CIVIL LAW REVIEW II

SALES AND LEASE

TABLE OF CONTENTS
1. Dignos v. Court of Appeals ............................................................................................ 3
2. Hulst v. PR Builders ........................................................................................................ 3
3. Toyota Shaw, Inc. v. Court of Appeals ......................................................................... 4
4. Spouses Edrada v. Spouses Ramos ............................................................................... 4
5. Sanchez v. Rigos ............................................................................................................... 5
6. Guzman, Bocaling & Co., vs Bonnevie ......................................................................... 6
7. Riviera Filipina, Inc. v. Court of Appeals ..................................................................... 7
8. Paraaque Kings Enterprises, Incorporated v. Court of Appeals............................. 9
9. Lao v. Genato .................................................................................................................. 10
10. Alcantara-Daus v. Spouses De Leon ........................................................................... 11
11. Sampaguita Pictures, Inc. v. Jalwindor Manufacturers, Inc. ................................... 13
12. Philippine National Bank v. Severo Eugenio Lo, et al. ............................................. 13
13. Philippine Suburban Development Corporation v. The Auditor General Pedro
Gimenez .......................................................................................................................... 14
14. Norkis Distributors v. Court of Appeals and Alberto Nepales ............................... 15
15. A.A. Addison v. Marciana Felix and Balbino Tioco.................................................. 16
16. Ten Forty Realty and Development Corporation v. Marina Cruz .......................... 17
17. Jesus Teran v. Francisca Villanueva, Viuda De Riosa, Et Al. ................................... 18
18. Consolidated Rural Bank (Cagayan Valley), Inc., v. Court of Appeals and Heirs
of Teodoro Dela Cruz .................................................................................................... 19
19. Martinez v. Court of Appeals ....................................................................................... 21
20. Fudot v. Cattleya Land, Inc. ......................................................................................... 22
21. Lillian M. Mercado, et al. v. Allied Banking Corporation ........................................ 22
22. Spouses Amancio et al. v. Court of Appeals, et al..................................................... 23
23. Alejandro Gabriel and Alfredo Gabriel, v. Spouses Pablo Mabanta et al. ............. 24
24. Narcisa Sanchez v. Roque Ramos ................................................................................ 26
25. Crisanto Lichauco, et al., v. Jose Berenguer ............................................................... 27
26. Carlos Palanca vs. The Director of Lands, et al., ....................................................... 29
27. Sigaya v. Mayuga ........................................................................................................... 30
28. Yap Kim Chuan v. Tiaoqui ........................................................................................... 30
29. Moles vs. IAC ................................................................................................................. 31
30. Bricktown Development Corporation v. Amor Tierra Development Corporation
.......................................................................................................................................... 32
31. EDCA Publishing & Distributing Corp. v. Spouses Leonor And Gerardo Santos,
doing business under the name and style of "Santos Bookstore," and Court of
Appeals ............................................................................................................................ 33
32. Pilar T. Ocampo vs. Court of Appeals and Magdalena S. Villaruz ........................ 34
33. Southern Motors, Inc. v. Moscoso ............................................................................... 35
34. Nonato v. IAC................................................................................................................. 36
35. Luis Ridad and Lourdes Ridad v. Filipinas Investment and Finance Corp. ......... 37
36. Daniel L. Borbon II and Francisco L. Borbon v. Servicewide Specialists, Inc. & CA
.......................................................................................................................................... 38

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37. Pascual vs. Universal Motors Corp. ............................................................................ 39
38. Magna Financial Services Group, Inc., v. Colarina ................................................... 40
39. Filipinas Investment & Finance Corporation v. Julian R. Vitug, Jr. and Supreme
Sales & Development Corporation .............................................................................. 40
40. Olympia Housing, Inc., vs. Panasiatic Travel Corporation and Ma. Nelida
Galvez-Ycasiano ............................................................................................................. 42
41. Pedro A. Felicen Sr. (Deceased), substituted by his Widow, Beatriz Lanuevo and
his Children, Eleuterio, Pedro, Jr., Clarita, Fernando and Jose Maria, all
surnamed Felicen v.Severino Orias, et al.................................................................... 43
42. Heirs of Dominga Tabora vda. De Macoy, represented by Generoso Macoy v.
Court Of Appeals et al................................................................................................... 45
43. Felisa R. Paez, et al. v. Francisco Magno..................................................................... 46
44. Mauricio N. Cachola, Sr., represented by his attorney-in-fact, Nilo C. Cachola v.
Court of Appeals et al.................................................................................................... 47
45. Primary Structures Corp. v. Sps. Anthony S. Valencia and Susan T. Valencia ..... 49
46. Dominico Etcuban vs. Court of Appeals .................................................................... 49
47. Manuel Melencio, Mariano Melencio, Pura Melencio, and Caridad Melencio vs.
Dy Tiao Lay..................................................................................................................... 50
48. W.H. Tipton, Chief of the Bureau of Lands and Administrator of the Estate of the
San Lazaro Hospital vs. Roman Martinez Y Andueza ............................................. 51
49. Viuda E Hijos De Pio Barretto Y Cia., v. Albo & Sevilla, Inc., et al. ........................ 52
50. Claudina vda. de Villaruel, Et Al. v. Manila Motor Co., Inc. and Arturo
Colmenares ..................................................................................................................... 54
51. M. Goldstein v. Roces, et al........................................................................................... 56
52. Paz S. Baens v. Court of Appeals and Chua Seng ..................................................... 56
53. Bernardo Dizon, substituted by his heirs, Dominina Alvendia Vda. De Dizon, et
al. v. Ambrosio Magsaysay and Nicanor Padilla ...................................................... 57
54. Jespajo Realty Corporation v. Court of Appeals, Tan Te Gutierrez and Co Tong 58
55. Rudolf Lietz, Inc., v. Court of Appeals et al. .............................................................. 59
56. Juanita Naval v. Court of Appeals et al. ..................................................................... 60
57. Hon. Dominador F. Carilo, Maria Gonzales v. Court of Appeals........................... 61
58. Consolidated Rural Bank v. Court of Appeals .......................................................... 61
59. Estate of Lino Olaguer v. Ongjoco ............................................................................... 63
60. Abrigo v. De Vera .......................................................................................................... 63
61. Acabal v. Acabal............................................................................................................. 64
62. Jestra Development And Management Corporation v. Daniel Ponce Pacifico ..... 65
63. Garcia v. Court of Appeals ........................................................................................... 66
64. Valdez v. Court of Appeals .......................................................................................... 67

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Dignos v. Court of Appeals

G.R. No. L-59266, 29 February 1988
FACTS: Dignos spouses were owners of a parcel of land in Opon, Lapu-Lapu
City. Dignos spouses sold the said parcel of land to plaintiff-appellant, payable in
two installments, with an assumption of indebtedness with the First Insular
Bank.
On November 25, 1965, the Dignos spouses sold the same land in favor of
defendants spouses, Luciano Cabigas and Jovita L. De Cabigas, who were then
U.S. citizens, for the price of P35,000.00. A deed of absolute sale was executed by
the Dignos spouses in favor of the Cabigas spouses, and which was registered in
the Office of the Register of Deeds.
As the Dignos spouses refused to accept from plaintiff-appellant the balance of
the purchase price of the land, and as plaintiff- appellant discovered the second
sale made by defendants-appellants to the Cabigas spouses, plaintiff-appellant
brought the present suit. Petitioners claim that when they sold the land to the
Cabigas spouses, the contract of sale was already rescinded.
ISSUE: Is the second sale of the same parcel of land to another buyer due to non
payment of the complete purchase price by the seller subject to automatic
rescission?
HELD: No.
It is undisputed that petitioners never notified private respondents Jabil by
notarial act that they were rescinding the contract, and neither did they file a suit
in court to rescind the sale. The most that they were able to show is a letter of
Cipriano Amistad who, claiming to be an emissary of Jabil, informed the Dignos
spouses not to go to the house of Jabil because the latter had no money and
further advised petitioners to sell the land in litigation to another party.
It has been ruled, however, that "where time is not of the essence of the
agreement, a slight delay on the part of one party in the performance of his
obligation is not a sufficient ground for the rescission of the agreement" (Taguba
v. Vda. de Leon, supra). Considering that private respondent has only a balance
of P4,000.00 and was delayed in payment only for one month, equity and justice
mandate as in the aforecited case that Jabil be given an additional period within
which to complete payment of the purchase price.

Hulst v. PR Builders
G.R. No. 156364, September 3, 2007
FACTS: An execution sale was executed by the sheriff. However, a petition was
filed seeking to nullify such sale on the ground of the gross inadequacy of the
price.
ISSUE: Is the gross inadequacy of a price in an execution sale a valid ground to
nullify such sale on the theory that the lesser the price the easier it is for the
owner to effect redemption.

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HELD: In other words, gross inadequacy of price does not nullify an execution
sale. In an ordinary sale, for reason of equity, a transaction may be invalidated on
the ground of inadequacy of price, or when such inadequacy shocks one's
conscience as to justify the courts to interfere; such does not follow when the law
gives the owner the right to redeem as when a sale is made at public auction,
upon the theory that the lesser the price, the easier it is for the owner to effect
redemption. When there is a right to redeem, inadequacy of price should not be
material because the judgment debtor may re-acquire the property or else sell his
right to redeem and thus recover any loss he claims to have suffered by reason of
the price obtained at the execution sale. Thus, respondent stood to gain rather
than be harmed by the low sale value of the auctioned properties because it
possesses the right of redemption. More importantly, the subject matter in
Barrozo is the auction sale, not the levy made by the Sheriff.

Toyota Shaw, Inc. v. Court of Appeals

G.R. No. L-116650. May 23, 1995
DAVIDE, JR., J.
FACTS: A agreement for the sale of a car was reduced into writing via a Vehicle
Sales Proposal. The stipulations include the sale is subject to the availability of
the unit; the price is subject to change without prior notice; and that the car will
be picked up at a specific date and time. There is also an agreed down payment
and payment through a financing company in monthly amortization for the
balance. The down payment did not make specific reference to the car. There was
no mention as to the full purchase price and the manner the installments are to
be paid.
ISSUE: Whether or not there was a perfected contract of sale?
HELD: No, because the written agreement of the parties may be considered as
part of the initial phase of the generation or negotiation stage of a contract of
sale.
The Vehicle Sales Proposal was a mere proposal which was aborted in lieu of
subsequent events. It follows that the VSP created no demandable right in favor
of Sosa for the delivery of the vehicle to him, and its non-delivery did not cause
any legally indemnifiable injury.

Spouses Edrada v. Spouses Ramos

G.R. No. 154413 August 31, 2005
Tinga, J.:
FACTS: A written acknowledgment was drafted acknowledging that a fishing
vessel owned by another is now in the possession and now the responsibility of
the other party. The document further states that the documents pertaining to
the sale and agreement of payments between the parties are to follow. The
agreed price for the vessel is Nine Hundred Thousand Only (P900,000.00).
ISSUE: Whether or not there was a perfected contract of sale.

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HELD: No, because there was no agreement as to the transfer of ownership. A

contract of sale must evince the consent on the part of the seller to transfer and
deliver and on the part of the buyer to pay. An examination of the document
reveals that there is no perfected contract of sale. The agreement may confirm the
receipt by respondents of the two vessels and their purchase price. However,
there is no equivocal agreement to transfer ownership of the vessel, but a mere
commitment that "documents pertaining to the sale and agreement
of payments are to follow."

Sanchez v. Rigos
G.R. No. L-25494 June 14, 1972
FACTS: Plaintiff Nicolas Sanchez and defendant Severina Rigos executed an
instrument entitled "Option to Purchase," whereby Mrs. Rigos "agreed, promised
and committed ... to sell" to Sanchez for the sum of P1,510.00, a parcel of land
within two (2) years from said date with the understanding that said option shall
be deemed "terminated and elapsed," if "Sanchez shall fail to exercise his right to
buy the property" within the stipulated period. Inasmuch as several tenders of
payment of the sum of Pl,510.00, made by Sanchez within said period, were
rejected by Mrs. Rigos, on March 12, 1963, the former deposited said amount
with the Court of First Instance of Nueva Ecija and commenced against the latter
the present action, for specific performance and damages.
After the filing of defendant's answer admitting some allegations of the
complaint, denying other allegations thereof, and alleging, as special defense,
that the contract between the parties "is a unilateral promise to sell, and the same
being unsupported by any valuable consideration, by force of the New Civil
Code, is null and void" on February 11, 1964, both parties, assisted by their
respective counsel, jointly moved for a judgment on the pleadings. Accordingly,
on February 28, 1964, the lower court rendered judgment for Sanchez, ordering
Mrs. Rigos to accept the sum judicially consigned by him and to execute, in his
favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to
pay P200.00, as attorney's fees, and other costs. Hence, this appeal by Mrs. Rigos.
ISSUE: Whether or not an option contract unsupported by a separate
consideration is binding.
HELD: Citing Atkins, Kroll and Co., Inc. v. Cua Hian Tek, the Court ruled that an
option is unilateral: a promise to sell at the price fixed whenever the offeree
should decide to exercise his option within the specified time. After accepting the
promise and before he exercises his option, the holder of the option is not bound to
buy. He is free either to buy or not to buy later. In this case, however, upon
accepting herein petitioner's offer a bilateral promise to sell and to buy ensued,
and the respondent ipso facto assumed the obligation of a purchaser. He did not
just get the right subsequently to buy or not to buy. It was not a mere option
then; it was a bilateral contract of sale. If the option is given without a
consideration, it is a mere offer of a contract of sale, which is not binding until
accepted. If, however, acceptance is made before a withdrawal, it constitutes a
binding contract of sale, even though the option was not supported by a
sufficient consideration.

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In other words, since there may be no valid contract without a cause or

consideration, the promisor is not bound by his promise and may, accordingly,
withdraw it. Pending notice of its withdrawal, his accepted promise partakes,
however, of the nature of an offer to sell which, if accepted, results in a perfected
contract of sale.

Guzman, Bocaling & Co., vs Bonnevie

G.R. No. 86150 March 2, 1992
FACTS: Africa Valdez de Reynoso leased a parcel of land with two buildings
constructed thereon to Raoul S. Bonnevie and Christopher Bonnevie, for a period
of one year beginning August 8, 1976, at a monthly rental of P4,000.00, with an
agreement that should Africa decide to sell the property, the respondent lessee
shall be given the first priority to purchase the same. Then on November 1976,
Africa sent a letter to the respondents that she was selling the property for the
amount of P600,000 less a mortgage loan of P100,000, giving them 30 days
to exercise their right of first priority. Failure to exercise the said right,
respondents should vacate the property not later than March 1977.
Then on January 1977, Africa informed that the property have been sold to the
petitioner, because respondents failed to exercise their right to do such.
Respondent s on the other hand informed Africa that they have not received
their letter and refused to vacate the property. And on April of the same year,
Africa demanded that they vacate the property for failure to pay rent for four
months, which they refused. Hence a complaint for ejectment was filed against
them. During the pendency of the ejectment case, respondent filed an action for
annulment of the sale between Africa and the herein petitioner and for the
cancellation of the transfer certificate of title in the name of the latter. Asking also
that Africa be required to sell the property to them under the same terms and
conditions agreed upon in the Contract of Sale in favor of the petitioner. Then on
May 1980, the City Court ruled that the respondent to vacate the premises, and
deliver possession of the property to the petitioner as well as pay the rent due to
them. Upon appeal to the Court of First Instance of Manila, affirmed the said
ejection case with modification and granted respondents petition to cancel the
Deed of Sale executed between Africa and the petitioner and ordered her to sell
the property to respondent, and for petitioner and Africa to pay respondent for
damages. CA affirmed the said decision but with modification on the amount
of damages. Hence the petition.
ISSUE: Whether or not a contract may be rescinded even if it is valid.
HELD: 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.
According to Tolentino, 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
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persons from all injury and damage the contract may cause, or to protect some
incompatible and preferent right created by the contract. Recission implies a
contract which, even if initially valid, produces a lesion or pecuniary damage to
someone that justifies its invalidation for reasons of equity.
It is true that the acquisition by a third person of the property subject of the
contract is an obstacle to the action for its rescission where it is shown that such
third person is in lawful possession of the subject of the contract and that he did
not act in bad faith. However, this rule is not applicable in the case 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.

Riviera Filipina, Inc. v. Court of Appeals

G.R. No. 117355, April 5, 2002
De Leon, Jr., J.:
FACTS: Riviera Filipina, Inc. instituted a suit to compel the defendants Juan L.
Reyes, now deceased, Philippine Cypress Construction & Development
Corporation, Cornhill Trading Corporation, and Urban Development Bank to
transfer the title covering a 1,018 square meter parcel of land located along
EDSA, Quezon City for alleged violation of Rivieras right of first refusal.
Reyes executed a ten-year renewable Contract of Lease with Riviera. The said
parcel of land was subject of a Real Estate Mortgage executed by Reyes in favor
of Prudential Bank. Since the loan remained unpaid upon maturity, the
mortgagee bank extrajudicially foreclosed the mortgage thereon. At the public
auction sale, the mortgagee bank emerged as the highest bidder. Realizing that
he could not possibly raise in time the money needed to redeem the property,
Reyes decided to sell the same.
Since paragraph 11 of the lease contract expressly provided that the "LESSEE
shall have the right of first refusal should the LESSOR decide to sell the property
during the term of the lease," Reyes offered to sell the subject property to Riviera
for P5,000.00 per square meter. However, Angeles bargained for P3,500.00 per
square meter. Seven months later, Angeles communicated with Reyes Rivieras
offer to purchase the subject property for P4,000.00 per square meter. However,
Reyes did not accept the offer. This time he asked for P6,000.00 per square meter
since the value of the property in the area had appreciated in view of the plans of
Araneta to develop the vicinity. After series of negotiations on the price, Reyes
was firm to sell the property at P6,000.00 per square meter. In a letter to Riviera,
Reyes expressed that much as it is his earnest desire to really give Riviera the
preference to purchase the subject property, the latter unfortunately failed to take
advantage of such opportunity and thus lost its right of first refusal.
Meanwhile, Reyes confided to Rolando P. Traballo, a close family friend and
president of Cypress, his predicament about the nearing expiry date of the
redemption period and the money for which he could not raise on time, thereby
offering the property to him for P6,000.00 per square meter. Traballo expressed
interest in buying the said property. Traballo bargained for P5,300.00 per square
meter. After considering the reasons cited by Traballo for his quoted price, Reyes
accepted the same. Later, Cypress and its partner in the venture, Cornhill
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Trading Corporation, were able to come up with the amount sufficient to cover
the redemption money, with which Reyes paid to the Prudential Bank to redeem
the subject property. A Deed of Absolute Sale covering the property was
executed by Reyes in favor of Cypress and Cornhill for P5,395,400.00. Cypress
and Cornhill mortgaged the property to Urban Development Bank for
P3,000,000.00.
Thereafter, Riviera sought from Reyes, Cypress and Cornhill a resale of the
property to it claiming that its right of first refusal under the lease contract was
violated.
ISSUE: Whether or not the right of first refusal of the lessee Riviera was violated
when the owner-lessor Reyes sold the leased property to Cypress and Cornhill,
after failed negotiations on the price between Riviera and Reyes.
HELD: No, the right of first refusal of Riviera was not violated. The prevailing
doctrine is 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.
However, general propositions do not decide specific cases. Rather, laws are
interpreted in the context of the peculiar factual situation of each proceeding. In
the case at bar, the Court finds that the intention of the parties shall be accorded
primordial consideration and in case of doubt, their contemporaneous and
subsequent acts shall be principally considered.
An examination of the attendant particulars of the case is not persuasive of
Rivieras view. The actions of the parties to the contract of lease, Reyes and
Riviera, shaped their understanding and interpretation of the lease provision
"right of first refusal" to mean simply that should the lessor Reyes decide to sell
the leased property during the term of the lease, such sale should first be offered
to the lessee Riviera. That is what exactly ensued between Reyes and Riviera, a
series of negotiations on the price per square meter of the subject property with
neither party, especially Riviera, unwilling to budge from his offer.
It can clearly be discerned from Rivieras letters that it was so intractable in its
position and took obvious advantage of the knowledge of the time element in its
negotiations with Reyes as the redemption period of the subject foreclosed
property drew near. Riviera strongly exhibited a "take-it or leave-it" attitude in
its negotiations with Reyes, quoted its "fixed and final" price as P5,000.00 and not
any peso more, and voiced out that it had other properties to consider so Reyes
should decide and make known its decision "within fifteen days." It even
downgraded its offer when Reyes offered anew the property to it, such that
whatever amount Reyes initially receives from Riviera would absolutely be
insufficient to pay off the redemption price. Naturally, Reyes had to disagree
with Rivieras highly disadvantageous offer. Nary a howl of protest or shout of
defiance spewed forth from Rivieras lips, as it were, but a seemingly whimper of
acceptance when the counsel of Reyes strongly expressed in a letter that Riviera
had lost its right of first refusal. Riviera cannot now be heard that had it been
informed of the offer of P5,300.00 of Cypress and Cornhill, it would have
matched said price.

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Paraaque Kings Enterprises, Incorporated v. Court of Appeals

G.R. No. 111583, February 26, 1997
Panganiban, J.:
FACTS: Catalina L. Santos is the owner of eight parcels of land located at
Paraaque, Metro Manila. Frederick Chua leased such property from Santos and
the said lease was registered in the Register of Deeds. Chua assigned all his
rights and interest and participation in the leased property to Lee Ching Bing, by
virtue of a deed of assignment and with the conformity of defendant Santos, the
said assignment was also registered. Lee Ching Bing also assigned all his rights
and interest in the leased property to Paraaque Kings Enterprises, Incorporated
by virtue of a deed of assignment and with the conformity of defendant Santos,
the same was duly registered.
The assigned leased contract provides that in case the leased properties subject
are sold or encumbered, lessors shall impose as a condition that the buyer or
mortgagee thereof shall recognize and be bound by all the terms and conditions
of this lease agreement and in case of sale, lessee shall have the first option or
priority to buy the properties subject of the lease.
Santos sold the eight parcels of land subject of the lease to David Raymundo for
P5,000,000.00. The said sale was allegedly in contravention of the contract of
lease, for the first option or priority to buy was not offered by Santos to
petitioner. Upon petitioner's request to rectify the error, Santos had the property
reconveyed to her. She subsequently offered it for sale to petitioner for P15
Million and give the latter 10 days to make good of the offer. Petitioner offered to
buy it for P5 Million but before replying to such offer to purchase, Santos
executed another deed of sale in favor of Raymundo for P9 Million.
Petitioner alleges that the sale was simulated and that there was a collusion
between the defendants in the sales of the leased properties. It seeks that the
deed of sale be annulled and that the leased properties be sold to it.
ISSUE: Whether or not the lessee-petitioner's contractual right of first option or
priority to buy has been violated when the lessor Santos offered to sell the same
to petitioner at P15 Million but resold the parcels of land to Raymundo, a
stranger, for P9 Million.
HELD: YES. In order to have full compliance with the contractual right granting
petitioner the first option to purchase, the sale of the properties for the amount of
P9 million, the price for which they were finally sold to Raymundo, should have
likewise been first offered to petitioner.
In the case of Guzman, Bocaling & Co. vs. Bonnevie, it has been held that the
basis of the right of first refusal must be the current offer to sell of the seller or
offer to purchase of any prospective buyer. Only after the optionee fails to
exercise its right of first priority under the same terms and within the period
contemplated, could the owner validly offer to sell the property to a third person,
again, under the same terms as offered to the optionee. This doctrine has been
reiterated in the case of Equatorial Realty vs. Mayfair Theater, Inc.
Moreover, the Deed of Assignment included the option to purchase. One of such
rights included in the contract of lease and, therefore, in the assignments of
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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. Needless to state, Santos gave her
unqualified conformity to both assignments of rights.

Lao v. Genato
137 SCRA 85-86
FACTS: On June 25, 1980, Sotero Jr., with due notice to all his co-heirs, moved
to sell certain properties of the deceased to pay off certain debts. The motion was
granted. So, Sotero Jr. sold to his son, Sotero III, the subject property which the
latter sold to William Go. Respondent-heir Florida Nuqui, moved to annul the
sale on the ground that it was made in violation of the court's order and that the
consideration of the two sales were grossly inadequate. Sotero Jr. opposed
Nuquis motion alleging that the actual consideration of the sale was
P200,000.00 and they agreed that preference will be given to close family
members to keep the property within the family. Nuqui filed a Reply, stating
that the two sales were but a single transaction simultaneously hatched and
consummated in one occasion. The other heirs joined Nuquis motion. Go moved
to intervene and manifested that he paid Sotero III P225,000.00 and being a
purchaser in good faith and for value, his title to the property is indefeasible
pursuant to law.
On February 6, 1981, petitioner spouses moved to intervene and alleged that
Sotero Jr, without revealing that the property had already been sold to William
Go, entered into a Mutual Agreement of Promise to Sell to them for P270,000
which was reduced to P220,000.00; that they paid earnest money of P70,000;
that the balance of P150,000 was to be paid upon the production of the TCT and
the execution of the final Deed of Sale; that Sotero III the was merely a
nominal party because the negotiation and transactions were between the Sotero
Jr. and petitioners; that the contract of sale has been perfected because earnest
money was already paid; that the sale in favor of Go was made to defraud the
estate and the other heirs; At the hearing, petitioners submitted a copy of the
Contract of mortgage executed by Sotero Jr in favor of Juan Lao, one of the
petitioners, whereby the former mortgaged "all his undivided interest in the
estate of his deceased mother. After several days of hearing, respondent
Judge allowed all the interested parties to bid for the property. Go bid
P280,000.00. Petitioners bid P282,000.00, spot cash. All the heirs, except the
administrator (Sotero Jr.), filed a Motion Ex Parte stated that the offer of William
Go appears the highest obtainable price and that of the petitioners was not
been made within a reasonable period. So, they submitted an amicable
settlement to which the petitioners opposed because they offered to buy the
property for 300,000. Despite said opposition, respondent Judge approved
the Amicable Settlement.
ISSUE: Whether or not respondent Judge is guilty of grave abuse of discretion
in 1) approving the amicable settlement and confirming the two (2) Deeds of Sale
in question; and 2) in not accepting the offer of the petitioners in the amount of
P300,000.00 for the purchase of the lot in question.
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HELD: Sotero Jr. as administrator occupies a position of the highest trust and
confidence. In the case at bar, the sale was made necessary "in order to settle
other existing obligations of the estate. In order to guarantee faithful compliance
with the authority granted, respondent Judge ordered him to submit to this
Court for approval the transactions made by
him." The sale to his son was for the grossly low price of only P75,000,00.
Dionisio III has no income whatsoever and still a dependent of Dionisio, Jr. On
top of that, not a single centavo, of the P75,000.00 was ever accounted for nor
reported by Dionisio, Jr. to the probate court. Neither did he submit said
transaction as mandated by the order for its approval. This sale was confirmed
and legalized by His Honor's approval of the assailed Amicable Settlement. No
doubt, respondent Judge's questioned approval violates Article 1409 of the New
Civil Code and cannot work to confirm nor serve to ratify a fictitious contract
which is non-existent and void from the very beginning. The heirs assent to such
an illegal scheme does not legalize the same. The offer by the petitioner of
P300,000.00 for the purchase of the property in question does not appear
seriously disputed on record. As against the price stated in the assailed
Compromise Agreement the former amount is decidedly more beneficial and
advantageous not only to the estate, the heirs of the descendants, but more
importantly to its creditors, for whose account and benefit the sale was
made. No satisfactory and convincing reason appeared given for the rejection
and/or non-acceptance of said offer thus giving rise to a well-grounded
suspicion that a collusion of some sort exists between the administrator and the
heirs to defraud the creditors and the government.

Alcantara-Daus v. Spouses De Leon

G.R. No. 149750, June 16, 2003
FACTS: Spouses De Leon are the owners of a parcel of land situated in the
Municipality of San Manuel, Pangasinan with an area of Four Thousand Two
Hundred Twelve square meters more or less. Respondent Hermoso De Leon
inherited the said lot from his father Marcelino De Leon by virtue of a Deed of
Extra-Judicial Partition. Said lot is covered by Original Certificate of Title No.
22134 of the Land Records of Pangasinan.
Sometime 1960s, Spouses De Leon engaged the services of the late Atty.
Florencio Juan to take care of the documents of their properties. They were
asked to sign voluminous documents by the latter. After the death of Atty. Juan,
some documents surfaced and most revealed that their properties had been
conveyed by sale or quitclaim to Hermosos brothers and sisters, to Atty. Juan
and his sisters, when in truth and in fact, no such conveyances were ever
intended by them. Furthermore, respondent found out that his signature in the
Deed of Extra-judicial Partition with Quitclaim made in favor of Rodolfo de Leon
was forged. They discovered that the land in question was sold by Rodolfo de
Leon to Aurora Alcantara
Spouses De Leon demanded the annulment of the document and re-conveyance
but defendants refused. Petitioner, Aurora Alcantara-Daus averred that she
bought the land in question in good faith and for value on December 1975 and
that she has been in continuous, public, peaceful, open possession over the same
and has been appropriating the produce thereof without objection from anyone.

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The RTC of Urdaneta, Pangasinan rendered its Decision in favor of herein

petitioner. It ruled that respondents claim was barred by laches, because more
than 18 years had passed since the land was sold. It further ruled that since it
was a notarial document, the Deed of Extrajudicial Partition in favor of Rodolfo
de Leon was presumptively authentic.
ISSUES: Whether or not the Deed of Absolute executed by Rodolfo De Leon over
the land in question in favor of petitioner was perfected and binding upon the
parties therein?
Whether or not the evidentiary weight of the Deed of Extrajudicial Partition with
Quitclaim, executed by respondent Hermoso de Leon, Perlita de Leon and
Carlota de Leon in favor of Rodolfo de Leon was overcome by more than a
preponderance of evidence of respondents?

HELD:
First Issue:
NO. It is during the delivery that the law requires the seller to have the right to
transfer ownership of the thing sold. In general, a perfected contract of sale
cannot be challenged on the ground of the sellers non-ownership of the thing
sold at the time of the perfection of the contract.
Further, even after the contract of sale has been perfected between the parties, its
consummation by delivery is yet another matter. It is through tradition or
delivery that the buyer acquires the real right of ownership over the thing sold.
Undisputed is the fact that at the time of the sale, Rodolfo De Leon was not the
owner of the land he delivered to petitioner. Thus, the consummation of the
contract and the consequent transfer of ownership would depend on whether he
subsequently acquired ownership of the land in accordance with Article 1434 of
the Civil Code. Therefore, we need to resolve the issue of the authenticity and the
due execution of the Extrajudicial Partition and Quitclaim in his favor.
Second Issue:
NO. As a general rule, the due execution and authenticity of a document must be
reasonably established before it may be admitted in evidence. Notarial
documents, however, may be presented in evidence without further proof of
their authenticity, since the certificate of acknowledgment is prima facie evidence
of the execution of the instrument or document involved. To contradict facts in a
notarial document and the presumption of regularity in its favor, the evidence
must be clear, convincing and more than merely preponderant.
The CA ruled that the signature of Hermoso De Leon on the Extrajudicial
Partition and Quitclaim was forged. However, this factual finding is in conflict
with that of the RTC. While normally this Court does not review factual issues,
this rule does not apply when there is a conflict between the holdings of the CA
and those of the trial court, as in the present case.
After poring over the records, the SC finds no reason to reverse the factual
finding of the appellate court. A comparison of the genuine signatures of
Hermoso De Leon with his purported signature on the Deed of Extrajudicial
Partition with Quitclaim will readily reveal that the latter is a forgery. As aptly

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held by the CA, such variance cannot be attributed to the age or the mechanical
acts of the person signing.

Sampaguita Pictures, Inc. v. Jalwindor Manufacturers, Inc.

G.R. No. L-43059. October 11, 1979
De Castro, J.:
FACTS: Sampaguita Pictures, Inc. leased to Capitol 300, Inc. a roof deck of its
building with the agreement that any permanent improvements made on the
property by Capitol shall belong to Sampaguita. Shortly, Capitol installed glass
and wooden jalousies on the leased premises. The glass and wooden jalousies
were purchased on credit from Jalwindor Manufacturers, Inc. Upon Capitols
failure to pay, Jalwindor levied on the glass and wooden jalousies.
ISSUE: Was the execution on the said properties proper? Is payment essential for
the transfer of ownership in a contract of sale?
HELD: No. The properties were no longer owned by Capitol when they were
levied upon. Ownership is not transferred by perfection of the contract but by
delivery, either actual or constructive. This is true even if the purchase has been
made on credit. Payment of the purchase price is not essential to the transfer of
ownership as long as the property sold has been delivered. Ownership is
acquired from the moment the thing sold was delivered the vendee, as when it is
placed in his control and possession.

Philippine National Bank v. Severo Eugenio Lo, et al.

G.R. No. L-26937. October 5, 1927
Villamor, J.:
FACTS: Lo and King, together with Lian Ping, Hun, On Yem Ke Lam, and Sieng
Peng formed a commercial partnership under the name of Tai Sing Co. Lian
Ping was appointed as the general manager. Lian Ping executed a power of
attorney in favor of A.Y. Kelam authorizing him to act in his stead as manager
and administrator of the partnership and to obtain a loan from PNB. Properties
were mortgaged as security for the loan. PNB instituted an action to collect.
ISSUE: Describe the liability of general partners with respect to partnership
liabilities.
HELD: All the members of a general partnership, be they managing partners
thereof or not, shall be personally and solidarily liable with all their property, for
the results of the transactions made in the name and for the account of the
partnership, under the signature of the latter, and by a person authorized to use
it.

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Philippine Suburban Development Corporation v. The Auditor General

Pedro Gimenez
G.R. No. L-19545 April 18, 1975
Antonio, J.
FACTS: On December 29,1960, Petitioner Philippine Suburban Development
Corporation, as owner of the unoccupied portion of the Sapang Palay Estate and
the Peoples Homesite and Housing Corporation, entered into a contract
embodied in a public instrument entitled Deed of Absolute Sale whereby the
former conveyed unto the latter the two parcels of land abovementioned. This
was not registered in the Office of the Register of Deeds until March 14, 1961,
due to the fact, petitioner claims, that the PHHC could not at once advance the
money needed for registration expenses.
In the meantime, the Auditor General, to whom a copy of the contract had been
submitted for approval in conformity with Executive Order No. 290, expressed
objections thereto and requested a re-examination of the contract, in view of the
fact that from 1948 to December 20, 1960, the entire hacienda was assessed at
P131,590.00, and reassessed beginning December 21, 1960 in the greatly increased
amount of P4,898,110.00.
It appears that as early as the first week of June, 1960, prior to the signing of the
deed by the parties, the PHHC acquired possession of the property, with the
consent of petitioner, to enable the said PHHC to proceed immediately with the
construction of roads in the new settlement and to resettle the squatters and
flood victims in Manila who were rendered homeless by the floods or ejected
from the lots which they were then occupying.
On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to
withhold the amount of P30,099.79 from the purchase price to be paid by it to the
Philippine Suburban Development Corporation. Said amount represented the
realty tax due on the property involved for the calendar year 1961. Petitioner,
through the PHHC, paid under protest the abovementioned amount to the
Provincial Treasurer of Bulacan and thereafter, or on June 13, 1961, by letter,
requested then Secretary of Finance to order a refund of the amount so paid.
Upon recommendation of the Provincial Treasurer of Bulacan, said request was
denied by the Secretary of Finance in a letter-decision dated August 22, 1961.
Petitioner claimed that it ceased to be the owner of the land in question upon the
execution of the Deed of Absolute Sale on December 29, 1960. It is now claimed
in this appeal that the Auditor General erred in disallowing the refund of the real
estate tax in the amount of P30,460.90 because aside from the presumptive
delivery of the property by the execution of the deed of sale on December 29,
1960, the possession of the property was actually delivered to the vendee prior to
the sale, and, therefore, by the transmission of ownership to the vendee,
petitioner has ceased to be the owner of the property involved, and,
consequently, under no obligation to pay the real property tax for the year 1961.
Respondent, however, argues that the presumptive delivery of the property
under Article 1498 of the Civil Code does not apply because of the requirement
in the contract that the sale shall first be approved by the Auditor General,
pursuant to the Executive Order.

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ISSUE: Whether there was already a valid transfer of ownership between the
parties.
HELD: Considering the aforementioned approval and authorization by the
President of the Philippines of the specific transaction in question, the prior
approval by the Auditor General envisioned by Administrative Order would
therefore, not be necessary.
Under the civil law, delivery (tradition) as a mode of transmission of ownership
maybe actual (real tradition) or constructive (constructive tradition).
When the sale of real property is made in a public instrument, the execution
thereof is equivalent to the delivery of the thing object of the contract, if from the
deed the contrary does not appear or cannot clearly be inferred.
In other words, there is symbolic delivery of the property subject of the sale by
the execution of the public instrument, unless from the express terms of the
instrument, or by clear inference therefrom, this was not the intention of the
parties. Such would be the case, for instance, when a certain date is fixed for the
purchaser to take possession of the property subject of the conveyance, or where,
in case of sale by installments, it is stipulated that until the last installment is
made, the title to the property should remain with the vendor, or when the
vendor reserves the right to use and enjoy the properties until the gathering of
the pending crops, or where the vendor has no control over the thing sold at the
moment of the sale, and, therefore, its material delivery could not have been
made.
In the case at bar, there is no question that the vendor had actually placed the
vendee in possession and control over the thing sold, even before the date of the
sale. The condition that petitioner should first register the deed of sale and secure
a new title in the name of the vendee before the latter shall pay the balance of the
purchase price, did not preclude the transmission of ownership. In the absence of
an express stipulation to the contrary, the payment of the purchase price of the
good is not a condition, precedent to the transfer of title to the buyer, but title
passes by the delivery of the goods.

Norkis Distributors v. Court of Appeals and Alberto Nepales

G.R. No. 91029. February 7, 1991
Grio-Aquino, J.
FACTS: Alberto Nepales bought a motorcycle from Norkis Distributors in
Bacolod. The motorcycle, worth P7,500 was sold on credit, payable with a Letter
of Guaranty from the Development Bank of the Philippines.
Nepales executed a chattel mortgage on the motorcycle in favor of DBP. Norkis
issued a sales invoice to Nepales and registered it under Nepales name in the
Land Transportation Commission, in compliance with DBP requirements.
Norkis remained in possession of the unit.
Four months later, Norkis released the motorcycle to a certain Julian Nepales.
The motorcycle figured in a vehicular collission and was a total wreck while
being driven by a certain Zacarias Payba.
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The DBP released the proceeds of the Letter of Guaranty to Norkis and thereafter
Nepales demanded the delivery of the motorcycle. For Norkis failure to deliver
the motorcycle, Nepales filed an action for specific performance.
Norkis concedes that there was no "actual" delivery of the vehicle, but insists that
there was constructive delivery of the unit upon: (1) the issuance of the sales
invoice, (2) the registration of the unit in Nepales name, and (3) the issuance of
the official receipt. Hence, according to Norkis, Nepales as owner should bear
the loss.
ISSUE: Who should bear the risk of loss when there is no actual delivery of the
object of the sale?
HELD: Affirming the decision of the Court of Appeals, the Supreme Court
reiterated that Article 1496 of the Civil Code which provides that "in the absence
of an express assumption of risk by the buyer, the things sold remain at seller's
risk until the ownership thereof is transferred to the buyer," is applicable in the
case at bar for there was neither an actual nor constructive delivery of the thing
sold.
The Court of Appeals correctly ruled that the purpose of the execution of the
sales invoice dated September 20, 1979 and the registration of the vehicle in the
name of Alberto Nepales with the Land Registration Commission was not to
transfer the ownership and dominion over the motorcycle to him, but only to
comply with the requirements of the DBP for processing private respondent's
motorcycle loan. The circumstances in the case itself more than amply rebut the
disputable presumption of delivery upon which Norkis anchors its defense to
Nepales' action.

A.A. Addison v. Marciana Felix and Balbino Tioco

G.R. No. L-12342, August 3, 1918
FACTS: Addison sold to Marciana Felix, 4 parcels of land, on June 11, 1914,
evidenced by a public instrument. In the Contract of Sale, both agreed that Felix
will pay P3,000 upon execution of the deed, and pay the remaining balance in
installments. The first installment of P2,000 to be paid on July 15, 1914, while the
second P5,000 to be paid 30 days after the issuance of the certificate of title of the
property. They further agreed that within 10 years from the date of such title,
Felix would pay Addison P10.00 for each bearing coconut tree, while P5.00 for
non bearing trees, provided that the total price should not exceed P85,000. It was
also agreed that Felix was to deliver to Addison 25% of the value of the products
that she might obtain from the 4 parcels from the moment she take possession of
them until the certificate of title be issued in her favor. Notwithstanding the
foregoing stipulations, the parties agreed that within 1 year from the date of the
certificate of title, the parties may rescind the contract of sale, and as a result,
they should make necessary restitution.
For failure of Felix to pay the first installment, Addison brought a suit before the
CFI of Manila for the recovery of payment. Felix in defense alleging that Addison
failed to deliver the lands that were subject to the sale despite of the demands
made upon him. Hence, she filed a counterclaim demanding for the recession of
the contract.
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The trial courts judgment was rendered in favour of Felix, and ordered the
plaintiff to return the P3,000 received by virtue of the contract plus interest rate
of 10%. Thus for this appeal.
ISSUE: Whether or not the trial court erred in rescinding the contract when the
stipulation on rescission clearly indicate that the said right may be exercised only
within one year from the date of the certificate of title in favour of Felix, when in
this case, the properties involved has net yet been registered?
HELD: No. The Court finds the argument of Addison untenable. Although
under the Code, the thing is considered to be delivered when it is placed in the
hands and possession of the vendee, and in case of real property, the same article
declares that the execution of a public instrument is equivalent to delivery of the
thing which is the object of the contract, in order that there be symbolic delivery
which may produce the effect of tradition, it is necessary that the vendor shall
have had such control over the thing sold at the moment of sale. 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 to prevent
the thing from passing into the tenancy of the purchaser, symbolic delivery
through execution of a public instrument is sufficient. However, when despite
execution of the public instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing sold, because such tenancy and enjoyment are
opposed by the interposition of another will, delivery has not been effected.
In this case, Addison was only able to designate 2 of the 4 parcels, because more
than 2/3 of these were found to be in possession of Juan Villafuerte, who claimed
to be the owner of the parts so occupied by him. Addison, in fact, admitted that
the purchaser would have to bring suit to obtain possession of the land. It is
evident, then that the mere execution of the instrument was not a fulfilment of
the vendors' obligation to deliver the thing sold, and that from such nonfulfillment arises the purchaser's right to demand, as she has demanded, the
rescission of the sale and the return of the price.

Ten Forty Realty and Development Corporation v. Marina Cruz

G.R. No. 151212, September 10, 2003
FACTS: Ten Forty Realty filed an ejectment suit against Cruz before the MTC.
The corporation argued that the property in issue was purchased by them from
Galino on December 1996, and that the same property was again sold to Cruz on
April 1998. Cruz, in answer, argued that Ten Forty Realty never occupied the
said property. In addition, the property was a public land and the action for
ejectment cannot succeed where it shows that she has been in possession of the
property prior to Ten Forty.
On October 2000, the trial court ruled in favour of Ten Forty, thereby ordering
her to leave the land and surrender to Ten Forty the possession thereof. The
decision was reversed by the RTC, which was thereafter affirmed by the CA.
ISSUE: Whether or not Marina Cruz should be declared as the rightful owner of
the property in issue considering that she has prior possession of the same?

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HELD: Yes. The Supreme Court ruled on several issues. First, the property
involved had not yet been delivered to the corporation, therefore, it did not
acquire possession either materially or symbolically. Under the Civil Code, as
between two buyers, the first who acquires actual possession shall have better
right over the property.
Second, the corporation failed to prove before the Court that when Cruz
subsequently acquired the property, she was aware that her acquisition was
defective. During such time, the property had not yet been registered in the
name of Galino, it was still in record, a public property. She relied on the tax
declaration under the name of Galino, and the fact that the latter is occupying the
property when she took over the possession. Hence, there was no circumstance
which would have placed her into doubt that required her to further investigate
Galinos ownership.

Jesus Teran v. Francisca Villanueva, Viuda De Riosa, Et Al.

G.R. No. L-34697, March 26, 1932
Villamor, J.:
FACTS: On October 6, 1928, the parties in this case executed the deed of sale,
whereby the defendants sold to the plaintiff for P4,000 the parcel of land therein
described as containing an area of 34 hectares, 52 ares, and 43 centares.
The plaintiff brought this action for rescission of the contract, with damages,
upon discovering that the parcel of land contained only about then hectares.
The trial court found no evidence of bad faith on the part of the defendants, and
we agree with this finding. This land, with the same area stated in the contract,
was inherited by the defendants from their late father, Mariano Villanueva; and
the same area appears in the tax declaration given to the plaintiff by an agent of
the defendants, named Rafael Villanueva. The latter, accompanied by the
plaintiff, inspected the land. Villanueva pointed out some of the boundaries, as
they did not go over all of them. Without further investigating the area of the
land, the plaintiff agreed to purchase it for the sum of four thousand pesos,
paying the amount and taking possession thereof. The plaintiff alleges that after
the 1928 harvest he discovered that the boundaries pointed out to him by Rafael
Villanueva were not the real ones, and, in order to ascertain the exact area of the
land, he went to the cadastral office in Malinao and got a sketch of the property
which shows that the land in question contains only ten hectares, and not thirtyfour, as appears in the deed of sale.
In view of these facts, the plaintiff now seeks to rescind the contract on the
ground that the property contains a smaller area than that stated in the deed of
sale. Evidently this is a sale of real estate with area and boundaries given, for a
lump sum and not so much per unit of measure, provided for in article 1471 of
the Civil Code.
ISSUE: Whether or not the contract may be rescinded.
HELD: No. Whenever a certain real estate is sold for a lump sum the rule in law
is that there shall be no increase or decrease in price even if the area or extent is
found to be more or less than that stated in the contract; but, if the vendor cannot
deliver to the vendee all that is included within the boundaries stated in the
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contract the latter has the option either to reduce the price in proportion to the
deficiency, or to set aside the contract. In this case the Civil Code presumes that
the purchaser had in mind a determined piece of land, and that he ascertained its
area and quality before the contract was perfected. If he did not do so, or it,
having done so, he made no objection and consented to the transaction, he can
blame no one but himself; and, because it is presumed that he intended to buy a
determined object, any proof of misrepresentation will not avail him, neither will
it vitiate the transaction.
Furthermore, in Azarraga v. Gay (52 Phil., 599), it was held that When the
purchaser proceeds to make investigations by himself, and the vendor does
nothing to prevent such investigation from being as complete as the former
might made false representations to him. One who contracts for the purchase of
real estate is reliance on the representations and statements of the vendor as to its
character and value, but after he has visited and examined it for himself, and has
had the means and opportunity of verifying such statements, cannot avoid the
contract on the ground that they were false or exaggerate.
The plaintiff had ample opportunity to investigate the conditions of the land he
was purchasing, without the defendant's doing anything to prevent him from
making as many inquiries as he deemed expedient, for which reason he cannot
now allege that the vendors made false representations.
In the present case the parties did not consider the area as an essential element of
the contract. There is no evidence of record that the parties fixed the price at so
much per hectare. The contract is valid and binding upon the parties.

Consolidated Rural Bank (Cagayan Valley), Inc., v. Court of Appeals and

Heirs of Teodoro Dela Cruz
G.R. No. 132161. January 17, 2005
Tinga, J.:
FACTS: Rizal, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid
(hereafter the Madrid brothers), were the registered owners of Lot No. 7036-A of
plan Psd-10188, Cadastral Survey 211, situated in San Mateo, Isabela.
On 23 and 24 October 1956, Lot No. 7036-A was subdivided into several lots. On
15 August 1957, Rizal Madrid sold part of his share identified to Aleja Gamiao
and Felisa Dayag to which his brothers Anselmo, Gregorio, Filomeno and
Domingo offered no objection. The deed of sale was not registered with the
Office of the Register of Deeds of Isabela. However, Gamiao and Dayag declared
the property for taxation purposes in their names on March 1964 under Tax
Declaration No. 7981.
On 28 May 1964, Gamiao and Dayag sold the southern half to Teodoro dela
Cruz, and the northern half to Restituto Hernandez. Thereupon, Teodoro dela
Cruz and Restituto Hernandez took possession of and cultivated the portions of
the property respectively sold to them.
Later, on 28 December 1986, Restituto Hernandez donated the northern half to
his daughter, Evangeline Hernandez-del Rosario. The children of Teodoro dela

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Cruz continued possession of the southern half after their fathers death on 7
June 1970.
In a Deed of Sale dated 15 June 1976, the Madrid brothers conveyed all their rights
and interests over Lot No. 7036-A-7 to Pacifico Marquez. The deed of sale was
registered with the Office of the Register of Deeds of Isabela on 2 March 1982.
Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight (8) lots for which
TCT Nos. T-149375 to T-149382 were issued to him on 29 March 1984. On the
same date, Marquez and his spouse, Mercedita Mariana, mortgaged Lots Nos.
7036-A-7-A to 7036-A-7-D to the Consolidated Rural Bank, Inc. of Cagayan
Valley (hereafter, CRB) to secure a loan of One Hundred Thousand Pesos
(P100,000.00). These deeds of real estate mortgage were registered with the Office
of the Register of Deeds on 2 April 1984.On 6 February 1985, Marquez
mortgaged Lot No. 7036-A-7-E likewise to the Rural Bank of Cauayan (RBC) to
secure a loan of Ten Thousand Pesos (P10,000.00). As Marquez defaulted in the
payment of his loan, CRB caused the foreclosure of the mortgages in its favor
and the lots were sold to it as the highest bidder on 25 April 1986.
On 31 October 1985, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto
(Calixto). The Heirs-now respondents herein-represented by Edronel dela Cruz,
filed a case for reconveyance and damages the southern portion of Lot No. 7036A (hereafter, the subject property) against Marquez, Calixto, RBC and CRB in
December 1986.
Evangeline del Rosario, the successor-in-interest of Restituto Hernandez, filed
with leave of court a Complaint in Intervention wherein she claimed the northern
portion of Lot No. 7036-A-7.
In the Answer to the Amended Complaint, Marquez, as defendant, alleged that
apart from being the first registrant, he was a buyer in good faith and for
value. He also argued that the sale executed by Rizal Madrid to Gamiao and
Dayag was not binding upon him, it being unregistered. For his part, Calixto
manifested that he had no interest in the subject property as he ceased to be the
owner thereof, the same having been reacquired by defendant Marquez.
CRB, as defendant, and co-defendant RBC insisted that they were mortgagees in
good faith and that they had the right to rely on the titles of Marquez which were
free from any lien or encumbrance.
ISSUE: Whether or not the rule on double sale is applicable in the case.
HELD: The petition is devoid of merit. Like the lower court, the appellate court
resolved the present controversy by applying the rule on double sale provided in
Article 1544 of the Civil Code. They, however, arrived at different
conclusions. The RTC made CRB and the other defendants win, while the Court
of Appeals decided the case in favor of the Heirs.
The provision is not applicable in the present case. It contemplates a case of
double or multiple sales by a single vendor. More specifically, it covers a
situation where a single vendor sold one and the same immovable property to
two or more buyers. According to a noted civil law author, it is necessary that the
conveyance must have been made by a party who has an existing right in the
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thing and the power to dispose of it. It cannot be invoked where the two
different contracts of sale are made by two different persons, one of them not
being the owner of the property sold. And even if the sale was made by the same
person, if the second sale was made when such person was no longer the owner
of the property, because it had been acquired by the first purchaser in full
dominion, the second purchaser cannot acquire any right.
In the case at bar, the subject property was not transferred to several purchasers
by a single vendor. In the first deed of sale, the vendors were Gamiao and Dayag
whose right to the subject property originated from their acquisition thereof from
Rizal Madrid with the conformity of all the other Madrid brothers in 1957,
followed by their declaration of the property in its entirety for taxation purposes
in their names. On the other hand, the vendors in the other or later deed were
the Madrid brothers but at that time they were no longer the owners since they
had long before disposed of the property in favor of Gamiao and Dayag.
In a situation where not all the requisites are present which would warrant the
application of Art. 1544, the principle of prior tempore, potior jure or simply he
who is first in time is preferred in right, should apply. The only essential
requisite of this rule is priority in time; in other words, the only one who can
invoke this is the first vendee. Undisputedly, he is a purchaser in good faith
because at the time he bought the real property, there was still no sale to a
second vendee. In the instant case, the sale to the Heirs by Gamiao and Dayag,
who first bought it from Rizal Madrid, was anterior to the sale by the Madrid
brothers to Marquez. The Heirs also had possessed the subject property first in
time. Thus, applying the principle, the Heirs, without a scintilla of doubt, have a
superior right to the subject property.
Moreover, it is an established principle that no one can give what one does not
have nemo dat quod non habet. Accordingly, one can sell only what one owns or is
authorized to sell, and the buyer can acquire no more than what the seller can
transfer legally. In this case, since the Madrid brothers were no longer the
owners of the subject property at the time of the sale to Marquez, the latter did
not acquire any right to it.
In any event, assuming arguendo that Article 1544 applies to the present case, the
claim of Marquez still cannot prevail over the right of the Heirs since according
to the evidence he was not a purchaser and registrant in good faith.
In the instant case, the actions of Marquez have not satisfied the requirement of
good faith from the time of the purchase of the subject property to the time of
registration. Found by the Court of Appeals, Marquez knew at the time of the
sale that the subject property was being claimed or taken by the Heirs. This
was a detail which could indicate a defect in the vendors title which he failed to
inquire into.

Martinez v. Court of Appeals

G.R. No. 123547; 21 May 2001
Mendoza, J.:
ISSUE: Can the second purchaser in a case of double sales of immovable
property (under Article 1544 of the New Civil Code) claim the presence of good
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faith despite the fact that he had previously seen the construction of a house on
the same lot?
HELD: NO. A purchaser who is aware of facts which should put a reasonable
man upon his guard cannot turn a blind eye and later claim that he acted in good
faith. The fact that there are persons, other than the vendors, in actual possession
of the disputed lot should have put the purchaser on inquiry as to the nature of
the builders right over the property. Mere reliance on the assurance of a third
person regarding the assertion that the lot had not been previously sold to
another purchaser does not meet the standard of good faith required under
Article 1544.

Fudot v. Cattleya Land, Inc.

G.R. No. 171008; 13 September 2007
Tinga, J.:
ISSUE: Can there be a case of double sales under Article 1544 of the New Civil
Code if the first purchasers alleged right is based on a Deed of Sale that was
later on declared by the trial a forgery?
HELD: NO. Despite the fact that one deed of sale was registered ahead of the
other, Art. 1544 of the Civil Code will not apply where said deed is found to be a
forgery, the result of this being that the right of the other vendee should prevail.
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. The
act of registration does not validate an otherwise void contract. Registration is a
mere ministerial act by which a deed, contract, or instrument is sought to be
inscribed in the records of the Office of the Register of Deeds and annotated at
the back of the certificate of title covering the land subject of the deed, contract,
or instrument. While it operates as a notice of the deed, contract, or instrument to
others, it does not add to its validity nor converts an invalid instrument into a
valid one as between the parties, nor amounts to a declaration by the state that
the instrument is a valid and subsisting interest in the land. The registration of a
void deed is not an impediment to a declaration by the courts of its invalidity.

Lillian M. Mercado, et al. v. Allied Banking Corporation

GR No. 171460. July 24, 2007
Chico-Nazario, J.:
FACTS: Perla executed a Special Power of Attorney in favor of her husband,
Julian Mercado over several pieces of real property registered under her name,
authorizing the latter to perform several acts.
On the strength of the aforesaid SPA, Julian obtained a loan from the
respondent. Still using the subject property as security, Julian obtained
additional loan from the respondent. It appears, however, that there was no
property identified in the SPA and registered with the Registry of Deeds. What
was identified in the SPA instead was the property different from the one used
as security for loan.

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Julian defaulted on the payment of his loan obligations. Thus, respondent

initiated extra-judicial foreclosure proceedings over the subject property which
was subsequently sold at public auction wherein respondent was the highest
bidder.
ISSUE: Is there a valid mortgage constituted over the subject property?
HELD: It was Julian who obtained the loan obligations from respondent which
he secured with the mortgage of the subject property. The property mortgaged
was owned by his wife Perla, considered a third party to the loan obligations
between Julian and respondent. It was, thus, a situation recognized by the last
paragraph of Article 2085 of the Civil Code that third persons who are not
parties to the principal obligation may secure the latter by pledging or
mortgaging their own property. There is no question therefore that Julian was
vested with the power to mortgage the pieces of property indentified in the
SPA, however, the subject property was not among those enumerated therein.
Julian was not conferred by Perla with the authority to mortgage the subject
property under the terms of the SPA, the real estate mortgages Julian executed
over the said property are therefore unenforceable.

Spouses Amancio et al. v. Court of Appeals, et al.

G.R. No. 152627. September 16, 2005.
Chico-Nazario, J.:
FACTS: A parcel of land situated in Marikina was previously owned by the
Sarmiento spouses by virtue of a deed of absolute sale executed on July 17,
1972. The subject land was mortgaged by the Sarmiento spouses to Carlos
Moran Sison as a security for a sixty-five thousand three hundred seventy
pesos and 25/100 loan obtained by the Sarmiento spouses from Mr. Sison.
Upon failure of the Sarmiento spouses to pay the loan, Mr. Sison initiated the
extra-judicial foreclosure sale of the mortgaged property, and the said property
was foreclosed.
Jose Puzon purchased the same property in an auction sale conducted by the
Municipal Treasurer of Marikina for non-payment of taxes. After paying
P3,400.00, he was issued a certificate of sale and caused it to be registered in the
Registry of Deeds of Marikina. No redemption having been made by the
Sarmiento spouses, a final bill of sale was issued in his favor.
On August 16, 1986, Mr. Puzon sold the property in question to herein
plaintiff-appellee. By virtue of such sale, a transfer certificate of title over the
subject property was issued in favor of the plaintiff-appellee. Records show
that Mr. Puzon assured the plaintiff-appellee that he will take care of the
squatters in the subject property by filing an ejectment case against them.
However, Mr. Puzon failed to comply with his promise.
ISSUE: Is there good faith on the part of the purchaser?
HELD: Verily, every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way
oblige him to go behind the certificate to determine the condition of the
property. Thus, the general rule is that a purchaser may be considered a
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purchaser in good faith when he has examined the latest certificate of title. An
exception to this rule is when there exist important facts that would create
suspicion in an otherwise reasonable man to go beyond the present title and to
investigate those that preceded it. Thus, it has been said that a person who
deliberately ignores a significant fact which would create suspicion in an
otherwise reasonable man is not an innocent purchaser for value. A purchaser
cannot close his eyes to facts which should put a reasonable man upon his
guard, and then claim that he acted in good faith under the belief that there
was no defect in the title of the vendor.
The fact that private respondent RRC did not investigate the Sarmiento
spouses claim over the subject land despite its knowledge that Pedro Ogsiner,
as their overseer, was in actual possession thereof means that it was not an
innocent purchaser for value upon said land. Article 524 of the Civil Code
directs that possession may be exercised in ones name or in that of another. In
herein case, Pedro Ogsiner had informed RRC that he was occupying the
subject land on behalf of the Sarmiento spouses. Being a corporation engaged
in the business of buying and selling real estate, it was gross negligence on its
part to merely rely on Mr. Puzons assurance that the occupants of the property
were mere squatters considering the invaluable information it acquired from
Pedro Ogsiner and considering further that it had the means and the
opportunity to investigate for itself the accuracy of such information.

Alejandro Gabriel and Alfredo Gabriel, v. Spouses Pablo Mabanta et al.

G.R. No. 142403. March 26, 2003
Sandoval-Gutierrez, J.:
FACTS: Spouses Pablo and Escolastica Mabanta were the registered owners of
two lots located in Patul and Capaltitan, Santiago, Isabela, with an area of 512
and 15,000 square meters, covered by Transfer Certificates of Title (TCT) Nos.
72705 and 72707, respectively. On October 25, 1975, they mortgaged both lots
with the Development Bank of the Philippines (DBP) as collateral for a loan of
P14,000.00.
Five years thereafter or on September 1, 1980, spouses Mabanta sold the lots to
Susana Soriano by way of a Deed of Sale of Parcels of Land With Assumption of
Mortgage.[4] Included in the Deed is an agreement that they could repurchase
the lots within a period of two (2) years.
Spouses Mabanta failed to repurchase the lots. But sometime in 1984, they were
able to convince Alejandro Gabriel to purchase the lots from Susana Soriano. As
consideration, Alejandro delivered to Susana a 500-square meter residential lot
with an actual value of P40,000.00 and paid spouses Mabanta the sum of
P5,000.00. On May 15, 1984, spouses Mabanta executed a Deed of Sale with
Assumption of Mortgagein favor of Alejandro. For her part, Susana executed a
document entitled Cancellation of Contract whereby she transferred to
Alejandro all her rights over the two lots.
Alejandro and his son Alfredo cultivated the lots. They also caused the
restructuring of spouses Mabantas loan with the DBP. However, when they
were ready to pay the entire loan, they found that spouses Benito and Pura Tan
had paid it and that the mortgage was already cancelled.
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On August 18, 1985, Benito Tan and Alejandro Tridanio, a barangay official,
approached Alejandro to refund to him the P5,000.00 he paid to spouses
Mabanta. Alejandro refused because Tan was unwilling to return the formers
500-square meter lot delivered to Susana as purchase price for the
lots. Thereafter, spouses Tan tried to eject Alejandro from the lot covered by TCT
No. 72707.
On September 17, 1985, Alejandro and Alfredo filed with the Regional Trial
Court, Branch 21, Santiago, Isabela a complaint (involving the lot covered by
TCT No. 72707) for specific performance, reconveyance and damages with an
application for a preliminary injunction against spouses Mabanta, spouses Tan,
the DBP and barangay officials Dominador Maylem and Alejandro Tridanio. In
due
time,
these
defendants
filed
their
respective
answers.
During the proceedings, it turned out that it was spouses Tans daughter,
Zenaida Tan-Reyes who bought one of the lots (covered by TCT No. 72707) from
spouses Mabanta on August 21, 1985. Not having been impleaded as a partydefendant, she filed an answer-in-intervention alleging that she is the registered
owner of the lot covered by TCT No. 72707; that she purchased it from spouses
Mabanta in good faith and for value; that she paid their loan with the DBP in
the amounts of P17,580.88 and P16,845.17 per Official Receipts Nos. 1749539 and
1749540, respectively; that the mortgage with the DBP was cancelled and spouses
Mabanta executed a Deed of Absolute Sale in her favor; and that TCT No. T72707 was cancelled and in lieu thereof, TCT No. T-160391 was issued in her
name.
On April 12, 1991, the trial court rendered its Decision sustaining the right of
Alejandro and Alfredo Gabriel over the lot covered by TCT No. 72707 (now TCT
No. T-160391)
ISSUE: Whether or not the second sale of the disputed lot executed by spouses
Mabanta in favor of Zenaida Tan-Reyes is valid under Article 1544 of the Civil
Code.
HELD: We have consistently held that in cases of double sale of immovables,
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. In Salvoro vs. Tanega, we had the occasion to rule that if a
vendee in a double sale registers the 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.
Mere registration of title is not enough, good faith must concur with the
registration. To be entitled to priority, the second purchaser must not only
establish prior recording of his deed, but must have acted in good faith, without
knowledge of the existence of another alienation by the vendor to the other. In
the old case of Leung Yee vs. F. L. Strong Machinery, Co. and Williamson, this
Court ruled: One who purchases a real estate with knowledge of a defect of title
in his vendor cannot claim that he has acquired title thereto in good faith as
against the true owner of the land or of an interest therein; and the same rule
must be applied to one who has knowledge of facts which should have put him
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upon such inquiry and investigation as might be necessary to acquaint him with
the defects in the title of his vendor. A purchaser cannot close his eyes to facts
which should put a reasonable man upon his guard, and then claim that he acted
in good faith under the belief that there was no defect in the title of the
vendor. His mere refusal to believe that such a defect exists, or his willful
closing of his eyes to the possibility of the existence of a defect in his vendors
title will not make him an innocent purchaser for value, if it afterwards develops
that the title was in fact defective, and it appears that he had such notice of the
defect as would have led to its discovery had he acted with that measure of
precaution which may reasonably be required of a prudent man in a like
situation.
In fine, we hold that respondent Zenaida Tan-Reyes did not act in good faith
when she bought the lot and had the sale registered.

Narcisa Sanchez v. Roque Ramos

G.R. No. L-13442, December 20, 1919
Avancea, J.:
FACTS: This is an action for the recovery of a piece of land described in the
second paragraph of the complaint. This land is in the defendant's possession
and formerly belonged to Ciriaco Fernandez. On July 1, 1910, Ciriaco Fernandez
sold it to the spouses Marcelino Gomez and Narcisa Sanchez under pacto de
retro for the period of one year. This also was executed in a public instrument.
Marcelino Gomez and Narcisa Sanchez never took material possession of the
land. The period for repurchase elapsed without the vendor making use of it. On
July 3, 1912, Ciriaco Fernandez again sold the same land, by means of a private
document, to Roque Ramos who immediately took material possession thereof.
By applying article 1473 of the Civil Code, the trial court declared preferable the
sale executed to the defendant and absolved him from the complaint.
ISSUE: Whether or not the sale executed to the plaintiff must be declared
preferable.
HELD: By the same article applied by the lower court, we are of the opinion that
the sale executed to the plaintiff must be declared preferable.
To what kind of possession does this article refer? Possession is acquired by the
material occupancy of the thing or right possessed, or by the fact that the latter is
subjected to the action of our will, or by the appropriate acts and legal formalities
established for acquiring possession (art. 438, Civil Code.). By a simple
reasoning, it appears that, because the law does not mention to which of these
kinds of possession the article refers, it must be understood that it refers to all of
these kinds. The proposition that this article, according to its letter, refers to the
material possession and excludes the symbolic does not seem to be founded
upon a solid ground. It is said that the law, in the gradation of the causes of
preference between several sales, fixes, first, possession and then the date of the
title and, as a public instrument is a title, it is claimed that the inference is that
the law has deliberately intended to place the symbolic possession, which the
execution of the public document implies after the material possession. This
argument, however, would only be forceful if the title, mentioned by this article,
includes public instruments, and this would only be true if public instruments
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are not included in the idea of possession spoken of in said article. In other
words, the strength of the argument rests in that this possession is precisely the
material and does not include the symbolic. Consequently, the argument is
deficient for it is begging the same question, because if this possession includes
the symbolic, which is acquired by the execution of a public instrument, it should
be understood that the title, mentioned by the law as the next cause of
preference, does not include public instruments.
Furthermore, our interpretation of this article 1473 is more in consonance with
the principles of justice. The execution of a public instrument is equivalent to the
delivery of the realty sold (art. 1462, Civil Code) and its possession by the vendee
(art. 438). Under these conditions the sale is considered consummated and
completely transfers to the vendee all of the vendor's rights of ownership
including his real right over the thing. The vendee by virtue of this sale has
acquired everything and nothing, absolutely nothing, is left to the vendor. From
this moment the vendor is a stranger to the thing sold like any other who has
never been its owner. As the thing is considered delivered, the vendor has no
longer the obligation of even delivering it. If he continues taking material
possession of it, it is simply on account of vendee's tolerance and, in this sense,
his possession is vendor's possession. And if the latter should have to ask him for
the delivery of this material possession; it would not be by virtue of the sale,
because this has been already consummated and has produced all its effects, but
by virtue of the vendee's ownership, in the same way as said vendee could
require of another person although same were not the vendor. This means that
after the sale of a realty by means of a public instrument, the vendor, who resells
it to another, does not transmit anything to the second vendee and if the latter,
by virtue of this second sale, takes material possession of the thing, he does it as
mere detainer, and it would be unjust to protect this detention against the rights
to the thing lawfully acquired by the first vendee.
From the foregoing it follows that the plaintiff was the first to take possession of
the land, and consequently the sale executed to him is preferable.

Crisanto Lichauco, et al., v. Jose Berenguer

G.R. No. L-5933, August 25, 1911
FACTS: Crisanto Lichauco and other co-heirs, applied for the registration of two
rural estates situated in the pueblo of Arayat, Province of Pampanga, one of
which, in the barrio of Batasan and the other, in the sitio of Panantaglay, barrio of
Calumpang. With respect to both the said properties, the applicants allege that
they obtained them by inheritance from their grandmother, Cornelia
Laochangco, and that the latter, in turn, had acquired them from Macario
Berenguer, through purchase with an agreement that the vendor should have the
right to redeem them within two years and that all the fruits of the said lands
shall be deposited in the sugar depository of the vendee, situated in the district
of Quiapo of this city, and the value of which shall be applied on account of the
price of this sale.
Jose Berenguer, the son of Macario Berenguer and the administrator of his estate,
opposed the registration of the first of the aforementioned properties, and
acquiesced in that of the second. Trial court ruled in favour of Jose Berenguer
and denied the application.
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ISSUE: Whether or not the period of right of redemption has lapsed thereby
consolidating the ownership of the land to the heirs of the vendee
HELD: Conventional redemption is the right which the vendor reserves to
himself to recover the thing sold, with the obligation to reimburse to the vendee
the price of the sale, the expenses of the contract, and any other legitimate
payment made by reason of the sale, and the useful and necessary expenses
incurred for account of the thing sold.
The right of redemption, in the present case, began to be exercised from the year
following that of the sale and continued, during seven years, until 1896, in such
wise that already in August 1890 the price which the vendor must reimburse to
the vendee had been reduced to 3,888.61 pesos, and the reduction was continued
by the deposits of sugar intended to cancel the debt. This was done by the
express will of both parties, who believed that by so doing they best served their
interests, and in that manner they covenanted and acted one towards the other,
without the least contradiction or complaint. The exercise of the right of
redemption having been commenced and such advancement having already
been made up to 1896 in the way of reimbursement of the price of the
repurchase, by the amount of sugar which the vendee had received from the
vendor for the purpose of reimbursing the price of the sale, it is in no manner
permissible, at the will of the heirs of the vendee, to consider had begun and
continued by mutual agreement of both contracting parties.
The terms of two years stipulated for the redemption expired; but in the contract
itself there is the additional covenant that the vendor shall deposit under the
control of the vendee all the fruits of the lands leased for the purpose of repaying
the price of the sale. After the expiration of that term of two years, the vendee
continued receiving in subsequent years fruits of the leased lands, under that
additional agreement that they all should be placed in his control in order to
cancel the price of the sale. These are facts absolutely incompatible with the term
stipulated and with the idea of the vendee becoming the owner of the lands
merely by the expiration of the two years.
The vendee, who has been reimbursed by the vendor for a part of the repurchase
price, is bound to fulfill the obligation to sell back, derived from the sale with
right to repurchase, or must show reason why he may keep this part of the price
and, notwithstanding his so doing, be considered released from effecting the
resale. He may be entitled to require the completion of the price, or that he be
paid other expenses before he returns the thing which he had purchased under
such a condition subsequent; but the exercise of the right of redemption having
been begun and admitted, the irrevocability of the ownership in such manner
acquired is in all respects incompatible with these acts so performed.
It is sufficient for the purposes of the appeal to find, as we hereby do find, that
the right of redemption has not lapsedlapse which was the ground for the
application for registration that was based on the consolidation of the ownership
of the two parcels of land, in the vendee, from whom the applicants derive their
right.

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Carlos Palanca vs. The Director of Lands, et al.,

G.R. No. 15950, March 9, 1922
FACTS: Carlos Palanca is the applicant for the registration of the parcel of land
marked lot No. 2 described in the plan accompanying his application. Roman
Santos opposes the registration of the eastern portion of this lot which is more
fully described in this written opposition.
Lot No. 2 together with lot No. 1, which is the subject of antoehr proceeding,
form one piece of land, lot No. 1 being located within the Province of Pampanga
and lot No. 2 in the Province of Bulacan.
On October 31, 1917, the sisters Irene Mojica and Consuelo Mojica sold
the hacienda composed of these two lots to Felipe Buncamino Suntay and in
December of the same year said Suntay sold the same lands to Carlos Palanca. In
the description of this hacienda in the document of sale to Suntay the portion
claimed by Roman Santos appears to have been excluded. In January, 1918, Irene
and Consuelo Mojica sold to the opponent Roman Santos the said portion that
had been excluded. The deeds of sale of Felipe Buencamino Suntay and of the
applicant Carlos Palanca were recorded in the registry on January 26, 1918, and
the document of sale to Santos was also recorded on August 6, 1918.
ISSUE: Whether or not there was a double sale.
HELD: Yes. It results, therefore, that the land under discussion was twice sold to
two different purchasers. In accordance with article 1473 of the Civil Code the
sale that was first recorded must be given preference. Although the sale to
Suntay and the sale by the latter to Palanca wre recorded, it must be deemed that
no record was made as to the portion of land in question. For the purposes of
articles 1473, the record in the registry is tantamount to a notice of the fact of the
existence of the contract. But, as in the deeds containing these contracts the
portions of land under discussion does not appear, the registration of the
documents cannot be considered as a notice of the sale of the said portion. On the
other hand, although the sale to Roman Santos was also recorded, it was only
effected in August, 1918, after the herein applicant had already filed his
application for this land claiming to have bought it from the sisters Irene and
Conseulo Mojica and after the said Palanca had filed an oppostion to the
application of Roman Santos for the registration of the said parcel of land, it
being noted that Palanca, before that time, had brought an action for injunction
against Santos on account of the same portion of land. Wherefore, when Santos
recorded his sale he knew that Palanca was claiming the land in question by
virtue of a former purchase. consequently the record made by Santos was not in
good faith and he cannot base his preference of title thereon. The record to which
article 1473 of the Civil Code refers is that made in good faith, for the law will
not protect anything done in bad faith.
The preference, therefore, as between these two sales must be adjudged to
Palanca in accordance with said article 1473 of the Civil Code, on account of
priority of possession. Palanca had possession of the land as a lessee before the
land was sold and after the consummation of the sale he continued in such
possession uninterruptedly, not as lessee, but, as owner of the property.

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Sigaya v. Mayuga
G.R. No. 143254, August 18, 2005
Austria-Martinez, J.:
FACTS: The parties in this case are both claiming their right over a parcel of
land. Petitioners argued that their predecessor, upon whom they inherited the
title, is a purchaser in good faith who has merely relied on the certificate of title
of the land sold to their predecessor. On the other hand, the respondents argued
that they have a better right over the said land since they were then occupying
the same even before the alleged sale made in favor the petitioner's predecessor.
They further argued that the petitioner's predecessor is not a purchaser in good
faith knowing that there is occupant on the land to be sold to him and yet he did
not made any suspicion.
ISSUE: Is the petitioner's predecessor a purchaser in good faith who can rely on
the title of the said land?
HELD: No. Indeed, it is a well-settled rule that every person dealing with
registered land may safely rely on the correctness of the certificate of title issued
therefor and the law will in no way oblige him to go beyond the certificate to
determine the condition of the property. Where there is nothing in the certificate
of title to indicate any cloud or vice in the ownership of the property, or any
encumbrance thereon, the purchaser is not required to explore further than what
the Torrens Title upon its face indicates in quest for any hidden defects or
inchoate right that may subsequently defeat his right thereto.
However, this rule shall not apply when the party has actual knowledge of facts
and circumstances that would impel a reasonably cautious man to make such
inquiry or when the purchaser has knowledge of a defect or the lack of title in his
vendor or of sufficient facts to induce a reasonably prudent man to inquire into
the status of the title of the property in litigation.
There being occupants of the property, the Court cannot ascribe good faith to
petitioner's predecessor who has not shown any diligence in protecting his
rights.

Yap Kim Chuan v. Tiaoqui

G.R. No. 10006, September 18, 1915
Torres, J.:
FACTS: The plaintiff in this case is a lessee of the defendant. During the period
of lease, his merchandise was damaged due to leaks in the roof of the storeroom
in the leased building. For this reason, he asked the defendant-lessor to
indemnify him for damage caused by the leaks in the roof. The defendant-lessor,
on the other hand, argued that the building being occupied by the plaintiff was
new and was built based on standard required by the government. The leak was
due to a torrential rain the heaviest from the month of January of that year. He
further argued that the leak was not solely caused by the heavy rain but also due
to improper location of said merchandise inside the building.
ISSUE: Can the lessor be held liable for indemnity for the damage caused to the
goods of lessee? Did he fail to perform his obligations as lessor?
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HELD: No. Article 1562 of the Civil Code reads: "If, at the time of the lease of the
estate, the condition of the same was not mentioned, the law presumes that the
lessee received it in good condition, unless there be proof to the contrary."
Moreover, there is no evidence in the case that he failed in the performance of the
obligations he assumed in executing the lease, nor does there appear to have
been stipulated therein the liability now imputed to him. The fact is that neither
the lessor no the lessees knew that the roof was defective and was going to leak
when it rained, for they only became aware of the leaks during the rainstorm;
and therefore only on the hypothesis that the lessor had known of such defect
and had concealed it from the plaintiffs could he be held responsible for the
consequences thereof on account of the leakages that occurred.
Indeed lessor is liable for warranty against any hidden defects. But this liability
for warranty of the thing leased does not amount to an obligation to indemnify
the tenant for damages, which is only to be allowed when there is proof that the
lessor acted with fraud and in bad faith by concealing to the lessee.

Moles vs. IAC

G.r. No. 73913, January 31, 1981
Regalado, J.:
FACTS: Petitioner Moles commenced a suit against private respondent Diolosa
for rescission of contract with damages. Petitioner bought a linotype printing
machine from respondent for his printing business, and applied for an industrial
loan with the Development Bank of the Philippines. The transaction was
basically verbal in nature but to facilitate the loan with the DBP, a pro forma
invoice was signed by petitioner with addendum that payment had not yet been
made but that he promised to pay the full amount upon the release of his loan
from the aforementioned bank on or before the end of the month. The machine
was later on found to have been defective and petitioner had never been able to
use the same since it was purchased. Petitioner claimed that he felt he was
cheated because the expert of the Linotype machine from Manila says that the
most he will buy the machine is at P5,000 only, but private respondent sold the
same to petitioner for P40,000.
ISSUES: (1) Whether or not a sales invoice is a contract evidencing the sale
between the parties.
(2) Whether or not there is an implied warranty of quality and fitness
when an article is sold as a secondhand item.
(3) Whether the hidden defects in the machine is sufficient to warrant
a rescission of the contract between the parties
(4) Whether or not the prescriptive period of six months for
redhibitory action applies in the case at bar.
HELD: (1) NO. A sales invoice is not the contract evidencing the sale in the case
at bar, it being merely a preliminary memorandum of a proposal to buy one
linotype machine, using for such purpose a printed form used for printing job
orders in private respondents printing business. The sales invoice is merely a
pro forma memorandum.
Consequently, the printed provisions therein,
especially since the printed form used was for purposes of other types of
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transactions, could not have been intended by the parties to govern their
transaction on the printing machine. It is obvious that a venue stipulation, in
order to bind the parties, must have been intelligently and deliberately intended
by them to exclude their case from the reglementary rules on venue.
(2) YES. 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. On the other hand, there is also authority to the effect that in a sale of a
secondhand article there may be, under some circumstances, an implied
warranty of fitness for the ordinary purpose of the article sold or for the
particular purpose of the buyer. Article 1562 of our Civil Code, which was taken
from the Uniform Sales Act, 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; xxx
(3) The redhibitory defect contemplated in Article 1561 of the Civil Code 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.
(4) NO. While it is true that Article 1571 of the Civil Code provides for a
prescriptive period of six months for a redhibitory action a cursory reading of the
ten preceding articles to which it refers will reveal that said rule may be applied
only in case of implied warranties. The present case involves one with express
warranty. Consequently, the general rule on rescission of contract, which is four
years shall apply.

Bricktown Development Corporation v. Amor Tierra Development

Corporation
G.R. No. 112182, December 12, 1994
Vitug, J.:
FACTS: Petitioner Bricktown Development Corporation, represented by its
President and co-petitioner Mariano Velarde, executed two Contracts to sell in
favor of respondent Amor Tierra Development Corporation, represented by its
vice president Moises Petilla, covering a total of 96 residential lots. The total
price of P21,639,875.00 was stipulated to be paid by private respondent in such
amounts and maturity dates, as follows: P2,200,000.00 on 31 March 1981;
P3,209,968.75 on 30 June 1981; P4,729,906.25 on 31 December 1981; and the
balance of P11,500,000.00 to be paid by means of an assumption by private
respondent of petitioner corporation's mortgage liability to the Philippine
Savings Bank or, alternatively, to be made payable in cash.
Private respondent was only able to pay petitioner corporation the sum of
P1,334,443.21. In the meanwhile, however, the parties continued to negotiate for
a possible modification of their agreement, although nothing conclusive would
appear to have ultimately been arrived at. Finally, on 12 October 1981, petitioner
corporation, through its legal counsel, sent private respondent a "Notice of
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Cancellation of Contract" on account of the latter's continued failure to pay the

installment due. Petitioner corporation advised private respondent, however,
that it still had the right to pay its arrearages within 30 days from receipt of the
notice "otherwise the actual cancellation of the contract (would) take place."
ISSUE: Whether a grace period is a right or an obligation.
HELD: A grace period is a right, not an obligation, of the debtor. When
unconditionally conferred, such as in this case, the grace period is effective
without further need of demand either calling for the payment of the obligation
or for honoring the right. The grace period must not be likened to an obligation,
the non-payment of which, under Article 1169 of the Civil Code, would generally
still require judicial or extrajudicial demand before "default" can be said to arise.
The cancellation of the contracts to sell by petitioner corporation accords with the
contractual covenants of the parties, and such cancellation must be respected. It
may be noteworthy to add that in a contract to sell, the non-payment of the
purchase price (which is normally the condition for the final sale) can prevent the
obligation to convey title from acquiring any obligatory force.
A contract, once perfected, has the force of law between the parties with which
they are bound to comply in good faith and from which neither one may renege
without the consent of the other. The autonomy of contracts allows the parties to
establish such stipulations, clauses, terms and conditions as they may deem
appropriate provided only that they are not contrary to law, morals, good
customs, public order or public policy. The standard norm in the performance of
their respective covenants in the contract, as well as in the exercise of their rights
thereunder, is expressed in the cardinal principle that the parties in that juridical
relation must act with justice, honesty and good faith.

EDCA Publishing & Distributing Corp. v. Spouses Leonor And Gerardo

Santos, doing business under the name and style of "Santos Bookstore,"
and Court of Appeals
G.R. No. 80298. April 26, 1990
Cruz, J.
FACTS: A person identifying himself as Professor Jose Cruz placed an order by
telephone with the EDCA for 406 books, payable on delivery. EDCA prepared
the corresponding invoice and delivered the books as ordered, for which Cruz
issued a personal check covering the purchase price. Cruz sold 120 of the books
to private respondent Leonor Santos who, after verifying the seller's ownership
from the invoice he showed her, paid him the purchase price. Meanwhile, EDCA
having become suspicious over a second order placed by Cruz even before
clearing of his first check, made inquiries with the De la Salle College where he
had claimed to be a dean and was informed that there was no such person in its
employ. Further verification revealed that Cruz had no more account or deposit
with the Philippine Amanah Bank, against which he had drawn the payment
check. EDCA then went to the police, which set a trap and arrested Cruz.
Investigation disclosed his real name as Tomas de la Pea and his sale of 120 of
the books he had ordered from EDCA to the private respondents. EDCA sought
the assistance of the police, which forced their way into the store of the private
respondents and threatened Leonor Santos with prosecution for buying stolen
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property. They seized the 120 books without warrant and thereafter turned them
over to the petitioner. Private respondents sued for recovery of the books after
demand for their return was rejected by EDCA.
ISSUE: Whether the petitioner has been unlawfully deprived of the books
because the check issued by the impostor in payment therefor was dishonored.
HELD: NO. 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. 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.
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.

Pilar T. Ocampo vs. Court of Appeals and Magdalena S. Villaruz

G.R. No. 97442. June 30, 1994
Bellosillo, J.:
FACTS: Severino Tolosa and Pilar T. Ocampo entered into an "Agreement to Sell
Real Property" whereby Tolosa sells the parcel of land to Ocampo in
consideration of P25,000.00, where half was paid upon signing of the deed and
the balance to be due within six months thereafter. Before the six-month period
to complete the payment of the purchase price expired, Ocampo failed to
complete his payment. Nevertheless Tolosa accepted her subsequent late
payments. Meanwhile, the subject property was involved in a boundary dispute.
Upon learning of the mortgage lien, Ocampo caused her adverse claim to be
annotated on Tolosas certificate of title. Tolosa sought the cancellation of
Ocampos adverse claim and presented her with two options, namely, a refund
of payments made, or a share from the net proceeds if sold to a third
party. Ocampo expressed to pay the balance of the purchase price, should
Tolosa be ready to deliver to her the deed of absolute sale and the owners
duplicate for purposes of registration. Subsequently, Tolosa and Magdalena S.
Villaruz executed a "Contract to Sell" whereby Tolosa sold to Villaruz the same
land in consideration of P94,300.00. The amount of P15,000.00 was to be paid
upon execution and the balance upon cancellation of all liens and encumbrances
from the certificate of title. The contract stipulated the immediate conveyance of
the physical possession of the land to Villaruz, although no deed of definite sale
would be delivered to her unless the price was fully paid. The contract noted the
supposed judicial termination of the boundary dispute over the land. Tolosa
wrote Ocampo offering to reimburse her what she paid provided she would sign
a document canceling her adverse claim. Failing to convince Ocampo, Tolosa
filed a petition to cancel the adverse claim of Ocampo, which was later denied.
Tolosa succeeded in securing from another branch of the court the cancellation of
the adverse claims of Ocampo without notice to her. This paved the way for the
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registration of the contract of sale of Villaruz and the subsequent issuance of a

Transfer Certificate of Title in her name which canceled the Original Certificate
of Title of Tolosa. Ocampo filed a third party complaint against Villaruz. The trial
court ruled in favor of Ocampo, declaring the agreement between Tolosa and
Villaruz as null and void and ordered Tolosa to execute the corresponding Deed
of Sale in favor of Ocampo. The Court of Appeals reversed the trial courts
decision, hence, this appeal.
ISSUE: Whether or not Tolosa has the right to rescind the contract entered
between him and Ocampo.
HELD: NO. The failure of the buyer to pay the price in full within a fixed period
does not, by itself, bar the transfer of the ownership or possession, much less
dissolve the contract of sale. The agreement between Tolosa and Ocampo was a
perfected contract of absolute sale wherein Tolosa forthwith sold, ceded and
transferred the land to Ocampo. Under Art. 1592 of the Civil Code, the failure of
Ocampo to complete her payment of the purchase price within the stipulated
period merely accorded Tolosa the option to rescind the contract of sale upon
judicial or notarial demand. However, the letter claimed to have been sent by
Tolosa to Ocampo rescinding the contract of sale was defective because it was
not notarized and, more importantly, it was not proven to have been received by
Ocampo. Tolosa, on the other hand, is precluded from raising the issue of late
payments. His unqualified acceptance of payments after the 6-month period
expired constitutes waiver of the period, and hence of the ground to rescind
under Article 1592 of the Civil Code. The breach on the part of Ocampo was only
slight, if not outweighed by the bad faith of Tolosa in reneging in his own
prestations, hence, judicial rescission of the contract cannot be justified. While the
contract in favor of Villaruz is also a contract of sale, that of Ocampo should
prevail pursuant to Article 1544 of the Civil Code on double sales. While Villaruz
may have registered his contract or came into possession ahead of Ocampo,
Villaruz was not in good faith since Ocampo already had her adverse claim
annotated on Tolosas title before the sale between Tolosa and Villaruz.

Southern Motors, Inc. v. Moscoso

G.R. No. L-14475.May 30, 1961
Paredes, J.:
FACTS: Plaintiff Southern Motors, Inc. sold to defendant Angel Moscoso one
Chevrolet truck on installment basis, for P6,445.00. Upon making a down
payment, the defendant executed a promissory note for the sum of P4,915.00,
representing the unpaid balance of the purchase price to secure the payment of
which, a chattel mortgage was constituted on the truck in favor of the
plaintiff. Of said account, the defendant had paid a total of P550.00, of which
P110.00 was applied to the interest and P400.00 to the principal, thus leaving an
unpaid balance of P4,475.00. The defendant failed to pay 3 installments on the
balance of the purchase price .Plaintiff filed a complaint against the defendant, to
recover the unpaid balance of the promissory note. Upon plaintiff's petition, a
writ of attachment was issued by the lower court on the properties of the
defendant. Pursuant thereto, the said Chevrolet truck, and a house and lot
belonging to defendant, were attached by the Sheriff and said truck was brought
to the plaintiff's compound for safe keeping. After attachment and before the trial
of the case on the merits, acting upon the plaintiff's motion for the immediate
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sale of the mortgaged truck, the Provincial Sheriff of Iloilo sold the truck at
public auction in which plaintiff itself was the only bidder for P1,OOO.OO. The
trial court condemned the defendant to pay the plaintiff the amount of P4,475.00
with interest at the rate of 12% per annum from August 16, 1957,until fully paid,
plus 10% thereof as attorneys fees and costs. Hence, this appeal by the defendant.
ISSUE: Whether or not the attachment caused to be levied on the truck and its
immediate sale at public auction, was tantamount to the foreclosure of the chattel
mortgage on said truck.
HELD: No. Article 1484 of the Civil Code provides that 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: (I) Exact fulfilment 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; and (3) Foreclose the chattel mortgage on
the thing sold, if one has been constituted, should the vendee's failure to pay
cover two or more installments. In this case, he shall have no further action
against the purchaser to recover any unpaid balance of the price. Any agreement
to the contrary shall be void. The plaintiff had chosen the first remedy. The
complaint is an ordinary civil action for recovery of the remaining unpaid
balance due on the promissory note. The plaintiff had not adopted the procedure
or methods outlined by Sec. 14 of the Chattel Mortgage Law but those prescribed
for ordinary civil actions, under the Rules of Court. Had the plaintiff elected the
foreclosure, it would not have instituted this casein court; it would not have
caused the chattel to be attached under Rule 59, and had it sold at public auction,
in the manner prescribed by Rule 39. That the plaintiff did not intend to foreclose
the mortgage truck, is further evinced by the fact that it had also attached the
house and lot of the appellant at San Jose, Antique. We perceive nothing
unlawful or irregular in plaintiff's act of attaching the mortgaged truck itself.
Since the plaintiff has chosen to exact the fulfilment of the appellant's obligation,
it may enforce execution of the judgment that may be favorably rendered hereon,
on all personal and real properties of the latter not exempt from execution
sufficient to satisfy such judgment. It should be noted that a house and lot at San
Jose, Antique were also attached. No one can successfully contest that the
attachment was merely an incident to an ordinary civil action. The mortgage
creditor may recover judgment on the mortgage debt and cause an execution on
the mortgaged property and may cause an attachment to be issued and levied on
such property, upon beginning his civil action.

Nonato v. IAC
G.R. No. L-67181 November 22, 1985
Escolin, J.:
FACTS: Nonato spouses purchased from Peoples Car a Volkswagen car. They
issued a Promissory Note with chattel mortgage. Peoples Car thereafter
assigned its rights to the note to Investors Finance. The Nonatos defaulted, thus
Investors Finance repossessed the car and demanded the payment of the balance
of the purchase price.
ISSUE: Whether or not Investors Finance may still demand for the payment of
the balance when it repossessed the car.

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HELD: NO. The remedies contemplated under Art. 1484 are in the
ALTERNATIVEnot cumulative. Investors Finance in effect cancelled the sale
and it cannot now claim the balance of the purchase price. When it took
possession of the car, it gave the spouses 15 days to redeem the car. This could
mean that their failure to do so would constrain the company to retain the
permanent possession of the car. There was no attempt at all the return the car
thus, it is untrue that the same was retained merely for appraisal

Luis Ridad and Lourdes Ridad v. Filipinas Investment and Finance

Corp.
G.R. No. L-39806, January 27, 1983
De Castro, J:
FACTS: Plaintiffs purchased from the Supreme Sales arid Development
Corporation two (2) brand new Ford Consul Sedans complete with accessories
payable in 24 monthly installments. To secure payment thereof, plaintiffs
executed a promissory note covering the purchase price and a deed of chattel
mortgage not only on the two vehicles purchased but also on another car
(Chevrolet) and plaintiffs' franchise or certificate of public convenience for the
operation of a taxi fleet. With the conformity of the plaintiffs, the vendor
assigned its rights, title and interest to the above-mentioned promissory note and
chattel mortgage to defendant Filipinas Investment and Finance Corporation.
Plaintiffs failed to pay their monthly installments, hence, the defendant
corporation foreclosed the chattel mortgage extra-judicially, and at the public
auction sale of the two Ford Consul cars, of which the plaintiffs were not
notified, the defendant corporation was the highest bidder and purchaser.
Another auction sale was held involving the remaining properties subject of the
deed of chattel mortgage since plaintiffs' obligation was not fully satisfied by the
sale of the aforesaid vehicles, and at the public auction sale, the franchise of
plaintiffs to operate five units of taxicab service was sold to the highest bidder,
herein defendant corporation, which subsequently sold and conveyed the same
to herein defendant Jose D. Sebastian, who then filed with the Public Service
Commission an application for approval of said sale in his favor.
ISSUE: Whether Filipinas Investment is precluded from foreclosing the second
mortgage to recover the deficiency on the first mortgage
HELD: No. The vendor of personal property sold on the installment basis is
precluded, after foreclosing the chattel mortgage on the thing sold from having a
recourse against the additional security put up by a third party to guarantee the
purchasers performance of his obligation on the theory that to sustain the same
would overlook the fact that if the guarantor should be compelled to pay the
balance of the purchase price, said guarantor will in turn be entitled to recover
what he has paid from the debtor-vendee, and ultimately it will be the latter who
will be made to bear the payment of the of the balance of the price, despite the
earlier foreclosure of the chattel mortgage given by him, thereby indirectly
subverting the protection given the latter.
If the vendor under such circumstance is prohibited from having a recourse
against the additional security for reasons therein stated, there is no ground why
such vendor should not likewise be precluded from further extrajudicially
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foreclosing the additional security put up by the vendees themselves, as in the

instant case, it being tantamount to a further action that would violate Article
1484 of the Civil Code, for then is actually no between an additional security put
up by the vendee himself and such security put up by a third party insofar as
how the burden would ultimately fall on the vendee himself is concerned.

Daniel L. Borbon II and Francisco L. Borbon v. Servicewide Specialists,

Inc. & CA
G.R. No. 106418, July 11, 1996
Vitug, J.:
FACTS:
Defendants Daniel Borbon and Francisco Borbon signed a promissory note in
favor of Pangasinan Auto Mart, Inc. amounting to P122,856.00 payable in equal
monthly installments for 12 months. To secure the Promissory Note, the
defendants executed a Chattel Mortgage of his brand new car. The rights of
Pangasinan Auto Mart was assigned to Filinvest Credit Corporation
(Filinvest). Filinvest later on assigned all its rights, interest and title over the
Promissory Note and the chattel mortgage to the plaintiff Servicewide
Specialists, Inc. Defendants did not pay their monthly installments, thus,
Filinvest attempted to collect by sending a demand letter to the defendants for
them to pay their entire obligation.
For their defense, the defendants claim that what they intended to buy from
Pangasinan Auto Mart was a jeepney type Isuzu K. C. Cab. The vehicle that they
bought was not delivered. Instead, through misrepresentation and machination,
the Pangasinan Motor, Inc. delivered an Isuzu crew cab, as this is the unit
available at their warehouse.
In sustaining the decision of the court a quo, the appellate court ruled that
petitioners could not avoid liability under the promissory note and the chattel
mortgage that secured it since private respondent took the note for value and in
good faith.
Petitioners seek a modification of the decision of the appellate court insofar as it
has upheld the court a quo in the award of liquidated damages and attorney's
fees in favor of private respondent. Petitioners invoke that under Article 1484 of
the Civil Code, the vendor-mortgagee or its assignees loses any right "to recover
any unpaid balance of the price" and any "agreement to the contrary (would be)
void.
ISSUE: Whether the affirmance by the appellate court of the awards made by the
court a quo of liquidated damages and attorney's fees to private respondent is
proper.
HELD: The court strikes down the award for liquidated damages but uphold the
grant of attorneys fees. When the assignee forecloses the mortgage, there can be
no further recovery of the deficiency and the seller-mortgagee is deemed to have
renounced any right thereto. Under Art. 1484 of the Civil Code, the vendormortgagee or its assignees losses any right to recover any unpaid balance of the
price and any agreement to the contrary is void. Any unpaid balance can only
mean the deficiency judgment to which mortgagee may be entitled to when the
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proceeds form the auction sale are insufficient to recover the full amount of the
secured obligation which include interest on the principal, attorneys fees,
expenses of collection and costs.
Where the mortgagor unjustifiably refused to surrender the chattel subject of the
mortgage upon failure of two or more installments, or if he concealed the chattel
to place it beyond the reach of the mortgagee, that thereby constrained the latter
to seek court relief, the expenses incurred for the prosecution of the case, such as
attorney's fees, could rightly be awarded.

Pascual vs. Universal Motors Corp.

G.R. No. L-27862 November 20, 1974
FACTS: Plaintiff-appellee spouses Lorenzo Pascual and Leonila Torres (spouses
Pasqual) executed a real estate mortgage on December 14, 1960 to secure the
payment of the indebtedness of PDP Transit, Inc. (PDP Trans.) for the purchase
of 5 units of Mercedes Benz trucks, with a total purchase price or principal
obligation of P152,506.50 which was to bear interest at 1% per month starting
that day, but the plaintiffs' guarantee is not to exceed P50,000.00 which is the
value of the mortgage. PDP Trans., as the spouses Pasqual's principal, paid to
defendant-appellant Universal Motors Corporation (Universal Motors) the sum
of P92,964.91 on April 5, 1961 for two of the five Mercedes Benz trucks and on
May 22, 1961 for the remaining three, thus leaving a balance of P68,641.69
including interest due on February 8, 1965.
On March 19, 1965, Universal Motors filed a complaint with the CFI of Manila
against the PDP Trans. to collect the balance due under the Chattel Mortgages
and to repossess all the units sold to PDP Trans. as the spouse Pascuals
principal, including the 5 units guaranteed under the subject Real (Estate)
Mortgage. During the hearing, Universal Motors admitted that it was able to
repossess all the units sold to the latter, including the 5 units guaranteed by the
subject real estate mortgage, and to foreclose all the chattel mortgages
constituted thereon, resulting in the sale of the trucks at public auction. As the
real estate mortgagors, the spouses Pascual filed an action with the CFI of
Quezon City for the cancellation of the mortgage they constituted on 2 parcels of
land in favor of the Universal Motors to guarantee the obligation of PDP Trans.
to the amount of P50,000. The said CFI rendered judgment in favor of the
spouses Pascual and ordered the cancellation of the mortgage.
ISSUE: Whether or not, as contended by the Universal Motors, Article 1484
prohibits the vendor from recovering from the purchaser the unpaid balance of
the price after he has foreclosed the chattel mortgage on the thing sold, but not a
recourse against the security put up by a third party
HELD: No. To sustain Universal Motors argument would be to overlook the fact
that if the guarantor should be compelled to pay the balance of the purchase
price, the guarantor will in turn be entitled to recover what she has paid from the
debtor vendee (Art. 2066, Civil Code); so that ultimately, it will be the vendee
who will be made to bear the payment of the balance of the price, despite the
earlier foreclosure of the chattel mortgage given by him. Thus, the protection
given by Article 1484 would be indirectly subverted, and public policy
overturned.
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Magna Financial Services Group, Inc., v. Colarina

G.R. No. 158635 December 9, 2005
FACTS: Elias Colarina bought from petitioner a Suzuki Multicab payable on
installments and secured by an integrated promissory note and a deed of chattel
mortgage. Upon respondents default in payment, petitioner filed a complaint for
Foreclosure of the Chattel Mortgage with Replevin. Colarina then voluntarily
surrendered the physical possession of the vehicle. Failing to answer within the
reglementary period, the MTC ordered respondent to pay petitioner the unpaid
balance of the vehicles purchase price. This was affirmed by the RTC. The CA,
on the other hand, reversed and set aside the decisions of the lower courts
granting the payment of the unpaid balance for being inconsistent with
petitioners complaint for foreclosure.
ISSUE: Whether or not the foreclosure of mortgage, as an exercise of the 3rd
remedy in Article 1484, is in nature an action for sum of money with execution of
the security.
HELD: No. A Contract of chattel mortgage is in the nature of a conditional sale
of personal property given as a security for the payment of a debt, or the
performance of some other obligation specified therein, the condition being that
the sale shall be void upon the seller paying to the purchaser a sum of money or
doing some other act named. If the condition is performed according to its terms,
the mortgage and sale immediately become void, and the mortgage is thereby
divested of his title. But in case of nonpayment, foreclosure is one of the
alternative remedies available to a mortgagee. Since the petitioner has
undeniably elected a remedy of foreclosure under Article 1484(3) of the Civil
Code, it is bound by its election and thus may not be allowed to change what it
has opted for nor to ask for more.
Petitioner, having elected the foreclosure of chattel mortgage, is not entitled to be
paid the balance even though it did not actually foreclose the chattel mortgage.
Article 1484, paragraph 3, provides that if the vendor has availed himself of the
right to foreclose the chattel mortgage, he shall have no further action against the
purchaser to recover any unpaid balance of the purchase price. Any agreement to
the contrary shall be void. In other words, in all proceedings for the foreclosure
of chattel mortgages executed on chattels which have been sold on the
installment plan, the mortgagee is limited to the property included in the
mortgage. The petitioners prayer contains two remedies, payment of unpaid
balance and foreclosure of chattel mortgage. Such a scheme is not only irregular
but is a flagrant circumvention of the prohibition of the law. By praying for the
foreclosure of the chattel, petitioner renounced whatever claim it may have
under the promissory note.

Filipinas Investment & Finance Corporation v. Julian R. Vitug, Jr. and

Supreme Sales & Development Corporation
G.R. No. L-25951 June 30, 1969
Barredo, J.:
FACTS: The defendant, Julian R. Vitug, executed and delivered to appellee a
promissory note in the amount of P14,605.00 payable in monthly installments
according to a schedule of payments; the payment of the aforesaid amount which
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was the purchase price of a motor vehicle, a 4-door Consul sedan, bought by said
defendant from appellee, was secured by a chattel mortgage over such
automobile; on the same day, appellee negotiated the above-mentioned
promissory note in favor of appellant Filipinas Investment & Finance
Corporation, assigning thereto all its rights, title and interests to the same, the
assignment including the right of recourse against appellee; defendant Vitug defaulted
in the payment of part of the installment which fell due on January 6, 1965, as
well as the subsequent three consecutive monthly installments which he was
supposed to have paid on February 6, March 6 and April 6, 1965; there being a
provision in the aforesaid promissory note and chattel mortgage that failure to
pay the installments due would result in the entire obligation becoming due and
demandable, appellant demanded from appellee the payment of such
outstanding balance; in turn, appellee "authorized (appellant) to take such action
as may be necessary to enable (it) to take possession of the ... motor vehicle."
Pursuant to such authority, appellant secured possession of the mortgaged
vehicle by means of a writ of replevin duly obtained from the court, preparatory
to the foreclosure of the mortgage, but said writ became unnecessary because
upon learning of the same, defendant Vitug voluntarily surrendered the car to
appellant; thereafter, the said car was sold at public auction, but the proceeds
still left a deficiency of P8,349.35, plus interest of 12% per annum from April 21,
1965; and appellant, the above foreclosure and sale notwithstanding, would hold
appellee liable for the payment of such outstanding balance, plus attorney's fees
and costs.
On August 4, 1965, appellee filed an urgent motion to dismiss on the ground,
inter alia, that under Article 1484 of the Civil Code of the Philippines, which
particular provision is otherwise known as the Recto Law, appellant has no cause
of action against appellee. In its order of August 30, 1965, subject of this appeal,
the lower court found the aforesaid ground to be meritorious and, as already
stated, the amended complaint was dismissed as to appellee Supreme Sales &
Development Corporation. On September 23, 1965, appellant filed a motion for
reconsideration but this was denied on October 26, 1965, hence, this appeal.
ISSUE: Whether or not the provision regarding recourse contained in the
agreement between appellant and appellee violates the Recto Law (Art. 1484 of
the Civil Code) which declares null and void any agreement in contravention
thereof.
HELD: No. As pointed out in appellant's brief, the transaction between appellant
and appellee was purely an ordinary discounting transaction whereby the
promissory note executed by defendant Vitug was negotiated by appellee in
favor of appellant for a valuable consideration at a certain discount,
accompanied by an assignment also of the chattel mortgage executed by said
defendant to secure the payment of his promissory note and with the express
stipulation that should there be any deficiency, recourse could be had against
appellee. Stated otherwise, the remedy presently being sought is not against the
buyer of the car or the defendant Vitug but against the seller, independent of
whether or not such seller may have a right of recovery against the buyer, which,
in this case, he does not have under the Recto Law. It is clear to Us, on the other
hand, that under said law, what Congress seeks to protect are only the buyers on
installment who more often than not have been victimized by sellers who, before
the enactment of this law, succeeded in unjustly enriching themselves at the
expense of the buyers because aside from recovering the goods sold, upon
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default of the buyer in the payment of two installments, still retained for
themselves all amounts already paid, in addition, furthermore, to other damages,
such as attorney's fees, and costs. Surely, Congress could not have intended to
impair and much less do away with the right of the seller to make commercial
use of his credit against the buyer, provided said buyer is not burdened beyond
what this law allows.
The very fact that the assignee was given the stipulated right of recourse against
the assignor negates the idea that the parties contemplated to limit the recovery
of the assignee to only the proceeds of the mortgage sale. Accordingly, the order
of dismissal of the lower court is reversed and this case is ordered remanded to
the lower court for further proceedings, with costs against appellee Supreme
Sales & Development Corporation.

Olympia Housing, Inc., vs. Panasiatic Travel Corporation and Ma.

Nelida Galvez-Ycasiano
G.R. No. 140468, January 16, 2003
Vitug, J.:
FACTS: The case originated from a complaint for Recovery of Possession (Accion
Publiciana) filed by Olympia Housing, Inc., against Panasiatic Travel
Corporation, Maria Nelida Ycasiano and the latter's husband. The object in
litigation is a condominium unit sold at the price of P2,340,000.00 payable on
installments at the rate of P33,657.40 per month.
On August 8, 1984, plaintiff and defendant Ma. Nelida Galvez-Ycasiano entered
into a Contract to Sell, whereby the former agreed to sell to the latter
condominium unit no. D-12, comprising an area of 160.50 square meters, more or
less, situated on the ground floor of Olympia Condominium located at Makati,
Metro Manila. Pursuant to the Contract to Sell, defendant Ma. Nelida GalvezYcasiano made a reservation/deposit in the amount of P100,000.00 on July 17,
1984 and 50% down payment in the amount of P1,070,000.00 on July 19, 1984.
Defendants made several payments in cash and thru credit memos issued by
plaintiff representing plane tickets bought by plaintiff from defendant Panasiatic
Travel Corp., which is owned by defendant Ma. Nelida Galvez-Ycasiano, who
credited/offset the amount of the said plane tickets to defendant's account due to
plaintiff. Plaintiff alleged that far from complying with the terms and conditions
of said Contract to Sell, defendants failed to pay the corresponding monthly
installments which as of June 2, 1988 amounted to P1,924,345.52. Demand to pay
the same was sent to defendant Ma. Nelida Galvez-Ycasiano, but the latter failed
to settle her obligation. For failure of defendant to pay her obligation plaintiff
allegedly rescinded the contract by a Notarial Act of Rescission.
On 31 January 1995, the Regional Trial Court, Branch V, of Makati City ruled that
the obligation of defendant Maria Nelida Galvez Ycasiano has now become due
and demandable, said defendant is hereby ordered to pay the sum of
P4,007,473.49 as of November 30, 1994 plus 18% interest per annum, computed
from 1 December 1994, but within sixty days from receipt of a copy of this
decision. Thereupon, respondents tendered the amount of P4,304,026.53 to
petitioner via Metrobank Cashier's Check No. CC008857. Petitioner refused to
accept the payment, constraining respondents to consign at the disposal of the
court a quo the check on 26 April 1995. In an order, dated 05 June 1996, the check
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was allowed to be substituted by another cashier's check payable to the Clerk of

Court of the Makati Regional Trial Court. Complying with yet another court
order of 04 January 1996, respondents deposited the amount of P4,304,026.53
with the Land Bank of the Philippines and subsequently submitted to the court
the corresponding bank book as well as the bank's verification. Meanwhile, both
parties appealed the judgment of the trial court. In its now questioned decision of
11 June 1999, the appellate court sustained the trial court. Hence, this appeal
ISSUE: Whether or not there was valid rescission of the contract to sell on
account of the failure of petitioner to give notice of rescission by notarial act, a
requisite laid down in Republic Act No. 6552 and failure of petitioner to pay the
cash surrender value.
HELD: No. The action for reconveyance filed by petitioner was predicated on an
assumption that its contract to sell executed in favor of respondent buyer had
been validly cancelled or rescinded. The records would show that, indeed, no
such cancellation took place at any time prior to the institution of the action for
reconveyance. As so aptly observed by the courts below, the foregoing
communication to the buyer merely demanded payment within thirty (30) days
from receipt thereof with the threat that if the demand were not heeded, the
contract would forthwith be cancelled or rescinded. Nor did the appellate court
erroneously ignore the "notarial rescission" attached to the complaint for
reconveyance. Apparently, the so-called "notarial rescission" was not sent to
respondents prior to the institution of the case for reconveyance but merely
served on respondents by way of an attachment to the complaint. In any case, a
notarial rescission, standing alone, could not have invalidly effected, in this case,
the cancellation of the contract.
The governing law is Republic Act No. 6552, otherwise known as the "Realty
Installment Buyer Protection Act," which has become effective since 16
September 1972. Republic Act No. 6552 is a special law governing transactions
that involve, subject to certain exceptions, the sale on installment basis of real
property. 10 The law has been enacted mainly "to protect buyers of real estate on
installment payments against onerous and oppressive conditions."
The enactment recognizes the right of the seller to cancel the contract but any
such cancellation must be done in conformity with the requirements therein
prescribed. 12 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. 13 The actual cancellation of the contract can only be deemed to take
place upon the expiry of a 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.

Pedro A. Felicen Sr. (Deceased), substituted by his Widow, Beatriz

Lanuevo and his Children, Eleuterio, Pedro, Jr., Clarita, Fernando and
Jose Maria, all surnamed Felicen v.Severino Orias, et al.
G.R. No. L-33182 December 18, 1987
Narvasa, J.:
FACTS: Under a "Deed of Sale With Right to Repurchase," the spouses Severino
Orias and Milagros O. Lim sold to Pedro A. Felicen, Sr. a parcel of land in
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Salcedo, Samar with an area of 7.8 hectares at the price of P 3,000.00. The deed
expressly reserved to the vendors the right to redeem within two (2) years. That
period expired without any offer having been made by the vendors a retro to
repurchase the land.
Some eight (8) years afterwards" the vendors a retro filed suit in the Court of
First Instance against the vendees to compel the latter to resell and reconvey the
property to them. After due proceedings, the Trial Court rendered judgment,
finding that the contract between the parties was in truth one of sale with pacto de
retro, and that the period stipulated for the repurchase had already expired; but
this notwithstanding, the vendors a retro still had the right to repurchase the
property within thirty (30) days from the time the judgment becomes final, in
accordance with the third paragraph of Article 1606 of the Civil Code, by
complying with the requirements of Article 1616. The Court of Appeals affirmed
the decision of the Trial Court.
ISSUE: Whether or not the vendors a retro can still repurchase the property
pursuant to the third paragraph of Art.1606 of the Civil Code.
HELD: The thesis of the RTC and CA cannot upon the undisputed facts be
sustained.
The application of the third paragraph of Article 1606 is predicated upon
the bona fides of the vendor a retro. It must appear that there was a belief on his
part, founded on facts attendant upon the execution of the sale with pacto de retro,
honestly and sincerely entertained, that the agreement was in reality a mortgage,
one not intended to affect the title to the property ostensibly sold, but merely to
give it as security for a loan or other obligation. In that event, if the matter of the
real nature of the contract is submitted for judicial resolution, the application of
the rule is meet and proper: that the vendor a retro be allowed to repurchase the
property sold within 30 days from rendition of final judgment declaring the
contract to be a true sale with right to repurchase. Conversely, if it should
appear that the parties' agreement was really one of sale transferring
ownership to the vendee, but accompanied by a reservation to the vendor of the
right to repurchase the property and there are no circumstances that may
reasonably be accepted as generating some honest doubt as to the parties'
intention, the proviso is inapplicable. The reason is quite obvious. If the rule
were otherwise, it would be within the power of every vendor a retro to set at
naught a pacto de retro, or resurrect an expired right of repurchase, by simply
instituting an action to reform the contract known to him to be in truth a sale
with pacto de retro into an equitable mortgage. As postulated by the
petitioner, "to allow herein private respondents to repurchase the property by
applying said paragraph .. to the case at bar despite the fact that the stipulated
redemption period had already long expired when they instituted the present
action, would in effect alter or modify the stipulation in the contract as to the
definite and specific limitation of the period for repurchase (2 years from date of
sale or only until June 25, 1958) thereby not simply increasing but in reality
resuscitating the expired right to repurchase .. and likewise the already
terminated and extinguished obligation to resell by herein petitioner." The rule
would thus be a made a tool to spawn protect and even reward fraud and bad
faith, a situation surely never contemplated or intended by the law.

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Heirs of Dominga Tabora vda. De Macoy, represented by Generoso

Macoy
v.
Court Of Appeals et al.
G.R. No. 95871 February 13, 1992
Medialdea, J.:
FACTS: Dominga Tabora Vda. de Macoy was the owner of a rice land, with an
area of 3.0082 hectares, located at Bagasbas, Daet, Camarines Norte. acquired the
land from spouses Patrocinio and Pablo Serrano on January 27, 1964, for a
consideration of P11,000.00. On December 28, 1970, she executed a document
which is dominated "Pabilihang Mabibili-Muli" or sale with a right to repurchase
in favor of private respondents spouses Jesus F. Redillas and Anatalia Elon, for
the sum of P6,000.00 over the land. Among other things, it was provided therein
that the period of repurchase is between December 29, 1973 and December 29,
1975.
Dominga Tabora Vda. de Macoy died in February, 1972, leaving as heirs
petitioners Julieta Macoy Pongco, Rufina, Francisco, Miriam and Herson Macoy
and Teopista Macoy de Zantua. Alleging failure of petitioners to repurchase the
land, private respondent Jesus F. Redillas executed an Affidavit of Consolidation
of Ownership on May 31, 1977. On July 21, 1977, he and his wife filed a petition
for Recording of Consolidation of Ownership. In the trial court's order dated
January 16, 1978, it declared petitioners in default for failure to file an answer to
the petition, thereby ordering consolidation of ownership and registration of title
over the land in the name of private respondents.
On October 4, 1978, petitioners filed a petition for relief from the trial court's
decision They alleged that the document executed by the late Dominga Tabora
Vda. de Macoy was not a sale with a right to repurchase but an equitable
mortgage or a contract of antichresis. They alleged further that even assuming it
to be a sale with a right to repurchase they nevertheless had thirty (30) days from
final judgment under Article 1606 of the Civil Code within which to redeem the
land.
On July 16, 1986, judgment was rendered by the trial court in favor of petitioners.
It declared the document to be in fact an equitable mortgage on the basis of its
findings that the consideration thereof was inadequate and the taxes on the land
continued to be paid under the name of Dominga Tabora Vda. de Macoy even up
to 1977.
From this judgment, private respondents appealed to public respondent Court of
Appeals. Respondent court reversed the trial court's decision
ISSUE: Whether or not the transaction is pacto de retro sale, thereby effectively
depriving the heirs of Vda. De Macoy the right to repurchase the property as
provided in Art.1606 of the Civil Code.
HELD: YES. We find that respondent court did not commit any reversible error
in granting consolidation of ownership in favor of private respondents.
Under Article 1602 of the Civil Code, the contract shall be presumed to be an
equitable mortagage, in any of the 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;
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(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.
Based on the evidence on record, none of the aforementioned instances is present
in this case. Rather, evident manifestations of a genuine sale with right to
repurchase exist. The price of the sale is not unusually inadequate. The price
fixed in a pacto de retro sale is not necessarily the true value of the land sold. The
reason is that the vendor has the right to repurchase the land. The practice is to
fix a relatively reduced price (but not a grossly inadequate one) in order to afford
the vendor a retro every facility to redeem the land, unlike in an absolute sale
where the vendor, in permanently giving away his property, tries to get, as
compensation, its real value. Dominga Tabora Vda. de Macoy did not bind
herself to pay the real estate taxes on the land. There is not even any proof that
she paid the real estate taxes thereon since the time of the sale. On the contrary,
Exhibit "E" shows that the private respondent Anatalia Elon paid the real estate
taxes thereon for the calendar years 1974-1977. Inasmuch as the document is
plainly a pacto de retro sale, it cannot be considered a loan with mortgage.

Felisa R. Paez, et al. v. Francisco Magno

G.R. No. L-793. April 27, 1949
Moran, C.J.:
FACTS: On October 1943, plaintiffs and appellants borrowed from defendant
and appellee P4,000 in Japanese Military notes, with the promise to pay within a
period of five years. As a security, a parcel of land was mortgaged in favor of the
creditor. On September 1944, payment of this debt was offered and tendered, but
was rejected by the creditor. For that reason, an action was filed on November 18,
1945 asking that the obligation be declared as already paid and the deed of
mortgage be cancelled. Defendant filed a motion to dismiss upon the ground that
plaintiffs have no cause of action, there being no cause of action, there being no
allegation that the thing due was consigned in court, as provided by law. The
motion was granted, hence, this appeal by the plaintiffs.
ISSUE: Whether or not the order of dismissal is correct.
HELD: Yes. According to the Civil Code:
Article 1176 - "if a creditor to whom tender of payment has been made should
refuse without reason to accept it, the debtor may relieve himself of the liability
by the depositor (consignacion) of the thing due."
Article 1177 - "in order that the deposit (consignacion) of the thing due may
release the obligor, previous notice thereof must be given to the persons
interested in the performance of the obligation."
Article 1178, "by delivery to a judicial authority of the things due, accompanied
by proof of tender, when required, and of notice of the depositor in other cases."

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In the complaint, there is no allegation that the amount of debt was consigned in
court after tender of payment had been made and rejected. Therefore, the debtor
is not relieved of his liability. The rule regarding payment of redemption price is
invoked. True that consignation of the redemption price is not necessary in order
that the vendor may compel the vendee to allow the repurchase within the time
provided by the contract. We have held that in such cases a mere tender of
payment is enough, if made on time, as a basis for action against the vendee to
compel him to resell. But that tender does not in itself relieve the vendor from his
obligation to pay the price when redemption is allowed by the court. In other
word, tender of payment is sufficient to compel redemption but is not in itself a
payment that relieves the vendor from his liability to pay the redemption price.

Mauricio N. Cachola, Sr., represented by his attorney-in-fact, Nilo C.

Cachola v. Court of Appeals et al.
G.R. No. 97822. May 7, 1992
Gutierrez, Jr., J.:
FACTS: On July 30, 1973, the respondent spouses Federico Briones and Trinidad
Encinas mortgaged their property to Benjamin Ocampo as a security for a loan
For failure of the spouses to pay the loan, Ocampo caused the foreclosure of the
real estate mortgage and the subsequent sale of the property at public auction.
Ocampo being the highest bidder, purchased the property at the auction. A
certificate of sale was executed in his favor.
The respondents were able to exercise their right of redemption within the oneyear period from the auction sale by paying P19,876.80 plus accrued interests and
taxes. This was made possible through a loan of P40,000.00 obtained from
petitioner, the late Mauricio Cachola and Angelina Alfaras. This second loan was
evidenced by a promissory note executed by the spouses Briones duly signed by
them dated March 11, 1975, but subscribed before a notary public on March 13,
1975.
The loan was also evidenced by a "Kasunduan" between the petitioners, on the
one hand, and the respondent spouses, on the other signed on March 13, 1975
containing the same stipulation for payment. The Kasunduan recognized the full
ownership by the respondents. There was also a stipulation that after the
properties shall have been redeemed from Ocampo, the title should be placed in
the hands of Cachola for the purpose of securing the loan. Hence, another real
estate mortgage was entered into by virtue of the Kasunduan over the same
house and lot in favor of petitioner Cachola. TCT No. 72398 was placed under
the custody of Angelina Alfaras on behalf of the petitioner. The respondent
spouses failed to pay any amount within the stipulated six month period and
even afterwards.
ISSUE: Whether the contract involving the real property in this case, i.e., a house
and lot, at No. 10 Langka St., Project 2, Quezon City with an area of 236.30 square
meters, is one of sale or an equitable mortgage.
HELD: An equitable mortgage is "one which although it lacks some formality,
form of words or other requisites prescribed by a statute, show(s) the intention of
the parties to charge a real property as security for a debt and contains nothing
impossible or contrary to law."
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After a careful re-examination of the records as well as the decisions of the two
courts below, the Court is convinced that the evidence is wanting to substantiate
the conclusion that a contract which in form and substance is a deed of sale is
actually an equitable mortgage. It is not clear from the sole testimony of the
respondent himself why somebody should offer to buy his house and lot worth
P400,000.00 for only P75,000.00. The Court holds that even assuming that the
consideration was below standard, it was not unusually inadequate during that
time. Besides, inadequacy of the price does not by itself support the conclusion
that the property was not at all sold to the petitioner or that the contract was a
loan. Inadequacy is not sufficient to set aside a sale unless it is purely shocking to
the conscience.
The words of the contract are clear and leave no doubt as to the desire of the
spouses to transfer the property by way of sale to the petitioner. No other
meaning could be given to the terms and stipulations of the contract but their
literal meaning. (Article 1370, New Civil Code). The contract was proper in form.
It was properly executed and signed by each of the spouses and by Cachola on
its second page as well as on the left hand margin of every page. It was
acknowledged by a notary public.
No intention to the contrary can be derived especially if we consider further the
release of the real property mortgage constituted through the Kasunduan. The
existence of the Release of Mortgage was never disputed by the respondents.
In all the instances in which the respondents were requested to sign, there was,
however, no proof that they were pressured, forced or intimidated by Alfaras or
Atty. Atienza.
The Court is of the opinion that the respondents' attempts to establish the fact of
having been misled into selling are woefully inadequate. The respondents
wanted to nullify later what they fully knew at the time of the contract would
deprive them of ownership as a consequence.
The fact that the respondents-vendors remained for a while in possession of the
property is not a compelling reason to depart from the view that there was
indeed a sale. A mortgagee who decides to discharge a mortgage and who
directly purchases the property from the mortgagors upon an offer to sell,
instead of resorting to foreclosure proceedings, will naturally want to take
possession over the property. Unless by simple tolerance or by contract of lease
he allows other persons to occupy the premises, he has every right to use it for
his own purposes and reap income therefrom.
It is hard to believe the respondents' theory that after having been fooled into
signing a promissory note without actually receiving the balance of what was
being borrowed, they would have willingly submitted themselves to another
precarious situation in which they would irresponsibly affix their signatures on a
"blank piece of paper."
The Court concludes that the respondents were fully aware of the contents and
meaning of the three documents they signed including the Deed of Absolute
Sale. There was no act done or event that occurred simultaneous to, or after the
execution of the contract of sale that would manifest the intention of the parties
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to have been otherwise, and that would alter substantially the vendor-vendee
relations between the parties expressly stated in the agreement. The contract
could not have been a reiteration of the mortgage for the P40,000.00 loan, the
period for payment of which had already lapsed since September 13, 1975. The
debt was overdue as of the date of execution of the sale on January 30, 1976.

Primary Structures Corp. v. Sps. Anthony S. Valencia and Susan T.

Valencia
G.R. No. 150060, August 19, 2003
Vitug, J.:
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 30 January 1996, signifying its intention to redeem the
three lots.
ISSUE: Is Petitioner entitled as a matter of right to buy rural lands adjacent from
his own?
HELD: Yes. According to Article 1621 of the Civil Code, whenever a piece of
rural land not exceeding one hectare is alienated, the law grants to the adjoining
owners a right of redemption except when the grantee or buyer does not own
any other rural land. 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.
Furthermore, 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 the prospective vendor, or by the vendor, as the case may be.
In the present case, petitioner is not a party to the deed of sale between
respondents and Mendoza and has had 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.
In view of the foregoing, petitioner may thus exercise its right to buy the lands in
question.

Dominico Etcuban vs. Court of Appeals

G.R. No. L-45164, March 16, 1987
Paras, J.:
FACTS: Petitioner inherited a piece of land with an area of approximately
14.0400 hectares together with his co-heirs from their deceased father. In the
settlement proceedings, petitioner along with 11 co-heirs was declared as co[49]

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owners of the aforementioned property. Thereafter the 11 co-heirs executed in

favor of private respondents 11 deeds of sale of their respective shares in the coownership for the total sum of P26,340.00. Petitioner alleged that his co-owners
leased and/or sold their respective shares without giving due notice to him as a
co-owner notwithstanding his intimations to them that he was willing to buy all
their respective shares. He further maintained that even upon inquiry from his
co-heirs/co-owners, and also from the alleged buyers (respondents) he elicited
nothing from them. Private respondents, on the other hand, alleged that plaintiff
came to know of the sale of the land in question to them in August, 1968 or
sometime prior thereto and that no action was taken by plaintiff.
ISSUE: Has petitioner complied with the requirements of legal redemption?
HELD: No. Petitioner contends that vendors (his co-heirs) should be the ones to
give him written notice and not the vendees. Such contention is of no moment.
While it is true that written notice is required by the law (Art. 1623), it is equally
true that the same Art. 1623 does not prescribe any particular form of notice, or
any distinctive method for notifying the redemptioner. So long, therefore, as the
latter is informed in writing of the sale and the particulars thereof, the 30 days
for redemption start running. If the redemptioner fails to exercise such right
within the given period, he cannot thereafter demand to buy the property.
The respondent court found that written notice was given to petitioner in the
form of an answer with counterclaim to the complaint in Civil Case No. BN-109
instituted by petitioner himself. Said court ruled that "this notice is sufficient to
inform the plaintiff about the sale and the reckoning date for the 30-day period
commenced upon receipt thereof. No other notice is needed under the premises
because it is the substance conveyed rather than the form embodying it that
counts.
The records reveal that on May 27, 1974, petitioner deposited with the lower
court the amount of P26,340.00 the redemption price. Since the answer with
counterclaim was filed on March 18, 1972, the deposit made on May 27, 1974 was
clearly outside the 30-day period of legal redemption. The period within which
the right of legal redemption or pre-emption may be exercised is non-extendible.

Manuel Melencio, Mariano Melencio, Pura Melencio, and Caridad

Melencio vs. Dy Tiao Lay
G.R. No. L-32047. November 1, 1930
Ostrand, J.:
FACTS: A land in Nueva Ecija originally owned by one Julian Melencio. He died
and left his widow, Ruperta Garcia, and his five children, Juliana, Ramon,
Ruperta, Pedro R., and Emilio Melencio.
On July 24,1905, Ruperta Garcia, Pedro, Julian, and Ruperta Melencio executed a
contract of lease of the land in favor of one Yap Kui Chin, but neither Jose P.
Melencio nor Ramon Melencio were mentioned in the lease. The term of the lease
was for twenty years, extendible for a like period at the option of the lessee. Yap
Kui Chin dealt with Pedro R. Melencio who acted as manager of the property.
Upon Yap Kui Chins death the property was transferred to Uy Eng Jui then Uy
Eng Jui & Co.,and finally to Dy Tiao Lay.
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The plaintiffs who are the heirs of Ramon Melencio brought the present action
against Dy Tiao Lay for the recovery of the land. The plaintiffs prayed that the
contract of lease be declared null and void for lack of consent, concurrence, and
ratification by the owners thereof. They contended that under Article 1548 of the
Civil Code the administrator of property without a special power giving him
such authority, cannot execute a lease for a period exceeding six years. RTC
declared the lease valid.
ISSUE: Whether the receipt of benefits from the contract of lease of the
uninformed co-owner shall be construed as consent so as to enable the
administrator or manager of the property to enter into a contract of lease for
more than six (6) years as prescribed in Article 1548 of the Civil Code.
HELD: We cannot by mere suspicion conclude that they were informed of the
existence of the document and its terms; it must be remembered that under a
strict interpretation of the terms of the lease, the lessees could remain indefinitely
in their tenancy unless the lessors could purchase the mill and the buildings on
the land. In such circumstances, better evidence than that presented by the
defendant in regard to the plaintiff's knowledge of the lease must be required.
The fact that Ramon during his lifetime received his share of the products of land
owned in common with his coheirs is not sufficient proof of knowledge of the
existence of the contract of lease when it is considered that the land in question
was only a small portion of a large tract which Pedro R. Melencio was
administering in connection with other community property.

W.H. Tipton, Chief of the Bureau of Lands and Administrator of the

Estate of the San Lazaro Hospital vs. Roman Martinez Y Andueza
G.R. No. 2070. January 2, 1906
Mapa, J.:
FACTS: Vicente Aguirre, as administrator of the San Lazaro Hospital, leased to
the defendant in this case a tract of land belonging to the hospital. It was
stipulated in the contract that the lease should run for a period of ten years from
the 1st day of January, 1899. Aguirre, the administrator, was duly authorized to
execute such contracts, but his power was general in terms and contained no
provision specially authorizing him to make leases with respect to the hospital
property for a period of ten years or any other specific term.
W.H. Tipton, as the present administrator of the hospital property, claims that
the contract made by his predecessor, Aguirre, was null and void for want of
power on his part to make such contract, basing his contention upon the
provisions of article 1548 of the Civil Code stating that the administrator of
property without a special power giving him such authority, cannot execute a
lease for a period exceeding six years.
ISSUE: Whether the contract is null and void in its entirety when it was executed
for a period longer than six (6) years as prescribed in Article 1548, when the
administrator has no special power of attorney.
HELD: This provision plainly shows that Aguirre could not, as administrator,
have validly executed a lease of the land in question for a period of ten years in
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the absence of special authority to that effect. This, in our opinion, vitiated the
contract. This defect, however, did not affect the contract in its entirety, but only
in so far as it exceeded the six-year limit fixed by law as the maximum period for
which an administrator can execute a lease without special power. The contract
in question was perfectly valid in so far as it did not exceed that limit, it having
been executed by the administrator, Aguirre, within the scope of the legal
authority he had under his general power to lease. That general power carried
with it, under the article above quoted, the authority to lease the property for a
period not exceeding six years. There was no excess of authority and
consequently no cause for nullification arising therefrom, as to the first six years
of the lease. As to the last four, the contract was, however, void, the
administrator having acted beyond the scope of his powers.

Viuda E Hijos De Pio Barretto Y Cia., v. Albo & Sevilla, Inc., et al.
G.R. No. L-41768, December 17, 1935
FACTS: On July 15, 1930, the plaintiff and the defendants entered into a contract
of lease. By force of said contract of lease, the defendants occupied the "Cine
Collegian" and regularly paid the rent therefor until February 28, 1931.
Thereafter, the rents for said cinema have been paid by Angel Garchitorena
either by check of Benigno del Rio or in cash.
The receipts for rent paid from March, 1931, were issued in the name of Albo &
Sevilla, Inc., without prejudice to the right of the defendants Albo & Sevilla, Inc.,
Eugenio Sevilla, and Vicente Albo to adduce evidence that the said issuance has
not come to their knowledge from March 1, 1931.
On January 19, 1931, the defendants Eugenio Sevilla, Vicente Albo and Angel
Garchitorena executed a chattel mortgage of the fixtures and of the "Cine
Collegian" in favor of Vda. e Hijos de Pio Barretto and Co., Inc., which was
presented for registration on February 6, 1931, but said document was not
registered; and that said mortgage was executed under the stipulation in
subsection (h) of the second paragraph of the contract of lease.
By a deed of February 28, 1931, Vicente Albo and Eugenio Sevilla, in their own
behalf and in that of the corporation Albo & Sevilla, Inc., sold their right interest,
and participation, including the rights of lease of the "Cine Collegian", to Angel
Garchitorena and Benigno del Rio, reserving plaintiff's right to establish that it
neither has knowledge of, nor consented to, said sale.
On August 15, 1931, Angel Garchitorena and Benigno del Rio executed in favor
of Viuda e Hijos de Pio Barretto & Co., Inc., another chattel mortgage of the same
fixtures and chattels of the "Cine Collegian" described therein, which deed is
duly registered in the office of the register of deeds of the City of Manila
pursuant to Act No. 1508.
The defendants have been required by the attorneys for the plaintiff to pay the
rent, as evidenced by the letters of February 6, 1933, and March 1 of the same
year and they have orally alleged that they are no longer connected with the
"Cine Collegian" in virtue of the aforesaid sale to Benigno del Rio and Angel
Garchitorena.

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ISSUE: Whether the contract of lease was novated by the substitution of lessees,
and, if so, whether the, substitution was consented to by the plaintiff lessor
HELD: Responsive to Articles 1203 and 1205 of the New Civil Code, the
substitution of the debtor or in an obligation with the creditor's consent,
produces novation by bringing into being a new obligation in place of the old.
Applied to the case under consideration, the result is, that if the plaintiff
consented to the substitution of Angel Garchitorena and Benigno del Rio in lieu
of the original lessees, it has exhausted all its right of action against the latter and
can only enforce the same against the new lessees. Our inquiry, therefore, will
bear on the existence of such consent.
The plaintiff argues that Vicente Albo and Eugenio Sevilla undertook to be joint
and several sureties for the payment of rents under the third paragraph of the
contract of lease which says: "Third: Messrs. Vicente Albo, Eugenio Sevilla and
Angel Garchitorena, jointly and severally under take with Albo & Sevilla, Inc., to
comply with all the obligations of the lessees in this contract." We understand
and so hold that by the terms, clear to be sure, of said clause, Albo and Sevilla
did not execute a special and separate bond, but only intended to state that the
obligations assumed by them with Garchitorena and the corporation Albo &
Sevilla, Inc., relative to the conditions of the contract of lease, were joint and
several in nature. It would be repugnant to the nature of the contract of guaranty
and to the provisions of article 1922 of the Civil Code to construe that the
intention of said alleged sureties was to become guarantors of their own
obligations. Granting, however, That it were a bond, which seems to us absurd,
their obligations as sureties were extinguished at the same time as their
obligations as debtors or lessees, under the express provisions of article 1847 of
the same Code.
After the promulgation of the decision rendered in this case, which is practically
that above-quoted, the co-defendant Albo & Sevilla, Inc., filed a motion entitled
"Motion to clarify the dispositive part of the judgment" praying that the
judgment be modified by absolving it likewise from the complaint. In support of
the petition the point is made that the corporation Albo & Sevilla, Inc., was
likewise released from its obligation as lessee in view of our holding that there
had a novation by the substitution of lessees. And the whole argument rests on
the stipulation in paragraph 8 of the agreed statement of facts that the
corporation had likewise conveyed its interest, rights, and obligations in the
contract of lease Exhibit A to Angel Garchitorena and Benigno del Rio. The
contention, although it was not discussed at length in the original decision
because it was not raised then in the briefs,, is clearly untenable and without
merit. It should be borne in mind that while such fact has really been stipulated,
however, the said paragraph 8 has likewise stated that Exhibit 1, which is the
deed of conveyance furnishing one of the grounds of novation, forms an integral
part of said stipulation, hence, its content cannot and should not be overlooked
in ascertaining who transferred their obligations to the new lessees under the
contract of lease. Viewing the fact stipulated in paragraph 8 in connection with
the contents of Exhibit 1, and interpreting them together pursuant to the
provisions of article 1285 of the Civil Code, it will plainly be seen that the
corporation Albo & Sevilla, Inc., neither intervened in Exhibit 1 nor conveyed its
rights and obligations in the lease from which it follows that the plaintiff could
not have consented expressly or impliedly to non-existing contract. We said that
there was a novation the original contract of lease in view of certain statements
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appearing in the second chattel mortgage deed, Exhibit C, from which the
plaintiff necessarily obtained knowledge of the existence of the deed of
conveyance Exihibit 1, and in yielding assent to the second mortgage, the logical
and inescapable deduction is that it consented impliedly to the substitution of
lessees. If these were the grounds of the novation, and if the corporation Albo &
Sevilla, Inc., neither took part nor intervened either in the deed of conveyance
Exhibit 1 or in the second chattel mortgage Exhibit C, it is evident that the
novation was not extended to it, nor can it successfully allege that it was
substituted by the new lessees. We, therefore, conclude that the petition is
absolutely groundless and untenable.

Claudina vda. de Villaruel, Et Al. v. Manila Motor Co., Inc. and Arturo
Colmenares
G.R. No. L-10394, December 13, 1958
FACTS: On May 31, 1940, the plaintiffs Villaruel and the defendant Manila
Motor Co., Inc. entered into a contract whereby, the former agreed to convey by
way of lease to the latter the following described premises: (a) Five hundred
(500) square meters of floor space of a building of strong materials for
automobile showroom, offices, and store room for automobile spare parts; (b)
Another building of strong materials for automobile repair shop; and (c) A 5bedroom house of strong materials for residence of the Bacolod Branch Manager
of the defendant company.
The term of the lease was five (5) years, to commence from the time that the
building were delivered and placed at the disposal of the lessee company, ready
for immediate occupancy. The contract was renewable for an additional period
of five (5) years. The Manila Motor Company, in consideration of the above
covenants, agreed to pay to the lessors, or their duly authorized representative, a
monthly rental of Three Hundred (P300) pesos payable in advance before the
fifth day of each month, and for the residential house of its branch manager, a
monthly rental not to exceed Fifty (P50) pesos "payable separately by the
Manager".
The leased premises were placed in the possession of the lessee on the 31st day of
October, 1940, from which date, the period of the lease started to run under their
agreement.
This situation, the Manila Motor Co., Inc. and its branch manager enjoying the
premises, and the lessors receiving the corresponding rentals as stipulated,
continued until the invasion of 1941; and shortly after the Japanese military
occupation of the Provincial Capital of Bacolod the enemy forces held and used
the properties leased as part of their quarters from June 1, 1942 to March 29, 1945,
ousting the lessee therefrom. No payment of rentals were made at any time
during the said period.
Immediately upon the liberation of the said city in 1945, the American Forces
occupied the same buildings that were vacated by the Japanese, including those
leased by the plaintiffs, until October 31, 1945. Monthly rentals were paid by the
said occupants to the owners during the time that they were in possession, as the
same rate that the defendant company used to pay.

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Thereafter, when the United States Army finally gave up the occupancy the
premises, the Manila Motor Co., Inc., through their branch manager, Rafael B.
Grey, decided to exercise their option to renew the contract for the additional
period of five (5) years, and the parties, agreed that the seven months occupancy
by the U. S. Army would not be counted as part of the new 5-year term.
Simultaneously with such renewal, the company sublet the same buildings,
except that used for the residence of the branch manager, to the other defendant,
Arturo Colmenares.
However, before resuming the collection of rentals, Dr. Alfredo Villaruel, who
was entrusted with the same, consulted Atty. Luis Hilado on whether they (the
lessors) had the right to collect, from the defendant company, rentals
corresponding to the time during which the Japanese military forces had control
over the leased premises. Upon being advised that they had such a right, Dr.
Villaruel demanded payment thereof, but the defendant company refused to
pay. As a result, Dr. Villaruel gave notice seeking the rescission of the contract of
lease and the payment of rentals from June 1, 1942 to March 31, 1945 totalling
P11,900. This was also rejected by the defendant company in its letter to
Villaruel, dated July 27, 1946.
After it had become evident that the parties could not settle their case amicably,
the lessors commenced this action on April 26, 1947 with the Court of First
Instance of Negros Occidental against the appellants herein.
ISSUE: Whether the defendant-appellant Manila Motor Co., Inc. should be held
liable for the rentals of the premises leased corresponding to the lapse of time
that they were occupied as quarters or barracks by the invading Japanese army
HELD: Under the first paragraph of article 1560 the lessor does not answer for a
mere act of trespass (perturbacion de mero hecho) as distinguished from trespass
under color of title (perturbacion de derecho).
It is demonstrable that the ouster of the appellant by the Japanese occupying
forces belongs to the second class of disturbances, de derecho. For under the
generally accepted principles of international law (and it must be remembered
that those principles are made by our Constitution a part of the law of our nation
1) a belligerent occupant (like the Japanese in 1942-1945) may legitimately billet
or quarter its troops in privately owned land and buildings for the duration of its
military operations, or as military necessity should demand.
The distinction between confiscation and temporary sequestration of private
property by a belligerent occupant was also passed upon by this Court in Haw
Pia vs. China Banking Corporation, 80 Phil. 604, wherein the right of Japan to
sequester or take temporary control over enemy private property in the interest
of its military effort was expressly recognized.
We are thus forced to conclude that in evicting the lessee, Manila Motor Co., Inc.
from the leased buildings and occupying the same as quarters for troops, the
Japanese authorities acted pursuant to a right recognized by international and
domestic law. Its act of dispossession, therefore, did not constitute perturbacion de
hecho but a perturbacion de derecho for which the lessors Villaruel (and not the
appellants lessees) were liable (Art. 1560, supra) and for the consequences of
which said lessors must respond, since the result of the disturbance was the
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deprivation of the lessee of the peaceful use and enjoyment of the property
leased. Wherefore, the latter's corresponding obligation to pay rentals ceased
during such deprivation.

M. Goldstein v. Roces, et al.

G.R. No. L-8697, March 30, 1916
Arellano, C. J.
FACTS: Alejandro Roces leased to M. Goldstein, who is the proprietor of a
saloon named Luzon Caf, the first floor of a building belonging to them. They
leased the rest of the premises to the proprietor of the Hotel de Francia. The
proprietor of the hotel requested that another story be added to the building.
Roces acceded to the request. The proprietor then hired the services of a
contractor to do the work. The contractor deemed it necessary to open holes for
the insertion of the uprights. When it rained, water leaked through these holes. It
stained the walls and furniture. M. Goldstein incurred expenses for the repairs.
Thus he suffered losses. He sued Roces based on Article 1654 which provides
that the lessor is obliged to maintain the lessee in the peaceful enjoyment of the
lease during all the time covered by the contract. The trial court ruled in favor of
Roces.
ISSUE: Did the act of the lessor, in allowing another to introduce improvements
in the leased premises, thereby causing damage to another lessee, a violation of
his obligation to maintain the lessee in the peaceful enjoyment of the leased
premises?
HELD: No. The lessor must see to it that the enjoyment is not interrupted or
disturbed, either by others' acts, save in the case provided for in the Article 1664,
or by his own. In this case, it is not disputed that M. Goldstein maintained his
peaceful enjoyment, or his quiet and peaceable possession of the floor he
occupies. That there was a disturbance of the peace or order in which he
maintained his things in the leased story does not mean that he lost the peaceful
enjoyment of the thing rented. Had the lessor attempted to render ineffective the
right of the lessee to use the thing leased as agreed upon, then he could have
been liable. That was not present in this case. Therefore, the action should have
not been brought against the lessor, but against the contractor, the tort feasor,
who disturbed his enjoyment of the leased premises. Also, the distinction
between legal trespass and trespass in fact must be emphasized. To the latter, the
lessor is not liable. Article 1664 speaks of trespass in fact only in the use of the
property leased. If such trespass is translated into anything material which
affects the property itself, such as when a third person claims a legal right to the
property, then it becomes a trespass in law in which the lessor shall become
liable.

Paz S. Baens v. Court of Appeals and Chua Seng

G.R. No. L-57091, November 23, 1983
Gutierrez, J.
FACTS: Chua Seng and Dra. Paz Baens are lessee and lessor respectively. Chua
Seng had been leasing the property for some time. He temporarily left the leased
premises to attend to his health, leaving his personal properties therein. He
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locked the same before he left. The day after, to his surprise, additional padlocks
were placed. Chua Seng asked Baens to remove the locks. The latter refused.
Chua Senf tendered payment for the rentals but Baens still refused to remove the
padlocks. This constrained Chua Seng to file a case for forcible entry against
Baens alleging that the latters refusal to remove the padlocks was a breach of the
contract of lease consisting in the deprivation of his right to occupy and use the
leased premises. She alleged in her answer that Chua Sengs right to occupy said
premises had long expired and that the he failed to pay the rentals due and had
voluntarily vacated the premises. Thereafter, she filed an unlawful detainer case
against Chua Seng. In both cases, the trial court ruled in favor of Chua affirming
the restoration to his possession of the premises. Actual, moral, and exemplary
damages were awarded in his favor.
ISSUES: (1) Does the award of damages in a case for unlawful detainer and
forcible entry include those that the plaintiff may suffer which do not have direct
relation to the use and occupation of the premises? (2) Does a verbal contract of
lease where monthly rentals were paid, understood to be one made in a month to
month basis?
HELD: (1) No, it does not include the same. It has been held that while damages
may be adjudged in forcible entry and detainer cases, these "damages" mean
"rents" or "the reasonable compensation for the use and occupation of the
premises" or "fair rental value of the property." Profits which the plaintiff might
have received were it not for the forcible entry or unlawful detainer, moral
damages and exemplary damages do not represent a fair rental value, hence
cannot be awarded.
(2) In view of the Rental Law (B.P. 25) existing at the time the contract was
entered into, the lease is still subsisting. It effectively suspended Article 1673,
paragraph 1 which relates to the termination of contracts of lease which are on a
year to year, month to month, week to week, or day to day basis. However, even
if the month to month arrangement is on a verbal basis, if it is shown that the
lessor needs the property for his own use or for the use of an immediate member
of the family or for any of the other statutory grounds to eject under Section 5 of
Batas Pambansa Blg. 25 then the lease is considered terminated as of the end of
the month, after proper notice or demand to vacate has been given. This does not
obtain in this case. Hence, the lease must be considered as still effective.

Bernardo Dizon, substituted by his heirs, Dominina Alvendia Vda. De

Dizon, et al. v. Ambrosio Magsaysay and Nicanor Padilla
G.R. No. L-23399 May 31, 1974
Makalintal, C.J.:
FACTS: On April 1, 1949 Ambrosio Magsaysay, registered owner of a parcel of
land located in Sampaloc, Manila, and the late Bernardo M. Dizon executed a
written contract of lease over a portion of the parcel of land which the latter had
been occupying as lessee since 1937. The lease contract expired on April 1, 1951
without the parties' having expressly renewed their agreement. Bernardo Dizon,
however, continued to occupy the leased premises, paying the same monthly
rental of P100.00, which Ambrosio Magsaysay accepted.

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Two years later, the counsel of Ambrosio Magsaysay formally advised Bernardo
Dizon of the termination of the existing lease at the end of that month. Dizon
learned that there were negotiations for the sale of the entire lot to Nicanor
Padilla. On March 11, 1953 a new certificate of title was issued to Nicanor Padilla
pursuant to the sale.
When Dizon learned of the sale he communicated with Magsaysay and Padilla,
inviting their attention to the original written lease contract, which gave him the
preferential right to purchase the land under the same conditions as those
offered by other buyers. He commenced suit against Magsaysay and Padilla,
praying that the deed of sale between them be declared null and void; that they
be ordered to sell the land to him. The trial court rendered judgment, dismissing
the complaint. On appeal to the Court of Appeals the decision was affirmed on
June 8, 1964. Hence this petition for review
ISSUE: Whether at the time of the sale of the disputed property to Nicanor
Padilla on March 7, 1953 appellant Dizon had a preferential right to purchase it
at the same price and terms.
HELD: No. "The other terms of the original contract" which are revived in the
implied new lease under Article 1670 are only those terms which are germane to
the lessee's right of continued enjoyment of the property leased. This is a
reasonable construction of the provision, which is based on the presumption that
when the lessor allows the lessee to continue enjoying possession of the property
for fifteen days after the expiration of the contract he is willing that such
enjoyment shall be for the entire period corresponding to the rent which is
customarily paid in this case up to the end of the month because the rent was
paid monthly. Necessarily, if the presumed will of the parties refers to the
enjoyment of possession the presumption covers the other terms of the contract
related to such possession, such as the amount of rental, the date when it must be
paid, the care of the property, the responsibility for repairs, etc. But no such
presumption may be indulged in with respect to special agreements, which by
nature are foreign to the right of occupancy or enjoyment inherent in a contract
of lease.

Jespajo Realty Corporation v. Court of Appeals, Tan Te Gutierrez and

Co Tong
G.R. No. 113626 September 27, 2002
Austria-Martinez, J.:
FACTS: The subject of this controversy is an apartment building located at 619
Asuncion Street, Binondo, Manila and owned by Jespajo Realty Corporation. On
February 1, 1985, said corporation, represented by its President, Jesus L. Uy,
entered into separate contracts of lease with Tan Te Gutierrez and Co Tong.xxx
Pursuant to the contract, Tan Te occupied room No. 217 of the subject building at
a monthly rent of P847.00 while Co Teng occupied the Penthouse at a monthly
rent of P910.00.
Since the effectivity of the lease agreement on February 1985, the lessees
religiously paid their respective monthly rentals together with the 20% yearly
increased (sic) in the monthly rentals as stipulated in the contract. On January 2,
1990, the lessor corporation sent a written notice to the lessees informing them of
the formers intention to increase the monthly rentals on the occupied premises
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to P3,500.00 monthly effective February 1, 1990. The lessees through its counsel
in a letter dated March 10, 1990 xxx manifested their opposition alleging that the
same is in contravention of the terms of the contract of lease as agreed
upon. Due to the opposition and the failure of the lessees to pay the increased
monthly rentals in the amount of P3,500.00, the lessor through its counsel in a
letter dated April 10,1990 xxx demanded that the lessees vacate the premises and
pay the amount of P7,000.00 corresponding to the months of February and
March, 1990.
On November 15, 1990, or more than six (6) months from the filing of the case for
consignation, the lessor instituted an ejectment suit against the lessees before the
Metropolitan Trial Court of Manila Branch 20 xxx. The court in its decision dated
May 10, 1991 rendered a decision dismissing the ejectment suit for lack of merit.
The RTC reversed the decision of the MTC. On appeal with the CA, the decision
of the RTC was reversed by the CA. Hence, this petition for review.
ISSUE: Whether the parties to a contract of lease stipulated for an indefinite
period and shall continue for as long as the lessee is paying the rent, is the said
contract interminable even by the lessor.
HELD: Yes. The fact that such option is binding only on the lessor and can be
exercised only by the lessee does not render it void for lack of mutuality. After
all, the lessor is free to give or not to give the option to the lessee. And while the
lessee has a right to elect whether to continue with the lease or not, once he
exercises his option to continue and the lessor accepts, both parties are thereafter
bound by the new lease agreement. Their rights and obligations become
mutually fixed, and the lessee is entitled to retain possession of the property for
the duration of the new lease, and the lessor may hold him liable for the rent
therefor. The lessee cannot thereafter escape liability even if he should
subsequently decide to abandon the premises. Mutuality obtains in such a
contract and equality exists between the lessor and the lessee since they remain
with the same faculties in respect to fulfillment.

Rudolf Lietz, Inc., v. Court of Appeals et al.

G.R. No. 122463. December 19, 2005
Tinga, J.:
FACTS: Respondent Agapito Buriol previously owned a parcel of unregistered
land in San Vicente Palawan. On August 15, 1986, respondent Buriol entered a
lease agreement for 25 years, renewable for another 25 years with Flavia
Turatello and respondents Turatello and Sani, all Italian citizens, involving one
(1) hectare of respondents property.
On November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz, Inc. the
same parcel of land for the amount of P30,000.00. Petitioner later discovered that
respondent Buriol owned only four (4) hectares, and with one more hectare
covered by lease, only three (3) hectares were actually delivered to petitioner.
Hence, complaint was filed against respondent alleging that with evident bad
faith and malice, respondent Buriol sold to petitioner five (5) hectares of land
when in fact he knew that he owned only four (4) hectares with one hectare
under a lease agreement.

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ISSUE: Whether or not petitioner Rudolf Lietz, Inc. is entitled to the reduction of
the purchase price in the sale of a parcel of land.
HELD: No. As correctly noted by the trial court and the Court of Appeals, the
sale between the petitioner and respondent Buriol involving the latters property
is one made for a lump sum. The Deed of Absolute Sale shows that the parties
agreed on the purchase price on a predetermined area of five hectares within the
specified boundaries and not based on a particular rate per area.
In accordance with Article 1542, there shall be no reduction in the purchase price
even if the area delivered to the petitioner is less than that stated in the contract.
In the instant case, the area within the boundaries as stated in the contract shall
control over the area agreed upon in the contract. However, the discrepancy
must not be substantial. A vendee of land, when 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 use of such words in designating
quantity covers only a reasonable excess or deficiency.

Juanita Naval v. Court of Appeals et al.

G.R. No. 167412. February 22, 2006
Ynares-Santiago, J.:
FACTS: On December 2, 1969, Ildefonso A. Naval sold a parcel of land in
Camarines Sur to Gregorio B. Galarosa. The sale was recorded in the Registry of
Deeds of Camarines Sur on December 3, 1969 pursuant to Act No. 3344, the law
governing registrations of all instruments on unregistered lands. Subsequently,
Gregorio sold portions of the land to respondents Conrado Rodrigo Balilla on
November 4, 1976, Jaime Nacion on January 10, 1977 and spouses Ireneo and
Ester Moya in July 1977, and Juanito Camalla on September 4, 1987. All buyers
occupied the portion they bought, built improvements thereon, and paid the
taxes due thereto.
The controversy arose when petitioner Juanita Naval, the great granddaughter of
Ildefonso, was issued on April 1, 1975 by the Register of Deeds of Camarines Sur
an Original Certificate of Title (OCT) covering 733 sq. m. of the subject land. She
claimed that she bought the subject land from Ildefonso in 1972.
ISSUE: Who has the superior right to a parcel of land sold to different buyers at
different times by its former owner?
HELD: The Court held that the respondents have a superior right to the parcel of
land in the case at bar. While we agree with the appellate court that respondents
have superior right over the petitioner on the subject property, we find Article
1544 inapplicable to the case at bar since the subject land was unregistered at the
time of the first sale. The registration contemplated under this provision has been
held to refer to registration under the Torrens System, which considers the act of
registration as the operative act that binds the land.
The law applicable therefore is Act No. 3344, which provides for the registration
of all instruments on land neither covered by the Spanish Mortgage Law nor the
Torrens System. Under this law, registration by the first buyer is constructive
notice to the second buyer that can defeat his right as such buyer in good faith.

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Hon. Dominador F. Carilo, Maria Gonzales v. Court of Appeals

G.R. No. 121165, September 26, 2006
FACTS: Maria Gonzales alleged that on April 26, 1988, she paid P10,000 to
Priscilla Manio as downpayment on the P400,000 purchase price of the lot with
improvements, since Priscilla had a special power of attorney from her son,
Aristotle, the owner of the land. After the lapse of the period and despite
repeated demands, Priscilla did not execute the deed of sale. Thus, Gonzales filed
an action for specific performance against the spouses Priscilla and Jose Manio.
The court rendered judgment in favor of Gonzales.
Respondents Maria Paz Dabon and Rosalina Dabon, claiming to have bought the
aforementioned lot from Aristotle Manio filed before the Court of Appeals a
petition for annulment of judgment and orders of the RTC in Civil Case No.
2647. The Dabons alleged therein that the judgment of the trial court was void ab
initio because of lack of jurisdiction over their persons, as the real parties.
ISSUE: Was there a basis to annul the judgment of the RTC?
HELD: The action filed by Gonzales before the RTC is for specific performance to
compel Priscilla to execute a deed of sale, involving real property which,
however, does not belong to Priscilla but to Aristotle Manio, the son of Priscilla.
Priscilla had no interest on the lot and can have no interest whatever in any
judgment rendered. She was not acting in her own name, nor was she acting for
the benefit of an undisclosed principal. The joinder of all indispensable parties is
a condition sine qua non of the exercise of judicial powers, and the absence of
indispensable party renders all subsequent actions of the court null and void for
want of authority to act, not only as to the absent parties but even as to those
present. Accordingly, the failure to implead Aristotle Manio as defendant
renders all proceedings in the Civil Case No. 2647, including the order granting
the cancellation of TCT No. 16658 and issuance of a new title, null and void.
Petitioner insists that the contract of sale between her and Priscilla was valid and
enforceable because under the provision on double sale, she owned the land
because she bought the lot on April 26, 1988, while the same was allegedly sold
to the Dabons on October 19, 1989. In our view, the doctrine on double sale holds
no relevance in this case.
The action for annulment of judgment under Rule 47 of the Rules of Court does
not involve the merits of the final order of the trial court. The issue of whether
before us is a case of double sale is outside the scope of the present petition for
review. The appellate court only allowed the reception of extraneous evidence to
determine extrinsic fraud. To determine which sale was valid, review of evidence
is necessary. This we cannot do in this petition. An action for annulment of
judgment is independent of the case where the judgment sought to be annulled is
rendered and is not an appeal of the judgment therein.

Consolidated Rural Bank v. Court of Appeals

G.R. No. 132161, January 17, 2005
FACTS: Madrid brothers were the registered owners of Lot No. 7036-A. Rizal
Madrid sold part of his share identified as Lot No. 7036-A-7, to Aleja Gamiao and
Felisa Dayag by virtue of a Deed of Sale, to which his brothers Anselmo, Gregorio,
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Filomeno and Domingo offered no objection as evidenced by their Joint Affidavit.

The deed of sale was not registered with the Office of the Register of Deeds of
Isabela. However, Gamiao and Dayag declared the property for taxation
purposes in their names .
Later on, the Madrid brothers conveyed all their rights and interests over the
same lot to Pacifico Marquez .The deed of sale was registered with the Office of
the Register of Deeds of Isabela. Marquez mortgaged the lot to the Consolidated
Rural Bank, Inc. of Cagayan Valley to secure a loan of One Hundred Thousand
Pesos (P100,000.00). These deeds of real estate mortgage were registered with the
Office of the Register of Deeds. As Marquez defaulted in the payment of his loan,
CRB caused the foreclosure of the mortgages in its favor and the lots were sold to
it as the highest bidder.
Claiming to be null and void the issuance of TCT Nos. T-149375 to T-149382; the
foreclosure sale of Lot Nos. 7036-A-7-A to 7036-A-7-D; the mortgage to RBC; and
the sale to Calixto, the Heirs-now respondents herein-represented by Edronel
dela Cruz, filed a case for reconveyance and damages the southern portion of Lot
No. 7036-A against Marquez, Calixto, RBC and CRB in December 1986.
ISSUE: Does Article 1544 apply in this case?
HELD: Artcile 1544 of the Civil Code is not applicable in the present case. It
contemplates a case of double or multiple sales by a single vendor. More
specifically, it covers a situation where a single vendor sold one and the same
immovable property to two or more buyers. According to a noted civil law
author, it is necessary that the conveyance must have been made by a party who
has an existing right in the thing and the power to dispose of it. It cannot be
invoked where the two different contracts of sale are made by two different
persons, one of them not being the owner of the property sold. And even if the
sale was made by the same person, if the second sale was made when such
person was no longer the owner of the property, because it had been acquired by
the first purchaser in full dominion, the second purchaser cannot acquire any
right.
In the case at bar, the subject property was not transferred to several purchasers
by a single vendor. In the first deed of sale, the vendors were Gamiao and Dayag
whose right to the subject property originated from their acquisition thereof from
Rizal Madrid with the conformity of all the other Madrid brothers. On the other
hand, the vendors in the other or later deed were the Madrid brothers but at that
time they were no longer the owners since they had long before disposed of the
property in favor of Gamiao and Dayag.
In a situation where not all the requisites are present which would warrant the
application of Art. 1544, the principle of prior tempore, potior jure or simply "he
who is first in time is preferred in right," should apply. The only essential
requisite of this rule is priority in time; in other words, the only one who can
invoke this is the first vendee. Undisputedly, he is a purchaser in good faith
because at the time he bought the real property, there was still no sale to a
second vendee.
In any event, assuming arguendo that Article 1544 applies to the present case, the
claim of Marquez still cannot prevail over the right of the Heirs since according
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to the evidence he was not a purchaser and registrant in good faith. Prior
registration of the subject property does not by itself confer ownership or a better
right over the property. Article 1544 requires 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 buyers rights) from
the time of acquisition until the title is transferred to him by registration or
failing registration, by delivery of possession. In the instant case, the actions of
Marquez have not satisfied the requirement of good faith from the time of the
purchase of the subject property to the time of registration. Found by the Court
of Appeals, Marquez knew at the time of the sale that the subject property was
being claimed or "taken" by the Heirs. This was a detail which could indicate a
defect in the vendors title which he failed to inquire into. Marquez also admitted
that he did not take possession of the property and at the time he testified he did
not even know who was in possession. It is further perplexing that Marquez did
not fight for the possession of the property if it were true that he had a better
right to it. In our opinion, there were circumstances at the time of the sale, and
even at the time of registration, which would reasonably require a purchaser of
real property to investigate to determine whether defects existed in his vendors
title. Instead, Marquez willfully closed his eyes to the possibility of the existence
of these flaws. For failure to exercise the measure of precaution which may be
required of a prudent man in a like situation, he cannot be called a purchaser in
good faith.

Estate of Lino Olaguer v. Ongjoco

563 SCRA 373
FACTS: Several parcels of land were registered under the name of Virgilio
Olaguer. Ongjoco purchased these by transacting with Jose Olaguer, who had a
general power of attorney expressly empowering him to sell any of the
properties of Virgilio and to sign, execute, acknowledge, and deliver any
agreement therefor. Subsequently, a complaint was filed in court in relation to
the properties belonging to the Estate of Lino Olaguer and it as found that certain
lots, including those sold to Ongjoco through Jose, were sold from the Estate is
an absolutely simulated or fictitious manner.
ISSUE: Can an individual be considered an innocent purchaser for value if he
did not bother to verify the title and the capacity of the vendor to convey the
properties involved to him?
HELD: Yes. Ongjoco was able to present a document which, although designated
as a general power of attorney, met the requirement of a special power of
attorney. There was a clear mandate from the principal specifically authorizing
the performance of the act. The special power of attorney can be included in the
general power when the act of transaction for which the special power is
required is specified therein.

Abrigo v. De Vera
432 SCRA 544
FACTS: Gloria Villafania sold a house and lot to Rosenda Tigno-Salazar and
Rosita Cave-Go but it became a subject of a suit for annulment of documents
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between the parties. They then entered into a compromise agreement where
Villafania was given a year to buy back the property and failure to do so would
mean that the previous sale shall remain valid and binding. Villafania failed to
buy back the properties so the vendees declared the lot in their name. However,
Villafania obtained a free patent over the land. The vendees sold the house and
lot to Spouses Abrigo, which sale was registered under Act 3344, while Villafania
sold the same to Romana de Vera.
ISSUE: To whom does the law give ownership priority as between two buyers of
the same immovable property registered under the Torrens System?
HELD: (1) The first registrant in good faith; (2) the first possessor in good faith;
(3) the buyer who in good faith presents the oldest title. However, this does not
apply if the property is not registered under the Torrens system. Registration by
the first buyer under Act 3344 can only have the effect of constructive notice to
the second buyer that can defeat his right as such buyer in good faith if the
property is not registered under the Torrens system. On lands covered by the
Torrens System, the purchaser acquires such rights and interest as they appear in
the certificate of title, unaffected by any prior lien or encumbrance not noted
therein. The purchaser is not required to explore farther than what the Torrens
title, upon its face, indicates. The only exception is where the purchaser has
actual knowledge of a flaw or defect in the title of the seller or of such liens or
encumbrances which, as to him, is equivalent to registration. De Vera, as a
purchaser in good faith and for value, had relied in good faith on the Torrens
title of Villafania and must thus be protected.

Acabal v. Acabal
G.R. No. 148376. March 31, 2005
Carpio Morales, J:
FACTS: Respondent Villaner Acabals parents owned a parcel of land situated in
Barrio Tanglad, Manjuyod, Negros Oriental. By a Deed of Absolute Sale, his
parents transferred for P2,000.00 ownership of the said land to him, who was
then married to Justiniana Lipajan.
Sometime after the foregoing transfer, it appears that Villaner became a
widower. Subsequently, he executed on April 19, 1990 a deed conveying the
same property in favor of his godson-nephew-petitioner Leonardo Acabal.
Villaner was later to claim that while the April 19, 1990 document he executed
now appears to be a Deed of Absolute Sale, what he signed was a document
captioned Lease Contract wherein he leased for 3 years the property to
Leonardo at P1,000.00 per hectare.
Villaner thus filed on October 11, 1993 a complaint against Leonardo and Ramon
Nicolas to whom Leonardo in turn conveyed the property, for annulment of the
deeds of sale.
ISSUE: Is the sale valid?
HELD: While Villaner owns five-ninths (5/9) of the disputed property, he could
not claim title to any definite portion of the community property until its actual
partition by agreement or judicial decree. Prior to partition, all that he has is an
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ideal or abstract quota or proportionate share in the property. Villaner, however,

as a co-owner of the property has the right to sell his undivided share
thereof. Since a co-owner is entitled to sell his undivided share, a sale of the
entire property by one co-owner without the consent of the other co-owners is
not null and void. However, only the rights of the co-owner-seller are
transferred, thereby making the buyer a co-owner of the property. It is now
settled that the appropriate recourse of co-owners in cases where their consent
were not secured in a sale of the entire property as well as in a sale merely of the
undivided shares of some of the co-owners is an action for PARTITION under
Rule 69 of the Revised Rules of Court. Neither recovery of possession nor
restitution can be granted since the defendant buyers are legitimate proprietors
and possessors in joint ownership of the common property claimed.

Jestra Development And Management Corporation v. Daniel Ponce

Pacifico
G.R. No. 167452, January 30, 2007
Carpio Morales, J:
FACTS: Daniel Ponce Pacifico (Pacifico) signed a Reservation Application with
Fil-Estate Marketing Association for the purchase of a house and lot located at
Lot 28, Block 3, Phase II, Jestra Villas, Barangay La Huerta, Municipality of
Paraaque, Metro Manila (the property), and paid the reservation fee of P20,000.
Under the Reservation Application, the total purchase price of the property
was P2,500,000, and the down payment equivalent to 30% of the purchase price
or P750,000 was to be paid interest-free in six monthly installments due every
fifth of the month starting July 1996 until December 1996.
Also under the Reservation Application, upon full payment of the 30% down
payment by Pacifico, he was to sign a contract to sell with the owner and
developer of the property, Joprest Development and Management Corporation
(now Jestra Development and Management Corporation, hereafter Jestra).
With still a remaining balance of P260,000 on the down payment, Pacifico and
Jestra executed on March 6, 1997, Contract to Sell over the property. The said
contract was silent on the unsettled balance on the down payment.
Under the Contract to Sell, Pacifico should have had on November 5, 1996, or
one month prior to the deadline stated under the Reservation Application, fully
paid the 30% down payment, and that the 120 monthly installments for the 70%
balance or P1,750 should have had commenced on December 7, 1996,
Pacifico informed Jestra that due to sudden financial difficulties, he was
suspending payment of his obligation during the 10-month period, and that he
wanted to dispose of the property to recover his investment. And he requested
that the postdated checks he issued be returned to him.
Pacifico filed a complaint before the Housing and Land Use Regulatory Board
(HLURB) against Jestra claiming that despite his full payment of the down
payment, Jestra failed to deliver to him the property within 90 days as provided
in the Contract to Sell dated March 6, 1997, and Jestra instead sold the property
to another buyer in October of 1998.

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ISSUE: Is respondent, entitled to a refund of the cash surrender value of his

payments pursuant to Section 3 of RA No. 6552?
HELD: No. The total purchase price of the property is P2,500,000. As provided in
the Reservation Application, the 30% down payment on the purchase price
or P750,000 was to be paid in six monthly installments of P121,666.66. Under the
Contract to Sell, the 70% balance of P1,750,000.00 on the purchase price was to be
paid in 10 years through monthly installments of P34,983, which was later
increased to P39,468 in accordance with the agreement to restructure the same.
While, under the above-quoted Section 3 of RA No. 6552, the down payment is
included in computing the total number of installment payments made, the
proper divisor is neither P34,983 nor P39,468, but P121,666.66, the monthly
installment on the down payment.
The P750,000 down payment was to be paid in six monthly installments. If the
down payment of P750,000 is to be deducted from the total payment of P846,600,
the remainder is only P96,600. Since respondent was able to pay the down
payment in full eleven (11) months after the last monthly installment was due,
and the sum of P76,600 representing penalty for delay of payment is deducted
from the remaining P96,600, only a balance of P20,000 remains.
As respondent failed to pay at least two years of installments, he is not, under
above-quoted Section 3 of RA No. 6552, entitled to a refund of the cash surrender
value of his payments. What applies to the case instead is Section 4 of the same
law, viz:
SECTION 4. In case where less than two years of installments were paid, 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.
The cancellation of the contract under Section 4 is a two-step process. First, the
seller should extend the buyer a grace period of at least sixty (60) days from the
due date of the installment. Second, at the end of the grace period, the seller shall
furnish the buyer with a notice of cancellation or demand for rescission through
a notarial act, effective thirty (30) days from the buyer's receipt thereof.

Garcia v. Court of Appeals

G.R. No. 172036, April 23, 2010
J. Carpio;
Effect of non-payment of purchase price in a contract to sell
ISSUE: Whether or not the seller is considered in good faith if he subsequently
sells the property
HELD: 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
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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. Strictly speaking, 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.
It is undeniable that petitioners 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.

Valdez v. Court of Appeals

G.R. No. 140715, September 24, 2004
J. Callejo
Bilateral agreement on automatic rescission.
ISSUE: Whether or not the respondents breach resulted to an automatic
rescission of the contract of sale.
HELD: There was no need for petitioner Josefina to make a notarized demand to
the respondent or file an action to rescind the deed of absolute sale to enable her
to recover the ownership of the property. This is so because the petitioner and
the respondent had agreed that upon the latters failure to construct a new and
fully operational commercial building and to cause the transfer of the Rural Bank
of Isulan to the property on or before May 9, 1984, the deed of absolute sale
would be deemed null and void without need of any demand from the
petitioners. Such agreement is evidenced by the affidavit executed by the
respondent himself on April 27, 1981.
Petitioners refusal to deliver the torrens title over the subject property under the
respondents name was justified, precisely because of the respondents refusal to
comply with his obligation to pay the balance of the purchase price. Had the
respondent paid the purchase price of the property, such failure on the part of
petitioner Josefina to deliver the torrens title to and under the name of the
respondent would have warranted the suspension of the five-year period agreed
upon for the construction of a fully operational commercial building, as well as
the transfer of the aforesaid bank to the property.

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