REMINDERS:

● Do not change the formatting of this document.

● Follow the format of the sample digest.
● Input all necessary details (Facts, Issue, Ruling, Fallo)
● Submit on time. (Deadline: 8PM, Monday, April 24)

CONTRACTS, SALES, & LEASE (CASES)

CASE DETAILS DIGEST

Facts:
In September 2003, there was a rumored leakage in the bar examination on the Mercantile Law subject. The
investigation was led back to the office of Atty. Marcial Balgos, then Mercantile Law Examiner, where the leakage
started. Allegedly, Atty. Danilo de Guzman (an assistant lawyer in the firm of Balgos and Perez) stole a copy of Atty.
Balgos’ file on Mercantile Law with the proposed test items, and the former sent it to some members of the Beta
In Re: 2003 Bar Sigma Lambda Fraternity.
Examinations, B.M. No.
1222, February 4, 2004 Issue:
WON Atty. Balgos and Atty. de Guzman are guilty of gross misconduct unbecoming a member of the Bar.
SAMPLE ONLY Ruling:
Yes. De Guzman abetted cheating or dishonesty by his fraternity brothers in the examination, which is violative of
Rule 1.01 of Canon 1, as well as Canon 7 of the Code of Professional Responsibility for members of the Bar. As for
Atty. Balgos’ negligence, if he had taken those simple precautions to protect the secrecy of his papers, nobody could
have stolen them and copied and circulated them. The integrity of the bar examinations would not have been sullied
by the scandal.

Facts:
1. Reynes signed a Deed of Sale in favor of Montecillo in consideration for P47,000.00 payable within one month
from the signing of the Deed of Sale.
2. Reynes alleged that Montecillo failed to pay the purchase price after the lapse of the one-month period. Reynes
demanded from Montecillo the return of the Deed of Sale. Since Montecillo refused to return the Deed of Sale,
Reynes executed a document unilaterally revoking the sale and gave a copy of the document to Montecillo.
3. Subsequently, Reynes signed a Deed of Sale transferring to the Abucay Spouses the entire Mabolo Lot, at the
same time confirming the previous sale of a 185-square meter portion of the lot.
4. Respondents Reynes and spouses Abucay, receiving information that the Register of Deeds of Cebu City issued
Certificate of Title No. 90805 in the name of Montecillo for the Mabolo Lot, argued that “for lack of consideration
Montecillo v. Reynes, G.R. there was no meeting of the minds'' between Reynes and Montecillo. Thus, the trial court should declare null and
No. 138018, July 26, 2002 void ab initio Montecillo’s Deed of Sale, and order the cancellation of Certificate of Title in the name of Montecillo.
(1318)
 Issue:
W/N the lack of payment for the lot makes the contract void.

Ruling:
Yes. There is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object
certain which is the subject matter of the contract; (3) Cause of the obligation which is established. For failure to
pay the purchase price there is absence of cause of the obligation

Facts:
1. Malbarosa was president and general manager of Philtectic while an officer in SEADC’s other group of
companies. Philtectic assigned Malbarosa a Mitsubishi vehicle and membership certificates with Architectural
Center, Inc. during his employment with the former.
2. January 1990: Malbarosa expressed his desire to retire and requested that his incentive compensation for 1989
be given him. Per the president of SEADC and Commonwealth Insurance, Malbarosa is entitled to P395,000.
However, due to alleged bankruptcy of the company, they later only offered him P251k net through a letter-offer
dated March 14, 1990, to be satisfied via the car and membership share of subsidiary Tradestar International Inc.
in Architectural Center Inc.
3. But because he was dismayed after learning that the company was financially sound, he insisted to be paid
P395k in cash. He merely indicated on the duplicate “received original for review purposes” (on March 16), taking
the original with him.
4. After more than 2 weeks, nothing was heard from Malbarosa, so SEADC withdrew its offer. Then on April 3, 1990,
SEADC issued a board resolution authorizing Phitectic and/or Valero to demand the return of the car and to take
court action for the same.
5. Malbarosa responded that he already accepted the offer and included a photocopy of the original wherein he
allegedly signed the letter-offer on March 28, 1990. Malbarosa argued that he tried to call Da Costa on March 29
to inform him of his acceptance, but since he was not around, the receptionist relayed the message to which Da
Costa merely nodded his head.
6. The trial court stated that there existed no perfected contract on the March 14, 1990 letter-offer for failure of the
petitioner to effectively notify the respondent of his acceptance of said letter-offer before the respondent withdrew
the same. This was reversed on a motion and TC amended, ordering the defendant to pay to plaintiff lease
rentals for the use of the motor vehicle at the rate of P1,000.00/day from May 8, 1990. CA Affirmed.

Issues:
WON there was an effective withdrawal of the letter? YES.

Ruling:
Yes. The receipt by the petitioner of the original of the March 14, 1990 Letter-offer for review purposes amounted
Malbarosa v. CA , G.R. No. merel
125761, April 30, 2003 y to a counter-offer of the petitioner. There was effective withdrawal – no meeting of the minds between the
(1319) parties.
 Acceptance must be absolute, unconditional, and without variance of any sort from thenoffer when made known to
the offeror. An acceptance not made in the manner prescribed is not effective but constitutes a counter-offer. The
offer was made through Valero. Malbarosa neither accepted nor rejected the letter-offer. He indeed affixed his
signature but failed to transmit the same before the company decided to withdraw its offer.

Malbarosa’s complaint that he was not given reasonable time cannot stand. There was no time frame fixed to
accept or reject. If an offer is made to a person present, acceptance must be made immediately. The petitioner
had more than two weeks which was more than sufficient for the petitioner to accept the offer of the respondent.
Unless and until the respondent received said copy of the letter-offer, it cannot be argued that a contract had
already been perfected between the petitioner and the respondent.

Facts: Sometime in February, 1970, the late Jose G. Gana and his family, numbering nine (the GANAS), purchased
from AIR FRANCE through Imperial Travels, Incorporated, a duly authorized travel agent, nine (9) "open-dated" air
passage tickets for the Manila/Osaka/Tokyo/Manila route. The GANAS paid a total of US$2,528.85 for their
economy and first class fares. The GANAS also paid travel taxes of P100.00 for each passenger. On 24 April 1970,
AIR FRANCE exchanged or substituted the aforementioned tickets with other tickets for the same route. The
aforesaid tickets were valid until 8 May 1971, the date written under the printed words "Non valuable apres de
(meaning, "not valid after the"). They were warned that although the tickets could be used by the GANAS if they left
on 7 May 1971, the tickets would no longer be valid for the rest of their trip because the tickets would then have
expired on 8 May 1971. Notwithstanding the warnings, the GANAS departed from Manila in the afternoon of 7 May
1971. However, for the Osaka/Tokyo flight on 17 May 1971, Japan Airlines refused to honor the tickets because of
their expiration, and the GANAS had to purchase new tickets. They encountered the same difficulty with respect to
their return trip to Manila as AIR FRANCE also refused to honor their tickets. They were able to return only after
pre-payment in Manila, through their relatives, of the readjusted rates. Because of this, the GANAS commenced an
action against AIRFRANCE for breach of contract of carriage.
ISSUE: Whether or not there was a breach of contract of carriage on the part of AIRFRANCE (NO)
RULING: Pursuant to tariff rules and regulations of the International Air Transportation Association (IATA), included
in paragraphs 9, 10, and 11 of the Stipulations of Fact between the parties in the Trial Court, dated 31 March 1973,
an airplane ticket is valid for one year. "The passenger must undertake the final portion of his journey by departing
from the last point at which he has made a voluntary stop before the expiry of this limit (parag. 3.1.2. ) ... That is the
time allowed a passenger to begin and to complete his trip (parags. 3.2 and 3.3.). ... A ticket can no longer be used
for travel if its validity has expired before the passenger completes his trip (parag. 3.5.1.) ... To complete the trip, the
passenger must purchase a new ticket for the remaining portion of the journey" (ibid.) From the foregoing rules, it is
clear that AIR FRANCE cannot be faulted for breach of contract when it dishonored the tickets of the GANAS after 8
May 1971 since those tickets expired on said date; nor when it required the GANAS to buy new tickets or have their
tickets re-issued for the Tokyo/Manila segment of their trip. Neither can it be said that, when upon sale of the new
tickets, it imposed additional charges representing fare differentials, it was motivated by self-interest or unjust
Air France vs. CA, 245 enrichment considering that an increase of fares took effect, as authorized by the Civil Aeronautics Board (CAB) in
SCRA 485 April, 1971. This procedure is well in accord with the IATA tariff rules.
 FACTS:

Africa Valdez de Reynoso leased a parcel of land to Raoul S. Bonnevie and Christopher Bonnevie for a period of
one year beginning August 8, 1976. Reynoso alleged that on November 3, 1976 she notified respondents by
registered mail that she was selling the leased premises for P600,000 and that she was giving respondents 30 days
from receipt of the letter to exercise their right of first priority to purchase the subject property as stipulated in their
Contract of Lease. On January 20, 1977, Reynoso sent another letter to the respondents informing them that the
property had been sold. Respondents wrote back to Reynoso that they did not receive her first letter and that they
had already signified their interest to purchase the property beforehand to Reynoso’s agent and thus were
constrained to refuse Reynoso’s request to terminate the lease. Reynoso went on with the sale in favor of Guzman,
Bocaling & Co. for a lesser price, and filed an ejectment case against the Bonnevies. Respondents filed an action
for annulment of the sale. The Court of First Instance ruled in favor of the respondents, declaring the deed of sale
executed by Reynoso in favor of Guzman, Bocaling & Co. null and void. The Court of Appeals affirmed the lower
court’s decision but held that the Contract of Sale was not voidable but was instead rescissible.

ISSUE:

1.) Did the Court of Appeals err in holding that the Contract of Sale was not voidable but was instead rescissible?

2.) Did the Court of Appeals err in considering the petitioner as a buyer in bad faith?

HELD:

1.) No. Under Article 1380 to 1381 (3) of the Civil Code, a contract otherwise valid may nonetheless be
subsequently rescinded by reason of injury to third persons, like creditors. The status of creditors could be validly
accorded the Bonnevies for they had substantial interests that were prejudiced by the sale of the subject property to
the petitioner without recognizing their right of first priority under the Contract of Lease. Rescission is a remedy
granted by law to the contracting parties and even to third persons, to secure reparation for damages caused to
them by a contract, even if this should be valid, by means of the restoration of things to their condition at the
moment prior to the celebration of said contract. It is a relief allowed for the protection of one of the contracting
parties and even third persons from all injury and damage the contract may cause, or to protect some incompatible
and preferent right created by the contract. Recission implies a contract which, even if initially valid, produces a
lesion or pecuniary damage to someone that justifies its invalidation for reasons of equity.

2.) No. Petitioner cannot be deemed a purchaser in good faith for the record shows that it categorically admitted it
was aware of the lease in favor of the Bonnevies, who were actually occupying the subject property at the time it
was sold to petitioner. A purchaser in good faith and for value is one who buys the property of another without notice
that some other person has a right to or interest in such property and pays a full and fair price for the same at the
Guzman Bocaling vs. time of such purchase or before he has notice of the claim or interest of some other person in the property. Good
Bonnevie, 206 SCRA 668 faith connotes an honest intention to abstain from taking unconscientious advantage of another. Tested by these
 principles, the petitioner cannot tenably claim to be a buyer in good faith as it had notice of the lease of the property
by the Bonnevies and such knowledge should have cautioned it to look deeper into the agreement to determine if it
involved stipulations that would prejudice its own interests.

FACTS:

1. Petitioner's/Plaintiff's claim/s:
Carmelo owned a block of land in Recto with two 2-story buildings
(covered by four land titles), which he leased to Mayfair for 20 years in
1967. In 1978, Carmelo sold the entire Recto property to Equatorial for
P11,300,000.
2. Respondent's/Defendant's claim/s (no more than 3 sentences)
Mayfair requested to have the sale canceled on the grounds that it
violated paragraph 8 of the respondent's lease with Carmelo, which
states: "If the LESSOR desires to sell the leased premises, the
LESSEE shall be offered a 30-day exclusive option to acquire the
same."
3. Decisions of the lower courts
The Trial court ruled in favor of the petitioners because paragraph 8
was regarded as an option contract. Mayfair appealed, and the CA
reversed the Trial court's decision, holding that paragraph 8 should be
interpreted as a "right of first refusal" rather than an option contract.

ISSUE:

Whether paragraph 8 is a right of first refusal clause or an option

contract clause.
HELD:
4. Disposition of the case (one sentence)
For the lack of a specified purchasing price in the agreement, the SC
concurred with the CA's judgment that paragraph 8 cannot be
considered an option clause (as defined in Articles 1324 and 1479 of
the Civil Code).
5. Dictum (no more than five sentences addressing the issue
relevant to the topic under discussion)
NO. Both Carmelo and Equatorial behaved in bad faith by entering into
a Contract of Sale despite the fact that paragraph 8 (right of first
Equatorial Realty vs. refusal) was agreed upon in the Contract of Lease and that Mayfair
Mayfair Theatre, 264 SCRA (another party) was interested in the property in question.
483
 Facts:
Respondent Jerry V. David is an employee of the SSS, and is an awardee of a house and lot located at North
Fairview, Quezon City under the SSS Employees' Housing Loan Program. A Deed of Conditional Sale over the
subject property was thereafter executed between the parties.

Acting on reports that numerous violations of some of the housing awardees, SSS conducted an investigation, and
in the case of David, he committed two (2) violations of his deed of conditional sale, to wit: (1) neither the
respondent nor his immediate family resided and/or occupied the said housing unit, and (2) he allowed a certain
Buenaventura Penus to possess and occupy the property.

As a consequence, SSS sent a letter to David formally revoking, terminating and/or rescinding the deed of
conditional sale. However, the latter refused to vacate and surrender possession of the subject property, prompting
SSS to institute a complaint with the Quezon City RTC revoking the deed of conditional sale and likewise praying for
the issuance of a writ of possession in its favor.

David denied the alleged violations, stating that Buenaventura Penus, alluded to by the [petitioner] as
possessor-occupant of the subject property, was in fact his caretaker until and after the necessary renovations and
modifications were made on the house.

The court a quo dismissed the complaint and adjudged the [petitioner] liable for costs, later affirmed by the CA.

Issue: Whether or not the CA erred in its decision affirming the trial court in not finding the respondent guilty of
violation of the T&C of the Deed of Conditional Sale.
Ruling:
Yes, the respondent did not comply with his obligations so rescission is proper. The Supreme Court ruled under the
terms of the subject Contract, "actual possession" cannot be equated with "actual occupancy." Inasmuch as the
housing unit was physically occupied by parties other than those intended to be benefited by the SSS housing
program, there was a clear violation of the Contract. In his letter to SSS Assistant Administrator Amador Monteiro on
David admitted as much, but tried to justify his noncompliance by saying that the property was not in a habitable
condition at the time of delivery.

Petition GRANTED and the assailed Decision SET ASIDE. The Deed of Conditional Sale CANCELLED and
petitioner ORDERED to pay respondent P172,978.85, plus the legal interest and the value of any substantial
Republic v. David, August improvements thereon. Respondent ORDERED to vacate immediately said H&L; and to surrender possession
16, 2004 thereof to petitioner.
 FACTS:

Petitioner Edna Binua was found guilty by RTC Branch 2 for the crime of estafa and was sentenced to imprisonment
and payment of damages. To avoid her criminal liability, Edna executed a separate real estate mortgage over her
husband's properties in favor of responded Lucia Ong. Edna filed a motion for a new trial which was granted
wherein the Court, after the trial, ordered Edna to pay Lucia Ong the total amount of her indebtedness plus interest
and other damages. The promissory note that the petitioners presented novated their original agreement into a civil
obligation. The RTC Branch 2 said that the promissory note is evidence of the mutual understanding of both Edna
and Lucia to turn the former's indebtedness into a loan and thus must be respected. However, Edna failed to settle
her obligation forcing Lucia to foreclose the mortgage with the latter as the highest bidder during a public sale.

Petitioners then filed for the Declaration of Nullity of Mortgage Contracts, alleging that the mortgage documents
were executed under duress due to the fear that Edna would be criminally punished and their consent was vitiated.
Unfortunately, RTC Branch 5 dismissed the case, ruling that it is true that the petitioners entered the mortgage
contract under duress. However, the threat was just and legal, a decision made by a competent court. Hence, the
threat to the petitioners' claim does not vitiate consent. Moreover, Edna benefitted when she and Lucia
compromised because she was acquitted of her criminal offense. The CA affirmed the RTC's decision as well.

ISSUE:

WON the mortgage contracts were executed under duress.

RULING:

No, the contracts were not executed under duress.

Article 1390(2) of the Civil Code provides that contracts, where the consent is vitiated by mistake, violence,
intimidation, undue influence, or fraud are voidable or annullable. Article 1335 of the Civil Code states that
intimidation is when one of the contracting parties is compelled by a reasonable and well-grounded fear of an
imminent and grave evil upon their person or property or the person or property of their spouse, descendants, or
ascendants. In De Leon v. Court of Appeals, the Court held that so that intimidation may vitiate consent and render
the contract invalid, the following requisites must concur: (1) that the intimidation must be the determining cause of
Binua v. Ong G.R. No. the contract or must have caused the consent to be given; (2) that the threatened act be unjust or unlawful; (3) that
207176, June 18, 2014 the threat be real and serious; and (4) that it produces a reasonable and well-grounded fear from the fact that the

Coronel vs. Constantino,
et al., G.R. No. 121069, 07
February 2003
person from whom it comes has the necessary means or ability to inflict the threatened injury. In cases involving
mortgages, a preponderance of the evidence is essential to establish its invalidity. The petitioners allege that the
respondent informed them of petitioner Edna's conviction in the criminal cases for estafa, but there is nothing unjust,
unlawful, or evil in the respondent's act. The petitioners should have shown how the respondent used such
information to convince them to sign the mortgages.
The Court stated that the threat to prosecute for estafa is not an unjust act but rather a valid and legal action to
enforce a claim and cannot be considered intimidation. The Court will not consider the petitioners' arguments on
such an issue, for to do so would sanction the petitioners' act of subverting the immutability of a final judgment.
Wherefore, the spouses' petition was denied for lack of merit.
FACTS: The subject property is made up of two pieces of land that were formerly held by Honoria Aguinaldo. Emilia
Meking Vda inherited one-half of it. de Coronel and her sons Benjamin, Catalino, and Ceferino, all Coronels.
Florentino Constantino and Aurea Buensuceso inherited the other half. On February 20, 1991, Constantino and
Buensuceso filed a case against Benjamin, Emilia, and John Does seeking a declaration of ownership, quieting of
title, and damages, as well as a writ of obligatory and/or prohibitory injunction.
Plaintiffs claimed that on April 23, 1981, Jess C. Santos and Priscilla Bernardo acquired Emilia and her boys'
property through a deed of sale signed by Emilia. By virtue of a settlement agreement, Santos and Bernardo sold
the same to Constantino and Buensuceso on June 21, 1990. That they are the owners of the relevant property and
that defendants have illegally begun to build on the premises in question. Plaintiffs request that the defendants
recognize, accept, and affirm the plaintiffs' ownership rights to the one-third stake, interest, and participation in the
above-mentioned property.
ISSUE: Whether or not a contract of sale made on behalf of a parent-co-owner is unenforceable with respect to the
shares of her co-heirs-children.
RULING: The deed of sale is insufficient to establish that petitioner Benjamin sold his part of the subject property. It
is undeniable that Benjamin did not sign the paper, making it unenforceable against him. Emilia signed the
agreement on her own behalf, not on behalf of her three children. As a result, the Court disagrees with the appellate
court. Emilia's three sons refused to approve the transaction. There is no evidence to suggest that the three brothers
were aware of their mother's selling. Catalino, Ceferino, and Benjamin could not be said to have willfully kept silent
and consciously opted not to initiate an action to annul the transaction since they were unaware of the sale. Their
purported silence and inactivity should not be regarded as an act of ratification. As a result, Jess C. Santos and
Priscilla Bernardo, who bought Emilia's portion, became co-owners of the subject land alongside Benjamin and the
heirs of Ceferino and Catalino. As a result, Santos and Bernardo may legally dispose of Emilia's part of the subject
property in favor of the private respondents Constantino and Buensuceso.
 FACTS:
Petitioner is the owner of a 374 square meters land located at Masbate and private respondent RCBC entered into a
“Contract of Lease with Option to Buy” which provided that petitioner will lease the land to RCBC for twenty-five
years and that the RCBC has option to purchase the land at 210.00 pesos per square meter within a period of 10
years from the date of contract signing. According to the contract, RCBC constructed improvements on the subject
land. Within three years upon signing, petitioner complied with his part of the agreement by registering the property
under the Torrens System for which OCT was issued by the Registry of Deeds. Respondent bank decided to
proceed with his option to buy the property at the agreed price of not greater than 210.00 pesos. However, the
petitioner answered that he is no longer selling the property. RCBC then filed an action for specific performance and
damages against the petitioner alleging that during their negotiations, there was a clear intention to permanently
stay on the property. The RTC declared the contract valid which was also affirmed by the CA.

ISSUE:
Whether or not the contract is a contract of adhesion.

HELD:
No. The Court held that a contract of adhesion is when a party, usually a corporation, prepares the stipulations in the
contract while the other party affixes his signature thereto as “adhesion”. A Contract of Adhesion is an ordinary
contract because a party who adheres to this kind of contract may reject it entirely. Furthermore, the Court does not
agree because the petitioner is a highly educated man, a CPA-lawyer, which means that he should be cautious with
the transactions he enters into.
Serra vs. CA, 229 SCRA 61

FACTS:
The herein respondent owned several parcels of land located in the northern portion of BF Homes Paranaque
Subdivision or known as Italia II lots.

BF Homes, represented by Florencio B. Orendain, as rehabilitation receiver appointed by the Securities and
Exchange Commission (SEC); and SMPI, represented by Federico C. Gonzales, President, entered into three
successive Deeds of Absolute Sale whereby the former sold to the latter a total of 130 Italia II lots with a combined
area of 44,345 square meters for the aggregate consideration of P106,247,701.00.

Petitioner completed the payments for the 130 Italia II lots in December 1995.

In compliance with Section 3 of all the three Deeds of Absolute Sale, BF Homes delivered the TCTs to SMPI but
only for 110 of the 130 Italia II lots purchased by SMPI.
San Miguel Prop. V. BF SMPI, thru counsel, sent BF Homes a letter on May 20, 1996 demanding the delivery of the remaining 20 TCTs.
Homes G.R. NO. 169343, Despite receipt of the afore-mentioned letter, BF Homes failed or refused to heed the demand of SMPI.
August 5, 2015 Consequently, SMPI filed a Complaint for specific performance with damages before the HLURB on August 24,
 2000 to compel BF Homes to deliver the remaining 20 TCTs to SMPI.

ISSUE:

Whether or not BF Homes is obligated to deliver the title of the remaining twenty lots to SMPI notwithstanding that
the latter had fully paid the same.

HELD:

Yes. Sec. 25, P.D. 957, The owner or developer shall deliver the title of the lot or unit to the buyer upon full payment
of the lot or unit. SMPI submitted adequate proof showing full payment to and receipt by BF Homes of the purchase
price for the 130 Italia II lots as fixed in the Deeds of Absolute Sale. BF Homes expressly admitted receipt of some
payments, while it remained silent as to the others without presenting controverting evidence.

Upon full payment by SMPI of the purchase price for the 130 Italia II lots to BF Homes, it became mandatory upon
BF Homes to deliver the TCTs for said lots to SMPI.

FACTS:

Macaria Averia inherited property in Extramadura, Sampaloc, from her 2nd husband, Roberto Romero.
Macaria had 6 six children from her first marriage and none with 2nd. She shared the Extremadura property
with her son Gregorio, his family, and Teresa's family until her passing.

Almost six years after Macaria passed away, her other children, Domingo, Angel, Felipe, and Filemon's heirs,
filed a complaint against her brother and niece for a judicial partition of the 180 square meter Extramadura
property of their late mother.

Gregorio and his niece Sylvanna averred that ½ of the property was verbally sold to them by Macaria for
bearing the expenses for a civil suit that Macaria filed against the relatives of Roberto, which resulted in an
additional 30 square meters to the Extramadura property, and as consideration for Gregorio's wife efforts in
taking care of her. Gregorio and Sylvanna further countered that Domingo also sold 1/6 of his share of the
remaining half of the property to Gregorio and Agripina and that Domingo was paid P10,000 for his land.
Thus, the remaining 5/6 of the half of the property's total area is to be subdivided among the heirs of Macaria.

After the trial, the RTC ruled in favor of Gregorio, stating that only 5/6 of ½ of the property is to be distributed
among the heirs of Macaria. The decision was based on oral arguments during the trial.

Averia v. Averia, 436 SCRA Domingo appealed with the CA because there was no evidence of the sale or transfer of ownership of ½ of
459 the property between her mother and brother and the 1/6 portion of him to Gregorio. The CA reversed the
RTC's decision in favor of Domingo and his co-claimants, remanding the case to the trial courts for proper
judicial distribution of the whole subject property.

Hence, Gregorio and Sylvanna appealed with the Supreme Court, claiming that they did establish the
conveyance of the portions of the property of Macaria and Domingo to Gregorio through the testimonies of
credible witnesses.

As for the courts' application of the Statute of Fraud, the petitioner contends that the statute only refers to
purely executory contracts and not to partially or entirely executed contracts as in their case.

ISSUE:

WON the conveyance of ½ portion and 1/6 portion of the other half of the subject property infringed the
Statute of Frauds for lack of a written contract.

RULING:

The conveyance of the said portions of the property did infringe the Statute of Fraud because of the lack of
written forms but was ratified following Article 1403 (2c). However, the contracts were eventually ratified by
the failure to object during the presentation of the oral evidence of Domingo's party regarding the ½ portion of
the property and the acceptance of payment by Domingo for his 1/6 portion of the other half; this is in
accordance with Article 1405.

Number 2 of Article 1403 lists the unenforceable contracts due to violation of the Statute of Frauds for lack of
a written agreement. This provision applies to executory contracts and does not apply to partial or completely
executed contracts. However, it must be proven by documentary or oral evidence that the contract was wholly
or partially executed. Moreover, contracts violating the Statute of Frauds referred to as Number 2 of Article
1403, may become enforceable under Article 1405, which state that the failure to object to the presentation of
oral evidence to prove the violation or by the acceptance of benefits under them.

In this case, the conveyance of ½ of the property and the 1/6 of the other half in favor of Gregorio violated
Article 1403, Number 2c for lack of written agreement. However, it was proven through the plaintiffs'
presentation of oral evidence that the conveyances of the said portions were completely executed:

1. Macaria conveyed ½ of the property to Gregorio in exchange for her son and her daughter-in-law's
expenses with the civil suit and taking care of her, which meant the equivalent value of the property
conveyed.
2. Domingo accepted P10,000 from his brother as payment for his portion.
3. Neither Domingo nor his co-claimants objected to the oral evidence, meaning they ratified the
 properties' conveyance.

Thus, the SC reversed the CA's decision and ruled that Gregorio owns 1/2 of the property and 1/6 of the other
half. The remaining 5/6 was subjected to judicial distribution to be conducted by the trial court.

Fornilda vs. RTC, 169

SCRA 351

FACTS:

Spouses Onnie Serrano and Amparo Herrera were the registered owner of a parcel of land situated in Las Pinas,
Metro Manila, which they agreed to sell to the respondent Godofredo Caguiat. A partial payment, as earnest money,
was paid by the respondent in the amount of P100,000 on March 19, 1990. As evidence, the petitioners gave a
corresponding receipt acknowledging the payment made by the respondent whereby full payment must be made on
or before March 23, 1990, and only then a final deed of sale will be executed.

Respondent, through his counsel, informed the petitioners of his readiness to pay the remaining balance and that
the latter should prepare the final deed of sale on March 28, 1990, 5 days after the agreed due date. However, the
petitioners responded, on April 4, 1990, through their counsel, that they were canceling their transaction with the
respondent and would be returning the earnest money to the respondent. A manager’s check was delivered to the
respondent’s counsel on April 6, 1990 payable to Caguiat.

Because of the cancellation, the respondent filed a case with the RTC of Makati City and demanded specific
performance and damages.

After the trial, the RTC and the CA ruled that there was a perfected contract of sale when Caguiat made a partial
payment based on Article 1482 of the Civil Code, which reads, “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.” The receipt given by
the petitioners served as evidence of the contract of sale between the latter and respondent, Caguiat.

Hence, the present petition wherein the petitioners claim that the receipt is not a perfected contract of sale based on
Article 1458 in relation to Article 1475 of the Civil Code because there needed to be an explicit agreement regarding
the amount of consideration. The respondent paid a mere downpayment that he decided to pay as a partial
Spouses Amparo and
payment.
Onnie Serrano vs.
Godofredo Caguiat, G.R. ISSUE:
No. 139173,
28 February 2007 Whether or not the document “Receipt of Partial Payment” signed by both parties is a contract to sell or a contract of
 sale.

RULING:

The given receipt was not a contract of sale but rather a contract to sell.

The Supreme Court determined the real nature of the contract entered into by the parties by interpreting the terms
used therein. By the terms used in the receipt, the parties entered into a conditional contract of sale, and it can
only be perfected upon delivery of the full payment of the purchase price.

A conditional contract of sale is akin to a contract to sell because the perfection of the contract relies upon the
happening of a suspensive condition, which is commonly full payment of the purchase price. Until such full payment
is made, the seller retains ownership of the property. In contrast, in a contract of sale, the ownership is transferred to
the buyer after an immediate full payment of the purchase price, or there is an agreement wherein the ownership of
the property is transferred to the buyer even if the payment is not yet completed. A resolutory condition exists
therein that if the buyer fails to fulfill his end of the agreement, the seller has the right to take back his property.

In the case herein, the Receipt of Partial Payment shows that there was only a contract to sell. Here, the ownership
and possession of the certificate of title of the lot are retained by the seller even after a partial payment was made,
and the ownership will only be transferred upon full payment on or before the agreed due date. After the due date
came and the respondent failed to pay the full purchase price, the petitioners had the right to rescind the contract
unilaterally. Also, the absence of a formal deed of conveyance indicated that the parties did not intend an immediate
transfer of ownership. Hence, there was no contract of sale but a contract to sell. Furthermore, the suspensive
condition did not take place; therefore, respondent Caguiat cannot compel the petitioners to transfer the ownership
of the property to him.

It is true that Article 1482 of the Civil Code states, "Whenever earnest money is given in a contract of sale, it shall be
considered as part of the price and evidence that the contract has been fulfilled." However, this provision refers to
earnest money given in a contract of sale. In this instance, the earnest money was provided in a contract to sell.
The earnest money is only included in the consideration if the sale is consummated upon complete payment of the
purchase price. Since the earnest money was paid under a contract to sell, Article 1482, which refers to a sale
contract, does not apply.

Wherefore, the SC granted the petitioners’ petition, reversed the CA’s decision, and dismissed the respondent’s
complaint.
San Miguel Properties
Phil. vs. Alfredo Huang,
G.R. No. 137290, 31 July
2000
 Facts:
Optima Realty Corporation (petitioner) owns a parcel of land in Pasay City which Securitron Security Services Inc.
(respondent), through its General Manager Antonio Eleazar, offered to purchase at P6000 per square meter. In
December 2004, Eleazer sent a letter to Optima’s Exec. Vice-President Carolina Young indicating such an offer.
Eleazer connected with Young’s employees but was not able to personally negotiate with Young. Later, Eleazar went
to the respondent’s office offering to pay the property in cash but Young declined saying that she still needed to
secure her sister’s advice and prior approval of the Board of Directors.

In February 2005, Eleazar sent a letter to the petitioner accompanied by a PNB Check issued for P100,000 and
made payable to the petitioner. The letter stated that the respondent is making a deposit of P100,000 as an earnest
money for the property and that full payment will be made upon clearing of the tenants at said property and signing
of Deed of Sale. The letter and the check were not personally delivered to Young or her office but through an
ordinary receiving clerk. A provisional receipt was issued. Then, the check was deposited and credited to the
petitioner's bank.

Respondent, through counsel, demanded that the petitioner proceed with the sale of property. In March 2006, Young
sent a letter to respondent’s counsel expressing their non-acceptance of the offer to buy their property and failure of
the Board to pass a resolution agreeing in such sale; that Eleazar offered to buy the property and tendered an
earnest money despite the fact that the petitioner is still undecided to sell subject property.

Respondent filed with the Pasay RTC a civil case against the petitioner for specific performance with damages to
compel the latter to consummate the sale. The trial court ruled in favor of the respondent and held that the
petitioner’s acceptance of the P100,000 earnest money indicated a perfected contract of sale. Upon appeal before
the CA, the honorable court only affirmed the lower court’s decision. It pronounced that the petitioner’s acceptance
of earnest money and issuance of receipt show that there was an agreement between the parties; that the inaction
of the petitioner to return the earnest money it received for more than one year implies that the petitioner cannot
argue lack of knowledge of the payment of the check.

Petitioner argues that respondent failed to prove the existence of a perfected contract of sale because there was
never an agreement in the first place concerning the sale of the subject property. The check tendered by the
petitioner was an offer which requires the acceptance of the petitioner to give rise to a perfected sale. Since there is
no perfected agreement, the check cannot be treated as earnest money but only as deposit, option money or
guarantee.

Issue:
First Optima Realty
Whether or not the CA erred in ruling that the money received by the petitioner was earnest money thereby
Corporation vs. Securitron providing a perfected contract of sale and that the time that lapsed in returning the money and in replying to the
Security Services, Inc., letter is proof of acceptance of earnest money.
G.R. No.199648, 28
January 2015 Ruling:
 Yes. The CA erred in rendering such decisions.

Respondent’s offer to purchase the subject property was never accepted by the petitioner at any instance even after
the negotiations of Eleazar and Young. The latter declined to enter into an agreement and accept cash payment.
When there is merely an offer by one party w/o acceptance of the other, there is no contract. The stages of the
contract of sale are (1) negotiation, (2) perfection, and (3) consummation. The parties never got past the negotiation
stage.

The letter and check sent by Eleazer in February 2005 only reiterated the original offer that was previously rejected.
Since there is no perfected sale, respondent had no obligation to pay nor did it possess the right to deliver earnest
money to bind the petitioner to a sale. As per Art. 1482 of the Civil Code, there must be a perfected contract of sale
before we can speak of earnest money. Where the parties merely exchanged offers and counter-offers, no contract
is perfected since they did not yet give consent to such offers. Also, the failure to return the supposed earnest
money was made under dubious circumstances. It cannot mean that the petitioner agreed to the respondent’s offer.

In a potential sale transaction, prior payment of earnest money even after the owner agrees to sell property is
irregular and cannot bind the owner to the obligations of a seller under a perfected contract of sale. The carriage
cannot be placed before the horse.

Wherefore, the petition is granted.

FACTS:

Spouses (Jacinto & Dalmacia) Nemeño, the predecessors-in-interest of herein respondent heirs, owned 2
parcels of coconut land (5-hectares and 4,420sqm) located in Ozamiz City. In 1979, Dalmacia died -
survived by her husband, Jacinto, and their 6 children: Meliton, Eleuteria, Timoteo, Justo, Saturnino (now
deceased) and Felipa. In 1985, Jacinto, together with his other 5 children, conveyed the 2 lots to his
daughter, Felipa, and the latter's husband (spouses Lumayag) The instrument of conveyance was
denominated as Deed of Sale with Pacto De Retro, with stipulation that: (1) the consideration for the sale
was P20,000.00; (2) the vendors a retro have the right to repurchase the same lots within 5 years from the
date of the execution of the instrument (February 25, 1985); (3) in the event no purchase is effected within
the said stipulated period, "conveyance shall become absolute and irrevocable without the necessity of
drawing up a new absolute deed of sale (subject to the requirements of law regarding consolidation of
ownership of real property) Unfortunately, in the same year; Jacinto also died. In 1996, the petitioner
spouses Lumayag filed with the RTC of Ozamiz City a petition for the reconstitution of the owner's
Lumayag vs. Heirs of duplicate copy for one of the 2 lots previously subject of the Deed of Sale with Pacto De Retro. This was
Jacinto Nemeo, G.R. No. opposed by the heirs of the deceased Spouses Nemeño, but the trial court ruled in favor of petitioner
162112, July 3, 2007 spouses Lumayag. Thereafter; the heirs of the deceased spouses Nemeño filed with the same trial court a
complaint for Declaration of Contract as Equitable Mortgage, Accounting and Redemption with Damages.
The trial court then rendered a Decision considering the subject Deed of Sale with Pacto De Retro as an
equitable mortgage. Both parties appealed before the CA. The CA affirmed the findings of the trial court
with some modifications - the mortgaged properties are subject to foreclosure should the respondents fail
to redeem the same within thirty (30) days from finality of the decision. The subsequent MR was likewise
denied, hence this present recourse.

ISSUE:

Whether or not the Deed of Sale with Pacto de Retro is an equitable mortgage? (YES)

Ruling:

An equitable mortgage has been defined "as 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. Article 1602
of the Civil Code enumerates the instances when a contract may be presumed to be an equitable
mortgage regardless of the nomenclature of the contract. In relation to, Article 1604 of the Civil Code, it
provides that the provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale,
and, in case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an
equitable mortgage. Moreover; the law requires the presence of any one and not the concurrence of all of
the circumstances enumerated under Article 1602. In the case at bar; the presence of not merely one but
4 circumstances indicative of the true nature of the subject transaction as an equitable mortgage, to wit:
gross inadequacy of the contract price of P20,000.00 for 2 parcels of land, the total area of which is almost
5.5 hectares; respondent heirs remained in possession of the subject property even after the execution of
the supposedly Deed of Sale with Pacto de Retro: said respondents' payment of realty taxes; and the
provision on pactum commissorium. It was evident that respondent heirs, as vendors a retro, remained in
possession of the subject lots after the execution of the deed of sale with right to repurchase. It is
well-settled elementary doctrine that where the vendor remains in physical possession of the land as
lessee or otherwise, the contract should be treated as an equitable mortgage Respondent heirs' continued
payment of the real property taxes - coupled with continuous possession of the pronertv constitutes orpat
weight of evidence that a nerson under whose name the realty taxes were declared has a valid and rightful
claim over the land. Lastly, the stipulation in the deed making the conveyance absolute and irrevocable if
the repurchase is not exercised is considered a pactum commissorium, which stipulation is contrary to the
nature of a true pacto de retro sale, because in pacto de retro sale, ownership of the property sold is
immediately transferred to the vendee a retro upon execution of the sale, subject only to the repurchase
 right of the vendor.

FACTS:The late Dionisia Dorado Delfin and her heirs were trying to recover a particular parcel of land from respondent
Salvador D. Dellota. The petitioners argued that the Deed of Sale with Right of Redemption, which was entered into by Dionisia
and respondent Dellota, is actually an equitable mortgage under Article 1602 of the Civil Code. They claimed that the price
stipulated for a five-hectare portion of the subject property was extremely low, indicating that the contract was actually an
equitable mortgage, rather than a sale with a right of redemption.

However, despite their argument, the trial court ruled against Dionisia and her heirs. The court found that the Deed of Sale with
Right of Redemption was a valid contract of sale, and not an equitable mortgage. The trial court may have considered factors
such as the intention of the parties at the time of the contract and the circumstances surrounding the transaction.

On appeal, the Court of Appeals (CA) upheld the decision of the trial court, stating that there was no error in the trial court's
findings and that the evidence supported the ruling. In other words, the CA agreed that the Deed of Sale with Right of
Redemption was a valid contract of sale and that Dionisia and her heirs had no legal right to recover the parcel of land from
respondent Dellota.

ISSUE:Whether the Deed of Sale with Right of Redemtion executed by Dionisia and Dellota is an equitable
mortgage under Article 1602 of the Civil Code.

RULING:The Supreme Court says NO. Petition denied.An equitable mortgage is a type of mortgage that lacks some
of the formalities required by law but still serves the purpose of securing a debt through real property. In such cases,
a purported contract of sale may actually be an equitable mortgage if the parties intended to secure an existing debt.
One of the key elements to determine if a sale is actually an equitable mortgage is whether the consideration paid
for the property is "unusually inadequate." However, the courts also take into consideration the circumstances
surrounding the transaction, such as whether the seller was threatened or coerced into signing the contract.In this
case, the court found that the price paid for the five-hectare portion of Lot No. 1213 was not unusually inadequate
based on previous cases. Furthermore, there was no evidence to suggest that Dionisia was coerced or did not
Vda de Delfin vs. Dellota, understand the contract she signed. Therefore, the court ruled that it was not their place to interfere with the terms
G.R. No. 143697, January of the agreement, especially since Dionisia was not legally incompetent.
28, 2008
Biana vs. Gimenez, GR
No. 132768, 9 September
2005, 469 SCRA 486

Facts :
Petitioner Adalia B. Francisco and three of her sisters were co-owners of four parcels of land, one on which stands
Francisco vs. Boiser, G.R. the Ten Commandments Building at 689 Rizal Avenue Extension, Caloocan City. They sold 1/5 of undivided
No. 137677, May 31, 2000 share to Adela Bias for the amount of P10,000 and thus making the Bias a co-owner of said real property to
the extent of the share sold.The latter then sold the same 1/5 share to Zenaida Boiser without the knowledge and
consent of his four co-owners. Boiser then demanded from Adalia, her share in the rentals collected from the
tenants of the building in the co-owned property via court action; Adalia received summons therefore on August 5,
1992. After which, Adalia sought to exercise her right to redeem Boiser’s 1/5 share, consigning P10,000 with the
Clerk of Court. Boiser refused. Thus, Adalia filed a complaint for legal redemption with the RTC.

In her defense, Boiser said that the 30-day period granted to Adalia had already expired as she sent Adalia a notice
of sale (Bias to Boiser) on May 30, 1992, enclosed on said letter as a copy of the Deed of Sale. Adalia claimed
otherwise, saying that period did not start to run until her receipt of the summons on August 5, 1992. The RTC
dismissed the complaint. The CA affirmed.

Issue :

Whether the letter of May 30, 1992 sent by respondent to petitioner notifying her of the sale on August 8, 1986 of
Adela Blas' 1/5 share of the property to respondent, containing a copy of the deed evidencing such sale, can be
considered sufficient as compliance with the notice requirement of Art. 1623 for the purpose of legal redemption.

Ruling :

NO. THE NOTICE CONTEMPLATED BY ART. 1623 MUST BE GIVEN BY THE CO-OWNER-VENDOR, NOT THE
VENDEE; THE NOTICE SHOULD HAVE BEEN RECEIVED FROM BIAS. ZENAIDA BOISER’S LETTER IS
INSUFFICIENT.

The notice required for the exercise of legal pre-emption or redemption contemplated under Art. 1623 must be given
by the co-owner-vendor, not the vendee. Now, it is clear that by not immediately notifying the co-owner, a vendor
can delay or even effectively prevent the meaningful exercise of the right of redemption. In the present case, for
instance, the sale took place in 1986, but it was kept secret until 1992 when vendee (herein respondent) needed to
notify petitioner about the sale to demand 1/5 rentals from the property sold. Compared to serious prejudice to
petitioner's right of legal redemption, the only adverse effect to vendor Adela Blas and respondent-vendee is that the
sale could not be registered. It is non-binding, only insofar as third persons are concerned. It is, therefore, unjust
when the subject sale has already been established before both lower courts and now, before this Court, to further
delay petitioner's exercise of her right of legal redemption by requiring that notice be given by the vendor before
petitioner can exercise her right. For this reason, we rule that the receipt by petitioner of summons in Civil Case No.
15510 on August 5, 1992 constitutes actual knowledge on the basis of which petitioner may now exercise her right
of redemption within 30 days from finality of this decision.

In the present case, as previously discussed, receipt by petitioner of summons in Civil Case No. 15510 on August 5,
1992 amounted to actual knowledge of the sale from which the 30-day period of redemption commenced to run.
Petitioner had until September 4, 1992 within which to exercise her right of legal redemption, but on August 12,
 1992 she deposited the P10,000.00 redemption price. As petitioner's exercise of said right was timely, the same
should be given effect.

WHEREFORE, in view of the foregoing, the petition is GRANTED and the decision of the Court of Appeals is
REVERSED and the Regional Trial Court, Branch 122, Caloocan City is ordered to effect petitioner's exercise of her
right of legal redemption in Civil Case No. C-17055.

Facts:

During the lifetime of the spouses, the property was transferred to their children and the Registry of Deeds,
Pasay City, issued TCT No. 16007 in the names of the three sons. Annotated in the title is the total cancellation of
said title by virtue of the Deed of Sale, Executed by Cresenciana Alejo (attorney-in-fact of Crisostomo Armada) in
favor of Anita Si the 113.34 sq meters of the said property.

Spouses Armada filed a complaint for Annulment of Deed of Sale and Reconveyance of Title with Damages,
against herein petitioners Anita and Serafin Si and Conrado Isada, brother-in-law of Cresenciana. Isada brokered
the sale.

The complaint alleged that Conrado Isada sold Crisostomo's share by making it appear that Cresenciana, the
attorney-in-fact of her husband, is a Filipino citizen and that that the other owners, Jose and Severo, Jr., had no
written notice of the sale; and that all upon learning of the sale to the spouses Si, private respondents filed a
complaint for annulment of sale and reconveyance of title with damages, claiming they had a right of redemption.

Issue:

Whether or not Spouses Armada have the right of redemption to the subject property.

Held:

No.

Ratio:

Notably, every portion conveyed and transferred to the three sons was definitely described and segregated and
Si vs Court of Appeals, GR with the corresponding technical description (sic). In short, this is what we call extrajudicial partition. Moreover, every
122047 portion belonging to the three sons has been declared for taxation purposes with the Assessor's Office of Pasay City
 on September 21, 1970. These are the unblinkable facts that the portion sold to defendant spouses Si by
defendants Crisostomo Armada and Cresenciana Armada was concretely determined and identifiable. The fact that
the three portions are embraced in one certificate of title does not make said portions less determinable or
identifiable or distinguishable, one from the other, nor that dominion over each portion less exclusive, in their
respective owners. Hence, no right of redemption among co-owners exists."

Facts:
Sofia P. Martinez was the registered owner of 2 parcels of land in Tacloban City. On October 25, 1961, Sofia leased
the lots to Yu Siong, father of the president and stockholders of petitioner Sen Po Ek for a period of 10 years. The
lease contract required the lessee the construction of a commercial building which was to become the property of
Sofia upon the expiration of the lease on October 25, 1971.

On September 20, 1973, the lease contract was renewed between Sofia and Yu Siong's wife, Lim Hua, who
succeeded him as lessee. The contract expressly stated that “as of October 1, 1973, the lessor shall be the absolute
owner of a building located at Lot Nos. 50 and 106 of the Tacloban Cadastre.” The lease then underwent several
renewals and the last written contract of lease was executed on March 24, 1982 for a term of 5 years expiring on
January 1, 1987.

In the meantime, Sofia sold the lots and the building to Teodora P. Martinez. After the lease contract expired in
January 1987, it was no longer renewed by the parties. Petitioner Sen Po Ek, however, continued to possess and
occupy the leased properties, and regularly paid the monthly rentals to Sofia until her death in August 1989. After
the latter's death, the rentals were paid to the heirs of Sofia through Teodora P. Martinez.

On November 11, 1989, Teodora sent a letter to petitioner Sen Po Ek informing it of her intention to sell the leased
premises and authorizing Mrs. Remedios Petilla to negotiate the sale “with any and all interested parties” Petitioner
sought to purchase the properties at Php 6 000.00 per square meter, and the Yu Siongs were able to contact private
respondent Teodora P. Martinez who advised them to formalize their offer in writing.

Sometime in December 1989, private respondent Juanito Tiu Uyping, Jr. was informed that the subject leased
premises were for sale and that the sale was being brokered by Mrs. Remedios Petilla.
Sen Po Ek Marketing On January 9, 1990, petitioner Sen Po Ek filed a verified complaint against Teodora in the RTC of Palo, Leyte, for
Corporation vs. Martinez, the annulment of the Deed of Sale executed by her mother, Sofia, in her favor and notarized on November 5, 1985.
GR No. 134117, 9 February Petitioner invoked its alleged right of first refusal on the leased premises based on Republic Act (R.A.) No. 1162, as
2000, 325 SCRA 210 amended, in relation to Presidential Decree (P.D.) No. 1517. On January 12, 1990, Teodora sold the property to the
 respondent Tiu Uyping brothers.

RTC held in favor of the petitioner and ordered the recission of the Deed of Absolute Sale executed between Teidira
and the Uypings. The court also held that the plaintiffs had the right of first preference to buy the subject lots as well
as the building erected thereon.

CA reversed the decision of the RTC and held that being the owner of the property in suit, Teodora had the right to
exercise all the attributes of ownership and thus she may dispose of the property to whomsoever and in whatsoever
manner and for whatever consideration she wishes, under the attribute of jus disponendi. The CA found that the
appellee corporation is neither an adjoining owner of the property nor a qualified tenant of the land.

Issue: WON Sen Po Ek has a right of first refusal to assert against private respondents

Ruling:
Petitioner Sen Po Ek does not have a right of first refusal to assert against private respondents. Neither any law nor
any contract grants it preference in the purchase of the leased premises.

Article 1622 of the New Civil Code, which provides that: “Whenever a piece of urban land which is so small and so
situated that a major portion thereof cannot be used for any practical purpose within a reasonable time, having been
bought merely for speculation, is about to be re-sold, the owner of the adjoining land shall have the right of
redemption, also at a reasonable price. When two or more owners of adjoining lands wish to exercise the right of
pre-emption or redemption, the owner whose intended use of the land in question appears best justified shall be
preferred,”

The SC stated that this provision only deals with small urban lands that are bought for speculation where only
adjoining lot owners can exercise the right of redemption. Petitioner Sen Po Ek is not an adjoining lot owner, but a
lessee trying to buy the land that it was leasing. Indeed the right of first refusal may be provided for in a lease
contract. However in this case, such right was never stipulated in any of the several lease contracts between
petitioner and Sofia. Petitioner claims that it was Teodora herself who assured them that they can have the priority to
buy the subject parcels of land, but there is absolutely no proof of this. Such grant of the right of first refusal must be
clearly embodied in a written contract, but there is none in the present case.

FACTS:
In 1965, Ayala y Cia Hacienda de Calatagan, owned by Alfonso Zobel, allegedly expanded the original
area of their land from 9, 652.583 hectares to about 12, 000 hectares usurping 2, 000 hectares consisting
of portions of territorial sea, foreshore, beach, and navigable waters which belongs to the public domain. A
Republic vs. Delos final and executory judgment of the Court was rendered to recover the illegally obtained territory but Ayala
Angeles, GR No. L-30240, and Zobel have made technical maneuvers to prevent its execution.
25 March 1988, 41 SCRA
422 Respondent Zobel, represented by Judge De Los Angeles, ousted De Chavez, the petitioner and a
government’s fishpond lessor, by bulldozing the same and threatened to eject other lessors from their
respective fishpond lots described as being embraced in the void subdivision tittles claimed by said
respondent.
The Petitioner filed an Accion Reinvidicatoria with Preliminary Injunction against the Respondents praying
for cancellation of Zobel’s void subdivision titles and the reconveyance of the same to the government.
Respondent Zobel then prayed for a writ of preliminary mandatory injuction restoring to him possession of
the subject land, and a judgment ordering De Chavez and other lessors to vacate the premises in question
and to surrender possession to him. This was granted by respondent Judge De Los Angeles.
The Petitioner then filed a motion for authority to conduct re-survey of the lands affected to properly
segregate them from the respondent’s private lands which the respondent judge denied.
The Petitioner again filed a Motion to Re-survey in 1973 which was granted. Three years later, the
re-survey confirmed the uncontroverted fact that the disputed areas form part of the expanded area
already reverted to public dominion.
The Respondent then filed a Motion for immediate resolution of defendant-movant’s motion to suspend.
Judge Argueli, then dismissed the motion of the petitioner.
While the case is pending the respondent, Zobel, has breached the restraining order and started acquiring
possession of the areas in dispute by cutting trees.
Hence, this petition for certiorari.

ISSUE:
WON the private petitioners as lessors have a right to the possession of the areas which were allegedly a
part of public domain.

RULING:
Yes. The Republic’s co-petitioners and private plaintiffs, namely Chavez and Mercado, were entitled to be
placed in possession of the fishponds as lessees of the Republic of the Philippines. With regard to the
areas covered by “Transfer Certificates of Title Nos. 3699 and 9692, they are entitled to be placed in
 possession thereof as their application had been duly approved. Such leases as official acts of the
Government have the presumption of regularity and cannot be summarily, prematurely and capriciously
set aside without trial as the respondent court has done.

FACTS

Angelito Miranda, Angel Miranda's son, founded the Executive Machineries and Equipment Corporation (EMECO) in
1984, a domestic corporation largely engaged in the manufacturing and fabrication of rubber rollers. Angelito
possessed 80% of the corporation's shares, while his wife Florenda owned 10%. That year, Angel agreed into a
verbal leasing agreement with EMECO, allowing it to develop a factory on the property. The arrangement was for a
month-to-month rental of P8,000 per month. On the property, EMECO built its factory. EMECO initially paid the
monthly rentals. However, upon Angelito's death on June 21, 1988, EMECO failed to pay the rentals but continued
to occupy the leased premises.

The EMECO facility was completely destroyed by fire on November 19, 1989. Angel demanded payment of accrued
rentals in the sum of P280,000.00 as of May 1991 in a letter to EMECO dated June 3, 1991. EMECO was also
advised that the oral lease contract will be terminated on June 30, 1991. EMECO, on the other hand, neglected to
pay the accumulated rentals and to evacuate the premises. EMECO received another demand letter on September
27, 1991. It left the leased premises, but the rent owed remained unpaid.

Florenda appeared at the petitioner's office in November 1991 and offered to sublease the property to Wilson Kho,
the corporation's Officer-in-Charge. Florenda allegedly presented Kho a copy of a lease contract for the
abovementioned property supposedly signed by Angel in favor of EMECO. Kho agreed to rent the place after
visiting and examining it, on the condition that its true and registered owner sign the lease contract in his presence.
Kho declined Florenda's proposition as she failed to provide Angel for the stated purpose.

Later, Kho was able to locate Angel in Noveleta, Cavite, and offered to lease the property on behalf of the petitioner,
to which Angel consented.

However, on January 27, 1992, Florenda, along with several armed men posing as police officers, forcibly ejected
petitioner from the rented premises, claiming that she was the owner and that the location was already covered by
another lease contract.

Florenda and her crew removed some of petitioner's equipment, machinery, and other property during the incident,
incurring loss and damage to said property.
G.Q. Garments, Inc. vs.
Miranda, GR No. 161722, Meanwhile, Angel obtained a copy of the claimed lease contract he signed in favor of EMECO. On March 12, 1992,
20 July 2006, 495 SCRA he filed a lawsuit for declaration of nullity of the leasing contract with the Makati Regional Trial Court (RTC), Branch
741 66, docketed as Civil Case No. 92-699. Angel claimed that his signature as lessor on the putative contract was
 forged. He asked for a judgment declaring the contract null and void in his favor.

Petitioner filed an action for damages and recovery of possession of the property before the RTC of Cavite City,
Branch 17, on April 20, 1992, with Angel, EMECO, and Florenda as alternative defendants.

Angel and petitioner, as plaintiffs, filed a separate ejectment action against Florenda before the Municipal Trial Court
(MTC) of Bacoor, Cavite, docketed as Civil Case No. 1265 on June 25, 1992. On July 2, 1993, the court issued a
judgment ordering the eviction of Florenda and all individuals claiming the property on her behalf. The decision was
challenged in the RTC. However, when Florenda failed to post a supersedeas bail, the judgement was carried out
and she was evicted from the property.

ISSUE:

The issues are: (1) whether defendants are responsible to petitioner for P10,000,000.00 in actual damages; and (2)
whether respondent Angel Miranda is liable to petitioner for the P360,000.00 paid as rentals.

RULING

The trespass committed by respondent Florenda Miranda and her associates in this case was merely trespass in
fact. They violently entered the property and damaged petitioner's equipment and building because the latter
refused to engage into a lease agreement with EMECO over the property due to respondent Florenda Miranda's
inability to provide respondent Angel Miranda to sign the lease agreement. Respondent Florenda Miranda sought to
dupe petitioner by forging respondent Angel Miranda's signature on the... She presented the petitioner the lease
contract. Respondent Florenda Miranda appears to have attempted to compel the petitioner into signing a lease
contract with EMECO over the land, only to be denied by the petitioner.

FACTS: This is a second ejectment case to the prior ejectment case that was compromised. The parties are the
respondent Mutya Victorio, the owner of certain commercial units located in Isabela and the petitioners are
Leonardo Chua and Heirs of Yong Tian.

1994-ON REFUSAL TO PAY THE INCREASED RENT

Chua vs. Victorio, GR No. In September 1994, the respondent made a rental survey as a result a 25% rental increase was demanded from
157568, 18 May 2004, 428 petitioners. cralawrePetitioners refused to pay the increased rentals which compelled respondent to file unlawful
SCRA 447 detainer cases against both lessees. The dismissal was affirmed by the Regional Trial Court (RTC), but reversed by
the Court of Appeals, which ordered petitioners to vacate the leased premises and upon motion filed by respondent,
the MTCC issued writs of execution ordering the ejectment of petitioners from respondents property. However, the
MTCC found that the petitioners paid the increased monthly rental even before the Court of Appeals decision
attained finality. The MTCC quashed the writs of execution that it earlier issued.cralawred

Respondent assailed the quashal of the writ of execution directly to the Supreme Court via a Petition for Review on
Certiorari. This petition was dismissed. Petitioners thus remained in possession of respondents properties.

1998-ON REFUSAL TO PAY THE INCREASED RENT

In October 1998, respondent wrote a letter to petitioners informing them of her intention to increase the monthly
rentals effective November 1, 1998 to a sum more than double the original rental fee. Petitioners refused to pay the
increased amount thus the Respondent instituted Civil Cases. The Court of Appeals granted petitioners an
extension of one year from finality of the decision within which to vacate the premises. Petitioners motion for
reconsideration was denied on March 11, 2003. Hence, this petition.

PETITIONERS’ CONTENTION

Petitioners contend that they have a continued right of occupancy, paying monthly rentals which may be increased
only by 25% every four years. They argue that the increase demanded by respondent was in excess of the
allowable amount, and, therefore, is invalid.

ISSUE: 1.W/N The Compromise Agreement had a continued validity.

RULING: NO, The compromise agreement ceased to be the law between the parties and ceased to govern their
legal relationship when in 1994, the petitioners refused to pay the rentals, and respondent initiated the earlier
ejectment suits, the juridical bond between the parties was severed. The parties were no longer connected by the
link of a lessor-lessee relation. No amount of subsequent payment by the lessees could automatically restore the
parties to what they once were. The lessors acceptance of the increased rentals did not have the effect of reviving
the earlier contract of lease. Upon the moment of acquiescence by respondents to the increased amount, an entirely
new contract of lease was entered into, forging an entirely new juridical relation. Hence, respondent was well within
her rights to increase the rental of her properties each month as she desired, subject to existing laws. Petitioners
were similarly within their rights to refuse to acquiesce. Upon this refusal, the contract of lease between the parties
was once more terminated. Respondent thus has the right to demand that petitioners vacate her properties.The
petition is denied.
 Facts:

The Magallanes billboard was leased by Macgraphics to Sime Darby in April 1994 at a monthly rental of
P120,000.00. (4 year contract) April 23, 1996, Goodyear bought the assets of Sime Darby from P1.5 billion to P1.65
billion. The increase of the purchase price was made in consideration, among others, of the assignment by Sime
Darby of the receivables in connection with its billboard advertising in Makati City and Pulilan, Bulacan. On May 9,
1996, Sime Darby and Goodyear executed a deed entitled "Deed of Assignment in connection with Microwave
Communication Facility and in connection with Billboard Advertising in Makati City and Pulilan, Bulacan" (Deed of
Assignment), [8] through which Sime Darby assigned, among others, its leasehold rights and deposits made to
Macgraphics pursuant to its lease contract over the Magallanes billboard. Sime Darby notified MAcgraphics through
a letter-notice.

After submitting a new design for the Magallanes billboard to feature its name and logo, Goodyear requested that
Macgraphics submit its proposed quotation for the production costs of the new design. In a letter [10] dated June 21,
1996 Macgraphics informed Goodyear that the monthly rental of the Magallanes billboard is P250,000.00 and
explained that the increase in rental was in consideration of the provisions and technical aspects of the submitted
design. Good year declined and sued. RTC ruled in favor of Macgraphics and CA affirmed awarding the latter
attorneys fees and the assignment partially rescinded.

Issue

WON the assignment of SIME DARBY the right to lease with the same amount should be honored. And
Macgraphics be entitled of attorneys fees

Ruling

Negative on the part of the assignment because Macgraphics did not expressly agree on the assignment. Goodyear
Sime Darby Pilipinas, Inc. is treated as a new client. Macgraphics is entitled to attorneys fee because it was dragged into litigation and for the
vs. Goodyear Philippines, protection of its assets.
Inc., G.R. No. 182148,
June 8, 2011
Sulo sa Nayon, Inc. vs.
Nayong Pilipino
Foundation, GR No.
170923, 20
January 2009, 576 SCRA
655
 FACTS:
This case stemmed from an injunction suit filed by plaintiff-appellants Shirley Yu-go et.al, alleging that, sometime in March 1983,
appellees Alida Mores, pleaded to appellants that they be allowed to stay in the subject property in the meantime that they did
not own a house yet. Said property was co-owned by plaintiff-appellants. They readily agreed without asking for any rental but
subject only to the condition that the said stay would last until anyone of appellants would need the subject property. Hene,
appellees and their children occupied the same as agreed upon.

In November 1997, appellants made known to appellees that they were already in need of the subject property. However,
appellees begged that they be given more time. Extensions of time were repeatedly given to appellee but, instead of heeding
such demand, appellees hired some laborers and started demolishing the improvements on the subject property on January
20, 1999.

Consequently, appellants instituted the said action for injunction where they also prayed for the reimbursement of the value of
the residential building illegally demolished. Appellees filed their Answer where they denied the material averments of the
complaint. They claimed that appellees were the ones who caused its renovation consisting of a 3-bedroom annex, a covered
veranda and a concrete hollow block fence, at their own expense, and with appellants’ consent, which renovation was made
without altering the form and substance of the subject property. Also, appellees argued that what they removed was merely the
improvements made on the subject property, which removal had not caused any substantial damage thereto as, in fact, it
remained intact. By way of counterclaims, they demanded payment of actual damages, attorney’s fees and litigation expenses.

The trial court promulgated its Decision in favor of the spouses Mores ruling that Defendants, who are possessors in good
faith, were able to prove by preponderance of evidence that they removed only the improvements they introduced without
destroying the principal building, after the plaintiffs refused to pay them the reasonable value of the improvements.

However, the appellate court disagreed that spouses Mores were in good faith, believing that the relationship between the Yu
siblings and the spouses Mores is one between a lessor and a lessee, making Article 1678 of the Civil Code applicable to the
present case. The options given by Article 1678, the right of appropriating the useful improvements after reimbursing 50% of
its value or the right of removal of the useful improvements, are given by law to the lessor - the Yu siblings. Hence the
appellate court ordered the spouses Mores to pay the Yu siblings moral damages worthP100,000 and denied Mores’ Motion
for Reconsideration for want of merit.

ISSUE:
Whether or not the appellate court awarding the Yu siblings moral damages in the amount of P100,000 is rendered with grave
abuse of discretion and is not in accord with the decisions of this Court.

RULING:

The petition has merit. The good faith referred to by Alida Mores was about the building of the improvements on the leased
subject property. However, tenants like the spouses Mores cannot be said to be builders in good faith as they have no
Mores vs. Yu-Go, G.R. No pretension to be owners of the property. Indeed, full reimbursement of useful improvements and retention of the premises until
172292, 23 July 2010 reimbursement is made applies only to a possessor in good faith, i.e., one who builds on land with the belief that he is the
 owner thereof. It does not apply where one’s only interest is that of a lessee under a rental contract; otherwise, it would always
be in the power of the tenant to "improve" his landlord out of his property.

The appellate court is correct in ruling that Article 1678 of the Civil Code should apply in the present case. Article 1678 reads:
“If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without
altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half
of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment
upon the property leased than is necessary.”
With regard to the ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the
ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by
paying their value at the time the lease is extinguished.

There is thus no reason for the appellate court’s award of moral damages to the Yu siblings. We agree with the trial court’s
finding that the spouses Mores "removed only the improvements they introduced without destroying the principal building, after
the [Yu siblings] refused to pay them the reasonable value of the improvements." When the spouses Mores demanded
reimbursement, the Yu siblings should have offered to pay the spouses Mores one-half of the value of the improvements.
Since the Yu siblings failed to make such offer, the spouses Mores had the right to remove the improvements.

Petition is Granted with Modification as to damages awarded to the Yu siblings.

Facts: In an oral lease agreement, Cheng agreed to lease his property to Donini, who intended to put up a
restaurant thereon. Donini then proceeded to introduce improvements in the premises.

However, before respondents’ business could take off and before any final lease agreement could be
drafted and signed, the parties began to have serious disagreements regarding its terms and conditions.
Cheng wrote to Donini, demanding payment of the deposit and rentals, and signifying that he had no
intention to continue with the agreement should Donini fail to pay. Donini ignored the demand, and
continued to occupy the premises, until in April 17, 1991, when their caretaker voluntarily surrendered the
property to the petitioner.

Note that the CA made the following findings and conclusions: 1.) There was no agreement that the
deposit and rentals accruing to petitioner would be deducted from the costs of repairs and renovation
incurred by respondents; 2.). Respondents committed a breach in the terms and conditions of the
agreement when they failed to pay the rentals; 3) There was no valid rescission on the part of petitioner;
4). Respondents were entitled to reimbursement for the cost of improvements under the principle of equity
Cheng vs. Donini, GR No. and unjust enrichment; and 5) The award of damages in favor of the petitioner had no basis in fact and
167017, 22 June 2009, 590 law.
SCRA 406
Issue: Whether or not the CA erred on the following decisions: 1) CONSIDERED RESPONDENTS NOT AS
MERE LESSEES BUT POSSESSORS IN GOOD FAITH UNDER ARTICLES 448 AND 546 OF THE CIVIL CODE; 2)
DECIDED THIS CASE NOT IN ACCORD WITH ARTICLE 1678 OF THE CIVIL CODE WHICH GIVES THE LESSOR
THE OPTION TO REIMBURSE THE LESSEE ONE-HALF OF THE VALUE OF USEFUL IMPROVEMENTS OR, IF HE
DOES NOT WANT TO, ALLOW THE LESSEE TO REMOVE THE IMPROVEMENTS; 3) CONTRAVENED THE SECOND
PARAGRAPH OF ARTICLE 1678 BY ORDERING PETITIONER TO REIMBURSE THE VALUE OF ORNAMENTAL
EXPENSES; 4) IN APPLYING THE PRINCIPLE OF EQUITY IN FAVOR OF THE RESPONDENTS; 5) IN NOT
AFFIRMING THE DECISION OF THE TRIAL COURT AWARDING DAMAGES TO PETITIONER; and, 6) IN FIXING THE
AMOUNT OF ₱961,000.00 CONTRARY TO RESPONDENTS’ OWN REPRESENTATION AND EVIDENCE.

Ruling:

1) Yes, since the CA did not provide any statutory basis therefore and instead applied the principles of equity and
unjust enrichment. The petitioner had a valid claim. Contrary to respondents’ position, Articles 448 and 546 of the
Civil Code did not apply.
2) Being mere lessees, respondents knew that their right to occupy the premises existed only for the duration of the
lease. Under Article 1678 of the Civil Code, the lessor has the primary right (or the first move) to reimburse the
lessee for 50% of the value of the improvements at the end of the lease. If the lessor refuses to make the
reimbursement, the subsidiary right of the lessee to remove the improvements, even though the principal thing
suffers damage, arises. Consequently, on petitioner rests the primary option to pay for one-half of the value of the
useful improvements. It is only when petitioner as lessor refuses to make the reimbursement that respondents, as
lessees, may remove the improvements. Should petitioner refuse to exercise the option of paying for one-half of
the value of the improvements, he cannot be compelled to do so. It then lies on respondents to insist on their
subsidiary right to remove the improvements even though the principal thing suffers damage but without causing
any more impairment on the property leased than is necessary.
3) As regards the ornamental expenses, respondents are not entitled to reimbursement under the express provision
of Article 1678. Moreover, since they failed to remove these ornaments despite the opportunity to do so when they
vacated the property, then they were deemed to have waived or abandoned their right of removal.
4) Yes, the CA erred as the principle of equity did not apply in this case. Equity, which has been aptly described as
"justice outside legality," is applied only in the absence of, and never against, statutory law or judicial rules of
procedure.

For 5 and 6, the petition is PARTIALLY GRANTED and MODIFIED.