LS 207 SALES LAW CASE Under Atty. Resci Rizada Nolasco 2nd Case Digest Compilation

HERMINIO TAYAG, PETITIONER,
VS.
AMANCIA LACSON, ROSENDO LACSON, ANTONIO LACSON, JUAN LACSON,
TEODISIA LACSON-ESPINOSA AND THE COURT OF APPEALS, RESPONDENTS.
G.R. NO. 134971 MARCH 25, 2004
CALLEJO, SR., J.:
DIGESTED BY: KAREN GRACE M. AGUIMOD
DOCTRINE:
An option is a contract by which the owner of the property agrees with another
person that he shall have the right to buy his property at a fixed price within a certain
time; An option contract is a separate and distinct contract from which the parties
may enter into upon the conjunction of the option.
FACTS:
Angelica Tiotuyco Vda. de Lacson and her children all surnamed Lacson (Lacsons)
were the registered owners of three parcels of land located in Mabalacat,
Pampanga. The properties, which were tenanted agricultural lands, were
administered by Renato Espinosa for the owner.
A group of original farmers/tillers individually executed in favor of the Herminio

Tayag (Tayag) separate Deeds of Assignment in which the assignees assigned to
Tayag their respective rights as tenants/tillers of the landholdings possessed and
tilled by them for and in consideration of P50.00 per square meter.
Tayag was also granted the exclusive right to buy the property if and when
Lacsons, with the concurrence of the defendants-tenants, agreed to sell the
property. Tayag gave varied sums of money to the tenants as partial payments,
and the latter issued receipts for the said amounts.
Tayag called a meeting of the defendants-tenants (Tenants) to work out the

implementation of the terms of their separate agreements. The defendants-tenants,
through Joven Mariano, wrote Tayag stating that they were not attending the
meeting and instead gave notice of their collective decision to sell all their rights
and interests, as tenants/lessees, over the landholding to Lacsons.
Tayag filed a complaint for the court to fix a period within which to pay the agreed
purchase price of P50.00 per square meter to the tenants.
TAYAG CONTENTION:
Those tenants are original farmers or direct tillers of landholdings over parcels of
lands which are registered in the names of Lacsons; while other tenants are sub-
tenants over the same parcel of land. The tenants Tiamson, et al., entered into
Deeds of Assignment with Tayag by which the tenants assigned all their rights and
interests on their landholdings to the Tayag and the Tenants received from the
Tayag partial payments in the amounts corresponding to their names. Tayag
prayed Writ of Preliminary
SALES Case Digest (2nd Part)2021-2022, 2nd Semester MONDAY (6:30-9:30) PROFESSOR: ATTY. RESCI
ANGELLI R. RIZADA-NOLASCO
Injunction be issued prohibiting, enjoining and restraining Tenants from rescinding
their contracts with Tayag and from alienating their rights and interest over the
properties in favor of Lacsons or any other third persons; and prohibiting the
Lacsons from encumbering/alienating.
LACSON CONTENTION:
Being merely tenants-tillers, the Tenants had no right to enter into any transactions
involving their properties without their knowledge and consent. They also averred
that the transfers or assignments of leasehold rights made by the tenants to Tayag
is contrary to Presidential Decree (P.D.) No. 27 and Republic Act No. 6657, the
Comprehensive Agrarian Reform Program (CARP). Lacsons interposed
counterclaims for damages against Tayag.
TENANTS CONTENTION:
The tenants Tiamson, et al., alleged that the money each of them received from Tayag
were in the form of loans, and that they were deceived into signing the deeds of
assignment. They never knew that what they signed was a Deed of Assignment.
That the Deeds of Assignment were signed through the employment of fraud,
deceit and false pretenses of plaintiff and made the defendants believe that what
they signed was a mere receipt for amounts received by way of loans
Hence, Tayag filed for petition for review on certiorari on the contention that
the deeds of assignment executed by the defendants-tenants are perfected
option contracts.
ISSUE:
Whether or not the deeds of assignment executed by the defendants-tenants are

perfected option contracts.
RULING:
No. We do not agree with the contention of Tayag that the deeds of assignment
executed by the defendants-tenants are perfected option contracts.
An option is a contract by which the owner of the property agrees with another
person that he shall have the right to buy his property at a fixed price within a certain
time.
It is a condition offered 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 certain time,
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 imposes no binding
obligation on the person holding the option, aside from the consideration for the
offer. Until accepted, it is not, properly speaking, treated as a contract.
The second party gets in praesenti, not lands, not an agreement that he shall have the
lands, but the right to call for and receive lands if he elects. An option contract is a
separate and distinct contract from which the parties may enter into upon the
conjunction of the option.
In this case, the defendants-tenants-subtenants, under the deeds of assignment,

granted to Tayag is not only an option but the exclusive right to buy the landholding.
But the grantors were merely the defendants-tenants, and not Lacsons, the registered
owners of the property.
Not being the registered owners of the property, the defendants-tenants could not
legally grant to Tayag the option, much less the "exclusive right" to buy the
property. As the Latin saying goes, "NEMO DAT QUOD NON HABET." (NO ONE
GIVES WHAT HE DOESN’T HAVE)
A right of first refusal is a contractual grant, not of the sale of a property, but of the
first priority to buy the property in the event the owner sells the same. As
distinguished from an option contract, in a right of first refusal, while the object
might be made determinate, the exercise of the right of first refusal would be
dependent not only on the owner’s eventual intention to enter into a binding
juridical relation with another but also on terms, including the price, that are yet to
be firmed up. (Polytechnic university of the Philippines vs Golden Horizon Realty
Corporation, GR. 183612, 2010)
ADELFA PROPERTIES, INC., PETITIONER,
VS.
COURT OF APPEALS, ROSARIO JIMENEZ-CASTAÑEDA AND SALUD JIMENEZ,
RESPONDENTS.
G.R. NO. 111238 JANUARY 25, 1995
REGALADO, J.:
DIGESTED BY: ANALOU DORADO-MAYPA
DOCTRINE:
An option, 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 certain time, 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.” 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 property gives the
optionee the right or privilege of accepting the offer and buying the property on
certain terms.
FACTS:
Rosario and Salud Jimenez, and their brothers Jose and Dominador were the co-
owners of a parcel of land in Las Pinas, Metro Manila. In 1988, Jose and Dominador
sold their ½ share to Adelfa Properties pursuant to a Kasulatan ng Bilihan ng Lupa.
A Confirmatory Extrajudicial Partition Agreement was executed wherein the eastern
portion was adjudicated to Jimenez’ Brothers. Adelfa Properties expressed interest
in buying western portion from the Jimenez Sisters. Then, in 1989 an Exclusive
Option to Purchase was executed between Adelfa Properties and the Jimenez
Sisters with the following terms and conditions:
(1) the selling price is P2.8M for an area of 8,655 square meters;
(2) the sum of P50,000 they received as an option money shall be credited as
partial payment upon the consummation of the sale and the balance in the sum of
P2,806,150 to be paid on or before November 30, 1989;
(3) In case of default option shall be cancelled and 50% of the option money be
forfeited in favor of private respondents;
(4) all expenses are for the account of vendors while registration on the account of
Adelfa Properties.
Before Adelfa Properties could make payment, it received summons, with a copy of
complaint for annulment of deed of sale. Thus, it informed the Jimenezes that it
would hold payment of full purchase price and suggested that they settle the case
with the nephews and nieces. Salud Jimenez refused to heed the suggestion of
Adelfa Properties. Later, the Jimenez Sisters informed Adelfa Properties that they
were canceling the transaction. In turn, Atty. Bernardo offered to pay the purchase
price provided that P500,000 be deducted therefrom for the settlement of the civil
case. This was rejected by the Jimenezes; he again made another offer on a later
date, but this was also rejected by the Jimenez’ sisters.
In 1990, the Jimenez Sisters executed a Deed of Conditional Sale in favor of
Emylene Chua over the same parcel of land for P3M, which P1.5M was paid to them
on said date, with balance payable upon the transfer of title. Counsel for Adelfa
Properties wrote to them that in view of the dismissal of the annulment case, Adelfa is
now willing to pay the purchase price.
The Jimenez Sisters then sent a letter to petitioner enclosing therein a check for
P25,000 representing the refund of the 50% of the option money paid; and they
requested Adelfa Properties to return the title, which the latter failed to do.
The Jimenez Sisters filed before the RTC for Annulment of Contract with Damages
praying that the exclusive option to purchase be declared null and void. The RTC
ruled that agreement was merely an option contract and the suspension of
payment by constituted a counter-offer which, therefore, was tantamount to a
rejection of the optio; and that the sale to Chua is valid and binding. The CA
affirmed the RTC Judgment.
Jimenez Sisters’ Contention:

The failure of petitioner to pay the balance of the purchase price within the agreed
period was attributed by private respondents to "lack of word of honor" on the part
of the former; And the offer of petitioner to deduct P500,000 (later reduced to
P300,000) from the purchase price for the settlement of the civil case was tantamount
to a counter- offer.
There was really no intention on their part to deliver the title to Adelfa Properties
with the purpose of transferring ownership to it. They claim that Adelfa’s counsel
had possession of the title only because he was their counsel in the petition for
reconstitution.
Adelfa Properties’ Contention:

To justify its failure to pay the purchase price within the agreed period, Adelfa
Properties invokes Article 1590; that it may suspend the payment of the price until
the vendor has caused the disturbance or danger to cease.
ISSUE:
Was the agreement entered into an option contract?
RULING:
No. Irrefragably, the controverted document should legally be considered as a

perfected contract to sell. We reject the position and ratiocination of respondent
Court of Appeals which, while awarding the correct relief to private respondents,
categorized the instrument as “strictly an option contract.”
There are two features which convince us that the parties never intended to transfer
ownership to petitioner except upon the full payment of the purchase price.
1. The exclusive option to purchase, although it provided for automatic

rescission of the contract and partial forfeiture of the amount already paid in
case of default, does not mention that petitioner is obliged to return possession
or ownership of
the property as a consequence of non-payment. There is no stipulation anent
reversion or reconveyance of the property to herein private respondents in the
event that petitioner does not comply with its obligation. With the absence of
such a stipulation, although there is a provision on the remedies available to the
parties in case of breach, it may legally be inferred that the parties never
intended to transfer ownership to the petitioner to completion of payment of the
purchase price.
2. It has not been shown there was delivery of the property, actual or constructive,
made to herein petitioner. The exclusive option to purchase is not contained in a
public instrument the execution of which would have been considered equivalent
to delivery. Neither did petitioner take actual, physical possession of the
property at any given time.
An option, 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 certain time, 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, that is, 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 property gives the optionee
the right or privilege of accepting the offer and buying the property on certain
terms.
The distinction between an “option” and a contract of sale is that an option is an

unaccepted offer. It states the terms and conditions on which the owner is willing
to sell his land, if the holder elects to accept them within the time limited. If the
holder does so elect, he must give notice to the other party, and the accepted offer
thereupon becomes a valid and binding contract. If an acceptance is not made
within the time fixed, the owner is no longer bound by his offer, and the option is
at an end. A contract of sale, on the other hand, fixes definitely the relative rights
and obligations of both parties at the time of its execution. The offer and the
acceptance are concurrent, since the minds of the contracting parties meet in the
terms of the agreement.
The test in determining whether a contract is a “contract of sale or purchase” or a mere

“option” is whether or not the agreement could be specifically enforced. There is no
doubt that the obligation of petitioner to pay the purchase price is specific, definite
and certain, and consequently binding and enforceable. Had private respondents
chosen to enforce the contract, they could have specifically compelled petitioner to
pay the balance of P2,806,150.00. This is distinctly made manifest in the contract itself
as an integral stipulation, compliance with which could legally and definitely be
demanded from petitioner as a consequence.
An agreement is only an “option” when no obligation rests on the party to make
any payment except such as may be agreed on between the parties as
consideration to support the option until he has made up his mind within the time
specified. An option, and not a contract to purchase, is effected by an agreement to
sell real estate for payments to be made within a specified time and providing for
forfeiture of money paid upon failure to make payment, where the purchaser does
not agree to purchase, to make payment, or to bind himself in any way other than
the forfeiture of the payments made. As hereinbefore discussed, this is not the
situation obtaining in the case at bar.
SPOUSES JULIO D. VILLAMOR AND MARINA VILLAMOR, PETITIONERS V. THE
HON. COURT OF APPEALS AND SPOUSES MACARIA LABINGISA REYES AND
ROBERTO REYES, RESPONDENTS.
GR. NO. 97332 OCTOBER 10, 1991
MEDIALDEA, J.:
DIGESTED BY: ROMER JAY B. ARAÑEZ
DOCTRINE:
DEFINITION OF CONSIDERATION- As expressed in Gonzales v. Trinidad, 67 Phil.

682, consideration is "the why of the contracts, the essential reason which moves
the contracting parties to enter into the contract."
FACTS:
Macaria Labingisa Reyes was the owner of a 600-sq.m. lot located at Baesa, Caloocan
City.In July 1971,
Macaria sold a portion of 300 sq. m. of the lot to the Sps. Julio and Marina Villamor
for the total amount of P21,000. Earlier, Macaria borrowed P2,000 from the spouses
which amount was deducted from the total purchase price of the 300 sq. m. lot
sold. On Nov. 11, 1971, Macaria executed a “Deed of Option” in favor of Villamor in
which the remaining 300 sq. m. portion of the lot would be sold to Villamor
“whenever the need of such sale arises either on the part of the Reyeses or on the
part of the sps. Villamor” at the same price of P70.00 per sq. m. and excluding
whatever improvement may be found thereon.
When Roberto Reyes, the husband, retired in 1984, they offered to repurchase the
lot sold by them to the Villamor spouses but Marina Villamor refused and reminded
them instead that the Deed of Option in fact gave them the option to purchase the
remaining portion of the lot.
The Villamors, on the other hand, claimed that they had expressed their desire to
purchase the remaining 300 sq. m. portion of the lot but the Reyeses had been
ignoring the. Thus, on July 13, 1987 they filed a complaint for specific performance
against the Reyeses.
ISSUE:
Whether or not the Deed of Option is valid
RULING:
YES. The court a quo, ruled that the Deed of Option was a valid agreement
between the parties.
As expressed in Gonzales v. Trinidad, consideration is “the why of the contracts,

the essential reason which moves the contracting parties to enter into the
contract.” The
cause or the impelling reason on the part of private respondent in executing the
deed of option as appearing in the deed itself is the petitioners’ having agreed to
buy the 300 sq. m. portion of private respondents’ land at P70.00/sq.m. “which was
greatly higher than the actual reasonable prevailing price.” This cause or
consideration is clear from the deed which stated: “That the only reason why the
spouses-vendees Julio Villamor and Marina V. Villamor agreed to buy the said one-
half portion at the above stated price of about P70.00 per square meter, is because
I, and my husband Roberto Reyes, have agreed to sell and convey to them the
remaining one-half portion still owned by me.”
The respondent appellate court failed to give due consideration to petitioners'

evidence which shows that in 1969 the Villamor spouses bought an adjacent lot
from the brother of Macaria Labing-isa for only P18.00 per square meter which the
private respondents did not rebut. Thus, expressed in terms of money, the
consideration for the deed of option is the difference between the purchase price of
the 300 square meter portion of the lot in 1971 (P70.00 per sq.m.) and the
prevailing reasonable price of the same lot in 1971. Whatever it is, (P25.00 or P18.00)
though not specifically stated in the deed of option, was ascertainable. Petitioner's
allegedly paying P52.00 per square meter for the option may, as opined by the
appellate court, be improbable but improbabilities does not invalidate a contract
freely entered into by the parties.
BIBLE BAPTIST CHURCH AND PASTOR REUBEN BELMONTE, PETITIONERS,
V.
COURT OF APPEALS AND MR. & MRS. ELMER TITO MEDINA VILLANUEVA,
RESPONDENTS.
G.R. NO. 126454 NOVEMBER 26, 2004
AZCUNA, J.:
DIGESTED BY: MARK ANTHONY B. MULIT
DOCTRINE:
An option contract needs to be supported by a separate consideration. The

consideration need not be monetary but could consist of other things or
undertakings. However, if the consideration is not monetary, these must be things or
undertakings of value, in view of the onerous nature of the contract of option.
Furthermore, when a consideration for an option contract is not monetary, said
consideration must be clearly specified as such in the option contract or clause.
FACTS:
Spouses Villanueva leased a property to Bible Baptist for a period of 15 years

and monthly rental of 10,000.00. The lease contract contained the following
pertinent stipulations:
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.
Baptist Church seeks to buy the leased premises from the spouses Villanueva,
under the option given to them. They argue that the consideration supporting the
option was their agreement to pay off Villanueva's P84,000 loan with the bank,
thereby freeing the subject property from the mortgage encumbrance.
ISSUE:
WON the option to buy given to Bible Baptist Church is founded upon consideration.
RULING:
No. The option contract was not supported by a consideration and the payments
made by Bible Baptist are all rental fees.
The 84,000 paid by Bible Baptist to free the property from mortgage cannot be
considered as an option money because it was actually exhausted as rental payment
for the first year. Hence, Bible Baptist did not part with something of value other
than the rental fees.
The SC said that an option contract should have a determinate thing, price certain
and a consideration separate and distinct from the price.
Additionally, an option contract needs to be supported by a separate consideration.

The consideration need not be monetary but could consist of other things or
undertakings. However, if the consideration is not monetary, these must be things
or undertakings of value, in view of the onerous nature of the contract of option.
Furthermore, when a consideration for an option contract is not monetary, said
consideration must be clearly specified as such in the option contract or clause.
Hence, there was no option contract.
NICOLAS SANCHEZ, PLAINTIFF-APPELLEE,
v.
SEVERINA RIGOS, DEFENDANT-APPELLANT.
G.R. NO. L-25494 JUNE 14, 1972
CONCEPCION, C.J.:
DIGESTED BY: KARINA MARA C. TANJILI
DOCTRINE:
Ø Non applicability of Article 1479 of the Civil Code

Ø Article 1479 versus Article 1354, both of the Civil Code
o Article 1354 applies to contracts in general while the 2nd paragraph of
Article 1479 applies to “sales” in particular, specifically to an accepted
unilateral promise to buy or sell.
o In order that the unilateral promise may be binding upon the promisor,
Article 1479 requires the concurrence of the condition that the promise be
supported by a consideration distinct from the price. Hence, the promisee
cannot compel the promisor to comply, absent said condition.
FACTS:
On April 3, 1961, plaintiff Nicolas Sanchez (‘Sanchez’) and defendant Severina Rigos
(‘Rigos’) executed an Option to Purchase whereby Rigos “agreed, promised and
committed to sell a parcel of land for P1, 510 with an understanding that if Sanchez
fail to exercise his right to buy the property within two years of said execution, said
option shall be terminated and elapsed”. Tenders of payment were made by
Sanchez but were rejected by Rigos, hence the former had deposited said amounts
with the trial court and commenced this action praying for specific performance and
damages. Sanchez contends that the contract is reciprocally demandable pursuant
to the first paragraph of Article 1479.
In her defense, Rigos argued that the contract executed is a unilateral promise to
sell and one which is without consideration hence is null and void.
ISSUE:
Whether or not there was consideration involved in the contract executed.
RULING:
None. The Court held that the instrument executed merely granted Sanchez the
option to buy the property and while Rigos had agreed and promised to sell the
same, said is not supported by consideration which is distinct from the P1, 510
stipulated price of the property; as such, Article 1479 is not applicable.
Absent said consideration, the contract is not valid and the promisor or Rigos in this
case is not bound by her promise and may accordingly withdraw it. Pending notice
of its withdrawal, Sanchez’s accepted promise partakes, but of the nature of an
offer to sell, which, if accepted, results in a perfected contract of sale.
PERCELINO DIAMANTE, PETITIONER,
VS.
HON. COURT OF APPEALS AND GERARDO DEYPALUBUS, RESPONDENTS.
G.R. NO. L-51824 FEBRUARY 7, 1992
DAVIDE, JR., J:
DIGESTED BY: LADERA, KENNETH CLAIRE P.
DOCTRINE:
An agreement to repurchase becomes a promise to sell when made after the sale,
because when the sale is made without such an agreement, the purchaser acquires
the thing sold absolutely. If he afterwards grants the vendor the right to repurchase, it
is a new contract entered into by the purchaser or new absolute owner. Hence, the
Option to Repurchase executed by private respondent in the present case, was
merely a promise to sell, which must be governed by Article 1479 of the Civil Code.
FACTS:
Aniceta Dionio had a fishery lot with an area of 9.4 hectares which was previous
covered by Fishpond permit. Upon Anecita's death, her heirs, petitioner Diamante
and Primitivo Dafeliz, inherited the property which they later divided between
themselves. Primitivo Dafeliz later sold his share to Gerardo Deypalubus. In 1959,
Diamante sold to Deypalubus his leasehold rights over the property in question for
P8,000.00 with the right to repurchase the same within three (3) years. Deypalubus
filed an application for fishpond permit. Due to urgent financial needs, Diamante sold
again all of his remaining rights over his property to Deypalubus for 4k. Eight days
after, Deypalubus had just executed an option to repurchase the said property
within 10 years from the said date an 10 year grace period in favor of Diamante.
Thereafter, on 2 August 1961, the Bureau of Fisheries issued to Deypalubus
Fishpond Permit but Diamante opposed to this and alleged that he has a valid
twenty-year option to repurchase the subject property. hence, bureau of fisheries
should nullify Deypalubus’ permit insofar as the said property.
ISSUE:
Whether or not the “Option to Repurchase” executed by Deypalubos granted

Diamante the right to repurchase the subject lot.
RULING:
NO. THE OPTION TO REPURCHASE WAS A MERE PROMISE TO SELL SINCE THERE
WAS NO SEPARATE CONSIDERATION DISTINCT FROM THE PRICE AND
ACCEPTANCE.
An agreement to repurchase becomes a promise to sell when made after the sale,
because when the sale is made without such an agreement, the purchaser acquires
the thing sold absolutely. If he afterwards grants the vendor the right to repurchase, it
is a new contract entered into by the purchaser or new absolute owner. Hence, the
Option to Repurchase executed by private respondent in the present case, was
merely a promise to sell, which must be governed by Article 1479 of the Civil Code.
Article 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable. 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. (1451a)
In this case, A copy of the so-called Option to Repurchase is neither attached to the
records nor quoted in any of the pleadings of the parties. This Court cannot,
therefore, properly rule on whether the promise was accepted and a consideration
distinct from the price, supports the option. Undoubtedly, in the absence of either
or both acceptance and separate consideration, the promise to sell is not binding
upon the promissor (private respondent).
a unilateral promise to buy or sell is a mere offer, which is not converted into a
contract except at the moment it is accepted. Acceptance is the act that gives life
to a juridical obligation, because, before the promise is accepted, the promisor may
withdraw it at any time. Upon acceptance, however, a bilateral contract to sell and
to buy is created, and the offeree ipso facto assumes the obligations of a
purchaser; the offeror, on the other hand, would be liable for damages if he fails to
deliver the thing he had offered for sale.
The contract of option is a separate and distinct contract from the contract which
the parties may enter to upon the consummation of the option, and a consideration
for an optional contract is just as important as the consideration for any other kind of
contract. Thus, a distinction should be drawn between the consideration for the
option to repurchase, and consideration for the contract of repurchase itself.
Therefore, even if the promise was accepted, respondent was not bound thereby in
the absence of a distinct consideration.
PHILIPPINE NATIONAL OIL COMPANY AND PNOC DOCKYARD & ENGINEERING
CORPORATION, PETITIONERS
VS.
KEPPEL PHILIPPINES HOLDINGS, INC., RESPONDENT
G.R. NO. 202050 JULY 25, 2016
BRION, J.:
DIGESTED BY: GENEVIEVE D. GUNDA
DOCTRINE:
When an offer is not supported by a separate consideration, the offer stands but, in
the absence of a binding contract, the offeror may withdraw it any time. Once the
acceptance of the offer is duly communicated before the withdrawal of the offer, a
bilateral contract to buy and sell is generated.
FACTS:
On August 6, 1976, the respondent Keppel Philippines Holdings, Inc. (Keppel)

entered into a lease agreement (the agreement) with Luzon Stevedoring
Corporation (Lusteveco) covering 11 hectares of land. The lease was for a period of
25 years for a consideration of P2.1 million. At the option of Lusteveco, the rental
fee could be totally or partially converted into equity shares in Keppel.
At the end of the 25-year lease period, Keppel was given the "firm and absolute
option to purchase" the land for ₱4.09 million, provided that it had acquired the
necessary qualification to own land under Philippine laws at the time the option is
exercised.
If, at the end of the 25-year lease period (or in 2001), Keppel remained unqualified
to own private lands, the agreement provided that the lease would be automatically
renewed for another 25 years. Keppel was further allowed to exercise the option to
purchase the land up to the 30th year of the lease (or in 2006), also on the
condition that, by then, it would have acquired the requisite qualification to own
land in the Philippines.
Together with Keppel’s lease rights and option to purchase, Lusteveco warranted
not to sell the land or assign its rights to the land for the duration of the lease
unless with the prior written consent of Keppel. When the petitioner Philippine
National Oil Corporation (PNOC) acquired the land from Lusteveco and took over
the rights and obligations under the agreement, Keppel did not object to the
assignment so long as the agreement was annotated on PNOC’s title. With PNOC’s
consent and cooperation, the agreement was recorded as Entry No. 65340 on
PNOC’s Transfer of Certificate of Title No. T-50724.
On December 8, 2000, Keppel wrote PNOC informing the latter that at least 60% of
its shares were now owned by Filipinos. Keppel expressed its readiness to exercise
its option to purchase the land. Keppel reiterated its demand to purchase the land
several times, but on every occasion, PNOC did not favorably respond.
Keppel instituted a complaint for specific performance with the RTC on September
26, 2003 against PNOC.
PNOC countered Keppel’s claims by contending that the agreement was illegal for
circumventing the constitutional prohibition against aliens holding lands in the
Philippines. It further asserted that the option contract was void, as it was unsupported
by a separate valuable consideration
The RTC rendered a decision in favor of Keppel and ordered PNOC to execute a
deed of absolute sale upon payment by Keppel of the purchase price of ₱4.09
million.
ARGUMENTS
PNOC contends that the terms of the agreement amounted to a virtual sale of the
land to Keppel who, at the time of the agreement’s enactment, was a foreign
corporation and, thus, violated the 1973 Constitution.
Keppel opposes the claim that there was "virtual sale" of the land, noting that the
option is subject to the condition that Keppel becomes qualified to own private
lands in the Philippines. This condition ripened in 2000, when at least 60% of
Keppel’s equity became Filipino-owned.
Keppel contends that the agreement is not a scheme designed to circumvent the
constitutional prohibition. Lusteveco was not proscribed from alienating its
ownership rights over the land but was simply required to secure Keppel’s prior
written consent. Indeed, Lusteveco was able to transfer its interest to PNOC without
any objection from Keppel.
PNOC contends the illegality of the option contract for lack of a separate
consideration, as required by Article 1479 of the Civil Code. It claims that the option
contract is distinct from the main contract of lease and must be supported by a
consideration other than the rental fees provided in the agreement.
Keppel counters that the requirement of a separate consideration for an option to

purchase applies only when the option is granted in a separate contract. In the
present case, the option is embodied in a reciprocal contract and, following the
Court’s ruling in Vda. De Quirino v. Palarca, the option is supported by the same
consideration supporting the main contract.
ISSUES:
1. Is the agreement constitutional?

2. Is the option to purchase the land given to Keppel supported by a
separate valuable consideration?
RULING:
The constitutionality of the agreement.

The agreement is constitutional.
Preserving the ownership of land, whether public or private, in Filipino hands is the
policy consistently adopted in all three of our constitutions. Under the 1935,46
1973, and 1987 Constitutions, no private land shall be transferred, assigned, or
conveyed except to individuals, corporations, or associations qualified to acquire or
hold lands of the public domain. Only Filipino citizens, or corporations or
associations whose capital is 60% owned by Filipinos citizens, are constitutionally
qualified to own private lands.
Upholding this nationalization policy, the Court has voided not only outright
conveyances of land to foreigners, but also arrangements where the rights of
ownership were gradually transferred to foreigners. In Lui She, the Court
considered a 99-year lease agreement, which gave the foreigner-lessee the option
to buy the land and prohibited the Filipino owner-lessor from selling or otherwise
disposing the land, amounted to 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
In the present case, the agreement was executed to enable Keppel to use the land
for its shipbuilding and ship repair business. The industrial/commercial purpose
behind the agreement differentiates the present case from Lui She where the
leased property was primarily devoted to residential use. Keppel’s uncontested
testimony showed that it incurred P60 million costs solely for preliminary activities
to make the land suitable as a shipyard, and subsequently introduced
improvements worth P177 million. Taking these investments into account and the
nature of the business that Keppel conducts on the land, the Court finds it
reasonable that the agreement’s terms provided for an extended duration of the
lease and a restriction on the rights of Lusteveco.
The Court observed that unlike in Lui She, Lusteveco was not completely denied its
ownership rights during the course of the lease. It could dispose of the lands or
assign its rights thereto, provided it secured Keppel’s prior written consent. That
Lusteveco was able to convey the land in favor of PNOC during the pendency of the
lease should negate a finding that the agreement’s terms amounted to a virtual
transfer of ownership of the land to Keppel.
Separate Valuable Consideration.
No. The agreement did not refer to any consideration to support Keppel’s option to
purchase the land. However, an option, though unsupported by a separate
consideration, remains an offer that, if duly accepted, generates into a contract to
sell where the parties’ respective obligations become reciprocally demandable
When the written agreement itself does not state the consideration for the option
contract, the offeree or promisee bears the burden of proving the existence of a
separate consideration for the option . The offeree cannot rely on Article 1354 of the
Civil Code, which presumes the existence of consideration, since Article 1479 of the
Civil Code is a specific provision on option contracts that explicitly requires the
existence of a consideration distinct from the purchase price.
In this case, none of the above rules were observed. Nothing in paragraph 5 of the
Agreement indicating that the grant to Lusteveco of the option to convert the
purchase price for Keppel shares was intended by the parties as the consideration
for Keppel’s option to buy the land. Keppel itself as the offeree presented no
evidence to support this finding. On the contrary, the option to convert the
purchase price for shares should be deemed part of the consideration for the
contract of sale itself, since the shares are merely an alternative to the actual cash
price.
Since the Agreement did not categorically refer to any consideration to support
Keppel’s option to buy and for Keppel’s failure to present evidence in this regard,
the Court cannot uphold the existence of an option contract in this case.
The absence of a consideration supporting the option contract, however, does not
invalidate an offer to buy (or to sell). An option unsupported by a separate
consideration stands as an unaccepted offer to buy (or to sell) which, when properly
accepted, ripens into a contract to sell.
Sanchez v. Rigos reconciled the apparent conflict between Articles 1324 and 1479 of
the Civil Code, which are quoted below:
Article 1324. When the offerer has allowed the offeree a certain period to accept,
the offer may be withdrawn at any time before acceptance by communicating such
withdrawal, except when the option is founded upon a consideration, as something
paid or promised.
Article 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price

certain is binding upon the promissor if the promise is supported by a consideration
distinct from the price.
The Court en banc declared that there is no distinction between these two
provisions because the scenario contemplated in the second paragraph of Article
1479 is the same as that in the last clause of Article 1324. Instead of finding a
conflict, Sanchez v. Rigos harmonized the two provisions, consistent with the
established rules of statutory construction.
Thus, when an offer is supported by a separate consideration, a valid option contract

exists.
On the other hand, when the offer is not supported by a separate consideration, the
offer stands but, in the absence of a binding contract, the offeror may withdraw it any
time. In either case, once the acceptance of the offer is duly communicated before
the
withdrawal of the offer, a bilateral contract to buy and sell is generated which,
in accordance with the first paragraph of Article 1479 of the Civil Code, becomes
reciprocally demandable.
In the present case, the offer to buy the land was timely accepted by Keppel. As
early as 1994, Keppel expressed its desire to exercise its option to buy the land.
Instead of rejecting outright Keppel’s acceptance, PNOC referred the matter to the
Office of the Government Corporate Counsel (OGCC). In its Opinion No. 160, series
of 1994, the OGCC opined that Keppel "did not yet have the right to purchase the
Bauan lands." On account of the OGCC opinion, the PNOC did not agree with
Keppel’s attempt to buy the land; nonetheless, the PNOC made no categorical
withdrawal of the offer to sell provided under the Agreement.
By 2000, Keppel had met the required Filipino equity proportion and duly
communicated its acceptance of the offer to buy to PNOC. Keppel met with the
board of directors and officials of PNOC who interposed no objection to the sale. It
was only when the amount of purchase price was raised that the conflict between
the parties arose, with PNOC backtracking in its position and questioning the
validity of the option.
Thus, when Keppel communicated its acceptance, the offer to purchase the Bauan
land stood, not having been withdrawn by PNOC. The offer having been duly
accepted, a contract to sell the land ensued which Keppel can rightfully demand
PNOC to comply with.
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES,
PETITIONER, VS.
GOLDEN HORIZON REALTY CORPORATION, RESPONDENT.
G.R. NO. 183612 MARCH 15, 2010
BELLOSILLO, J.:
DIGESTED BY: RUBY ANNE P. TRINIDAD
DOCTRINE:
first priority to buy the property in the event the owner sells the same. When a
lease contract contains a right of first refusal, the lessor has the legal duty to the
lessee not to sell the leased property to anyone at any price until after the lessor has
made an offer to sell the property to the lessee and the lessee has failed to accept
it.
FACTS:
In the early sixties, NDC had in its disposal a ten (10)-hectare property popularly known
as the NDC Compound.
NDC entered into a Contract of Lease with Golden Horizon Realty Corporation
(GHRC) over portions of the property.
First Contract (September 7, 1977): with an area of 2,407 square meters for a period of
ten (10) years, renewable for another ten (10) years with mutual consent of the parties.
Second Contract (May 4, 1978): covering 3,222.80 square meters, also renewable
upon mutual consent after the expiration of the ten (10)-year lease period. In addition,
GHRC as lessee was granted the "option to purchase the area leased, the price to
be negotiated and determined at the time the option to purchase is exercised."
On June 13, 1988, before the expiration of the ten (10)-year period under the
second lease contract, GHRC wrote a letter to NDC indicating its exercise of the
option to renew the lease for another ten (10) years. As no response was received
from NDC, GHRC sent another letter on August 12, 1988, reiterating its desire to
renew the contract and also requesting for priority to negotiate for its purchase
should NDC opt to sell the leased premises. NDC still did not reply but continued to
accept rental payments from GHRC and allowed the latter to remain in possession
of the property.
Sometime after September 1988, GHRC discovered that NDC had decided to
secretly dispose the property to a third party.
In the meantime, then President Corazon C. Aquino issued Memorandum Order No.
214 dated January 6, 1989, ordering the transfer of the whole NDC Compound to
the National Government, which in turn would convey the said property in favor of
PUP at acquisition cost for the expansion of its campus.
PUP then demanded that GHRC vacate the premises, insisting that the latter’s lease
contract had already expired.
GHRC argued that Memorandum Order No. 214 is a nullity, for being violative of
the writ of injunction issued by the trial court. In the alternative, should the trial
court adjudge the memorandum order as valid, GHRC contended that its existing
right must still be respected by allowing it to purchase the leased premises.
RTC rendered its decision upholding the right of first refusal granted to GHRC under
its lease contract with NDC and ordering PUP to reconvey the said portion of the
property in favor of GHRC.
Both the RTC and the CA applied this Court’s ruling in Polytechnic University of the
Philippines v. Court of Appeals (supra), considering that GHRC is similarly situated as
a lessee of NDC whose right of first refusal under the lease contract was violated by the
sale of the property to PUP without NDC having first offered to sell the same to GHRC
despite the latter’s request for the renewal of the lease and/or to purchase the leased
premises prior to the expiration of the second lease contract. CA further agreed with
the RTC’s finding that there was an implied renewal of the lease upon the failure of
NDC to act on GHRC’s repeated requests for renewal of the lease contract, both verbal
and written, and continuing to accept monthly rental payments from GHRC which was
allowed to continue in possession of the leased premises.
PUP’S CONTENTIONS:
· PUP argues that respondent’s right to exercise the option to purchase

had expired with the termination of the original contract of lease and was
not carried over to the subsequent implied new lease between respondent
and petitioner NDC. There was no agreement or document to the effect
that respondent’s request for extension or renewal of the subject
contracts of lease for another ten (10) years was approved by NDC.
· While it is conceded that there was an implied new lease between

GHRC and petitioner NDC after the expiration of the lease contracts, the
same did not include the right of first refusal originally granted to
respondent.
NDC’S CONTENTIONS:
· NDC assails the CA in holding that the contracts of lease were impliedly
renewed for another ten (10)-year period. The provisions of the Contracts of
Lease clearly state that the lessee is granted the option "to renew for
another ten (10) years with the mutual consent of both parties."
· CA’s erroneous conclusion that such right of refusal subsisted even after
the expiration of the original lease period, when respondent was allowed
to continue staying in the leased premises under an implied renewal of
the lease and without the right of refusal carried over to such month-to-
month
lease. Petitioners thus maintain that no right of refusal was violated by the
sale of the property in favor of PUP.
· CA erred in applying the ruling in Polytechnic University of the Philippines

v. Court of Appeals pointing out that the case of lessee Firestone
Ceramics, Inc. is different because the lease contract therein had not yet
expired while in this case respondent’s lease contracts have already
expired and never renewed.
ISSUE:
Whether or not the option to purchase the portion leased to GHRC violated by the
sale of the NDC Compound in favor of PUP pursuant to Memorandum Order No.
214. - Yes
RULING:
RIGHT TO FIRST REFUSAL
first priority to buy the property in the event the owner sells the same. As
distinguished from an option contract, in a right of first refusal, while the object
might be made determinate, the exercise of the right of first refusal would be
dependent not only on the owner’s eventual intention to enter into a binding
juridical relation with another but also on terms, including the price, that are yet to
be firmed up.
As the option to purchase clause in the second lease contract has no definite period
within which the leased premises will be offered for sale to respondent lessee and
the price is made subject to negotiation and determined only at the time the option
to buy is exercised, it is obviously a mere right of refusal, usually inserted in lease
contracts to give the lessee the first crack to buy the property in case the lessor
decides to sell the same. That respondent was granted a right of first refusal under
the second lease contract appears not to have been disputed by petitioners.
It appears that NDC and PUP did not dispute that GHRC was granted a right of first
refusal under the second lease contract.
Their contention regarding such right of refusal subsisted even after the expiration
of the original lease period, when respondent was allowed to continue staying in
the leased premises under an implied renewal of the lease and without the right of
refusal carried over to such month-to-month lease was found by the Supreme Court
to be untenable.
When a lease contract contains a right of first refusal, the lessor has the legal duty
to the lessee not to sell the leased property to anyone at any price until after the
lessor has made an offer to sell the property to the lessee and the lessee has failed
to accept it. Only after the lessee has failed to exercise his right of first priority
could the lessor
sell the property to other buyers under the same terms and conditions offered to
the lessee, or under terms and conditions more favorable to the lessor.
GHRC was able to prove that they exercised its option to purchase on a timely
manner when they presented a letter regarding the proposed memorandum order
submitted to President Corazon C. Aquino transferring the whole NDC Compound,
including the premises leased by respondent, in favor of petitioner PUP dated July
15, 1988. Considering that NDC had been negotiating through the National
Government for the sale of the property in favor of PUP as early as July 15, 1988
without first offering to sell it to respondent and even when respondent
communicated its desire to exercise the option to purchase granted to it under the
lease contract, it is clear that NDC violated respondent’s right of first refusal. Under
the premises, the matter of the right of refusal not having been carried over to the
impliedly renewed month-to-month lease after the expiration of the second lease
contract on October 21, 1988 becomes irrelevant since at the time of the
negotiations of the sale to a third party, petitioner PUP, respondent’s right of first
refusal was still subsisting.
ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, PETITIONERS,
VS.
THE HON. COURT OF APPEALS AND BUEN REALTY DEVELOPMENT
CORPORATION, RESPONDENTS.
G.R. NO. 109125 DECEMBER 2, 1994
VITUG, J.:
DIGESTED BY: CARYLL C. CAYABAN
DOCTRINE:
The Supreme Court held that remedy is not a writ of execution of judgment. There
was RIGHT of the first refusal here, but since there was still no Contract of Sale. The
proper action is the action for damages.
FACTS:
Ang Yu Asuncion, et al., (plaintiffs) are tenants/lessees of residential and

commercial spaces owned by the Cu Unjieng.
The Cu Unjiengs informed the plaintiffs that they are offering to sell the said
premises and are giving them a priority.
During the negotiations, the Cu Unjiengs offered a price of P6M, but the plaintiffs
counter offered P5M. Plaintiffs then asked the Cu Unjiengs to put their offer in
writing, to which the latter agreed.
PLAINTIFFS ASSERTION
The plaintiffs then asked that the terms and conditions of the offer to sell be
specified, but the Cu Unjiengs did not reply.
Thus, plaintiffs filed a complaint to compel the Cu Unjiengs to sell the property to
them.
ISSUE:
Whether or not Ang Yu Asuncion's right of first refusal be recognized and the
property should be sold in their favor.
RULING:
No. Ang Yu Asuncion's right of first refusal cannot be recognized and the property
should not be sold in their favor.
In the law on sales, the so-called "right of first refusal" is an innovative juridical
relation. Needless to point out, it cannot be deemed a perfected contract of sale
under Article 1458 of the Civil Code. Neither can the right of first refusal,
understood in its normal concept, per se be brought within the purview of an option
under the second paragraph of Article 1479, aforequoted, or possibly of an offer
under Article 13199 of the same Code. An option or an offer would require, among
other things,10 a clear
certainty on both the object and the cause or consideration of the envisioned
contract. In a right of first refusal, while the object might be made determinate, the
exercise of the right, however, would be dependent not only on the grantor's
eventual intention to enter into a binding juridical relation with another but also on
terms, including the price, that obviously are yet to be later firmed up. Prior
thereto, it can at best be so described as merely belonging to a class of preparatory
juridical relations governed not by contracts (since the essential elements to establish
the vinculum juris would still be indefinite and inconclusive) but by, among other
laws of general application, the pertinent scattered provisions of the Civil Code on
human conduct. Even on the premise that such right of first refusal has been
decreed under a final judgment, like here, its breach cannot justify correspondingly
an issuance of a writ of execution under a judgment that merely recognizes its
existence, nor would it sanction an action for specific performance without thereby
negating the indispensable element of consensuality in the perfection of contracts.11
It is not to say, however, that the right of first refusal would be inconsequential for,
such as already intimated above, an unjustified disregard thereof, given, for
instance, the circumstances expressed in Article 1912 of the Civil Code, can warrant
a recovery for damages. The final judgment in Civil Case No. 87-41058, it must be
stressed, has merely accorded a "right of first refusal" in favor of petitioners. The
consequence of such a declaration entails no more than what has heretofore been
said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure
of private respondents to honor the right of first refusal, the remedy is not a writ of
execution on the judgment, since there is none to execute, but an action for
damages in a proper forum for the purpose.
EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC.,
PETITIONERS,
VS.
MAYFAIR THEATER, INC., RESPONDENT.
G.R. NO. 106063 NOVEMBER 21, 1996
HERMOSISIMA, JR., J.:
DIGESTED BY: ROSALITA P. GOMEZ
DOCTRINE:
In granting the right of first refusal, the requirement of a separate consideration for the
option finds no applicability. Not also correct to say that there is no consideration in
an agreement of right of first refusal as when the stipulation is part and parcel of the
entire contract of lease. In such case, the consideration for the lease includes the
consideration for the right of first refusal
FACTS:
Petitioner Carmelo and respondent Mayfair Theater Inc entered into two Contracts
of Lease over the portion of the two-storey buildings owned by Carmelo for use by
Mayfair as a motion picture theater for a term of twenty (20) years. Mayfair
thereafter constructed on the leased property two movie houses known as Maxim
and Marimar Theatres. Both contracts of lease provide that if Carmelo, the Lessor,
should desire to sell the leased premises, Mayfair Theatre Inc, the Lessee, shall be
given 30-days exclusive option to purchase the property and in the event that the
leased premises is sold to someone other than Mayfair, Acrmelo is is bound and
obligated to stipulate in the Deed of Sale that the purchaser shall recognize the said
lease and be bound by all the terms and conditions thereof. Several years after,
representative of Carmelo informed the president of Mayfair via telephone
conversation that Carmelo was desirous of selling the entire property and asked if
Mayfair was willing to buy the property for Six to Seven Million Pesos. Mayfair
replied through a letter reiterating the stipulation on the Contracts of Lease but
Carmelo did not reply. Four years later, Carmelo sold the land and building, which
included the leased premises housing the two theatres to petitioner Equatorial
Realty Development Inc by virtue of a Deed of Absolute Sale, for the total
consideration of P11,300,000.00. This prompted Mayfair to institute an action for
specific performance with damages and annulment of sale of the leased premises to
Equatorial. Carmelo alleged that it had informed Mayfair of its desire to sell the
entire property and offered the same to Mayfair, but the Mayfair answered that it
was interested only in buying the areas under lease, which was impossible since the
property was not a condominium and that the option to purchase invoked by
Mayfair is null and void for lack of consideration. The trial court found paragraph 8
of the Contracts of Lease to be an option clause which however cannot be deemed
to be binding on Carmelo because of lack of distinct consideration therefor. On
appeal, the Court of Appeals reversed the decision and found paragraph 8 of the
two Contracts of Lease to be a right of first refusal proviso and not an option
contract,
particularly the stipulation giving Mayfair "30-days exclusive option to purchase the
(leased premises)," which was meant to provide Mayfair the opportunity to
purchase and acquire the leased property in the event that Carmelo should decide
to dispose of the property.
ISSUE:
Whether or not paragraph 8 or the option clause of the two Contracts of Lease is
an Option Contract and not a right of first refusal proviso.
RULING:
NO, the Supreme Court ruled that the aforecited contractual stipulation provides for a
right of first refusal in favor of Mayfair and not an option clause or an option contract.
No option to purchase in contemplation of the second paragraph of Article 1479 of the
Civil Code [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], has been granted to Mayfair under the said
lease contracts.
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.
Paragraph 8 was incorporated into the contracts of lease for the benefit of Mayfair
which wanted to be assured that it shall be given the first option to buy the
property at the price which Carmelo is willing to accept. The consideration for the
right of first refusal was included in the consideration for the lease. In effect, Mayfair
is stating that it consents to lease the premises and to pay the price agreed upon
provided Carmelo also consents that, should it sell the leased property, then,
Mayfair shall be given the right to match the offered purchase price and to buy the
property at that price. In reciprocal contract, the obligation or promise of each
party is the consideration for that of the other.
Consequently, since both Carmelo and Equatorial acted in bad faith, it renders the
sale of the property in question rescissible. Rescission is a remedy granted by law
to the contracting parties and even to third persons, to secure reparation for
damages caused to them by a contract, even if this should be valid, by means of
the restoration of things to their condition at the moment prior to the celebration of
said contract. While it is true that the acquisition by a third person of the property
subject of the contract is an obstacle to the action for its rescission where it is
shown that such third person is in
lawful possession of the subject of the contract and that he did not act in bad faith.
However, this rule is not applicable in the case before us because the petitioner is
not considered a third party in relation to the Contract of Sale nor may its
possession of the subject property be regarded as acquired lawfully and in good
faith.
Ultimately, Mayfair should be allowed to exercise its right of first refusal at the price
of P11,300,000.00 which it was entitled to accept or reject.
PARAÑAQUE KINGS ENTERPRISES, INCORPORATED, PETITIONER,
VS.
COURT OF APPEALS, CATALINA L. SANTOS, REPRESENTED BY HER ATTORNEY-
IN-FACT, LUZ B. PROTACIO, AND DAVID A. RAYMUNDO, RESPONDENTS.
G.R. NO. 111538 FEBRUARY 26, 1997
PANGANIBAN, J
DIGESTED BY: RIVERA, RIZZA JEAN R.
DOCTRINE:
A contractual right of "first option or priority to buy the properties subject of the
lease" constitute a valid cause of action. The grantee of such right is entitled to be
offered the same terms and conditions as those given to a third party who
eventually bought such properties.
FACTS:
Parañaque Kings Enterprises (PKE) is a private corporation is renting 8 parcels of

land owned by defendant Catalina Santos. The said lease sprung out from a deed
of assignment from a certain Frederick Chua and Lee Ching Bing who assigned all
his rights and interest in the leased property to Parañaque Kings Enterprises to
which defendant-owner Santos conformed. The deed of assignment as well as the
contract of lease contain a right of first refusal clause.
On September 21, 1988, defendant Santos sold the eight parcels of land subject of
the lease to defendant David Raymundo for a consideration of FIVE MILLION
(P5,000,000.00) PESOS. The said sale was in contravention of the contract of lease, for
the first option or priority to buy was not offered by defendant Santos to the
plaintiff. On March 5, 1989, defendant Santos wrote a letter to the plaintiff
informing the same of the sale of the properties to defendant Raymundo. Upon
learning of this fact plaintiff's representative wrote a letter to defendant Santos,
requesting her to rectify the error and consequently realizing the error, she had it
reconveyed to her for the same consideration of FIVE MILLION (P5,000,000.00)
PESOS.
Subsequently the property was offered for sale to plaintiff PKE by the defendant for the
sum of FIFTEEN MILLION (P15,000,000.00) PESOS. Plaintiff was given ten (10) days to
make good of the offer, but the said period expired. On May 8, 1989, before the period
given in the letter offering the properties for sale expired, plaintiff's counsel wrote
counsel of defendant Santos offering to buy the properties for FIVE MILLION
(P5,000,000.00) PESOS. On May 15, 1989, before they replied to the offer to purchase,
another deed of sale was executed by defendant Santos (in favor of) defendant
Raymundo for a consideration of NINE MILLION (P9,000,000.00) PESOS.
Defendant Santos violated again paragraph 9 of the contract of lease by executing a
second deed of sale to defendant Raymundo. It was only on May 17, 1989, that
defendant Santos replied to the letter of the plaintiff's offer to buy or two days after she
sold her properties. On July 6, 1989, counsel for defendant Santos informed the
plaintiff that the new owner is defendant Raymundo. Defendants have the same
counsel who represented both of them in their exchange of communication with
plaintiff's counsel, a fact that led to the conclusion that a collusion exist between the
defendants. The purpose of this unholy alliance between defendants Santos and
Raymundo is to mislead the plaintiff and make it appear that the price of the leased
property is much higher than its actual value of FIVE MILLION (P5,000,000.00) PESOS,
so that plaintiff PKE would purchase the properties at a higher price. Plaintiff PKE has
made considerable investments in the said leased property by erecting a two (2) storey,
six (6) doors commercial building This considerable improvement was made on the
belief that eventually the said premises shall be sold to the plaintiff.
ISSUE:
Did defendant Santos breach PKE’s contractual right of "first option or priority to
buy"?
RULING:
Yes. Under paragraph 9 of the contract of lease between respondent Santos and
petitioner, the latter was granted the "first option or priority" to purchase the
leased properties in case Santos decided to sell. If Santos never decided to sell at
all, there can never be a breach, much less an enforcement of such "right." But on
September 21, 1988, Santos sold said properties to Respondent Raymundo without
first offering these to petitioner. Santos indeed realized her error, since she
repurchased the properties after petitioner complained. Thereafter, she offered to
sell the properties to petitioner for P15 million, which petitioner, however, rejected
because of the "ridiculous" price. But Santos again appeared to have violated the
same provision of the lease contract when she finally resold the properties to
respondent Raymundo for only P9 million without first offering them to petitioner at
such price.
One of such rights included in the contract of lease and, therefore, in the assignments
of rights was the lessee's right of first option or priority to buy the properties subject of
the lease, as provided in paragraph 9 of the assigned lease contract. The deed of
assignment need not be very specific as to which rights and obligations were passed
on to the assignee. It is understood in the general provision that all specific rights
and obligations contained in the contract of lease are those referred to as being
assigned.
The complaint states a valid cause of action for breach of the right of first refusal
and that the trial court should thus not have dismissed the complaint. The assailed
decisions of the trial court and Court of Appeals are reversed and the case is
remanded to the Regional Trial Court of Makati for further proceedings.
DR. DANIEL VAZQUEZ AND MA. LUIZA M. VAZQUEZ, PETITIONERS, VS.
AYALA CORPORATION, RESPONDENT.
G.R. NO. 149734; NOVEMBER 19, 2004
TINGA, J.:
DIGESTED BY: BRILLA JOY D. COSGAFA
DOCTRINE:
An option is a preparatory contract in which one party grants to another, for a fixed
period and at a determined price, the privilege to buy or sell, or to decide whether
or not to enter into a principal contract. It binds the party who has given the option
not to enter into the principal contract with any other person during the period
designated, and within that period, to enter into such contract with the one to
whom the option was granted, if the latter should decide to use the option. 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 a right of first refusal, on the other hand, while the object might be made
determinate, the exercise of the right would be dependent not only on the grantor's
terms, including the price, that are yet to be firmed up.
FACTS:
Spouses Daniel and Luiza Vasquez entered into a MOA with Ayala for their share of
stocks in Conduit Development. The main asset of Conduit is the 49.9 hectare of
land, divided into Village 1, 2 and 3. The MOA was signed on April 23, 1981.
According to the MOA, Ayala intends to complete its development plan 3 years after
the date of the agreement. Ayala agreed to give the petitioners a first option to
purchase the developed lots at the prevailing market price at the time of the
purchase.
The relevant provisions of the MOA on this point are:
"5.7. The BUYER hereby commits that it will develop the 'Remaining
Property' into a first-class residential subdivision of the same class as its New
Alabang Subdivision, and that it intends to complete the first phase under its
amended development plan within three (3) years from the date of this
Agreement. x x x"
5.15. The BUYER agrees to give the SELLERS a first option to purchase four
developed lots next to the "Retained Area" at the prevailing market price at
the time of the purchase."
The parties are agreed that the development plan referred to in paragraph
5.7 is not Conduit's development plan, but Ayala's amended development
plan which was still to be formulated as of the time of the MOA. While in the
Conduit plan, the 4 lots to be offered for sale to the Vasquez Spouses were
in the first
phase thereof or Village 1, in the Ayala plan which was formulated a year
later, it was in the third phase, or Phase II-c.
After the execution of the MOA, Ayala suspended the work on Village 1. The
Vasquez spouses, believing that Ayala was obligated to sell them the lots 3 years
after the agreement, sent reminder letters of the approaching so-called deadline.
Also, Engr. Turla, an authorized agent of the Vasquez, sent a letter to Ayala stating
that they expected “the development of Phase 1 to be completed by Feb 19, 1990,
3 years after the legal problems with the previous contractor was settled.”
By early 1990, Ayala was able to finish the developments and offered the lots to the
Vasquez at the prevailing price in 1990. The Vasquez rejected the offer and insisted
to pay the 1984 price (the original date of the supposed 3 year develop period
given by Ayala after the agreement. Ayala argues that the MOA only gives the
petitioners a first right of refusal and can therefore not demand Ayala to sell the
property at the 1984 price.
ISSUE:
Whether or not paragraph 5.15 of the Memorandum of Agreement can be

construed as an option contract or a right of first refusal.
RULING:
Paragraph 5.15 of the Memorandum of Agreement is a mere right of first refusal.
The Court has clearly distinguished between an option contract and a right of first
refusal. An option is a preparatory contract in which one party grants to another,
for a fixed period and at a determined price, the privilege to buy or sell, or to
decide whether or not to enter into a principal contract. It binds the party who has
given the option not to enter into the principal contract with any other person
during the period designated, and within that period, to enter into such contract
with the one to whom the option was granted, if the latter should decide to use the
option. 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 a right of first refusal, on the other hand, while the object might be made
determinate, the exercise of the right would be dependent not only on the grantor's
terms, including the price, that are yet to be firmed up.
Applied to the instant case, paragraph 5.15 is obviously a mere right of first refusal
and not an option contract. Although the paragraph has a definite object, i.e., the
sale of subject lots, the period within which they will be offered for sale to
petitioners and, necessarily, the price for which the subject lots will be sold are not
specified.
The phrase "at the prevailing market price at the time of the purchase" connotes
that there is no definite period within which Ayala Corporation is bound to reserve
the subject lots for petitioners to exercise their privilege to purchase. Neither is
there a fixed or determinable price at which the subject lots will be offered for sale.
The price is considered certain if it may be determined with reference to another
thing certain or if the determination thereof is left to the judgment of a specified
person or persons.
ROSENCOR DEVELOPMENT CORPORATION AND RENE JOAQUIN,
PETITIONERS,
VS.
PATERNO INQUING, IRENE GUILLERMO, FEDERICO BANTUGAN, FERNANDO
MAGBANUA AND LIZZA TIANGCO, RESPONDENTS
G.R. NO. 140479, MARCH 8, 2001
GONZAGA-REYES, J,:
DIGESTED BY: EDMAR P. PEREZ
DOCTRINE:
Rescission shall not take place when the things which are the object of the contract
are legally in possession of a third person who did not act in bad faith.
FACTS:
Paterno Inquing, Irene Guilermo and Federico Bantugan are lesses of the 2 storey
building apartment located at Tomas Morato Ave. in Quezon City.
The lease was not covered by a contract and the lessee was assured by the spouses
Tiangco (owner) of the right of first refusal if ever there is a decision to sell the property.
Upon the death of the spouses, the heirs represented by Eufrocina de Leon
allegedly promised the lessees the same pre-emptive rights to purchase the subject
property if there is a decision to sell those properties.
There were instances where the lessees received a letter from certain Atty Erlinda
Aguila demanding that they have to vacate the premises for demolition. The lessees
refused to vacate.
They also received a letter from Eufrocina de Leon offering them to sell 2 Million
pesos. The lessees countered the offer for 1 Million, but no feedback from other
heirs of the counter offer.
Thereafter, a certain Rene Joaquin representing Rosencor Dev’t Corp came

introducing himself as the owner, that the said property was already sold by the
heirs of spouses Tiangco to Rosencor Devt Corp.
After knowing of the sale between de Leon and Rosencor, the lessees offered to
reimburse de leon the selling price but they refused. They filed an action for
rescission of the deed of Absolute Sale between Rosencor and De leon in view of
violation of the provision of Right of First Refusal.
ISSUE:
Whether or not the rescission of the deed of Absolute Sale was proper.
RULING:
No. Jurisprudence provides that when a contract of sale entered into in violation of
a right of first refusal of another person, the remedy is rescission of contract.
However, Art. 1385 provides that rescission shall not take place when the things
which are the object of the contract are legally in possession of a third person who
did not act in bad faith.
In this case, there was no evidence that the respondents(lessees) notified Rosencor of
their right of first refusal after they received the letter advising them to vacate the
property. No mention is made of the right of first refusal granted to respondents.
Thus, the petitioner, Rosencor Dev’t Corp was considered in good faith in acquiring
the property.
TANAY RECREATION CENTER AND DEVELOPMENT CORP., PETITIONERS,
VS.
CATALINA MATIENZO FAUSTO* AND ANUNCIACION FAUSTO PACUNAYEN,
RESPONDENTS.
G.R. NO. 140182. APRIL 12,
2005 AUSTRIA-MARTINEZ, J.:
DIGESTED BY: SILVANO M. CAMILLO, JR.
DOCTRINE:
The “right of first refusal” applies regardless of the relationship of the owner and
the buyer. 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.
FACTS:
Tanay Recreation Center and Development Corp. (TRCDC) was the lessee of a
property owned by Catalina Fausto. A contract of lease was executed with a period
of 20 years which may be extended. In said contract, a stipulation provides “that
should Fausto decide to sell the property, Tanay Recreation shall have the “priority
right” to purchase the same.” When Tanay Recreation wrote the land owner with the
intention of renewing the lease contract, Fausto’s daughter Anunciacion, replied
saying that she is now the new owner since the property was already sold to her.
She also demanded that the former vacate the property since she will not be
renewing the contract.
ISSUE:
Whether or not contractual stipulation giving petitioner the priority right to

purchase the leased premises shall only apply if the lessor decides to sell the same
to strangers.
RULING:
No. The “right of first refusal” applies regardless of the relationship of the owner
and the buyer. The Court explained: “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.
Tanay Recreation’s right of first refusal is an integral and indivisible part of the contract
of lease and is inseparable from the whole contract. The consideration for the lease
includes the consideration for the right of first refusal and is built into the reciprocal
obligations of the parties.” The terms of the contract of lease stated clearly that
“That should the LESSOR decide to sell the leased premises, the LESSEE shall have
the priority right to purchase the same”.
This could not have any other interpretation other than that the lessor cannot sell
the property to another unless the lessee to whom it is offered refuses to buy it or
waives his right. If this stipulation is violated by the lessor, the lessee has the remedy
of having the deed of sale rescinded or annulled. The SC went on to elucidate that
“a right of first refusal means identity of terms and conditions to be offered to the
lessee and all other prospective buyers and a contract of sale entered into in
violation of a right of first refusal of another person, while valid, is rescissible”. It was
therefore erroneous for the CA to rule that the right of first refusal does not apply if
the buyer is a relative of the owner/lessor.
HEIRS OF FAUSTO C. IGNACIO, PETITIONERS, VS. HOME BANKERS SAVINGS
AND TRUST COMPANY, RESPONDENT
G.R. NO. 177783 JANUARY 23, 2013
VILLARAMA, JR., J.
CASE DIGESTED BY: DANILO JR. T. FORRO
DOCTRINE:
A contract of sale is perfected only when there is consent validly given. There is no
consent when a party merely negotiates a qualified acceptance or a counter-offer.
An acceptance must reflect all aspects of the offer to amount to a meeting of the
minds between the parties
FACTS:
The case sprang from a real estate mortgage of two parcels of land in August 1981.
Fausto C. Ignacio mortgaged the properties to Home Bankers Savings and Trust
Company (Bank) as security for a loan extended by the Bank. After Ignacio
defaulted in the payment of the loan, the property was foreclosed and subsequently
sold to the Bank in a public auction.Ignacio offered to repurchase the property.
Universal Properties Inc. (UPI), the bank’s collecting agent sent Ignacio a letter on
March 22, 1984 which contained the terms of the repurchase. However, Ignacio
annotated in the letter new terms and conditions. He claimed that these were verbal
agreements between himself and the Bank’s collection agent, UPI.No repurchase
agreement was finalized between Ignacio and the Bank. Thereafter the Bank sold
the property to third parties. Ignacio then filed an action for specific performance
against the Bank for the reconveyance of the properties after payment of the
balance of the purchase price. He argued that there was implied acceptance of the
counter-offer of the sale through the receipt of the terms by representatives of UPI.
The Bank denied that it gave its consent to the counter-offer of Ignacio. It countered
that it did not approve the unilateral amendments placed by Ignacio.
ISSUE:
Whether or not the negotiations between Ignacio and UPI are binding on the Bank.
RULING:
A contract of sale is perfected only when there is consent validly given. There is no
consent when a party merely negotiates a qualified acceptance or a counter-offer. An
acceptance must reflect all aspects of the offer to amount to a meeting of the minds
between the parties.In this case, while it is apparent that Ignacio proposed new terms
and conditions to the repurchase agreement, there was no showing that the Bank
approved the modified offer. The negotiations between Ignacio and UPI, the collection
agent, were merely preparatory to the repurchase agreement and, therefore, was not
binding on the Bank. Ignacio could not compel the Bank to accede to the repurchase
of the property. A corporation may only give valid acceptance of an offer of sale
through its authorized officers or agents. Specifically, a counter-offer to repurchase
a property will not bind a corporation by mere acceptance of an agent in the
absence of evidence of authority from the corporation’s board of directors.
VILLONCO REALTY COMPANY, PLAINTIFF-APPELLEE AND EDITH PEREZ DE
TAGLE, INTERVENOR-APPELLEE,
VS.
BORMAHECO, INC., FRANCISCO N. CERVANTES AND ROSARIO N.
CERVANTES, DEFENDANTS-APPELLANTS.
G.R. NO. L-26872 JULY 25, 1975
AQUINO, J.:
DIGESTED BY: MARLON LOUIE T. MANALO
DOCTRINE:
It is true that an acceptance may contain a request for certain changes in the terms
of the offer and yet be a binding acceptance. 'So long as it is clear that the
meaning of the acceptance is positively and unequivocally to accept the offer,
whether such request is granted or not, a contract is formed.
FACTS:
Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes, are the owners
of Lots 3, 15 and 16 located at 245 Buendia Avenue
Cervantes is the president of Bormaheco, Inc.
There negotiations for the sale of the said lots and the improvements thereon
between Romeo Villonco of Villonco Realty Company "and Bormaheco, Inc.,
represented by its president, Francisco N. Cervantes, through the intervention of
Edith
During the negotiations, Villonco Realty Company assumed that the lots belonged
to Bormaheco, Inc. and that Cervantes was duly authorized to sell the same.
Bormaheco, Inc. made a written offer dated February 12, 1964, to Romeo Villonco
for the sale of the property. Stipulation in the offer are as follows:
(1) That we are offering to sell to you the above property at the price of
P400.00 per square meter;
(2) That a deposit of P100,000.00 must be placed as earnest money on the

purchase of the above property which will become part payment of the
property in the event that the sale is consummated;
(3) That this sale is to be consummated only after I shall have also consummated
my purchase of another property located at Sta. Ana, Manila;
(4)That if my negotiations with said property will not be consummated by reason

beyond my control, I will return to you your deposit of P100,000 and the sale of
my property to you will not also be consummated; and
(5) That final negotiations on both properties can be definitely known after 45 days.
On March 4, 1964, Villonco Realty Company made a revised counter-offer for the
purchase of the property. The following are the pertinent revision on the offer:
3. This sale shall be cancelled, only if your deal with another property in Sta.
Ana shall not be consummated and in such case, the P100,000-00 earnest
money will be returned to us with a 10% interest p.a. However, if our deal
with you is finalized, said P100,000.00 will become as part payment for the
purchase of your property without interest:
4. The manner of payment shall be as follows:
a. P100,000.00 earnest money and 650,000.00 as part of the down payment, or

P750,000.00 as total down payment
b. The balance is payable as follows:
P100,000.00 after 3 months
125,000.00 -do-
212,500.00 -do-
P650,000.00 Total
On March 4, 1964, Villonco Realty Company sent a check for P100,000 and was
received by Cervantes
Then twenty-six days after the signing of the contract of sale, Cervantes returned
the earnest money, with interest amounting to P694.24 (at ten percent per
annum). Cervantes cited as an excuse the... circumstance that "despite the lapse of 45
days from February 12, 1964 there is no certainty yet" for the acquisition of the Punta
property
In a letter dated April 7, 1964 Villonco Realty Company returned the two checks to
Bormaheco, Inc., stating that the condition for the cancellation of the contract had not
arisen and at the same time filing an action for breach of contract against
Bormaheco, Inc.
Bormaheco, Inc. and the Cervantes spouses contend that the sale was not
perfected because Cervantes allegedly qualified his acceptance of Villonco's revised
offer and, therefore, his acceptance amounted to a counter-offer which Villonco
Realty Company should accept but no such acceptance was ever transmitted to
Bormaheco, Inc. which, therefore, could withdraw its offer.
ISSUES:
1. Whether or not no contract of sale was perfected because Cervantes made a
supposedly qualified acceptance of the revised offer, which acceptance
amounted to a counter-offer.
2. Whether or not the contract was not perfected because the condition that
Bormaheco, Inc. would acquire the Nassco land within forty-five days from
February 12, 1964 was not fulfilled.
RULING:
1.. No, there was a perfected sale.
According to the Supreme Court, the alleged changes or qualifications in the
revised counter — offer are not material or are mere clarifications of what the
parties had previously agreed upon.
The controlling fact is that there was agreement between the parties on the subject
matter, the price and the mode of payment and that part of the price was paid.
"Whenever earnest money is given in a contract of sale, it shall be considered as
part of the price and as proof of the perfection of the contract" (Art. 1482, Civil
Code).
"It is true that an acceptance may contain a request for certain changes in the terms of
the offer and yet be a binding acceptance. 'So long as it is clear that the meaning
of the acceptance is positively and unequivocally to accept the offer, whether such
request is granted or not, a contract is formed.' "
In this case, Cervantes allegedly crossed out the word "Nassco" in paragraph 3 of
Villonco's revised counter-offer and substituted for it the word "another" so that the
original phrase, "Nassco's property in Sta. Ana", was made to read as "another
property in Sta. Ana". That change is trivial. What Cervantes did was merely to
adhere to the wording of paragraph 3 of Bormaheco's original offer which mentions
"another property located at Sta. Ana." His obvious purpose was to avoid
jeopardizing his negotiation with the Nassco for the purchase of its Sta. Ana
property by unduly publicizing it.
Similarly, Cervantes' alleged insertion of the letters "PA" ( per annum) after the word
"interest" in that same paragraph 3 of the revised counter-offer (Exh. D) could not
be categorized as a major alteration of that counter-offer that prevented a meeting
of the minds of the parties. It was understood that the parties had contemplated a rate
of ten percent per annum since ten percent a month or semi-annually would be
usurious.
Appellants Bormaheco, Inc. and Cervantes further contend that Cervantes, in clarifying
in the voucher for the earnest money of P100,000 that Bormaheco's acceptance
thereof was subject to the terms and conditions embodied in Bormaheco's letter of
February 12, 1964 and your (Villonco's) letter of March 4, 1964" made Bormaheco's
acceptance "qualified and conditional".
That contention is not correct. There is no incompatibility between Bormaheco's

offer of February 12, 1964 and Villonco's counter-offer of March 4, 1964. The
revised counter-offer merely amplified Bormaheco's original offer.
Thus, it was held that the vendor's change in a phrase of the offer to purchase,
which change does not essentially change the terms of the offer, does not amount
to a rejection of the offer and the tender of a counter-offer
2. No. The sale of the Buendia lots to Villonco Realty Company was conditioned on
Bormaheco's acquisition of the Nassco land. But it was not spelled out that such
acquisition should be effected within forty-five days from February 12, 1964.
The term of forty-five days was not a part of the condition that the Nassco property
should be acquired. It is clear that the statement "that final negotiations on both
property can be definitely known after 45 days" does not and cannot mean that
Bormaheco, Inc. should acquire the Nassco property within forty-five days from
February 12, 1964 as pretended by Cervantes.
It is simply a surmise that after forty-five days (in fact when the forty-five-day period
should be computed is not clear) it would be known whether Bormaheco, Inc. would
be able to acquire the Nassco property and whether it would be able to... sell the
Buendia property.
MANILA METAL CONTAINER CORPORATION, PETITIONER
REYNALDO C. TOLENTINO, INTERVENOR
VS.
PHILIPPINE NATIONAL BANK, RESPONDENT,
DMCI-PROJECT DEVELOPERS, INC., INTERVENOR
G.R. NO. 166862 DECEMBER 20,2006
CALLEJO, SR., J.:
DIGESTED BY: ADELINE D. BARROQUILLO
DOCTRINE:
Art. 1482, CC. Whenever earnest money is given in a contract of sale, it shall be
considered as part of the price and as proof of the perfection of the contract.
FACTS:
Manila Metal Container Corporation, an owner of an 8,015 sqm parcel of land

located in Mandaluyong, secured a loan from PNB for Php 900,000. The petitioner
executed a real estate mortgage over the said lot. Later on, was granted a new
credit accommodation of Php 1,000,000. On March 31, 1981, the petitioner secured
another loan of Php 653,000 from PNB, payable in quarterly installments of Php
32,650, plus interests and other charges. On August 5, 1982, PNB filed a petition
for extrajudicial foreclosure of the real estate mortgage and sought to have the
property sold at public auction for 911,532.21, petitioner’s outstanding obligation to
respondent PNB as of June 30,1982, plus interests and attorney’s fees. After due
notice and publication, the property was sold at public auction on September 28,
1982 where PNB was declared the winning bidder for P1,000,000.00. The period to
redeem the property was to expire on February 17, 1984. Upon failure of MMCC to
redeem the property, a new certificate of title was issued in favor of PNB. The
problem arose, when the Special Assets Management Department accepted the Php
725,000 deposit of MMCC, that is upon its prepared statement of account, and as of
June 25, 1984 MMCC’s obligation was Php 1,574,560.47. That the deposit of Php
725,000 was accepted by SAMD on the condition that the purchase price would still
be approved by its Board of Directors. In a letter dated November 14, 1984, the
PNB management informed MMCC that it was rejecting the offer and
recommendation of SAMD. It suggested that MMCC purchase the property for Php
2,660,000, as its minimum market value. PNB gave MMCC until December 15,1984
to act on the proposal; otherwise, its Php 725,000 deposit would be returned and
the property would be sold to other interested buyers.
ISSUE:
Whether the Php 725,000 represents earnest money?
RULING:
NO. The 725,000 was ruled as a deposit made by the Manila Metal Container
Corporation to respondent PNB. The Php 725,000 was merely a deposit to be
applied as part of the purchase price of the property, in the event that PNB would
approve the recommendation of SAMD for PNB to accept MMCC offer to purchase
the property for Php 1,574,560.47. Unless and until PNB accepted the offer on
these terms, no perfected contract of sale would arise. Absent proof of the
concurrence of all the essential element of a contract of sale, the giving of earnest
money cannot establish the existence of a perfected contract of sale. It appears
that, per its letter to petitioner dated June 4,1985, the respondent had decided to
accept the offer to purchase the property for Php 1,931,389.53. However, this
amounted to an amendment of PNB’s qualified acceptance, or an amended counter-
offer, because while the respondent lowered the purchase price, it still declared
that its acceptance was subject to terms and conditions. MMCC refused the counter
offer of the PNB bank, instead requested respondent to reconsider its amended
counter-offer. This request was rejected by PNB, and offered to refund its 725,000
deposit.
FIRST OPTIMA REALTY CORPORATION, PETITIONER
VS
SECURITON SECURITY SERVICES, INC, RESPONDENTS
G.R NO. 199648, JANUARY 28, 2015
DEL CASTILLO, J.,
DIGESTED BY: ANDEMAR C MORALES JR
DOCTRINE:
In a potential sale transaction, the prior payment of earnest money even before the
property owner can agree to sell his property is irregular, and cannot be used to
bind the owner to the obligations of a seller under an otherwise perfected contract
of sale; to cite a well-worn cliché, the carriage cannot be placed before the horse.
The property owner-prospective seller may not be legally obliged to enter into a
sale with a prospective buyer through the latter’s employment of questionable
practices which prevent the owner from freely giving his consent to the transaction;
this constitutes a palpable transgression of the prospective seller’s rights of
ownership over his property, an anomaly which the Court will certainly not
condone.
FACTS:
Securitron Security Agency sought to expand business and sought to add officer,
thus its General Manager Eleazar sent a letter to First Optima Realty offer to
purchase the subject property in Pasay for P6000/sqm but Eleazar was unable to
personally negotiate with its Executive VP Young or BOD.
Eleazar went personally offering to pay in cash with he brought with him. Young
declined to accept payment, saying that she still needed to secure her sister’s
advice and informed him that prior approval of BOD was required which Eleazar
should wait.
Securitron sent another letter accompanied by check of P100K and made payable
to First Optima, it was not delivered to Young personally but instead through the
receiving clerk who issued a provisional receipt and the check was eventually
deposited and credited to the account of First Optima.
Later on Securitron demanded in writing that First Optima proceed with the sale of
property, in reply First Optima wrote back that it tendered the earnest money
despite the fact that it was still undecided to sell property and BOD still did not pass
a resolution whether it agrees to the sale of such and that there was no contract
for the earnest money to start with. First Optima through Young also felt that such
acts were forms of intimidation and harassment.
RTC however ruled in favor of Securitron and ordered First Optima to proceed with
the sale due to the acceptance of the P100K which the CA affirmed.
ISSUE:
Whether or not there was a perfected contract of sale such the payment can be
correctly considered as earnest money?
RULING:
No, there were negotiations but ended in decline of Young to enter into an
agreement and accept cash payment then being tendered by the former. Instead
Young informed Eleazar that she still had to confer with her sister as well as the
BOD. Eleazer responded that he shall wait.
Thus, the offer to purchase was never accepted by the First Optima at any instance
even after negotiations, and thus there was no sale to speak of, when there is
merely an offer by one party without acceptance of the other there is no contract.
Here the parties never got past the negotiation stage. Nothing shows that the
parties had a meeting of the minds.
The sending of Securitron of the letter with approval of First Optima constitutes a
mere reiteration of the original offer which was already rejected and thus First
Optima had no obligation to reply to the letter.
It would be absorbed to require a party to reject the very same offer made every
time otherwise a perfected contract of sale could simply arise from the failure to
reject the same offer made for the hundredth time. Thus, said letter cannot be
considered as evidence of a perfected sale. The failure to return the earnest money
did not necessarily mean it agreed to the offer due to it being mixed up with all
other checks.
The supposed payment of earnest money was made under dubious circumstances
and in disregard of sound business practice and common sense. Indeed,
respondent must be faulted for taking such a course of action that is irregular and
extraordinary. Thus, the SC ruled in favor of First Optima.
RIZALINO, SUBSTITUTED BY HIS HEIRS, JOSEFINA, ROLANDO AND FERNANDO,
ERNESTO, LEONORA, BIBIANO, JR., LIBRADO AND ENRIQUETA, ALL
SURNAMED OESMER, PETITIONERS,
VS.
PARAISO DEVELOPMENT CORPORATION, RESPONDENT.
GR NO. 157493 FEBRUARY 5, 2007
CHICO-NAZARIO, J.:
DIGESTED BY: ARNEL M. SAHID SAHID
DOCTRINE:
The co-owners, being owners of their respective undivided shares in the subject
properties, can dispose of their shares even without the consent of all the co-heirs.
FACTS:
Oesmer here is the seller and the Paraiso development corporation is the buyer
which was engage in the real estate business. When the spouses Oesmer died,
petitioners, acquired the lots by right of succession. In March 1989, there was a
meeting with Ernesto and Sotero Lee, the president of Paraiso, pursuant to the
meeting, a contract to sell was drafted and petitioners signed the said contract and
the check in the amount of 100,000 was given as option money. However, the two
brothers (Adolfo and Jesus) did not sign the document.
Petitioners, informed Paraiso development corporation that they want to rescind the
contract to sell and to return the option money, but respondent paraiso did not
respond, hence, the petitioners filed a complaint for declaration of nullity or for
annulment of the contract to sell with damages.
ISSUE:
Whether or not the consideration of 100,000 was and option money?
RULING:
No, a careful examination of the words used in the contract indicates that the
money is not an option money but it was earnest money. “Earnest money” and
“option money” are not the same but distinguished thus: (a) earnest money is part of
the purchase price, while option money is the money given as a distinct
consideration for an option contract; (b) earnest money is given only where there is
already a sale, while option money applies to a sale not yet perfected; and, (c)
when earnest money is given, the buyer is bound to pay the balance, while when
the would-be buyer gives option money, he is not required to buy, but may even
forfeit it depending on the terms of the option.
SPS. SEGUNDO DALION AND EPIFANIA SABESAJE-DALION, PETITIONERS,
VS.
THE HONORABLE COURT OF APPEALS AND RUPERTO SABESAJE, JR.,
RESPONDENTS.
G.R. NO. 78903 FEBRUARY 28, 1990
MEDIALDEA, J.:
DIGESTED BY: SUMUGAT, RAMON SIXTO
DOCTRINE:
A contract of sale is a consensual contract, which means that the sale is perfected
by mere consent. No particular form is required for its validity. Upon perfection of
the contract, the parties may reciprocally demand performance (Art. 1475, NCC).
FACTS:
On May 28, 1973, Sabesaje sued to recover ownership of a parcel of land, based on
a private document of absolute sale, dated July 1, 1965, allegedly executed by
Dalion, who, however denied the fact of sale, contending that the document sued
upon is fictitious, his signature thereon, a forgery, and that subject land is conjugal
property, which he and his wife acquired in 1960 from Saturnina Sabesaje as
evidenced by the "Escritura de Venta Absoluta". The spouses denied claims of
Sabesaje that after executing a deed of sale over the parcel of land, they had
pleaded with Sabesaje, their relative, to be allowed to administer the land because
Dalion did not have any means of livelihood. They admitted, however, administering
since 1958, five (5) parcels of land in Sogod, Southern Leyte, which belonged to
Leonardo Sabesaje, grandfather of Sabesaje, who died in 1956. They never
received their agreed 10% and 15% commission on the sales of copra and abaca,
respectively. Sabesaje's suit, they countered, was intended merely to harass,
preempt and forestall Dalion's threat to sue for these unpaid commissions.
On January 17, 1984 the Regional Trial Court decided in favor of the validity of the
sale. Thus, immediately ordering Dalion to deliver the parcel of land to Sabesaje,
and to execute a deed of conveyance in a public document. Dalion appealed before
the Court of appeals however the CA affirmed the decision of the trial court.
ISSUE:
Whether or not the contract of sale of the parcel of land between Sabesaje and
Dalion is valid.
RULING:
Yes. The contract of sale of the parcel of land between Sabesaje and Dalion is valid.
A contract of sale is a consensual contract, which means that the sale is perfected
by mere consent. No particular form is required for its validity. Upon perfection of
the contract, the parties may reciprocally demand performance (Art. 1475, NCC).
The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje the
parcel of land and to execute corresponding formal deed of conveyance in a public
document. Under Art. 1498, NCC, when the sale is made through a public
instrument, the execution thereof is equivalent to the delivery of the thing. Delivery
may either be actual (real) or constructive. Thus, delivery of a parcel of land may
be done by placing the vendee in control and possession of the land (real) or by
embodying the sale in a public instrument (constructive).
Furthermore, the provision of Art. 1358 on the necessity of a public document is

only for convenience, not for validity or enforceability. It is not a requirement for the
validity of a contract of sale of a parcel of land that this be embodied in a public
instrument.
SERAFIN, RAUL, NENITA, NAZARETO, NEOLANDA, ALL SURNAMED
NARANJA, AMELIA NARANJA-RUBINOS, NILDA NARANJA-LIMANA, AND
NAIDA NARANJA-GICANO, PETITIONERS,
VS.
COURT OF APPEALS, LUCILIA P. BELARDO, REPRESENTED BY HER ATTORNEY-
IN-FACT, REBECCA CORDERO, AND THE LOCAL REGISTER OF DEEDS,
BACOLOD CITY, RESPONDENTS.
G.R. NO. 160132 APRIL 17, 2009
NACHURA, J.:
DIGESTED BY: JOHN ALFRED MEJIA
DOCTRINE:
To be valid, a contract of sale need not contain a technical description of the

subject property—contracts of sale of real property have no prescribed form for
their validity, they follow the general rule on contracts that they may be entered
into in whatever form, provided all the essential requisites for their validity are
present.
FACTS:
Roque Naranja was the registered owner of a parcel of land, denominated as Lot
No. 4 in Consolidation-Subdivision Plan (LRC) Pcs-886, Bacolod Cadastre, with an
area of 136 square meters and covered by Transfer Certificate of Title (TCT) No. T-
18764. Roque was also a co-owner of an adjacent lot, Lot No. 2, of the same
subdivision plan, which he co-owned with his brothers, Gabino and Placido Naranja.
The two lots were being leased by Esso Standard Eastern, Inc. for 30 years from
1962-1992. For his properties, Roque was being paid ₱200.00 per month by the
company.
In 1976, Roque, who was single and had no children, lived with his half-sister, Lucilia P.
Belardo (Belardo). Roque had no other source of income except for the ₱200.00
monthly rental of his two properties. To show his gratitude to Belardo, Roque sold
Lot No. 4 and his one-third share in Lot No. 2 to Belardo on August 21, 1981,
through a Deed of Sale of Real Property which was duly notarized by Atty. Eugenio
Sanicas. The deed of sale could not be registered because Belardo did not have the
money to pay for the registration fees.
Belardo’s only source of income was her store and coffee shop. Sometimes, her
children would give her money to help with the household expenses, including the
expenses incurred for Roque’s support. At times, she would also borrow money
from Margarita Dema-ala, a neighbor. When the amount of her loan reached
₱15,000.00, Dema-ala required a security. On November 19, 1983, Roque executed
a deed of sale in favor of Dema-ala, covering his two properties in consideration of
the ₱15,000.00 outstanding loan and an additional ₱15,000.00, for a total of
₱30,000.00. Dema-ala explained that she wanted Roque to execute the deed of
sale himself since the properties were still in his name. Belardo merely acted as a
witness. The titles to the properties were given to Dema-ala for safekeeping.
Three days later, or on December 2, 1983, Roque died of influenza. The proceeds
of the loan were used for his treatment while the rest was spent for his burial. In
1985, Belardo fully paid the loan secured by the second deed of sale. Dema-ala
returned the certificates of title to Belardo, who, in turn, gave them back to Atty.
Sanicas.
Unknown to Belardo, the children of Placido and Gabino Naranja, executed an

Extrajudicial Settlement Among Heirs. on October 11, 1985, adjudicating among
themselves Lot No. 4. On February 19, 1986, petitioner Amelia Naranja-Rubinos,
accompanied by Belardo, borrowed the two TCTs, together with the lease
agreement with Esso Standard Eastern, Inc., from Atty. Sanicas on account of the
loan being proposed by Belardo to her. Thereafter, the Naranjas had the
Extrajudicial Settlement Among Heirs notarized on February 25, 1986. With Roque’s
copy of TCT No. T-18764 in their possession, they succeeded in having it cancelled
and a new certificate of title, TCT No. T-140184, issued in their names.
On June 23, 1992, Belardo, through her daughter and attorney-in-fact, Rebecca
Cordero, instituted a suit for reconveyance with damages. The complaint prayed
that judgment be rendered declaring Belardo as the sole legal owner of Lot No. 4,
declaring null and void the Extrajudicial Settlement Among Heirs, and TCT No. T-
140184, and ordering petitioners to reconvey to her the subject property and to
pay damages. The case was docketed as Civil Case No. 7144.
The RTC rendered a decision in favor of the Naranjas which the CA reversed.
ISSUE:
Whether or Not the Sale between Roque Naranja and Lucila P. Bernardo was valid
even if it does comply with provisions of Act No. 496?
RULING:
Yes, the sale is valid. The Court does not agree with Naranja’s contention that a
deed of sale must contain a technical description of the subject property in order to
be valid. The Naranja’s anchor their theory on Section 127 of Act No. 496, which
provides a sample form of a deed of sale that includes, in particular, a technical
description of the subject property.
To be valid, a contract of sale need not contain a technical description of the

subject property. Contracts of sale of real property have no prescribed form for
their validity; they follow the general rule on contracts that they may be entered
into in whatever form, provided all the essential requisites for their validity are
present. The requisites of a valid contract of sale under Article 1458 of the Civil
Code are: (1) consent or meeting of the minds; (2) determinate subject matter;
and (3) price certain in money or its equivalent.
The failure of the parties to specify with absolute clarity the object of a contract by
including its technical description is of no moment. What is important is that there
is,
in fact, an object that is determinate or at least determinable, as subject of the contract
of sale. The form of a deed of sale provided in Section 127 of Act No. 496 is only a
suggested form. It is not a mandatory form that must be strictly followed by the parties
to a contract.
In the instant case, the deed of sale clearly identifies the subject properties by
indicating their respective lot numbers, lot areas, and the certificate of title covering
them. Resort can always be made to the technical description as stated in the
certificates of title covering the two properties.
Thus, the Court affirmed the decision of the Court of Appeals. The deed of
extrajudicial settlement that petitioners executed over Lot No. 4 is, therefore, void,
since the property subject thereof did not become part of Roque’s estate.
HEIRS OF CECILIO (ALSO KNOWN AS BASILIO) CLAUDEL, NAMELY, MODESTA
CLAUDEL, LORETA HERRERA, JOSE CLAUDEL, BENJAMIN CLAUDEL, PACITA
CLAUDEL, CARMELITA CLAUDEL, MARIO CLAUDEL, ROBERTO CLAUDEL,
LEONARDO CLAUDEL, ARSENIA VILLALON, PERPETUA CLAUDEL AND FELISA
CLAUDEL, PETITIONERS,
VS.
HON. COURT OF APPEALS, HEIRS OF MACARIO, ESPERIDIONA, RAYMUNDA
AND CELESTINA, ALL SURNAMED CLAUDEL, RESPONDENTS.
G.R. NO. 85240, JULY 12, 1991
SARMIENTO, J.:
DIGESTED BY: ERMELYN JANE P.
CELINDRO
FACTS:
As early as Dec 28, 1922, Cecilio Claudel acquired from the Bureau of Lands the
subject Lot No. 1230. He dutifully paid real estate taxes until his death. His widow
Basilia, and later her son Jose, thereafter paid the taxes. However, this parcel of
land became the subject of protracted litigation 39 years after his death.
Two branches of Cecilio’s family contested the ownership over the land: on one
hand the children of Cecilio (Modesto, Loreta, Jose, Benjamin, Pacita, etc --- known
as Heirs of Cecilio), and on the other, the brother and sisters of Cecilio: Macario,
etc (private respondents Siblings of Cecilio).
In 1972, the Heirs of Cecilio partitioned the lot among themselves and obtained
TCTs on their shares.
Four years later, the Siblings of Cecilio filed a “complaint for cancellation of titles
and reconveyance with damages”. They alleged that 46 years earlier, their parents
had purchased from Cecilio several portions of Lot 1230 for P30. They admitted
that the transaction was verbal. However, as proof of sale, the Siblings of Cecilio
presented a subdivision plan of the said land indicating the portions allegedly sold
to the Siblings of Cecilio. The complaint was dismissed by CFI. CA reversed the
decision.
ISSUE:
Whether or not the contract of sale was sufficiently proved.
RULING:
No, the contract of sale was not sufficiently proved.
The rule of thumb is that a sale of land, once consummated, is valid regardless of
the form it may have been entered into. For nowhere does law or jurisprudence
prescribe that the contract of sale be put in writing before such contract can validly
cede or transmit rights over a certain real property between the parties themselves.
However, in the event that a third party, as in this case, disputes the ownership of
the property, the person against whom that claim is brought cannot present any
proof of such sale and hence has no means to enforce the contract. Thus, the Statute
of Frauds
was precisely devised to protect the parties in a contract of sale of real property so
that no such contract is enforceable unless certain requisites, for purposes of proof,
are met.
The provisions of the Statute of Frauds pertinent to the present controversy, state:
Art. 1403 (Civil Code). The following contracts are unenforceable, unless they are
ratified:
xxx xxx xxx
2) Those that do not comply with the Statute of Frauds as set forth in this number.
In the following cases, an agreement hereafter made shall be unenforceable by action
unless the same, or some note or memorandum thereof, be in writing, and subscribed
by the party charged, or by his agent; evidence, therefore, of the agreement cannot
be received without the writing, or a secondary evidence of its contents:
xxx xxx xxx
e) An agreement for the leasing for a longer period than one year, or for the sale
of real property or of an interest therein;
The purpose of the Statute of Frauds is to prevent fraud and perjury in the
enforcement of obligations depending for their evidence upon the unassisted
memory of witnesses by requiring certain enumerated contracts and transactions to
be evidenced in Writing.
The provisions of the Statute of Frauds originally appeared under the old Rules of
Evidence. However, when the Civil Code was re-written in 1949 (to take effect in 1950),
the provisions of the Statute of Frauds were taken out of the Rules of Evidence in
order to be included under the title on Unenforceable Contracts in the Civil Code.
The transfer was not only a matter of style but to show that the Statute of Frauds
is also a substantive law.
Therefore, except under the conditions provided by the Statute of Frauds, the
existence of the contract of sale made by Cecilio with his siblings cannot be proved.
SPOUSES GODOFREDO ALFREDO AND CARMEN LIMON ALFREDO, SPOUSES
ARNULFO SAVELLANO AND EDITHA B. SAVELLANO, DANTON D.
MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. AND ESTELA S. ESPIRITU AND
ELIZABETH TUAZON, PETITIONERS,
VS.
SPOUSES ARMANDO BORRAS AND ADELIA LOBATON BORRAS,
RESPONDENTS.
G.R. NO. 144225 JUNE 17, 2003
CARPIO, J.
DIGESTED BY: JOEHANNAH EM LIBOON
DOCTRINE:
Validity and Enforceability of Sale: Spouses Alfredo and Spouses Borras contract of
sale was a perfected one. Perfection of a contract happens when there is consent
of both contracting parties on object certain and cause of the obligation. In this
case the object was the sale of the subject land and the price certain was P15,000.
The contract of sale was also consummated, as seller, Spouses Alfredo, delivered
their obligation to the Spouses Borras, placing latter in actual, physical possession
and transferred ownership of the subject land. While obligation of buyer, Spouses
Borras, also succeeded in paying price certain to seller evidenced by receipt in
March 1970 issued by petitioner-wife.
FACTS:
The Alfredo spouses mortgaged their land to DBP. To pay their debt, they sold the
land to spouses Borras for P15,000. The latter also assumed to pay the loan. Borras
subsequently paid the balance of the purchase price of the land for which Alfredo
issued a receipt dated 11 March 1970 as well as the corresponding owner’s
duplicate copy of the land’s OCT. Borras thereafter took possession of the said
land. Later, they found out that Alfredo sold the land again to other buyers by
securing duplicate copies of the OCTs upon petition with the court. Thus, they filed
for specific performance. Alfredo spouses claimed that the sale, not being in
writing, is unenforceable under the Statute of Frauds.
ISSUE:
Whether or Not the contract of sale is unenforceable under the Statute of Frauds.
RULING:
NO. The Statute of Frauds provides that a contract for the sale of real property shall
be unenforceable unless the contract or some note or memorandum of the sale is
in writing and subscribed by the party charged or his agent. The existence of the
receipt dated 11 March 1970, which is a memorandum of the sale, removes the
transaction from the provisions of the Statute of Frauds. The Statute of Frauds
applies only to
executory contracts and not to contracts either partially or totally performed. Thus,
where one party has performed one’s obligation, oral evidence will be admitted to
prove the agreement. In the instant case, the parties have consummated the sale of
the Subject Land, with both sellers and buyers performing their respective
obligations under the contract of sale. In addition, a contract that violates the
Statute of Frauds is ratified by the acceptance of benefits under the contract.
Alfredo spouses benefited from the contract because they paid their DBP loan and
secured the cancellation of their mortgage using the money given by Borras.
Alfredo also accepted payment of the balance of the purchase price. Alfredo
spouses cannot invoke the Statute of Frauds to deny the existence of the verbal
contract of sale because they have performed their obligations, and have accepted
benefits, under the verbal contract. Borras spouses have also performed their
obligations under the verbal contract. Clearly, both the sellers and the buyers have
consummated the verbal contract of sale of the Subject Land. The Statute of
Frauds was enacted to prevent fraud. This law cannot be used to advance the very
evil the law seeks to prevent.
LOURDES J. ESTRELLADO; THE HEIRS OF EUGENIO ESTRELLADO,
REPRESENTED BY LOURDES J. ESTRELLADO; NARCISA T. ESTRELLADO; THE
HEIRS OF NICOLAS ESTRELLADO, REPRESENTED BY CLARITA E. MAINAR; PILAR
E. BARREDO-FUENTES; AND THE HEIRS OF VIVINA ESTRELLADO-BARREDO
AND ALIPIO BARREDO, REPRESENTED BY PILAR E. BARREDO-FUENTES,
PETITIONERS
VS.
THE PRESIDING JUDGE OF THE MUNICIPALTRIAL COURT IN CITIES, LLTH
JUDICIAL REGION, BRANCH 3, DAVAO CITY; J.S. FRANCISCO,AND SONS, INC.,
REPRESENTED BY ITS PRESIDENT, JOSELITO C. FRANCISCO; AND THE HEIRS
OF DR. JOVITO S. FRANCISCO, REPRESENTED BY JOSELITO C. FRANCISCO,
RESPONDENTS
X-----------------------------X
LOURDES C.FRANCISCO-MADRAZO; ROMEO C. FRANCISCO; CONCEPCION

C. FRANCISCO; GATCHALIAN; AND RENE JOSE C. FRANCISCO, PETITIONERS,
VS.
PILAR BARREDO-FUENTES; JORGE BARREDO; OSCAR BARREDO; RODOLFO
BARREDO; ERNESTO BARREDO; ARMANDO BARREDO; DANILO BARREDO;
TERESITA BARREDO-MCMAHON; LETICIA BARREDO-CUARIO; AND ESPERANZA
BARREDO-TUL-ID, RESPONDENTS
GR NO. 164482 & 211320, NOVEMBER 8, 2017
BERSAMIN, J.:
DIGESTED BY: RUEL M. AGANAP
JR.
FACTS:
The estrellado’s were the former owner of the three parcels of land with an area of
15,465, 15,465 and 15,466 meters located in Barangay Matina-Aplaya. Each of the
three parcels of land herein mentioned was subdivided into two portions - the
smaller portion containing 5,000 square meters, and the bigger portion with an
area of about 10,465 square meters.
Sometime in 1967, Estrellado’s sold their 5,000-square meter lot for ₱l0,000.00 to
Dr. Jovito S. Francisco, the owner of J.S. Francisco & Sons, Inc. and the sale was
evidenced by a deed of absolute sale dated. After selling the smaller lots to Dr.
Francisco, the Estrellados separately sold the bigger portions of their respective lots
to the latter. Immediately the Francisco’s started their uninterrupted possession of
the entire landholdings of the Estrellados in 1967. However, the Franciscos could
not produce the formal deeds of sale relevant to the subsequent sales. They only
had a book of accounts evidencing their installments to the Estrellados.
Hence,, the three bigger lots covered became the subject of the three forcible entry
cases commenced in the MTCC Davao City by J.S. Francisco & Sons, Inc. against
the Estrellados on October 21, 1998. The Estrellados, as the defendants in the three
cases, denied selling the bigger lots to Dr. Francisco.
ISSUE:
Whether or not the sale entered between Estrellado’s and Francisco’s enforceable
under statute of Frauds
RULING:
Yes, under Article 1475 of the Civil Code, the contract of sale is perfected at the
moment there is a meeting of minds not only upon the thing that is the object of
the contract but also upon the price. From that moment, the parties may
reciprocally demand performance, subject to the provisions of the law governing
the form of contracts. The elements of a contract of sale are consent, object, and
price in msoney or its equivalent. The absence of any of these essential elements
negates the existence of a perfected contract of sale. Sale is a consensual contract,
and the party who alleges the sale must show its existence by competent proof.
Despite the document embodying the agreement on the sale not being
acknowledged before a notary public, the nonobservance of the form prescribed by
Article 1358(1)35 of the Civil Code did not render the sale invalid. Indeed, the form
required by Article 1358 was only for convenience of the parties, and was not
essential to the validity or enforceability of the sale. It is required under Article
1403(2) of the Civil Code that
the sale of real property, to be enforceable, should be in a writing subscribed by
the party charged for it. This requirement was met herein by the Franciscos even in
the absence of any formal deed of sale. Considering that the agreement between
the parties on the sale was reduced in writing and signed by the late Spouses Alipio
and Vivina Barredo as the sellers, the sale was enforceable under the Statute of Frauds.
Lastly, the respondents' possession of the owner's duplicate copy of the TCT
obtained in 1998 did not justify the conclusion of the CA that they were the owners
of the parcel of land. Indeed, possession of the owner's duplicate copy of the TCT
was not necessarily equivalent to ownership of the land therein described. For one,
the TCT was merely evidence of title.37 And, moreover, registration of real property
under the Torrens System does not create or vest title because it is not a mode of
acquiring ownership.\
ZENAIDA M. SANTOS, PETITIONER, VS. CALIXTO SANTOS, ALBERTO SANTOS,
ROSA SANTOS-CARREON AND ANTONIO SANTOS, RESPONDENTS.
G.R. NO. 133895 OCTOBER 2,
2001 QUISUMBING, J.:
DIGESTED BY: KARIZ CHARALANE A. ESCANO
DOCTRINE:
When there is no impediment to prevent the thing sold from converting to tenancy
of the purchaser by the sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if, notwithstanding the execution
of the instrument, the purchaser cannot have the enjoyment and material tenancy
nor make use of it himself or through another in his name, then delivery has not
been effected.
FACTS:
Subject property is owned by Spouses Jesus and Rosalia Santos. They have 5
children: Salvador, Calixto, Alberto, Antonio, and Rosa. In the said lot, there was a
4-story building that Rosalia rented out.
Spouses Santos sold the property to two of their children, Salvador and Rosa and
they executed 2 deeds of sale. Rosa subsequently sold her share to Salvador. A
new TCT was issued in favor of Salvador.
Jesus died, followed by Salvador, then Rosalia. Zenaida, as Salvador’s heir, asked
from Antonio Hombrebueno (Rosalia’s tenant) his rent but the latter refused to pay.
This prompted Zenaida to file a case for ejectment against Antonio which was
decided in her favor.
The heirs of Spouses Santos (brothers and sister or Salvador) filed an action for
reconveyance with preliminary injunction against Zenaida, they allege that the two
deeds of sale were simulated for lack of consideration. They were executed to
accommodate Salvador in generation funds for his business and providing him with
greater business flexibility.
Zenaida countered, alleging that Salvador was the registered owner of the
property, which could only be subjected to encumbrances or liens annotated on the
title; that the Santos heir' right to reconveyance was already barred by prescription
and laches; and that the complaint state no cause of action.
Zenaida invokes Article 1477 which provides that ownership of the thing sold is
transferred to the vendee upon its actual or constructive delivery. Article 1498, in turn,
provides that when the sale is made through a public instrument, its execution is
equivalent to the delivery of the thing subject of the contract. She avers that
applying said provisions to the case, Salvador became the owner of the subject
property by virtue of the two deeds of sale executed in his favor.
ISSUE:
Whether the sale through a public instrument tantamount to delivery of the thing
sold?
RULING:
NO. Nowhere in the Civil Code, however, does it provide that execution of a deed of
sale is a conclusive presumption of delivery of possession. The Code merely said
that the execution shall be equivalent to delivery. The presumption can be rebutted
by clear and convincing evidence. Presumptive delivery can be negated by the
failure of the vendee to take actual possession of the land sold.
In Danguilan vs. IAC, 168 SCRA 22, 32 (1988), we held that for the execution of a
public instrument to effect tradition, the purchaser must be placed in control of the
thing sold. When there is no impediment to prevent the thing sold from converting to
tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if, notwithstanding the execution of
the instrument, the purchaser cannot have the enjoyment and material tenancy nor
make use of it himself or through another in his name, then delivery has not been
effected.
As found by both the trial and appellate courts and amply supported by the
evidence on record, Salvador was never placed in control of the property. The
original sellers retained their control and possession. Therefore, there was no real
transfer of ownership.
PERFECTO DY, JR. PETITIONER,
VS.
COURT OF APPEALS, GELAC TRADING INC., AND ANTONIO V. GONZALES,
RESPONDENTS.
G.R. NO. 92989 JULY 8, 1991
GUTIERREZ, JR., J.
DIGESTED BY: JAYWARD Z. BACO
DOCTRINE:
There was constructive delivery already upon the execution of the public instrument
pursuant to Article 1498 and upon the consent or agreement of the parties when
the thing sold cannot be immediately transferred to the possession of the vendee.
The mortgagor who gave the property as security under a chattel mortgage did not
part with the ownership over the same. He had the right to sell it although he was
under the obligation to secure the written consent of the mortgagee or he lays
himself open to criminal prosecution under the provision of Article 319 par. 2 of the
Revised Penal Code. And even if no consent was obtained from the mortgagee, the
validity of the sale would still not be affected.
FACTS:
The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979,

Wilfredo Dy purchased a truck and a farm tractor through financing extended by
Libra Finance and Investment Corporation (Libra). Both truck and tractor were
mortgaged to Libra as security for the loan. Petitioner wanted to buy the tractor from
his brother so on August 20, 1979, he wrote a letter to Libra requesting that he be
allowed to purchase from Wilfredo Dy the said tractor and assume the mortgage
debt of the latter. Libra thru its manager, Cipriano Ares approved the petitioner's
request. Wilfredo Dy executed a deed of absolute sale in favor of the petitioner
over the tractor in question. At this time, the subject tractor was in the possession
of Libra Finance due to Wilfredo Dy's failure to pay the amortizations. Despite the
offer of full payment by the petitioner to Libra for the tractor, the immediate
release could not be effected because Wilfredo Dy had obtained financing not only
for said tractor but also for a truck and Libra insisted on full payment for both.
A PNB check was issued in the amount of P22,000.00 in favor of Libra, thus settling
in full the indebtedness of Wilfredo Dy with the financing firm. Payment having
been effected through an out-of-town check, Libra insisted that it be cleared first
before Libra could release the chattels in question. Civil Case No. R-16646 entitled
"Gelac Trading, Inc. v. Wilfredo Dy", a collection case to recover the sum of
P12,269.80 was pending in another court. On the strength of an alias writ of
execution issued on December 27, 1979, the provincial sheriff was able to seize and
levy on the tractor which was in the premises of Libra in Carmen, Cebu. The tractor
was subsequently sold at public auction
where Gelac Trading was the lone bidder. Later, Gelac sold the tractor to one of its
stockholders, Antonio Gonzales. It was only when the check was cleared on
January 17, 1980 that the petitioner learned about GELAC having already taken
custody of the subject tractor. Consequently, the petitioner filed an action to
recover the subject tractor against GELAC
ISSUE:
Whether or not there was a consummated contract of sale between Perfecto and
Wilfredo.
RULING:
Yes. Article 1496 of the Civil Code states that the ownership of the thing sold is
acquired by the vendee from the moment it is delivered to him in any of the ways
specified in Articles 1497 to 1501 or in any other manner signing an agreement that
the possession is transferred from the vendor to the vendee.
In the instant case, actual delivery of the subject tractor could not be made.
However, there was constructive delivery already upon the execution of the public
instrument pursuant to Article 1498 and upon the consent or agreement of the
parties when the thing sold cannot be immediately transferred to the possession of
the vendee. The respondent court avers that the vendor must first have control and
possession of the thing before he could transfer ownership by constructive delivery.
Here, it was Libra Finance which was in possession of the subject tractor due to
Wilfredo's failure to pay the amortization as a preliminary step to foreclosure. As
mortgagee, he has the right of foreclosure upon default by the mortgagor in the
performance of the conditions mentioned in the contract of mortgage. The law
implies that the mortgagee is entitled to possess the mortgaged property because
possession is necessary in order to enable him to have the property sold.
While it is true that Wilfredo Dy was not in actual possession and control of the
subject tractor, his right of ownership was not divested from him upon his default.
Neither could it be said that Libra was the owner of the subject tractor because the
mortgagee can not become the owner of or convert and appropriate to himself the
property mortgaged (Article 2088, Civil Code) Said property continues to belong to
the mortgagor.
There is no showing that Libra Finance has already foreclosed the mortgage and
that it was the new owner of the subject tractor. Undeniably, Libra gave its consent
to the sale of the subject tractor to the petitioner. It was aware of the transfer of rights
to the petitioner.
The payment of the check was actually intended to extinguish the mortgage
obligation so that the tractor could be released to the petitioner. It was never
intended nor could it be considered as payment of the purchase price because the
relationship between
Libra and the petitioner is not one of sale but still a mortgage. The clearing or
encashment of the check which produced the effect of payment determined the full
payment of the money obligation and the release of the chattel mortgage. It was
not determinative of the consummation of the sale. The transaction between the
brothers is distinct and apart from the transaction between Libra and the petitioner.
The sale of the subject tractor was consummated upon the execution of the public
instrument on September 4, 1979. At this time constructive delivery was already
effected. Hence, the subject tractor was no longer owned by Wilfredo Dy when it
was levied upon by the sheriff in December, 1979. Well settled is the rule that only
properties unquestionably owned by the judgment debtor and which are not
exempt by law from execution should be levied upon or sought to be levied upon.
For the power of the court in the execution of its judgment extends only over
properties belonging to the judgment debtor.
A. A. ADDISON, PLAINTIFF-APPELLANT VS. MARCIANA FELIX AND BALBINO
TIOCO, DEFENDANTS-APPELLEES.
G.R. NO. L-12342 AUGUST 3, 1918
FISHER, J.
DIGESTED BY: JAMERO, GERARDO JR. T.
DOCTRINE:
The execution of a public instruments is equivalent to the delivery of the thing

which is the object of the contract, but, in order that this symbolic delivery may
produce the effect of tradition, it is necessary that the vendor shall have had such
control over the thing sold that, at the moment of the sale, its material delivery
could have been made.
FACTS:
In 1914 through a public instrument, A.A Addison sold to Marciana Felix, with the
consent of her husband, Balbino Tioco, four parcels of land, described in the
instrument. At the time of the execution of the deed, Felix piad the sum of P3,000
on account of the purchase price, and bound herself to pay the remainder in
installments, the first of P2,000 on July 15, 1914, and the second of P5,000 thirty
days after the issuance to her of a certificate of title under the Land Registration
Act.
It was also covenanted that "within one year from the date of the certificate of title
in favor of Marciana Felix, she may rescind the contract of purchase and sale, in
which case Marciana Felix shall be obliged to return to A. A. Addison, the net value
of all the products of the four parcels sold, and Addison shall obliged to return to
Marciana Felix, all the sums that she may have paid to Addison, together with interest
at the rate of 10 per cent per annum."
In 1915, A. A. Addison, filed suit in CFI Manila to compel Marciana Felix to make
payment of the first installment of P2,000, demandable in accordance with the
terms of the contract of sale aforementioned, on July 15, 1914, and of the interest in
arrears, at the stipulated rate of 8 per cent per annum.
Felix, alleged that the A.A Addison had absolutely failed to deliver to the Spouses
the lands that were the subject matter of the sale, notwithstanding the demands
made upon him for this purpose. She therefore asked that she be absolved from
the complaint, and that, after a declaration of the rescission of the contract of the
purchase and sale of said lands, the plaintiff be ordered to refund the P3,000 that
had been paid to him on account, together with the interest agreed upon, and to
pay an indemnity for the losses and damages which Felix alleged she had suffered
through the plaintiff's non-fulfillment of the contract.
ISSUE:
Was there a delivery made and, therefore, a transfer of ownership of the thing sold?
RULING:
No. The record shows that the plaintiff did not deliver the thing sold. With respect
to two of the parcels of land, he was not even able to show them to the purchaser; and
as regards the other two, more than two-thirds of their area was in the hostile and
adverse possession of a third person.
The Code imposes upon the vendor the obligation to deliver the thing sold. The
thing is considered to be delivered when it is placed "in the hands and possession
of the vendee." (Civ. Code, art. 1462.) It is true that the same article declares that
the execution of a public instruments is equivalent to the delivery of the thing which
is the object of the contract, but, in order that this symbolic delivery may produce
the effect of tradition, it is necessary that the vendor shall have had such control
over the thing sold that, at the moment of the sale, its material delivery could have
been made. It is not enough to confer upon the purchaser the ownership and the
right of possession. The thing sold must be placed in his control. When there is no
impediment whatever to prevent the thing sold passing into the tenancy of the
purchaser by the sole will of the vendor, symbolic delivery through the execution of
a public instrument is sufficient. But if, notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and material tenancy of the
thing and make use of it himself or through another in his name, because such
tenancy and enjoyment are opposed by the interposition of another will, then
fiction yields to reality — the delivery has not been effected.
It is evident, then, in the case at bar, that the mere execution of the instrument was
not a fulfillment of the vendors' obligation to deliver the thing sold, and that from
such non- fulfillment arises the purchaser's right to demand, as she has demanded,
the rescission of the sale and the return of the price.
SPOUSES EROSTO SANTIAGO AND NELSIE SANTIAGO, PETITIONERS, VS.
MANCER VILLAMOR, CARLOS VILLAMOR, JOHN VILLAMOR AND
DOMINGO VILLAMOR, JR., RESPONDENTS.
G.R. NO. 168499 NOVEMBER 26,
2012 BRION, J.:
DOCTRINE:
A person who does not have actual possession of the thing sold cannot transfer
constructive possession by the execution and delivery of a public instrument. In this
case, no constructive delivery of the land transpired upon the execution of the deed
of sale since it was not the spouses Villamor, Sr. but the respondents who had
actual possession of the land. The presumption of constructive delivery is
inapplicable and must yield to the reality that the petitioners were not placed in
possession and control of the land.
FACTS:
Spouses Villamor are the parents of respondents Mancer, Carlos and Domingo Jr.
(respondents) and the grandparents of respondent John Villamor. In January 1982:
Spouses Villamor mortgaged their 4.5-hectare coconut land in Masbate to the San
Jacinto Bank as security for a P10,000.00 loan. For failure to pay the loan, the property
was extra-judicially foreclosed by the bank. Spouses Villamor failed to redeem the
property so San Jacinto Bank obtained a final deed of sale in its favor in 1991. The
San Jacinto Bank then offered the land for sale to any interested buyer. The
children of spouses Villamor agreed to buy the property. The San Jacinto Bank
agreed with the respondents and Catalina (one of the sisters of the respondents) to a
P65,000.00 sale, payable in installments. Upon full payment of the children of
spouses Catalina, San Jacinto bank refused to issue the deed of conveyance.
Hence, they filed an action for specific performance. In 1994, before the action for
specific performance was filed, Spouses Villamor sold the land to petitioner-spouses
Santiago for P150k. When the children of Spouses Villamor refused to vacate the
land after spouses Santiago’s demand, the latter also filed an action for quieting of
title.
RTC ruled in the Specific Performance case that the issuance of the deed of
registration of San Jacinto Bank in favor of spouses Villamor was done in good faith
because the children were mere acting as representative of their parents in paying
the said installment and therefore the issuance of the said deed of registration was
done in good faith by the bank in favor to Sps. Villamor. While in Quieting of Title
case, the RTC ruled that spouses Villamor were purchasers in good faith, hence
they are the legal owners. RTC also said that the notarized deed of sale in their
favor resulted in constructive delivery of the land.
CA reversed RTC’s ruling in specific performance case and ruled that the children of
Spouses Villamor did not act as representatives of their parents because
respondents children and Catalina made the installment payments on their own
behalf. CA also
reversed the RTC ruling in Quieting of Title case where the CA ruled that spouses
Villamor’s action for quieting of title cannot prosper for they have no legal or
equitable title over the land because it was noted that there was no real transfer of
ownership since neither the spouses Villamor, Sr. nor the petitioners were placed in
actual possession and control of the land after the execution of the deeds of sale.
Spouses Villamor that the deed of sale executed in their favor was equivalent to
delivery of the land under Article 1498 of the CC and that they are purchasers in
good faith since they had no knowledge of the supposed transaction between the
San Jacinto Bank and the respondents and Catalina.
The children of Spouses Villamor (respondents) hold that they have a legal title to
the land since they perfected the sale with the San Jacinto Bank as early as
November 4, 1991, the first installment payment, and are in actual possession of
the land; and that petitioners-spouses Santiago are not purchasers in good faith
because they failed to show why they are not in possession of the property.
ISSUE:
Whether there was constructive delivery of the land to the Sps. Villamor?
RULING:
NO. There was no constructive delivery of the land to Sps. Villamor.
Article 1477 of the Civil Code recognizes that the "ownership of the thing sold shall
be transferred to the vendee upon the actual or constructive delivery thereof."
Related to this article is Article 1497 which provides that "the thing sold shall be
understood as delivered, when it is placed in the control and possession of the
vendee."
A person who does not have actual possession of the thing sold cannot transfer
constructive possession by the execution and delivery of a public instrument. With
respect to incorporeal property, Article 1498 of the Civil Code lays down the general
rule: the execution of a public instrument "shall be equivalent to the delivery of the
thing which is the object of the contract, if from the deed the contrary does not
appear or cannot clearly be inferred." However, the execution of a public
instrument gives rise only to a prima facie presumption of delivery, which is
negated by the failure of the vendee to take actual possession of the land sold.
In this case, no constructive delivery of the land transpired upon the execution of
the deed of sale since it was not the spouses Villamor, Sr. but the respondents who
had actual possession of the land. The presumption of constructive delivery is
inapplicable and must yield to the reality that the petitioners were not placed in
possession and control of the land.
LA FUERZA, INC., PETITIONER,
VS.
THE HON. COURT OF APPEALS AND ASSOCIATED ENGINEERING CO., INC.,
RESPONDENTS.
G.R. NO. L-24069 JUNE 28, 1968
CONCEPCION, C.J.:
DOCTRINE:
Article 1571 provides that “Actions arising from the provisions of the preceding ten
articles shall be barred after six months from the delivery of the thing sold”
The 4-year prescriptive period under Article 1389 of the Civil Code in contracts to
claim rescission applies to contracts in general while the 6-month prescriptive
period under Article 1571 of the same Code applies specifically to Sales. Hence, the
latter provision prevailed over the former.
FACTS:
Private respondent Associated Engineering Co. Inc. (‘Associated Engineering’) is a

corporation engaged in the manufacture and installation of flat belt conveyors
which offered its services to petitioner La Fuerza Inc., a corporation engaged in the
manufacture of wines. The offer was put into writing which was eventually
conformed by Mariano Lim, President of La Fuerza but added a condition which
reads: “All specifications shall be in strict accordance with the approved plan made
part of this agreement hereof”.
The installation of the conveyors was completed in May 1960. After series of trial
runs which ended in July 1960, it was discovered that the conveyor system did not
function to La Fuerza’s satisfaction and had defect which caused La Fuerza to incur
damages; said defects despite La Fuerza’s request that the same be remedied
remained unheeded hence the latter’s refusal to pay.
In 1961, La Fuerza prayed for the rescission of the contract and insisted the following:
1. That there has been xxx no delivery of the conveyors unless the Associated
Engineering has complied the conditions and requirements agreed by both parties;
and
2. That assuming that there has been such delivery, the 6 months prescribed in
Article 1571 of the Civil Code refers to the “period within which La Fuerza may
bring an action to demand compliance of the warranty against hidden defects, not
the action for rescission of the contract.
ISSUE:
Whether or not there was delivery
RULING:
Yes. The moment the installation and operation of conveyors was completed in July
1960, La Fuerza had acquired possession of the same. Its failure to express
categorically of whether or not the same is accepted or rejected does not change
the fact that there was already delivery in their favor, and with that, the period
prescribed under Article 1571 of the Civil Code had begun.
The Court cited Articles 1566 and 1567 of the same Code, which provided the
obligation of the vendor and the right of the vendee respectively. Applying these
provisions in relation to Article 1571, the Court held that La Fuerza was already
barred from filing for rescission of the contract and to claim for damages, even if
later found that the conveyor installed may have hidden defects.
BEHN, MEYER & CO. (LTD.), PLAINTIFF-APPELLANT,
VS.
TEODORO R. YANCO, DEFENDANT-APPELLEE.
G.R. NO. 13203, SEPTEMBER 18, 1918
MALCOLM, J.:
DOCTRINE:
In mercantile contracts of American origin, the letters, "F.O.B.," standing for the words
"Free on Board," are frequently used. The meaning is that the seller shall bear all
expenses until the goods are delivered where they are to be "F.O.B." According as
to whether the goods are to be delivered "F.O.B." at the point of shipment or at the
point of destination determines the time when property passes.
FACTS:
A contract for sale of 80 drums of caustic soda was agreed between Behn, Meyer &
Co. and Teodoro Yanco, the merchandise was shipped from New York to Manila.
The steamship was detained by the British authorities in Penang, causing seventy-one
of the eighty drums of caustic soda to be removed. Yanco refused to accept what
was left and also refused to accept the offer of Behn Meyer to have the products
substituted with other merchandise which were different from what was ordered.
The contract provided for “c.i.f. Manila, pagadero against delivery of documents.”
Yanco filed an action seeking for damages for alleged breach of contract.
ISSUE:
Whether Behn, Meyer & Co should bear the burden of the loss of the merchandise.
RULING:
Yes. The rule as to delivery of goods by a vendor via a common carrier is that if the
contract is silent, delivery of seller to common carrier transfer ownership to buyer. If
the contract be silent as to the person or mode by which the goods are to be sent,
delivery by the vendor to a common carrier, in the usual and ordinary course of
business, transfers the property to the vendee.
If freight is paid by the buyer, he acquires ownership at the point of shipment but if
payment of freight is made by the seller, the title of property does not pass until
the goods have reached their destination.
The letters "c.i.f." found in British contracts stand for cost, insurance, and freight. They
signify that the price fixed covers not only the cost of the goods, but the expense
of freight and insurance to be paid by the seller.
In this case, in addition to the letters "c.i.f.," has the word following, "Manila." In
mercantile contracts of American origin the letters "F.O.B." standing for the words
"Free on Board," are frequently used. The meaning is that the seller shall bear all
expenses until the goods are delivered where they are to be "F.O.B." According as
to whether the goods are to be delivered "F.O.B." at the point of shipment or at the
point of destination determines the time when property passes.
Delivery was to be made in Manila. The word Manila in conjunction with the letters
"c.i.f." must mean that the contract price, covering costs, insurance, and freight,
signifies that delivery was to made at Manila. If petitioner Behn Meyer has seriously
thought that the place of delivery was New York and Not Manila, it would not have
gone to the trouble of making fruitless attempts to substitute goods for the
merchandise named in the contract, but would have permitted the entire loss of the
shipment to fall upon the defendant.
Behn Meyer failed to prove that it performed its part in the contract. In this case, the
place of delivery was Manila and Behn Meyer has not legally excused default in
delivery of the specified merchandise at that place. In resume, the Court find that the
Behn, Meyer,
VIRGILIO S. DAVID, PETITIONER, VS.
MISAMIS OCCIDENTAL II ELECTRIC COOPERATIVE, INC., RESPONDENT.
G.R. NO. 194785 JULY 11, 2012
MENDOZA, J.:
DOCTRINE:
Where, in pursuance of a contract of sale, the seller is authorized or required to

send the goods to the buyer delivery of the goods to a carrier, whether named by
the buyer or not, for the purpose of transmission to the buyer is deemed to be a
delivery of the goods to the buyer, except in the cases provided for in Article 1503,
first, second and third paragraphs, or unless a contrary intent appears.
FACTS:
Virgilio S. David was the owner or proprietor of VSD Electric Sales, a company
engaged in the business of supplying electrical hardware including transformers for
rural electric cooperatives. To solve its problem of power shortage affecting some
areas within its coverage, MOELCI expressed its intention to purchase a 10 MVA
power transformer from David. David presented his proposal for the acquisition of
said transformer. This proposal was the same proposal that he would usually give
to his clients.
As stated in the proposal, the subject transformer, together with the basic
accessories, was valued at P5,200,000.00. It was also stipulated therein that 50%
of the purchase price should be paid as downpayment and the remaining balance
to be paid upon delivery. Freight handling, insurance, customs duties, and
incidental expenses were for the account of the buyer.In early December 1992 and
requested David to deliver the transformer to them even without the required
downpayment. David granted the request provided that MOELCI would pay interest
at 24% per annum. Engr. Rada acquiesced to the condition. On December 17,
1992, the goods were shipped to Ozamiz City via William Lines. In the Bill of
Lading, a sales invoice was included which stated the agreed interest rate of 24% per
annum.
When no payment was made after several months, Medina was constrained to send
a demand letter, this prompted Medina to head back to Ozamiz City where he
found out that the goods had already been released to MOELCI evidenced by the
shipping company’s copy of the Bill of Lading which was stamped "Released," and
with the notation that the arrastre charges in the amount of P5,095.60 had been paid.
This was supported by a receipt of payment with the corresponding cargo delivery
receipt issued by the Integrated Port Services of Ozamiz, Inc.
ISSUE:
Whether or Not there was a delivery that consummated the Contract.
RULING:
Yes. The delivery made by David to William Lines, Inc., as evidenced by the Bill of
Lading, was deemed to be a delivery to MOELCI. David was authorized to send the
power transformer to the buyer pursuant to their agreement. When David sent the item
through the carrier, it amounted to a delivery to MOELCI.
Furthermore, in the case of Behn, Meyer & Co. (Ltd.) v. Yangco, it was pointed out that
a specification in a contract relative to the payment of freight can be taken to
indicate the intention of the parties with regard to the place of delivery. So that, if
the buyer is to pay the freight, as in this case, it is reasonable to suppose that the
subject of the sale is transferred to the buyer at the point of shipment. In other words,
the title to the goods transfers to the buyer upon shipment or delivery to the carrier.
Of course, Article 1523 provides a mere presumption and in order to overcome said
presumption, MOELCI should have presented evidence to the contrary. The burden
of proof was shifted to MOELCI, who had to show that the rule under Article 1523
was not applicable. In this regard, however, MOELCI failed. There being delivery
and release, said fact constitutes partial performance which takes the case out of
the protection of the Statute of Frauds. It is elementary that the partial execution
of a contract of sale takes the transaction out of the provisions of the Statute of
Frauds so long as the essential requisites of consent of the contracting parties,
object and cause of the obligation concur and are clearly established to be present.
DESIGNER BASKETS, INC., PETITIONER, V. AIR SEA TRANSPORT, INC. AND ASIA
CARGO CONTAINER LINES, INC., RESPONDENTS
JARDELEZA, J.
G.R. NO. 184513, MARCH 09, 2016
DIGESTED BY: DANILO JR. T. FORRO
DOCTRINE:
Article 1503 of the Civil Code does not apply to contracts for carriage of goods.
Articles 1523 and 1503, refer to a contract of sale between a seller and a buyer. In
particular, they refer to who between the seller and the buyer has the right of
possession or ownership over the goods subject of the sale. Articles 1523 and 1503
do not apply to a contract of carriage between the shipper and the common carrier.
FACTS:
DBI is a domestic corporation engaged in the production of housewares and

handicraft items for Export. In October 1995, Ambiente, a foreign based company,
ordered from DBI 223 cartons of assorted wooden items. Ambiente designated
ACCLI as the forwarding agent that will ship out its order from the Philippines to
the United States. ACCLI is a domestic corporation acting as agent of ASTI, a US
based corporation engaged in carrier transport business, in the Philippines. On
January 7, 1996, DBI delivered the shipment to ACCLI for sea transport from Manila
and delivery to Ambiente. To acknowledge receipt and to serve as the contract of
sea carriage, ACCLI issued to DBI triplicate copies of ASTI Bill of Lading. DBI
retained possession of the originals of the bills of lading pending the payment of
the goods by Ambiente. On January 23, 1996, Ambiente and ASTI entered into an
Indemnity Agreement. Under the Agreement, Ambiente obligated ASTI to deliver
the shipment to it or to its order “without the surrender of the relevant bill(s) of
lading due to the non-arrival or loss thereof.” In exchange, Ambiente undertook to
indemnify and hold ASTI and its agent free from any liability as a result of the
release of the shipment. Thereafter, ASTI released the shipment to Ambiente
without the knowledge of DBI, and without it receiving payment for the total cost of
the shipment. DBI then made several demands to Ambiente for the payment of the
shipment, but to no avail. Thus, on October 7, 1996, DBI filed the Original
Complaint against ASTI, ACCLI and ACCLI’s incorporators- stockholders DBI claimed
that under Bill of Lading is “to release and deliver the cargo/shipment to the
consignee, x x x, only after the original copy or copies of [the] Bill of Lading is or
are surrendered to them; otherwise, they become liable to the shipper for the value
of the shipment.” DBI also averred that ACCLI should be jointly and severally liable
with its co defendants because ACCLI failed to register A STI as a foreign
corporation doing business in the Philippines. In addition, ACCLI failed to secure a
license to act as agent of ASTI.
ISSUE:
Whether ASTI, ACCLI, and Ambiente are solidarily liable to DBI for the value of the
shipment.
RULING:
Petition Denied. A common carrier may release the goods to the consignee even
without the surrender of the bill of lading.The general rule is that upon receipt of
the goods, the consignee surrenders the bill of lading to the carrier and their
respective obligations are considered canceled. The law, however, provides two
exceptions where the goods may be released without the surrender of the bill of
lading because the consignee can no longer return it. These exceptions are when
the bill of lading gets lost or for other causes. In either case, the consignee must issue
a receipt to the carrier upon the release of the goods. Such receipt shall produce the
same effect as the surrender of the bill of lading. We have already ruled that the
non-surrender of the original bill of lading does not violate the carrier’s duty of
extraordinary diligence over the goods (Republic v. LorenzoShipping Corporation).
Thus, we held that the surrender of the original bill of lading is not a condition
precedent for a common carrier to be discharged of its contractual obligation.
Clearly, law and jurisprudence is settled that the surrender of the original bill of
lading is not absolute; that in case of loss or any other cause, a common carrier
may release the goods to the consignee even without it.
DASMARIÑAS T. ARCAINA AND MAGNANI T. BANTA, PETITIONERS
VS.
NOEMI L. INGRAM, REPRESENTED BY MA. NENETTE L. ARCHINUE,
RESPONDENT
G.R. NO. 196444, FEBRUARY 15, 2017
JARDELEZA, J.:
DIGESTED BY: ANALOU DORADO - MAYPA
DOCTRINE:
Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a
certain sum for a unit of measure or number, there shall be no increase or decrease
of the price, although there be a greater or less area or number than that stated in
the contract.
The same rule shall be applied when two or more immovables are sold for a single
price; but if, besides mentioning the boundaries, which is indispensable in every
conveyance of real estate, its area or number should be designated in the contract,
the vendor shall be bound to deliver all that is included within said boundaries,
even when it exceeds the area or number specified in the contract; and, should he
not be able to do so, he shall suffer a reduction in the price, in proportion to what
is lacking in the area or number, unless the contract is rescinded because the
vendee does not accede to the failure to deliver what has been stipulated.
FACTS:
Arcaina is the owner of Lot No. 3230 located in Albay. Sometime in 2004, her attorney-
in-fact Banta, entered into a contract with Ingram for the sale of the property. Banta
showed Ingram and the latter’s attorney-in-fact, Archinue the metes and bounds of Lot
3230 and represented that it has an area of 6,200 square meters. The contract price
was P1.86M; and Ingram made installment payments totaling P1.715M.
Subsequently, they executed a MOA acknowledging the previous payments, and

that Ingram still had an obligation to pay the remaining balance of P145,000. They
also executed Deeds of Absolute Sale over the property in Ingram’s favor. Both
deeds described the property with an area of 6,200 square meter, Ingram caused
the property to be surveyed and discovered that Lot No. 3230 has an area of
12,000 square meters. Upon learning of the actual area of the property, Banta
allegedly insisted that the difference of 5,800 square meters remains unsold. Upon
learning the actual area of the property, Banta insisted on fencing the portion which
she claimed to be unsold.
Ingram’s Contention:
The sale contemplated the entire property as in fact the boundaries of the lot were
stated in the deeds. Ingram maintained that she is ready to pay the balance of
P145,000 as soon as Arcaina recognize her ownership of the whole property.
Arcaina’s Contention:
Arcaina denied that the sale contemplated the whole property and contended that
the parties agreed that only 6,200 square meters was to be sold at P300 per square
meter which was consistent in the contemporaneous acts.
The RTC held that under Article 1542 which covers the sale of real estate in lump
sum, Arcaina as the vendor is obligated to deliver all the land included in the
boundaries of the property, regardless of whether the real area should be greater
or smaller than what is recited in the deeds of sale.
CA affirmed RTC that sale was for a lump sum and not on a per square meter basis.
ISSUE:
Whether or not the property was sold for a lump sum or on a per square meter
basis.
RULING:
It was sold for a lump sum (but only for an area of 6,200 square meters).
In sale of real estate, parties may choose between two types of pricing agreement:
1. Unit price contract wherein the purchase price is determined by way of reference
to a stated rate per unit area; or
2. Lump sum contract which states a full purchase price for an immovable the area
of which may be declared based on an estimate where both the area and the
boundaries are stated.
The Deeds of Sale both show that the property was conveyed to Ingram at the
predetermined price of P1.86M. There was no indication that it was bought on a
per- square-meter basis. Thus, Article 1542 of the Civil Code governs the sale:
ARTICLE 1542: In the sale of real estate, made for a lump sum and not at the
rate of a certain sum for a unit of measure or number, there shall be no
increase or decrease of the price, although there be a greater or less area or
number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a
single price; but if, besides mentioning the boundaries, which is
indispensable in every conveyance of real estate, its area or number should
be designated in the contract, the vendor shall be bound to deliver all that is
included within said boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to do so, he shall suffer
a reduction in the price, in proportion to what is lacking in the area or
number, unless the contract is rescinded because the vendee does not
accede to the failure to deliver what has been stipulated.
The provision teaches that where both the area and the boundaries of the
immovable are declared in a sale of real estate for a lump sum, the area covered
within the boundaries of the immovable prevails over the stated area. The vendor is
obliged to deliver all that is included within the boundaries regardless of whether
the actual area is more than what was specified in the contract of sale; and he/she
shall do so without a corresponding increase in the contract price. This is
particularly true when the stated area is qualified to be approximate only, such as
when the words "more or less" were used.
The deeds of sale in this case provide both the boundaries and the estimated area of
the property. The uniform allegations of Arcaina and Ingram, however, reveal that the
actual area within the boundaries of the property amounts to more or less 12,000
square meters, with a difference of 5,800 square meters from what was stated in
the deeds of sale.
The Court deems that the RTC and CA are mistaken. In the case of Del Prado v.
Sps. Caballero, with analogous factual basis, the court did not apply Article 1542,
because the rule in Article 1542 is not a hard and fast rule. A caveat is in order, the
use of "more or less" or similar words in designating quantity covers only a
reasonable excess or deficiency. A vendee of land sold in gross or with the
description "more or less" with reference to its area does not thereby ipso facto
take all risk of quantity in the land. The words are intended to cover slight and
unimportant inaccuracies in quantity and are ordinarily to be interpreted as taking
care of unsubstantial differences or differences of small importance compared to
the whole number of items transferred. In a lump sum contract, a vendor is
generally obligated to deliver all the land covered within the boundaries, regardless
of whether the real area should be greater or smaller than that recited in the deed.
However, in case there is conflict between the area actually covered by the
boundaries and the estimated area stated in the contract of sale, he/she shall do so
only when the excess or deficiency between the former and the latter is reasonable.
Applying Del Prado, we find that the difference of 5,800 square meters is too
substantial to be considered reasonable. We note that only 6,200 square meters
was agreed upon between petitioners and Ingram. Declaring Ingram as the owner
of the whole 12,000 sq. m. on the premise that this is the actual area included in
the boundaries would be ordering the delivery of almost twice the area stated in
the deeds of sale. Surely, Article 1542 does not contemplate such an unfair
situation to befall a vendor-that he/she would be compelled to deliver double the
amount that he/she originally sold without a corresponding increase in price. In
Asiain v. Jalandoni, we explained that “a vendee of a land when it is sold in gross
or with the description ‘more or less’ does not thereby ipso facto take all risk of
quantity in the land. The use of ‘more or less’ or similar words in designating
quantity covers only a reasonable excess or deficiency.”
Therefore, we rule that Ingram is entitled only to 6,200 sq. m. of the property. An area
of 5,800 sq. m. more than the area intended to be sold is not a reasonable excess
that can be deemed included in the sale. Further, at the time of the sale, Ingram
and petitioners did not have knowledge of the actual area of the land within the
boundaries of the property. It is undisputed that before the survey, the parties
relied on the tax declaration covering the lot, which merely stated that it measures
more or less 6,200 sq. m. Thus, when petitioners offered the property for sale and
when Ingram accepted the offer, the object of their consent or meeting of the
minds is only a 6,200-sq. m. property. The deeds of sale merely put into writing
what was agreed upon by the parties.
SPOUSES JOSE C. ROQUE AND BEATRIZ DELA CRUZ ROQUE, WITH DECEASED
JOSE C. ROQUE REPRESENTED BY HIS SUBSTITUTE HEIR JOVETTE ROQUE-
LIBREA, PETITIONERS,
VS.
MA. PAMELA P. AGUADO, FRUCTUOSO C. SABUG, JR., NATIONAL COUNCIL OF
CHURCHES IN THE PHILIPPINES (NCCP), REPRESENTED BY ITS SECRETARY
GENERAL SHARON ROSE JOY RUIZ-DUREMDES, LAND BANK OF THE
PHILIPPINES (LBP), REPRESENTED BY BRANCH MANAGER EVELYN M.
MONTERO, ATTY. MARIO S.P. DIAZ, IN HIS OFFICIAL CAPACITY AS REGISTER
OF DEEDS FOR RIZAL, MORONG BRANCH, AND CECILIO U. PULAN, IN HIS
OFFICIAL CAPACITY AS SHERIFF, OFFICE OF THE CLERK OF COURT,
REGIONAL TRIAL COURT, BINANGONAN, RIZAL, RESPONDENT.
G.R. NO. 193787 APRIL 17, 2014
PERLAS-BERNABE, J.:
DOCTRINE:
It is essential to distinguish between a contract to sell and a conditional contract of

sale specially in cases where the subject property is sold by the owner not to the
party the seller contracted with, but to a third person. Spouses Roque’s reliance on
Article 1544 of the Civil Code on double sale has been misplaced since the contract
they base their claim of ownership on is a contract to sell, and not one of sale
FACTS:
The subject property in this case is a parcel of land denominated as Lot 18089 with
a total area of 20,862 sq.m. The original owners of the then unregistered Lot 18089
were the Riveros. Petitioners-spouses Jose and Beatriz Roque and the Riveros
executed a Deed of Conditional Sale of Real Property in 1977 over the 1,231-sq.m.
portion of Lot 18089, for a consideration of ₱30,775.00. As per their agreement,
Spouses Roque shall make an initial payment of ₱15,387.50 upon signing of the
Deed, while the remaining balance of the purchase price shall be payable upon the
registration of the said lot, as well as the segregation and the issuance of a
separate title over the subject portion in their names. After the execution of the
Deed of Conditional Sale, Spouses Roque took possession and introduced
improvements on the subject portion which they utilized as a balut factory.
In 1991, respondent Fructuoso Sabug, Jr., former Treasurer of the National Council
of Churches in the Philippines (NCCP), applied for a free patent over the entire Lot
18089 and was eventually issued Original Certificate of Title in his name. In 1993,
Sabug and Velia Rivero, in her personal capacity and in representation of the other
original owners, executed a Joint Affidavit, acknowledging that the subject portion
belongs to Spouses Roque and expressed their willingness to segregate the same
from the entire
area of the said lot. In 1999, Sabug through a Deed of Absolute Sale sold the said
lot to respondent Ma. Pamela Aguado for ₱2.5M, who caused the cancellation of
the Original Certificate of Title and the issuance of Transfer Certificate of Title in her
name. Aguado then obtained an ₱8M loan from the Land Bank of the Philippines
secured by a mortgage over the said lot. When Aguado failed to pay her loan
obligation, Land Bank commenced extra-judicial foreclosure proceedings and
eventually bought the land as the highest bidder in the auction sale. Since Aguado
failed to redeem the subject property, Land Bank consolidated its ownership, and
Transfer Certificate of Title was issued to it in July 2003.
In June 2003, Spouses Roque filed a complaint for reconveyance, annulment of

sale, deed of real estate mortgage, foreclosure, and certificate of sale, and
damages against Aguado, Sabug, NCCP, Land Bank, the Register of Deeds and the
Sheriff, seeking to be declared as the true owners of the subject 1,231- sq. m.
portion which had been erroneously included in the sale between Aguado and
Sabug, and subsequently, the mortgage to Land Bank, both covering the entire lot.
NCCP and Sabug, Jr. denied any knowledge of the 1977 Deed of Conditional Sale
between spouses Roque and Riveros. Aguado raised the defense of an innocent
purchaser for value as she allegedly derived her title (through the 1999 Deed of
Absolute Sale) from Sabug, Jr., who was the registered owner in the original
certificate of title which at the time of sale was free from any lien and/or
encumbrances. Land Bank also denied knowledge of Sps. Roque’s claim on the
subject portion, considering that at the time the loan was taken out, Lot 18089 in
its entirety was registered in Aguado’s name and no lien and/or encumbrance was
annotated on her certificate of title.
The RTC dismissed the complaints of Spouses Roque for failure of the latter to
establish their ownership over the subject portion. The CA, affirming the decision of
the RTC, did not order its reconveyance or segregation in the latter’s favor because
of Sps. Roque’s failure to pay the remaining balance of the purchase price. Spouses
Roque asserted that being the first purchasers and in actual possession of the
disputed 1,231- sq. m. portion of Lot 18089, they have a better right and cannot be
ousted therefrom by Land Bank, which was adjudged as a mortgagee/purchaser in
bad faith, pursuant to Article 1544 of the Civil Code
ISSUE:
Whether or not there is a double sale in this case.
RULING:
NO, the Supreme Court held that there is no double sale in this case there being no
previous sale. The 1977 Deed of Conditional Sale, the contract that Spouses Roque
base their claim of ownership on is a contract to sell, and not one of sale. It has
been consistently ruled that where the seller promises to execute a deed of
absolute sale upon the completion by the buyer of the payment of the purchase
price, such as the
stipulation contained in the 1977 Deed of Conditional Sale, the contract is only a
contract to sell even if the agreement is denominated as a Deed of Conditional
Sale.
Also, the circumstances which must concur in order to determine the applicability of
Article 1544 or the provision on double sale, as enunciated in the case of Cheng vs
Genato, are not present in this case:
(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 same seller
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL,
ANNABELLE C. GONZALES (FOR HERSELF AND ON BEHALF OF FLORIDA
C. TUPPER, AS ATTORNEY-IN-FACT), CIELITO A. CORONEL, FLORAIDA A.
ALMONTE, AND CATALINA BALAIS MABANAG, PETITIONERS,
VS.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, AND RAMONA
PATRICIA ALCARAZ, ASSISTED BY GLORIA F. NOEL AS ATTORNEY-IN-FACT,
RESPONDENTS.
G.R. NO. 103577 OCTOBER 7, 1996
MELO, J.
DIGESTED BY: RIVERA, RIZZA JEAN R.
DOCTRINE:
Double Sale. The provision on double sale presumes title or ownership to pass to
the first buyer, the exceptions being: (a) when the second buyer, in good faith,
registers the sale ahead of the first buyer, and (b) should there be no inscription by
either of the two buyers, when the second buyer, in good faith, acquires possession
of the property ahead of the first buyer. Unless, the second buyer satisfies these
requirements, title or ownership will not transfer to him to the prejudice of the first
buyer. The governing principle is prius tempore, potior jure (first in time, stronger in
right).
FACTS:
On January 19, 1985, defendants-appellants Romulo Coronel, et al. (Coronels)

executed a document entitled "Receipt of Down Payment" in favor of plaintiff
Ramona Patricia Alcaraz (Ramona). The Total amount of the subject property is
P1,240,000.00 where Ramona placed a downpayment of Php 50,000.
The Coronels will cause the transfer in their names of the title of the property
registered in the name of their deceased father upon receipt of the downpayment.
Upon the transfer in their names of the subject property, the Coronels will execute
the deed of absolute sale in favor of Ramona and the latter will pay the former the
whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00)
Pesos. On February 18, 1985, the Coronels sold the property covered by TCT No.
327043 to intervenor- appellant Catalina B. Mabanag for One Million Five Hundred
Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred
Thousand (P300,000.00) Pesos.
For this reason, Coronels canceled and rescinded the contract with Ramona by
depositing the down payment paid by Concepcion in the bank in trust for Ramona
Patricia Alcaraz. On February 22, 1985, Concepcion, et al., filed a complaint for
specific performance against the Coronels and caused the annotation of a notice of
lis pendens at the back of TCT No. 327403. On April 2, 1985, Catalina caused the
annotation of a notice of adverse claim covering the same property. On April 25,
1985, the Coronels executed a Deed of Absolute Sale over the subject property in
favor of Catalina. On June 5, 1985, a new title over the subject property was issued
in the name of Catalina under TCT No. 351582. The RTC ordered defendant to
execute in favor of Concepcion a deed of absolute sale. The Court of Appeals
rendered its decision fully agreeing with the trial court.
ISSUE:
Did the sale to Catalina give rise to a double sale in this case?
RULING:
Yes, the sale to Catalina give rise to a double sale in this case.
There is, first, a need to determine the legal significance of the document “Receipt of
Down Payment"
The court held that the said document embodied the binding contract between
Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on
the other, pertaining to a particular house and lot covered by TCT No. 119627, as
defined in Article 1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305. 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.
Since there is a perfected contract in this case, the sale to Catalina Mabanag
constituted double sale. It was held that Mabanag as the second buyer was not a
registrant in good faith.
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.
The second paragraph of Article 1544 shall apply. The provision on double sale
presumes title or ownership to pass to the first buyer, the exceptions being: (a)
when the second buyer, in good faith, registers the sale ahead of the first buyer,
and (b) should there be no inscription by either of the two buyers, when the second
buyer, in good faith, acquires possession of the property ahead of the first buyer.
Unless, the second buyer satisfies these requirements, title or ownership will not
transfer to him to the prejudice of the first buyer. The governing principle is prius
tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of
the second sale cannot defeat the first buyer's rights except when the second buyer
first registers in good faith the second sale. Conversely, knowledge gained by the
second buyer of the first sale defeats his rights even if he is first to register, since
knowledge taints his registration with bad faith. It is essential, to merit the
protection of Art. 1544, second paragraph, that the second realty buyer must act in
good faith in registering his deed of sale.
It is contended that the notice of lis pendens was annoted on the title of the
property only on February 22, 1985, whereas, the second sale between petitioners
Coronels and petitioner Mabanag was supposedly perfected prior thereto or on
February 18, 1985. Hence, at the time Mabanag, the second buyer, bought the
property under a clean title, she was unaware of any adverse claim or previous sale,
for which reason she is buyer in good faith. In a case of double sale, what finds
relevance and materiality is not whether or not the second buyer was a buyer in
good faith but whether or not said second buyer registers such second sale in good
faith, that is, without knowledge of any defect in the title of the property sold. As
clearly borne out by the evidence in this case, petitioner Mabanag could not have in
good faith, registered the sale entered into on February 18, 1985 because as early
as February 22, 1985, a notice of lis pendens had been annotated on the transfer
certificate of title in the names of petitioners,
whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the
time of registration, therefore, petitioner Mabanag knew that the same property
had already been previously sold to private respondents, or, at least, she was
charged with knowledge that a previous buyer is claiming title to the same
property. Petitioner Mabanag cannot close her eyes to the defect in petitioners' title
to the property at the time of the registration of the property.
If a vendee in a double sale registers that sale after he has acquired knowledge
that there was a previous sale of the same property to a third party or that another
person claims said property in a previous sale, the registration will constitute a
registration in bad faith and will not confer upon him any right. Thus, the sale of
the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on
February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on
February 18, 1985, was correctly upheld.
ROSARIO CARBONELL, PETITIONER,
VS.
HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA INFANTE AND
RAMON INFANTE, RESPONDENTS.
G.R. NO. L-29972 JANUARY 26, 1976
MAKASIAR, J.
DIGESTED BY: HAZEL KAYE R. TECSON
DOCTRINE:
In case of double sale of an immovable property, second paragraph of Article 1544

directs that ownership should be recognized in favor of one who in good faith first
recorded his right. If there is no inscription, what is decisive is prior possession in
good faith.
FACTS:
On January 27, 1955, respondent Jose Poncio executed a private memorandum of

sale (in the Batanes dialect) of his parcel of land with improvements situated in San
Juan, Rizal in favor of petitioner Rosario Carbonell who knew that the said property
was at that time subject to a mortgage in favor of the Republic Savings Bank (RSB) for
the sum of P1,500.00, as Poncio was unable to keep up with the installments due
on the mortgage.
On January 31, 1955, Poncio, in another private memorandum, bound himself to

sell the same property for an improved price to one Emma Infante for the sum of
P2,357.52, with the latter still assuming the existing mortgage debt in favor of the
RSB in the amount of P1,177.48. Thus, in February 2, Poncio executed a formal
registerable deed of sale in her (Infante's) favor. So, when the first buyer Carbonell
saw the seller Poncio a few days afterwards, bringing the formal deed of sale for the
latter's signature and the balance of the agreed cash payment, she was told that he
could no longer proceed with formalizing the contract with her (Carbonell) because
he had already formalized a sales contract in favor of Infante.
To protect her legal rights as the first buyer, Carbonell registered on February 8,
1955 with the Register of Deeds her adverse claim as first buyer entitled to the
property. Meanwhile, Infante, the second buyer, was able to register the sale in her
favor only on February 12, 1955, so that the transfer certificate of title issued in her
name carried the duly annotated adverse claim of Carbonell as the first buyer.
Carbonell filed a complaint praying that she be declared the lawful owner. Infant
moved to dismiss on the ground that the alleged sale was not evidenced by a
written document. During the trial, Carbonell presented the agreement written in
Batanes dialect, in which Infante objected and the court dismissed the complaint on
the ground that the memorandum does not satisfy the requirements of the law.
ISSUE:
Who has a better right over the subject property?
RULING:
Carbonell has a better right over Infante.
The Supreme court declared the first buyer Carbonell to have the superior right
over the subject property, relying on Article 1544 of the Civil Code. Unlike the first
and third paragraphs of said Article 1544, which accord preference to the one who
first takes possession in good faith of personal or real property, the second
paragraph directs that ownership of immovable property should be recognized in
favor of one "who in good faith first recorded" his right. Under the first and third
paragraphs, good faith must characterize the prior possession, while under the
second paragraph, good faith must characterize the act of anterior registration.
When Carbonell bought the lot from Poncio on January 27, 1955, she was the only
buyer thereof and the title of Poncio was still in his name solely encumbered by
bank mortgage duly annotated thereon. Carbonell was not aware—and she could
not have been aware—of any sale to Infante as there was no such sale to Infante
then. Hence, Carbonell’s prior purchase of the land was made in good faith. Her
good faith subsisted and continued to exist when she recorded her adverse claim
four days prior to the registration of Infantes’s deed of sale. Carbonell’s good faith
did not cease after Poncio told her on January 31, 1955 of his second sale of the
same lot to Infante. Because of that information, Carbonell wanted an audience
with Infante, which desire underscores Carbonell’s good faith. With an aristocratic
disdain unworthy of the good breeding of a good Christian and good neighbor,
Infante snubbed Carbonell like a leper and refused to see her. So Carbonell did the
next best thing to protect her right— she registered her adverse claim on February
8, 1955. Under the circumstances, this recording of her adverse claim should be
deemed to have been done in good faith and should emphasize Infante’s bad faith
when she registered her deed of sale four days later on February 12, 1955.
Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell
is shown by the following facts: (1) Mrs. Infante refused to see Carbonell, who wanted
to see Infante after she was informed by Poncio that he sold the lot to Infante but
several days before Infante registered her deed of sale, This indicates that Infante
knew—from Poncio and from the bank—of the prior sale of the lot by Poncio to
Carbonell. x x x (2) Carbonell was already in possession of the mortgage passbook
and Poncio’s copy of the mortgage contract, when Poncio sold the lot to Infante. This
also shows that the lot was already sold to Carbonell who, after paying the
arrearages of Poncio, assumed the balance of his mortgage indebtedness to the
bank, which in the normal course of business must have necessarily informed
Infante about the said assumption by Carbonell of the mortgage indebtedness of
Poncio. x x x (3) The fact that Poncio was no longer in possession of his mortgage
passbook should have compelled Infante to inquire from Poncio why he was no
longer in possession of the mortgage passbook
and from Carbonell why she was in possession of the same, x x x (4) Carbonell
registered on February 8, 1955 her adverse claim which was accordingly annotated
on Poncio’s title, four days before Infante registered on February 12, 1955 her deed
of sale executed on February 2, 1955. Here she was again on notice on the prior
sale to Carbonell.
As to the validity of the sale, the Court held that a private deed of sale is a valid
contract between the parties. The private document, in the Batanes dialect, is a
valid contract of sale between the parties, since sale is a consensual contract and is
perfected by mere consent. x x x Being a valid consensual contract, Exhibit A
effectively transferred possession of the lot to the vendee Carbonell by constitutum
possessorium (Art. 1500, NCC); because thereunder the vendor Poncio continued to
retain physical possession of the lot as tenant of the vendee and no longer as
owner thereof.
ANGEL M. PAGADUAN, AMELIA P. TUCCI, TERESITA P. DEL MONTE, ORLITA P.
GADIN, PERLA P. ESPIRITU, ELISA P. DUNN, LORNA P. KIMBLE, EDITO N.
PAGADUAN, AND LEO N. PAGADUAN, PETITIONERS,
VS.
SPOUSES ESTANISLAO & FE POSADAS OCUMA, RESPONDENTS.
G.R. NO. 176308, MAY 8, 2009
TINGA, J.:
CELINDRO
FACTS:
The subject lot used to be part of a big parcel of land that originally belonged to
Nicolas Cleto .
The first line of disposition: Cleto sold land to Antonio Cereso on May 11, 1925.
Cereso in turn sold the land to the siblings with the surname Antipolo on September
23, 1943. The Antipolos sold the property to Agaton Pagaduan, father of
petitioners, on March 24, 1961. All the dispositions in this line were not registered
and did not result in the issuance of new certificates of title in the name of the
purchasers.
The second line of disposition: started on January 30, 1954, after Cleto’s death,
when his widow Ruperta Asuncion as his sole heir and new owner of the entire
tract, sold the same to Eugenia Reyes. This resulted in the issuance of Transfer
Certificate of Title (TCT) No. T-1221 in the name of Eugenia Reyes in lieu of TCT
No. T-1220 in the name of Ruperta Asuncion.
On November 26, 1961, Eugenia Reyes executed a unilateral deed of sale where
she sold the northern portion with an area of 32,325 square meters to Spouses
Ocuma for P1,500.00 and the southern portion consisting of 8,754 square meters to
Agaton Pagaduan for P500.00. (FIRST SALE)
Later, on June 5, 1962, Eugenia executed another deed of sale, this time conveying
the entire parcel of land, including the southern portion, to Spouses Ocuma
(SECOND SALE).
Thus, a new TCT No. T5425 was issued in the name of Spouses Ocuma. On June
27, 1989, Spouses Ocuma subdivided the land into two lots.
On July 26, 1989, Heirs of Agapito Pagaduan, the petitioners in this case, instituted
a complaint for reconveyance of the southern portion of the subject parcel of land
with an area of 8,754 square meters, with damages, against Spouses Ocuma before
the RTC of Olongapo City.
RTC: Decided in favor of the Heirs of Pagaduan.

Ruling that a constructive trust over the property was created in petitioners’ favor,
the court below ordered respondents to reconvey the disputed southern portion
and to pay attorney’s fees as well as litigation expenses to petitioners.
CA: Reversed decision.

While the registration of the southern portion in the name of Spouses Ocuma had
created an implied trust in favor of Agaton Pagaduan, the Heirs, however, failed to
show that they had taken possession of the said portion.
ISSUE:
Whether the heirs of Agaton Pagaduan have a better right over the southern
portion of the lot previously sold to their successor.
RULING:
YES. In this case, there was a double sale. Article 1544 should apply.
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 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 possession;
and, in the absence thereof; to the person who presents the oldest title, provided
there is good faith.
“where it is an immovable property that is the subject of a double sale, ownership

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.”
The requirement of the law then is two-fold: acquisition in good faith and
registration in good faith.
DOUBLE SALE: first sale by Eugenia Reyes to Agaton Pagaduan and a second sale
by Eugenia Reyes to the respondents.
For a second buyer like the Spouses Ocuma to successfully invoke the second
paragraph, Article 1544 of the Civil Code, it must possess good faith from the time
of the sale in its favor until the registration of the same. Spouses Ocuma sorely
failed to meet this requirement of good faith since they had actual knowledge of
Eugenia’s prior sale of the southern portion property to Agapito Pagaduan, a fact
antithetical to good faith. This cannot be denied by Spouses Ocuma since in the
same deed of sale that Eugenia sold them the northern portion of the land, Eugenia
also sold the southern portion of the land to Agaton Pagaduan.
It is to be emphasized that Agaton Pagaduan never parted with the ownership and
possession of that portion of Lot No. 785 which he had purchased from Eugenia.
Hence, the registration of the deed of sale by Spouses Ocuma was ineffectual and
vested upon them no preferential rights to the property in derogation of the rights
of the heirs of Pagaduan.
The knowledge gained by Spoouses of the first sale defeats their rights even if they
were first to register the second sale. Knowledge of the first sale maligns this prior
registration with bad faith. Good faith must concur with the registration. Therefore,
because the registration by the Spouses Ocuma was in bad faith, it amounted to no
registration at all.
As the Spouses Ocuma gained no rights over the land, it is heirs of Pagaduan who
are the rightful owners, having established that their successor-in-interest Agaton
Pagaduan had purchased the property from Eugenia Reyes on November 26, 1961
and in fact took possession of the said property. Hence, the petition was granted.
EMILIA M. URACA, CONCORDIA D. CHING AND ONG SENG, REPRESENTED BY
ENEDINO H. FERRER, PETITIONERS, V. COURT OF APPEALS, JACINTO VELEZ,
JR., CARMEN VELEZ TING, AVENUE MERCHANDISING, INC., FELIX TING AND
ALFREDO GO, RESPONDENTS.
GR NO. 115158, SEPTEMBER 5, 1997
PANGANIBAN, J.
DIGESTED BY: CARYLL C. CAYABAN
DOCTRINE:
Article 1544 of the Civil Code provides the statutory
solution: "x x x
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."
Under the foregoing, the prior registration of the disputed property by the second
buyer does not by itself confer ownership or a better right over the property. Article
1544 requires that such registration must be coupled with good faith.
FACTS:
The Velezes (herein private respondents) were the owners of the lot and
commercial building in question located at Progreso and M.C. Briones Streets in
Cebu City.
Herein Petitioners were lessees of said commercial building.
On July 8, 1985, the Velezes through Carmen Velez Ting wrote a letter to herein
(petitioners) offering to sell the subject property for P1,050,000.00 and at the same
time requesting (herein petitioners) to reply in three days.
On July 10, 1985, Petitioners sent a reply-letter to the Velezes accepting the
aforesaid offer to sell.
On July 11, 1985, (herein petitioner) Emilia Uraca went to see Carmen Ting about
the offer to sell but she was told by the latter that the price was P1,400,000.00 in
cash or manager’s check and not P1,050,000.00 as erroneously stated in their letter-
offer after some haggling. Emilia Uraca agreed to the price of P1,400,000.00 but
counter- proposed that payment be paid in installments with a down payment of
P1,000,000.00 and the balance of P400,000 to be paid in 30 days. Carmen Velez
Ting did not accept the said counter-offer of Emilia Uraca although this fact is
disputed by Uraca.
No payment was made by (herein petitioners) to the Velezes on July 12, 1985 and
July 13, 1985.
On July 13, 1985, the Velezes sold the subject lot and commercial building to the
Avenue Group (Private Respondent Avenue Merchandising Inc.) for P1,050,000.00 net
of taxes, registration fees, and expenses of the sale.
At the time the Avenue Group purchased the subject property on July 13, 1985
from the Velezes, the certificate of title of the said property was clean and free of
any annotation of adverse claims or lis pendens.
On July 31, 1985 as aforestated, herein (petitioners) filed the instant complaint against
the Velezes.
On August 1, 1985, (herein petitioners) registered a notice of lis pendens over the
property in question with the Office of the Register of Deeds.
On October 30, 1985, the Avenue Group filed an ejectment case against (herein
petitioners) ordering the latter to vacate the commercial building standing on the
lot in question.
Thereafter, herein (petitioners) filed an amended complaint impleading the Avenue

Group as new defendants (after about 4 years after the filing of the original
complaint)."
The trial court found two perfected contracts of sale between the Velezes and the
petitioners involving the real property in question. The first sale was for P1,050,000.00
and the second was for P1,400,000.00.
Private respondents appealed to the Court of Appeals. As noted earlier, the CA

found the appeal meritorious.
ISSUE:
Whether the petitioners have better rights to buy and own the Velezes’ property
for registering their notice of lis pendens ahead of the Avenue Group’s
registration of their deeds of sale taking into account Art. 1544, 2nd paragraph,
of the Civil Code.
RULING:
Yes. Article 1544 of the Civil Code provides the statutory
solution: "x x x
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."
Under the foregoing, the prior registration of the disputed property by the second
buyer does not by itself confer ownership or a better right over the property. Article
1544 requires that such registration must be coupled with good faith.
Jurisprudence teaches us that" (t)he governing principle is primus tempore, potior

jure (first in time, stronger in right). Knowledge gained by the first buyer of the
second sale cannot defeat the first buyer’s rights except where the second buyer
registers in good faith the second sale ahead of the first, as provided by the Civil
Code. Such knowledge of the first buyer does not bar her from availing of her rights
under the law, among them, to register first her purchase as against the second
buyer. But in converso, knowledge gained by the second buyer of the first sale
defeats his rights even if he is first to register the second sale, since such
knowledge taints his prior registration with bad faith This is the price exacted by
Article 1544 of the Civil Code for the second buyer being able to displace the first
buyer; that before the second buyer can obtain priority over the first, he must show
that he acted in good faith throughout (i.e. in ignorance of the first sale and of the first
buyer’s rights) — from the time of acquisition until the title is transferred to him by
registration or failing registration, by delivery of possession." (Emphasis supplied)
After a thorough scrutiny of the records of the instant case, the Court finds that
bad faith tainted the Avenue Group’s purchase on July 13, 1985 of the Velezes’ real
property subject of this case, and the subsequent registration thereof on August 1,
1995. The Avenue Group had actual knowledge of the Velezes’ prior sale of the
same property to the petitioners, a fact antithetical to good faith. For a second
buyer like the Avenue Group to successfully invoke the second paragraph, Article
1544 of the Civil Code, it must possess good faith from the time of the sale in its
favor until the registration of the same. This requirement of good faith the Avenue
Group sorely failed to meet. That it had knowledge of the prior sale, a fact
undisputed by the Court of Appeals, is explained by the trial court thus:
The Avenue Group, whose store is close to the properties in question, had known
the plaintiffs to be the lessee-occupants thereof for quite a time. Felix Ting
admitted to have a talk with Ong Seng in 1983 or 1984 about the properties. In the
cross- examination, Manuel Ting also admitted that about a month after Ester
Borromeo allegedly offered the sale of the properties Felix Ting went to see Ong
Seng again. If these were so, it can be safely assumed that Ong Seng had
consequently told Felix about plaintiffs’ offer on January 11, 1985 to buy the
properties for P1,000,000.00 and of their timely acceptance on July 10, 1985 to buy
the same at P1,050 000.00.
The two aforesaid admissions by the Tings, considered together with Uraca’s
positive assertion that Felix Ting met with her on July 11th and who was told by
her that the plaintiffs had transmitted already to the Velezes their decision to buy
the properties at
P1,050,000.00, clinches the proof that the Avenue Group had prior knowledge of
plaintiffs’ interest. Hence, the Avenue Group defendants, earlier forewarned of the
plaintiffs’ prior contract with the Velezes, were guilty of bad faith when they
proceeded to buy the properties to the prejudice of the plaintiffs."
The Court sees no reason to disturb the factual finding of the trial court that the
Avenue Group, prior to the registration of the property in the Registry of Property,
already knew of the first sale to petitioners
In the present case, the Court of Appeals did not explicitly sustain this particular
holding of the trial court, but neither did it controvert the same. Therefore, because
the registration by the Avenue Group was in bad faith, it amounted to no
"inscription" at all. Hence, the third and not the second paragraph of Article 1544
should be applied to this case. Under this provision, petitioners are entitled to the
ownership of the property because they were first in actual possession, having
been the property’s lessees and possessors for decades prior to the sale.
Having already ruled that the Avenue Group’s actual knowledge of the first sale
tainted their registration, we find no more reason to pass upon the issue of
whether the annotation of lis pendens automatically negated good faith in such
registration.
HOSPICIO D. ROSAROSO, ANTONIO D. ROSAROSO, MANUEL D. ROSAROSO,
ALGERICA D. ROSAROSO, AND CLEOFE R. LABINDAO, PETITIONERS,
VS.
LUCILA LABORTE SORIA, SPOUSES HAM SOLUTAN AND **LAILA SOLUTAN,
AND MERIDIAN REALTY CORPORATION, RESPONDENTS.
G.R. NO. 194846 JUNE 19, 2013
MENDOZA, J.:
DOCTRINE
The requirement of the law is two-fold: acquisition in good faith and registration in
good faith. Good faith must concur with the registration. If it would be shown that
a buyer was in bad faith, the alleged registration they have made amounted to no
registration at all.
FACTS:
That on November 4, 1991, Luis, with full knowledge and consent of his second
wife, Lourdes, executed the Deed of Absolute Sale (first sale) covering the
properties with TCT of lots 8, 19, 22, 23 and lot nos. 5665 and 7967, all located on
Daan Batayan, Cebu, in favor of petitioners Hospicio, Antonio, Angelica and Cleofe.
The second sale commenced on August 23, 1994 with Meridian Realty Corporation
with three parcels of residential land of lot no. 19, 22 and 23 through the Deed of
Absolute Sale, for the amount of Php 960, 500.00. Petitioners Hospicio, Antonio,
Angelica and Cleofe alleged that Lucila obtained SPA from Luis through affixing his
thumbmark, when he was then sick, infirm, blind and of unsound mind.
ISSUE:
Whether or not there was a double sale, and thus Meridian was a buyer in bad faith?
RULING:
Yes, there was a double sale, and Meridian was in bad faith in obtaining the subject
residential properties. Luis lost his right to dispose of the said properties to Meridian
from the time he executed the first deed of sale in favor of Hospicio, Antonio,
Angelica and Cleofe. In case of double sale, article 1544 of the civil code provides
that if the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may first 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 possession; and, in the absence thereof;
to the person who presents the oldest title, provided there is good faith. The
requirement of the law is two-fold: acquisition in good faith and registration in
good faith. Good faith must concur with
the registration. If it would be shown that a buyer was in bad faith, the alleged
registration they have made amounted to no registration at all.
SPS. ESMERALDO D. VALLIDO AND ARSENIA M. V ALLIDO, REP. BY ATTY.
SERGIO C. SUMAYOD PETITIONERS, VS. SPS. ELMER PONO AND JULIET PONO,
AND PURIFICACION CERNA-PONG AND SPS. MARIANITO PONO AND
ESPERANZA MERO-PONO, RESPONDENTS.
G.R. NO. 200173; APRIL 15, 2013
MENDOZA, J.:
DOCTRINE:
Although it is a recognized principle that a person dealing on a registered land need

not go beyond its certificate of title, it is also a firmly settled rule that where there
are circumstances which would put a party on guard and prompt him to investigate
or inspect the property being sold to him, such as the presence of
occupants/tenants thereon, it is expected from the purchaser of a valued piece of
land to inquire first into the status or nature of possession of the occupants; The
failure of a prospective buyer to take such precautionary steps would mean
negligence on his part and would preclude him from claiming of invoking the rights
of a “purchaser in good faith.
FACTS:
It appears that Martino Dandan was the registered owner of a parcel of land in
Kananga, Leyte, with an area of 28,214 square meters covered by OCT No. P-429.
On January 4, 1960, Martino, sold a portion of the subject property equivalent to
18,214 square meters to respondent Purificacion Cerna. Upon execution of the
Deed of Absolute Sale, Martino gave Purificacion the owner’s copy of OCT No. P-
429. The transfer, however, was not recorded in the Registry of Deeds.
On May 4, 1973, Purificacion sold the subject property to respondent Marianito

Pono and also delivered OCT No. P-429 to him. Marianito registered the portion he
bought for taxation purposes, paid its taxes, took possession, and allowed his son
respondent Elmer Pono to construct a house thereon. Marianito kept OCT No. P-
429. The transfer, however, was also not recorded in the Registry of Deeds.
Meanwhile, Martino left Leyt and re-settled in Cavite. On June 14, 1990, he sold the
whole subject property to his grandson, petitioner Esmeraldo Vallido. Considering
that Martino had delivered OCT No. P-429 to Purificacion in 1960, he no longer had
any certificate of title to hand over to Esmeraldo. On May 7, 1997, Martino filed a
petition seeking for the issuance of a new owner’s duplicate copy of OCT No. P-429
which was granted by the RTC. Esmeraldo then registered the deed of sale was
issued a TCT under his name.
Subsequently, Esmeraldo filed before the RTC a complaint for quieting of title,
recovery of possession of real property and damages against the respondents. The
RTC promulgated a decision favoring them and held that there was a double sale
under Article 1544 of the Civil Code. On appeal, the CA agreed that there was a
double
sale. It, however, held that the petitioners were neither buyers nor registrants in
good faith. The respondents indisputably were occupying the subject land. It wrote
that where the land sold was in the possession of a person other than the vendor,
the purchaser must go beyond the certificate of title and make inquiries concerning
the rights of the actual possessors. It further stated that mere registration of the
sale was not enough as good faith must concur with the registration.
ISSUE:
Whether or not petitioner Sps. Vallido are buyers or registrants in good faith.
RULING:
No. Spouses Vallido are not buyers in good faith.
It is undisputed that there is a double sale and that the respondents are the first buyers
while the petitioners are the second buyers. The burden of proving good faith lies
with the second buyer (petitioners herein) which is not discharged by simply
invoking the ordinary presumption of good faith.
Notably, it is admitted that Martino is the grandfather of Esmeraldo. As an heir,

petitioner Esmeraldo cannot be considered as a third party to the prior transaction
between Martino and Purificacion. The purpose of the registration is to give notice
to third persons. And, privies are not third persons. The vendor's heirs are his
privies. Based on the privity between petitioner Esmeraldo and Martino, the
petitioner as a second buyer is charged with constructive knowledge of prior
dispositions or encumbrances affecting the subject property. The second buyer who
has actual or constructive knowledge of the prior sale cannot be a registrant in
good faith.
Moreover, although it is a recognized principle that a person dealing on a registered

land need not go beyond its certificate of title, it is also a firmly settled rule that
where there are circumstances which would put a party on guard and prompt him
to investigate or inspect the property being sold to him, such as the presence of
occupants/tenants thereon.
There are several indicia that should have placed the petitioners on guard and
prompted them to investigate or inspect the property being sold to them.
1. First, Martino, as seller, did not have possession of the subject property.
2. Second, during the sale on July 4, 1990, Martino did not have the owner’s
duplicate copy of the title.
3. Third, there were existing permanent improvements on the land.
4. Fourth, the respondents were in actual possession of the land.
These circumstances are too glaring to be overlooked and should have prompted
the petitioners, as prospective buyers, to investigate or inspect the land. Where the
vendor
is not in possession of the property, the prospective vendees are obligated to
investigate the rights of one in possession.
SPOUSES DESIDERIO AND TERESA DOMINGO, PETITIONERS
VS.
SPOUSES EMMANUEL AND TITA MANZANO, FRANKLIN ESTABILLO, AND
CARMELITA AQUINO, RESPONDENTS
G.R. NO. 201883, NOVEMBER 16, 2016
DEL CASTILLO, J.:
DOCTRINE:
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 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 possession; and, in the absence
thereof; to the person who presents the oldest title, provided there is good faith.
FACTS:
Respondents Emmanuel and Tita Manzano (the Manzanos) were the registered
owners of a 35,281-square meter parcel of land with improvements in Bagong
Barrio, Caloocan City ,through their duly appointed attorney-in• fact and herein co-
respondent Franklin Estabillo (Estabillo), executed a notarized agreement [5] with
petitioners Desiderio and Teresa Domingo.
However, they failed to tender full payment of the balance when the March 2001
deadline came. In December 2001, petitioners offered to pay the remaining
P555,000.00 balance, but Estabillo refused to accept payment; instead, he advised
petitioners to await respondent Tita Manzano's (Tita) arrival from abroad.
When Tita arrived, petitioners tendered payment of the balance, but the former
refused to accept it. Instead, she told them that the property was no longer for sale
and she was forfeiting their payments. Soon thereafter, petitioners discovered that
respondent Carmelita Aquino (Aquino) bought the subject property on May 7, 2002,
and a new title - TCT No. C-359293 - had been issued in her name.
Petitioners filed a Complaint for specific performance and to to accept payment of

the remaining balance, execute a deed of sale over the subject property in their
favor, and restrain the sale in favor of Aquino.
Aquino and Estabillo alleged essentially that there was no sale between petitioners
and the Manzanos, but a mere offer to buy from petitioners, which was refused due
to late payment.
RTC issued a Decision declaring that, as against Aquino, petitioners have a prior
right over the subject property. Applying Article 1544 of the Civil Code,[10] the RTC
held that Aquino was a buyer in bad faith, as she knew of petitioners' prior
purchase and
registered adverse claim - and such knowledge was equivalent to registration, and
thus, the registration of her sale was done in bad faith
CA decided differently, it upheld the validity of the sale between Manzano and
Aquino. The non-payment of the purchase price renders the contract to sell
ineffective and without force and effect. Thus, a cause of action for specific
performance does not arise.
ISSUE:
Whether or not their agreement is a mere contract to sell where title is retained by
the latter until full payment of the price have a superior right over the subject
property, as against Aquino by virtue of applicability of Article 1544.
RULING:
NO. In a contract to sell, payment of the price is a positive suspensive condition,

failure of which is not a breach of contract warranting rescission but rather just an
event that prevents the prospective buyer from compelling the prospective seller to
convey title. In other words, the non-fulfillment of the condition of full payment
renders the contract to sell ineffective and without force and effect.
And it is precisely for the above reason that Article 1544 of the Civil Code cannot
apply. Since failure to pay the price in full in a contract to sell renders the same
ineffective and without force and effect, then there is no sale to speak of.
Thus, as between the parties to the instant case, there could be no double sale
which would justify the application of Article 1544. Petitioners failed to pay the
purchase price in full, while Aquino did, and thereafter she was able to register her
purchase and obtain a new certificate of title in her name. As far as this Court is
concerned, there is only one sale - and that is, the one in Aquino's favor. "Since
there is only one valid sale, the rule on double sales under Article 1544 of the Civil
Code does not apply."
CARMELITA FUDOT, PETITIONER, V. CATTLEYA LAND, INC., VELASCO, JR., JJ.
RESPONDENT.
G.R. NO. 171008 SEPTEMBER 13, 2007
TINGA, J.
DOCTRINE:
Cattleya Land purchased 9 lots through a Deed of Conditional Sale to the spouses
Troadio and Asuncion Tecson. Subsequently Cattleya and the Tecsons executed a
Deed of Absolute Sale over the same properties. The Deed of Conditional Sale and
the Deed of Absolute Sale were registered with the Register of Deeds. The Register
of Deeds refused to actually annotate the deed of sale on the titles because of the
existing notice of attachment in connection with a pending Civil Case. The
attachment was eventually cancelled by virtue of a compromise agreement
between the Tecsons and their attaching creditor. Titles to 6 of the 9 lots were
issued, but the Register of Deeds refused to issue titles to the remaining 3 lots,
because the titles covering the same were still unaccounted for.
Carmelita Fudot presented for registration before the Register of Deeds the owner’s
copy of the title of the subject property, together with the deed of sale purportedly
executed by the Tecsons in favor of Fudot in 1986. This was opposed by Cattleya
and learned that the Register of Deeds had already registered the deed of sale in
favor of Fudot and issued a new title in her name.
Cattleya filed its Complaint for Quieting of Title &/Or Recovery Of Ownership,
Cancellation Of Title before RTC Tagbilaran. Asuncion filed a complaint-in-
intervention, claiming that she never signed any deed of sale covering any part of
their conjugal property in favor of Fudot. She averred that her signature in Fudot’s
deed of sale was forged and that she has discovered that there was an amorous
relationship between her husband and Fudot.
Fudot alleged that the spouses Tecson had sold to her the subject property and
delivered to her the owner’s copy of the title in 1986. She claims that she
subsequently presented the said title to the Register of Deeds but the latter refused
to register the same because the property was still under attachment.
The trial court rendered its decision quieting the title or ownership of the subject
land in favor of Cattleya and declaring the deed of sale between Fudot and spouses
Tecson invalid. It held that Cattleya had recorded in good faith the deed of sale in
its favor ahead of Fudot and purported signature of Asuncion was forged. Fudot
argue that the rule on double sale was applicable to the case.
ISSUE:
Was there double sale in this case? Who has the better right over the property in
question?
RULING:
No. In the first place, there is no double sale to speak of. Art. 1544 of the Civil
Code, 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 Cattleya.
Double sale is not applicable where there is only one valid sale, the previous sale
having been found to be fraudulent. In this case, the sale between the spouses
Tecson and Fudot is invalid, as it bears the forged signature of Asuncion. The
congruence of the wills of the spouses is essential for the valid disposition of
conjugal property. Thus, under Article 166 of the Civil Code which was still in effect
on 19 December 1986 when the deed of sale was purportedly executed, the
husband cannot generally alienate or encumber any real property of the conjugal
partnership without the wife’s consent.
Pursuant to Art. 1544 of the Civil Code, the second realty buyer must act in good faith
in registering his deed of sale. In this case, Cattleya was a buyer in good faith, having
purchased the nine (9) lots, including the subject lot, without any notice of a previous
sale, but only a notice of attachment relative to a pending civil case. In fact, in its
desire to finally have the title to the properties transferred in its name, it persuaded the
parties in the said case to settle the same so that the notice of attachment could be
cancelled.
EMILIO CALMA, PETITIONER,
VS.
ATTY. JOSE M. LACHICA, JR., RESPONDENT
846 SCRA 451, G.R. NO. 222031 NOVEMBER 22, 2017
TIJAM, J.:
DOCTRINE:
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.
FACTS:
The subject of the said complaint was a 20,000-square meter parcel of land situated
in Sumacabeste, Cabanatuan City. Atty. Jose M. Lachica, Jr. (Lachica) alleged that he
was the absolute owner and actual physical possessor of the subject property,
having acquired the same sometime in 1974 for PhP15,000 through sale from
Ceferino Tolentino (Ceferino), who was Ricardo’s father.
The 1974 Deed of Sale was allegedly lost. Hence, sometime in 1979, Lachica and
Ceferino agreed to execute another deed of sale. Spouses Tolentino allegedly took
advantage of the situation and demanded an additional PhP15,000 from Lachica.
Thus, in the new Deed of Sale executed on April 29, 1979, the consideration for the
sale of the subject property was increased to PhP30,000.
After the notarization of the 1979 Deed of Sale on April 29, 1986, Lachica requested
Spouses Tolentino to execute an Affidavit of Non-Tenancy and other documents for
the transfer of the title in his name. Again, taking advantage of the situation,
Ceferino and his son Ricardo allegedly requested Lachica to allow them to cultivate
the 5,000- square meter portion of the subject land.
Due to Lachica’s employment and also because of an illness, he lost contact with
the Tolentinos for a long period. Sometime in March 2001, Lachica returned to
Cabanatuan City and he found Pablo Tumale (Pablo) to have been placed in
possession of the 5,000-square meter portion of the subject property.
He discovered that the title of the subject property was canceled and replaced
under the name of Ricardo, which had been later on transferred to the Emilio Calma
(Calma) and then to Pablo. Lachica argued that the sale between Ceferino and
Ricardo was null and void for being executed with fraud, deceit, breach of trust,
and also lack of lawful
consideration. Lachica also alleged that Calma is an alien, a full-blooded Chinese
citizen, hence, not qualified to own lands in the Philippines, and is likewise a buyer
in bad faith.
Lachica prayed for the annulment of the Deed of Sale between Ceferino and
Ricardo, as well as the Deed of Sale between Ricardo and Calma and ejectment of
Pablo from the 5,000-square meter portion of the subject property and the
reconveyance of the entire property to him.
RTC RULING: Calma is an innocent purchaser for value and he had already
acquired his indefeasible rights over the title. It may be true that Lachica’s adverse
claim was annotated in Ricardo's title, the same title also shows that such adverse
claim had already been canceled more than four years before he bought the
property.
CA RULING: Ricardo and Calma were in bad faith in their respective acquisitions of
the subject property. Hence, both their titles should be annulled. The registration of
the title in Ricardo's name was null and void as he had prior knowledge of the sale
between his father and Lachica. Calma should not have just relied on the face of
the title as the notice of adverse claim annotated on Ceferino's title carried over to
Ricardo's title for a total of 13 years before its cancellation should have alerted him
to conduct an actual inspection of the title. The subject property, since he was
considered to be in bad faith, such registration did not confer any right upon him.
Applying the rule on double sale under Article 1544 of the Civil Code, as his
registration is deemed to be no registration at all because of his bad faith, the
buyer who took prior possession of the property in good faith shall be preferred.
ISSUE:
Between Calma and Lachica, who has the better right over the subject
property. CALMA
RULING:
The Supreme Court ruled for Calma. Applying now the rule on double sale under
Article 1544 of the Civil Code, Calma's right as an innocent purchaser for value who
was able to register his acquisition of the subject property should prevail over the
unregistered sale of the same to the Lachica.
The sale of the subject property by Ceferino to Lachica was valid and as such, and
Lachica has a valid claim of right over the same. Calma's claimed right over the
subject property, on the other hand, is grounded upon his acquisition of the same
from Ricardo by sale. Unlike the sale from Ceferino to Lachica, the Deed of Sale in
Calma’s favor was registered with the Registry of Deeds, giving rise to the issuance
of a new certificate of title in his name.
The Torrens system was adopted to "obviate possible conflicts of title by giving the
public the right to rely upon the face of the Torrens certificate and to dispense, as a
rule, with the necessity of inquiring further." From this sprung the doctrinal rule
that every person dealing with registered land may safely rely on the correctness of
the certificate of title issued therefor and is in no way obliged to go beyond the
certificate to determine the condition of the property.
To be sure, this Court is not unaware of the recognized exceptions to this rule, to
wit: (1.) when the party has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make further inquiry; (2.) when the buyer has
knowledge of a defect or the lack of title in his vendor; or (3.) when the
buyer/mortgagee is a bank or an institution of similar nature as they are enjoined to
exert a higher degree of diligence, care, and prudence than individuals in handling
real estate transactions.
Complementing this doctrinal rule is the concept of an innocent purchaser for value,
which refers to someone who buys the property of another without notice that
some other person has a right to or interest in it, and who pays in full and fair the price
at the time of the purchase or without receiving any notice of another person's
claim. We find that the circumstances obtaining, in this case, show that Calma is an
innocent purchaser for value who exercised the necessary diligence in purchasing
the property.
As the fact that Calma is an innocent purchaser for value had been established, the
validity and efficacy of the registration, as well as the cancellation, of Lachica's adverse
claim is immaterial in this case. What matters is that the Calma had no knowledge
of any defect in the title of the property that he was going to purchase and that the
same was clean and free of any lien and encumbrance on its face by virtue of the
entry on the cancellation of adverse claim therein. Thus, Calma may safely rely on
the correctness of the entries in the title.
JOSE B. AZNAR, PLAINTIFF-APPELLANT,
VS.
RAFAEL YAPDIANGCO, DEFENDANT-APPELLEE;
TEODORO SANTOS, INTERVENOR-APPELLEE.
G.R. NO. L-18536 MARCH 31,
1965 REGALA, J.:
DOCTRINE:
For the legal acquisition and transfer of ownership and other property rights, the
thing transferred must be delivered, inasmuch as, according to settled
jurisprudence, the tradition of the thing is a necessary and indispensable requisite
in the acquisition of said ownership by virtue of contract.
So long as property is not delivered, the ownership over it is not transferred by

contract merely but by delivery. Contracts only constitute titles or rights to the
transfer or acquisition of ownership, while delivery or tradition is the method of
accomplishing the same, the title and the method of acquiring it being different in
our law.
FACTS:
Teodoro Santos sold his car to Vicente Marella. Vicente Marella, however,
fraudulently took possession of the car by stealing it. He then sold the car to one
Jose B. Aznar.
The stealing incident, however, had been reported to the police who seized and
confiscated the subjective vehicle.
Jose B. Aznar filed a complaint for replevin. Claiming ownership of the vehicle, he
prayed for its delivery to him. In the course of the litigation, however, Teodoro
Santos moved and was allowed to intervene by the lower court.
Jose B. Aznar was found by the lower courts to be a buyer in good faith and for a
valuable consideration.
The Jose B. Aznar accepts that the car in question originally belonged to and was
owned by the Teodoro Santos, and that Teodoro Santos was unlawfully deprived of
the same by Vicente Marella. However, the appellant contends that upon the facts
of this case, the applicable provision of the Civil Code is Article 1506 and not Article
559 as was held by the decision under review. Article 1506 provides:
ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has
not been voided at the time of the sale, the buyer acquires a good title to the
goods, provided he buys them in good faith, for value, and without notice of the
seller's defect of title.
ISSUE:
Whether or not Art 1506 is applicable.
RULING:
No, it is not applicable.
Under the aforequoted provision, it is essential that the seller should have a
voidable title at least. It is very clearly inapplicable where, as in this case, the seller
had no title at all.
Vicente Marella did not have any title to the property under litigation because the
same was never delivered to him. He sought ownership or acquisition of it by virtue
of the contract. Vicente Marella could have acquired ownership or title to the
subject matter thereof only by the delivery or tradition of the car to him.
Under Article 712 of the Civil Code, "ownership and other real rights over property
are acquired and transmitted by law, by donation, by testate and intestate
succession, and in consequence of certain contracts, by tradition." As interpreted by
this Court in a host of cases, by this provision, ownership is not transferred by
contract merely but by tradition or delivery. Contracts only constitute titles or rights
to the transfer or acquisition of ownership, while delivery or tradition is the mode of
accomplishing the same
For the legal acquisition and transfer of ownership and other property rights,
the thing transferred must be delivered, inasmuch as, according to settled
jurisprudence, the tradition of the thing is a necessary and indispensable
requisite in the acquisition of said ownership by virtue of contract. (Walter Laston
v. E. Diaz & Co. & the Provincial Sheriff of Albay, supra.)
So long as property is not delivered, the ownership over it is not transferred

by contract merely but by delivery. Contracts only constitute titles or rights to
the transfer or acquisition of ownership, while delivery or tradition is the
method of accomplishing the same, the title and the method of acquiring it
being different in our law. (Gonzales v. Roxas, 16 Phil. 51)
In the case on hand, the car in question was never delivered to the vendee by the
vendor as to complete or consummate the transfer of ownership by virtue of the
contract. It should be recalled that while there was indeed a contract of sale
between Vicente Marella and Teodoro Santos, the former, as vendee, took
possession of the subject matter thereof by stealing the same while it was in the
custody of the latter's son.
TRINIDAD C. TAGATAC, PETITIONER
V.
LIBERATO JIMENEZ, RESPONDENT
GR NO. 13514-R, FEB. 22, 1957
OCAMPO, J.:
DIGESTED BY: SILVANO M. CAMILLO, JR.
DOCTRINE:
Article 1506: Where the seller of goods has a voidable title thereto, but his title has
not been avoided at the time of the sale, the buyer acquires a good title to the
goods, provided he buys them in good faith, for value, and without notice of the
seller’s defect of title.
FACTS:
Tagatac sold her car to Feist for P15,000.00 who sold it to Sanchez, who sold it to
Jimenez. When the payment check issued to Tagatac by Feist was dishonored,
Tagatac sued to recover the vehicle from Jimenez on the ground that she had been
unlawfully deprived of it by reason of Feist's deception.
Jimenez was a purchaser in good faith for he was not aware of any flaw invalidating
the title from the seller of the car. Feist paid by means of a postdated check, and
the car was delivered to Feist. However, PNB refused to honor the checks and told
her that Feist had no account in said bank. Tagatac notified the law enforcement
agencies of the estafa committed by Feist, but the latter was not apprehended and
the car disappeared.
In addition, when Jimenez acquired the car, he had no knowledge of any flaw in
the title of the person from whom he acquired it. It was only later that he became
fully aware that there were some questions regarding the car. Meanwhile, Feist
succeeded in having the car’s registration certificate (RC) transferred in his name.
He sold the car to Sanchez, who was able to transfer the registration certificate to his
name.
Sanchez then offered to sell the car to Liberato Jimenez, who bought the car for
P10,000 after investigating the Motor Vehicles Office. Tagatac discovered that the
car was in California Car Exchange’s (place where Jimenez displayed the car for
sale), so she demanded from the manager for the delivery of the car, but the latter
refused.
ISSUE:
Whether or not Jimenez was a purchaser in good faith and thus entitled to the
ownership and possession of the car.
RULING:
Yes. It must be noted that Tagatac was not unlawfully deprived of his car. In this case,
there is a valid transmission of ownership from Tagatac to the swindler, Feist.
The contract between Feist and Tagactac was a voidable contract, it can be
annulled or ratified. The fraud and deceit practiced by Warner L. Feist earmarks this
sale as a voidable contract Being a voidable contract, it is susceptible of either
ratification or annulment. If the contract is ratified, the action to annul it is
extinguished and the contract is cleansed from all its defects.
If the contract is annulled, the contracting parties are restored to their respective
situations before the contract and mutual restitution follows as a consequence.
Being a voidable contract, it remains valid and binding until annulled. However, as
long as no action is taken by the party entitled, either that of annulment or of
ratification, the contract of sale remains valid and binding. When Trinidad C.
Tagatac delivered the car to Feist by virtue of said voidable contract of sale, the
title to the car passed to Feist. Of course, the title that Feist acquired was defective
and voidable. Nevertheless, at the time he sold the car to Felix Sanchez, his title
thereto had not been avoided and he therefore conferred a good title on the latter,
provided he bought the car in good faith, for value and without notice of the defect
in Feist's title. There being no proof on record that Felix Sanchez acted in bad faith, it
is safe to assume that he acted in good faith.
ART. 1506. Where the seller of goods has a voidable title thereto, but his title has
not been avoided at the time of the sale, the buyer acquires a good title to the
goods provided he buys them in good faith, for value, and without notice of the
seller’s defect of title.
EDCA PUBLISHING & DISTRIBUTING CORP., PETITIONER,
VS.
THE SPOUSES LEONOR AND GERARDO SANTOS, DOING BUSINESS UNDER THE
NAME AND STYLE OF "SANTOS BOOKSTORE," AND THE COURT OF APPEALS,
RESPONDENTS.
G.R. NO. 80298, APRIL 26, 1990
CRUZ, J.:
DIGESTED BY: ANDEMAR C MORALES JR
DOCTRINE:
The possession of movable property acquired in good faith is equivalent to a title.

Nevertheless, one who has lost any movable or has been unlawfully deprived
thereof may recover it from the person in possession of the same. If the possessor of a
movable lost or of which the owner has been unlawfully deprived has acquired it in
good faith at a public sale, the owner cannot obtain its return without reimbursing
the price paid therefor.
FACTS:
On October 5, 1981, a person identifying himself as Prof. Jose Cruz ordered 406
books from EDCA Publishing. EDCA Subsequently prepared the corresponding
invoice and delivered the books as ordered, for which Cruz issued a personal check
covering the purchase price of said books. Subsequently on October 7, 1981, Cruz
sold 120 of the books to Leonor Santos who, after verifying the seller’s ownership
from the invoice he showed her, paid him P1,700.
Upon verification by EDCA, it was discovered that Cruz was not employed as
professor by De La Salle College and that he had no more account or deposit with
Phil. Amanah Bank, the bank where he allegedly drawn the payment check. Upon
arrest of Cruz by the police, it was revealed that his real name was Tomas dela Pena
and that there was a further sale of 120 books to Sps. Santos.
EDCA, through the assistance of the police forced their way into the store of Sps.
Santos and threatened Leonor with prosecution for buying stolen property. The 120
books were seized and were later turned over to EDCA.
This resulted to Sps. Santos filing a case for recovery of the books after their
demand for the return of the books was rejected.
ISSUES:
.
1. Whether EDCA has been unlawfully deprived of the books because the
heck issued by Cruz in payment thereof was dishonored.
2. Whether EDCA may retrieve the books from Santos.
RULING:
1. No, EDCA argues that because Cruz, the impostor acquired no title to the
books, the latter could not have validly transferred such to Sps. Santos. Its
reason is that as the payment check bounced for lack of funds, there was a
failure of consideration that nullified the contract of sale between it and Cruz.
However, upon perusal of the provisions on the Law on Sales, a contract of

sale is consensual and is perfected once agreement is reached between the
parties on the subject matter and the consideration. As provided in Art.
1478- Ownership in the thing sold shall not pass to the buyer until full
payment of the purchase only if there is a stipulation to that effect.
Otherwise, the rule is that such ownership shall pass from the vendor to the
vendee upon the actual or constructive delivery of the thing sold even if the
purchase price has not yet been paid. Non-payment only creates a right to
demand payment or to rescind the contract, or to criminal prosecution in the
case of bouncing checks. But absent the stipulation above noted, delivery of
the thing sold will effectively transfer ownership to the buyer who can in turn
transfer it to another. Actual delivery of the books having been made, Cruz
acquired ownership over the books which he could then validly transfer to
the private respondents. The fact that he had not yet paid for them to EDCA
was a matter between him and EDCA and did not impair the title acquired by
the private respondents to the books.
2. No, Leonor Santos took care to ascertain first that the books belonged to
Cruz before she agreed to purchase them. The EDCA invoice Cruz showed
her assured her that the books had been paid for on delivery. By contrast,
EDCA was less than cautious — in fact, too trusting in dealing with the impostor.
Although it had never transacted with him before, it readily delivered the
books he had ordered (by telephone) and as readily accepted his personal
check in payment. It did not verify his identity although it was easy enough
to do this. It did not wait to clear the check of this unknown drawer. Worse,
it indicated in the sales invoice issued to him, by the printed terms thereon,
that the books had been paid for on delivery, thereby vesting ownership in
the buyer.
Santos did not need to go beyond that invoice to satisfy herself that the
books being offered for sale by Cruz actually belonged to him; yet she still
did. Although the title of Cruz was presumed under Article 559 by his mere
possession of the books, these being movable property, Leonor Santos
nevertheless demanded more proof before deciding to buy them.
CHRYSLER PHILIPPINES CORPORATION vs. THE HONORABLE COURT OF
APPEALS and SAMBOK MOTORS CO. (BACOLOD)
G.R. NO. L-55684 DECEMBER 19, 1984
MELENCIO-HERRERA, J:
DIGESTED BY: ESCANO, KARIZ CHARALANE A.
DOCTRINE:
Where the delivery to the buyer was not effected, the seller should bear the risk of
loss. Res perit domino.
FACTS:
Pepito Ng, the president of Sambok (Bacolod Branch) ordered from Chrysler various
automotive products worth P30,909.61, payable in 45 days. Chrysler delivered said
products to Allied Brokerage Corp. for shipment and was loaded on board M/S
Dona Florentina, a ship owned by Negros Navigation company. When Chrysler tried
to claim the purchase price from Sambok Bacolod, it refused top pay alleging that it
did not receive the merchandise and that it had no knowledge of having ordered
from Chrysler.
Chrysler filed with the CFI a Complaint for Damages against Allied Brokerage
Corporation, Negros Navigation Company and Sambok, Bacolod. CFI dismissed the
petition against Negros Navigation but found Sambok Bacolod liable.
Sambok Bacolod appealed to the CA. CA set aside the CFI decision and found that
Chrysler had not had not performed its part of the obligation under the contract by
not delivering the goods at Sambok, Iloilo, the place designated in the Parts Order
Form, and must, therefore, suffer the loss. That there was misdelivery. Hence the
present petition by Chrsyler.
ISSUE:
Who shall suffer the risk of loss?
RULING:
The general rule that before, delivery, the risk of loss is home by the seller who is
still the owner, under the principle of "res petit domino".
In sum, the judgment of CA, will have to be sustained not on the basis of
misdelivery but on non-delivery since the merchandise was never placed in the
control and possession of Sambok, Bacolod, the vendee.
AS TO MISDELIVERY. To our minds, the matter of misdelivery is not the decisive factor
for relieving Sambok, Bacolod, of liability herein. While it may be that the Parts
Order Form specifically indicated Iloilo as the destination, as testified to by Ernesto
Ordonez, Parts Sales Representative of Sambok, Bacolod, and Sambok, Iloilo, are
actually one. In fact, admittedly, the order for spare parts was made by the
President of Sambok, Pepito Ng, through its marketing consultant. Notwithstanding,
upon receipt of the Bill of Lading, Sambok, Bacolod, initiated, but did not pursue,
steps to take delivery as they were advised by Negros Navigation that because
some parts were missing. they would just be informed as soon as the missing parts
were located.
It was only four years later, however, or in 1974, when a warehouseman of Negros
Navigation, Severino Aguarte, found in their off-shore bodega, parts of the
shipment.- in question, but already deteriorated and valueless.
Under the circumstances, Sambok, Bacolod, cannot be faulted for not accepting or
refusing to accept the shipment from Negros Navigation four years after shipment.
The evidence is clear that Negros Navigation could not produce the merchandise
nor ascertain its whereabouts at the time Sambok, Bacolod, was ready to take
delivery. Where the seller delivers to the buyer a quantity of goods less than he
contracted to sell, the buyer may reject them.
From the evidentiary record, Negros Navigation was the party negligent in failing to
deliver the complete shipment either to Sambok, Bacolod, or to Sambok, Iloilo, but
as the Trial Court found, petitioner failed to comply with the conditions precedent
to the filing of a judicial action. Thus, in the last analysis, it is Chrysler that must
shoulder the resulting loss.
LAWYERS COOPERATIVE PUBLISHING COMPANY, PLAINTIFF-APPELLEE,
VS.
PERFECTO A. TABORA, DEFENDANT-APPELLANT.
G.R. NO. L-21263 APRIL 30, 1965
BAUTISTA ANGELO, J.
DIGESTED BY: JAYWARD Z. BACO
DOCTRINE:
Seller’s retention of title, when merely intended to secure payment of the purchase
price, does not prevent shifting of the risk of loss to the buyer upon delivery of the
thing.
FACTS:
Tabora bought from Lawyers Coop. one set of American Jurisprudence, including
one set of general index, payable on installment plan. It was provided in the
contract that “title to and ownership of the books shall remain with the seller until
the purchase price shall have been fully paid. Loss or damage to the books after
delivery to the buyer shall be borne by the buyer.” The total price of the books,
including the cost of freight, amounts to P1,682.40. Tabora only made a down
payment of P300.00 leaving a balance of P1,382.40. However, a big fire broke out
in that locality which destroyed and burned all the buildings standing on one whole
block including at the law office and library of Tabora.
Lawyers Coop. demanded for the payment of the same but Tabora refused. Thus,
the seller filed a complaint for the recovery of the balance.
The buyer contended the seller should bear the risk of loss given that they were
destroyed immediately after the transaction and that it was agreed upon that title
to and the ownership of the books shall remain with the seller until the purchase
price shall have been fully paid. In the alternative, he sought exemption from
liability on a ground of fortuitous event.
The lower court ruled in favor of Lawyers Coop, ordering Tabor to pay the balance.
ISSUE:
Whether respondent Tabora should bear the loss and pay the unpaid purchase price.
RULING:
Yes. Tabora should bear the loss and pay the unpaid purchase price.
It was provided in the contract that "title to and ownership of the books shall
remain with the seller until the purchase price shall have been fully paid. Loss or
damage to the books after delivery to the buyer shall be borne by the buyer."
As a general rule, the loss of the object of the contract of sale is borne by the
owner, or in case of force majeure the one under obligation to deliver the object is
exempt from
liability. But, this rule does not apply in this case because the parties clearly agreed
to the abovementioned contrary stipulation.
Although the seller agreed that the ownership of the books shall remain with it until
the purchase price shall have been fully paid, such stipulation cannot make the
seller liable in case of loss not only because such was agreed merely to secure the
performance by the buyer of his obligation but in the very contract it was expressly
agreed that the "loss or damage to the books after delivery to the buyer shall be
borne by the buyer."
Any such stipulation is sanctioned by Article 1504 of our Civil Code, which in part
provides that where delivery of the goods has been made to the buyer or to a
bailee for the buyer, in pursuance of the contract and the ownership in the goods
has been retained by the seller merely to secure performance by the buyer of his
obligations under the contract, the goods are at the buyer's risk from the time of
such delivery.
In this case, the seller’s retention of title over the books was agreed merely to
secure the performance by the buyer of his obligation but in the very contract it
was expressly agreed that the “loss or damage to the books after delivery to the
buyer shall be borne by the buyer.”
Force majeure will not exempt Tabora from his liability. This is because this only
holds true when the obligation consists in the delivery of a determinate thing and
there is no stipulation holding him liable even in case of a fortuitous event. Here
these qualifications are not present. The obligation does not refer to a determinate
thing, but is pecuniary in nature(money), and the obligor bound himself to assume
the loss after the delivery of the goods to him. Obligor(Tabora) agreed to assume
any risk concerning the goods from the time of their delivery.
LEVY HERMANOS, INC., PETITIONERS,
VS.
LAZARO GERVACIO, RESPONDENTS
G.R. NO. L-46306, OCTOBER 27, 1939
MORAN, J,:
DOCTRINE:
In a contract for the sale of personal property payable in installments, failure to pay two
or more installments shall confer upon the vendor the right to cancel the sale or
foreclosure the mortgage if one has been given on the property without
reimbursement to the purchaser of the installments already paid, if there be an
agreement to this effect.
“However, if the vendor has chosen to foreclose the mortgage he shall have no
further action against the purchaser for the recovery of any unpaid balance owing
by the same and any agreement to the contrary shall be null and void.”
FACTS:
Levy Hermanos sold a Packard car to Lazaro Blas Gervacio. After making the initial
payment, he executed a Promissory Note for the P2,400 balance. To secure the
payment of the Promissory Note, he mortgaged the car to the seller. Gervacio failed
to pay upon maturity, that is why the seller foreclosed the property and was sold at
public auction, and plaintiff was the highest bidder for P800. The present action in
this case is the collection of P1,600 and interest. The Lower court applied the
provisions of Act No. 4122 and applied article 1454-A of the Civil Code and
rendered judgement in favor of the defendant. Article 1454-A provides:
“In a contract for the sale of personal property payable in installments, failure to
pay two or more installments shall confer upon the vendor the right to cancel the
sale or foreclosure the mortgage if one has been given on the property without
reimbursement to the purchaser of the installments already paid, if there be an
agreement to this effect.
“However, if the vendor has chosen to foreclose the mortgage he shall have no
further action against the purchaser for the recovery of any unpaid balance owing
by the same and any agreement to the contrary shall be null and void.”
ISSUE:
Whether or not the Article 1454-A of Act No. 4122 is proper in this case.
RULING:
No. In order to apply the provisions of Article 1454-A of the Civil Code, it must
appear that there was a contract for the sale of personal property payable in
installments and
that there has been a failure to pay two or more installments. The contract in this
case while a sale of personal property, it is not however one on installments but on
a 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. Accordingly, Article 1454-A
of the Act 4122 not applied in this case and Levy Hermanos, the seller have the
right to recover the unpaid balance.The suggestion that the cash payment made in
this case shall not be considered as an installment payment. A cash payment
cannot be considered as a payment by installment, and even if it can be
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. Thus, Lazaro Gervacio was
ordered to pay the sum of P1,600 plus interest.
DELTA MOTOR SALES CORPORATION, PLAINTIFF-APPELLEE
V.
NIU KIM DUAN AND CHAN FUE ENG, DEFENDANTS-APPELLANTS.
G.R. NO. 61043. SEPTEMBER 2, 1992
NOCON, J.:
DIGESTED BY: SWEET KARRAH M. SALAZAR
DOCTRINE:
REMEDIES OF THE VENDOR IN A SALE OF PERSONAL PROPERTY PAYABLE IN

INSTALLMENTS; REMEDIES ARE ALTERNATIVE AND NOT CUMULATIVE. — The vendor
in a sale of personal property payable in installments may exercise one of three
remedies, namely, (1) exact the fulfillment of the obligation, should the vendee fail
to pay; (2) cancel the sale upon the vendee’s failure to pay two or more
installments; (3) foreclose the chattel mortgage, if one has been constituted on the
property sold, upon the vendee’s failure to pay two or more installments. The third
option or remedy, however, is subject to the limitation that the vendor cannot
recover any unpaid balance of the price and any agreement to the contrary is void
(Art. 1484) The three (3) remedies are alternative and NOT cumulative. If the
creditor chooses one remedy, he cannot avail himself of the other two.
FACTS:
Defendants Niu Kim Duan and Chan Fue Eng purchased from Delta Motors 3 units
of ‘DAIKIN’ air-conditioner all valued at P19,350.00. The deed of sale stipulates that
the defendants shall pay a down payment of P774.00 and the balance of
P18,576.00 shall be paid by them in 24 installments; that the title to the properties
purchased shall remain with Delta Motors until the purchase price thereof is fully
paid; that if any two installments are not paid by the defendants on their due
dates, the whole of the principal sum remaining unpaid shall become due, with
interest
After paying the amount of P6,966.00, the defendants failed to pay at least 2
monthly installments. Statements of accounts were sent to the defendants to effect
collections but they failed to do so. Because of the unjustified refusal of the
defendants to pay their outstanding account and their wrongful detention of the
properties in question, Delta Motors prayed for the issuance of a writ of replevin, by
which the Court granted.
By virtue of the writ, Delta Motors succeeded in retrieving the properties in

question. The trial court ordered the defendants to pay Delta Motors the amount of
P6,188.29 with a 14% per annum interest which was due on the 3 “Daikin” air-
conditioners after the same was declared rescinded by the trial court.
ISSUE:
Did the lower court erred in its decision to order the defendants to pay the unpaid
balance despite the fact that Delta motors already retrieved the subject properties?
RULING:
Yes. The Court held that the lower court committed error in deciding on the matter.
The court emphasizes that the vendor in a sale of personal property payable in
installments may exercise one of three remedies, namely:
1. Exact the fulfillment of the obligation 2. Rescind the Sale 3. Foreclose the Chattel
Mortgage
In the following remedies, the court stresses that the 3 remedies available are
alternative and not cumulative. If the creditor chooses one remedy, he cannot avail
himself of the other two.
In this case, Delta Motors filed was to seek a judicial declaration that it had validly
rescinded the Deed of Conditional Sale, hence choosing the second remedy
indicated in Article 1484 of the Civil Code.
Having done so, Delta Motors is barred from exacting payment from Niu Kim Duan
of the balance of the price of the three air-conditioning units which it had already
repossessed.
AMADOR TAJANLANGIT, ET AL., PLAINTIFF-APPELLANTS,
VS.
SOUTHERN MOTORS, INC., ET AL., DEFENDANTS-APPELLEES.
GR NO. L-10789. MAY 28, 1957
BENGZON, J.:
DIGESTED BY: ARNEL M. SAHIDSAHID
DOCTRINE:
Personal property sold on instalments.
FACTS:
Tajanlangit bought 2 tractors and a thresher for 24,755.75 from Southern Motors
on the condition to pay the said property in an installment basis. However the
petitioner failed to pay the purchase price, and subsequently the respondent filed a
case and levied the execution on the said property sold, and subsequently bought
the subject property in a public auction for 10K. Southern Motors obtain another
writ of execution for the real properties of the petitioner, herein the latter filed a
petition contending that the obligation was already satisfied because the property
sold was returned to the respondent, and that the respondent was only limited to
the proceeds of the sale.
ISSUE:
Whether or not the vendor of a movable on installment is limited to the proceeds of

the sale?
RULING:
No. Art. 1484. In a contract of sale of personal property the price of which is
payable in installments, the vendor may exercise 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. (New Civil Code.)
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.
At any rate it is the actual sale of the mortgaged chattel in accordance with section
14 Act No. 1508 that would bar the creditor (who chooses to foreclose) from
recovering
any unpaid balance. (Pacific Com. Co. vs. De la Rama, 72 Phil. 380.) (Manila Motor Co.
vs. Fernandez, 99 Phil., 782.).
It is true that there was a chattel mortgage on the goods sold. But the Southern
Motors elected to sue on the note exclusively, i.e. to exact fulfillment of the
obligation to pay. It had a right to select among the three remedies established in
Article 1484. In choosing to sue on the note, it was not thereby limited to the
proceeds of the sale, on execution, of the mortgaged good.
ELISCO TOOL MANUFACTURING CORPORATION, PETITIONER
V.
COURT OF APPEALS, ROLANDO LANTAN, AND RINA LANTAN, RESPONDENTS
G.R. NO. 109966 MAY 31, 1999
MENDOZA, J.:
DIGESTED BY: RAMON SIXTO C. SUMUGAT
DOCTRINE:
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 vendees failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendees 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.
FACTS:
Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as

head of its cash department. In 1980, he entered into an agreement with the
company that he will lease a car 2 door Colt Cancer model 1979 from the company
for 1,010.65 monthly for 5 years. Payment will be through salary deduction. It was
also included in the contract that all the expenses for vehicle maintenance will be
shouldered by the employee. At the end of 5 years, he may exercise the option to
purchase from the employer and that all the monthly rentals will be applied to the
full purchase price. If he desires to purchase, he will do so by paying the remaining
balance, this OPTION IS LIMITED to the employee. Failure to pay 3 accumulate
monthly rentals will vest upon the employer the full right to lease the vehicle to
another employee. On the same day, PR executed a Promissory note for 60, 639
php After taking possession of the car, private respondent installed accessories
therein worth P15,000.00. In 1981, Elisco Tool ceased operations, as a result of
which private respondent Rolando Lantan was laid off. Nonetheless, as of
December 4, 1984, private respondent was able to make payments for the car in
the total amount of P61,070.94. On June 6, 1986, petitioner filed a complaint,

entitled “replevin plus sum of money,” against private respondent Rolando Lantan,
his wife Rina, and two other persons, identified only as John and Susan Doe, before
the Regional Trial Court of Pasig, Metro Manila. Petitioner alleged that private
respondents failed to pay the monthly rentals which, as of May 1986, totalled
P39,054.86; that despite demands, private respondents failed to settle their
obligation thereby entitling petitioner to the possession of the car;
ISSUES:
1. Whether or not there is a contract of sale in the case at bar.

2. Whether or not replevin is the proper remedy for this case.
RULING:
1. Yes. There was a contract of sale in the case at bar.

Although the agreement provides for the payment by Lantan of monthly
rentals”, the 5th paragraph thereof gives them the option to purchase the
motor vehicle at the end of the 5th year or upon payment of the 60 th monthly
rental when “all monthly rentals shall be applied to the payment of the full
purchase price of the car.” Clearly, the transaction is a lease in name only. The
so-called monthly rentals are in truth monthly amortizations on the car’s price.
Being a contract of sale on installment, article 1484 and 1485 should be applied.
2. The Writ of replevin is not the proper remedy in the case at bar. Instead, the
Supreme court pursuant to paragraph 1 of Article 1484 of the New Civil Code
suggested that the proper remedy is that of an action for specific performance.
The prayer for a writ of replevin is only for the purpose of ensuring specific
performance by private respondents. However, the private respondents could
no longer be held liable for the payment of interest on unpaid monthly rentals
since it was entered into in pursuance of a car plan adopted by petitioner for
the benefit of its deserving employees. Further, private respondents’ default in
payment was due to the cessation of operations of petitioner’s sister
company. Elizalde Steel Company. That petitioner accepted payments from
Lantan more than 2 years after the latter’s employment had been terminated
constitutes a waiver of petitioner’s right to collect interest on delayed payment.
What private respondents paid should
be considered the payment in full.
EQUITABLE SAVINGS BANK, (NOW KNOWN AS THE MERGED ENTITY
"BDO UNIBANK, INC.") PETITIONER, V. ROSALINDA C. PALCES,
RESPONDENT G.R. NO. 214752, MARCH 09, 2016
PERLAS-BERNABE, J
DIGESTED BY: MARK MULIT
DOCTRINE:
In this case, there was no vendor-vendee relationship between respondent and

petitioner. A judicious perusal of the records would reveal that respondent never
bought the subject vehicle from petitioner but from a third party, and merely
sought financing from petitioner for its full purchase price. Therefore, Article 1484
is inapplicable
FACTS:
Palces purchased the subject vehicle through a loan granted by Equitable Savings
Bank. Respondent executed a Promissory Note with Chattel Mortgage in favor of
the petitioner. Respondent failed to pay 2 monthly installments, thereby triggering
the acceleration and prompting petitioner to send a demand to compel respondent
to pay the remaining balance of the. As the demand went unheeded, petitioner
instituted a Complaint for Recovery of Possession with Replevin with Alternative
Prayer for Sum of Money and Damages against respondent. Pending respondent's
answer, summons and a writ of replevin were issued and served to her personally.
In her defense, while admitting that she indeed defaulted on her installments for 2
months, the respondent insisted that she called the petitioner regarding such delay
in payment and spoke to a bank officer, who gave his consent. In the succeeding
months, respondent then paid her late installment payments amounting to P103,000.
The CA ordered the petitioner to return the amount of P103,000.00 to respondent.

It held that while respondent was indeed liable to petitioner under the Promissory
Note with Chattel Mortgage, petitioner should not have accepted respondent's late
partial payments. The CA opined that by choosing to recover the subject vehicle via
a writ of replevin, petitioner already waived its right to recover any unpaid
installments, pursuant to Article 1484 of the Civil Code.
ISSUE:
Whether or not the CA correctly ordered petitioner to return to respondent her late
installment payments by applying Article 1484 of the NCC
RULING:
The CA erred in ordering petitioner to return the amount to respondent. Article

1484 of the Civil Code governs the sale of personal properties in installments. In
this case, there was no vendor-vendee relationship between respondent and
petitioner.
Respondent never bought the subject vehicle from petitioner but from a third party,
and merely sought financing from petitioner for its full purchase price. A loan
contract with the accessory chattel mortgage contract - and not a contract of sale
of personal property in installments - was entered into by the parties with
respondent standing as the debtor-mortgagor and petitioner as the creditor-
mortgagee. Further, there is nothing in the Promissory Note with Chattel Mortgage
that bars petitioner from receiving any late partial payments from respondent.
Petitioner's acceptance of respondent's late partial payments will only operate to
reduce her outstanding obligation to petitioner. In sum, the CA erred in ordering
petitioner to return the amount to respondent. In case foreclosure proceedings on
the subject chattel mortgage has not yet been conducted/concluded, petitioner is
ordered to commence foreclosure proceedings on the subject vehicle in accordance
with the Chattel Mortgage Law, i.e., within thirty (30) days from the finality of the
decision. The proceeds therefrom should be applied to the reduced outstanding
balance of respondent and the excess, if any, should be returned to her.
ABELARDO VALARAO, GLORIOSA VALARAO AND CARLOS VALARAO,
PETITIONERS,
VS.
COURT OF APPEALS AND MEDEN A. ARELLANO, RESPONDENTS.
G.R. NO. 130347 MARCH 3, 1999
PANGANIBAN, J.:
DIGESTED BY: RUEL AGANAP
FACTS:
On September 4, 1987, spouses Abelardo and Gloriosa Valarao, thru their son Carlos
Valarao as their attorney-in-fact, sold to Meden Arellano under a Deed of Conditional
Sale a parcel of land with an area of 1,504 square meters, for the sum of P3,225,000.00
payable under a schedule of payment stated therein. The following are the
Stipulations:
The vendee obligated herself to encumber by way of real estate mortgage in favor
of vendors her separate piece of property with the condition that upon full payment
of the balance of P2,225.000.00, the said mortgage shall become null and void and
without further force and effect
should the vendee fail to pay three successive monthly installments or anyone year
end lump sum payment within the period stipulated, the sale shall be considered
automatically rescinded without the necessity of judicial action and all payments
made by the vendee shall be forfeited in favor of the vendors by way of rental for
the use and occupancy of the property and as liquidated damages. The
improvements introduced by the vendee to the property shall belong to the vendors
without any right of reimbursement
Appellant alleged that as of September, 1990, she had already paid the amount of
P2,028,000.00, although she admitted having failed to pay the installments due in
October and November, 1990. Petitioner, however, [had] tried to pay the
installments due [in] the said months, including the amount due [in] the month of
December, 1990 on December 30 and 31, 1990, but was turned down by the
vendors-[petitioners] thru their maid, Mary Gonzales, who refused to accept the
payment offered. [Private respondent] maintains that on previous occasions, the
same maid was the one who [had] received payments tendered by her. It appears
that Mary Gonzales refused to receive payment allegedly on orders of her
employers who were not at home.
[Private respondent] tried to get in touch with [petitioners] over the phone and was
able to talk with [Petitioner] Gloriosa Valarao who told her that she [would] no
longer accept the payments being offered and that [private respondent] should
instead confer with her lawyer, a certain Atty. Tuazon. When all her efforts to make
payment were unsuccessful, [private respondent] sought judicial action by filing
this petition for consignation on January 4, 1991.
On the other hand, vendors-[petitioners], thru counsel, sent [private respondent] a

letter dated 4 January 1991 (Exh. "C") notifying her that they were enforcing the
provision on automatic rescission as a consequence of which the Deed of
Conditional Sale [was deemed] null and void, and . . . all payments made, as well
as the improvements introduced on the property, [were] thereby forfeited. The
letter also made a formal demand on the [private respondent] to vacate the
property should she not heed the demand of [petitioners] to sign a contract of
lease for her continued stay in the property.
In reply, [private respondent] sent a letter dated January 14, 1991 (Exh. "D"), denying
that she [had] refused to pay the installments due [in] the months of October,
November and December, and countered that it was [petitioners] who refused to
accept payment, thus constraining her to file a petition for consignation before the
Regional Trial Court of Quezon City.
Petitioners, through counsel, sent the private respondent another letter dated
January 19, 1991 (Exh. "F"), denying the allegations of her attempts to tender
payment on December 30 and 31, 1990, and demanding that [private respondent]
vacate and turnover the property and pay a monthly compensation for her
continued occupation of the subject property at the rate of P20,000.00, until she shall
have vacated the same.
ISSUE:
Whether the Answer is tantamount to a judicial demand and notice of rescission

under Art. 1592 of the Civil Code.
RULING:
The court held that the issue of whether the requirement of a judicial demand or a
notarial act has been fulfilled is immaterial to the resolution of the present case.
Article 1592 of the Civil Code states that 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 notarial act. After the
demand, the court may not grant him a new term.
It is well-settled that the above-quoted provision applies only to a contract of sale,

8 and not to a sale on installment or a contract to sell. In the present case, the
Deed of Conditional Sale is of the same nature as a sale on installment or a
contract to sell, which is not covered by Article 1592.
SPOUSES FAUSTINO AND JOSEFINA GARCIA, SPOUSES MELITON GALVEZ AND
HELEN GALVEZ, AND CONSTANCIA ARCAIRA REPRESENTED BY THEIR
ATTORNEY-IN-FACT JULIANA O. MOTAS, PETITIONERS,
VS.
COURT OF APPEALS, EMERLITA DE LA CRUZ, AND DIOGENES G.
BARTOLOME, RESPONDENTS.
G.R. NO. 172036 APRIL 23, 2010
CARPIO, J.:
DOCTRINE:
In contracts to sell, where ownership is retained by the seller and is not to pass until
the full payment, such payment, is a positive suspensive condition, the 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. There can be
no rescission or resolution of an obligation that is still non-existent due to the non-
happening of the suspensive condition.
FACTS:
On May 28, 1993, spouses Faustino and Josefina Garcia (spouses Garcia) and
spouses Meliton and Helen Galvez (spouses Galvez) and Emerlita dela Cruz (dela
Cruz) entered into a Contract to Sell wherein dela Cruz agreed to sell to spouses
Garcia and spouses Galvez for ₱3,170,220.00, five (5) parcels of land situated at
Tanza, Cavite. At the time of the execution of the said contract, three of the subject
lots, namely, Lot Nos. 2776, 2767, and 2769 were registered in the name of one
Angel Abelida (Abelida) from whom dela Cruz allegedly acquired said properties by
virtue of a Deed of Absolute Sale dated March 31, 1989.
As agreed, upon, spouses Garcia and Galvez shall make a down payment of
₱500,000.00 upon signing of the contract. The balance of ₱2,670,220.00 shall be
paid in three installments:
1. ₱500,000.00 on June 30, 1993
2. ₱500,000.00 on August 30, 1993
3. ₱1,670,220.00 on December 31, 1993.
On December 31, 1993, spouses Garcia and Galvez failed to pay the last installment
in the amount of ₱1,670,220.00. Sometime in July 1995, spouses Garcia and Galvez
offered to pay the unpaid balance, which had already been delayed by one and a
half years, which dela Cruz refused to accept. On September 23, 1995, dela Cruz
sold the same parcels of land to intervenor Diogenes G. Bartolome (Bartolome)
₱7,793,000.00.
Spouses Garcia and Galvez filed before the RTC a complaint for specific
performance in order to compel dela Cruz to accept their payment in full
satisfaction of the purchase price and, thereafter, execute the necessary document of
transfer in their favor.
Arguments
Spouses Garcia and spouses Galvez alleged that they discovered the infirmity of the
Deed of Absolute Sale covering Lot Nos. 2776, 2767 and 2769, between Abelida
and dela Cruz because Abelida’s signature was falsified. This is the reason why they
withheld their last installment which was due on December 31, 1993. They
tendered payment of the unpaid balance sometime in July 1995, after Abelida
ratified the sale
made in favor of dela Cruz, but dela Cruz refused to accept their payment for no
justifiable reason.
Dela Cruz denied the allegation that the Deed of Absolute Sale was spurious and
argued that spouses Garcia and spouses Galvez failed to pay in full the agreed
purchase price on its due date despite repeated demands. The Contract to Sell
contains a proviso that failure of plaintiffs to pay the purchase price in full shall
cause the rescission of the contract and forfeiture of one-half (1/2%) percent of the
total amount paid to dela Cruz.
RTC Decision
The trial court ruled that dela Cruz’s rescission of the contract was not valid. The
RTC applied Republic Act No. 6552 (Maceda Law) and stated that dela Cruz is not
allowed to unilaterally cancel the Contract to Sell. The RTC found that spouses
Garcia and spouses Galvez are justified in withholding the payment of the last
installment because of the alleged spurious sale between Abelida and dela Cruz.
CA Decision
The CA reversed the RTC’s decision. Dela Cruz’s obligation under the Contract to
Sell did not arise because of spouses Garcia and spouses Galvez’s undue failure to
pay in full the agreed purchase price on the stipulated date. Moreover, judicial
action for the rescission of a contract is not necessary where the contract provides
that it may be revoked and cancelled for violation of any of its terms and
conditions. The case was dismissed but dela Cruz was ordered to return to spouses
Garcia and spouses Galvez the amount in excess of one-half (1/2%) percent of
₱1,500,000.00 which was earlier paid by spouses Garcia and spouses Galvez.
ISSUE:
Is Dela Cruz compelled to accept the full payment and execute the
corresponding Deed of Absolute Sale?
RULING:
No. Dela Cruz is not compelled to accept the full payment and execute the Deed of
Absolute Sale because spouses Garcia and spouses Galvez failed to comply with
what was stipulated in the contract.
The pertinent provisions of the contract, denominated Contract to Sell, between the
parties read:
Failure on the part of the vendees to comply with the herein stipulation as to the
terms of payment shall cause the rescission of this contract and the payments made
shall be returned to the vendees subject however, to forfeiture in favor of the
Vendor equivalent to 1/2% of the total amount paid.
xxx
It is hereby agreed and covenanted that possession shall be retained by the
VENDOR until a Deed of Absolute Sale shall be executed by her in favor of the
Vendees. Violation of this provision shall authorize/empower the VENDOR to
demolish any construction/improvement without need of judicial action or court
order.
That upon and after the full payment of the balance, a Deed of Absolute Sale shall
be executed by the Vendor in favor of the Vendees.
That the duplicate original of the owner’s copy of the Transfer Certificate of Title of
the above subject parcels of land shall remain in the possession of the Vendor until
the execution of the Deed of Absolute Sale.
Contracts are law between the parties, and they are bound by its stipulations. It is clear
from the above-quoted provisions that the parties intended their agreement to be a
Contract to Sell: Dela Cruz retains ownership of the subject lands and does not
have the obligation to execute a Deed of Absolute Sale until petitioners’ payment of
the full purchase price. Payment of the price is a positive suspensive condition,
failure of which is not a breach but an event that prevents the obligation of the
vendor to convey title from becoming effective. There can be no rescission or
resolution of an obligation that is still non-existent due to the non-happening of the
suspensive condition. Dela Cruz is thus not obliged to execute a Deed of Absolute
Sale in petitioners’ favor because of petitioners’ failure to make full payment on the
stipulated date.
Spouses Garcia and spouses Galvez failed to pay the balance of the purchase price
on the stipulated date of the Contract to Sell. Thus, Dela Cruz is within her rights to
sell the subject lands to Bartolome.
The Supreme Court ruled in Pangilinan v. Court of Appeals:
Article 1592 of the New Civil Code, requiring demand by suit or by notarial act in case
the vendor of realty wants to rescind does not apply to a contract to sell but only to
contract of sale. In contracts to sell, where ownership is retained by the seller and is
not to pass until the full payment, such payment, as we said, is a positive
suspensive condition, the 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. To argue that there was only a casual breach is to proceed from the
assumption that the contract is one of absolute sale, where non-payment is a resolutory
condition, which is not the case.
The applicable provision of law in instant case is Article 1191 of the New Civil Code
which provides as follows:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.
The law makes it available to the injured party alternative remedies such as the
power to rescind or enforce fulfillment of the contract, with damages in either case
if the obligor does not comply with what is incumbent upon him. There is nothing in
this law which prohibits the parties from entering into an agreement that a violation
of the terms of the contract would cause its cancellation even without court
intervention. Where such propriety is sustained, the decision of the court will be
merely declaratory of the revocation, but it is not in itself the revocatory act.
Moreover, the vendor’s right in contracts to sell with reserved title to extrajudicially
cancel the sale upon failure of the vendee to pay the stipulated installments and
retain the sums and installments already received has long been recognized by the
well-established doctrine of 39 years standing. The validity of the stipulation in the
contract providing for automatic rescission upon non-payment cannot be doubted.
It is in the nature of an agreement granting a party the right to rescind a contract
unilaterally in case of breach without need of going to court. Thus, rescission
under Article 1191 was inevitable due to
petitioners’ failure to pay the stipulated price within the original period fixed in the
agreement.
R.A. 6552 or the Maceda Law is not applicable in this case. The Maceda Law applies
to contracts of sale of real estate on installment payments, including residential
condominium apartments but excluding industrial lots, commercial buildings and
sales to tenants. The subject lands do not comprise residential real estate within
the contemplation of the Maceda Law. Even if the SC will apply the Maceda Law to
the present case, petitioners’ offer of payment to Dela Cruz was made a year and a
half after the stipulated date. This is beyond the 60-day grace period under Section
4 of the Maceda Law. Spouses Garcia and spouses Galvez still cannot use the
second sentence of Section 4 of the Maceda Law against Dela Cruz for Dela Cruz’s
alleged failure to give an effective notice of cancellation or demand for rescission
because Dela Cruz merely sent the notice to the address supplied by spouses
Garcia and spouses Galvez in the Contract to Sell.
Spouses Garcia and spouses Galvez failed to pay the balance of the purchase price
on the stipulated date of the Contract to Sell. Thus, Dela Cruz is within her rights to
sell the subject lands to Bartolome. Neither Dela Cruz nor Bartolome can be said to
be in bad faith.
ROYAL PLAINS VIEW, INC. AND/OR RENATO PADILLO, PETITIONERS, V.
NESTOR C. MEJIA, RESPONDENT.
G.R. NO. 230832, NOVEMBER 12, 2018
J. REYES, JR., J.:
BY: RUBY ANNE TRINIDAD
DOCTRINE:
Whether the property is residential, commercial or industrial, Maceda Law does not
make any distinction insofar as the availability of the remedy of cancellation by the
seller in case of nonpayment of installments is concerned. The only distinction lies
on the added protection given by the law to residential buyers, which is not
enjoyed by commercial and industrial lot buyers.
FACTS:
The late Dominador Ramones (Dominador) was the registered owner of the said
parcel of land that is the subject of the present controversy. During his lifetime,
Dominador executed a Contract of Sale in favor of Bias Mejia (Bias), father of
respondent Nestor C. Mejia (Nestor), involving the western portion of the subject
land. Despite the sale, the title over the property remained in the name of the
Spouses Ramones. The remaining portion of the lot was sold to a certain Pablo
Benitez (Pablo) through a Deed of Absolute Sale of Land.
After that transaction, Bias died and he was survived by his son, Nestor. The latter was
in actual physical occupation of a parcel of land when he met Renato, the President
of petitioner Corporation, Royal Plains View, Inc., a real estate company. He also
had in his possession the Contract of Sale executed by Bias and Dominador and the
Deed of Sale in favor of Pablo. Renato and Nestor agreed to split the entire lot into
two titles resulting to the issuance of Transfer Certificates of Title (TCT) Nos. T-
225549 and T- 225550. Both titles were still under the name of spouses Ramones
but TCTs were retained by the Corporation and a person named Casimiro Benitez
respectively.
Nestor and petitioner Corporation, represented by Renato's wife entered into a

contract of Deed of Conditional Sale in which the petitioner Corporation bound itself
to pay Nestor the sum of P8,000,000.00 of which P500,000.00 was for down payment.
The balance was to be paid in 36 equal monthly installments of P208,333.30. The
Deed of Conditional Sale was later revoked and a new deed was executed on April
11, 2007 between Nestor and petitioner Corporation, represented by Renato. The
new Deed of Conditional Sale stated that petitioner Corporation had paid
respondent the amount of P1,972,000.00 and the remaining balance was to be paid
in 40 equal monthly installment of P150,000.00 starting on July 1, 2007 and ending
in June 2010.
Petitioner, Renato, later found out that Nestor had sold the whole property to the
spouses Egina. As a consequence, TCTs were issued in the name of the spouses
Egina.
Renato attempted several times to contact Nestor, but the latter did not take his
calls and simply vanished. Instead, Renato received a document entitled "Rescission
of Deed of Conditional Sale" whereby Nestor rescinded the April 11, 2007 Deed of
Conditional Sale alleging that Renato and the Corporation had defaulted in the
payment of the monthly installments agreed upon.
CONTENTIONS OF THE PETITIONER CORPORATION
Renato alleged that since the time when TCT No. T-225549 was gone, petitioner
Corporation already stopped its marketing business. Also, no one who bought the
individual lot had entered the subject property yet, as they were barred by Nestor.
ISSUE:
Whether or not the Rescission of the Deed of Conditional Sale is valid and whether
Maceda Law can be applied to the present case.
RULING:
The Supreme Court held that in order to fully pass upon the validity and propriety
of the Rescission of the Deed of Conditional Sale executed by respondent Nestor, it
is vital to characterize the nature of the agreement between the parties - whether
the same is a contract of sale or a contract to sell. The Court agrees with the CA
that the April 11, 2007 Deed of Conditional Sale executed between the parties is a
contract to sell. The pertinent portion of the agreement “And upon full payment of
the agreed consideration the Vendor shall execute the deed of absolute sale in
favor of the Vendee” is indicative that it is a contract to sell. This stipulation evinces
the intention of the parties for the vendor (respondent) to reserve ownership of the
land and the same is not to pass until the remaining balance (payable in 40 monthly
installments) has been fully paid by the vendee (petitioners).
APPLICABILITY OF MACEDA LAW
The Maceda Law addressed the predicament of thousands upon thousands of

residential property buyers who, in the words of the Court, are hounded to suffer
the loss of their life earnings only because of an oversight or difficulty in paying one
or two installments. This is not the case for industrial or commercial lot buyers, who
the law perceives to have deep pockets.
Contrary to the findings of the CA, the protection provided under R.A. No. 6552
(Maceda Law) is not applicable. Notwithstanding the parties' stipulation for
installment payments, wherein the payment of the price is more than one, the
parties' contract to sell does not automatically fall under the coverage of the
Maceda Law. R.A. No. 6552 provides exclusions for its application.
It is clear that the buyer's protection under R.A. No. 6552 only applies to contracts
of sale of real estate on installment payments, including residential
condominium
apartments, but excluding industrial lots, commercial buildings and sales to tenants.
A purchase by a company involved in the real estate business, just like the Royal
Plains View, Inc in this case can hardly be considered as residential. Also, in this
case, it was shown that petitioner Corporation is already engaged in the selling of
the portions of the said lots to individual buyers.
But this is not to say that sellers in a contract to sell of industrial and commercial
lots are precluded to cancel the contract when buyers defaulted in one installment.
The Supreme Court in the old case of Luzon Brokerage Co., Inc. v. Maritime Building
Co., Inc. held that the Act in modifying the terms and application of Art. 1592 Civil
Code reaffirms the vendor's right to cancel unqualifiedly in the case of industrial
lots and commercial buildings (as in the case at bar) and requires a grace period in
other cases, particularly residential lots, with a refund of certain percentages of
payments made on account of the cancelled contract. In other words, whether the
property is residential, commercial or industrial, Maceda Law does not make any
distinction insofar as the availability of the remedy of cancellation by the seller in
case of nonpayment of installments is concerned. The only distinction lies on the
added protection given by the law to residential buyers, which is not enjoyed by
commercial and industrial lot buyers.
A careful reading of the notarized "Rescission of Deed of Conditional Sale" executed

by respondent Nestor reveals that he availed of the remedy of rescission apparently
because petitioners defaulted in the payment of their monthly installment in the
amount of P150,000.00. To say that a contract to sell is rescissible is quite
misplaced. Jurisprudence abounds with rulings that the remedies of rescission,
under Articles 1191 and 1592 of the Civil Code, are not available in contracts to sell.
Strictly speaking, in a contract to sell, there can be no rescission or resolution of an
obligation that is still non-existent due to the non-happening of the suspensive
condition. Nestor's act of rescinding the Deed of Conditional Sale, or, more
correctly, canceling it, is theoretically valid and the parties shall stand as if the
obligation to sell never existed.
However, while the Court recognize the seller's right to unqualifiedly cancel the
contract to sell (of industrial or commercial properties) upon the buyer's default, as
pronounced in the earlier cited case of Luzon Brokerage, such cancellation must be
made with notice to the other party who failed to perform his end part of the
bargain. This gives the opportunity to the other party to question the cancellation
made on account of error, abuse or any other grounds.
Respondent Nestor's action in canceling (through a notarized Rescission of

Conditional Sale) the contract to sell is unjustified. There was no showing that he
made a demand (judicially or extrajudicially) to pay the remaining balance at the
moment petitioners failed to pay the monthly installment due for December 2009.
Technically speaking, petitioners have not incurred in delay, and thus, were not yet
in default. In addition to that, it appears that payment was still not made, there is
no showing that respondent
Nestor sent a notice to petitioners informing them that he is already canceling the
contract to sell or, at the very least, his intent to cancel the said contact.
Considering that the Deed of Conditional Sale was not validly cancelled, it follows
then that the same subsists and remains effective. In the given case, the contract
price involved is P8,000,000.00 and the petitioners already paid the substantial
amount of P3,567,500.00 as found by the CA. This is almost half of the purchase
price. Thus, for equitable consideration, the Court will give leeway to petitioners to
pay the balance of the unpaid purchase price within a reasonable period of time.
ACTIVE REALTY & DEVELOPMENT CORPORATION, PETITIONER, V. NECITA G.
DAROYA, REPRESENTED BY ATTORNEY-IN-FACT SHIRLEY DAROYA-QUINONES,
RESPONDENTS.
G.R. NO. 141205. MAY 9, 2002
PUNO, J.:
DIGESTED BY: ARNEL M. SAHIDSAHID
DOCTRINE:
For failure to cancel the contract in accordance with the procedure provided by law,
the contract to sell between the parties remains valid and subsisting.
FACTS:
Active Realty entered into a Contract to Sell with Daroya, whereby the latter agreed
to buy a lot for P224,025.00 in petitioner’s subdivision and that the respondent
shall pay a down payment upon execution of the contract and the balance in sixty
(60) monthly instalments which totalled to a figure higher than that stated as the
contract price. However, respondent was in default representing three (3) monthly
amortizations. Petitioner moved for the cancellation of their contract to sell.
Petitioner refused the respondent’s offer to pay the remaining amount as it has sold
the lot to another buyer. Respondent filed a complaint against petitioner before the
Housing and Land Use Regulatory Board (HLURB) for the execution of a final Deed
of Absolute Sale in respondent’s favor after she pays any balance that may still be
due from her. HLURB Arbiter found for the respondent and ruled that the
cancellation of the contract to sell was void as petitioner failed to pay the cash
surrender value to respondent as mandated by law. On appeal, the HLURB Board of
Commissioners set aside the Arbiter’s Decision which did not apply the remedies
provided under the Maceda Law and found both parties were at fault, i.e.,
respondent incurred in delay in her instalment payments and respondent failed to
send a notarized notice of cancellation. The Board ordered petitioner to refund to
the respondent one half of the total amount she has paid. Respondent appealed to
the Office of the President which modified the Decision of the HLURB. The COS
between the parties subsisted and concluded that respondent was entitled to the
lot after payment of her outstanding balance due to petitioner’s failure to comply
with the legal requisites for a valid cancellation of the contract. However, as the lot
was already sold to another person and that the actual value of the lot as of the date
of the contract was P1,700.00 per square meter, petitioner was ordered to refund
to the respondent the amount of P875,000.00, the true and actual value of the lot
as of the date of the contract, with interest at 12% per annum computed from August
26, 1991 (date of filing of the complaint) until fully paid, or to deliver a substitute
lot at the choice of respondent.
CA ruled against petitioner only on the basis of form and substance.
ISSUE:
Whether or not the Active Realty can be compelled to refund to the respondent the
value of the lot or to deliver a substitute lot at Daroya’s option?
RULING:
Yes. The contract to sell in the case at bar is governed by Republic Act No. 6552
“The Realty Instalment Buyer Protection Act,” or more popularly known as the
Maceda Law which came into effect in September 1972. Its declared public policy is
to protect buyer of real estate on instalment basis against onerous and oppressive
conditions. The law seeks to address the acute housing shortage problem in our
country that has prompted thousands of middle- and lower-class buyers of houses,
lots and condominium units to enter into all sorts of contracts with private housing
developers involving instalment schemes. Lot buyers, mostly low-income earners
eager to acquire a lot upon which to build their homes, readily affix their signatures
on these contracts, without an opportunity to question the onerous provisions
therein as the contract is offered to them on a “take it or leave it” basis.
MANUEL C. PAGTALUNAN, PETITIONER, VS. RUFINA DELA CRUZ VDA. DE
MANZANO, RESPONDENT.
G.R. NO. 147695 SEPTEMBER 13, 2007
AZCUNA, J.:
DIGESTED BY: ESCANO, KARIZ CHARALANE A.
FACTS:
A Contract to Sell was entered into by Patricio Pagtalunan and Rufina Vda. De
Manzano. Patricio agreed to sell to Rufina a house and lot to be paid in the sum of
P 17,800, with P 1,500 as downpayment and equal monthly installments of P 150
until fully paid.
It was alleged that Rufina paid P 12,950 and thereafter stopped paying after
December 1979 without just cause, also in a Kasunduan she borrowed P 3,000 from
Patricio which was due in a year, which to pay which be added to the monthly
amortizations of the land. Patricio offered to refund all her payments provided she
would surrender the house. She refused. Patricio then started harassing her and
began demolishing the house portion by portion.
Manuel filed a Complaint for unlawful detainer against Rufina. MTC ruled in favor of
Manuel alleging that he had the right to resolution under A1191. Rufina’s failure to
pay not a few installments caused the resolution or termination of the Contract to
Sell.On appeal, RTC reversed the MTC decision. That the agreement could not be
automatically rescinded since there was delivery to the buyer. A judicial
determination of rescission must be secured as a condition precedent to convert the
possession de facto of respondent from lawful to unlawful.The CA affirmed the
RTC decision and added that the MTC and RTC failed to apply the Maceda Law, a
special law enacted in 1972 to protect buyers of real estate on installment
payments against onerous and oppressive conditions. CA held that the Contract to
Sell was not validly cancelled or rescinded under Sec. 3 (b) of R.A. No. 6552, and
recognized Rufina’s right to continue occupying unmolested the property subject of
the contract to sell. Hence the present petition.
Manuel alleges that the requirements under Maceda Law has been complied with.
ISSUE:
Whether the Contract to Sell was validly cancelled under the Maceda Law
RULING:
NO. Contract to Sell was not validly cancelled or rescinded under Sec. 3 (b) of R.A.
No. 6552. The law provision provides that:
If the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty percent of
the total payments made and, after five years of installments, an additional
five percent
every year but not to exceed ninety percent 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.
NOTICE OF CANCELLATION. the letter dated February 24, 1997, merely made
formal demand upon Rufina to vacate the premises in question within five days
from receipt thereof since she had "long ceased to have any right to possess the
premises x x x due to [her] failure to pay without justifiable cause the installment
payments x x x."
Clearly, the demand letter is not the same as the notice of cancellation or demand for
rescission by a notarial act required by R.A No. 6552. Manuel cannot rely on Layug v.
Intermediate Appellate Cour to support his contention that the demand letter was
sufficient compliance. Layug held that "the additional formality of a demand on [the
seller’s] part for rescission by notarial act would appear, in the premises, to be merely
circuitous and consequently superfluous" since the seller therein filed an action for
annulment of contract, which is a kindred concept of rescission by notarial act.
Evidently, the case of unlawful detainer filed by Manuel does not exempt him from
complying with the said requirement.
CASH SURRENDER VALUE. The provision does not provide a different requirement
for contracts to sell which allow possession of the property by the buyer upon
execution of the contract like the instant case. Hence, petitioner cannot insist on
compliance with the requirement by assuming that the cash surrender value payable
to the buyer had been applied to rentals of the property after respondent failed to
pay the installments due.
There being no valid cancellation of the Contract to Sell, the CA correctly

recognized respondent’s right to continue occupying the property subject of the
Contract to Sell and affirmed the dismissal of the unlawful detainer case by the RTC.
Considering that the Contract to Sell was not cancelled by the vendor, Patricio,
during his lifetime or by petitioner in accordance with R.A. No. 6552 when
petitioner filed this case of unlawful detainer after 22 years of continuous
possession of the property by respondent who has paid the substantial amount of
P12,300 out of the purchase price of P17,800, the Court agrees with the CA that it
is only right and just to allow respondent to pay her arrears and settle the balance
of the purchase price.
PLANTERS DEVELOPMENT BANK, PETITIONER,
VS.
JULIE CHANDUMAL, RESPONDENT
G.R. NO. 195619 SEPTEMBER 5, 2012
REYES, J.:
BY: CARYLL C. CAYABAN
DOCTRINE:
R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial,
commercial, residential) the right of the seller to cancel the contract upon non-
payment of an installment by the buyer, which is simply an event that prevents the
obligation of the vendor to convey title from acquiring binding force. The law also
provides for the rights of the buyer in case of cancellation. Thus, Sec. 3 (b) of the law
provides that:
"If the contract is cancelled, the seller shall refund to the buyer the cash surrender
value of the payments on the property equivalent to fifty percent of the total payments
made and, after five years of installments, an additional five percent every year but not
to exceed ninety percent 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.” (Citation omitted
and emphasis ours)
R.A. No. 6552 recognizes the right of the seller to cancel the contract but any such
cancellation must be done in conformity with the requirements therein prescribed.
In addition to the notarial act of rescission, the seller is required to refund to the
buyer the cash surrender value of the payments on the property. The actual
cancellation of the contract can only be deemed to take place upon the expiry of a
thirty (30)-day period following the receipt by the buyer of the notice of
cancellation or demand for rescission by a notarial act and the full payment of the
cash surrender value.
FACTS:
The instant case stemmed from a contract to sell a parcel of land, together with
improvements, between BF Homes, Inc. (BF Homes) and herein respondent Julie
Chandumal (Chandumal). The property subject of the contract is located in Talon
Dos, Las Piñas City and covered by a Transfer Certificate of Title.
On February 12, 1993, BF Homes sold to PDB all its rights, participations and
interests over the contract.
Chandumal paid her monthly amortizations from December 1990 until May 1994
when she began to default in her payments. In a Notice of Delinquency and
Rescission of Contract with Demand to Vacate dated July 14, 1998, PDB gave
Chandumal a period of thirty (30) days from receipt within which to settle her
installment arrearages
together with all its increments; otherwise, all her rights under the contract shall be
deemed extinguished and terminated and the contract declared as rescinded.
Despite demand, Chandumal still failed to settle her obligation.
On June 18, 1999, an action for judicial confirmation of notarial rescission and
delivery of possession was filed by PDB against Chandumal.
ALLEGATIONS OF PDB
PDB alleged that despite demand, Chandumal failed and/or refused to pay the
amortizations as they fell due; hence, it caused the rescission of the contract by means
of notarial act, as provided in Republic Act (R.A.) No. 6552.5 According to PDB, it
tried to deliver the cash surrender value of the subject property, as required under
R.A. No. 6552, in the amount of ₱ 10,000.00; however, the defendant was unavailable
for such purpose
CHANDUMAL’S DEFENSE
She maintained that she did not receive the summons and/or was not notified of
the same. She further alleged that her failure to file an answer within the
reglementary period was due to fraud, mistake or excusable negligence. In her
answer, Chandumal alleged the following defenses: (a) contrary to the position of
PDB, the latter did not make any demand for her to pay the unpaid monthly
amortization; and (b) PDB did not tender or offer to give the cash surrender value
of the property in an amount equivalent to fifty percent (50%) of the actual total
payment made, as provided for under Section 3(b) of R.A. No. 6552. Moreover,
Chandumal claimed that since the total payment she made amounts to ₱
782,000.00, the corresponding cash surrender value due her should be ₱
391,000.00.
ISSUE:
Whether there was proper rescission by notarial act of the contract to sell.
RULING:
In Leaño v. Court of Appeals, it was held that:
R. A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial,
commercial, residential) the right of the seller to cancel the contract upon non-
payment of an installment by the buyer, which is simply an event that prevents the
obligation of the vendor to convey title from acquiring binding force. The law also
provides for the rights of the buyer in case of cancellation. Thus, Sec. 3 (b) of the law
provides that:
"If the contract is cancelled, the seller shall refund to the buyer the cash surrender
value of the payments on the property equivalent to fifty percent of the total
payments made
and, after five years of installments, an additional five percent every year but not to
exceed ninety percent 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.”
(Citation omitted and emphasis ours)
R.A. No. 6552 recognizes the right of the seller to cancel the contract but any such
cancellation must be done in conformity with the requirements therein prescribed.
In addition to the notarial act of rescission, the seller is required to refund to the
buyer the cash surrender value of the payments on the property. The actual
cancellation of the contract can only be deemed to take place upon the expiry of a
thirty (30)-day period following the receipt by the buyer of the notice of
cancellation or demand for rescission by a notarial act and the full payment of the
cash surrender value.
In this case, it is an admitted fact that PDB failed to give Chandumal the full payment of
the cash surrender value. In its complaint,33 PDB admitted that it tried to deliver
the cash surrender value of the subject property as required under R.A. No. 6552
but Chandumal was "unavailable" for such purpose. Thus, it prayed in its complaint
that it be ordered to "deposit with a banking institution in the Philippines, for the
account of Defendants (sic), the amount of Ten Thousand Pesos (₱ 10,000.00),
Philippine Currency, representing the cash surrender value of the subject property;
x x x." The allegation that Chandumal made herself unavailable for payment is not
an excuse as the twin requirements for a valid and effective cancellation under the law,
i.e., notice of cancellation or demand for rescission by a notarial act and the full
payment of the cash surrender value, is mandatory.35 Consequently, there was no
valid rescission of the contract to sell by notarial act undertaken by PDB and the
RTC should not have given judicial confirmation over the same.
OPTIMUM DEVELOPMENT BANK, PETITIONER,
VS.
SPOUSES BENIGNO V. JOVELLANOS AND LOURDES R. JOVELLANOS,
RESPONDENTS
G.R. NO. 189145 DECEMBER 4, 2013
PERLAS-BERNABE, J.:
BY: ANDEMAR C MORALES JR
DOCTRINE:
In a contract to sell, the prospective seller binds himself to sell the property subject
of the agreement exclusively to the prospective buyer upon fulfillment of the
condition agreed upon which is the full payment of the purchase price but reserving
to himself the ownership of the subject property despite delivery thereof to the
prospective buyer.
FACTS:
On April 26, 2005, Sps. Jovellanos entered into a Contract to Sell6 with Palmera
Homes, Inc. (Palmera Homes) for the purchase of a residential house and lot
situated in Block 3, Lot 14, Villa Alegria Subdivision, Caloocan City (subject
property) for a total consideration of P1,015,000.00. Pursuant to the contract, Sps.
Jovellanos took possession of the subject property upon a down payment of
P91,500.00, undertaking to pay the remaining balance of the contract price in equal
monthly installments of P13,107.00 for a period of 10 years starting June 12, 2005.
On August 22, 2006, Palmera Homes assigned all its rights, title and interest in the
Contract to Sell in favor of petitioner Optimum Development Bank (Optimum)
through a Deed of Assignment of even date.
On April 10, 2006, Optimum issued a Notice of Delinquency and Cancellation of

Contract to Sell for Sps. Jovellanos’s failure to pay their monthly installments
despite several written and verbal notices.
In a final Demand Letter dated May 25, 2006, Optimum required Sps. Jovellanos to
vacate and deliver possession of the subject property within seven (7) days which,
however, remained unheeded. Hence, Optimum filed, on November 3, 2006, a
complaint for unlawful detainer before the MeTC, docketed as Civil Case No. 06-
28830. Despite having been served with summons, together with a copy of the
complaint, Sps. Jovellanos failed to file their answer within the prescribed
reglementary period, thus prompting Optimum to move for the rendition of
judgment.
Thereafter, Sps. Jovellanos filed their opposition with motion to admit answer,
questioning the jurisdiction of the court, among others. Further, they filed a Motion
to Reopen and Set the Case for Preliminary Conference, which the MeTC denied.
ISSUE:
WON there was a valid and effective cancellation of the Contract to Sell in
accordance with Section 4 of RA 6552
RULING:
Yes, Verily, in a contract to sell, the prospective seller binds himself to sell the
property subject of the agreement exclusively to the prospective buyer upon
fulfillment of the condition agreed upon which is the full payment of the purchase
price but reserving to himself the ownership of the subject property despite
delivery thereof to the prospective buyer.The full payment of the purchase price
in a contract to sell is a suspensive condition, the non-fulfillment of which prevents
the prospective seller’s obligation to convey title from becoming effective, as in this
case.
Further, it is significant to note that given that the Contract to Sell in this case is one
which has for its object real property to be sold on an installment basis, the said
contract is especially governed by — and thus, must be examined under the provisions
of — RA 6552, or the “Realty Installment Buyer Protection Act”, which provides for the
rights of the buyer in case of his default in the payment of succeeding installments.
Given the nature of the contract of the parties, the respondent court correctly applied
Republic Act No. 6552. Known as the Maceda Law, R.A. No. 6552 recognizes in
conditional sales of all kinds of real estate (industrial, commercial, residential) the right
of the seller to cancel the contract upon non-payment of an installment by the buyer,
which is simply an event that prevents the obligation of the vendor to convey title from
acquiring binding force. It also provides the right of the buyer on installments in case
he defaults in the payment of succeeding installments, viz.:
(1) Where he has paid at least two years of installments, (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 one 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. (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 fifty per cent of the total payments made and, after five years of
installments, an additional five per cent every year but not to exceed ninety per cent of
the total payments made:
Provided, That the actual cancellation of the contract shall take place after
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. Down payments, deposits or
options on the contract shall be included in the computation of the total number of
installments made.
(2) Where he has paid less than two years in installments, Sec. 4. x x x the seller shall
give the buyer a grace period of not less than sixty days from the date the installment
became due. If the buyer fails to pay the installments due at the expiration of the grace
period, the seller may cancel the contract 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.
(Emphasis and underscoring supplied)
Pertinently, since Sps. Jovellanos failed to pay their stipulated monthly installments
as found by the MeTC, the Court examines Optimum’s compliance with Section 4 of
RA 6552, as above quoted and highlighted, which is the provision applicable to
buyers
who have paid less than two (2) years-worth of installments. Essentially, the said
provision provides for three (3) requisites before the seller may actually cancel the
subject contract: first, the seller shall give the buyer a 60-day grace period to be
reckoned from the date the installment became due; second, the seller must give
the buyer a notice of cancellation/demand for rescission by notarial act if the buyer
fails to pay the installments due at the expiration of the said grace period; and
third, the seller may actually cancel the contract only after thirty (30) days from the
buyer’s receipt of the said notice of cancellation/demand for rescission by notarial
act.
In the present case, the 60-day grace period automatically operated in favor of the
buyers, Sps. Jovellanos, and took effect from the time that the maturity dates of
the installment payments lapsed. With the said grace period having expired bereft
of any installment payment on the part of Sps. Jovellanos, Optimum then issued a
notarized Notice of Delinquency and Cancellation of Contract on April 10, 2006.
Finally, in proceeding with the actual cancellation of the contract to sell, Optimum
gave Sps. Jovellanos an additional thirty (30) days within which to settle their arrears
and reinstate the contract, or sell or assign their rights to another.
It was only after the expiration of the thirty day (30) period did Optimum treat the
contract to sell as effectively cancelled – making as it did a final demand upon Sps.
Jovellanos to vacate the subject property only on May 25, 2006. Thus, based on the
foregoing, the Court finds that there was a valid and effective cancellation of the
Contract to Sell in accordance with Section 4 of RA 6552 and since Sps. Jovellanos
had already lost their right to retain possession of the subject property as a
consequence of such cancellation, their refusal to vacate and turn over possession
to Optimum makes out a valid case for unlawful detainer as properly adjudged by
the MeTC.
ASSOCIATED MARINE OFFICERS AND SEAMEN'S UNION OF THE PHILIPPINES
PTGWO-ITF, PETITIONER,
VS.
NORIEL DECENA, RESPONDENT
G.R. NO. 178584 OCTOBER 8,
2012 PERLAS-BERNABE, J.:
DOCTRINE:
R.A. No. 6552, otherwise known as the Realty Installment Buyer Protection Act,
recognizes in conditional sales of all kinds of real estate (industrial, commercial,
residential) the right of the seller to cancel the contract upon non-payment of an
installment by the buyer, which is simply an event that prevents the obligation of
the vendor to convey title from acquiring binding force.
FACTS:
Associated Marine Officers and Seamen’s Union of the Philippines—PTGWO-ITF

(Seamen’s Union) is a duly registered labor organization engaged in an on-going
Shelter Program, which offers residential lots and fully-furnished houses to its
members-seafarers under a reimbursement scheme requiring no down payment
and no interest on the principal sum advanced for the acquisition and development
of the land and the construction of the house.
Seamen’s Union entered into a contract under the Shelter Program with one of its
members, Noriel Decena (Decena), allowing the latter to take possession of a
house and lot described as 7 STOLT MODEL, Lot 16, Block 7, in the Seamen’s
Village, Sitio Piela, Barangay Paliparan, Dasmariñas, Cavite, with the obligation to
reimburse Seamen’s Union the cost (US$28,563)4 thereof in 180 equal monthly
payments. It was stipulated in the said contract that, in case Decena fails to remit
three (3) monthly reimbursement payments, he shall be given a 3-month grace
period within which to remit his arrears, otherwise, the contract shall be
automatically revoked or canceled and Decena shall voluntarily vacate the premises
without the need of demand or judicial action.
Subsequently, Decena failed to pay twenty-five (25) monthly reimbursement payments

covering the period August 1999 to August 2001, despite demands. Hence,
Seamen’s Union canceled the contract and treated all his reimbursement. For
failure of Decena to heed said notices, Seamen’s Union filed a complaint before the
barangay lupon and, eventually, a case for unlawful detainer.
MTC RULING: MTC found Seamen’s Union’s case meritorious and, thus, rendered
judgment ordering Decena to (1) vacate the premises; (2) pay monthly rental in
the amount of P8,109.00 from August 1999 with legal interests thereon until he has
actually and fully paid the same; and (3) pay attorney’s fees in the amount of
P30,000.00, as well as the costs of suit.
RTC RULING: The Regional Trial Court (RTC) affirmed in toto the decision of the
MTC after finding that the cancellation and revocation of the contract for the failure
of Decena to remit 25 monthly reimbursement payments converted the latter’s stay
on the premises to one of “mere permission” by Seamen’s Union and that Decena’s
refusal to heed the notice to vacate the premises rendered his continued
possession thereof unlawful.
CA RULING: The CA held that the contract between the parties is not a contract of
lease, but a contract to sell, which stipulates that upon full payment of the value of the
house and lot, Decena shall become the owner thereof.The issues, which involve
“the propriety of terminating the relationship contracted by the parties, as well as
the demand upon Decena to deliver the premises and to pay unpaid
reimbursements” extend beyond those commonly involved in unlawful detainer
suits, thus, converting the instant case into one incapable of pecuniary estimation
exclusively cognizable by the RTC.
ISSUE:
Is the agreement between the parties allegedly one of a contract to sell—when the
Housing and Land Use Regulatory Board itself already made a pronouncement that
the Shelter Program and its contract award is not a sale of real estate?
RULING:
Yes. The Shelter Contract Award granted to Decena expressly stipulates that
“(u)pon completion of payment of the amount of US$28,563 representing the full
value of the House and Lot subject of (the) Contract Award, the UNION shall
execute a Deed of Transfer and shall cause the issuance of the corresponding
Transfer Certificate of Title in favor of and in the name of the AWARDEE.” It cannot
be denied, therefore, that the parties herein entered into a contract to sell in the
guise of a reimbursement scheme requiring Decena to make monthly
reimbursement payments which are, in actuality, installment payments for the
value of the subject house and lot. While Decena occupied the subject premises,
the title nonetheless remained with Seamen’s Union. Considering, therefore, that
the basis for such occupation is a contract to sell the premises on installment, the
contractual relations between the parties are more than that of a lessor-lessee.
It is basic that a contract is what the law defines it to be, and not what it is called by
the contracting parties. 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 itself to sell the
said property exclusively to the prospective buyer upon fulfillment of the condition
agreed upon, that is, full payment of the purchase price.
In the parallel case of Pagtalunan v. Dela Cruz Vda. De Manzano, 533 SCRA 242 (2007),
which likewise originated as an action for unlawful detainer, we affirmed the finding
of
the appellate court that, since the contract to sell was not validly canceled or
rescinded under Section 3(b) of R.A. No. 6552, the respondent therein had the
right to continue occupying unmolested the property subject thereof.
As we emphasized in Pagtalunan vs. Dela Cruz Vda. De Manzano,, “R.A. No. 6552,
otherwise known as the Realty Installment Buyer Protection Act, recognizes in
conditional sales of all kinds of real estate (industrial, commercial, residential) the
right of the seller to cancel the contract upon non-payment of an installment by the
buyer, which is simply an event that prevents the obligation of the vendor to
convey title from acquiring binding force.” While we agreed that the cancellation of
a contract to sell may be done outside of court, however, “the cancellation by the
seller must be in accordance with Sec. 3(b) of R.A. No. 6552, which requires a
notarial act of rescission and the refund to the buyer of the full payment of the
cash surrender value of the payments on the property.”
SPOUSES JAIME SEBASTIAN AND EVANGELINE SEBASTIAN, PETITIONERS,
VS.
BPI FAMILY BANK, INC., CARMELITA ITAPO AND BENJAMIN HAO,
RESPONDENTS.
G.R. NO. 160107 OCTOBER 22, 2014
BERSAMIN, J.:
DIGESTED BY; HAZEL KAYE R. TECSON
DOCTRINE:
The protection of Republic Act No. 6552 (Realty Installment Buyer Protection Act)
does not cover a loan extended by the employer to enable its employee to finance
the purchase of a house and lot. The law protects only a buyer acquiring the
property by installment, not a borrower whose rights are governed by the terms of
the loan from the employer.
FACTS:
The spouses Sebastian used to work for BPI Family, Jaime as the Bank Manager in
one branch and Evangeline as a bank teller in another branch. On October 30,
1987, they availed themselves of a housing loan from BPI Family as one of the
benefits extended to its employees. They agreed that the loan would be payable in
monthly amortization which will be deducted from their monthly salary. To secure
the payment of the loan, they executed a real estate mortgage in favor of BPI
Family5 over their property in Bulacan.
On December 14, 1989, however, Jaime received a notice of termination, informing

him that he had been terminated from employment due to loss of trust and
confidence resulting from his willful non-observance of standard operating
procedures and banking laws. Evangeline also received a notice of termination
dated February 23, 1990,9 telling her of the cessation of her employment on the
ground of abandonment. Both notices contained a demand for the full payment of
their outstanding loans from BPI Family.
The spouses Sebastian filed a complaint for illegal dismissal against BPI Family.
About a year after their termination, the spouses received a demand letter requiring
them to pay their outstanding obligation and that the same had become due and
demandable upon their separation from BPI Family. Meanwhile, BPI Family
instituted a petition for the foreclosure of the real estate mortgage.
To prevent the foreclosure of their property, spouses Sebastian filed against the
respondents their complaint for injunction and damages with application for
preliminary injunction and restraining order, alleging that there was yet no basis for
the foreclosure of the mortgage property since their obligation was not yet due and
demandable because of pending resolution by the labor court.
BPI Family asserted that the loan extended to the spouses was a special privilege
granted to its employees.
Having paid monthly amortizations for two years and four months, the spouses now
insist that they were entitled to the grace period within which to settle the unpaid
amortizations without interest provided under Section 3 of R.A. No. 6522.
Otherwise,
the foreclosure of the mortgaged property should be deemed premature inasmuch
as their obligation was not yet due and demandable. Spouses Sebastian further
contended that the loan agreement was in the nature of a contract of adhesion that
must be construed strictly against the one who prepared it.
ISSUE:
Was the foreclosure of spouses Sebastian’s real estate mortgage premature?
RULING:
No. Republic Act No. 6552 was enacted to protect buyers of real estate on
installment payments against onerous and oppressive conditions.
The spouses’ insistence would have been correct if the monthly amortizations being
paid to BPI Family arose from a sale or financing of real estate. In their case, however,
the monthly amortizations represented the installment payments of a housing loan
that BPI Family had extended to them as an employee’s benefit. The monthly
amortizations they were liable for was derived from a loan transaction, not a sale
transaction, thereby giving rise to a lender-borrower relationship between BPI Family
and the spouses. It bears emphasizing that Republic Act No. 6552 aimed to protect
buyers of real estate on installment payments, not borrowers or mortgagors who
obtained a housing loan to pay the costs of their purchase of real estate and used the
real estate as security for their loan. The "financing of real estate in installment
payments" referred to in Section 3, should be construed only as a mode of payment
vis-à-vis the seller of the real estate, and excluded the concept of bank financing that
was a type of loan. Accordingly, Sections 3, 4 and 5, must be read as to grant
certain rights only to defaulting buyers of real estate on installment, whose rights
are properly demandable only against the seller of real estate.
In Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., the Court held that the
Act even in residential properties recognizes and reaffirms the vendor's right to
cancel the contract to sell upon breach and non-payment of the stipulated
installments but requires a grace period after at least two years of regular installment
payments.
Thus, in the present case, without the buyer-seller relationship between them and
BPI Family, the provisions of Republic Act No. 6552 were inapplicable and could not
be invoked by them against BPI Family.
On the spouses’ argument that the printed conditions appearing at the back of BPI
Family’s official receipt partook of a contract of adhesion that must be strictly
construed against BPI Family as the party who prepared the same, do not
persuade. The Court has reiterated that their reliance on Republic Act No. 6552 was
misplaced because its provisions could not extend to a situation bereft of any seller-
buyer relationship. Hence, they could not escape the consequences of the maturity
of their obligation by invoking the grace period provided in Section 3.
The CA correctly found that there was basis to declare the spouses’ entire
outstanding loan obligation mature as to warrant the foreclosure of their mortgage. It
is settled that foreclosure is valid only when the debtor is in default in the payment
of his obligation. Here, the records show that the spouses were defaulting
borrowers.
Therefore, the foreclosure of a mortgage is but the necessary consequence of the
non- payment of an obligation secured by the mortgage. Where the parties have
stipulated in their agreement, mortgage contract and promissory note that the
mortgagee is authorized to foreclose the mortgage upon the mortgagor's default,
the mortgagee has a clear right to the foreclosure in case of the mortgagor's
default. Thereby, the issuance of a writ of preliminary injunction upon the
application of the mortgagor to prevent the foreclosure will be improper.
PHILIPPINE STEEL COATING CORP., PETITIONER, V. EDUARD QUIÑONES,
RESPONDENT.
G.R. NO. 194533 APRIL 19, 2017
SERENO, CJ:
DIGESTED BY ANALOU DORADO -MAYPA
DOCTRINE:
Article 1546 of the Civil Code, provides: 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 is to induce the buyer to purchase the same, and if the
buyer purchases the thing relying thereon. No affirmation of the value of the thing,
nor any statement purporting to be a statement of the seller's opinion only, shall be
construed as a warranty, unless the seller made such affirmation or statement as an
expert and it was relied upon by the buyer.
FACTS:
A complaint for damages was filed by Quiñones (owner of Amianan Motors) against
PhilSteel. 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 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.
He further guaranteed that a laboratory test had in fact been conducted by
PhilSteel, and that the results proved that the two products were compatible.
However, 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; and because of the barrage of complaints, Quiñones was
forced to repair the damaged buses.
Quiñones’ contention:
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 the Amianan Motors.
PhilSteel’s contention:
The breaking and peeling off of the paint was caused by the erroneous painting
application done by Quiñones; and since the action of Quiñones is based on an
implied warranty, the action has already prescribed and Quiñones can no longer put
up the defense of hidden defects in the product sold as a basis for evading
payment of the balance.
The RTC rendered a Decision in favor of Quiñones and ordered PhilSteel to pay
damages. The trial court concluded that the paint blistering and peeling off were
due to the incompatibility of the painting process with the primer-coated G.I. sheets. It
also found out that the assurance made by Angbengco constituted an express
warranty under Article 1546. The CA affirmed the ruling of the RTC in toto.
ISSUES:
1. Whether vague oral statements made by seller 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 6
months under Article 1571;
3. Assuming that statements were made regarding the characteristics of the
product, whether Quinones as buyer is equally negligent; and
4. Whether non-payment of price is justified on allegations of breach of warranty.
RULING:
1st Issue. Yes. 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 is to induce the buyer to purchase the same, and if
the buyer purchases the thing relying thereon. No affirmation of the value of the
thing, nor any statement purporting to be a statement of the seller's opinion only,
shall be construed as a warranty, unless the seller made such affirmation or
statement as an expert and it was relied upon by the buyer.
As held in Carrascoso, Jr. v. 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.
A warranty is a statement or representation made by the seller of goods —

contemporaneously and as part of the contract of sale — that has reference to the
character, quality or title of the goods; and is issued to promise or undertake to
insure that certain facts are or shall be as the seller represents them. A warranty is
not necessarily written. It may be oral as long as it is not given as a mere opinion
or judgment. Rather, it is a positive affirmation of a fact that buyers rely upon, and
that influences or induces them to purchase the product.
This Court cannot subscribe to petitioner's stand that what they told Quiñones was
mere dealer’s talk or an exaggeration in trade that would exempt them from liability
for breach of warranty. Therefore, what does not appear on the face of the
contract should be regarded merely as “dealer’s” or “trader’s talk,” which cannot
bind either party. Contrary to petitioner's position, the so-called dealer’s or trader’s
talk cannot be treated as mere exaggeration in trade as defined in Article 1340 of
the Civil Code. Quiñones did not talk to an ordinary sales clerk such as can be
found in a department store or even a sari-sari store. If Lopez, a sales agent, had
made the assertions of Angbengco without true knowledge about the compatibility
or the authority to warrant
it, then this would be considered dealer’s talk. But sensing that a person of greater
competence and knowledge of the product had to answer Quiñones’ concerns,
Lopez wisely deferred to his boss, Angbengco.
2nd Issue. 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 (see Article 1389, Civil Code). 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.
3rd Issue. The buyer cannot be held negligent in the instant case. Negligence is the
absence of reasonable care and caution that an ordinarily prudent person would
have used in a given situation. Under Article 1173 of the Civil Code, where it is not
stipulated in the law or the contract, the diligence required to comply with one’s
obligations is commonly referred to as paterfamilias; or, more specifically, as bonos
paterfamilias or “a good father of a family.” A good father of a family means a
person of ordinary or average diligence. To determine the prudence and diligence
that must be required of all persons, we must use as basis the abstract average
standard corresponding to a normal orderly person. Anyone who uses diligence
below this standard is guilty of negligence.
4th Issue. The nonpayment of the unpaid purchase price was justified, since a
breach of warranty was proven. In seeking a remedy from the trial court, Quiñones
opted not to pay the balance of the purchase price, in line with a proportionate
reduction of the price under Article 1567 Civil Code, which states: In the cases of
Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a proportionate reduction of the
price, with damages in either case. We agree with the petitioner that the
nonpayment of the balance cannot be premised on a mere allegation of nonexisting
warranties. This Court has consistently ruled that whenever a breach of warranty is
not proven, buyers who refuse to pay the purchase price — or even the unpaid
balance of the goods they ordered — must be held liable therefor.
Quiñones has opted for a reduction in price or nonpayment of the unpaid balance
of the purchase price. Applying Article 1599(1), this Court grants this remedy. 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.
JERRY T. MOLES, PETITIONER,
VS.
INTERMEDIATE APPELLATE COURT AND MARIANO M. DIOLOSA,
RESPONDENTS.
G.R. NO. 73913 JANUARY 31, 1989
REGALADO, J.:
DOCTRINE:
As a general rule, there is no implied warranty in the sale of secondhand articles.
Exception to this general rule is where the buyer, expressly or by implication,
makes known to the seller the particular purpose for which the goods are acquired,
and it appears that the buyer relies on the seller's skill or judgment, then there is
an implied warranty that the goods shall be reasonably fit for such purpose
FACTS:
Jerry T. Moles (Moles), owner of The LM Press at Bacolod City, needed a linotype
printing machine for his printing business. He applied for an industrial loan at the
Development Bank of the Philippines (DBP) for the purchase of the said machine.
An agent introduced Moles to Mariano M. Diolosa (Diolosa), owner of the Diolosa
Publishing House in Iloilo City, who had two available machines. Moles then went to
Iloilo City to inspect the two machines offered for sale and was informed that the
two were secondhand but functional.
On Moles’ second visit to the Diolosa Publishing House, Moles together with Rogelio
Yusay, a letter press machine operator, decided to buy the linotype machine, Model
14. Moles promised Diolosa that he will pay the full amount after the loan from DBP
worth P50,000.00 is released. To facilitate the loan with DBP, a pro forma invoice,
dated April 23, 1977 and reflecting the amount of P50,000.00 as the consideration
of the sale, was signed by Moles with an addendum that payment had not yet been
made but that he promised to pay the full amount upon the release of his loan from
DBP on or before the end of the month.
Sometime between April and May, 1977, the machine was delivered to Moles'
publishing house at Tangub, Bacolod City where it was installed by an employee of
Diolosa. Another employee of the Diolosa Publishing House stayed at Moles’ house
for almost a month to train the Moles’ cousin in operating the machine. On August
29, 1977, Diolosa issued a certification wherein he warrantied that the machine
sold was an A-1 condition together with other express warranties.
Upon the release of the money from DBP, Moles required Diolosa to accomplish
certain requirements to which Diolosa complied. When Diolosa received the DBP
check amounting to Ph 50,000.00, he issued an official receipt stating that he
received from Moles a DBP check amounting to Ph 50,000.00 as full payment of
Moles for the linotype machine.
On November 29, 1977, Moles wrote to Diolosa telling him that the machine was
not functioning properly. Moles found out that the said machine was not in good
condition as experts advised and that the machine was worth lesser than the purchase
price. After several telephone calls regarding the defects in the machine,
Moles sent two technicians to make necessary repairs but they failed to put the
machine in good
running condition and since then Moles was not able to put the machine into good
use. An expert witness for Moles even found out that he had already inspected the
same machine under a previous sales transaction. But the previous purchase did
not push through after he learned that the machine was defective and major
repairs would need to be done to make good use of the same.
On May 17, 1978, Moles filed a suit against Diolosa for rescission of contract with
damages.
RTC favored Moles and decreed the rescission of the contract but IAC reversed this
decision.
ISSUES:
1. Is there in implied warranty as to quality or fitness is a sale of secondhand item?
2. Is Moles bound by the express warranty he executed in favor of Moles?
3. Are the hidden defects sufficient to warrant rescission of the contract?
RULING:
1. No. It is generally held that in the sale of a designated and specific article sold
as secondhand, there is no implied warranty as to its quality or fitness for the
purpose intended, at least where it is subject to inspection at the time of the sale.
Said general rule, however, is not without exceptions. Article 1562 of our Civil
Code provides:
Art. 1562. In a sale of goods, there is an implied warranty or condition as to
the quality or fitness of the goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to the seller the
particular purpose for which the goods are acquired, and it appears that the
buyer relies on the seller's skill or judgment (whether he be the grower or
manufacturer or not), there is an implied warranty that the goods shall be
reasonably fit for such purpose
2. Yes. Diolosa is bound by the express warranty he executed in favor of Moles.
A perusal of past American decisions reveals a uniform pattern of rulings to the
effect that an express warranty can be made by and also be binding on the
seller even in the sale of a secondhand article.
A certification issued by Diolosa that the linotype machine bought by Moles was
in A-1 condition was a condition sine qua non for the release of Moles' loan
which was to be used as payment for the purchase price of the machine.
Diolosa failed to refute this material fact. Neither does he explain why he made
that express warranty on the condition of the machine if he had not intended to
be bound by it.
On the contention of Diolosa that the express warranty as to the A-1 condition
of the machine was merely dealer's talk, the court held that Diolosa was not a
dealer of printing or linotype machines to whom could be ascribed the
supposed resort to the usual exaggerations of trade in said items. His
certification as to the condition of the machine was not made to induce Moles
to purchase it but to confirm in writing for purposes of facilitating his loan with
DBP. Ordinarily, what does not appear on the face of the written instrument
should be regarded as dealer’s or trader's talk. What is specifically represented
as true in said document, as in the instant case,cannot be considered as mere
dealer's talk.
3. Yes. The court considered the rule on redhibitory defects contemplated in
Article 1561 of the Civil Code. A redhibitory defect must be an imperfection or
defect of such nature as to engender a certain degree of importance. An
imperfection or defect of little consequence does not come within the category of
being redhibitory.
An expert witness for Moles categorically established that the machine required
major repairs before it could be used. This, plus the fact that Moles never made
appropriate use of the machine from the time of purchase until an action was
filed, attest to the major defects in said machine, by reason of which the rescission
of the contract of sale is sought. The factual finding, therefore, of the trial court
that the machine is not reasonably fit for the particular purpose for which it
was intended must be upheld, there being ample evidence to sustain the same.
PILIPINAS MAKRO, INC., PETITIONER, V. COCO CHARCOAL PHILIPPINES, INC.
AND LIM KIM SAN, RESPONDENTS.
G.R. NO. 196419, OCTOBER 4, 2017
MARTIRES, J.
DOCTRINE:
A warranty is a collateral undertaking in a sale of either real or personal property,

express or implied; that if the property sold does not possess certain incidents or
qualities, the purchaser may either consider the sale void or claim damages for
breach of warranty. Thus, a warranty may either be express or implied.
FACTS:
Petitioner Pilipinas Makro, Inc. is a duly registered domestic corporation. In 1999, it

was in need of acquiring real properties in Davao City to build on and operate a
store to establish its business presence in the city. After conferring with authorized
real estate agents, Makro found two parcelsof land suitable for its purpose. Makro
and respondent Coco Charcoal Phils., Inc. executed a notarized Deed of Absolute
Sale wherein the latter would sell its parcel of land, with a total area of 1,000 square
meters and covered by TCT No. 208776, to the former for the amount of
₱8,500,000.00.
On the same date, Makro entered into another notarized Deed of Absolute Sale
with respondent Lim Kim San for the sale of the latter's land, with a total area of 1,000
square meters and covered by TCT No. 282650, for the same consideration of
₱8,500,000.00. Makro engaged the services of Engr. Vedua, a geodetic engineer,
to conduct a resurvey and relocation of the two adjacent lots.
As a result of the resurvey, it was discovered that 131 square meters of the lot
purchased from Coco Charcoal had been encroached upon by the DPWH for its
road widening project and construction of a drainage canal to develop and expand
the Davao-Cotabato National Highway. On the other hand, 130 square meters of
the land bought from Lim had been encroached upon by the same DPWH project.
Meanwhile, TCT Nos. T-321199 and T-321049 were issued in January 2000 in favor
of Makro after the deeds of sale were registered and the titles of the previous
owners were cancelled.
Makro informed the representatives of Coco Charcoal and Lim about the supposed
encroachment on the parcels of land due to the DPWH project. Initially, Makro
offered a compromise agreement in consideration of a refund of 75% of the value
of the encroached portions. Thereafter, Makro sent a final demand letter to collect
the refund of the purchase price corresponding to the area encroached upon by the
road widening project, seeking to recover ₱1,113,500.00 from Coco Charcoal
and
₱1,105,000.00 from Lim.
Failing to recover such, Makro filed a separate complaints against Coco Charcoal
and Lim to collect the refund sought. RTC granted Makro's complaint and
ordered
respondents to refund the amount corresponding to the value of the encroached
area. CA reversed the RTC decision. While the appellate court agreed that the
DPWH project encroached upon the frontal portions of the properties, it ruled that
Makro was not entitled to a refund. It explained that the warranty expressed in Section
4(i) of the deeds of sale is similar to the warranty against eviction set forth under Article
1548 of the Civil Code. As such, the CA posited that only a buyer in good faith may
sue to a breach of warranty against eviction.
ISSUE:
Whether or not Section 4(i) of the deeds of sale is akin to an implied warranty
against eviction.
RULING:
No, the Supreme Court ruled that section 4(i) was not akin to an implied warranty
against eviction. Pursuant to Section 2 of the deeds of sale, Makro engaged the
services of a surveyor which found that the DPWH project had encroached upon
the properties purchased. After demands for a refund had failed, it opted to file the
necessary judicial action for redress. The courts a quo agree that the DPWH project
encroached upon the properties Makro had purchased from respondents.
Nevertheless, the CA opined that Makro was not entitled to a refund because it had
actual knowledge of the ongoing road widening project.
The appellate court likened Section 4(i) of the deeds of sale as a warranty against
eviction, which necessitates that the buyer be in good faith for it to be enforced. A
warranty is a collateral undertaking in a sale of either real or personal property,
express or implied; that if the property sold does not possess certain incidents or
qualities, the purchaser may either consider the sale void or claim damages for
breach of warranty.
Thus, a warranty may either be express or implied. An express warranty pertains to any
affirmation of fact or any promise by the seller relating to the thing, the natural
tendency of which is to induce the buyer to purchase the same. It includes all
warranties derived from the language of the contract, so long as the language is
express-it may take the form of an affirmation, a promise or a representation.
On the other hand, an implied warranty is one which the law derives by application
or inference from the nature of transaction or the relative situation or circumstances of
the parties, irrespective of any intention of the seller to create it. In other words, an
express warranty is different from an implied warranty in that the former is found
within the very language of the contract while the latter is by operation of law.
Thus, the CA erred in treating Section 4(i) of the deeds of sale as akin to an implied
warranty against eviction.
First, the deeds of sale categorically state that the sellers assure that the properties
sold were free from any encumbrances which may prevent Makro from fully and
absolutely possessing the properties in question.
Second, in order for the implied warranty against eviction to be enforceable, 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 prior right to the sale made by the vendor; and (d) the vendor has
been summoned and made codefendant in the suit for eviction at the instance of
the vendee.
Evidently, there was no final judgment and no opportunity for the vendors to have
been summoned precisely because no judicial action was instituted. Further, even if
Section 4(i) of the deeds of sale was to be deemed similar to an implied warranty
against eviction, the CA erred in concluding that Makro acted in bad faith.
It is true that the warranty against eviction cannot be enforced if the buyer knew of the
risks or danger of eviction and still assumed its consequences. It is undisputed that
Makro's legal counsel conducted an ocular inspection on the properties in question
before the execution of the deeds of sale and that there were noticeable works and
constructions going on near them.
Nonetheless, these are insufficient to charge Makro with actual knowledge that the
DPWH project had encroached upon respondents' properties. The dimensions of the
properties in relation to the DPWH project could have not been accurately
ascertained through the naked eye. A mere ocular inspection could not have
possibly determined the exact extent of the encroachment. It is for this reason that
only upon a relocation survey performed by a geodetic engineer, was it discovered
that 131 square meters and 130 square meters of the lots purchased from Coco
Charcoal and Lim, respectively, had been adversely affected by the DPWH project.
To reiterate, the fact of encroachment is settled as even the CA found that the
DPWH project had disturbed a portion of the properties Makro had purchased. The
only reason the appellate court denied Makro recompense was because of its
purported actual knowledge of the intrusion which is not reason enough to deny
Makro a refund of the proportionate amount pursuant to Section 2 of the deeds of
sale.
Nevertheless, the RTC errs in ordering respondents to pay ₱l,500,00.00 each to

Makro. Under Section 2 of the deeds of sale, the purchase price shall be adjusted in
case of increase or decrease in the land area at the rate of ₱8,500.00 per square
meter. In the case at bar, 131 square meters and 130 square meters of the
properties of Coco Charcoal and Lim, respectively, were encroached upon by the
DPWH project. Applying the formula set under the deeds of sale, Makro should be
entitled to receive
₱1,113,500.00 from Coco Charcoal and ₱1,105,000.00 from Lim.
POWER COMMERCIAL AND INDUSTRIAL CORPORATION, PETITIONER,
V.
COURT OF APPEALS, SPOUSES REYNALDO AND ANGELITA R. QUIAMBAO
AND PHILIPPINE NATIONAL BANK, RESPONDENTS.
G.R. NO. 119745 JUNE 20, 1997
PANGANIBAN, J.:
DOCTRINE:
Requisites of Breach of Warranty Against Eviction under Article 1547 of the Civil
Code
FACTS:
Petitioner Power Commercial and Industrial Corporation (‘PCIC’), an industrial

asbestos manufacturer entered a contract with private respondent Spouses
Reynaldo and Angelita Quiambao (‘Sps. Quiambao’) for the sale of a property which
PCIC needed for office space and warehouse.
As agreed, PCIC will pay P108K as downpayment and the balance of P295K upon
the execution of the deed of transfer of title over the property. PCIC assumed, as
part of the purchase price the existing mortgage on the subject property. To fully
satisfy the mortgage, PCIC paid the P79,145.77 to respondent bank PNB.
Sps. Quiambao again obtained another loan from PNB in the amount of P145K,
P80K of which was given to the respondent spouse. PCIC agreed to assume the
payment of the loan. Subsequently, PCIC and Sps. Quiambao executed a Deed of
Absolute Sale with Assumption of Mortgage and PCIC, among which contained the
condition:
We hereby also warrant that we are the lawful and absolute owners of the
above described property, free from any lien and/or encumbrance, and we hereby
agree and warrant to defend its title and peaceful possession thereof in favor of the
said Power Commercial and Industrial Development Corporation, its successors
and assigns, against any claims whatsoever of any and all third persons;
subject, however, to the provisions hereunder provided to wit:
Subsequently, PCIC was informed that its application for assumption of mortgage
was considered withdrawn for its failure to submit the necessary papers prior
approval of its application; that the outstanding balance of the loan is fully due and
demandable and that the same must be paid within 15 days from notice. PCIC then
made partial payments of the loan.
PCIC then sent a letter to PNB requesting for the approval of the assumption of
mortgage and to remove the persons occupying the property. PNB responded,
stating that the loan has been in past due and demanded the payment of the
remaining balance plus interest and charges.
Subsequently, PCIC filed an action for rescission and damages against Sps.
Quiambao, and demanded from PNB the return of payments made on the ground
that the assumption of mortgage was never approved. Pending said case, the
property was foreclosed and was eventually bought by PNB during the public
auction.
ISSUE:
Whether or not there was a breach in the warranty against eviction
RULING:
None. The Court held that a breach of warranty against eviction requires the
concurrence of the following:
1. The purchaser has been deprived of the whole or part of the thing sold;
2. This eviction is by a final judgment;
3. The basis thereof is by virtue of a right prior to the sale made by the vendor;
and
4. The vendor has been summoned and made co-defendant in the suit for
eviction at the instance of the vendee.
Absent the above requisites, a breach in the warranty against eviction under Article
1547 cannot be declared.
In the instant case, the presence of the occupants on the subject property does not
constitute an encumbrance of the land nor does deprive PCIC of its control thereof.
However, the Court noted that PCIC’s deprivation of ownership and control finally
occurred when it failed and/or discontinued paying the amortizations on the
mortgage, causing the lot to be foreclosed and sold at public auction; said
deprivation is due to PCIC’s fault, and not to any act attributable to the Sps.
Quiambao.
Because PCIC failed to impugn its integrity, the contract is presumed, under the
law, to be valid and subsisting.
MARIA LUISA DE LEON ESCALER AND ERNESTO ESCALER, CECILIA J. ROXAS
AND PEDRO ROXAS, PETITIONERS, VS. COURT OF APPEALS, JOSE L.
REYNOSO, NOW DECEASED, TO BE SUBSTITUTED BY HIS HEIRS OR LEGAL
REPRESENTATIVES AND AFRICA V. REYNOSO, RESPONDENTS
CUEVAS, J.:
G.R. NO. L-42636 AUGUST 1, 1985
DOCTRINE:
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.
FACTS:
On March 7, 1958, the spouses Africa V. Reynoso and Jose L. Reynoso sold to
petitioners several others, a parcel of land, situated in Antipolo, Rizal with an area
of 239,479 square meters.
On April 21, 1961, the Register of Deeds of Rizal and A. Doronilla Resources
Development, Inc. filed Case No. 4252 before the Court of First Instance of Rizal for
the cancellation of OCT No. 1526 issued in the name of Angelina C. Reynoso
(predecessor- in-interest of private respondents-vendors) on February 26, 1958
under Decree No. 62373, LRC Record No. N-13783, on the ground that the property
covered by said title is already pre•viously registered under Transfer Certificate of
Title No. 42999 issued in the name of A. Doronilla Development,Inc. Petitioners as
vendees filed their opposition to the said petition.
On August 31, 1965, herein petitioners, spouses Maria de Leon Escaler and Ernesto
Escaler and spouses Cecilia J. Roxas and Pedro Roxas, filed Civil Case No. 9014
before the Court of First Instance of Rizal 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."
ISSUE:
WON the CA erred in applying strictly to the instant case the provisions of Articles
1558 and 1559 of the New Civil Code?
RULING:
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.
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 afore-quoted 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.
NUTRIMIX FEEDS CORPORATION, PETITIONER,
VS.
COURT OF APPEALS AND SPOUSES EFREN AND MAURA EVANGELISTA,
RESPONDENT.
G.R. NO. 152219 OCTOBER 25, 2004
CALLEJO, SR., J.:
DOCTRINE:
The provisions on warranty against hidden defects under Articles 1561 and 1566 of
the New Civil Code are not applicable if the contrary has been stipulated and the
vendor was not aware of the hidden faults or defects in the thing sold. The defect
must be present upon the delivery or manufacture of the product; or when the
product left the seller’s or manufacturer’s control; or when the product was sold to
the purchaser; or the product must have reached the user or consumer without
substantial change in the condition it was sold. Otherwise, a manufacturer or seller
of a product cannot be held liable for any damage allegedly caused by the product.
FACTS:
Respondent-Spouses Efren and Maura Evangelista directly procured various kinds of

animal feeds from petitioner Nutrimix Feeds Corporation which gave the spouses
thirty-to-forty-five-day credit period to postdate checks to be issued in payment for
the delivery of the feeds. Eventually, spouses Evangelista started failing to issue
checks despite the deliveries of animal feeds which were appropriately covered by
sales invoices until they incurred an aggregate unsettled account with Nutrimix in
the amount of ₱766,151.00. When the checks which spouses Evangelista issued
were deposited at the Nutrimix’s depository bank, the same were dishonored as the
account had already been closed. Nutrimix made several demands for spouses
Evangelista to settle their unpaid obligation but the latter failed and refused to pay
their remaining balance. Hence, Nutrimix filed with the Regional Trial Court a
complaint for sum of money and damages with a prayer for an issuance of writ of
preliminary attachment.
Spouses Evangelista admitted their unpaid obligation but impugned their liability.
They were asserting that the nine checks they issued were made to guarantee the
payment of their purchases, which was previously determined to be procured from
the expected proceeds in the sale of their broilers and hogs which died due to the
alleged contaminated products of Nutrimix. Thus, the nonpayment of their
obligation was based on a just and legal ground. They also filed a counterclaim
against Nutrimix Feeds for untimely and unforeseen death of their livestock
supposedly due to the adulterated animal feeds that Nutrimix sold to them.
During the joint trial of the two consolidated cases, Nutrimix Assistant Manager
testified that its President Efren Bartolome had met spouses Evangelista to discuss
the possible settlement of their unpaid account wherein the spouses still
pleaded to
Nutrimix to continue its supply of feeds to them as their livestock were supposedly
plagued with disease. On the other hand, Maura Evangelista testified that the assorted
animal feeds which Nutrimix sold were delivered in their residence and stored in an
adjacent bodega. Spouses Evangelista also presented experts from governments to
whom they referred the examination of the feeds. Dr. Juliana G. Garcia, a doctor of
veterinary medicine and the Supervising Agriculturist of the Bureau of Animal Industry
testified that the sample feeds for chickens contained in a pail which were presented
to her for examination were negative of salmonella and that the very high aflatoxin
level found therein would not cause instantaneous death if taken orally by birds. Dr.
Rodrigo Diaz, the veterinarian who accompanied Efren Evangelista at the Bureau of
Animal Industry, testified that the feeds they brought to the laboratory came from one
bag of sealed Nutrimix feeds which was covered with a sack. Dr. Florencio Isagani
Medina III, Chief Scientist Research Specialist of the Philippine Nuclear Research
Institute conducted the Cytogenetic Analysis to the four initially live and healthy
chickens brought to him for laboratory examination and admitted on his cross-
examination that the feeds brought to him were merely placed in a small unmarked
plastic bag and that he had no way of ascertaining whether the feeds were indeed
manufactured by Nutrimix. Aida Viloria Magsipoc, Forensic Chemist III of the Forensic
Chemist Division of the National Bureau of Investigation, affirmed that the chemical
analysis she performed on the feed samples contained in a sealed plastic bag yielded
positive results to the tests for COUMATETRALYL Compound which an active component
of RACUMIN, a known brand of rat poison, which presence would be fatal to the
internal organs of the chickens, as it would give a delayed blood clotting effect and
eventually lead to internal hemorrhage, culminating in their inevitable death. Paz
Austria, the Chief of the Pesticide Analytical Section of the Bureau of Plants Industry,
conducted a laboratory examination in the animal feeds disclosed that no pesticide
residue was detected in the samples she received but it was positive for Warfarin, a
rodenticide (anticoagulant), which is the chemical family of Coumarin.
Nevertheless, the trial court did not sustain spouses Evangelista’s contention that
Nutrimix is liable under Articles 1561 and 1566 of the Civil Code governing "hidden
defects" of commodities sold. Instead, the trial court believe that the subject feeds
were contaminated sometime between their storage at the bodega of the Evangelistas
and their consumption by the livestock and that the contamination was perpetrated by
unidentified or unidentifiable ill-meaning mischief-maker(s) over whom Nutrimix had
no control in whichever way. Thus, the trial court ordered spouses Evangelista to pay
Nutrimix the unpaid value of assorted animal feeds delivered by the latter and received
by the former, with legal interest and attorney’s fees. On appeal, the Court of Appeals
modified the decision of the trial court and held that spouses Evangelista were not
obligated to pay their outstanding obligation to Nutrimix in view of its breach of
warranty against hidden defects. It gave much credence to the testimony of Dr. Diaz,
who attested that the sample feeds distributed to the various governmental agencies
for laboratory examination were taken from a sealed sack bearing the brand name
Nutrimix which were not effectively impugned during cross-examination, nor was
there any contrary evidence adduced to destroy his damning allegations.
ISSUE:
Whether or not Nutrimix Feeds Corporation can be held liable for breach of
warranty due to hidden defects.
RULING:
NO, the Supreme Court ruled that spouses Evangelista cannot be held liable for
breach of warranty due to hidden defects. As buyer of the product, spouses
Evangelista has the burden of proving that the seller of the product, Nutrimix
Feeds, breached its warranty. The circumstantial evidence that the chickens and hogs
eventually died after eating Nutrimix feeds was not enough to raise a reasonable
supposition with that degree of certainty and probability required that the feeds
were indeed the proximate cause of the death.
The Court ratiocinated that the provisions on warranty against hidden defects under
Articles 1561 and 1566 of the New Civil Code are not applicable if the contrary has
been stipulated and the vendor was not aware of the hidden faults or defects in the
thing sold. Hidden defect is one which is unknown or could not have been known to
the vendee. To be able to recover on account of hidden defects, the defect must be
hidden, must exist at the time the sale was made, must ordinarily have been
excluded from the contract, must be important that it renders thing UNFIT or
considerably decreases FITNESS, and 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 contemplated by both
parties. To be able to prove liability on the basis of breach of implied warranty,
spouses Evangelista must establish that they sustained injury because of the
product, that their injury occurred because the product was defective or
unreasonably unsafe, and that the defect existed when the product left the hands
of Nutrimix. The defect must be present upon the delivery or manufacture of the
product; or when the product left the seller’s or manufacturer’s control; or when
the product was sold to the purchaser; or the product must have reached the user
or consumer without substantial change in the condition it was sold. Otherwise, a
manufacturer or seller of a product cannot be held liable for any damage allegedly
caused by the product.
Tracing the defect to the Nutrimix requires some evidence that there was no
tampering with, or changing of the animal feeds. In the instant case, spouses
Evangelista had the animal feeds examined only barely three months after their
livestock had died which enfeebles their theory that Nutrimix is guilty of breach of
warranty by virtue of hidden defects. The feeds could have already been
contaminated by outside factors and conditions beyond the control of Nutrimix within
the span of three months. In fact, Dr. Garcia who was one of the witnesses for
spouses Evangelista testified that the animal feeds submitted to her for
laboratory examination contained very high level of
aflatoxin, possibly caused by mold (aspergillus flavus). There is simply no evidence
to show that the feeds given to the animals were identical to those submitted to the
expert witnesses. Also, the chickens which were brought to the Philippine Nuclear
Research Institute for laboratory tests were not the ones that were ostensibly
poisoned. There was even no attempt to have the dead fowls examined. Neither was
there any analysis of the stomach of the dead chickens to determine whether the
Nutrimix feeds really caused their sudden death. Mere sickness and death of the
chickens is not satisfactory evidence in itself to establish a prima facie case of breach
of warranty. Per testimony of Maura Evangelista, they combined different kinds of
animal feeds, as it was the common practice among chicken and hog raisers to mix
animal feeds, and that the mixture was given to their livestock. For having admitted
that they are indebted to the Nutrimix for the unpaid animal feeds delivered to
them, spouses Evangelista should be held liable for their unsettled obligations to
Nutrimix Feeds Corporation.
SUPERCARS MANAGEMENT & DEVELOPMENT CORPORATION,
REPRESENTED BY ITS PRESIDENT BENIGNO CHAN, PETITIONER, V. THE LATE
FILEMON FLORES, RESPONDENT
G.R. NO. 148173 DECEMBER 10, 2004
SANDOVAL-GUTIERREZ, J.:
DIGESTED BY: MARK MULIT
DOCTRINE:
A hidden defect is one which is unknown or could not have been known to the
vendee
FACTS:
Supercars Management and Development Corporation vs. Flores Facts: Respondent

Flores bought an Isuzu Carter Crew Cab from petitioner. The RCBC financed the
balance of the purchase price. Its payment was secured by a chattel mortgage of
the same vehicle. However, defects of the car emerged when the respondent was
using it. These defects persuaded respondent Flores to rescind the contract with
petitioner and stop the payment of the balance for the aforesaid car. As a result,
RCBC bank opted to file a petition for Extrajudicial Foreclosure of Chattel Mortgage.
The car was then sold at a public auction and RCBC acquired the same. It was later
sold to a third person. Petitioner contends that respondent has "no right to rescind
the contract of sale" because the motor vehicle in question is already in the hands
of a third party. Hence, Article 1191 can no longer be availed of by the respondent
ISSUE:
Whether or not, from the facts presented, Article 1191 can no longer be availed of
by respondent Flores ?
RULING:
Article 1191 is applicable. Rescission is proper if one of the parties to a contract

commits a substantial breach of its provision. It creates an obligation to return the
object of the contract. It can be carried out only when the one who demands
rescission can return whatever he may obliged to restore. Rescission abrogates the
contract from its inception and requires a mutual restitution of the benefits
received. Respondent is not obliged to return the car; while petitioner is obliged to
return what has been paid.
Petitioner is thus mandated by law to give back to respondent the purchase price
upon his return of the vehicle. Records show that at the time respondent opted to
rescind the contract, the vehicle was still in his possession. He returned it to
petitioner who, without objection, accepted it. Accordingly, the 30% down payment
equivalent to P63,600.00, plus the premium for the comprehensive insurance
amounting to P7,374.80 paid by respondent should be returned by petitioner.
SPOUSES MARIO AND JULIA GASPAR, PETITIONERS
VERSUS
HERMINIO ANGEL E. DISINI, JR., JOSEPH YU, DOING BUSINESS UNDER THE
NAME AND STYLE LEGACY LENDING INVESTOR AND DIANA SALITA,
RESPONDENTS.
G.R. NO. 239644, FEBRUARY 3, 2021
CAGUIOA, J.:
DOCTINE:
The implied warranty against hidden defects pertains to defects which render the
thing sold unfit for the use for which it is intended, or should diminish its fitness for
such use to such an extent that, had the vendee been aware thereof, would not
have acquired it or would have given a lower price.
A breach of the warranty against eviction presupposes the concurrence of the

following requisites: (i) the purchaser has been deprived of the whole or part of the
thing sold; (ii) this eviction is by a final judgment; (iii) the basis thereof is by virtue of a
right prior to the sale made by the vendor; and (iv) the vendor has been
summoned and made co-defendant in the suit for eviction at the instance of the
vendee.
FACTS:
Spouses Gaspar purchased a Pajero from Yu, owner of Legacy investment, for the
price of P1,000,000.00.
Spouses Gaspar offered the Pajero for sale to Disini, who agreed to buy it for the
total purchase price of P 1,160,000 .
About a year later, the police apprehended the subject Pajero while it was illegally
parked in Makati. Further police investigation revealed that the vehicle had been
stolen from the Office of the President. It appears that the chassis number had
been overlaid with another number through welding in order to avoid identification.
Disini immediately informed the Spouses Gaspar about the confiscation of the
subject Pajero, and the latter promised to return the full purchase price that he had
paid to them. In turn, the Spouses Gaspar sought reimbursement from Yu and Legacy.
A total reimbursement of P400,000.00 was made, leaving an unpaid balance of
P760,000.00.
Disini filed a complaint for sum of money with prayer for preliminary attachment
against the Spouses Gaspar to collect the unpaid reimbursement of what he paid
for the subject Pajero.
Spouses Gaspar filed a third-party complaint against Yu.
RTC ordered Spouses Gaspar to pay Disini. It also ordered Yu to reimbursed
Spouses Gaspar.
However, the CA found that the RTC erred in ordering Yu to reimburse Spouses
Gaspar the amount they returned to Disini.
According to the CA, the sale of the subject Pajero from Yu to Spouses Gaspar gave
rise to an implied warranty of title and a concomitant implied warranty against
eviction. These implied warranties, in turn, prescribe six (6) months from date of
delivery of the thing sold pursuant to Article 1571 of the Civil Code. Here, Spouses
Gaspar filed the third-party complaint against Yu nearly four (4) years after delivery
of the subject Pajero. Thus, said third-party complaint was filed out of time.
Spouses Gaspar argue that the basis of Yu and Salita's liability is the written
"Contract of Sale" (COS) which they entered into. On the other hand, Yu denies
liability and claims that as seller, he is only liable for the subject Pajero's hidden
defects which do not exist in this case. He adds that the conditions necessary for
the application of the implied warranty against eviction are not present. In any
event, Yu further claims that any cause of action that Spouses Gaspar may have
had based on said implied warranties have long prescribed.
ISSUE:
a. Whether or not there was perfected sale between Spouses Gaspar and Yu.
b. Whether or not Yu is liable for his implied warranties.
c. Whether or not the CA was correct in dismissing the 3rd part claim of Spouses
Gaspar to Yu because it has already expired.
RULING:
a. No, there was no perfected sale.
By the contract of sale, one of the contracting parties obligates himself or herself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent. In turn, the elements of a valid
contract of sale are: (i) consent or meeting of the minds; (ii) determinate subject
matter; and (iii) price certain in money or its equivalent. With respect to the second
element, it is further required that the thing which is the subject matter of the
contract must be licit, and that the vendor must have a right to transfer the ownership
thereof at the time it is delivered.
Here, the object of the COS turned out to be a vehicle stolen from the Office of the
President which was immediately confiscated when Disini was cited for illegal
parking. As a general rule, the possession of movable property acquired in good
faith is equivalent to a title. This general rule, however, does not apply in cases
where the
owner of said movable property has been unlawfully deprived of the same,43 as in
this case where the vehicle subject of the COS had been stolen. Evidently, Yu had
no right to transfer the ownership of the subject Pajero at the time it was delivered
to Spouses Gaspar, as the object of the COS is clearly illicit. The second element of
a valid contract of sale is consequently absent. The COS executed between Yu and
Spouses Gaspar is therefore void ab initio.
b.No, Yu's liability in this particular case is not hinged on the implied warranties
against hidden defects and/or eviction.
According to the Supreme Court, the implied warranties against hidden defects and
eviction are legal concepts with fixed definitions in law.
The implied warranty against hidden defects pertains to defects which render the
thing sold unfit for the use for which it is intended, or should diminish its fitness for
such use to such an extent that, had the vendee been aware thereof, would not
have acquired it or would have given a lower price. As its nomenclature suggests,
hidden defects pertain to imperfections or defects of the object sold. Such is not
the case here, where the subject Pajero, albeit stolen, was in working condition,
and was in fact being used by Disini for its intended purpose when it was
confiscated by the authorities.
On the other hand, a breach of the warranty against eviction presupposes the
concurrence of the following requisites: (i) the purchaser has been deprived of the
whole or part of the thing sold; (ii) this eviction is by a final judgment; (iii) the basis
thereof is by virtue of a right prior to the sale made by the vendor; and (iv) the vendor
has been summoned and made co-defendant in the suit for eviction at the instance
of the vendee. Here, Disini was not deprived of possession on the basis of a final
judgment. In fact, based on the records, it would appear that Disini did not contest
the confiscation of the subject Pajero when he was informed that it had been stolen
from the Office of the President.
c. No, the action has not prescribed.
Since none of the foregoing warranties apply, the six-month prescriptive period
under Article 1571 of the Civil Code is inapplicable. As the third-party complaint
filed by Spouses Gaspar assumes the nature of an action to declare the inexistence
of a contract due to its illicit object, said complaint is imprescriptible under Article
1409.
The CA thus erred when it dismissed the third-party complaint on the ground of
prescription.
ROBERTO R. DAVID, PETITIONER,
VS.
EDUARDO C. DAVID, RESPONDENT.
G.R. NO. 162365 JANUARY 15, 2014
BERSAMIN, J.
CASE DIGESTED BY: SILVANO M. CAMILLO, JR.
DOCTRINE:
The issue of novation involves a question of fact, as it necessarily requires the factual
determination of the existence of the various requisites of novation
FACTS:
Eduardo C. David and his brother Edwin C. David acting on their own and in behalf
of their co-heirs, sold their inherited parcel of land to Roberto R. David together
with all the improvements thereon and 2 units International CO 967- Truck Tractor with
two Mi- Bed Trailers. A deed of sale with assumption of mortgage embodied the
terms of their agreement. Eduardo and Edwin were given the right to repurchase
within 3 years from the execution of the deed of sale based on the purchase price
agreed upon, plus 12% interest per annum. A memorandum of agreement was
executed by Roberto and Edwin with spouses Marquez and Soledad Go, by which
they agreed to sell the Baguio City lot to the Spouses Go. Thereafter, Roberto gave
Eduardo P2,800,00.00 and returned to him one of the truck tractors and trailers
subject of the deed of sale. When Eduardo demanded for the return of the other
truck tractor and trailer but Roberto refused, he was exercising his right to
repurchase under the deed of sale. Roberto then denied that Eduardo could
repurchase the properties in question; and insisted that the MOA had extinguished
their deed of sale by novation.
ISSUE:
Whether or not the Memorandum of Agreement had extinguished their deed of Sale
by novation.
RULING:
No. The issue of novation involves a question of fact, as it necessarily requires the
factual determination of the existence of the various requisites of novation, namely: (a)
there must be a previous valid obligation; (b) the parties concerned must agree to
a new contract; (c) the old contract must be extinguished; and (d) there must be a
valid new contract.22 With both the RTC and the CA concluding that the MOA was
consistent with the deed of sale, novation whereby the deed of sale was
extinguished did not occur. In that regard, it is worth repeating that the factual
findings of the lower courts are binding on the Court.
VICENCIO T. TORRES AND SOCORRO S. TORRES, PETITIONERS, VS.
COURT OF APPEALS, CEFERINO ILLUSCUPIDES, ARACELI ILLUSCUPIDES AND
EMILIO OLORES, RESPONDENTS.
G.R. NO. 92248, G.R. NO. 93390; DECEMBER 9, 1992
NOCON. J.:
DOCTRINE:
The right of repurchase is not a right granted the vendor by the vendee in a
subsequent instrument, but is a right reserved by the vendor in the same instrument of
sale as one of the stipulations of the contract. Once the instrument of absolute sale
is executed, the vendor can no longer reserve the right to repurchase, and any
right thereafter granted the vendor by the vendee in a separate instrument cannot
be a right to repurchase but some other right like an option to buy in the instant
case.
FACTS:
The Illuscupideses are the owners of two (2) adjoining parcels of lands located in
the Tapuac District, Dagupan City. The said properties were mortgaged to the
GSIS. Sometime in 1965, the Illuscupideses contracted Emilio Olores for the
construction of a nine (9) door apartment on the parcels of land.
While construction was going on, another door was added, thereby increasing the
cost of the construction However, the Illuscupideses could only pay Olores
P54,390.51, thus compelling the latter to sue them for the balance before the Court
of First Instance of Pangasinan in Civil Case No. D-1955. On November 1969,
judgment was rendered in favor of Olores for the unpaid balance with interests and
costs. The Illuscupideses then appealed the decision to the Court of Appeals.
Meanwhile, the Illuscupideses received a notice from the GSIS that it was going to
foreclosure the mortgage for their failure to pay the loan when the same became
due. To stave off the foreclosure, the Illuscupideses sold the properties to Vivencio
Torres and Socorro Torres as evidenced by the Deed of Sale.
The parties also executed on the same day an agreement whereby the Torreses
would "RESELL, RETRANSFER, and RECONVEY" to the Illuscupideses "that certain
building, more particularly designated as a ten-door concrete apartment." Later on,
the lluscupideses filed a claim against the Torreses, alleging that the Deed of Sale
was a pacto de retro sale.
ISSUE:
Whether or not the Deed of Sale between Illuscupideses and Torres can be
construed as a pacto de retro sale.
RULING:
No. The Court of Appeals was correct in construing the Deed of Sale as an absolute
sale inasmuch as the terms thereof are clear on the matter.
The Illuscupideses argue, however, that the appellate court should have taken into
account the circumstances surrounding the execution of the deed, particularly the
fact that an Agreement to resell the apartment was executed on the very same day
as the deed of sale. The argument is unavailing.
Even if this Court were to agree with the Illuscupideses that parole evidence may
be allowed to add to the terms of the deed of sale, this Court has held in the case
of Villarica, et al. vs. Court of Appeals, et al., that the right of repurchase is not a
right granted the vendor by the vendee in a subsequent instrument, but is a right
reserved by the vendor in the same instrument of sale as one of the stipulations of the
contract. Once the instrument of absolute sale is executed, the vendor can no
longer reserve the right to repurchase, and any right thereafter granted the vendor
by the vendee in a separate instrument cannot be a right to repurchase but some
other right like an option to buy in the instant case.
SPS. CARLOS AND EULALIA RAYMUNDO AND SPS. ANGELITO AND JOCELYN
BUENAOBRA, PETITIONERS, V. SPS. DOMINADOR AND ROSALIA BANDONG,
RESPONDENTS.
G.R. NO. 171250. JULY 4, 2007
CHICO-NAZARIO, J.:
DOCTRINE:
In determining whether a deed absolute in form is a mortgage, the court is not

limited to the written memorials of the transaction. The decisive factor in evaluating
such agreement is the intention of the parties, as shown not necessarily by the
terminology used in the contract but by all the surrounding circumstances, such as
the relative situation of the parties at that time, the attitude acts, conduct,
declarations of the parties, the negotiations between them leading to the deed, and
generally, all pertinent facts having a tendency to fix and determine the real nature
of their design and understanding.
FACTS:
Eulalia Raymundo was engaged in the business of buying and selling large cattle
from different provinces within the Philippines employing "biyaheros" whose
primary task involved the procuring of large cattle with the financial capital
provided by Eulalia. In order to secure the financial capital she advanced for the
"biyaheros," Eulalia required them to surrender the TCTs of their properties and
to execute the corresponding Deeds of Sale in her favor. Dominador, one of
Eulalia’s biyaheros, incurred shortage in his cattle procurement operation in the
amount of ₱70,000.00. Dominador and his wife Rosalia Bandong then executed a
Deed of Sale in favor of Eulalia covering a parcel of land at Caloocan City. The
subject property was thereafter sold by the Spouses Raymundo to Eulalia’s
grandniece, Jocelyn Buenaobra. The Spouses Buenaobra instituted before MeTC
Caloocan City an action for ejectment against the Spouses Bandong, which the
Spouses Bandong opposed on the ground that they are the rightful owners and
possessors thereof. The Spouses Bandong instituted an action for annulment of
sale before the RTC against Eulalia and Jocelyn, alleging that there was no sale
intended but only equitable mortgage for the purpose of securing the shortage
incurred by Dominador.
ISSUE:
Whether or not the deed of sale between Dominador and Eulalia is valid and binding.
RULING:
No. It is an equitable mortgage --- one that although lacking in some formality,
forms and words, or other requisites demanded by a statute nevertheless reveals
the intention of the parties to charge a real property as security for a debt and
contains
nothing impossible or contrary to law pursuant to Articles 1602 and 1604 of the
Civil Code.
In determining whether a deed absolute in form is a mortgage, the decisive factor

is the intention of the parties, as shown not necessarily by the terminology used in
the contract but by all the surrounding circumstances, such as the relative situation
of the parties at that time. It is, thus, ruled that in executing the said Deed of Sale,
Dominador and Eulalia never intended the transfer of ownership of the subject
property but to burden the same with an encumbrance to secure the indebtedness
incurred by Dominador on the occasion of his employment with Eulalia.
It was Eulalia’s customary business practice to require her biyaheros to deliver to

her the titles to their real properties and to execute in her favor the corresponding
deeds of sale over the said properties as security for the money she provided for
their cattle procurement task. And the only reasonable conclusion that may be
derived from Dominador’s act of executing a Deed of Sale in favor of Eulalia is that
the latter required him to do so in order to ensure that he will subsequently pay his
obligation to her. Consequently, the agreement between Dominador and Eulalia
was not avoided in its entirety so as to prevent it from producing any legal effect at
all. Instead, the said transaction is an equitable mortgage, merely altering the
relationship of the parties from seller and buyer, to mortgagor and mortgagee,
while the subject property is not transferred but subjected to a lien in favor of the
latter.
HEIRS OF JOSE REYES, JR., NAMELY: MAGDALENA C. REYES, OSCAR C.
REYES, GAMALIEL C. REYES, NENITA R. DELA CRUZ, RODOLFO C. REYES,
AND RODRIGO C. REYES, PETITIONERS,
VS.
AMANDA S. REYES, CONSOLACION S. REYES, EUGENIA R. ELVAMBUENA,
LUCINA R. MENDOZA, PEDRITO S. REYES, MERLINDA R. FAMODULAN,
EDUARDO S. REYES, AND JUNE S. REYES, RESPONDENTS.
G.R. NO. 158377, AUGUST 13, 2010
BERSAMIN, J.:
CELINDRO
FACTS:
Antonio Reyes and his wife, Leoncia Mag-isa Reyes (Leoncia), were owners of a parcel
of residential land, where they constructed their dwelling. The couple had four
children, namely: Jose Reyes, Sr. (Jose, Sr.), Teofilo Reyes (Teofilo), Jose Reyes,
Jr. (Jose, Jr.) and Potenciana Reyes-Valenzuela (Potenciana). Antonio Reyes died
intestate, and was survived by Leoncia and their three sons, Potenciana having
predeceased her father. Potenciana also died intestate, survived by her children,
namely: Gloria ReyesValenzuela, Maria Reyes Valenzuela, and Alfredo Reyes
Valenzuela. Jose, Jr., and his family resided in the house of the parents, but Teofilo
constructed on the property his own house, where he and his family resided.
Leoncia and her three sons executed the Kasulatan ng Biling Mabibiling Muli by which
they sold their land to Sps. Francia for P500, subject to the vendors' right to
repurchase for the same amount “sa oras na sila'y makinabang”. Teofilo and
Jose, Jr. and their respective families remained in possession of the property and
paid the realty taxes thereon. Leoncia and her children did not repay the amount of
P500.00.
Alejandro, the son of Jose, Sr., first partially paid to the Sp. Francia P265.00 for the
obligation of Leoncia, his uncles and his father. Alejandro later paid the balance of
P235.00. Thus, on August 11, 1970, the heirs of Spouses Francia executed a deed
entitled Pagsasa-ayos ng Pag-aari at Pagsasalin , whereby they transferred and
conveyed to Alejandro all their rights and interests in the property for P500.00.
On August 21, 1970, Alejandro executed a K asulatan ng Pagmeme-ari, wherein he

declared that he had acquired all the rights and interests of the heirs of the Sps.
Francia, including the ownership of the property, after the vendors had failed to
repurchase within the given period. From then on, he had paid the realty taxes for
the property.
On October 17, 1970, Alejandro, his grandmother (Leoncia), and his father (Jose,
Sr.) executed a Magkasanib na Salaysay, by which Alejandro acknowledged the
right of Leoncia, Jose, Jr., and Jose, Sr. to repurchase the property at any time for
the same amount of P500.00.
In 1993, Alejandro died intestate and was survived by his wife, Amanda Reyes, and
their children, (respondents herein). In 1994, Amanda asked the heirs of Teofilo
and Jose, Jr., to vacate the property because she and her children already needed
it.
ISSUES:
1. Whether the transaction entered into by Alejandro, Leoncia, Jose Sr., Jose Jr.
and Teofilo was an equitable mortgage and not a pacto de retro sale.
2. Whether upon the execution of the Kasulatan ng Pagmeme-ari, ownership
was consolidated to Alejandro upon failure of Leoncia and her sons to
redeem within the agreed period; and
3. Whether the Magkasanib na Salaysay executed by Alejandro granted Leoncia
and her three sons a right to repurchase at any time for P500.
RULING:
1. It was an equitable mortgage.
There was no dispute that the purported vendors (Leoncia and sons) had continued
in the possession of the property even after the execution of the agreement; and
that the property had remained declared for taxation purposes under Leoncia's
name, with the realty taxes due being paid by Leoncia, despite the execution of the
agreement. Such established circumstances are among the badges of an equitable
mortgage enumerated in Article 1602, paragraphs 2 and 5 of the Civil Code, to wit:
Art. 1602. The contract shall be presumed to be an equitable
mortgage, x x x
(2) When the vendor remains in possession as lessee or otherwise;
xxx
(5) When the vendor binds himself to pay the taxes on the thing sold;
xxx
The existence of any one of the conditions enumerated under Article 1602 of the
Civil Code, not a concurrence of all or of a majority thereof, suffices to give rise to
the presumption that the contract is an equitable mortgage. Consequently, the
contract between the vendors and vendees (Spouses Francia) was an equitable
mortgage.
Considering that sa oras na sila'y makinabang, the period of redemption stated in

the Kasulatan ng Biling Mabibiling Muli, signified that no definite period had been
stated, the period to redeem should be ten years from the execution of the
contract, pursuant to Articles 1142 and 1144 of the Civil Code. Thus, the full
redemption price should have been paid by July 9, 1955; and upon the expiration
of said 10-year period, mortgagees Sps Francia or their heirs should have
foreclosed the mortgage, but they did not do so. Instead, they accepted Alejandro's
payments, until the debt was fully satisfied by August 11, 1970.
The acceptance of the payments even beyond the 10-year period of redemption
estopped the mortgagees' heirs from insisting that the period to redeem the
property had already expired. Their actions impliedly recognized the continued
existence of the equitable mortgage. The conduct of the original parties as well as
of their successors- in-interest manifested that the parties to the Kasulatan ng
Biling Mabibiling Muli really intended their transaction to be an equitable mortgage,
not a pacto de retro sale.
2. No, ownership was not consolidated to Alejandro upon failure of Leoncia and
her sons to redeem within the agreed period.
It is true that Alejandro became a co-owner of the property by right of

representation upon the death of his father, Jose Sr. As a co-owner, however, his
possession was like
that of a trustee and was not regarded as adverse to his co-owners but in fact
beneficial to all of them.
Yet, the respondents except to the general rule, asserting that Alejandro, having
earlier repudiated the co-ownership, acquired ownership of the property through
prescription.
The Court cannot accept the respondents' posture.
In order that a co-owner's possession may be deemed adverse to that of the cestui
que trust or the other co-owners, the following elements must concur:
1. The co-owner has performed unequivocal acts of repudiation of the co-ownership
amounting to an ouster of the cestui que trust or the other co-owners;
2. Such positive acts of repudiation have been made known to the cestui que trust
or the other co-owners;
3. The evidence on the repudiation is clear and conclusive; and
4. His possession is open, continuous, exclusive, and notorious.
The concurrence of the foregoing elements was not established herein. For one,
Alejandro did not have adverse and exclusive possession of the property, as, in
fact, the other co-owners had continued to possess it, with Alejandro and his heirs
occupying only a portion of it. Neither did the cancellation of the previous tax
declarations in the name of Leoncia, the previous co-owner, and the issuance of a
new one in Alejandro's name, and Alejandro's payment of the realty taxes
constitute repudiation of the co-ownership. The sole fact of a co-owner declaring
the land in question in his name for taxation purposes and paying the land taxes
did not constitute an unequivocal act of repudiation amounting to an ouster of the
other co-owner and could not constitute adverse possession as basis for title by
prescription.
Moreover, according to Blatero v. IAC, if a sale a retro is construed as an equitable

mortgage, then the execution of an affidavit of consolidation by the purported
buyer to consolidate ownership of the parcel of land is of no consequence and the
"constructive possession" of the parcel of land will not ripen into ownership,
because only possession acquired and enjoyed in the concept of owner can serve
as title for acquiring dominion.
The respondents did not present proof showing that Alejandro had effectively
repudiated the co-ownership. Their bare claim that Alejandro had made oral
demands to vacate to his co-owners was self-serving and insufficient. Alejandro's
execution of the affidavit of consolidation of ownership on August 21, 1970 and his
subsequent execution on October 17, 1970 of the joint affidavit were really
equivocal and ambivalent acts that did not manifest his desire to repudiate the co-
ownership.
The only unequivocal act of repudiation was done by the respondents when they
filed the instant action for quieting of title on September 28, 1994, nearly a year
after Alejandro's death on September 2, 1993. However, their possession could not
ripen into ownership considering that their act of repudiation was not coupled with
their exclusive possession of the property.
The Kasulatan ng Pagmeme-ari executed by Alejandro on August 21, 1970 was

ineffectual to predicate the exclusion of the petitioners and their predecessors in
interest from insisting on their claim to the property. Alejandro's being an assignee
of the mortgage did not authorize him or his heirs to appropriate the mortgaged
property for himself without violating the prohibition against pactum commissorium
contained in Article 2088 of the Civil Code, to the effect that "[t]he creditor cannot
appropriate the things given by way of pledge or mortgage, or dispose of them[;]
[a]ny stipulation to the contrary is null and void."
Moreover, the respondents, as Alejandro's heirs, were entirely bound by his

previous acts as their predecessors-in-interest. Thus, Alejandro's acknowledgment
of the effectivity of the equitable mortgage agreement precluded the respondents
from claiming that the property had been sold to him with right to repurchase.
3. No, the Magkasanib na Salaysay executed by Alejandro did not grant Leoncia
and her three sons a right to repurchase at any time for P500.
The provisions of the Civil Code governing equitable mortgages disguised as sale
contracts are primarily designed to curtail the evils brought about by contracts of
sale with right to repurchase, particularly the circumvention of the usury law and
pactum commissorium. Courts have taken judicial notice of the well-known fact that
contracts of sale with right to repurchase have been frequently resorted to in order
to conceal the true nature of a contract, that is, a loan secured by a mortgage. It is
a reality that grave financial distress renders persons hard-pressed to meet even
their basic needs or to respond to an emergency, leaving no choice to them but to
sign deeds of absolute sale of property or deeds of sale with pacto de retro if only
to obtain the much- needed loan from unscrupulous money lenders. This reality
precisely explains why the pertinent provision of the Civil Code includes a peculiar
rule concerning the period of redemption, to wit:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in

any of the following cases:
xxx
(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;
xxx
Ostensibly, the law allows a new period of redemption to be agreed upon or

granted even after the expiration of the equitable mortgagor's right to repurchase,
and treats such extension as one of the indicators that the true agreement between
the parties is an equitable mortgage, not a sale with right to repurchase. It was
indubitable, therefore, that the Magkasanib na Salaysay effectively afforded to
Leoncia, Teofilo, Jose, Sr. and Jose, Jr. a fresh period within which to pay to
Alejandro the redemption price of P500.00.
MARCELINO REPUELA AND CIPRIANO REPUELA, SUBSTITUTED BY CARMELA
REPUELA, MERLINDA R. VILLARUEL, WILLIAM REPUELA, ROSITA P. REPUELA,
CRISTINA R. RAMOS, ORLANDO REPUELA, JUNNE REPUELA, AND OSCAR
REPUELA, PETITIONERS,
V.
ESTATE OF THE SPOUSES OTILLO LARAWAN AND JULIANA BACUS,
REPRESENTED BY NANCY LARAWAN MANCAO, GALILEO LARAWAN
AND SOCRATES LARAWAN, RESPONDENTS.
G.R. NO. 219638, DECEMBER 07, 2016
MENDOZA, J.:
DIGESTED BY: SUMUGAT, RAMON SIXTO C.
DOCTRINE:
An equitable mortgage is one which, although lacking in some formality, or form, or
words, or other requisites demanded by a statute, reveals the intention of the
parties to charge real property as security for a debt, and contains nothing
impossible or contrary to law.
FACTS:
In July, 1963, Marcelino and Cipriano Repuela, brothers, inherited Lot 3357. They
went to the house of Otillo Larawan to borrow P200 for Marcelino’s fare to Iligan.
To secure the loan, Sps. Larawan required them to turn over the title to Lot 3357 and
made them sign a purported mortgage contract. Cipriano affixed his signature while
Marcelino, being illiterate, placed his thumbmark. They remained in possession and
had been planting corn etc. Cipriano’s daughter Cristina went to the treasurer’s
office and found out that the title to the property was already transferred to Sps.
Larawan through an extrajudicial declaration of heirs and sale bearing the signature
of Cipriano and thumb mark of Marcelino. Cipriano and Marcelino remember that
they signed a blank document. Thus, on January 17, 2003, Cipriano and Marcelino
filed a complaint to annul the extrajudicial declaration of heirs and sale. Burlas, who
lived next to the property, testified that Marcelino and Cipriano remained in
possession and that he never saw Otillo on the land.
ISSUE:
Whether or not the Extrajudicial Declaration of Heirs and Sale amounted to an
equitable mortgage.
RULING:
Yes. The extrajudicial declaration of heirs and sale amounts to an equitable

mortgage.
ART. 1602. The contract shall be presumed to be an equitable mortgage, in any of

the following cases:
(2) When the vendor remains in possession as lessee or otherwise;
(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.
ART. 1604. The provisions of Article 1602 shall also apply to a contract purporting
to be an absolute sale.
Evident from Article 1602, the presence of any of the circumstances set forth herein
suffices for a contract to be deemed an equitable mortgage. No concurrence or an
overwhelming number is needed. In other words, the fact that some or most of the
circumstances mentioned are absent in a case will not negate the existence of an
equitable mortgage.
In this case, it appears that two (2) instances enumerated in Article 1602 — possession
of the subject property and inference that the transaction was in fact a mortgage
attended the assailed transaction.
1) Burlas, a disinterested person, testified that it was only the Repuela brothers
who remained in possession of the land and she never saw Otillo work on the land.
Respondents’ claim of possession supported by a TCT and tax declaration of the
property in the name of Sps. Larawan is not persuasive. These do not prove actual
possession and do not rebut the overwhelming evidence of the Repuela brothers
that they were in actual possession.
2) It can be inferred that the real intention of the Repuela brothers was to secure
their indebtedness from Sps. Larawan. They needed money for Marcelino’s fare of
P200. Since Sps. Larawan would only agree to extend the loan if they surrender
their title, they obliged. It was never their intention to sell the property.
3) Granting that Cipriano and Marcelino signed and thumb marked the Extrajudicial
Declaration of Heirs and sale, they did so without understanding the real nature
thereof as this was never explained to them. Cipriano only finished grade 1 and
Marcelino was illiterate. They were in dire need of money. In dire need, they signed
a document knowing that it did not express their real intention. Thus, they should
be afforded the protection of the provisions on equitable mortgage.
Besides, where a party is unable to read and a mistake or fraud is alleged, the
obligation to show that the terms of the contract had been fully explained to such
party devolves on the party seeking to enforce it. Respondents failed to overcome
this burden.
KINGS PROPERTIES CORPORATION, PETITIONER,
VS.
CANUTO A. GALIDO, RESPONDENT.
G.R. NO. 170023 NOVEMBER 27,
2009 CARPIO, J.
DIGESTED BY: RIVERA, RIZZA JEAN
DOCTRINE:
An equitable mortgage is “one which although lacking in some formality, or form or

words, or other requisites demanded by a statute, nevertheless reveals the intention of
the parties to charge real property as security for a debt, and contains nothing
impossible or contrary to law.” In Lim v. Calaguas: The Court held that in order for the
presumption of equitable mortgage to apply, there must be: (1) something in the
language of the contract; or (2) in the conduct of the parties which shows clearly
and beyond doubt that they intended the contract to be a mortgage and not a
pacto de retro sale. The presumption of equitable mortgage under Article 1602 of
the Civil Code is not conclusive.
FACTS:
On 18 April 1966, the heirs of Domingo Eniceo were awarded with Homestead
Patent No. 112947 consisting of four parcels of land located in San Isidro, Antipolo,
Rizal. The Antipolo property with a total area of 14.8882 hectares was registered
under Original Certificate of Title (OCT) No. 535.
On 10 September 1973, a deed of sale covering the Antipolo property was executed
between Rufina Eniceo and Maria Eniceo (heirs of Domingo) as vendors and
respondent King Properties as vendee. Rufina Eniceo and Maria Eniceo sold the
Antipolo property to respondent for ₱250,000.
On 5 April 1988, the Eniceo heirs registered with the Registry of Deeds of Marikina
City (Registry of Deeds) a Notice of Loss dated 2 April 1988 of the owner’s copy of
OCT No.
535. The Eniceo heirs also filed a petition for the issuance of a new owner’s duplicate
copy of OCT No. 535 with Branch 72 of the Regional Trial Court (RTC) of Antipolo,
Rizal.
On 31 January 1989, the RTC rendered a decision finding that the certified true
copy of OCT No. 535 contained no annotation in favor of any person, corporation or
entity. The RTC ordered the Registry of Deeds to issue a second owner’s copy of
OCT No. 535 in favor of the Eniceo heirs and declared the original owner’s copy of
OCT NO. 535 cancelled and considered of no further value.
On 17 August 1995, the Secretary of the Department of Environment and Natural

Resources (DENR Secretary) approved the deed of sale between the Eniceo heirs
and respondent. On 16 January 1996, respondent filed a civil complaint with the
trial court against the Eniceo heirs and petitioner. Respondent prayed for the
cancellation of the
certificates of title issued in favor of petitioner, and the registration of the deed of
sale and issuance of a new transfer certificate of title in favor of respondent.
ISSUE:
Should the deed of sale delivered to respondent should be presumed an equitable

mortgage pursuant to Article 1602(2) and 1604 of the Civil Code?
RULING:
No. An equitable mortgage is “one which although lacking in some formality, or

form or words, or other requisites demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as security for a debt, and contains
nothing impossible or contrary to law.”
The essential requisites of an equitable mortgage are: 1. The parties entered into a
contract denominated as a contract of sale; and 306 2. Their intention was to
secure existing debt by way of a mortgage. Requisites for the presumption of
mortgage to apply In Lim v. Calaguas: The Court held that in order for the
presumption of equitable mortgage to apply, there must be: (1) something in the
language of the contract; or (2) in the conduct of the parties which shows clearly and
beyond doubt that they intended the contract to be a mortgage and not a pacto de
retro sale. The presumption of equitable mortgage under Article 1602 of the Civil
Code is not conclusive. It may be rebutted by competent and satisfactory proof of
the contrary.
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of

the following cases: (1) When the price of a sale with right to repurchase is
unusually inadequate; (2) When the vendor remains in possession as lessee or
otherwise; (3) When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period is
executed; (4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold; (6) In any other
case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other
obligation. In any of the foregoing cases, any money, fruits, or other benefit to be
received by the vendee as rent or otherwise shall be considered as interest which
shall be subject to the usury laws.
In this case, apart from the fact that the Eniceo heirs remained in possession of the
Antipolo property, Kings has failed to substantiate its claim that the contract of sale
was intended to secure an existing debt by way of mortgage. In fact, mere
tolerated possession is not enough to prove that the transaction was an equitable
mortgage. Furthermore, Kings has not shown any proof that the Eniceo heirs were
indebted to Galido. On the contrary, the deed of sale executed in favor of Galido
was drafted clearly to convey that the Eniceo heirs sold and transferred the
Antipolo property to Galido. The deed of sale even inserted a provision about
defrayment of registration expenses to effect the transfer of title to Galido. On the
defense of equitable mortgage
In any event, as pointed out by Galido in his Memorandum, this defense of
equitable mortgage is available only to Kings’s predecessors-in-interest who should
have demanded, but did not, for the reformation of the deed of sale. In their
Answer and Memorandum filed before the trial court, the Eniceo heirs claimed that
the alleged deed of sale dated 10 September 1973 between Rufina and Maria was
fake and spurious. The Eniceo heirs contended that even assuming there was a
contract, no consideration was involved. It was only in the Appellees’ Brief filed
before the CA that the Eniceo heirs claimed as an alternative defense that the deed
should be presumed as an equitable mortgage. A perusal of the records shows that
the Eniceo heirs never presented the defense of equitable mortgage before the trial
court. Although Kings raised the defense of equitable mortgage in the lower court,
he cannot claim that the deed was an equitable mortgage because Kings was not a
privy to the deed of sale dated 10 September 1973. Kings merely stepped into the
shoes of the Eniceo heirs. Kings, who merely acquired all the rights of its
predecessors, cannot espouse a theory that is contrary to the theory of the case
claimed by the Eniceo heirs. The Court notes that the Eniceo heirs have not
appealed the CA’s decision, hence, as to the Eniceo heirs, the CA’s decision that the
contract was a sale and not an equitable mortgage is now final. Since Kings merely
assumed the rights of the Eniceo heirs, Kings is now estopped from questioning the
deed of sale dated 10 September 1973.
Kings does not dispute that Galido registered his adverse claim with the Registry of
Deeds on 14 March 1995. The registration of the adverse claim constituted, by
operation of law, notice to the whole world. From that date onwards, subsequent
buyers were deemed to have constructive notice of Galido’s adverse claim. Kings
purchased the Antipolo property only on 20 March 1995 and 5 April 1995 as shown
by the dates in the deeds of sale. On the same dates, the Registry of Deeds issued
new TCTs in favor of Kings with the annotated adverse claim. Consequently, the
adverse claim registered prior to the second sale charged Kings with constructive
notice of the defect in the title of Eniceo heirs. Therefore, Kings cannot be deemed
as a purchaser in good faith when they bought and registered the Antipolo
property.
HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE; NAMELY,
ANTONIO T. BALITE, FLOR T. BALITE-ZAMAR, VISITACION T. BALITE-
DIFUNTORUM, PEDRO T. BALITE, PABLO T. BALITE, GASPAR T. BALITE,
CRISTETA T. BALITE AND AURELIO T. BALITE JR., ALL REPRESENTED BY
GASPAR T. BALITE, PETITIONERS,
VS.
RODRIGO N. LIM, RESPONDENT.
G.R. NO. 152168 DECEMBER 10, 2004
PANGANIBAN, J.:
DIGESTED BY: RUBY ANNE P. TRINIDAD
DOCTRINE:
A deed of sale in which the parties clearly intended to transfer ownership of the
property cannot be presumed to be an equitable mortgage under Article 1602 of
the Civil Code.
FACTS:
Spouses Aurelio and Esperanza Balite were the owners of a parcel of land with an
area of 17,551 square meters. When Aurelio died intestate, his wife and their
children, who are the petitioners in this case, inherited the subject property and
became co-owners thereof, with Esperanza inheriting an undivided share of 9,751
square meters.
In the meantime, Esperanza became ill and was in dire need of money for her
hospital expenses so she offered to sell to Rodrigo Lim, her undivided share for the
price of P1,000,000.00. Esperanza and Rodrigo agreed that, under the "Deed of
Absolute Sale", to be executed by Esperanza over the property, it will be made to
appear that the purchase price of the property would be P150,000.00 instead of
P1,000,000.00.
Esperanza executed a "Deed of Absolute Sale" in favor of Rodrigo N. Lim over a

portion of the property. They also executed, on the same day, a "Joint Affidavit"
under which they declared that the real price of the property was P1,000,000.00,
payable by installments
Only Esperanza and two of her children, namely, Antonio and Cristeta, knew about
the said transaction. When the rest of Esperanza’s children knew about the sale, they
wrote a letter to ROD saying that they were not informed of the sale of a portion of
the said property by their mother nor did they give their consent thereto. Esperanza
executed a "Special Power of Attorney" appointing her son, Antonio, to collect and
receive, from Rodrigo, the balance of the purchase price of the property and to sign
the appropriate documents therefor.
Esperanza signed a letter addressed to Rodrigo informing the latter that her
children did not agree to the sale of the property to him and that she was
withdrawing all her commitments until the validity of the sale is finally resolved.
Later, Esperanza died intestate and was survived by her aforenamed children.
Meanwhile, Rodrigo caused to be published the aforesaid "Deed of Absolute Sale".

After payment of the capital gain tax based on the amount reflected in the Deed of
Absolute Sale, the RD refused to issue a title over the property to and under the
name of Rodrigo unless and until the owner’s duplicate was presented to it.
The petitioner children filed a complaint against Rodrigo for "Annulment of Sale,
Quieting of Title, Injunction and Damages and also had a "Notice of Lis Pendens",
at the dorsal portion of the title.
Subsequently, Rodrigo secured a loan from the Rizal Commercial Banking

Corporation in the amount of P2,000,000.00 and executed a "Real Estate Mortgage"
over the subject property as security therefor. On motion of the petitioner children,
they were granted leave to file an amended complaint impleading the bank as an
additional party defendant. The court issued an order rejecting the said amended
complaint. Likewise, the trial court dismissed the Complaint and ordered the
cancellation of the lis pendens annotated at the back of TCT No. 6683. It held that,
pursuant to Article 493 of the Civil Code, a co-owner has the right to sell his/her
undivided share. The sale made by a co- owner is not invalidated by the absence of
the consent of the other co-owners.The CA affirmed the decision of the trial court
and rejected petitioners’ contention that, because of the allegedly unconscionably
low and inadequate consideration involved, the transaction covered by the Deed
was an equitable mortgage under Article 1602 of the Civil Code.
CONTENTION PETITIONER CHILDREN
The petitioner children contend that the Deed of Absolute Sale is null and void,
because the undervalued consideration indicated therein was intended for an
unlawful purpose -- to avoid the payment of higher capital gains taxes on the
transaction. They further posits that even assuming that the deed of sale is valid it
should only be deemed an equitable mortgage pursuant to Articles 1602 and 1604
of the Civil Code, because the price was clearly inadequate
ISSUE:
Whether or not the sale is valid and assuming that it is valid, it should only be
deemed an equitable mortgage because the price was clearly inadequate.
RULING:
The Supreme Court held that the sale is valid and enforceable. Article 1345 of the
Civil Code provides that the simulation of a contract may either be absolute or
relative. In
absolute simulation, there is a colorable contract but without any substance,
because the parties have no intention to be bound by it. An absolutely simulated
contract is void, and the parties may recover from each other what they may have
given under the "contract."
In the present case, the parties intended to be bound by the Contract, even if it did
not reflect the actual purchase price of the property. There was an intention to transfer
the ownership of over 10,000 square meters of the property . All the essential
requisites prescribed by law for the validity and perfection of contracts are present.
However, the parties shall be bound by their real agreement for a consideration of
P1,000,000 as reflected in their Joint Affidavit.
The Supreme Court also disagreed with petitioner children’s contention that the
contract of sale is deemed an equitable mortgage. For Articles 1602 and 1604 to
apply, two requisites must concur: one, the parties entered into a contract
denominated as a contract of sale; and, two, their intention was to secure an
existing debt by way of mortgage.
Indeed, the existence of any of the circumstances enumerated in Article 1602, not
a concurrence or an overwhelming number thereof, suffices to give rise to the
presumption that a contract purporting to be an absolute sale is actually an equitable
mortgage. In the present case, however, the Contract does not merely purport to
be an absolute sale. The records and the documentary evidence introduced by the
parties indubitably show that the Contract is, indeed, one of absolute sale. There is
no clear and convincing evidence that the parties agreed upon a mortgage of the
subject property.
Furthermore, the voluntary, written and unconditional acceptance of contractual

commitments negates the theory of equitable mortgage. There is nothing doubtful
about the terms of, or the circumstances surrounding, the Deed of Sale that would
call for the application of Article 1602. The Joint Affidavit indisputably confirmed
that the transaction between the parties was a sale.
Notably, petitioners never raised as an issue before the trial court the fact that the
document did not express the true intent and agreement of the contracting parties.
They raised mere suppositions on the inadequacy of the price, in support of their
argument that the Contract should be considered as an equitable mortgage.
FRANCISCO GARCIA, PAZ GARCIA, AND MARIA GARCIA, PETITIONERS, VS.
JOSE CALALIMAN, PACIENCIA TRABADILLO & HON. COURT OF APPEALS,
THIRD DIVISION, RESPONDENTS.
G.R. NO. L-26855 APRIL 17, 1989
PARAS, J.
DOCTRINE:
The registration of the deed of sale with the Register of Deeds cannot be
considered sufficient notice, most specially because the property involved was
unregistered land. The Court took note of the fact that the registration of the deed
of sale as sufficient notice of a sale under the provision of Section 51 of Act No. 496
applies only to registered lands and has no application whatsoever to a case where
the property involved is, admittedly, unregistered land.
FACTS:
Gelacio Garcia died intestate, leaving a parcel of unregistered land. On his death
the property was inherited by his nephews, nieces, grandnephews who are the
descendants of his late brothers.
The heirs, Juanita Bertomo, Joaquin Garcia, Porfirio Garcia, Dioscoro Garcia, Flora
Garcia, Consolacion Garcia, Remedios Garcia, Trinidad Garcia, Baltazar Garcia
signed a document entitled, “Extra-judicial Partition and Deed of Sale” in favor of
spouses Jose Calaliman and Paciencia Trabadillo.
Another group of heirs, Rosario Garcia, Margarita Garcia, Dolores Rufino,

Resurreccion Tagarao, Serafin Tagarao, Buenaventura Tagarao, Fortunata Garcia
and Simeon Garcia, all residents of Isabela, Negros Occidental, also sold to the
spouses Jose Calaliman and Paciencia Trabadillo their shares, rights, interest and
participation in the same parcel of land.
Heirs Francisco Garcia, Paz Garcia, and Maria Garcia filed against the spouses Jose
Calaliman and Paciencia Trabadillo an action for legal redemption of the 3/4 portion
of the parcel of land inherited by the heirs from the late Gelacio Garcia, which
portion was sold by their co-heirs to the spouses.
The spouses claim that the 30-day period prescribed in Article 1088 of the New Civil
Code for petitioners to exercise the right to legal redemption had already elapsed at
that time and that the requirement of Article 1088 of the New Civil Code that notice
would be in writing is deemed satisfied because written notice would be
superfluous, the purpose of the law having been fully served when petitioner
Francisco Garcia went to the Office of the Register of Deeds and saw for himself,
read and understood the contents of the deeds of sale
ISSUE:
Whether or not Heirs Francisco Garcia, Paz Garcia, and Maria Garcia took all the
necessary steps to effectuate their exercise of the right of legal redemption within
the period fixed by Art. 1088 of the Civil Code.
RULING:
Yes. Written notice is indispensable, actual knowledge of the sale acquired in some
other manners by the redemptioner, notwithstanding. He or she is still entitled to
written notice, as exacted by the Code, to remove all uncertainty as to the sale, its
terms and its validity, and to quiet any doubt that the alienation is not definitive.
The law not having provided for any alternative, the method of notifications
remains exclusive, though the Code does not prescribe any particular form of
written notice nor any distinctive method for written notification of redemption.
The registration of the deed of sale with the Register of Deeds cannot be
considered sufficient notice, most specially because the property involved was
unregistered land, as in the instant case. The Court took note of the fact that the
registration of the deed of sale as sufficient notice of a sale under the provision of
Section 51 of Act No. 496 applies only to registered lands and has no application
whatsoever to a case where the property involved is, admittedly, unregistered land.
VIRGILIO R. ROMERO, PETITIONER,
VS.
HON. COURT OF APPEALS AND ENRIQUETA CHUA VDA. DE ONGSIONG,
RESPONDENT
G.R. NO. 107207 NOVEMBER 23, 1995
VITUG, J.:
DIGESTED BY: RUEL AGANAP
FACTS:
Private respondent entered into a “Conditional Deed of Sale” with petitioner over a
parcel of land in Paranaque, the latter advancing P50,000 for the eviction of
squatters therein. An ejectment suit was then filed by the private respondent
against the squatters. Although successful, private respondent sought the return of
the downpayment she received because “she could not get rid of the squatters”.
ISSUE:
May the vendor demand the rescission of a contract for the sale of a parcel of land
for a cause traceable to his own failure to have the squatters on the subject
property evicted within the contractually-stipulated period?
RULING:
A sale is at once perfected when a person (the seller) obligates himself, for a price
certain, to deliver and to transfer ownership of a specified thing or right to another
(the buyer) over which the latter agrees. From the moment the contract is
perfected, the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which, according to their
nature, may be in keeping with good faith, usage and law. Under the agreement,
private respondent is obligated to evict the squatters on the property. Private
respondent's failure "to remove the squatters from the property" within the
stipulated period gives petitioner the right to either refuse to proceed with the
agreement or waive that condition in consonance with Article 1545 of the Civil
Code. This option clearly belongs to petitioner and not to private respondent.
In contracts of sale particularly, Article 1545 of the Civil Code allows the obligee to
choose between proceeding with the agreement or waiving the performance of the
condition. Here, evidently, petitioner has waived the performance of the condition
imposed on private respondent to free the property from squatters.
The right of resolution of a party to an obligation is predicated on a breach of faith

by the other party that violates the reciprocity between them. It is private respondent
who has failed in her obligation under the contract. Petitioner did not breach the
agreement. He has agreed, in fact, to shoulder the expenses of the execution of
the judgment in the ejectment case and to make arrangements with the sheriff to
effect such execution.
FRANCISCO GONZALES, PETITIONER, V. SEVERINO C. LIM AND TOYOTA
SHAW, INC., RESPONDENTS.
G.R. NO. 130403 JULY 30, 2007
CORONA, J.
DIGESTED BY: DANILO JR. T. FORRO
DOCTRINE:
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 nonperformance of the condition as a breach of warranty
FACTS:
Motown Vehicles, Inc. (Motown), owned by Gonzales, was a licensed distributor of

Ford vehicles. Its assets included two buildings standing on a 4,944 sq. m. lot
leased from Tanglaw Realty Inc. When Ford Philippines ceased operations,
Gonzales sold Motown’s shares of stocks to respondent Severino C. Lim and Toyota
Shaw, Inc. They signed an "Agreement" including Motown's two lease contracts
with Tanglaw. The total price to be paid by the respondents to Gonzales was
P6,746,000.00. The respondents paid P6,246,000 upon the signing of the contract
and according to the "Agreement", the remaining P500,000 will be paid upon
receipt of official communication from Tanglaw Realty Corporation to the effect that
Motown can have continuing and unhampered use of the pieces of [the leased]
land covered by the 2 Lease Contracts. Respondents claimed they discovered that
one of Motown’s lease contracts had already been terminated prior to the sale. As a
result, they were allegedly constrained to negotiate with Tanglaw for a new lease
contract. Respondents filed a case with RTC for declaratory relief with damages
against Gonzales seeking release from their obligation to pay the P500,000 balance.
ISSUE:
Whether petitioner was still entitled to the payment of P500,000 despite failure to
comply with the provision in the "Agreement" requiring him to obtain an official
communication from Tanglaw regarding the continuation ofMotown’s lease contract
RULING:
Petitioner’s undertaking set forth in the"Agreement" may be deemed a "condition,"

a future and uncertain event upon which the existence of an obligation is made to
depend or that which subordinates the existence of a liability under a contract to a
certain future event. It was a condition that was imposed on an obligation after the
consummation of the contract of sale, not a condition on the perfection of the
contract itself. As provided for inArticle 1545, if the condition imposed on an
obligation was not complied with by one of the parties, the other party may either
1) refuse to proceed with the agreement or 2) waive the fulfillment of the
condition.In the case at bar,
respondents obviously did not choose the first option as they proceeded with their
contract with petitioner despite the latter’s non-fulfillment of the condition in the
agreement. In fact, in their comment, they stated that they "took possession of the
properties and caused extensive improvement and installed facilities and
equipment" thereon.In the "Agreement", the petitioner was supposed to negotiate
a new lease contract with Tanglaw for the respondent.However, the records reveal
that respondents themselves negotiated directly with Tanglaw. Although they had
the right to require the compliance of the petitioner with the condition or compel
his performance of the undertaking, they opted otherwise. Respondents’ assertion
that they were merely forced to deal directly with Tanglaw because the latter had
threatened to evict them has no merit. RTC and CA both held that, at the time of
the sale, respondents are aware of the termination ofMotown's two lease contracts
with Tanglaw. Respondentstherefore cannot invoke this argument to justify their
actions and evade their liability to the petitioner. Respondents’ conduct showed that
they did not only disregard the condition but also placed the petitioner in a position
that his compliance was no longer necessary. Also,the condition was deemed
waived when respondents forged their new lease contract with Tanglaw. Petition
was granted.
ROLANDO T. CATUNGAL, JOSE T. CATUNGAL, JR., CAROLYN T. CATUNGAL
AND ERLINDA CATUNGAL-WESSEL, PETITIONERS, VS. ANGEL S. RODRIGUEZ,
RESPONDENT.
G.R. NO. 146839 MARCH 23,
2011 LEONARDO-DE CASTRO, J.:
DOCTRINE:
There is mixed condition when the condition is not dependent on the sole will of the
debtor but also on the will of third persons who own the adjacent land and from
whom the road right of way shall be negotiated. In a manner of speaking in the
present case, such a condition is likewise dependent on chance as there is no
guarantee that respondent and the third party-landowners would come to an
agreement regarding the road right of way.
FACTS:
Agapita Catungal owned a parcel of land (Lot 10963). Agapita, with the consent of
her husband Jose, entered into a Contract to Sell with respondent Rodriguez.
Subsequently, the CTS was purportedly “upgraded” into a Conditional Deed of Sale
(CDOS).
The provisions of the CDOS are as follows:
1.The VENDOR for and in consideration of the sum of 25M payable as follows:
a.500k downpayment upon the signing of this agreement,
b. The balance of 24.5M shall be payable in five separate checks. The first check shall
be for 4.5M and the remaining balance to be paid in four checks in the amounts of 5M
each after the VENDEE has successfully negotiated, secured and provided a Road
Right of Way consisting of 12 meters in width cutting across Lot 10884 up to the
national road, either by widening the existing Road Right of Way or by securing a new
Road one of 12 meters in width. If however said Road Right of Way could not
be negotiated, the VENDEE shall give notice to the VENDOR for them to reassess
and solve the problem by taking other options and should the situation ultimately
prove futile, he shall take steps to rescind or cancel the herein Conditional Deed of
Sale.
c. That the access road or Road Right of Way leading to Lot 10963 shall be
the responsibility of the VENDEE to secure and any or all cost relative to the
acquisition thereof shall be borne solely by the VENDEE.
Xxx
5. That the VENDEE has the option to rescind the sale. In the event the VENDEE
exercises his option to rescind the herein Conditional Deed of Sale, the VENDEE shall
notify the VENDOR by way of a written notice relinquishing his rights over the
property. The VENDEE shall then be reimbursed by the VENDOR the sum of FIVE
HUNDRED THOUSAND PESOS (P500,000.00) representing the downpayment,
interest free, payable but contingent upon the event that the VENDOR shall have been
able to sell the property to another party.8
The Catungals requested an advance of 5M on the purchase price for personal
reasons. Rodriguez refused. Rodriguez soon learned that the Catungals were
offering the property for sale to third parties. Jose Catungal thereafter demanded
that Rodriguez make up his mind about buying the land or exercising his “option” to
buy the property. Should he fail to exercise this option, the Catungals warned that
they would consider the contract cancelled and that they were free to look for other
buyers. Rodriguez registered his objections to what he termed as unwarranted
demands, but Catungal still cancelled the contract.
Rodriguez filed for a restraining order/writ of preliminary injunction. Catungals

contended that there was a contractual breach and bad faith on the part of
Rodriguez. Rodriguez alleged that the Catungals were guilty of several
misrepresentations which purportedly induced Rodriguez to buy the property at the
price of 25M. RTC ruled in favor of Rodriguez, which was affirmed by CA.
In the Motion for Reconsideration of the Catungals, they argued that the CDOS
violated the principle of mutuality of contracts under Art 1308 (constituting a
potestative condition; thus, the contract was supposedly void ab initio and the
Catungals’ rescission thereof was unnecessary).
ISSUE:
Whether the provisions of the Conditional Deed of Sale constitute a potestative

condition
RULING:
NO. At the outset, it should be noted that what the parties entered into is a
Conditional Deed of Sale, whereby the spouses Catungal agreed to sell and
Rodriguez agreed to buy Lot 10963 conditioned on the payment of a certain price
but the payment of the purchase price was additionally made contingent on the
successful negotiation of a road right of way. It is elementary that "[i]n conditional
obligations, the acquisition of rights, as well as the extinguishment or loss of those
already acquired, shall depend upon the happening of the event which constitutes
the condition."
Petitioners rely on Article 1308 of the Civil Code to support their conclusion regarding
the claimed nullity of the aforementioned provisions. Article 1308 states that
"[t]he contract must bind both contracting parties; its validity or compliance cannot
be left to the will of one of them."
Article 1182 of the Civil Code, in turn, provides:
Art. 1182. When the fulfillment of the condition depends upon the sole will of the
debtor, the conditional obligation shall be void. If it depends upon chance or upon
the will of a third person, the obligation shall take effect in conformity with the
provisions of this Code.
In the past, this Court has distinguished between a condition imposed on the
perfection of a contract and a condition imposed merely on the performance of an
obligation. While failure to comply with the first condition results in the failure of a
contract, failure to comply with the second merely gives the other party the option
to
either refuse to proceed with the sale or to waive the condition. This principle is
evident in Article 1545 of the Civil Code on sales, which provides in part:
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 x x x.
Paragraph 1(b) of the Conditional Deed of Sale, stating that respondent shall pay
the balance of the purchase price when he has successfully negotiated and secured
a road right of way, is not a condition on the perfection of the contract nor on the
validity of the entire contract or its compliance as contemplated in Article 1308. It is
a condition imposed only on respondent’s obligation to pay the remainder of the
purchase price. In our view and applying Article 1182, such a condition is not purely
potestative as petitioners contend. It is not dependent on the sole will of the debtor
but also on the will of third persons who own the adjacent land and from whom the
road right of way shall be negotiated. In a manner of speaking, such a condition is
likewise dependent on chance as there is no guarantee that respondent and the
third party-landowners would come to an agreement regarding the road right of
way. This type of mixed condition is expressly allowed under Article 1182.
In sum, Rodriguez’s option to rescind the contract is not purely potestative but
rather also subject to the same mixed condition as his obligation to pay the balance
of the purchase price – i.e., the negotiation of a road right of way. In the event the
condition is fulfilled (or the negotiation is successful), Rodriguez must pay the
balance of the purchase price. In the event the condition is not fulfilled (or the
negotiation fails), Rodriguez has the choice either (a) to not proceed with the sale
and demand return of his downpayment or (b) considering that the condition was
imposed for his benefit, to waive the condition and still pay the purchase price
despite the lack of road access. This is the most just interpretation of the parties’
contract that gives effect to all its provisions.
WHEREFORE, the Decision dated August 8, 2000 and the Resolution dated January
30, 2001 of the Court of Appeals in CA-G.R. CV No. 40627 consolidated with CA-
G.R. SP No. 27565 are AFFIRMED with the following MODIFICATION:
If still warranted, respondent Angel S. Rodriguez is given a period of thirty (30)

days from the finality of this Decision to negotiate a road right of way. In the event
no road right of way is secured by respondent at the end of said period, the parties
shall reassess and discuss other options as stipulated in paragraph 1(b) of the
Conditional Deed of Sale and, for this purpose, they are given a period of thirty (30)
days to agree on a course of action. Should the discussions of the parties prove
futile after the said thirty (30)-day period, immediately upon the expiration of said
period for discussion, Rodriguez may (a) exercise his option to rescind the contract,
subject to the return of his downpayment, in accordance with the provisions of
paragraphs 1(b) and 5 of the Conditional Deed of Sale or (b) waive the road right
of way and pay the balance of the deducted purchase price as determined in the
RTC Decision dated May 30, 1992.
HARRISON MOTORS CORPORATION, PETITIONER,
VS.
RACHEL A. NAVARRO, RESPONDENT.
G.R. NO. 132269 APRIL 27, 2000
BELLOSILLO, J.:
DIGESTED BY: SWEET KARRAH M. SALAZAR
DOCTRINE:
Under Art. 1599 of the Civil Code, once an express warranty is breached the buyer
can accept or keep the goods and maintain an action against the seller for
damages. This was what private respondent did. She opted to keep the two (2)
trucks which she apparently needed for her business and filed a complaint for
damages, particularly seeking the reimbursement of the amount she paid to secure
the release of her vehicles.
FACTS:
Harrison Motors Corporation, petitioner, through its president, Renato Claros, sold
twoIsuzu Elf trucks to private respondent Rachel Navarro, owner of RN Freight Lines, a
franchise holder operating and maintaining a fleet of cargo trucks all over Luzon.
Harrison Motors, an importer, assembler and manufacturer, assembled the two trucks
using imported component parts. Prior to the sale, Renato Claros represented to
private respondent that all the BIR taxes and customs duties for the parts used on the
two trucks had been paid for.
However, later on, the Bureau of Internal Revenue, The Land Transportation Office,
and The Bureau of Customs entered into a tripartite Memorandum of Agreement
which provided that prior to the registration in the LTO of any locally assembled
motor vehicle using imported component parts, a Certificate of Payment should first
be obtained from the BIR and the BOC to prove that all existing taxes and customs
duties have been paid.
Subsequently, the government agents seized and detained the two Elf trucks of
Navarro after discovering that there were still unpaid of the BIR taxes and BOC
duties. The BIR and the BOC ordered her to pay the proper assessments or her
trucks would be impounded.
Navarro went to Claros to ask for the receipts evidencing payment of BIR taxes and
customs duties; however, Claros refused to comply. But wanting to secure the
immediate release of the trucks to comply with her business commitments, private
respondent paid the assessed BIR taxes and customs duties. Consequently, she
returned to petitioner’s office to ask for reimbursement, but petitioner again
refused, prompting her to file a complaint for a collection of sum of money.
Trial Court ordered the petitioner to reimburse private respondent. Court of Appeals
sustained the lower court, hence this recourse of petitioner.
ISSUE:
Is Harrison Motors liable for warranty?
RULING:
Yes, Harrison Motors is liable for warranty even though it is true that the ownership
of the trucks shifted to Navarro after the sale. It must be remembered that prior to
its consummation, Harrison expressly intimated and assured to Navarro that it had
already paid the taxes and customs duties. Such representation shall be considered
as a seller’s express warranty under Article 1546 of the Civil Code which covers any
affirmation of fact or any promise by the seller which induces the buyer to purchase
the thing and actually purchases it relying on such affirmation or promise.
It includes all warranties which are derived from express language, whether the
language is in the form of a promise or representation. Presumably, therefore,
private respondent would not have purchased the two Elf trucks were it not for
petitioner’s assertion and assurance that all taxes on its imported parts were already
settled.
This express warranty was breached the moment petitioner refused to furnish
private respondent with the corresponding receipts since such documents were the
best evidence she could present to the government to prove that all BIR taxes and
customs duties on the imported component parts were fully paid. Without evidence
of payment, she was powerless to prevent the trucks from being impounded.
Under Art. 1599 of the Civil Code, once an express warranty is breached the buyer
can accept or keep the goods and maintain an action against the seller for
damages. This was what private respondent did. She opted to keep the two (2)
trucks which she apparently needed for her business and filed a complaint for
damages, particularly seeking the reimbursement of the amount she paid to secure
the release of her vehicles.
PRIMARY STRUCTURES CORP. REPRESENTED HEREIN BY ITS PRESIDENT ENGR.
WILLIAM C. LIU., PETITIONER,
VS.
SPS. ANTHONY S. VALENCIA AND SUSAN T. VALENCIA, RESPONDENTS
G.R. NO. 150060, AUGUST 19, 2003
VITUG, J:
DOCTRINE:
Article 1621 provides that the owners of adjoining lands shall have the right of
redemption when a piece of rural land, the area of which does not exceed one
hectare, is alienated unless the grantee does not own any rural land. This right is
not applicable to adjacent lands which are separated by brooks, drains, ravines,
roads and other apparent servitudes for the benefit of other estates. If two or more
adjoining owners desire to exercise the right of redemption at the same time, the
owner of the adjoining land of smaller area shall be preferred, and should both
lands have the same area, the one who first requested the redemption.
Article 1623 also provides that the right of legal 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 right of redemption
of co-owners excludes that of adjoining owners.
FACTS:
Petitioner is a private Corporation based in Cebu City and the registered owner of
Lot 4523 situated in Liloan Cebu with an area of 22, 214 square meters. Adjacent to
the lot of petitioner are parcels of land identified to be Lot 4527, Lot 4528 and Lot
4529 with a total combined area of 3, 751 square meters. The three lots
aforenumbered, have been sold by Hermogenes Mendoza to respondent spouses
sometime in December 1994. Petitioner learned of the sale of the lots only in
January 1996, when Hermogenes Mendoza sold to petitioner Lot No. 4820, a parcel
also adjacent to Lot 4523 belonging to the latter. Forthwith, it sent a letter to
respondents, on January 30, 1996 signifying its intention to redeem the three lots.
On May 30, 1996, petitioner sent another letter to respondents tendering payment
of the price paid to Mendoza by respondents for the lots. Respondents, in response
informed petitioner that they had no intention of selling the parcels. Thereupon,
invoking the provisions of Articles 1621 and 1623, petitioner filed an action against
respondents to compel the latter to allow the legal redemption. Petitioner claimed
that neither Mendoza, the previous owner, nor respondents gave formal or even
just a verbal notice of the sale of the lots as so required by Article 1623 of the Civil
Code. After trial, the Regional Trial Court of Cebu dismissed petitioner’s complaint
and respondents counterclaim, both parties
appealed the decision of the Trial Court to the Court of Appeals. The Appellate
Court affirmed the assailed decisions.
ISSUE:
Whether or not Article 1621 and Article 1623 are applicable in the instant case.
RULING:
Yes. Article 1621 provides that the owners of adjoining lands shall have the right of
redemption when a piece of rural land, the area of which does not exceed one
hectare, is alienated unless the grantee does not own any rural land. This right is
not applicable to adjacent lands which are separated by brooks, drains, ravines,
roads and other apparent servitudes for the benefit of other estates. If two or more
adjoining owners desire to exercise the right of redemption at the same time, the
owner of the adjoining land of a smaller area shall be preferred, and should both
lands have the same area, the one who first requested the redemption.
Article 1623 also provides that the right of legal 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 right of redemption
of co-owners excludes that of adjoining owners.
In order that the right may arise, the land sought to be redeemed and the adjacent
property belonging to the person exercising the right of redemption must both be
rural lands. If one or both are urban lands, the right cannot be invoked. The trial
court found the lots involved to be rural lands. Unlike the case of Fabe vs
Intermediate Appellate Court (which ruled, on the issue of whether a piece of land
was rural or not, that the use of the property for agricultural purpose would be
essential in order that the land might be characterized as rural land for purposes of
legal redemption), respondents in the instant case, however did not dispute before
the Court of Appeals the holding of the trial court that the lots in question are rural
lands. In failing to assail this factual finding on appeal, respondents would be hard
put to now belatedly question such finding and to ask the Court to still entertain that
issue.
Article 1621 of the Civil Code expresses that the right of redemption it grants to an
adjoining owner of the property conveyed may be defeated if it can be shown that
the buyer or grantee does not own any other rural land. The appellate court,
sustaining the trial court, has said that there has been no evidence proffered to
show that respondents are not themselves owners of rural lands for the exclusionary
clause of the law to apply.
With respect to the second issue, Article 1623 of the Civil Code provides that the
right of legal preemption or redemption shall not be exercised except within thirty
days from notice in writing by prospective vendor, or by the vendor, as the case
may be. In
stressing the mandatory character of the requirement, the law states that the deed
of sale shall not be recorded in the Registry of Property unless the same is
accompanied by an affidavit of the vendor that he has given notice thereof to all
possible pre- emptioners.
The Court of Appeals has equated the statement in the deed of sale to the effect
that the vendors have complied with the provisions of Article 1623 of the Civil Code,
as being the written affirmation under oath, as well as the evidence, that the
required written notice to petitioner under Article 1623 has been met. Respondents,
like the appellate court, overlook the fact that petitioner is not a party to the deed
of sale between respondents and Mendoza and has no hand in the preparation and
execution of the deed of sale. It could not thus be considered a binding equivalent
of the obligatory written notice prescribed by the code. Wherefore, in the case at
bar the petition is granted and the assailed decision of the Court of Appeals is
reversed and set aside. Petitioner is hereby given a period of thirty days from the
finality of this decision within which to exercise its right of legal redemption.
CARLOS ALONZO AND CASIMIRA ALONZO, PETITIONERS,
VS.
INTERMEDIATE APPELLATE COURT AND TECLA PADUA, RESPONDENTS.
G.R. NO. 72873 MAY 28, 1987
CRUZ, J.:
DIGESTED BY: ALEIAH JEAN LIBATIQUE
DOCTRINE:
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.
FACTS:
Five brothers and sisters inherited in equal pro indiviso shares a parcel of land
registered in 'the name of their deceased parents under OCT No. 10977 of the
Registry of Deeds of Tarlac.
On March 15, 1963, one of them, Celestino Padua, transferred his undivided share
of the herein petitioners for the sum of P550 by way of absolute sale. One year
later, Eustaquia Padua, his sister, sold her own share to the same vendees, in an
instrument denominated "Con Pacto de Retro Sale," for the sum of P 440. By virtue
of such agreements, the petitioners occupied, after the said sales, an area
corresponding to two-fifths of the said lot, representing the portions sold to them.
The vendees subsequently enclosed the same with a fence. In 1975, with their
consent, their son Eduardo Alonzo and his wife built a semi-concrete house on a
part of the enclosed area.
On February 25, 1976, Mariano Padua, one of the five coheirs, sought to redeem
the area sold to the spouses Alonzo, but his complaint was dismissed when it
appeared that he was an American citizen. On May 27, 1977, however, Tecla Padua,
another co- heir, filed her own complaint invoking the same right of redemption
claimed by her brother.
The trial court dismissed the complaint on the ground that the right had lapsed, not
having been exercised within thirty days from notice of the sales in 1963 and 1964.
Although there was no written notice, it was held that actual knowledge of the sales
by the co-heirs satisfied the requirement of the law. In truth, such actual notice as
acquired by the co-heirs cannot be plausibly denied. The other 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
redemption petition. Moreover, the petitioners and the private respondents
were close friends and
neighbors whose children went to school together. CA reversed the trial court
decision. It declared that the notice required by Art.1088 of the Civil Code was written
notice and that actual notice would not suffice as a substitute.
ISSUE:
Whether there was a valid and sufficient notice of the sale.
RULING:
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.
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.
VICTORIA N. RACELIS, IN HER CAPACITY AS ADMINISTRATOR, PETITIONER,
VS.
SPOUSES GERMIL JAVIER AND REBECCA JAVIER, RESPONDENTS.
G.R. NO. 189609 JANUARY 29, 2018
LEONEN, J.:
DOCTRINE:
Lessees are entitled to suspend the payment of rent under article 1658 of the civil
code if their legal possession is disturbed. Acts of physical disturbance that do not
affect legal possession is beyond the scope of this rule.
In a contract to sell, the payment of earnest money represents the seller’s

opportunity cost of holding in abeyance the search for other buyers or better deals.
Absent proof of a clear agreement to the contrary, it should be forfeited if the sale
does not happen without the seller’s fault.
FACTS:
In August 2001, the Spouses Javier offered to purchase the subject property in this
case, located in Marikina. However, they could not afford to pay the price of Php 3,
500,
000.00. They offered instead to lease the property while they raise enough money.
On July 26, 2002, the Spouses Javier tendered the sum of Php 65, 000.00
representing initial payment or goodwill money. On several occasions, they
tendered small sums of money to completed the promised Php 100,000.00, but by
the end of 2003, they only delivered a total of Php 78,000.00. Meanwhile, they
continued to lease the property. They consistently paid rent but started to fall
behind by February 2004. Realizing that the Spouse Javier had no genuine intention
of purchasing the property, Racelis wrote to inform them that her family had decide
to terminate the lease agreement and to offer the property to other interested
buyers. In the same letter, Racelis demanded that they vacate the property by May
30, 2004. However, the Spouses Javier repeatedly refused to give up possession of
the property and even refused to pay rent for the succeeding months. On May, 12,
2004, Racelis caused the disconnection of the electrical service over the property
forcing the Spouse Javier to purchase a generator.
ISSUES:
1. Whether or not respondents Spouses Germil and Rebecca Javier can invoke their
right to suspend the payment of rent under article 1658 of the civil code?
2. Whether or not the Php 78,000.00 initial payment can be used to offset Spouses
Germil and Rebecca Javier’s accrued rent?
RULING:
1. No. In this case, the disconnection of electrical service over the leased premises
on May 14, 2004 was not just an act of physical disturbance but one that is meant
to remove respondents from the leased premises and disturb their legal possession
as lessees. However, this rule will not apply in the present case because the lease
had already expired when petitioner requested for the temporary disconnection of
electrical service. At that point, petitioner was no longer obligated to maintain
respondents in the peaceful and adequate enjoyment of the lease for the entire
duration of the contract. Therefore, respondents cannot use the disconnection of
electrical service as justification to suspend the payment of rent.
2. No. Earnest money is paid for the seller’s benefit. It is part of the purchase price
while at the same time proof of commitment by the potential buyer. Absent proof
of a clear agreement to the contrary, it is intended to be forfeited if the sale does
not happen without the seller’s fault. The potential buyer bears the burden of
proving that the earnest money was intended other than as part of the purchase
price and to be forfeited if the sale does not occur without the fault of the seller.
Respondent Spouses Javier were unable to discharge this burden. Therefore,
respondents’ unpaid rent amounting to Php 84,000.00 cannot be offset by the
earnest money.
VIEGELY SAMELO, REPRESENTED BY ATTORNEY-IN-FACT CRISTINA SAMELO,
PETITIONER,
VS.
MANOTOK SERVICES, INC., ALLEGEDLY REPRESENTED BY PERPETUA
BOCANEGRA (DECEASED), RESPONDENT.
G.R. NO. 170509 JUNE 27, 2012
BRION, J.
CASE DIGESTED BY: SILVANO M. CAMILLO, JR.
DOCTRINE:
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.
FACTS:
Manotok Services, Inc. entered into a contract with the Viegely Samelo for the lease of
a portion of said lot. The lease contract was for a period of one (1) year, with a monthly
rental of ₱3,960.00. After the expiration of the lease contract on December 31, 1997,
Samelo continued occupying the subject premises without paying the rent.
Manotok Services filed a complaint for unlawful detainer against the Samelo.
Samelo alleged, among others, that her signature in the contract of lease was
obtained through the respondent’s misrepresentation, and that she is now the
owner of the subject premises as she had been in possession since 1944.
ISSUE:
Whether or not a lessee can bring a case for quieting of title respecting the
property leased.
RULING:
No. Manotok Services has a better right of possession over the subject premises. It
is undisputed that the Manotok and Manotok entered into a contract of lease. The
court note that petitioner did not deny that she signed the lease contract.
Here, the respondent did not give the petitioner a notice to vacate upon the
expiration of the lease contract and the latter continued enjoying the subject
premises for more than 15 days, without objection from the respondent.
By the inaction of the respondent as lessor, an implied new lease was created
pursuant to Article 1670 of the Civil Code, which expressly provides that 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.
When Manotok Services sent a notice to vacate to the petitioner on August 5, 1998,
the implied new lease was aborted, and the contract is deemed to have expired at
the end of that month. 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 lessee of
its property. After such notice, the lessee’s right to continue in possession ceases
and her possession becomes one of detainer.
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BLAZA, ESTER ABAD
DIZON AND JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A.
DIZON, AND JOSE A. DIZON, JR., PETITIONERS,
VS.
COURT OF APPEALS AND OVERLAND EXPRESS LINES, INC., RESPONDENTS.
G.R. NO. 122544 JANUARY 28, 1999
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD

DIZON AND JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A.
DIZON, AND JOSE A. DIZON, JR., PETITIONERS,
VS.
COURT OF APPEALS, HON. MAXIMIANO C. ASUNCION, AND OVERLAND
EXPRESS LINES, INC., RESPONDENTS.
G.R. NO. 124741 JANUARY 28, 1999
MARTINEZ, J.:
DOCTRINE:
Where the rentals are paid monthly, the lease, even if verbal may be deemed to be
on a monthly basis, expiring at the end of every month pursuant to Article 1687, in
relation to Article 1673 of the Civil Code, and in such case, a demand to vacate is
not even necessary for judicial action after the expiration of every month.
Where a lessee fails to exercise the option to purchase within the stipulated period,
he cannot enforce such option anymore.
The other terms of the original contract of lease which are revived in the implied
new lease under Article 1670 of the New Civil Code are only those terms which are
germane to the lessee’s right of continued enjoyment of the property leased—an
implied new lease does not ipso facto carry with it any implied revival of any option
to purchase the leased premises.
FACTS:
Overland Express Lines, Inc. (lessee) entered into a Contract of Lease with Option
to Buy with Dizon et. al. (lessors) involving a 1,755.80 square meter parcel of land
situated at corner MacArthur Highway and South "H" Street, Diliman, Quezon City
for 1 year commencing from May 16, 1974 up to May 15, 1975. During this period,
Overland was granted an option to purchase for P3,000 per square meter. Thereafter,
the lease shall be on a per month basis with a monthly rental of P3,000. In June 20,
1975, Overland allegedly paid P300,000 as partial payment for the leased property,
which an Alice A. Dizon accepted and for which an official receipt was issued In
June 1976, an increased rental of P8,000 per month was made effective. Overland
failed to pay. Dizon et. al. filed an action for ejectment.
MTC Court: Ordered Overland to vacate the leased premises and to pay the sum of
P624,000 representing rentals in arrears and/or as damages in the form of
reasonable compensation for the use and occupation of the premises during the
period of illegal detainer from June 1976 to Nov. 1982.
Overland filed an action for Specific Performance and Fixing of Period for
Obligation. Compel the execution of a deed of sale pursuant to the option to
purchase and the receipt of the partial payment, and fix the period to pay the
balance.
CA rendered a decision against Overland. It concluded that partial payment

accepted through an agent (Ms. Dizon) was the operative act that gave rise to a
perfected contract of sale on the leased premises. However CA dismissed the
petition and ruled that the Dizon have been shown, after all, to have no right to
eject Overland based on its previous decision which Overland herein acquired the
rights of a vendee in a contract of sale, in effect, recognizing the right of the
private respondent to possess the subject premises.
ISSUE:
1. Does Dizon have a right to evict Overland from the subject premises for
non- payment of rentals? YES.
2. Is the option of Overland within the stipulated one year period can still
be exercised? NO.
3. Is there a perfected contract of sale? NO.
RULING:
FIRST ISSUE: Dizons have established a right to evict Overland from the subject
premises for non-payment of rentals. The term of the Contract of Lease with Option
to Buy was for a period of one (1) year (May 16, 1974 to May 15, 1975) during
which the private respondent was given an option to purchase said property at
P3,000.00 per square meter. After the expiration thereof, the lease was for P3,000.00
per month.
Admittedly, no definite period beyond the one-year term of lease was agreed upon
by Dizons and Overland. However, since the rent was paid on a monthly basis, the
period of lease is considered to be from month to month in accordance with Article
1687 of the New Civil Code.18 Where the rentals are paid monthly, the lease, even
if verbal may be deemed to be on a monthly basis, expiring at the end of every
month pursuant to Article 1687, in relation to Article 1673 of the Civil Code.19 In
such case, a demand to vacate is not even necessary for judicial action after the
expiration of every month.
SECOND ISSUE: Having failed to exercise the option within the stipulated one-year
period, Overland cannot enforce its option to purchase anymore. Moreover, even
assuming arguendo that the right to exercise the option still subsists at the time
Overland tendered the amount on June 20, 1975, the suit for specific performance
to enforce the option to purchase was filed only on October 7, 1985 or more than
ten (10)
years after accrual of the cause of action as provided under Article 1144 of the New
Civil Code.
In this case, there was a contract of lease for one (1) year with option to purchase. The
contract of lease expired without Overland, as lessee, purchasing the property but
remained in possession thereof. Hence, there was an implicit renewal of the
contract of lease on a monthly basis. The other terms of the original contract of
lease which are revived in the implied new lease under Article 1670 of the New Civil
Code are only those terms which are germane to the lessee’s right of continued
enjoyment of the property leased. Therefore, an implied new lease does not ipso
facto carry with it any implied revival of Overland’s option to purchase (as lessee
thereof) the leased premises. The provision entitling the lessee the option to
purchase the leased premises is not deemed incorporated in the impliedly renewed
contract because it is alien to the possession of the lessee. Overland’s right to
exercise the option to purchase expired with the termination of the original contract
of lease for one year.
THIRD ISSUE: There was no perfected contract of sale between Dizons and
Overland. Under Article 1475 of the New Civil Code, “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 provisions of the law governing
the form of contracts.” Thus, the elements of a contract of sale are consent, object,
and price in money or its equivalent. It bears stressing that the absence of any of
these essential elements negates the existence of a perfected contract of sale. Sale
is a consensual contract and he who alleges it must show its existence by
competent proof.
In an attempt to resurrect the lapsed option, Overland gave P300,000.00 to Dizons

(thru Alice A. Dizon) on the erroneous presumption that the said amount tendered
would constitute a perfected contract of sale pursuant to the contract of lease with
option to buy. There was no valid consent by the Dizons (as co-owners of the
leased premises) on the supposed sale entered into by Alice A. Dizon, as Dizons’’
alleged agent, and Overland. The basis for agency is representation and a person
dealing with an agent is put upon inquiry and must discover upon his peril the
authority of the agent. As provided in Article 1868 of the New Civil Code, there was
no showing that Dizon et al consented to the act of Alice A. Dizon nor authorized
her to act on their behalf with regard to her transaction with Overland. The most
prudent thing the Overland should have done was to ascertain the extent of the
authority of Alice A. Dizon. Being negligent in this regard, Overland cannot seek
relief on the basis of a supposed agency. However, Dizons are ordered to REFUND
to Overland the amount of P300,000.00 which they received through Alice A. Dizon
on June 20, 1975.
-END-

LS 207 SALES LAW CASE Under Atty. Resci Rizada Nolasco 2nd Case Digest Compilation

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LS 207 SALES LAW CASE Under Atty. Resci Rizada Nolasco 2nd Case Digest Compilation

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HERMINIO TAYAG, PETITIONER,

A group of original farmers/tillers individually executed in favor of the Herminio

Tayag called a meeting of the defendants-tenants (Tenants) to work out the

Whether or not the deeds of assignment executed by the defendants-tenants are

In this case, the defendants-tenants-subtenants, under the deeds of assignment,

An option, is a continuing offer or contract by which the owner stipulates with

Jimenez Sisters’ Contention:

Adelfa Properties’ Contention:

Was the agreement entered into an option contract?

No. Irrefragably, the controverted document should legally be considered as a

1. The exclusive option to purchase, although it provided for automatic

An option, is a continuing offer or contract by which the owner stipulates with

The distinction between an “option” and a contract of sale is that an option is an

The test in determining whether a contract is a “contract of sale or purchase” or a mere

DEFINITION OF CONSIDERATION- As expressed in Gonzales v. Trinidad, 67 Phil.

Whether or not the Deed of Option is valid

As expressed in Gonzales v. Trinidad, consideration is “the why of the contracts,

The respondent appellate court failed to give due consideration to petitioners'

An option contract needs to be supported by a separate consideration. The

Spouses Villanueva leased a property to Bible Baptist for a period of 15 years

Additionally, an option contract needs to be supported by a separate consideration.

Ø Non applicability of Article 1479 of the Civil Code

Whether or not there was consideration involved in the contract executed.

Whether or not the “Option to Repurchase” executed by Deypalubos granted

On August 6, 1976, the respondent Keppel Philippines Holdings, Inc. (Keppel)

Keppel counters that the requirement of a separate consideration for an option to

1. Is the agreement constitutional?

The constitutionality of the agreement.

Separate Valuable Consideration.

An accepted unilateral promise to buy or to sell a determinate thing for a price

Thus, when an offer is supported by a separate consideration, a valid option contract

· PUP argues that respondent’s right to exercise the option to purchase

· While it is conceded that there was an implied new lease between

· CA erred in applying the ruling in Polytechnic University of the Philippines

RIGHT TO FIRST REFUSAL

Ang Yu Asuncion, et al., (plaintiffs) are tenants/lessees of residential and

Parañaque Kings Enterprises (PKE) is a private corporation is renting 8 parcels of

The relevant provisions of the MOA on this point are:

Whether or not paragraph 5.15 of the Memorandum of Agreement can be

Paragraph 5.15 of the Memorandum of Agreement is a mere right of first refusal.

Thereafter, a certain Rene Joaquin representing Rosencor Dev’t Corp came

Whether or not contractual stipulation giving petitioner the priority right to

(2) That a deposit of P100,000.00 must be placed as earnest money on the

(4)That if my negotiations with said property will not be consummated by reason

4. The manner of payment shall be as follows:

a. P100,000.00 earnest money and 650,000.00 as part of the down payment, or

b. The balance is payable as follows:

P100,000.00 after 3 months

That contention is not correct. There is no incompatibility between Bormaheco's

Manila Metal Container Corporation, an owner of an 8,015 sqm parcel of land

Whether the Php 725,000 represents earnest money?

Whether or not the consideration of 100,000 was and option money?

Furthermore, the provision of Art. 1358 on the necessity of a public document is

To be valid, a contract of sale need not contain a technical description of the

Unknown to Belardo, the children of Placido and Gabino Naranja, executed an

To be valid, a contract of sale need not contain a technical description of the

Whether or not the contract of sale was sufficiently proved.

No, the contract of sale was not sufficiently proved.

LOURDES C.FRANCISCO-MADRAZO; ROMEO C. FRANCISCO; CONCEPCION

The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979,

The execution of a public instruments is equivalent to the delivery of the thing

NO. There was no constructive delivery of the land to Sps. Villamor.

Private respondent Associated Engineering Co. Inc. (‘Associated Engineering’) is a