its terms. Bank replied that the provision Ragasa was pertaining was
actually a penal clause, which replaced the damages and interests in case of
breach. The RTC ruled in favour of Ragasa. The CA however reversed for lack of
legal basis, stating that the bank indeed breached the provision of the contract, but
to allow Ragasa to collect the value of the unexpired term would constitute unjust
enrichment.
ISSUE:
Is the bank liable for its act of pre-terminating the Contract of Lease?
RULING:
The Court ruled that Ragasa is not entitled to the rental for the unexpired
period of the lease contract, and it is only entitled to the forfeiture of the full deposit
and the amount stipulated as attorney’s fees pursuant to the provisions in the
contract.
Entitlement to rentals after the termination of the lease pursuant to an automatic rescission
or termination clause is possible in the case where the lessor invokes the clause and the
lessee refuses to vacate the premises.

4. SPOUSES EUTIQUIANO CLUTARIO and ARACELI CLUTARIO vs. HON. COURT

OF APPEALS, HON. GEORGE C. MACLI-ING, RTC Judge of Quezon City,
Branch C (100), and SPOUSES MELQUIADES GANDIA and MARIA V. GANDIA,
216 SCRA 341
DOCTRINE: For the lessor to be able to validly eject the lessee on the ground of
need for the leased property, it must be shown that there is no other available
residential unit to satisfy that need. The non-availability must exist at the time of
the demand by the lessor on the lessee to vacate the property.
FACTS:

Private respondents, the Spouses Melquiades Gandia and Maria V. Gandia,

are the owners of a two-storey residential apartment located, Cubao, Quezon City.
Since 1961, while private respondents have been occupying the upper storey of the
house, petitioners have been staying on the ground floor by virtue of a verbal lease
agreement for a monthly rental of P150.00.

In 1980, private respondents, through their counsel, wrote a letter to the

petitioners giving them ninety (90) days to vacate the premises. According to them,
due to their advanced age and failing health, they have decided to occupy the entire
apartment, including the ground floor leased to petitioners. Because petitioners did
not heed the demand letter, private respondents brought the matter to the
Katarungan Pambarangay for settlement, but this did not meet with success. Another
demand letter was sent by private respondents to petitioners on January 20, 1981.

In the meantime, it appears that 1980, petitioners were in arrears in the

payment of their rentals. On March 4, 1981, private respondents filed a complaint for
ejectment against petitioner Araceli Clutario 1 before the Metropolitan Trial Court
(MTC) of Quezon City because of : (1) their need for the premises; and (2)
non-payment of rentals by petitioners from August 1980. Pending the proceedings
before the MTC, petitioners paid the back rentals from August 1980 until May 1981.

After trial, the MTC rendered judgment 2 dismissing the complaint on the
ground that private respondents "failed to support their causes of action with
substantial evidence." 3

Private respondents then filed an appeal with the Regional Trial

Court (RTC) of Quezon Cityrespondent Judge George C. Macli-ing rendered

a well-written decision reversing the MTC judgment that petitioners' non-payment of
rentals for more than three months and private respondents' genuine need for the
leased premises are sufficient causes for petitioners' ejectment.

Petitioners file a petition for review before the Court of Appeals and in its
decision Court of Appeals affirmed the RTC judgment but deleted the award of
attorney's fees to private respondents. Petitioners elevated the case before this
Court, on a petition for review under Rule 45 of the Rules of Court, seeking the
reversal of the Court of Appeals' decision affirming the RTC ruling that they can be
ejected by their lessors, the private respondents.

ISSUE:
WON CA erred in affirming RTC’s ruling.

RULING:
Court ruled on the negative. In the case at bar, respondents invoked two of
the six grounds for ejectment provided under sec 5 of BP 25 (1979), namely: (1)
arrears in payment of rent for three (3) months at any one time; and (2) need of the
lessors to repossess their property for their own use or for the use of any immediate
member of their family as residential unit. Petitioner’s payment of the back rentals
and acceptance of the respondent does not constitute a waiver or abandonment of
their cause of action for ejectment against the latter. Respondents showed through
 their conduct, subsequent to the acceptance of the back rentals, that they have no
intention of to waive their right to eject the petitioners. Since they continued on with
the complaint and did not notify the trial court of their intention to have the said
complaint dismissed. Also, the action of ejectment started before their payment to
respondent, not after payment of ejectment. Hence it falls under the said grounds for
ejectment under sec5 of BP 25.In relation to the second ground raised by the
respondent, the lessor is able to validly eject the lessee on the ground of need for
the leased property; however it must be shown that there is no other available
residential unit to satisfy that need. The non-availability must exist at the time of the
demand by the lessor on the lessee to vacate the property, which declared to be
occupied by the RTC. MTC’s decision ruling in favor of petitioners, was because the
petitioners had already occupied the upper floor of the unit, discounting respondents
age and failing health. However, the SC finds that the decision of private
respondents to occupy both the lower and upper portions of the property sprang not
only from mere convenience, but from necessity as well, due to their advanced age
and the poor health of respondent Melquiades Gandia.

5. DR. MA. WENDELYN V. YAP, EVELIA H. BADIAGAN, TERESITA A. BALADAD

and FLORENCIA C. DE VERA vs. DR. VERGEL G. CRUZ, THE HON. MARCELO
R. OBIEN, as Presiding Judge of the Regional Trial Court of Manila, Br. 44, and
THE HON. COURT OF APPEALS, 208 SCRA 692
DOCTRINE: In the absence of such notice, the lease of private respondent
continues to be in force and can not be deemed to have expired as of the end of
the month automatically. Neither can the non-payment of the rent for the month of
August, 1985 be a ground for termination of the lease without a demand to pay
and to vacate.

FACTS:
Dr. Vergel G. Cruz, the private respondent in this case was the bonafide
tenant of Amado Q. Bugayon, Jr. for almost five years in the premises in question
before this controversy started. He religiously paid the monthly rentals of P1,400.00,
introduced several improvements and operated a veterinary clinic known as Malate
Veterinary Clinic. Sometime in the latter part of July, 1985, he offered for sale the
goodwill of the veterinary clinic and some of its equipment to Dr. Wendelyn V. Yap,
Evelia H. Badiagan, Teresita A. Baladad and Florencia C. de Vera, the petitioners
herein. During the period of negotiations, private respondent Cruz introduced to the
landlord Dr. Wendelyn V. Yap as the person interested in taking over the clinic.
However, the negotiations did not materialize but the petitioners managed to enter
into a contract of lease for the said premises at a monthly rental of P1,800.00 with
the landlord. As a result, private respondent Cruz brought an action for "Forcible
Entry with Damages" with the Metropolitan Trial Court of Manila, Branch 27 against
 petitioners herein and the landlord.

Metropolitan Trial court: judgment is hereby rendered in favor of the plaintiff and
all the defendants are ordered to vacate the premises in question and surrender
peaceful possession of the premises to plaintiff; defendants Amado Bugayon, Jr. and
Dr. Wendelyn Yap only are ordered to pay jointly and severally the plaintiff the
amount of P3,000.00 as moral damages; the amount of P2,000.00 as exemplary
damages and the sum of P2,000.00 as attorney’s fees."

Regional Trial Court: affirmed the aforesaid decision of the Metropolitan Trial Court.

Court of Appeals: dismissed the petition for review of petitioners and affirmed the
decision of the Regional Trial Court. Hence, this petition.

ISSUE:
Whether notice and demand are necessary to constitute forcible entry in the case at
bar

RULING:
Yes. In the case at bar, however, the lack of proper notice or demand to vacate
upon the private respondent is clearly evident. In the absence of such notice, the
lease of private respondent continues to be in force and can not be deemed to have
expired as of the end of the month automatically. Neither can the non-payment of the
rent for the month of August, 1985 be a ground for termination of the lease without a
demand to pay and to vacate. Thus, when the landlord and the petitioners entered
into a new contract of lease effectively depriving the private respondent of his lease,
they were clearly guilty of forcible entry in view of the subsisting lease of private
Respondent. We rule in favor of private Respondent. When the petitioners and the
landlord executed a new contract of lease, the lease of private respondent was still
valid and subsisting. There is no question that private respondent has not effectively
relinquished his leasehold rights over the premises in question in view of the failure
of negotiations for the sale of the goodwill. Clearly, the transfer of the leasehold
rights is conditional in nature and has no force and effect if the condition is not
complied with.

HOMEWORK NO. 11

1. Tagbilaran Integrated Sellers Association Vs. CA, 444 SCRA 193

Doctrine: A month-to-month lease under Article 1687 is a lease with a definite period,
hence, it is terminable at the end of each month upon demand to vacate by the lessor.
FACTS:
Tagbilaran Integrated Settlers Association (TISA), is an organization founded by individuals
who have residential and business establishments in a commercial lot located in Tagbilaran
City. The lot, which has an area of 2,726 square meters, is covered by a TCT in the name of
respondent Tagbilaran Women's Club (TWC). In 1986—1987, TWC entered into separate
written lease contracts for a period of one year with individual petitioners: Cirunay, Medina,
Pumares, Lumayno, Ramos, Erana, Ale, Sultan, Chatto, and Gamil.

Pertinent provisions of each contract of lease included the following: (1) stall space rented
shall be exclusively used for business; (2) converting the space into dwelling is strictly
prohibited; (3) no subleasing is allowed without the knowledge and consent of TWC; (4) all
ordinances as to sanitary and building permits shall be complied with; (5) rentals shall be
paid monthly; (6) the period of lease is for one year only; and (7) any violation of the lease
contract automatically rescinds the contract of lease.

The other petitioners: Tapay, Duran, Laway, Penaso, Malik, Gulleban, Mamacal, Estoque
and Saramosing, are sublessees of stalls in the lot.

In a letter to petitioners, TWC demanded that they vacate the rented premises on the
following grounds: expiration of lease contracts, non-payment of rentals, and violations of
the conditions of lease including noncompliance with sanitary and building ordinances.
Another letter of demand was sent to petitioners who refused to vacate the premises,
however.

Thereafter, TWC entered into a lease contract on the lot with one Lambert Lim. Petitioners
nevertheless refused to vacate the lot, and contended that the contract of lease between
TWC and Lambert Lim is null and void because TWC impliedly extended to them new
contracts of lease when it continued collecting monthly rentals from them.

Petitioners filed a petition against TWC and Lim for prohibition, annulment of contract of
lease, and damages with prayer for the issuance of a writ of preliminary prohibitory
injunction before the RTC.

The trial court dismissed petitioners' petition and ruled in favor of the defendants and
against the plaintiffs and third-party defendants.

Petitioners appealed the trial court's decision before the Court of Appeals which affirmed
that of the trial court.

ISSUE/S:
1. Whether implied new lease contracts existed which justify petitioners’ continued
occupation of the lot
2. Whether TWC violated its obligation under Art. 1654 of the Civil COde when it
entered into a lease contract with Lim
3. Whether provisions of P.D. 1517, P.D. 20, Proclamation No. 1893, and P.D. No. 1517
applies to the case at bar

HELD:
1. The lease contracts executed by TWC and petitioners in 1986/1987 were for a
period of one year. Following Article 1669, the lease contracts having been executed
for a determinate time, they ceased on the day fixed, that is, a year after their
execution without need of further demand. While no subsequent lease contracts
extending the duration of the original lease were forged, it appears that TWC allowed
petitioners to continue occupying the lot as in fact it continued to demand, collect
and accept monthly rentals. An implied new lease (tacita reconduccion) was thus
created pursuant to Art. 1670 which states:

If at the end of the contract the lessee should continue enjoying

the thing leased for fifteen days with the acquiescence of the lessor,
and unless a notice to the contrary by either party has previously
been given, it is understood that there is an implied new lease, not
for the period of the original contract, but for the time established in
Articles 1682 and 1687. The other terms of the original contract shall
be revived.

Since the period for the tacita reconduccion was not fixed and the rentals were paid
on a monthly basis, the contract was from month-to-month.

A month-to-month lease under Article 1687 is a lease with a definite period, hence,
it is terminable at the end of each month upon demand to vacate by the lessor.
When a notice to vacate was sent by TWC to petitioners, followed by another, the
tacita reconduccion was aborted. For a notice to vacate constitutes an express act
on the part of the lessor that it no longer consents to the continued occupation by the
lessees of its property.

2. No. While TWC as a lessor is obliged to maintain the lessee in the peaceful and
adequate enjoyment of the lease under Article 1654, the obligation persist only for
the duration of the contract. For after TWC notified petitioners, by letter of January 6,
1990, to vacate the occupied premises, the implied new lease had been aborted and
they, therefore, had no right to continue occupying the lot. Their continued
occupation of the premises had thus become unlawful.

3. No. Under P.D. 1517, only legitimate tenants who have resided on the land for ten
years or more who have built their homes on the land and residents who have legally
occupied the lands by contract continuously for the last ten years, are given the right
of first refusal to purchase the land within a reasonable time. In the case at bar,
petitioners entered into one year lease contracts with TWC for commercial use only
and conversion of the rented premises to dwelling was strictly prohibited. On that
score alone, petitioners' case does not fall under P.D. No. 1517. As for Proclamation
No. 1893, the same covers only the Metropolitan Manila Area.
 With respect to Section 28 of R.A. 7279, it covers only lands in urban areas,
including existing areas for priority development, zonal improvement sites, slum
improvement, resettlement sites, and other areas that may be identified by the local
government units as suitable for socialized housing. Petitioners have not shown that
the lot falls within the coverage of said law. Finally, with respect to Presidential
Decree No. 20, the same seeks to regulate rentals of properties used for housing
purposes and not for commercial use, hence, its inapplication to petitioners' case.

2. Spouses Modomo Vs. Spouses Layug, G.R. No. 197722, August 14, 2019
Doctrine: It is not in every case of novation that the old obligation is necessarily extinguished.
Our Civil Code now admits of the so-called imperfect or modificatory novation where the
original obligation is not extinguished but modified or changed in some of the principal
conditions of the obligation. Thus, Art. 1291 provides that obligations may be modified.
FACTS:
Sps. Layug filed a complaint for ejectment before the MeTC Makati. They alleged among
others that they are the legal possessors of the land located in Makati City. This property
was leased to Sps. Modomo for a period of 7 years. Pursuant to a Contract of Lease dated
Feb. 11, 2005 they agreed to pay 170,000 as monthly rentals subject to an escalation of
10% for the 2nd and 3rd year, 15% on the 4th and 5th year, and 20% on the 6th and 7th
year. It was also agreed that the real estate taxes shall be paid by Sps. Modomo.
Subsequently, Sps. Modomo defaulted in the payment of the escalation of rental fees
commencing from 2006 up to the filing of the ejectment in 2008. Sps. Modomo also failed to
pay their rentals for 2008 and real estate taxes. This prompted Sps. Layug to institute the
present suit claiming that Sps. Layug should vacate the premises.

On the contrary, Sps. Modomo argued that because Jocelyn Modomo had introduced
improvements to the property. Sps. Layug agreed to reduce the monthly rentals to Php
150,000 and the non-imposition of the escalation clause and the real estate tax provision.
Therefore, Sps. Modomo prayed that the case be dismissed because the contract of lease
had been amended by ORAL AGREEMENTS between the parties. They also alleged that
Sps. Layug are in estoppel pais, due to their unconditional acceptance of the reduced
monthly rental.

The MeTC and RTC ruled in favor of Sps. Layug. The RTC harped on the Parole Evidence
Rule and held that if the intention of the parties was to cancel the original contract of lease,
they should have executed a new contract. The CA held that Sps. Modomo failed to
establish the concurrence of the requisites necessary to extinguish or modify the contract of
lease by way of novation.

ISSUE/S:
 1. Whether the provision of the Contract of Lease have been partially novated by the
parties’ alleged subsequent verbal agreement - Yes, with regard to the lowering of
rental fees
2. Whether the principle of estoppel in pais applies so as to preclude Sps. Layug from
denying the partial novation of the Contract of Lease - NO

HELD:
1. While the CC permits the subsequent modification of existing obligations, these
obligations cannot be deemed modified in the absence of clear evidence to this
effect. Novation is never presumed, and the animus novandi, whether total or partial,
must appear by express agreement of the parties , or by their acts that are too clear
and unequivocal to be mistaken. The Court finds that the novation only applies to the
lowering of the monthly rental fee from Php 170,000 to Php 150,000. The records in
the court shows that there is sufficient evidence which shows the modification of
monthly rental through the verbal agreement of the parties. The Statement of
Accounts show that Sps. Layug computed the unpaid balance on the basis of the
lowered rental fee. In addition, Sps. Layug’s letter dated March 24, 2008 also reflects
a computation of Sps. Modomo’s unpaid balance on the basis of the lowered
monthly rental fee.

With regard to the escalation clause and the payment of real estate tax, the record
shows no sufficient evidence to warrant the non-imposition of the said provision. The
first Addendum which was executed to show the detailed schedule of payment and
the second addendum which reflects the modifications in relation to tax assessments
reinforce of the parties to impose an annual escalation and the payment of real
estate taxes.

2. Estoppel does not apply. Estoppel is pais arises when one, by his acts,
representation or admissions, or admissions, or by his own silence when he ought to
speak out, intentionally or through culpable negligence, induces another to believe
certain facts to exist and such other rightfully relies and acts on such belief, so that
he will be prejudiced of the former is permitted to deny the existence of such facts,
are otherwise than, and inconsistent with, those which the party subsequently
attempts to assert; (ii) intent, or at least expectation that this conduct shall be acted
upon, or at least influenced by the other party; and (iii) knowledge, actual or
constructive, of the actual facts. Based on the records, Sps. Layug served upon Sps.
Modomo several letters expressing their objection to the latter’s deficient payments.

3. Booklight, Inc. Vs. Tiu, G.R. No. 213650, June 17, 2019
Doctrine:
FACTS:
Booklight leased space in Tiu’s building for its bookstore business operations. The lease
contract was for 5 years, which expired on Sept. 1, 2001. Since the expiration, the contract
was never renewed. Booklight, however, continued its occupancy of the space until Feb. 28,
2003, when its business operations have ceased. In 13 Feb. 2003, Rudy Tiu filed a case
with the RTC for the collection of sum of money, damages, attorney’s fees, litigation
expenses and attachment against Booklight.

On September 2, 2003, the RTC declared petitioner non-suited for its failure to file a
pre-trial brief and for its failure to appear during the scheduled pre-trial. Petitioner filed a
motion to lift order of non-suit, which was denied by the RTC in its Resolution dated July 26,
2004. Petitioner's motion for reconsideration was likewise denied by the RTC. Hence, the
RTC set the hearing for the ex-parte presentation of respondent's evidence on March 21,
2005. RTC granted the writ of attachment and conducted a presentation of evidence by Tiu
ex-parte due to Booklight’s failure to file a pre-trial brief and to appear in the pre-trial
conference.

RTC: favored Tiu, ordering Booklight to pay the unpaid rentals with 6% legal interest per
annum beginning August 2002, attorney’s fees, litigation expenses, unpaid electric bill,
expenses for security services, and costs.

CA: affirmed RTC’s decision with modifications; deleted legal interest, expenses for security
services, litigation expenses, and attorney’s fees.

ISSUE/S:
1. Whether there was an advanced rental and deposit amounting to P109,440.00
2. If there was, whether this amount was already refunded or considered in the
computation of the unpaid rentals
3. Whether the electric bills amounting to P18,712.98 pertain only to March 2003
HELD:

4. Mulle Vs. Philippine National Bank, G.R. No. 215922, October 1, 2018
Doctrine: Under Article 1670 of the Civil Code, "[i]f at the end of the contract the lessee
should continue enjoying the thing leased for fifteen days with the acquiescence of the
lessor, and unless a notice to the contrary by either party has previously been given, it is
understood that there is an implied new lease, not for the period of the original contract,
but for the time established in Articles 1682 and 1687.
FACTS:
The spouses Fritz and Thelma Muller are the occupants of two parcels of land with
improvements owned by the respondent PNB. The latter informed the petitioners that their
lease will expire on June 1, 1987 and that they had rental arrears for two and a half years
amounting to PhP18,000.00. The petitioners, seek to renew the lease contract for another
year and proposed to buy the subject properties, however such was denied as well as their
intention to buy the subject property by the head office of PNB. Consequently, the
petitioners were demanded to vacate the subject properties within fifteen days in view of the
expiration of the lease, however they continued to occupy the property, hence, PNB sent its
final demand letter, demanding them the payment of the rental arrears from June 1984 up to
June 1, 2006. Respondents failed to pay due attention to the written demands against them
which prompted PNB to institute a Complaint for Ejectment.

The MTCC of Iloilo rendered the decision in favor of the respondent. Aggrieved, the
petitioner filed a notice of appeal to the RTC and the same was granted rendering decision
in favor of the appellant. The respondent PNB appealed to CA, and the latter decided the
case in favor of the respondent ruling that the latter had been consistent in its demands to
pay the rentals but respondents continuously failed to do so. Thus, contrary to the ruling of
the RTC, we agree with the MTCC in ordering for the payment of the rentals, not from the
date of last demand on June 17, 2006, but from May 26, 1987 or the date of the first
demand. It was the time when respondent spouses used and occupied the subject
properties without paying for the reasonable compensation, which is justly due to petitioner
bank as the registered owner of the properties. Petitioner moved to reconsider the decision
contending that the award of rentals should be reckoned from the time of receipt of the
latest demand -July 17, 2006 -and not prior demands; that prior to said last or latest
demand, PNB had no right to collect rent, since it is only after receipt of the latest demand
that they may be considered illegal occupants of the bank's property and thus obligated to
pay rent but was denied, hence the present petition.

ISSUE/S:

Whether or not the rentals may be awarded to respondent PNB only from the time of the
latest demand and not prior ones

HELD:

Under Article 1670 of the Civil Code, if at the end of the contract the lessee should continue
enjoying the thing leased for fifteen days with the acquiescence of the lessor, and unless a
notice to the contrary by either party has previously been given, it is understood that there is
an implied new lease, not for the period of the original contract, but for the time established
in Articles 1682 and 1687. The other terms of the original contract shall be revived." Thus,
when petitioners' written lease agreement with respondent expired on June 1, 1987 and
they did not vacate the subject properties, the terms of the written lease, other than that
covering the period thereof, were revived.

The Court held that so long as petitioners continued to occupy the subject properties
with or without PNB's consent there was a lease agreement between them. They cannot
escape the payment of rent, by any manner whatsoever. First of all, given the
circumstances where liberality is obviously not present and was never a consideration for
the lease contract, petitioners cannot be allowed to enjoy PNB's properties without paying
compensation therefor this would be contrary to fundamental rules of fair play, equity, and
law. Basically, Article 19 of the Civil Code states that every person must, in the exercise of
his rights and in the performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith, and Article 20 provides that every person who, contrary to
law, willfully or negligently causes damage to another, shall indemnify the latter for the
same."

5. Yek Seng Co Vs. Ca, 205 Scra 305

Doctrine:
FACTS:
The subject of the petition is a verbal contract of lease over a portion of a building belonging
to Dewey Veloso Yap and David T. Veloso Yap, and occupied by the Yek Seng Co. as
lessee. The leased premises have been used by the petitioner for its general merchandise
business for more than twenty years. The agreed monthly rental was P3,000.00.

On December 12, 1985, the lessors notified the petitioner that they were terminating the
lease as they intended to renovate the building and thereafter use it themselves. The
petitioner refused to vacate. The private respondents then filed a complaint for ejectment
against the petitioner. The petitioner filed a petition for consignation of the monthly rentals
which it claimed had been refused by the lessors.

ISSUE/S:
Whether Yek Seng Co. should be given an extension of its lease.

HELD:
No. The mere occupancy of the premises for a number of years, by itself, is not sufficient to
justify the extension of the lease. Neither are the substantial improvements it allegedly
made on the leased premises nor the difficulty of finding another place of business, on
which it has not submitted any evidence at all. Petitioner, being engaged in business, did
not take the necessary precautions against its possible and even abrupt displacement
because of the termination of the month-to-month lease.

The rental in the case at bar was paid monthly and the term had not been expressly agreed
upon, the lease was understood under Article 1687 to be terminable from month to month.
At the time the petitioner was asked to vacate the leased premises, the lease contract had
already expired and therefore, following the above-quoted decisions, could no longer be
extended. In fact, even if such contract had not yet expired, its extension would still be
subject to the sound discretion of the court and was by no means obligatory upon it as a
merely ministerial duty.

6. UNITED REALTY CORPORATION vs. HON. COURT OF APPEALS and

REVEREND FATHER JOSE TORRALBA SY, 183 Scra 725
 Doctrine: A reading of the two contracts of lease entered into between petitioner and private
respondent hereinabove reproduced show that its period is from month to month and that the
lease may be terminated when either party gives a 5 days notice in writing.No doubt such a
stipulation between the parties demonstrates that the agreement of lease is for a definite
period and not for an indefinite period.
FACTS:
United Realty Corporation, petitioner entered into a separate lease contract over 2
apartments located at 913-E and 913-F josefina St., Sampaloc, Manila with private
respondent, Rev. Fr. Jose Torralbe Sy with a monthly rent of Php 200.00, until termination of
the lease. Private Respondent then after converted the apartment unit into a Buddhist
Chapel.
Then on 1975, petitioner sent a letter to private respondent informing him of the increase of
his monthly rent from Php 200.00 to Php 500.00 or Php 1,000.00 for the 2 units leased by
the private respondent, with a request that the reply be given if respondent agrees with the
rent increase. Respondent Sy however, filed a complaint before the Department of Public
Information that the rental increase was in violation of P.D. No. 20, which the latter ruled that
it was not, since the place of worship is not protected by the said decree.

Then after, petitioner demanded that respondent leave and vacate the 2 premises, which
the latter failed to do. Thus a complaint for unlawful detainer was filed against Re. Fr. Sy,
the court however dismissed the petition, which was later affirmed by the CA with
modification finding that the respondent is entitled to damages. Hence this petition.

ISSUE/S:
Whether the Contract of Lease is for an indefinite period of time

HELD:

The court ruled that the lease agreement is for a definite period, per the stipulation that the
agreement would be terminated when either party gives a notice in five (5) days in writing.
Since the lease agreement in question is for a definite period it follows that petitioner has a
right to judicially eject private respondent from the premises as an exception to the general
rule provided for in Section 4 of P.D. No. 20 which provides as follows:

Except when the lease is for a definite period, the provisions of paragraph (1) of Article
1673 of the Civil Code of the Philippines insofar as they refer to dwelling unit or land on
which another's dwelling is located shall be suspended until otherwise provided; but other
provisions of the Civil Code and the Rules of Court of the Philippines on lease contracts
insofar as they are not in conflict with the provisions of this Act, shall apply.

Moreover, under Section of 5(f) of B.P. Blg. 25 one of the grounds for ejectment is the
expiration of the period of a written lease contract. In this case, because of the failure of the
private respondent to pay the increased rental demanded by petitioner, petitioner elected to
terminate the contract and asked the private respondent to vacate the premises. A lease
contract may be terminated at the end of any month, which shall be deemed terminated
upon the refusal to pay the increased monthly rental demanded by the petitioner, provided
the same is not exorbitant.

7. LEGAR MANAGEMENT & REALTY CORPORATION, vs. COURT OF APPEALS, HON.

JUAN O. ENRIQUEZ, JR., FELIPE PASCUAL, and DIONISIO ANCHETA , G.R. No.
117423, Jan. 24, 1996.
Doctrine:
FACTS:
Spouses Augusto and Celia Legasto entered into a written contract of lease of their building
with no definite period with private respondents Pascual and Ancheta. Sometime in 1987,
the Legasto spouses and their children organized Legar Management & Realty Corporation,
and transferred and assigned thereto all their rights, interests, and privileges over certain
properties, including the subject apartment building.

Thereafter, petitioner allowed private respondents to continue occupying their apartment

unit by virtue of a verbal contract of lease which was renewable on a month-to-month basis.
Pursuant to their verbal lease agreement, private respondents were to pay petitioner a
monthly rental of One Thousand Five Hundred Forty-Five Pesos (P1,545.00).

On April 21, 1992, petitioner wrote private respondent Pascual a formal notice of
termination, requesting him to vacate unit 318-T by the end of May, 1992. A similar formal
notice was sent to private respondent Ancheta on June 4, 1992, demanding vacation of the
same unit by the end of June, 1992. Both refused to heed petitioner's demand and did not
vacate the subject premises.

Thus an ejectment case was instituted against the private respondents with the MTC that
ruled that the verbal lease contract between the parties, being on a month-to-month basis,
is for a definite period, and may be terminated at the end of any month. Upon appeal
however, RTC reversed the said decision, holding that "the mere expiration of the
month-to-month lease period in accordance with Article 1687 of the New Civil Code does
not automatically give rise to an ejectment in cases governed by the Rent Control Law, in
view of Section 6 of Batas Pambansa Blg. 877, as amended. Said decision was upheld by
CA ruling that under the said law, the owner/lessor cannot eject the tenant by reason of the
expiration of the period of lease as fixed or determined under Article 1687 of the Civil Code.
Even if in the instant case the month-to-month period is deemed to have expired at the end
of the month after notice of demand to vacate . . . , (private) respondents' eviction cannot be
allowed without regard to the grounds for ejectment enumerated in Section 5 of Batas
Pambansa Blg. 877. Hence the petition.
ISSUE/S:
Whether the lessee of a residential property covered by the Rent Control Law can be
ejected on the basis alone of the expiration of the verbal lease contract under which rentals
are paid monthly.

HELD:
The court ruled in the affirmative. "Section 6 of Batas Pambansa Blg. 877 provides that
provisions of par. 1 of the A.1673 of the Civil Code of the Philippines referring to residential
units covered by the said act shall be suspended during the effectivity of the act, and the
other provisions of the Civil Code and the Rules of Court on lease contracts, insofar as they
are not in conflict with the provisions of the Act shall apply.
Also, Art. 1687 of the same code provides that “If the period for the lease has not been
fixed, it is understood to be from year to year, if the rent agreed upon is annual; from month
to month, if it is monthly; from week to week, if it is weekly; and from day to day, if the rent is
to be paid daily. However, even though a monthly rent is paid, and no period for the lease
has been set, the courts may fix a longer term for the lease after the lessee has occupied
the premises for over one year. If the rent is weekly, the courts may likewise determine a
longer period after the lessee has been in possession for over six months. In case of daily
rent, the courts may fix a longer period after the lessee has stayed in the place for over one
month.'

In the case at bench, it was found by all three lower courts that the lease over the subject
property was on a month-to-month basis, and that there was proper notice of non-renewal
of contract and demand for vacation of premises made by petitioners on private respondent.
Unquestionably, therefore, the verbal lease agreement entered into by private respondent
and petitioners' father and predecessor-in-interest has been validly terminated.

HOMEWORK NO. 12