232 Cifra v CA
198 SCRA 91
Topic: Earnest Money | Ponente: J. Gancayco | Author: S A Y O
Doctrine: Stipulations in the addendum is the law between the parties.; Seller must return
earnest money in case of rescission.
Emergency Recit: Parties entered into an agreement “Earnest Money” which involved the
sale of property to respondent including the assumption of mortgage and payment of earnest
money. An addendum to the agreement provided that if buyer fails to purchase, he earnest
shall be forfeited in addition to 20k + attys fees. In case the seller, however, fails to sell,
earnest money shall be returned plus 20k + attys fees. Sps Cifra (seller) refused to sell
because apparently the economic opportunity which the proceeds of the sale shall be applied
lapsed. Thus, buyer (res) filed specific performance. SC held the addendum is binding upon
the parties thus specific performance must fail. Rescision of the contract has the effect of
compelling seller to return earnest money + 20k.
Facts:
1. On December 27, 1985, petitioners spouses and respondent entered into an
agreement “EARNEST MONEY”
2. Relevant provisions of the agreement:
 Received from Dr. Manuel G. Yu Chua (res) the cash sum of P5,000.00 as
earnest money for the house and lot owned by petitioner spouses Cifra.
 Property also mortgaged to SSS thus respondent shall also assume
mortgage obligations to SSS (40k).
 The purchase price= 1.1M minus the outstanding mortgage balance with
the SSS and the above earnest money shall be paid by the buyer to the
seller upon the removal of the present tenant or occupant from the
premises and upon the execution of the Deed of Absolute Sale.
 If and when the buyer purchases the property according to the terms and
conditions above specified, the herein earnest money shall form a part of
the purchase price otherwise the same shall be forfeited in favor of the
seller.
3. Addendum: In the event that the buyer shall fail to purchase the property after he
is formally notified by the seller of the surrender of the premises by the present
tenant or occupant, in addition to the forfeiture of the earnest money the buyer
binds himself to pay the seller the sum P20,000.00 plus the attorney’s fees and
other costs for any court case that may arise.
4. On the other hand, if the seller shall not make good his promise to sell the above
property even after the present tenant shall have surrendered the premises the
1
seller binds himself to return the earnest money and in addition pay the buyer
P20,000.00 plus the attorney’s fees and other costs of any court case that may
arise.
5. Catalan informed private respondent of the desire of petitioners to rescind the
contract by a letter (missed the opportunity for which they wanted to apply the
proceeds of the sale because of long negotiations)
6. There were subsequent letters sent by both parties to each other demanding the
enforcement of the contract (respondent’s position) and refusal to enforce
(petitioners)
Issue/s: WON Respondent buyer may demand specific performance despite the facts that he
agreed to a waiver when he consented to the addendum- No, He cannot.
Ruling:
Under the addendum to the same agreement, both parties are given the freedom to back out
of the transaction provided that, in the case of the seller, he must return the earnest money
in addition to being liable to the buyer for P20,000.00, plus attorney’s fees and other costs in
case of litigation; and in case of the buyer, the earnest money is forfeited, and he is liable to
pay the seller P20,000.00 in damages plus attorneys fees and other costs in case of litigation
to the seller. This right which is afforded to both parties may be availed of by them,
irrespective of whether or not the occupant of the premises had vacated the same. This
stipulation is the law between the parties.
This is the literal and clear agreement of the parties. From their contemporaneous and
subsequent acts it also appears that the proceeds of the sale of the property by petitioners
were intended to apply to a proposed business venture of petitioners abroad. As said
proposed business did not prosper and the tenants/occupants of the premises have not yet
vacated the premises, petitioners decided to rescind the contract of sale in accordance with
the agreement.
Consequently, the action for specific performance must fail. For the rescission of the contract,
petitioners must return the P5,000.00 earnest money and pay P20,000.00 to the private
respondent. However, they are not liable for attorneys fees, for it was private respondent
who brought the case to court as a result of which petitioners unnecessarily incurred
expenses of litigation.
233 SERRANO v. CAGUIAT
G.R. No. 139173 | 28 February 2007 | J. Sandoval Gutierrez | TIGLAO
TOPIC: Earnest Money
DOCTRINE: It is true that Article 1482 of the Civil Code provides that Whenever earnest
money is given in a contract of sale, it shall be considered as part of the price and proof of the
perfection of the contract. However, this article speaks of earnest money given in a contract
of sale. In this case, the earnest money was given in a contract to sell. The earnest money
forms part of the consideration only if the sale is consummated upon full payment of the
purchase price. Now, since the earnest money was given in a contract to sell, Article 1482,
which speaks of a contract of sale, does not apply.
ER: Caguiat offered to buy the property and paid 100k to Serrano as partial payment. He was
given a receipt for partial payment which bore the promise of respondent to pay the balance.
When Caguiat was ready to buy, petitioners informed him that they were cancelling the
transaction and that he can claim back his earnest money. Caguiat sought for specific
performance. SC ruled that he cannot seek specific performance because title never passed
to him since the receipt was evidence that it was a contract to sell, not of sale. Most
importantly, his 100k only formed part of the consideration upon full payment of purchase
price because is a contract to sell. It would have been different if it was a contract for sale
because the earnest money would have constituted as evidence of perfection of the contract.
Since no full payment was made, title did not pass; hence, Caguiat cannot compel petitioners
to transfer title.
FACTS:
1. Caguiat offered to buy the lot owned by Serrano. They agreed to sell it at Php
1,500.00 per square meter.
2. Caguiat paid Serrano 100k as partial payment evidenced by a receipt for partial
payment indicating Caguiat’s promise to pay the balance.
3. Caguiat, through his counsel, informed petitioners that he was ready to pay the
balance of the contract price and requested them to prepare the final deed of sale.
4. Petitioners informed respondent that they were cancelling the transaction and that
respondent can recover the earnest money of 100k anytime.
5. Caguiat filed for specific performance against petitioners.
6. TC: Ruled in favor of Caguiat. The 100k was earnest money which signified the
perfection of the contract of sale. Applied Article 1482.
7. CA: Affirmed.
W/N the document entitled Receipt for Partial Payment signed by both parties is a contract to
sell or a contract of sale – CONTRACT TO SELL
HELD/RULING:
First, ownership over the property was retained by petitioners and was not to pass to
respondent until full payment of the purchase price. Thus, petitioners need not push through
with the sale should respondent fail to remit the balance of the purchase price before the
deadline on March 23, 1990. In effect, petitioners have the right to rescind unilaterally the
contract the moment respondent fails to pay within the fixed period.
Second, the agreement between the parties was not embodied in a deed of sale. The absence
of a formal deed of conveyance is a strong indication that the parties did not intend
immediate transfer of ownership, but only a transfer after full payment of the purchase price.
Third, petitioners retained possession of the certificate of title of the lot. This is an additional
indication that the agreement did not transfer to respondent, either by actual or constructive
delivery, ownership of the property.
It is true that Article 1482 of the Civil Code provides that Whenever earnest money is given
in a contract of sale, it shall be considered as part of the price and proof of the perfection of
the contract. However, this article speaks of earnest money given in a contract of sale. In
this case, the earnest money was given in a contract to sell. The earnest money forms part
of the consideration only if the sale is consummated upon full payment of the purchase
price. Now, since the earnest money was given in a contract to sell, Article 1482, which
speaks of a contract of sale, does not apply.
The suspensive condition (payment of the balance by respondent) did not take place. Clearly,
respondent cannot compel petitioners to transfer ownership of the property to him.

ISSUE/S:
W/N the partial payment constitutes an earnest money as manifested in Article 1482 – NO.
Art. 1482 applies only to earnest money in a contract of sale.

2
234 First Optima Realty vs. Securitron security
G.R. No. 199648, January 28, 2015| J. Del Castillo| Valera
TOPIC: Earnest Money.
DOCTRINE: In a potential sale transaction, the prior payment of earnest money even before
the property owner can agree to sell his property is irregular, and cannot be used to bind
the owner to the obligations of a seller under an otherwise perfected contract of sale; to
cite a well-worn cliché, the carriage cannot be placed before the horse. The property
owner-prospective seller may not be legally obliged to enter into a sale with a prospective
buyer through the latter's employment of questionable practices which prevent the owner
from freely giving his consent to the transaction; this constitutes a palpable transgression
of the prospective seller's rights of ownership over his property, an anomaly which the
Court will certainly not condone.
ER: Respondent wanted to buy Petitioners property, they engaged in negotiations but
Respondent thru its EVP, Young told respondent that they will need to confer with the BoD
and have a resolution. However, Respondent suddenly sent a letter with a check. The letter
stated that the check is a deposit of earnest money in the amount of 100k. this letter and
check was received by a receptionist who issued a receipt. There after Respondent
demanded Petitioner to execute the sale of property. Young replied stated that they are not
going to sell the property because of the conduct of the respondent. REspodnent went to
the RTC for specific Performance. The RTC ruled in favor of the Respondent holding that the
acceptance of the Earnest money is an indicative of a perfected contract of Sale. CA
Affirmed. The SC reversed holding that there was no contract of sale because of the non
acceptance of the Petitioner and the payment of earnest money before the contract of sale
is not binding. Th SC also faulted Respondent for dubious business practices in sending the
letter and check to a regular office clerk.
FACTS:
1. First Optima(Petitioner) is a corp engaged in the real estate business and owns a
property located in Pasay
 Securitron(Respondent) has offices beside the property.
2. Looking to expand its business and office, Respondent thru its GM(Eleazar) sent a
Dec 9 letter to Petitioner through its EVP(Young) Offering to purchase the property.
 A series of phone calls ensued but only between Eleazar and Young’s secretary.
 Eleazar also negotiated with Remoroso who was a mere employee of the
petitioner.
 At this point Eleazar was unable to personally negotiate with young or the
Board of Directors(BoD) of Petitioners
 Sometime after, Eleazar personally went tot petitioner’s office offering to pay
for the property in cash which he bought with him. Young declined to accept
the payment saying that she will still need to secure her sister’s advice and also
informed him that prior approval of the BoD was required.
3
 On Feb 4, 2005, sent a letter which was accompanied by a PNB check for 100k
payable to petitioner
- The letter states that Respondent thru Eleazar was making a deposit of
100k as earnest money for the property to be sold for 1.536m nad full
payment would ensue upon clearing of the tenants.
3. Despite the delicate nature of the matter and large amount involved, Respondent
did not deliver the letter and check directly to Young but was coursed through an
ordinary receiving clerk of the petitioner, who received the same and issed.
 The receipt has anote that “This is issued to transactions not yet cleared but
subsequently an OR will be issued”
 The check was eventually deposited and credited to petitioners bank account.
4. Afterwards, respondent through counsel demanded in writing that Petitioner
proceed with the sale of property.
 Petitioner wrote back stating that due to the haste and demands done by
Respondents are forms of intimidation and harassment, they will not accept
the offer to buy the property and is willing to refund the money.
5. Respondent filed a case for specific performance with the RTC. The RTC ruled in
favor of Respondents.
 There was a perfected contract of Sale. accepting the 100k earnest money
indicated the existence of a perfected contract of sale.
6. CA affirmed.
ISSUE/S:
1. W/N the receipt of the Earnest money prior to an agreement to sell the property is
an indicative of a perfected contract of sale? NO.
HELD/RULING;
 trial and appellate courts erred materially in deciding the case; they overlooked
important facts that should change the complexion and outcome of the case.
 It cannot be denied that there were negotiations between the parties
conducted after the respondent's December 9, 2004 letter-offer and prior to
the February 4, 2005 letter. These negotiations culminated in a meeting
between Eleazar and Young whereby the latter declined to enter into an
agreement and accept cash payment then being tendered by the former.
Instead, Young informed Eleazar during said meeting that she still had to
confer with her sister and petitioner's board of directors; in turn, Eleazar told
Young that respondent shall await the necessary approval.
 the trial and appellate courts failed to appreciate that respondent's offer to
purchase the subject property was never accepted by the petitioner at any
instance, even after negotiations were held between them. Thus, as between
them, there is no sale to speak of. "When there is merely an offer by one party
without acceptance of the other, there is no contract.
 Respondent's subsequent sending of the February 4, 2005 letter and check to
petitioner without awaiting the approval of petitioner's board of directors and
Young's decision, or without making a new offer constitutes a mere reiteration
of its original offer which was already rejected previously; thus, petitioner was
under no obligation to reply to the February 4, 2005 letter. It would be absurd
to require a party to reject the very same offer each and every time it is made;
 otherwise, a perfected contract of sale could simply arise from the failure to making a refund since it is equally to blame for making such payment under false
reject the same offer made for the hundredth time. Thus, said letter cannot be pretenses and irregular circumstances, and with improper motives.
considered as evidence of a perfected sale, which does not exist in the first  a potential sale transaction, the prior payment of earnest money even before the
place; no binding obligation on the part of the petitioner to sell its property property owner can agree to sell his property is irregular, and cannot be used to
arose as a consequence. The letter made no new offer replacing the first which bind the owner to the obligations of a seller under an otherwise perfected contract
was rejected of sale; to cite a well-worn cliché, the carriage cannot be placed before the horse.
 Since there is no perfected sale between the parties, respondent had no obligation The property owner-prospective seller may not be legally obliged to enter into a
to make payment through the check; nor did it possess the right to deliver earnest sale with a prospective buyer through the latter's employment of questionable
money to petitioner in order to bind the latter to a sale. As contemplated under Art. practices which prevent the owner from freely giving his consent to the transaction;
1482 of the Civil Code, "there must first be a perfected contract of sale before we this constitutes a palpable transgression of the prospective seller's rights of
can speak of earnest money."[35] "Where the parties merely exchanged offers and ownership over his property, an anomaly which the Court will certainly not
counter-offers, no contract is perfected since they did not yet give their consent to condone.
such offers. Earnest money applies to a perfected sale.  An agreement where the prior free consent of one party thereto is withheld or
 This Court is inclined to accept petitioner's explanation that since the check suppressed will be struck down, and the Court shall always endeavor to
was mixed up with all other checks and correspondence sent to and received protect a property owner's rights against devious practices that put his
by the corporation during the course of its daily operations, Young could not property in danger of being lost or unduly disposed without his prior
have timely discovered respondent's check payment; petitioner's failure to knowledge or consent.
return the purported earnest money cannot mean that it agreed to
respondent's offer.
 Besides, respondent's payment of supposed earnest money was made under
dubious circumstances and in disregard of sound business practice and
common sense. Indeed, respondent must be faulted for taking such a course
of action that is irregular and extraordinary: common sense and logic dictate
that if any payment is made under the supposed sale transaction, it should
have been made directly to Young or coursed directly through her office, since
she is the officer directly responsible for negotiating the sale, as far as
respondent is concerned and considering the amount of money involved; no
other ranking officer of petitioner can be expected to know of the ongoing
talks covering the subject property. Respondent already knew, from Eleazar's
previous meeting with Young, that it could only effectively deal with her; more
than that, it should know that corporations work only through the proper
channels. By acting the way it did coursing the February 4, 2005 letter and
check through petitioner's mere receiving clerk or receptionist instead of
directly with Young's office, respondent placed itself under grave suspicion of
putting into effect a premeditated plan to unduly bind petitioner to its rejected
offer, in a manner which it could not achieve through negotiation and
employing normal business practices.
 It impresses the Court that respondent attempted to secure the consent
needed for the sale by depositing part of the purchase price and under the
false pretense that an
 agreement was already arrived at, even though there was none. Respondent
achieved the desired effect up to this point, but the Court will not be fooled.
 as between respondent's irregular and improper actions and petitioner's failure to
timely return the P100,000.00 purported earnest money, this Court sides with
petitioner. In a manner of speaking, respondent cannot fault petitioner for not

4
235 RAYMUNDO S. DE LEON v. BENITA T. ONG
G.R. No. 170405, February 2, 2010
Topic: Double Sales| Ponente: J. Corona| Author: Acido
Doctrine: Art. 1544 clearly states that the rules on double or multiple sales apply only to
purchasers in good faith. Needless to say, it disqualifies any purchaser in bad faith.
A purchaser in good faith is one who buys the property of another without notice that some
other person has a right to, or an interest in, such property and pays a full and fair price for
the same at the time of such purchase, or before he has notice of some other person’s claim
or interest in the property. The law requires, on the part of the buyer, lack of notice of a
defect in the title of the seller and payment in full of the fair price at the time of the sale or
prior to having notice of any defect in the seller’s title.
ER (pls read first): De Leon sold 3 parcels of land, encumbered with a mortgage, to Ong.
While Ong was undergoing credit investigation for the approval of assumption of mortgage,
De Leon sold the lands to Viloria after paying the amount due on the mortgage and taking
back the certificates of title. RTC ruled in favor of De Leon, stating that the sale was subject to
a condition which was never fulfilled, thus, there was no sale to Ong. CA reversed and
nullified the second sale. SC said that the second sale was not void for the sole reason that
petitioner had previously sold the same properties to respondent; rather, there is a double
sale as the disputed properties were sold validly on two separate occasions by the same seller
to the two different buyers in good faith (walang discussion on Viloria’s good faith though)
Facts:
1. On March 10, 1993, petitioner Raymundo S. de Leon sold 3 parcels of land with
improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these
properties were mortgaged to Real Savings and Loan Association, Incorporated
(RSLAI), petitioner and respondent executed a notarized deed of absolute sale with
assumption of mortgage.
2. Pursuant to this deed, respondent Ong gave petitioner ₱415,500 as partial
payment. Petitioner De Leon, on the other hand, handed the keys to the properties
and wrote a letter informing RSLAI of the sale and authorizing it to accept payment
from respondent and release the certificates of title.
3. Thereafter, respondent undertook repairs and made improvements on the
properties. Respondent likewise informed RSLAI of her agreement with petitioner
for her to assume petitioner’s outstanding loan. RSLAI required her to undergo
credit investigation.
4. Subsequently, respondent learned that petitioner again sold the same properties to
one Leona Viloria after March 10, 1993 and changed the locks, rendering the keys
he gave her useless. Respondent thus proceeded to RSLAI to inquire about the
credit investigation. However, she was informed that petitioner had already paid
the amount due and had taken back the certificates of title.
5. Ong filed a complaint for specific performance, declaration of nullity of 2 nd sale, and
damages against petitioner and Viloria.
5
Ong: After the previous sale, De Leon no longer had a right to sell to Viloria. Thus,
petitioner fraudulently deprived her of the properties.
De Leon: The transaction with Ong was subject to a condition – RSLAI’s approval of
the assumption of mortgage. Since respondent did not apply for a loan, condition
never arose – no sale.
6. RTC: Dismissed complaint for lack of cause of action.
7. CA: Reversed; second sale void; there was no condition; parties entered into a
contract of sale.
Issue:
Was the 1st transaction a contract to sell or a contract of sale? Contract of sale
Was there a void sale or double sale? Double sale
Held/Ratio: Affirmed with modification
 [CONTRACT OF SALE] Nothing in the deed of sale implied that petitioner reserved
ownership of the properties until the full payment of the purchase price. On the
contrary, the terms and conditions of the deed only affected the manner of payment,
not the immediate transfer of ownership (upon the execution of the notarized contract)
said from petitioner as seller to respondent as buyer. Otherwise stated, the terms and
conditions pertained to the performance of the contract, not the perfection thereof nor
the transfer of ownership.
 In this instance, petitioner executed a notarized deed of absolute sale in favor of
respondent. Moreover, not only did petitioner turn over the keys to the properties to
respondent, he also authorized RSLAI to receive payment from respondent and release
his certificates of title to her. The totality of petitioner’s acts clearly indicates that he had
unqualifiedly delivered and transferred ownership of the properties to respondent.
Clearly, it was a contract of sale the parties entered into.
 [DOUBLE SALE] This case involves a double sale as the disputed properties were sold
validly on two separate occasions by the same seller to the two different buyers in good
faith.
 Respondent Ong was a purchaser in good faith. Respondent purchased the properties,
knowing they were encumbered only by the mortgage to RSLAI. According to her
agreement with petitioner, respondent had the obligation to assume the balance of
petitioner’s outstanding obligation to RSLAI. Consequently, respondent informed RSLAI
of the sale and of her assumption of petitioner’s obligation. However, because petitioner
surreptitiously paid his outstanding obligation and took back her certificates of title,
petitioner himself rendered respondent’s obligation to assume petitioner’s indebtedness
to RSLAI impossible to perform.
 Since respondent’s obligation to assume petitioner’s outstanding balance with RSLAI
became impossible without her fault, she was released from the said obligation.
Moreover, because petitioner himself willfully prevented the condition vis-à-vis the
payment of the remainder of the purchase price, the said condition is considered
fulfilled pursuant to Article 1186 of the Civil Code. For purposes, therefore, of
determining whether respondent was a purchaser in good faith, she is deemed to have
fully complied with the condition of the payment of the remainder of the purchase
price.
 Respondent was not aware of any interest in or a claim on the properties other than the
mortgage to RSLAI which she undertook to assume. Moreover, Viloria bought the
properties from petitioner after the latter sold them to respondent. Respondent was
therefore a purchaser in good faith. Hence, the rules on double sale are applicable.
 Article 1544 of the Civil Code provides that when neither buyer registered the sale of
the properties with the registrar of deeds, the one who took prior possession of the
properties shall be the lawful owner thereof.
 In this instance, petitioner delivered the properties to respondent when he executed
the notarized deed and handed over to respondent the keys to the properties. For this
reason, respondent took actual possession and exercised control thereof by making
repairs and improvements thereon. Clearly, the sale was perfected and consummated
on March 10, 1993. Thus, respondent became the lawful owner of the properties.
 Nonetheless, while the condition as to the payment of the balance of the purchase price
was deemed fulfilled, respondent’s obligation to pay it subsisted. Otherwise, she would
be unjustly enriched at the expense of petitioner.
6
236 ROMAN CATHOLIC CHURCH v REGINO PANTE
G.R. No. 174118| 11 April 2012| J. Brion | Tiglao/Castro
TOPIC: Double Sales
DOCTRINE: Jurisprudence has interpreted possession in Article 1544 of the Civil Code to
mean both actual physical delivery and constructive delivery.
ER: The Church sold a very small lot to Pante. It sold another lot to Sps Rubi which included
Pante’s lot. Pante sought to annul the sale. Church argued that the first sale was void because
Pante misrepresented himself. Court ruled that the sale was valid because no mispresentation
was made by Pante. Also, applying the rule on double sales, the Court ruled that Pante was
the owner of the land. Since neither Pante nor Sps Rubi registered the land, the rule provides
that the ownership shall pertain to the person who in good faith was first in possession.
Possession means both actual and constructive delivery. Under either mode, Pante was first
in possession in good faith,
FACTS:
1. The Church owned a lot. They entered into a Contract to Sell and to Buy with
respondent Pante on the belief that he was an actual occupant of the lot.
2. Later on, the Church sold in favor of Spouses Rubi another lot which included the lot
previously sold to Pante.
3. Pante filed an action to annul the sale between the Church and Spouses Rubi, insofar
as it included the lot previously sold to him.
4. The Church alleged that its consent was obtained by fraud when Pante, in bad faith,
mispreresented that he had been an actual occupant of the lot sold to him, when in
fact, he was just using it as a passageway.
5. RTC: In favor of the Church; CA Applied the rule on Double Sales: Since neither of the
two sales was registered, the CA upheld the full effectiveness of the sale in favor of
Pante who first possessed the lot by using it as a passageway since 1963.
ISSUE: Applying the rule on double sales, who shall own the land?
HELD: Pante, who was first in the possession of the property in good faith
HELD/RULING: The sale of the lot to Pante and later to the spouses Rubi resulted in a
double sale that called for the application of the rules in Article 1544 of the Civil Code: If the
same thing should have been sold to different vendees, the ownership shall be transferred to
the person who may have first taken possession thereof in good faith, if it should be movable
property. Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property. Should there be no
inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.
Here, neither Pante nor spouses Rubi registered the sale in their favor, therefore, the
question is who was first in possession of the property in good faith.
Jurisprudence has interpreted possession in Article 1544 of the Civil Code to mean both
actual physical delivery and constructive delivery. Under either mode of delivery, the facts
show that Pante was the first to acquire possession of the lot.
1. Actual delivery
Actual delivery of a thing sold occurs when it is placed under the control and possession of
the vendee.
Pante claimed that he had been using the lot as a passageway, with the Church’s permission,
since 1963. After purchasing the lot in 1992, he continued using it as a passageway until he
was prevented by the spouses Rubi’s concrete fence over the lot in 1994. Pantes use of the
lot as a passageway after the 1992 sale in his favor was a clear assertion of his right of
ownership that preceded the spouses Rubis claim of ownership. Pante also stated that he had
placed electric connections and water pipes on the lot, even before he purchased it in 1992,
and the existence of these connections and pipes was known to the spouses Rubi. Thus, any
assertion of possession over the lot by the spouses Rubi (e.g., the construction of a concrete
fence) would be considered as made in bad faith because works had already existed on the
lot indicating possession by another. [A] buyer of real property in the possession of persons
other than the seller must be wary and should investigate the rights of those in possession.
Without such inquiry, the buyer can hardly be regarded as a buyer in good faith and cannot
have any right over the property.
2. Constructive Delivery
Article 1498 of the Civil Code states that: When the sale is made through a public
instrument, the execution thereof shall be equivalent to the delivery of the thing which is
the object of the contract, if from the deed the contrary does not appear or cannot clearly be
inferred.
Under this provision, the sale in favor of Pante would have to be upheld since the contract
executed between the Church and Pante was duly notarized, converting the deed into a
public instrument. In Navera v. Court of Appeals, the Court ruled that: [A]fter 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 of the thing lawfully acquired by the first vendee.
7
237 Sabitsana v Muertegui, G.R. No. 181359, August 5, 2013
G.R. No. 181359 | August 5, 2013| DEL CASTILLO, J.| De Leon
TOPIC: Double Sales
DOCTRINE: The mere registration of a sale in one’s favor does not give him any right over
the land if the vendor was no longer the owner of the land, having previously sold the same
to another even if the earlier sale was unrecorded.
ER: Garcia sold the lot to the Muertegui’s. Thereafter, they sold the same lot to Muertegui’s
lawyer, Atty. Sabitsana. Atty. Sabitsana first registered the sale. The Court held that the
Muerteguis own the lot because mere registration of a sale in one’s favor does not give him
any right over the land if the vendor was no longer the owner of the land, having previously
sold the same to another even if the earlier sale was unrecorded.
FACTS:
 Alberto Garcia (Garcia) executed an unnotarized Deed of Sale5 in favor of
respondent Juanito Muertegui (Juanito) over a 7,500-square meter parcel of
unregistered land (the lot) located in Dalutan Island, Talahid, Almeira, Biliran, Leyte
del Norte.
 Juanito’s father Domingo Muertegui, Sr. (Domingo Sr.) and brother Domingo Jr. took
actual possession of the lot and planted thereon coconut and ipil-ipil trees. They
also paid the real property taxes on the lot for the years 1980 up to 1998.
 On October 17, 1991, Garcia sold the lot to the Muertegui family lawyer, petitioner
Atty. Clemencio C. Sabitsana, Jr. (Atty. Sabitsana), through a notarized deed of
absolute sale. Although Domingo Jr. and Sr. paid the real estate taxes, Atty.
Sabitsana also paid real property taxes in 1992, 1993, and 1999. In 1996, he
introduced concrete improvements on the property, which shortly thereafter were
destroyed by a typhoon.
 When Domingo Sr. passed away, his heirs applied for registration and coverage of
the lot under the Public Land Act or Commonwealth Act No. 141. Atty. Sabitsana, in
a letter addressed to the Department of Environment and Natural Resources’
CENRO/PENRO office in Naval, Biliran, opposed the application, claiming that he
was the true owner of the lot. He asked that the application for registration be held
in abeyance until the issue of conflicting ownership has been resolved.
 Juanito, through his attorney-in-fact Domingo Jr., filed Civil Case for quieting of title
and preliminary injunction, against herein petitioners Atty. Sabitsana and his wife,
Rosario, claiming that they bought the lot in bad faith and are exercising acts of
possession and ownership over the same, which acts thus constitute a cloud over
his title.
 Applying Article 1544 of the Civil Code, the trial court declared that even though
petitioners (si Atty) were first to register their sale, the same was not done in good
faith. And because petitioners’ registration was not in good faith, preference should
be given to the sale in favor of Juanito.
ISSUE/S: W/N the Muerteguis own the lot?
HELD/RULING; Yes
o Article 1544 of the Civil Code does not apply to sales involving
unregistered land.
o Both the trial court and the CA are, however, wrong in applying Article
1544 of the Civil Code. Both courts seem to have forgotten that the
provision does not apply to sales involving unregistered land. Suffice it to
state that the issue of the buyer’s good or bad faith is relevant only where
the subject of the sale is registered land, and the purchaser is buying the
same from the registered owner whose title to the land is clean. In such
case, the purchaser who relies on the clean title of the registered owner
is protected if he is a purchaser in good faith for value.
o Act No. 3344 applies to sale of unregistered lands.
o What applies in this case is Act No. 3344, as amended, which provides for
the system of recording of transactions over unregistered real estate. Act
No. 3344 expressly declares that any registration made shall be without
prejudice to a third party with a better right. The question to be resolved
therefore is: who between petitioners and respondent has a better right
to the disputed lot?
o Respondent has a better right to the lot.
o The sale to respondent Juanito was executed on September 2, 1981 via an
unnotarized deed of sale, while the sale to petitioners was made via a
notarized document only on October 17, 1991, or ten years thereafter.
Thus, Juanito who was the first buyer has a better right to the lot, while
the subsequent sale to petitioners is null and void, because when it was
made, the seller Garcia was no longer the owner of the lot. Nemo dat
quod non habet.
o The fact that the sale to Juanito was not notarized does not alter
anything, since the sale between him and Garcia remains valid
nonetheless. Notarization, or the requirement of a public document
under the Civil Code, is only for convenience, and not for validity or
enforceability. And because it remained valid as between Juanito and
Garcia, the latter no longer had the right to sell the lot to petitioners, for
his ownership thereof had ceased.
 Nor can petitioners’ registration of their purchase have any effect on Juanito’s
rights. The mere registration of a sale in one’s favor does not give him any right over
the land if the vendor was no longer the owner of the land, having previously sold
the same to another even if the earlier sale was unrecorded. Neither could it
validate the purchase thereof by petitioners, which is null and void. Registration
does not vest title; it is merely the evidence of such title. Our land registration laws
do not give the holder any better title than what he actually has.
8
238 ALFARO V SPS DUMALAGAN
G.R. No. 186622 January 22, 2014|PEREZ| DELFIN
TOPIC: DOUBLE SALES
DOCTRINE:
Article 1544 of the Civil Code provides
If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it
should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.
ONE LINER: SPS ALFARO CANNOT CLAIM GOOD FAITH BECAUSE THE TITLE WAS ANNOTATED
WITH ADVERSE CLAIM AND THEY HAD PRIOR KNOWLEDGE OF POSSESSION OF SPS
DUMALAGAN OF THE PROPERTY SOLD. THUS ARTICLE 1544 IN NOT APPLICABLE.
EMERGENCY RECIT:
Sps Bagano sold the subject property to Sps Alfaro which they immediately registered and
occupied. Apparently, the same property was sold by Bagano before to Sps Dumalagan. Upon
knowledge of the second sale to Sps Alfaro, Sps Dumalagan filed an action to annul the title
of Sps Alfaro. Sps Alfaro claims that they are in good faith and has better right and they
recorded the title first. Court said they are not in good faith because the title was annotated
with adverse claim and they have knowledge of prior possession of the property by Sps
Dumalagan. [NOTE: there is a contention that the adverse claim has expired – the SC ruled
against this because to be ineffective it has to be cancelled which was not done in this case]
FACTS:
1. Bagano sold property in Talisay City to Sps Alfaro through a Deed of Sale which Sps
Alfaro immediately transfer the title of said property in their name, paid real property
tax, amd constructed a perimeter fence around the subject property. They also
constructed a nipa hut which they leased to a third party.
2. Respondents Sps Dumalagan assails that they are the owner of the property based on a
notarized Deed of Absolute Sale dated Dec 6, 1993. They also offered Certificate of
Completion and a Certificate of Occupancy and Visayan Electric Company Inc electric
bills to prove their ownership.
3. To preserve the rights of Sps Dumalagan, they instituted this present case (Annulment of
Title with Prelim Injunction and TRO) against Sps Alfaro.
 [In the meantime, Sps Bagano filed for Declaration of Nullity of Sale against Sps Alfaro.
(separate case) However, the court upheld the validity of the sale.]
4. The court dismissed the case of Sps Dumalagan. (present case) due to failure to establish
that Sps Alfaro were in bad faith when they bought the property.
5. The CA revered the decision and held that Sps cannot claim good faith bec of the
annotation in the back of the Bagano Title who sold them the property. It held the
annotated adverse claims, even if not in the names of Sps Dumalagan, have the effect of
charging them as subsequent buyers with constructive notice of the defect of the seller’s
title.
6. Sps Alfaro contends that the the annotation has expired before they acquired the
property. Therefore it cannot serve as constructive notice and as such they are buyers in
good faith.
ISSUE/S:
WON the rule on double or multiple sales should apply as per Art 1544? - NO
HELD:
 The rule on double or multiple sales applies only when all the purchasers are in good
faith. In detail, Art. 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 buyer’s rights, from the time of acquisition until the title is
transferred to him by registration or failing registration, by delivery of possession.
 A purchaser in good faith is one who buys the property of another without notice that
some other person has a right to, or an interest in such property, and pays a full and fair
price for the same at the time of such purchase, or before he has notice of some other
person’s claim or interest in the property.
 Sps Alfaro had prior knowledge of the previous sales by installment of portions of the
property to several purchasers. Moreover, they also had prior knowledge of the
possession of Sps Dumalagan over the subject property. Hence, the rule on double sale
is inapplicable in the case at bar. As correctly held by the appellate court Sps Alfaro’s
prior registration of the subject property, with prior knowledge of Sps Dumalagan’s claim
of ownership and possession, cannot confer ownership or better right over the subject
property.
On the issue of the annotation in the title:
 Section 70 of P.D. 152922 provides:
Whoever claims any part or interest in registered land adverse to the registered owner,
arising subsequent to the date of the original registration, may, if no other provision is
made in this decree for registering the same, make a statement in writing setting forth
fully his alleged right or interest, and how or under whom acquired, a reference to the
number of certificates of title of the registered owner, the name of the registered owner,
and a description of the land in which the right or interest is claimed.
9
The statement shall be signed and sworn to, and shall state the adverse claimant’s
residence, and a place at which all notices may be served upon him. This statement shall
be entitled to registration as an adverse claim on the certificate of title. The adverse
claim shall be effective for a period of thirty days from the date of registration. After the
lapse of the said period, the annotation of adverse claim may be cancelled upon filing of
a verified petition therefore by the party in interest: Provided, however, that after
cancellation, no second adverse claim based on the same ground shall be registered by
the same claimant. x x x x
 The above provision would seem to restrict the effectivity of adverse claims to 30 days.
However, the same should not be read separately, but should be read in relation to the
subsequent sentence, which reads:
 After the lapse of said period, the annotation of adverse claim may be cancelled upon
filing of a verified petition therefore by the party in interest
 The law, taken together, simply means that the cancellation of the adverse claim is still
necessary to render it ineffective, otherwise, the inscription will remain annotated and
shall continue as a lien upon the property; for if the adverse claim already ceased to be
effective upon the lapse of the said period, its cancellation is no longer necessary and
the process of cancellation would be a useless ceremony.
 Therefore, petitioners cannot claim good faith on the basis of the supposed ineffectivity
of the annotated adverse claims as the same have not been cancelled at the time of
purchase. Assuming arguendo that the annotated adverse claims expired on 23 March
1995, petitioners still cannot claim good faith as they were fully aware that there were
occupants in the subject property other than the seller. Worse, they were also fully
aware that an occupant in the subject property bought the same; that aside from the
nipa hut, there were also other structures in the subject property, one of which was built
by Epifanio Pesarillo.
 By the very fact that the title of Bagano was not clean on its face, the defendants-
appellees [petitioners] were more than obliged to look beyond the former’s title and
make further inquiries about the extent of the latter’s right and authority over the
subject lot.
239 SPOUSES SUNTAY v. KEYSER MERCANTILE INC.
G.R. No. 208462; December 10, 2014
Topic: Double Sales – NCC 1544 | Ponente: J. MENDOZA | Author: Enriquez
Doctrine: A levy on execution duly registered takes preference over a prior unregistered sale.
Emergency Recitation: On 1989, Keyser entered into a contract to sell with Bayfront
Development Corporation (Bayfront) for the purchase of a condominium unit on an
installment basis. This was not registered with the Register of Deeds (RD). Thus, the unit
remained in Bayfront’s name. On 1990, Sps. Suntay also purchased several units from
Bayfront. Despite full payment, Bayfront failed to deliver the units. HLURB ruled in favor of
Sps. Suntay, rescinded the contract and issued a writ of execution. The Sheriffs of RTC levied
the unit bought by Keyser since its CCT was still registered under Bayfront. Eventually, an
auction sale was held and a Certificate of Sale in favor of Sps. Suntay was issued on April
1995. Meanwhile, the Deed of Absolute Sale between Bayfront and Keyser was executed on
November 1995. Thus, Keyser filed a complaint for annulment of the auction sale in favor of
Sps. Suntay. In ruling that Sps. Suntay has a better right, the SC said that Sps. Suntay properly
relied on the genuineness and legitimacy of Bayfront’s Torrens certificate of title when they
had their liens annotated thereon. Also, levy on execution is superior to the subsequent
registration of the deed of absolute sale. In this case, the deed of absolute sale between
Keyser and Bayfront was only made on November 1995 and registered on March 1996. The
Notice of Levy in favor of Sps. Suntay was registered on January 1995, while the Certificate of
Sale on April 1995, both dates clearly ahead of Keyser’s registration of its Deed of Absolute
Sale. Evidently, applying the doctrine of primus tempore, potior jure(first in time, stronger in
right), Sps. Suntay have a better right than Keyser.
Facts:
1. On October 20, 1989, Keyser entered into a contract to sell with Bayfront Development
Corporation (Bayfront) for the purchase on installment basis of a condominium unit in
Bayfront Tower Condominium. This Contract to Sell was not registered with the Register
of Deeds of Manila. Thus, the subject unit remained in the name of Bayfront with a clean
title.
2. On July 7, 1990 Spouses Suntay also purchased several condominium units of Bayfront
through another contract to sell. Despite payment of the full purchase price, however,
Bayfront failed to deliver the condominium units.
3. When Bayfront failed to reimburse the full purchase price, Spouses Suntay filed an
action against it before the HLURB for violation of P.D. No. 957 and P.D. No. 1344,
rescission of contract, sum of money, and damages.
4. HLURB rescinded rescinded the Contract to Sell between Bayfront and Spouses Suntay
and ordered Bayfront to pay Spouses Suntay the amount of purchase price plus interest.
A writ of execution was then issued.
5. Upon the application of Spouses Suntay, the Sheriffs of RTC Manila levied Bayfront’s
titled properties, including the subject condominium bought by Keyser. Considering that
CCT No. 15802 was still registered under Bayfront with a clean title, the sheriffs deemed
10
it proper to be levied. The levy on execution in favor of Spouses Suntay was duly
recorded in the Register of Deeds of Manila on January 18, 1995.
6. The auction sale was conducted on February 23, 1995, and Spouses Suntay were the
highest bidder. Consequently, on March 1, 1995, the Certificate of Sale in favor of
Spouses Suntay was issued. This was duly annotated at the back of CCT No. 15802 on
April 7, 1995.
7. Meanwhile, the Deed of Absolute Sale between Bayfront and Keyser involving the
subject property was finally executed on November 9, 1995. Keyser allegedly paid the
full purchase price sometime in 1991. When Keyser was about to register the said deed
of absolute sale in February 1996, it discovered the Notice of Levy and the Certificate of
Sale annotated at the back of CCT No. 15802 in favor of Spouses Suntay. Nevertheless,
on March 12, 1996, the Register of Deeds cancelled the title of Bayfront and issued CCT
No. 26474 in the name of Keyser but carried over the annotation of the Suntays.
8. Keyser filed before the RTC of Manila a new complaint for annulment of auction sale,
writ of execution, declaration of nullity of title, and reconveyance of property with
damages against Spouses Suntay.
9. RTC ruled in favor of Keyser. It explained that when Spouses Suntay registered the
Certificate of Sale, the condominium unit was already registered in the name of Keyser. It
also held that the auction sale was irregular due to lack of posting and publication of
notices. The auction was null and void.
10. CA affirmed. It held that Spouses Suntay did not acquire the subject property because at
the time it was levied, Bayfront had already sold the condominium unit to Keyser.
Considering that the judgment debtor had no interest in the property, Spouses Suntay,
as purchasers at the auction sale, also acquired no interest.
11. Spouses Suntay argue that the CA erred in not applying Section 52 of P.D. No. 1529 and
Article 1544 of the New Civil Code. Their right as purchasers in a public action should
have been preferred because their right acquired thereunder retroacts to the date of
registration of the Notice of Levy on January 18, 1995 and the subsequent auction sale
on February 23, 1995. They claim that their right over the subject property is superior
over that of Keyser because they purchased the subject property in a legitimate auction
sale prior to Keyser’s registration of the deed of absolute sale.
Issue/Held: Whether Sps. Suntay’s right over the property is superior over Keyser because
Sps. Suntay purchased the subject property in a legitimate auction sale prior to Keyser’s
registration of the deed of absolute sale? Yes.
Ratio:
 The petition is meritorious applying the Torrens System of Land Registration. The main
purpose of the Torrens system is to avoid possible conflicts of title to real estate and to
facilitate transactions relative thereto by giving the public the right to rely upon the face
of a Torrens certificate of title and to dispense with the need of inquiring further, except
when the party concerned has actual knowledge of facts and circumstances that should
impel a reasonably cautious man to make such further inquiry. Every person dealing with
a registered land may safely rely on the correctness of the certificate of title issued
 therefor and the law will in no way oblige him to go beyond the certificate to determine
the condition of the property.
 In the case at bench, the subject property was registered land under the Torrens System
covered by CCT No. 15802 with Bayfront as the registered owner. At the time that the
Notice of Levy was annotated on January 18, 1995, the title had no previous
encumbrances and liens. Evidently, it was a clean title. The Certificate of Sale, pursuant
to an auction sale, was also annotated on April 7,1995, with Bayfront still as the
registered owner.
 It was only on March 12, 1996, almost a year later, that Keyser was able to register its
Deed of Absolute Sale with Bayfront. Prior to such date, Spouses Suntay appropriately
relied on the Torrens title of Bayfront to enforce the latter’s judgment debt.
 When the notice of levy and certificate of sale were annotated on the title, the subject
property was unoccupied and no circumstance existed that might suggest to Spouses
Suntay that it was owned by another individual. Records reveal that it was only later, on
January 6, 1999, that the subject property was discovered by the sheriffs to be
padlocked. The administrator of the condominium did not even knowthe whereabouts
of the alleged owner. To reiterate, absent any peculiar circumstance, Spouses Suntay
could not be required to disregard the clean title of Bayfront and invest their time, effort
and resources to scrutinize every square feet of the subject property. This Court is
convinced that Spouses Suntay properly relied on the genuineness and legitimacy of
Bayfront’s Torrens certificate of title when they had their liens annotated thereon.
Levy on execution is superior to the subsequent registration of the deed of absolute sale.
 The doctrine is well settled that a levy on execution duly registered takes preference
over a prior unregistered sale. Even if the prior sale was subsequently registered before
the sale in execution but after the levy was duly made, the validity of the execution sale
should be maintained because it retroacts to the date of the levy. Otherwise, the
preference created by the levy would be meaningless and illusory.
 In this case, the contract to sell between Keyser and Bayfront was executed on October
20, 1989, but the deed of absolute sale was only made on November 9, 1995 and
registered on March 12, 1996. The Notice of Levy in favor of Spouses Suntay was
registered on January 18, 1995, while the Certificate of Sale on April 7, 1995, both dates
clearly ahead of Keyser’s registration of its Deed of Absolute Sale. Evidently, applying the
doctrine of primus tempore, potior jure(first in time, stronger in right), Spouses Suntay
have a better right than Keyser.
11
240 BADILLA v. BRAGAT
G.R. No. 187013; April 22, 2015
Topic: Double Sale | Ponente: J. Peralta | Author: Garcia
Note:
Doctrine:
 ownership of the thing sold is transferred to the vendee upon the actual or constructive
delivery of the same.
 One can sell only what one owns or is authorized to sell, and the buyer acquires no
better title than the seller.
 When neither buyer registered, in good faith, the sale of the properties with the register
of deeds, the one who took prior possession of the properties shall be the lawful owner
thereof
Emergency Recitation:
Sps. Pastrano sold a parcel of land to Ledesma in 1968. In 1970, Ledesma sold a portion (200)
to Sps. Badilla. Sps. Bragat bought the remaining portion from Ledesma in 1978. In 1984
Pastrano sold the same land to Fe Bragat. New TCT of the whole parcel of land was issued in
the name of Bragat. Who between Badilla and Bragat is the rightful owner of the parcel of
land. As to the portion sold by Ledesma to Sps. Badilla, Sps. Badilla is the rightful owner. But
as to the remaining portion, Bragat. Pastrano could no longer sell any part of the property to
Bragat on such later dates since he had already sold the same as early as November 18, 1968
to Ledesma. Well-settled is the rule that no one can give what one does not have — nemo
dat quod non habet — and, accordingly, one can sell only what one owns or is authorized to
sell, and the buyer acquires no better title than the seller.
Facts:
12. Spouses Pastrano were the original owners of Lot No. 19986 (OCT No. P-2035).
13. Before the issuance of the OCT, Spouses Pastrano (Nov. 18, 1968) sold the lot to
Ledesma.
14. Spouses Badilla claimed that in 1970, Ledesma sold to them (installment basis) a portion
amounting to 200m2 of Lot No. 19986. This was not reduced in writing, but possession of
the portion sold was transferred to the Badillas.
15. April 18, 1978 – Spouses Bragat bought 991 m2 of the property from Ledesma and his
wife.
16. May 5, 1984 – Spouses Pastrano executed another Deed of Absolute Sale of Registered
Land in favor fo Fe Bragat (OCT No. P-2035).
17. On the same date, Pastrano executed an Affidavit of Loss reporting the loss of the
owner’s duplicate copy of the OCT.
18. Bragat petitioned the court for the issuance of a new OCT.
19. October 2, 1987 – Spouses Pastrano executed another Deed of Sale in favor of Bragat,
which land is again covered by OCT No. P-2035.
20. OCT No. P-2035 was canceled and TCT No. T047759 was issued in the name of Bragat.
Issue/Held: Who is the owner of the property?
As to the 152m2 occupied by the spouses Badilla – Badilla
As to the remaining portion - Bragat
Ratio:
 As early as November 18, 1968, it is established that the Pastranos no longer had
ownership over the property.
 Ledesma subsequently sold, in 1970, a portion of the property to Spouses Badilla, who
immediately took delivery and possession, ownership of this portion had also been
transferred to the said spouses. Although that sale appears to be merely verbal, and
payment therefor was to be made on installment, it is a partially consummated sale,
with the Badillas paying the initial purchase price and Ledesma surrendering possession.
 The Civil Code states that ownership of the thing sold is transferred to the vendee upon
the actual or constructive delivery of the same. And the thing is understood as delivered
when it is placed in the control and possession of the vendee. Payment of the purchase
price is not essential to the transfer of ownership as long as the property sold has been
delivered; and such delivery (traditio) operated to divest the vendor of title to the
property which may not be regained or recovered until and unless the contract is
resolved or rescinded in accordance with law.
 Therefore, with the Spouses Badilla owning and occupying the said 152-square-meter
portion since 1970, it may be concluded that TCT No. T-47759 (which canceled OCT No.
P-2035) covering the said portion has been wrongfully issued.
 TCT No. T-47759 was issued to Fe Bragat on the strength of a Deed of Sale of Registered
Land dated October 2, 1987. This deed of sale, however, is void for being simulated,
since both the vendor (Pastrano) and the vendee (Bragat) knew at the time of its
execution of the vendor’s lack of ownership over Lot No. 19986, the property being sold.
At that time, it was not Pastrano but Ledesma who was absolute owner of the property
by virtue of the latter’s earlier purchase of Lot No. 19986 from the Spouses Pastrano on
November 18, 1968, via a Deed of Definite Sale of Unregistered Coconut and Residential
Land. Bragat herself knew this, as she and her husband themselves first bought the
property from Ledesma through a Deed of Absolute Sale of Residential Land dated April
18, 1978.
 Pastrano could no longer sell any part of the property to Bragaton such later dates since
he had already sold the same as early as November 18, 1968 to Ledesma. Well-settled is
the rule that no one can give what one does not have — nemo dat quod non habet
— and, accordingly, one can sell only what one owns or is authorized to sell, and the
buyer acquires no better title than the seller.
 Bragat cannot claim good faith as she herself knew of Pastrano’s lack of ownership.
 Bragat’s property bought from Ledesma in 1978 does not include the 152m 2. portion
that was already bought by the Badillas.
 Fe Bragat is entitled to a new transfer certificate of title issued in her name, but on the
basis of the Deed of Absolute Sale dated April 18, 1978, and excluding the 152m 2. in area
that the Spouses Badilla have already bought and have been occupying since 1970, but
which are currently covered by Bragat’s existing title, TCT No. T-47759. Hence, Bragat’s
TCT No. T-47759 (which canceled OCT No. P-2035), covering 1,015m 2, should be declared
void and cancelled and, in its place, two (2) new ones should be issued: (1) in the name
of the spouses Magdalino and Cleofe Badilla, covering the 152m 2 that they are
occupying, and (2) in the name of Fe Bragat, covering the remaining 863m 2.
12
241 Herminia L. MENDOZA (OIC RD Lucena City) v. Sps GARANA and Far East Bank and Trust
Co., Inc.
[G.R. No. 179751; August 5, 2015]
TOPIC: Double Sales - NCC 1544
PONENTE: BRION, J.| Author: Laureta
Doctrine: The first person to register his instrument has a superior right over the others.
Thus, if entry in the primary entry book or day book of the Register Deeds precedes the
registration of the sale, such involuntary registration will prevail over the subsequent sale
of the land.
Emergency Recit: Heirs of Uy caused the annotation of notice of lis pendens to 8 TCTs to
compel owners to sell to them. notice of lis pendens for all these titles was entered as Entry
No. 56142 in RD Lucena's primary entry book or day book. All owner’s duplicate titles
except one (subject property) was annotated because owner did not surrender their copy,
and the RD copy was missing. The missing copy was with an RD clerk who was processing
another transaction, but totally forgot about the annotation. Sps Garana subsequently
bought the subject property one month after the annotation (an earlier one -also UY’s, but
cancelled by someone else – Bienaflor) was cancelled. SC held that they are not buyers in
good faith and that the recording in the RD day book is binding to them, even if the TCT of
subject property they based their claim on had no notice of lis pendens.
Facts:
1. Heirs of Manuel Uy, represented by Belen Uy, sought the registration of a notice of
lis pendens with the Reg of Deeds of Lucena City intended to bind the properties covered by
8 TCTs subject of an action for specific performance (separate Civil Case) that the heirs of Uy
filed to compel the owners to sell these properties to them.
a. After paying the fees, on the same day the notice of lis pendens for all these titles
was entered as Entry No. 56142 in Volume VI, page 241 of RD Lucena's primary entry book or
day book.
b. RD Atty. Marquez wrote a letter to the properties' respective owners, asking
them to surrender their owner's duplicate copies of the titles so the annotation of the notice
of lis pendens could be made. Among those notified was Leovina Jalbuena, owner of TCT No.
T-72029, who did not surrender her duplicate copy for annotation.
2. Even before the notice of lis pendens was sought, Belen already caused the
annotation of an adverse claim on all the titles on August 16, 1993. However, this annotation
was subsequently cancelled on October 4, 1994, upon the filing of an affidavit with RD Lucena
by one Bienaflor C. Umali.
3. Meanwhile, RD Lucena annotated the notice of lis pendens on all the affected titles
except for TCT No. T-72029 (subject land), whose original at that time was missing from RD
Lucena's vault. Added to this was Jalbuena's failure to surrender her owner's duplicate copy
for annotation.
4. As it turned out, the original of TCT No. T-72029 was in the custody of one
Carmelina Rodriguez, a clerk at RD Lucena. She processed another transaction involving this
title but, after, totally forgot the annotation on TCT No. T-72029 of the notice of lis pendens of
the heirs of Manuel Uy.
5. Sometime 1994: Sps Garana started inquiries about Jalbuena's land for a possible
purchase. They found out that it was then the subject of Belen Uy's adverse claim annotated
on August 16, 1993. When they subsequently learned that this annotation had been
cancelled by Bienaflor C. Umali on October 4, 1994, Sps Garana immediately proceeded to
buy the land from Jalbuena on November 7, 1994. AIHTE
6. In accordance with the sale, RD Lucena cancelled TCT No. T-72029, and issued TCT
No. T-77739 under the names of the Sps. Garana. Since the October 6, 1993 notice of lis
pendens of the heirs of Manuel Uy did not appear in the cancelled title, it was also not
reflected in the new title of Sps. Garana.
7. Subsequently, the Sps Garana mortgaged the subject property with respondent
FEBTC (now BPI) as security for their loan.
8. Heirs of Manuel Uy learned that Jalbuena sold the subject land to the Sps. Garana
and that a new title had been issued in their favor without indicating their notice of lis
pendens, so they notified RD Lucena of this procedural lapse and asked for the annotation of
the notice of lis pendens on the SPS. GARANA’s new title.
9. To remedy its oversight, RD Lucena through Atty. Marquez, now substituted by
petitioner Herminia Mendoza or petitioner, filed a petition with the trial court to allow RD
Lucena to annotate the notice of lis pendens on the Spouses Garana's new title
10. The Spouses Garana and BPI opposed this petition and argued that the annotation
was too late and would prejudice them. The Spouses Garana argued that their reliance on the
clean title of TCT No. T-72029 should not diminish their status as innocent purchasers for
value. For its part, BPI submitted that when the land was mortgaged to them, there was no
indication that it was the subject of a pending litigation.
11. TC: In favor of RD Lucena, and ordered annotation of the notice of lis pendens on
the Spouses Garana's new title. This prompted the Sps. Garana and BPI to file an appeal with
the CA.
12. CA: Granted Sps. Garana and BPI’s appeal, ruling that Sps. Garana are innocent
purchasers for value.
Issue/s: W/N entry of a notice of lis pendens in the primary entry book or day book (not on
title itself) of the Register of Deeds serves as notice to third persons of the existence of
such claim against a registered land?
Held: YES. The law does not require the presentation as well as the annotation of the
involuntary instrument on the owner's duplicate title, or even on the original title. The
mere recording of the involuntary instrument in the primary entry book or day book is
sufficient to bind the registered land and affect third persons dealing with it.
13
Ruling:
1. This was already decided in Villasor case: court distinguished the registration
requirements of a voluntary instrument from an involuntary instrument.
• In registration of a voluntary instrument (sale, a mortgage, or a lease) since the
instrument sought to be registered is the willful act of the owner, he is expected to produce
all the necessary documents that will facilitate its registration.
• An involuntary instrument (attachment, lien, notice of lis pendens) are adverse to
the claims of the registered owner. Thus, he cannot be expected to provide all the necessary
documents such as his owner's duplicate copy of the title.
2. For this reason, the law does not require the presentation as well as the annotation
of the involuntary instrument on the owner's duplicate title, or even on the original title.
• The mere recording of the involuntary instrument in the primary entry book or day
book is sufficient to bind the registered land and affect third persons dealing with it.
• (Lenvin) In involuntary registration, the entry of the instrument in the primary entry
book or day book already serves as adequate notice to all persons of another person's or
entity's adverse claim over a registered land.
• Notably, Villasor and Levin were decided under Act No. 496, which contained the
following relevant provisions:
Section 56. Each register of deeds shall keep an entry book in which he shall enter in the
order of their reception all deeds and other voluntary instruments, and all copies of writs and
other process filed with him relating to registered land. He shall note in such book the year
month, day, hour, and minute of reception of all instruments, in the order in which they are
received. They shall be regarded as registered from the time so noted xxx.
3. In Caviles, the Court acknowledged that bad faith could not be imputed on the
buyers of a land whose certificate of title did not contain an annotation of someone else's
notice of attachment.
• In the same manner, the persons who caused the registration of the notice of
attachment should not be held negligent for not checking if the Register of Deeds actually
performed its obligation to annotate the instrument on the title.
• The duty to annotate rests with the Register of Deeds and not with the registrant. A
party which delivers its notice of attachment to the register of deeds and pays the
corresponding fees therefor has a right to presume that the official would perform his duty
properly.
4. Given this parity of good faith, the Court held in Caviles that the person who first
registered his instrument had a superior right over the other. The Court thus upheld in this
case the better right of the registrant of the notice of attachment despite its non-annotation
on the title, since in involuntary instruments, entry in the primary entry book or day book is
deemed registration.
• Thus, if entry in the primary entry book or day book of the Register Deeds precedes
the registration of the sale, such involuntary registration will prevail over the subsequent sale
of the land.
5. Sps Garana did not act in good faith.
• Examination of TCT No. T-72029 reveals notice of lis pendens and its cancellation.
The mere fact that a different person (Bienaflor C. Umali) sought the cancellation of Belen
Uy's adverse claim on Jalbuena's property should have triggered the Spouses Garana's
suspicion regarding the real condition of the subject land and compelled to check beyond the
4 corners of the TCT.
• More importantly, before buying the property, the Spouses Garana already knew of
Belen Uy's annotation. Sps Garana did not rebut the petitioner's allegation that upon knowing
that this first annotation was cancelled by Bienaflor C. Umali they immediately proceeded
with their purchase of the subject land from Jalbuena a month after. They did not even
bother to check further with Jalbuena, or inquire from Belen Uy, knowing well that it was not
she who caused the cancellation of her adverse claim.
6. The recording of the notice of lis pendens in RD Lucena's primary entry book
amounted to a valid registration; thus notice was thereby served to all persons, including the
Spouses Garana and BPI. In addition, the Court notes that the Spouses Garana and BPI should
not be allowed to raise the defense of the doctrine of indefeasibility of title as they did not
act in good faith. They disregarded glaring facts and circumstances that should have
prompted them to inquire beyond the four corners of TCT No. T-72029. S
7. CA reversed.
14
242. Domingo v. Manzano
G.R. No. 201883| 16 NOVEMBER 2016| Del Castillo| Mendoza
Topic: Double Sales
DOCTRINE:
The nonfulfillment of the condition of full payment renders the contract to sell ineffective and
without force and effect.
Article 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good faith,
if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.
ER:
Manzano and the Petitioners entered into contract of sell of the former’s land payable by
installments. Petitioners failed to pay the whole amount on the deadline. Petitioner’s
continued to pay upon the advise of Manzano’s attorney-in-fact. However, when the
petitioner’s offered to pay the remaining balance, Manzano refused to accept payment.
Manzano told them that the property was no longer for sale. Manzano sold it to Aquino.
According to Petitioners, the sale to Aquino was not valid because it constituted a double-
sale. SC held that there was no double sales because Petiitioners failed to pay the price in full
in a the contract to sell renders the same ineffective.
____________________________________________________________________
FACTS:
Spouses Manzano are the registered owners of the subject parcel of land in Bagong Barrio,
Caloocan City.
Manzano, through their duly appointed attorney-in-fact Estabillo, executed a notarized
agreement5 with petitioners Desiderio and Domingo for P900K
Petitioners paid the P100K reservation fee upon the execution of the agreement. Thereafter,
they also made payments on several occasions, amounting to P160K
However, they failed to tender full payment of the balance when the March 2001 deadline
came.
Even then, Estabillo advised petitioners to continue their payments; thus, they made
additional payments totaling P85K. All in all, as of November 2001, petitioners had made
payment in the amount of P345K.

All this time, the Manzanos remained in possession of the subject property.

In December 2001, petitioners offered to pay the remaining P555K balance, but Estabillo
refused to accept payment. Then, Manzano told them that the property was no longer for
sale and she was forfeiting their payments.

Petitioners discovered that respondent Carmelita Aquino (Aquino) bought the subject
property.Petitioners filed for Specific Performance. RTC in favor of Petitioners. CA in favor of
Manzano.

Petitioners contend that Article 1544 applies even when one of the double sale transactions
involved is a mere contract to sell and while their agreement with the Manzanos was
admittedly a mere contract to sell where title is retained by the latter until full payment of the
price, they have a superior right over the subject property, as against Aquino, by virtue of the
applicability of Article 1544 and the fact that Aquino was a buyer in bad faith.

ISSUE: Whether or not the sale made to Aquino constituted double-sale.NO

HELD:
In a contract to sell, payment of the price is a positive suspensive condition, Failure of which
is not a breach of contract warranting rescission but rather just an event that prevents the
prospective buyer from compelling the prospective seller to convey title. In other words, the
nonfulfillment of the condition of full payment renders the contract to sell ineffective and
without force and effect.

Article 1544 cannot apply. Since failure to pay the price in full in a contract to sell renders the
same ineffective and without force and effect, then there is no sale to speak of.

Thus, as between the parties to the instant case, there could be no double sale which
would justify the application of Art. 1544.

Petitioners failed to pay the purchase price in full, while Aquino did, and thereafter she was
able to register her purchase and obtain a new certificate of title in her name. As far as this
Court is concerned, there is only one sale — and that is, the one in Aquino’s favor. “Since
there is only one valid sale, the rule on double sales under Article 1544 of the Civil Code does
not apply.

15
243 BIGNAY EX-IM PHILIPPINES, INC. v UNION BANK OF THE PHILIPPINES
G.R. No. 171590; 12 February 2014
Topic: Warranties | Ponente: J. Del Castillo | Author: Pagcaliwagan
Doctrine: Union Bank was grossly negligent in the handling and prosecution of Civil Case
No. Q–52702. Its appeal of the December 12, 1991 Decision in said case was dismissed by
the CA for failure to file the required appellant’s brief. Next, the ensuing Petition for Review
on Certiorari filed with this Court was likewise denied due to late filing and payment of
legal fees. Finally, the bank sought the annulment of the December 12, 1991 judgment, yet
again, the CA dismissed the petition for its failure to comply with Supreme Court Circular
No. 28–91. As a result, the December 12, 1991 Decision became final and executory, and
Bignay was evicted from the property. Such negligence in the handling of the case is far
from coincidental; it is decidedly glaring, and amounts to bad faith. “[N]egligence may be
occasionally so gross as to amount to malice [or bad faith].” Indeed, in culpa contractual or
breach of contract, gross negligence of a party amounting to bad faith is a ground for the
recovery of damages by the injured party.
Emergency Recit: Bignay and Union Bank entered into a deed of sale (property involved was
mortgaged to Union Bank but was subject of a litigation) with terms: Section 1. The VENDEE
hereby recognizes that the Parcel/s of Land with improvements thereon is acquired through
foreclosure proceedings and agrees to buy the Parcel/s of Land with improvement[s] thereon
in its present state and condition. The VENDOR therefore does not make any x x x
representations or warranty with respect to the Parcel/s of Land but that it will defend its title
to the Parcel/s of Land with improvement[s] thereon against the claims of any person
whomsoever. Civil case decreed that the sale and mortgage between Union Bank and Bignay
is null and void. Union Bank appealed but was dismissed for failure to file appellant’s brief.
Also Petition for Review with SC was denied for late filing and payment of legal fees. Bignay
was evicted from property, thus it filed a civil case for breach of warranty against eviction
against Union Bank. Issue is WON there is breach of warranty. Court ruled YES. (See doctrine)
Facts:
 Alfonso mortgaged in favor of Union Bank real property (registered in his and his
wife Rosario’s name).
 Property was foreclosed and sold at auction to Union Bank. After redemption
period expired, bank consolidated its ownership, whereupon TCT was issued in its
name.
 Rosario filed against Alfonso and Union Bank a civil case for annulment of the
mortgage, claiming that Alfonso mortgaged the property without her consent, and
for reconveyance.
 Bignay, through its Presient (Milagros Siy) offered to purchase the property.
16
 Deed of Absolute Sale was executed by and between Union Bank and Bignay
whereby the propert was conveyed to Bignay for P4M. The deed of sale was
executed. One of the terms of the deed of sale is quoted below:
o Section 1. The VENDEE hereby recognizes that the Parcel/s of Land with
improvements thereon is acquired through foreclosure proceedings and
agrees to buy the Parcel/s of Land with improvement[s] thereon in its
present state and condition. The VENDOR therefore does not make any x
x x representations or warranty with respect to the Parcel/s of Land but
that it will defend its title to the Parcel/s of Land with improvement[s]
thereon against the claims of any person whomsoever.
 Bignay mortgaged the property to Union Bank to secure a loan obtained from the
latter.
 Decision was rendered in Civil Case (case filed by Rosario) decreeing as null and
void the following:
o Mortgage Contract between Alfonso and Union Bank
o Sheriff’s Sale
o TCT issued in the name of Union Bank
o Sale and mortgage by and between Union Bank and Bignay.
 Union Bank appealed the decision and likewise sought a new trial of the case,
which was denied.
o Appeal was dismissed for failure to file appellant’s brief
o The ensuing Petition for Review with SC was similarly denied for late filing
and payment of legal fees.
 Meanwhile, as a result of the decision Bignay was evicted from the property; by
then, it had demolished the existing structure on the lto and begun construction of
a new building
 Bignay filed a civil case for breach of warranty against eviction against Union Bank.
Issue/s: WON there is breach of warranty.
Held: Yes.
Ruling:
Indeed, this Court is convinced – from an examination of the evidence and by the concurring
opinions of the courts below – that Bignay purchased the property without knowledge of the
pending Civil Case No. Q–52702. Union Bank is therefore answerable for its express
undertaking under the December 20, 1989 deed of sale to “defend its title to the Parcel/s of
Land with improvement thereon against the claims of any person whatsoever.” By this
warranty, Union Bank represented to Bignay that it had title to the property, and by
assuming the obligation to defend such title, it promised to do so at least in good faith and
with sufficient prudence, if not to the best of its abilities.
The record reveals, however, that Union Bank was grossly negligent in the handling and
prosecution of Civil Case No. Q–52702. Its appeal of the December 12, 1991 Decision in said
case was dismissed by the CA for failure to file the required appellant’s brief. Next, the
ensuing Petition for Review on Certiorari filed with this Court was likewise denied due to
late filing and payment of legal fees. Finally, the bank sought the annulment of the
December 12, 1991 judgment, yet again, the CA dismissed the petition for its failure to
comply with Supreme Court Circular No. 28–91. As a result, the December 12, 1991
Decision became final and executory, and Bignay was evicted from the property. Such
negligence in the handling of the case is far from coincidental; it is decidedly glaring, and
amounts to bad faith. “[N]egligence may be occasionally so gross as to amount to malice
[or bad faith].” Indeed, in culpa contractual or breach of contract, gross negligence of a
party amounting to bad faith is a ground for the recovery of damages by the injured party.
17
244. JOSE V. TOLEDO, GLENN PADIERNOS AND DANILO PADIERNOS v. CA, LOURDES RAMOS,
ENRIQUE RAMOS, ANTONIO RAMOS, MILAGROS RAMOS AND ANGELITA RAMOS AS HEIRS
OF SOCORRO RAMOS, GUILLERMO PABLO, PRIMITIV A CRUZ AND A.R.C. MARKETING
CORPORATION
G.R. No. 167838; 5 August 2015
Topic: warranties | Ponente: J. Jardeleza | Author: Pineda
Notes: Due to multiple parties, I will collectively refer to Petitioners as “Petitioners”, and
Respondents as “Respondents”
Also, the case makes no mention of warranties. I included all possible doctrines that appear
related to warranties.
Doctrine:
An action for reconveyance is a legal and equitable remedy granted to the rightful owner of
land which has been wrongfully or erroneously registered in the name of another for the
purpose of compelling the latter to transfer or reconvene the land to him.
Article 1456 of the Civil Code provides that a person acquiring property through fraud
becomes, by operation of law, a trustee of an implied trust for the benefit of the real owner
of the property.
One who purchases real estate with knowledge of a defect or lack 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. The same rule must be applied to one whom has knowledge of facts
which should have put him upon such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor.
Emergency Recit: Del Rosario Realty entered into a Contract to Sell with Sps. Faustino. Sps.
Faustino assigned their rights thereunder to Petitioners, while Del Roasario assigned its rights
to Socorro Ramos. Petitioners made full payment, but Ramos would not release OCT.
Petitioners caused annotation of adverse claim on the OCT. Petitioners took possession of
property, constructed housed, and paid taxes.
Meanwhile… ARC Marketing ended up acquiring the subject property through a Compromise
Agreement stemming from a controversy regarding an execution sale.
When ARC Marketing sought to enforce the Compromise Agreement, Petitioners opposed
this and asserted ownership.
Facts:
 Del Rosario Realty entered into a Contract to Sell with Sps. Faustino – sell Lot 2 in
Sunrise Hills Subdivision for P13,000, with initial payment of P4200 and balance to
be paid on installment.
 Subsequent assignment of rights:
 o Sps. Faustino sold their rights to Vicente Padiemos. Transfer was
registered and annotated.
o Del Rosario assigned his rights to Socorro Ramos.
 Transactions concerning petitioners Sps. Toledo, Glenn and Danilo Padiemos
(collectively, will be referred to as “petitioners”)
o On January 1962, Vicente Padiemos sold ½ of the property to Sps. Toledo
(petitioners). The Deed stated that Sps. Toledo will continue payment, and
after completion thereof, they would own ½ of the property.
o On March 1967, Vicente Padiemos sold the remaining ½ to Sps. Vilgerio
Padiemos, who eventually assigned their rights to their children Glenn
and Danilo Padiemos (also, petitioners).
 Petitioners completed full payment. When they requested for the release of the
OCT, respondent Ramos (representing the heirs of Soccoro Ramos) issued a
Certification stating that while the property has been paid in full by Mr. Ciente
Padiemos… the title could not be released pending final decision of the SC”
o Petitioners caused annotation of adverse claim on the OCT.
o Petitioners constructed their houses on the property, resided therein, and
paid the corresponding taxes.
 Meanwhile… Transactions concerning respondents:
o Execution proceedings were taken against the estate of Soccoro Ramos.
The subject property was sold in auction to Pablo and Cruz (respondents),
who thereafter sold said properties to ARC Marketing (respondent).
o Heirs of Socorro Ramos filed a complaint to nullify the execution sale.
o The parties entered into a Compromise Agreement. Sole plaintiff Lourdes
Ramos agreed to settle for P2Million to be paid by ARC Marketing. The
subject property was adjudged in favor of ARC.
 Controversy: ARC then wanted to enforce the Compromise Agreement, and thus
sought to have the subject property titled in its name. Petitioners opposed this,
asserting their ownership through the assignment and the full payment of purchase
price.
18
 Petitioners filed an action praying or the cancellation of title issued in ARC
Marketing’s name, and the issuance of a new on in their favor.
o Petitioners allege that: first, they are the owners of the land by virtue of a
sale between their and respondents’ predecessors-in-interest; and
second, that respondents illegally dispossessed them by having the same
property registered in respondents’ names
 Respondents argue: RTC has no jurisdiction as the action is annulment of judgment;
res judicata; prescription; laches
o “Plaintiffs waited for more than ten (10) years from the issuance of the
certification, more than ten (10) [sic] after title over the subject property
was issued in favor of Guillermo Pablo, more than ten (10) years . . . after
title over the subject property was issued in favor of ARC and, for more
than four (4) years from the rendition of the Decision dated January 13,
1993, before they instituted the present action.”
 Respondents do not dispute the fact of full payment by petitioners, but argue that
certain conditions in the contract were not complied with, specifically: “The
PURCHASER/S agree/s not to sell, cede, encumber, transfer or in any other manner
dispose of his/her/their rights and obligations under this contact without the
previous written consent of the OWNER” – otherwise, contract provides ipso facto
cancellation
o According to ARC Marketing, the subsequent transfers made by the
Faustino spouses (from which petitioners derive their title) were made
without the written consent or approval of Del Rosario (and/or his
assignees). This caused the ipso facto cancellation of the contract to sell.
Issue/s: W/N grant reconveyance
Held: Yes. Petitioners entitled to land, given full payment of price. Also, ARC Marketing is not
an innocent purchaser for value
Ruling:
Issue of Jurisdiction: Annulment of Judgment (CA) or Reconveyance (RTC)
 The action is one for reconveyance, thus within the RTC’s jurisdiction. Annulment of
judgment not sought and not proper. Petitioners are not parties to the judgment
concerning the Compromise Agreement involving respondents.
  An action for reconveyance is a legal and equitable remedy granted to the rightful
owner of land which has been wrongfully or erroneously registered in the name of
another for the purpose of compelling the latter to transfer or reconvene the land
to him.
 Reconveyance respects the decree of registration as incontrovertible but seeks the
transfer of property, which has been wrongfully or erroneously registered in other
persons' names, to its rightful and legal owners, or to those who claim to have a
better right.
 There is no special ground for reconveyance. It is sufficient that the aggrieved party
has a legal claim on the property superior to that of the registered owned and that
the property has not yet passed to the hands of an innocent purchaser for value.
Effect of fraud + no prescription
 Article 1456 of the Civil Code provides that a person acquiring property through
fraud becomes, by operation of law, a trustee of an implied trust for the benefit of
the real owner of the property.
 The presence of fraud in this case, as shown by the disposition of the property to
ARC Marketing by Lourdes Ramos despite knowledge of petitioners' title over the
same, created an implied trust in favor of petitioners Toledo, et al. This gives
petitioners the right to seek reconveyance of the property from the subsequent
buyers.
 Prescription GR: An action for reconveyance based on an implied trust prescribes in
ten years, the reckoning point of which is the date of registration of the deed or the
date of issuance of the certificate of title over the property
 Prescription Exception: if the plaintiff also remains in possession of the same, as in
this case, the prescriptive period to recover title and possession of the property
does not run against him
o This is because the action for reconveyance is treated as quieting of title,
which is imprescriptible
o Prescription does not run against the plaintiff in actual possession of the
disputed land because such plaintiff has a right to wait until his
possession is disturbed or his title is questioned before initiating an action
to vindicate his right. His undisturbed possession gives him the continuing
right to seek the aid of a court of equity to determine the nature of the
adverse claim of a third party and its effect on his title.
19
o Petitioners’ undisturbed possession of the property for over 40 years is
uncontroverted. They have been paying taxes, and they constructed their
houses thereon.
There was no ipso facto cancellation of contract due to alleged violation by petitioners of
contract.
 While the contract to sell indeed provided for the ipso facto cancellation of the
contract "without need of notification or judicial action," jurisprudence requires, for
cancellation to be effective, that written notice be sent to the defaulter informing
him of said cancellation/rescission
 Judicial action for rescission of a contract is not necessary where the contract
provides that it may be revoked and cancelled for violation of any of its terms and
conditions. However, there should at least a written notice to the defaulter
informing him of the rescission. The act of the party in treating a contract as
cancelled should be made known to the other.
 ARC Marketing failed to take any steps to cancel the contract and/or eject
petitioners from the premises (much less notify petitioners about said cancellation)
prior to the latter's institution of the action for reconveyance. ARC Marketing's
predecessors-in-interest also seemed to have continued to accept payments for the
property without protest or qualification. Respondent Antonio A. Ramos,
representing the heirs of Socorro A. Ramos, even issued a
certification acknowledging full payment for the property on March 20, 1973, long
before the same was allegedly adjudged in ARC Marketing’s favor in 1993. ARC
Marketing is thus estopped from invoking cancellation of the contract to defeat
petitioners' rights over the property.
ARC Marketing is not an innocent purchaser for value.
 Reconveyance will not prosper when there is an innocent purchaser for value.
 An innocent purchaser for value is one who buys the property of another without
notice that some other person has a right to or interest in it, and who pays a full
and fair price at the time of the purchase or before receiving any notice of another
person's claim
 One who purchases real estate with knowledge of a defect or lack 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. The same rule must be applied to
one whom has knowledge of facts which should have put him upon such inquiry
and investigation as might be necessary to acquaint him with the defects in the title
of his vendor.
 In this case, Vicente Padiemos (petitioners' predecessor-in-interest) caused the 245 Phil. Steel Coating v Quinones
annotation on the title of his adverse claim over the property as early as October G.R. No. 194533, April 19, 2017
20, 1960. Thus, when ARC Marketing agreed, by way of the judicially approved Topic: Warranties | Ponente: CJ Sereno | Author: S A Y O
Compromise Agreement, to purchase the property on January 13, 1993, it already
had constructive notice of the adverse claim registered earlier. It is also beyond
dispute that petitioners have been in possession of the property even prior to the
Doctrine: A warranty is not necessarily written. It may be oral as long as it is not given as a
time of the Compromise Agreement.
mere opinion or judgment. Rather, it is a positive affirmation of a fact that buyers rely upon,
and that influences or induces them to purchase the product.
 These circumstances should have put ARC Marketing on guard and required it to
ascertain whether one of the properties subject of the Compromise Agreement it is
Emergency Recit: Respondent was induced to buy the product of PhilSteel because of the
entering into has already been sold to another. ARC Marketing cannot thus be
sales manager’s representation as to the quality and the guaranty that the product
considered an innocent purchaser for value.
underwent laboratory tests. The representations, however, were made orally thus petitioner
argues that vague oral statements cannot be invoked as warranties. SC held warranty is not
 ARC Marketing cannot rely on the indefensibility of its title as such defense does
necessarily written but may be oral as long as such is an affirmation of a fact that buyers
not extend to a transferee who takes the certificate of title with notice of a flaw in
relied on and that influences and induces them to purchase the product.
his title.

Facts:

7. This case arose from a Complaint for damages filed by respondent Quinones (owner
of Amianan Motors) against petitioner PhilSteel.

8. Allegedly, a sales engineer of PhilSteel (Richard Lopez), offered respondent

Quinones their new product (primer-coated, long-span, rolled galvanized iron
G.I.sheets).

9. Quiones (respondent buyer) asked Lopez if the primer-coated sheets were

compatible with the paint process used by Amianan Motors in the finishing of its
assembled buses.

10. Lopez referred the query to his immediate superior, Ferdinand Angbengco,
PhilSteel's sales manager.

11. Angbengco (Sales Manager):

 assured Quinones that the quality of their new product was superior to
the one being used by the latter in his business.
 guaranteed that a laboratory test had in fact been conducted by PhilSteel,
and that the results proved that the two products were compatible;

12. Hence, Quinones was induced to purchase the product and use it in the
manufacture of bus units.

13. However, sometime in 1995, Quinones received several complaints from customers
who had bought bus units, claiming that the paint or finish used on the purchased
vehicles was breaking and peeling off.

20
 14. Quinones then sent a letter-complaint to PhilSteel invoking the warranties given by
the latter. According to respondent, the damage to the vehicles was attributable to
the hidden defects of the primer-coated sheets and/or their incompatibility with
the Guilder acrylic paint process used by Amianan Motors, contrary to the prior
evaluations and assurances of PhilSteel.
Quinones to the former's immediate supervisor, Angbengco, to answer that question. As the
sales manager of PhilSteel, Angbengco made repeated assurances and affirmations and even
invoked laboratory tests that showed compatibility. In the eyes of the buyer Quinones,
PhilSteel - through its representative, Angbengco - was an expert whose word could be relied
upon.

15. According to its own investigation, PhilSteel discovered that the breaking and
peeling off of the paint was caused by the erroneous painting application done by
Requisites for Warranties:
Quinones.
As held in Carrascoso, Jr. v. CA, the following requisites must be established in order to prove
that there is an express warranty in a contract of sale: (1) the express warranty must be an
Issue/s: WON vague oral statements made by seller on the characteristics of a generic good
affirmation of fact or any promise by the seller relating to the subject matter of the sale; (2)
can be considered warranties that may be invoked to warrant payment of damages- YES
the natural effect of the affirmation or promise is to induce the buyer to purchase the thing;
and (3) the buyer purchases the thing relying on that affirmation or promise.
Ruling:

Prescription:
Petitioner argues that the purported warranties by mere "vague oral statements" cannot be
invoked to warrant the payment of damages.
There being an express warranty, this Court holds that the prescription period applicable to
the instant case is that prescribed for breach of an express warranty. The applicable
Contrary to the assertions of petitioner, the finding of the CA was that the former, through
prescription period is therefore that which is specified in the contract; in its absence, that
Angbengco, did not simply make vague oral statements on purported warranties. Petitioner
period shall be based on the general rule on the rescission of contracts: four years
expressly represented to respondent that the primer-coated G .I. sheets were compatible
with the acrylic paint process used by the latter on his bus units.

All in all, these "vague oral statements" were express affirmations not only of the costs that
could be saved if the buyer used PhilSteel's G.I. sheets, but also of the compatibility of those
sheets with the acrylic painting process customarily used in Amianan Motors. Angbengco did
not aimlessly utter those "vague oral statements" for nothing, but with a clear goal of
persuading Quinones to buy PhilSteel's product.

Taken together, the oral statements of Angbengco created an express warranty. They were
positive affirmations of fact that the buyer relied on, and that induced him to buy petitioner's
primer-coated G .I. sheets.

On 1546

Under Article 1546 of the Civil Code, "'[ n ]o affirmation of the value of the thing, nor any
statement purporting to be a statement of the seller's opinion only, shall be construed as a
warranty, unless the seller made such affirmation or statement as an expert and it was relied
upon by the buyer."

Despite its claims to the contrary, petitioner was an expert in the eyes of the buyer Quinones.
The latter had asked if the primer-coated G.I. sheets were compatible with Amianan Motors'
acrylic painting process. Petitioner's former employee, Lopez, testified that he had to refer
21
246 FIRST UNITED CONSTRUCTORS CORPORATION v. BAYANIHAN
G.R. No. 164985 | 15 January 2014 | J. Bersamin | TIGLAO
TOPIC: Recoupment
DOCTRINE: Recoupment (reconvencion) is the act of rebating or recouping a part of a claim
upon which one is sued by means of a legal or equitable right resulting from a counterclaim
arising out of the same transaction.7 It is the setting up of a demand arising from the same
transaction as the plaintiff’s claim, to abate or reduce that claim.
ER: Petitioners initially ordered six dump trucks from Bayanihan. They then ordered a Hino
Prime Mover and a Isuzu Transit Mixer which were paid both in cash and PDCs. Upon
presentment, they found out that petitioners ordered stop payment on the ground that one
of the dump trucks earlier purchased broke down. Petitioners argue that the stop payment
order was valid based on the principle of recoupment. SC disagreed and ruled that
recoupment in case of breach of warranty by the seller should be exercised only when it
refers to the same item or unit sold and not to a different transaction. It was erroneous on
the part of petitioners to invoke the remedy of recoupment on the prime mover and transit
mixer when the alleged breach of warranty was referring to a different contract, specifically
that of the dump trucks.
FACTS:
8. First United and Blue Star (petitioners) ordered six dump trucks from Bayanihan.
9. Subsequently, petitioners ordered one Hino Prime Mover from Bayanihan. It again
ordered from the same a Isuzu Transit Mixer. For both purchases, they partially paid
in cash and the balance through PDCs.
10. Upon presentment of said checks, Bayanihan found out that First United ordered
stop payment. Bayanihan immediately demanded the full settlement of their
obligation but to no avail.
11. Instead, First United and Blue Star informed Bayanihan that they were withholding
payment of the checks due to the breakdown of one of the dump trucks they had
earlier purchased.
12. Since petitioners refusedto pay, Bayanihan sought for collection.
13. TC: Petitioners are liable; CA: Affirmed.
14. Argument of Petitioners: They could justifiably stop the payment of the checks in
the exercise of their right of recoupment because of the respondent’s refusal to
settle their claim for breach of warranty as to the purchase of the second dump
truck.
ISSUE/S: W/N petitioners validly exercised the right of recoupment through the withholding
of payment of the unpaid balance of the purchase price of the two purchases. - NO
HELD/RULING:
Petitioners could not validly resort to recoupment against respondent
22
Recoupment (reconvencion) is the act of rebating or recouping a part of a claim upon which
one is sued by means of a legal or equitable right resulting from a counterclaim arising out of
the same transaction. It is the setting up of a demand arising from the same transaction as
the plaintiff’s claim, to abate or reduce that claim.
The legal basis for recoupment by the buyer is the first paragraph of Article 1599 of the Civil
Code, viz:
Article 1599. Where there is a breach of warranty by the seller, the buyer may, at
his election:
(1) Accept or keep the goods and set up against the seller, the breach of
warranty by way of recoupment in diminution or extinction of the price;
(2) Accept or keep the goods and maintain an action against the seller for
damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the seller
for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if the
goods have already been received, return them or offer to return them to
the seller and recover the price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in anyone of these ways,
no other remedy can thereafter be granted, without prejudice to the provisions of
the second paragraph of article 1191. (Emphasis supplied)
In its decision, the CA applied the first paragraph of Article 1599 of the Civil Code to this case,
explaining thusly:
Paragraph (1) of Article 1599 of the Civil Code which provides for the remedy of
recoupment in diminution or extinction of price in case of breach of warranty by
the seller should therefore be interpreted as referring to the reduction or
extinction of the price of the same item or unit sold and not to a different
transaction or contract of sale. This is more logical interpretation of the said article
considering that it talks of breach of warranty with respect to a particular item sold
by the seller. Necessarily, therefore, the buyer’s remedy should relate to the same
transaction and not to another.
Petitioners’ act of ordering the payment on the prime mover and transit mixer stopped was
improper considering that the said sale was a different contract from that of the dump trucks
earlier purchased by petitioners.
The claim of petitioners for breach of warranty, i.e. the expenses paid for the repair and spare
parts of dump truck no. 2 is therefore not a proper subject of recoupment since it does not
arise out of the contract or transaction sued on or the claim of plaintiff-appellee for unpaid
balances on the last two (2) purchases, i. e. the prime mover and the transit mixer.
The CA was correct. It was improper for petitioners to set up their claim for repair expenses
and other spare parts of the dump truck against their remaining balance on the price of the
prime mover and the transit mixer they owed to respondent. Recoupment must arise out of
the contract or transaction upon which the plaintiff’s claim is founded.
To be entitled to recoupment, therefore, the claim must arise from the same transaction,
i.e., the purchase of the prime mover and the transit mixer and not to a previous contract
involving the purchase of the dump truck. That there was a series of purchases made by
petitioners could not be considered as a single transaction, for the records show that the
earlier purchase of the six dump trucks was a separate and distinct transaction from the
subsequent purchase of the Hino Prime Mover and the Isuzu Transit Mixer. Consequently,
the breakdown of one of the dump trucks did not grant to petitioners the right to stop and
withhold payment of their remaining balance on the last two purchases.
23
247 Phil. Steel Coating v Quinones
G.R. No. 194533, April 19, 2017
Topic: Recoupment. | Ponente: CJ Sereno | Author: S A Y O edited by Valera(Added topic in
ratio)
Doctrine: Quiñones has opted for a reduction in price or nonpayment of the unpaid balance
of the purchase price. Applying Article 1599 (1), this Court grants this remedy.
The above provisions define the remedy of recoupment in the diminution or extinction of price
in case of a seller's breach of warranty. According to the provision, recoupment refers to the
reduction or extinction of the price of the same item, unit, transaction or contract upon which
a plaintiff's claim is founded
Emergency Recit: Respondent was induced to buy the product of PhilSteel because of the
sales manager’s representation as to the quality and the guaranty that the product
underwent laboratory tests. The representations, however, were made orally thus petitioner
argues that vague oral statements cannot be invoked as warranties. SC held warranty is not
necessarily written but may be oral as long as such is an affirmation of a fact that buyers
relied on and that influences and induces them to purchase the product. The SC futher held
that Respondent was justified in the non payment of the unpaid balance since it was a form
of recoupment for breach of express warramty granted by the Art 1599 of the civil code
Facts:
16. This case arose from a Complaint for damages filed by respondent Quinones (owner
of Amianan Motors) against petitioner PhilSteel.
17. Allegedly, a sales engineer of PhilSteel (Richard Lopez), offered respondent
Quinones their new product (primer-coated, long-span, rolled galvanized iron
G.I.sheets).
18. Quiones (respondent buyer) asked Lopez if the primer-coated sheets were
compatible with the paint process used by Amianan Motors in the finishing of its
assembled buses.
19. Lopez referred the query to his immediate superior, Ferdinand Angbengco,
PhilSteel's sales manager.
20. Angbengco (Sales Manager):
 assured Quinones that the quality of their new product was superior to
the one being used by the latter in his business.
 guaranteed that a laboratory test had in fact been conducted by PhilSteel,
and that the results proved that the two products were compatible;
 21. Hence, Quinones was induced to purchase the product and use it in the
manufacture of bus units.
22. However, sometime in 1995, Quinones received several complaints from customers
who had bought bus units, claiming that the paint or finish used on the purchased
vehicles was breaking and peeling off.
23. Quinones then sent a letter-complaint to PhilSteel invoking the warranties given by
the latter. According to respondent, the damage to the vehicles was attributable to
the hidden defects of the primer-coated sheets and/or their incompatibility with
the Guilder acrylic paint process used by Amianan Motors, contrary to the prior
evaluations and assurances of PhilSteel.
24. According to its own investigation, PhilSteel discovered that the breaking and
peeling off of the paint was caused by the erroneous painting application done by
Quinones.
Issue/s: WON vague oral statements made by seller on the characteristics of a generic good
can be considered warranties that may be invoked to warrant payment of damages- YES
Ruling:
Petitioner argues that the purported warranties by mere "vague oral statements" cannot be
invoked to warrant the payment of damages.
Contrary to the assertions of petitioner, the finding of the CA was that the former, through
Angbengco, did not simply make vague oral statements on purported warranties. Petitioner
expressly represented to respondent that the primer-coated G .I. sheets were compatible
with the acrylic paint process used by the latter on his bus units.
 The nonpayment of the unpaid purchase price was justified, since a breach of warranty was
All in all, these "vague oral statements" were express affirmations not only of the costs that
could be saved if the buyer used PhilSteel's G.I. sheets, but also of the compatibility of those
sheets with the acrylic painting process customarily used in Amianan Motors. Angbengco did
not aimlessly utter those "vague oral statements" for nothing, but with a clear goal of
persuading Quinones to buy PhilSteel's product.
Taken together, the oral statements of Angbengco created an express warranty. They were
positive affirmations of fact that the buyer relied on, and that induced him to buy petitioner's
primer-coated G .I. sheets.
On 1546
Under Article 1546 of the Civil Code, "'[ n ]o affirmation of the value of the thing, nor any
statement purporting to be a statement of the seller's opinion only, shall be construed as a
24
warranty, unless the seller made such affirmation or statement as an expert and it was relied
upon by the buyer."
Despite its claims to the contrary, petitioner was an expert in the eyes of the buyer Quinones.
The latter had asked if the primer-coated G.I. sheets were compatible with Amianan Motors'
acrylic painting process. Petitioner's former employee, Lopez, testified that he had to refer
Quinones to the former's immediate supervisor, Angbengco, to answer that question. As the
sales manager of PhilSteel, Angbengco made repeated assurances and affirmations and even
invoked laboratory tests that showed compatibility. In the eyes of the buyer Quinones,
PhilSteel - through its representative, Angbengco - was an expert whose word could be relied
upon.
Requisites for Warranties:
As held in Carrascoso, Jr. v. CA, the following requisites must be established in order to prove
that there is an express warranty in a contract of sale: (1) the express warranty must be an
affirmation of fact or any promise by the seller relating to the subject matter of the sale; (2)
the natural effect of the affirmation or promise is to induce the buyer to purchase the thing;
and (3) the buyer purchases the thing relying on that affirmation or promise.
Prescription:
There being an express warranty, this Court holds that the prescription period applicable to
the instant case is that prescribed for breach of an express warranty. The applicable
prescription period is therefore that which is specified in the contract; in its absence, that
period shall be based on the general rule on the rescission of contracts: four years
RECOUPMENT(TOPIC)
proven.
- Petitioner’s take issue with the nonpayment of quijones to Phil steel of a balance of
448,041.
- Quinones through counsel sought damages against petitioner Phil estate for breach of
implied warranty arising from hidden defects under Art 1561.
- In seeking a remedy from the Trial court, Quionnes opted not to pay the balance of the
purchase price.
- Since it was proven that there was an express warrantythe remedy for implied
warranties under Article 1567 of the Civil Code does not apply to the instant case.
Instead, following the ruling of this Court in Harrison Motors Corporation v. Navarro,
Article 1599 of the Civil Code applies when an express warranty is breached. The
provision reads: Where there is a breach of warranty by the seller, the buyer may, at his
election: Article 1599. Where there is a breach of warranty by the seller, the buyer may,
at his election:
  (1) Accept or keep the goods and set up against the seller, the breach of warranty
by way of recoupment in diminution or extinction of the price;
- refers to the reduction or extinction of the price of the same item, unit, transaction or
 (2) Accept or keep the goods and maintain an action against the seller for damages
for the breach of warranty;
 (3) Refuse to accept the goods, and maintain an action against the seller for
damages for the breach of warranty;
 (4) Rescind the contract of sale and refuse to receive the goods or if the goods have
already been received, return them or offer to return them to the seller and recover
the price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in anyone of these
ways, no other remedy can thereafter be granted, without prejudice to the
provisions of the second paragraph of article 1191.
- The above provisions define the remedy of recoupment in the diminution or extinction
of price in case of a seller's breach of warranty. According to the provision, recoupment
contract upon which a plaintiff's claim is founded
- In the case at bar, Quiñones refused to pay the unpaid balance of the purchase price of
the primer-coated G.I. sheets PhilSteel had delivered to him. He took this action after
complaints piled up from his customers regarding the blistering and peeling-off of the
paints applied to the bus bodies they had purchased from his Amianan Motors. The
unpaid balance of the purchase price covers the same G.I. sheets. Further, both the CA
and the RTC concurred in their finding that the seller's breach of express warranty had
been established. Therefore, this Court finds that respondent has legitimately defended
his claim for reduction in price and is no longer liable for the unpaid balance of the
purchase price of P448,041.50

Where the goods have been delivered to the buyer, he cannot rescind the sale if he
knew of the breach of warranty when he accepted the goods without protest, or if
he fails to notify the seller within a reasonable time of the election to rescind, or if
he fails to return or to offer to return the goods to the seller in substantially as good
condition as they were in at the time the ownership was transferred to the buyer.
But if deterioration or injury of the goods is due to the breach or warranty, such
deterioration or injury shall not prevent the buyer from returning or offering to
return the goods to the seller and rescinding the sale.

Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to
be liable for the price upon returning or offering to return the goods. If the price or
any part thereof has already been paid, the seller shall be liable to repay so much
thereof as has been paid, concurrently with the return of the goods, or immediately
after an offer to return the goods in exchange for repayment of the price.

Where the buyer is entitled to rescind the sale and elects to do so, if the seller
refuses to accept an offer of the buyer to return the goods, the buyer shall
thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien
to secure the payment of any portion of the price which has been paid, and with
the remedies for the enforcement of such lien allowed to an unpaid seller by article
1526.

 (5) In the case of breach of warranty of quality, such loss, in the absence of
special circumstances showing proximate damage of a greater amount, is the
difference between the value of the goods at the time of delivery to the buyer
and the value they would have had if they had answered to the warranty.

- Quiñones has opted for a reduction in price or nonpayment of the unpaid balance of the
purchase price. Applying Article 1599 (1), this Court grants this remedy.

25
248 AMADOR TAJANLANGIT, ET AL., v. SOUTHERN MOTORS, INC., ET AL.
G.R. No. L-10789, May 28, 1957
Topic: Sale of Movables – NCC 1484-1486| Ponente: J. Bengzon| Author: Acido
Note: Wala tayong 54 OG 8 sa lib  pero mukhang tama naman nasa Lawphil.
Doctrine:
ART. 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should
the vendee's failure to pay cover two or more installments. In this case, he shall have no
further action against the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void.
ER: Sps. Tajanlangits bought machinery from Southern Motors, secured by a PN with an
acceleration clause. They defaulted and Southern Motors sued on the note. Sheriff levied on
the machinery bought by the spouses and sold it at public auction, but a balance remained.
Southern Motors got an alias writ of execution to go after the Sps.’ real properties. This was
objected to by the Sps., which invoked par. 3 of Art. 1484. SC held that there has been no
foreclosure of the chattel mortgage nor a foreclosure sale. Therefore the prohibition against
further collection does not apply. Further, since Southern Motors went after the PN first, they
are not limited to the proceeds of the sale on execution.
Facts:
8. In April 1953 Amador Tajanlangit and his wife Angeles, residents of Iloilo, bought,
from the Southern Motors Inc. of Iloilo two tractors and a thresher. In payment for
the same, they executed a promissory note whereby they undertook to satisfy the
total purchase price of P24,755.75 in several installments (with interest) payable on
stated dates. The note stipulated that if default be made in the payment of interest
or of any installment, then the total principal sum still unpaid with interest shall at
once become demandable etc.
9. The spouse failed to meet any installment. Wherefore they were sued for the
amount of the promissory note. They defaulted. CFI ruled in favor of Southern
Motors for the total sum of P24,755.75 together with interest at 12 per cent, plus
10 per cent of the total amount due as attorney's fees and costs of collection.
10. Carrying out the order of execution, the sheriff levied on the same machineries and
farm implements which had been bought by the spouses; and later sold them at
public auction to the highest bidder — which turned out to be the Southern Motors
itself — for the total sum of P10,000.
11. As its judgment called for much more, the Southern Motors subsequently asked
and obtained, an alias writ of execution; and pursuant thereto, the provincial sheriff
levied attachment on the Tajanlangits' rights and interests in certain real properties
— with a view to another sale on execution.
26
12. To prevent such sale, the Tajanlangits instituted this action in the CFI for the
purpose among others, of annulling the alias writ of execution and all proceedings
subsequent thereto. Defense relevant to topic: as the Southern Motors Inc. had
repossessed the machines purchased on installment (and mortgaged) the buyers
were thereby relieved from further responsibility, in view of the Recto Law, now
article 1484 of the New Civil Code.
13. CFI: Dismissed complaint on the ground that it cannot invalidate the alias writ of
execution issued by a co-equal court. CA: forwarded case to SC (pure questions of
jurisdiction/law)
Issue: Whether Southern Motors can still go after the Tajanlangits’ real properties even
after suing on the note, and even after repossession and sale at public auction of the
machines.
Held/Ratio: Yes. Dismissal of complaint affirmed.
 What is being sought in this present is to prohibit and forbid the appellee Sheriff of Iloilo
from attaching and selling at public auction sale the real properties of appellants
because that is now forbidden by our law after the chattels that have been purchased
and duly mortgagee had already been repossessed by the same vendor-mortgagee and
later on sold at public auction sale and purchased by the same at such meager sum of
P10,000.
 [SEE ART. 1484] Appellants would invoke the last paragraph. But there has been no
foreclosure of the chattel mortgage nor a foreclosure sale. Therefore the prohibition
against further collection does not apply. At any rate it is the actual sale of the
mortgaged chattel that would bar the creditor (who chooses to foreclose) from
recovering any unpaid balance.
 It is true that there was a chattel mortgage on the goods sold. But the Southern Motors
elected to sue on the note exclusively, i.e. to exact fulfillment of the obligation to pay. It
had a right to select among the three remedies established in Article 1484. In choosing
to sue on the note, it was not thereby limited to the proceeds of the sale, on execution,
of the mortgaged good.
 [JUST IN CASE] Appellants allege that the very implements sold "were duly returned" by
them, and "were duly received and accepted by the said vendor-mortgagee". Therefore
they argue, "upon the return of the same chattels and due acceptance of the same by
the vendor-mortgagee, the conditional sale is ipso facto cancelled, with the right of the
vendor-mortgagee to appropriate whatever downpayment and posterior monthly
installments made by the purchaser as it did happen in the present case at bar."
 The trouble with the argument is that it assumes that acceptance of the goods by the
Southern Motors Co, with a view to "cancellation" of the sale. The company denies such
acceptance and cancellation, asserting the goods, were deposited in its shop when the
sheriff attached them in pursuance of the execution.
249 FILINVEST CREDIT CORPORATION v. PHILIPPINE ACETYLENE, CO., INC.
No. L-50449. January 30, 1982| J. De Castro| Garcia/Castro
TOPIC: Sale of movables
Doctrine: Under the law, the delivery of possession of the mortgaged property to the
mortgagee, the herein appellee, can only operate to extinguish appellant’s liability if the
appellee had actually caused the foreclosure sale of the mortgaged property when it
recovered possession thereof. It is worth noting that it is the fact of foreclosure and actual
sale of the mortgaged chattel that bar the recovery by the vendor of any balance of the
purchaser’s outstanding obligation not satisfied by the sale. As held by this Court, if the
vendor desisted, on his own initiative, from consummating the auction sale, such desistance
was a timely disavowal of the remedy of foreclosure, and the vendor can still sue for specific
performance. This is exactly what happened in the instant case.
Held: Estoppel would not lie since Filinvest never accepted the mortgaged motor vehicle in
full satisfaction of the mortgaged debt.
Ratio:
 Under the law, the delivery of possession of the mortgaged property to the
mortgagee, the herein appellee, can only operate to extinguish appellant’s liability if
the appellee had actually caused the foreclosure sale of the mortgaged property when
it recovered possession thereof. It is worth noting that it is the fact of foreclosure and
actual sale of the mortgaged chattel that bar the recovery by the vendor of any
balance of the purchaser’s outstanding obligation not satisfied by the sale As held by
this Court, if the vendor desisted, on his own initiative, from consummating the
auction sale, such desistance was a timely disavowal of the remedy of foreclosure, and
the vendor can still sue for specific performance. This is exactly what happened in the
instant case.

Facts:
 October 30, 1971, the Philippine Acetylene Co., Inc. purchased from Alexander Lim, as
evidenced by a Deed of Sale a motor vehicle described as Chevrolet for 55k with a down
payment of 20k and the balance of P35k payable, under the terms and conditions of the
promissory note.
 As security for the payment of said promissory note, the appellant executed a chattel
mortgage over the same motor vehicle in favor of Alexander Lim.
 Alexander Lim assigned to the Filinvest Finance Corporation all his rights, title, and
interests in the promissory note and chattel mortgage by virtue of a Deed of
Assignment. Then, Filinvest Finance Corporation assigned it to Filinvest Credit Corp.
 Phil Acetylene had defaulted in the payment of nine successive installments.
 Filinvest sent a demand letter. Phil Acetylene wrote back advising Filinvest of its decision
to “return the mortgaged property, which return shall be in full satisfaction of its
indebtedness pursuant to Article 1484 of the New Civil Code.
 The mortgaged vehicle was returned to Filinvest together with the document “Voluntary
Surrender with Special Power of Attorney To Sell”
 Filinvest wrote a letter to Phil Acetylene informing the latter that it cannot sell the motor
vehicle as there were unpaid taxes on the said vehicle in the sum of 70k. Filinvest
requested Phil Acetylene to update its account by paying the installments in arrears and
accruing interest in the amount of P4,232.21 on or before April 9, 1973.
 Filinvest offered to deliver back the motor vehicle to the Phil Acetylene but the latter
refused to accept it, so Filinvest instituted an action for collection of a sum of money
with damages.
 Phil Acetylene: Filinvest is now in estopped from demanding payment of the unpaid
obligation by accepting the delivery of the mortgaged motor vehicle. Since Filinvest
elected the alternative remedy of exacting fulfillment of the obligation, it is now
precluded from exercising any other remedy provided for under Article 1484 of the
Civil Code. The unpaid price was extinguished by the return of the motor vehicle, by
way of dacion en pago.

Issue: Whether estoppel would lie against Filinvest

27
250 De La Cruz v Asian Consumer 214 SCRA 103
G.R. No. 94828 | September 18, 1992| BELLOSILLO, J.| De Leon
TOPIC: Sale of Movables - NCC 1484 - 1486
DOCTRINE: In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of
the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee’s failure
to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold,
if one has been constituted, should the vendee’s failure to pay cover two or more
installments. In this case, he shall have no further action against the purchaser to recover
any unpaid balance of the price. Any agreement to the contrary shall be void
ER: Sps De La Cruz bought Hino trucks. Chattel mortgage as security. The defaulted in
payment, therefore Asian went to foreclose the mortgage, but they failed because the truck
was not turned over. Subsequently, the truck was turned over to Asian but Asian filed an
ordinary action for collection. The SC held that Asian can file ordinary action there being no
actual foreclosure of the mortgaged property, ASIAN is correct in resorting to an ordinary
action for collection of the unpaid balance of the purchase price.
FACTS:
 Spouses Romulo de la Cruz and Delia de la Cruz, and one Daniel Fajardo,
petitioners, purchased on installment basis one (1) unit Hino truck from Benter
Motor Sales Corporation (BENTER for brevity). To secure payment, they executed in
favor of BENTER a chattel mortgage over the vehicle 1 and a promissory note for
P282,360.00 payable in thirty (30) monthly installments of P9,412.00. 2 On the
same date, BENTER assigned its rights and interest over the vehicle in favor of
private respondent Asian Consumer and Industrial Finance Corporation (ASIAN for
brevity). Although petitioners initially paid some installments they subsequently
defaulted on more than two (2) installments. Thereafter, notwithstanding the
demand letter of ASIAN, petitioners failed to settle their obligation.
 by virtue of a petition for extrajudicial foreclosure of chattel mortgage, the sheriff
attempted to repossess the vehicle but was unsuccessful because of the refusal of
the son of petitioner, Rolando de la Cruz to surrender the same
 petitioner Romulo de la Cruz brought the vehicle to the office of ASIAN and left it
there where it was inventoried and inspected.
 On 27 November 1984, ASIAN filed an ordinary action with the court a quo for
collection of the balance of P196,152.99 of the purchase price, plus liquidated
damages and attorney’s fees.
ISSUE/S: W/N Asian can still file an ordinary action
HELD/RULING; Yes
 "In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies: (1) Exact
fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale,
should the vendee’s failure to pay cover two or more installments; (3) Foreclose the
chattel mortgage on the thing sold, if one has been constituted, should the
28
vendee’s failure to pay cover two or more installments. In this case, he shall have no
further action against the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void."
 In this jurisdiction, the three (3) remedies provided for in the "Recto Law" are
alternative and not cumulative; the exercise of one would preclude the other
remedies. Consequently, should the vendee-mortgagor default in the payment of
two or more of the agreed installments, the vendor-mortgagee has the option to
avail of any of these three (3) remedies: either to exact fulfillment of the obligation,
to cancel the sale, or to foreclose the mortgage on the purchased chattel, if one
was constituted.
 The records show that on 14 September 1984 ASIAN initiated a petition for
extrajudicial foreclosure of the chattel mortgage. But the sheriff failed to recover
the motor vehicle from petitioners due to the refusal of the son of petitioners
Romulo and Delia de la Cruz to surrender it. It was not until 10 October 1984, or
almost a month later that petitioners delivered the unit to ASIAN. The action to
recover the balance of the purchase price was instituted on 27 November 1984.
 It is thus clear that while ASIAN eventually succeeded in taking possession of the
mortgaged vehicle, it did not pursue the foreclosure of the mortgage as shown by
the fact that no auction sale of the vehicle was ever conducted.
 there being no actual foreclosure of the mortgaged property, ASIAN is correct in
resorting to an ordinary action for collection of the unpaid balance of the purchase
price.
 We note however that the trial court, as well as the Court of Appeals failed to
consider that the vehicle was already in the possession of ASIAN when it directed
petitioners herein to pay P184,466.67 representing the balance of the purchase
price of the mortgaged property. Law and equity will not permit ASIAN to have its
cake and eat it too, so to speak. By allowing ASIAN to retain possession of the
vehicle and then directing petitioners to pay the unpaid balance would certainly
result in unjust enrichment of the former. Accordingly, the ownership and
possession of the vehicle should be returned to petitioners by ASIAN in the
condition that it was when delivered to it, and if this be no longer feasible, to
deduct from the adjudged liability of petitioners the amount of P60,000.00, its
corresponding appraised value.
251 DE LOS SANTOS V CA
G.R. No. 147912 |April 26, 2006|CORONA| DELFIN
TOPIC: Rep. Act 6552, An Act To Provide Protection To Buyers Of Real Estate On Installment
Payments
DOCTRINE:
In cases such as this where less than two years of installments have been made, Section 4 of
RA 6552 grants the vendee a grace period of not less than sixty days from the date the
installment became due to pay the amortizations. If the vendee fails to pay at the end of the
grace period, the vendor may cancel the
contract 30 days after the receipt by the vendee of the notice of cancellation.
EMERGENCY RECIT:
Delos Santos entered into a contract to sell with Pasig Realty for a property in Parkwood
Green. They paid the down payment but only 1 of the monthly amortizations was paid, other
checks bounced. Pasig Realty demanded settlement of the balance, Delos Santos refused to
pay so Pasig Realty exercised its option to cancel the contract and forfeit payments already
made as per RA 6552 and provision in the contract. Delos Santos questions the validity of the
cancellation. The Court held rescission and forfeiture is valid, Pasig Realty gave them grace
period to pay and notice before cancellation.
 Delos Santos defaulted in the payment of several monthly amortizations. Out of the
contract price of P189,810, only P60,506.40 was paid. In effect, of the 60 monthly
amortizations agreed upon, only about 15 were settled.
 In cases such as this where less than two years of installments have been made, Section
4 of RA 6552 grants the vendee a grace period of not less than sixty days from the date
the installment became due to pay the amortizations. If the vendee fails to pay at the
end of the grace period, the vendor may cancel the contract 30 days after the receipt by
the vendee of the notice of cancellation.
 In the same vein, paragraph 6 of the contract to sell granted the vendor an option to
cancel the contract and forfeit the payments made should the vendee fail to pay any of
the monthly amortizations within 60 days from the due date. Thereafter, the vendor may
dispose of the subject lot to any other person as if said contract had never been made.
 Here, Delos Santos paid P10,000 on June 6, 1988. Despite the lapse of more than 60
days as grace period, they continued to default in their obligation. On January 18, 1989,
private respondent corporation opted to cancel the contract with forfeiture of payments
made. Accordingly, thirty days therefrom, the contract was cancelled and payments
made were forfeited.

FACTS:
1. Delos Santos entered into a contract to sell with Pasig Realty Development Corp for a
parcel of land in Parkwood Green Executive Village in 1987. They paid the down
payment and 10 post dated checks for the balance, out of which only one was honored
by the bank.
2. In 1988, Pasig Realty demanded for the settlement of the unpaid amortizations but
Delos Santos was unable to pay. For this reason, Pasig Realty informed them that its
exercising its option to cancel the contract with forfeiture of payments made in
accordance to Section 4 of RA 6552 and the contract to sell itself.
3. Pasig Realty requested Delos Santos to vacate the property but Delos Santos refused. It
argued that they only stopped payment because of the failure of Pasig Realty to develop
the subdivision. Delos Santos filed for specific performance with HLURB which was
dismissed. It ordered the cancellation of the contract to sell.
4. While the case is on appeal in the Office of the President, Pasig Realty sokd the property
to Sps Buenaventura.

ISSUE/S:
WON the rescission and forfeiture of the payments were made in accordance to the contract
and RA 6552? - YES

HELD:

29
252 FEDMAN DEVELOPMENT CORPORATION (FDC) v. FEDERICO AGCAOILI (Agcaoili)
G.R. No. 165025; August 31, 2011
Topic: Maceda Law | Ponente: J. BERSAMIN | Author: Enriquez
Doctrine: In order for FDC to have validly cancelled the existing contract to sell, it must have
first complied with Section 3 (b) of RA 6552 or the Maceda Law. FDC should have refund
Agcaoili the cash surrender value of the payments on the property equivalent to fifty percent
of the total payments made.
Emergency Recitation: FDC and Interchem entered into a contract to sell wherein Interchem
will purchase one of FDC’s condominium unit. Interchem transferred its rights to Agcaoili.
Agcaoili agreed to pay the installment balance in 135 equal monthly installments. FDC’s
centralized air-conditioning unit broke down. Since Agcaoili’s demands for the repair went
unheeded he suspended the payment of monthly amortizations. Thus, FDC cancelled the
contract to sell. In ruling that the cancellation of the contract to sell is improper, the SC said
that in order for FDC to have validly cancelled the existing contract to sell, it must have first
complied with Section 3 (b) of RA 6552 or the Maceda Law. FDC should have refund Agcaoili
the cash surrender value of the payments on the property equivalent to fifty percent of the
total payments made.
Issue/Held: Whether FDC’s cancellation of the contract to sell was improper? Yes.
Ratio:
 It was grave error on the part of the FDC to cancel the contract to sell for non-payment
of the monthly amortizations without taking into consideration Republic Act 6552,
otherwise known as the Maceda Law.
 As clearly specified in Section 3, the declared public policy espoused by Republic Act No.
6552 is "to protect buyers of real estate on installment payments against onerous and
oppressive conditions."
 Thus, in order for FDC to have validly cancelled the existing contract to sell, it must have
first complied with Section 3 (b) of RA 6552. FDC should have refund Agcaoili the cash
surrender value of the payments on the property equivalent to fifty percent of the total
payments made.
 There is nothing in the record to show that the aforementioned requisites for a valid
cancellation of a contract where complied with by FDC.
 Hence, the contract to sell which FDC cancelled remains valid and subsisting. FDC cannot
by its own forfeit the payments already made by the Agcaoili.

Facts:
21. FDC was the owner and developer of a condominium project known as Fedman Suites
Building (FSB). Interchem Laboratories Incorporated (Interchem) purchased FSB’s Unit
411 under a contract to sell.
22. On October 1980, Interchem, with FDC’s consent, transferred all its rights in Unit 411 to
Agcaoili. As consideration for the transfer, Agcaoili agreed: (a) to pay Interchem ₱150k
upon signing of the deed of transfer; (b) to update the account; and (c) to deliver to FDC
the balance in 135 equal monthly installments effective October 1980, The obligations
Agcaoili assumed totaled ₱302,760.00.
23. On December 1983, the centralized air-conditioning unit of FSB’s fourth floor broke
down. Being adversely affected and since there was no response from FDC, Agcaoili
informed FDC that he was suspending the payment of his condominium dues and
monthly amortizations.
24. FDC cancelled the contract to sell involving Unit 411 and cut off the electric supply to the
unit. On August 1985, the parties later executed a compromise agreement. As stipulated
in the compromise agreement, Agcaoili paid FDC as amortizations for the period from
November 1983 to July 1985. As a result, FDC reinstated the contract to sell.
25. On April 1986, FDC again disconnected the electric supply of Unit 411. Thus, Agcaoili
lodged a complaint for damages against FDC in the RTC.
26. In its answer, FDC contended that Agcaoili failed to comply with the terms of the
contract to sell; that despite demands, Agcaoili did not pay the amortizations due from
November 1983 to March 1985 and from October 1985 to May 1986, resulting in FDC
being unable to pay the electric bills on time to the Manila Electric Company.
27. RTC and CA ruled in favor of Agcaoili and stated that FDC’s cancellation of the contract to
sell was improper.
30
253 MANUEL UY & SONS, INC. V. VALBUECO, INCORPORATED
G.R. No. 179594; September 11, 2013
Topic: RA 6552 | Ponente: J. Peralta | Author: Garcia
Note:
Doctrine:
 Sec. 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.
Emergency Recitation:
Manuel and Valbueco executed conditional deeds of sale. Valbueco suspended pauments as
it was not satisfied with the manner Manuel complied with its obligation under the deeds
(less than 2 years of intsllments were paid). Manuel informed Valbueco of its intention to
rescind the conditional deeds and attaching therewith the original copy of the notarial
rescission. Whether or not the rescission was valid. Yes, in light of section 4. With regard to
notice, Valbueco cannot deny that it received the notarial rescission because it was attached
in the Answer filed by by Manuel when Valbueco filed a complaint for specific performance.
Also, Valbueco, in his reply, attached Manuel’s answer which included the notarial rescission.
Facts:
28. Manuel Uy & sons, Inc. (Manuel) is the owner of parcels of land in issue in this case.
29. November 29, 1973 – 2 Conditional Deeds of Sale were executed by Manuel in favor of
Valbueco, Incorporated (Valbueco).
30. Valbueco was able to pay Manuel the amount of P275,055.55 as partial payment for the
2 parcel of lands corresponding to the initial payments and the first installments of the
said properties.
31. Manuel complied with its obligation under the conditional deeds of sale, as follows: 1)
the mortgage for the subject parcels of land were released; 2) the unlawful occupants of
the lots surrendered their possession and use of the said lots.
32. Valbueco suspended further payments as it was not satisfied with the manner Manuel
complied with its obligation under the conditional deed of sale.
33. Manuel sent Valbueco a letter informing Valbueco of its intention to rescind the
conditional deeds and attaching therewith the original copy of the respective notarial
rescission.
34. Valbueco filed a Complaint (11/28/94) for specific performance and damages. However,
th case was dismissed (1/15/96) without prejudice for lack of interest, as Valbueco’s
counsel failed to attend the pre-trial conference.
35. Valbueco filed with the RTC a complaint (3/16/01) for specific performance and
damages, seeking to compel Manuel to accept the balance of the purchase price for the
conditional deeds of sale and to execute the corresponding deeds of absolute sale.
36. TC rendered a decision dismissing the complaint as Manuel had to rescind the contracts.
37. CA rendered a decision, reversing and setting aside the decision of the trial court. It
reinstated the complaint of Valbueco and directed Manuel to execute deeds of absolute
sale in favor of Valbueco after payment of the balance of the purchase price of the
subject lots.
31
Issue/Held: Whether or not Manuel Uy & Sons can be forced to execute deeds of absolute
sale in favor of Valbueco, Incorporated in light of the deeds of conditional sale. No
Ratio:
 The Court of Appeals correctly held that R.A. No. 6552, otherwise known as the Realty
Installment Buyer Act, applies to the subject contracts to sell. R.A. No. 6552 recognizes in
conditional sales of all kinds of real estate (industrial, commercial, residential) the right
of the seller to cancel the contract upon non-payment of an installment by the buyer,
which is simply an event that prevents the obligation of the vendor to convey title from
acquiring binding force. It also provides the right of the buyer on installments in case he
defaults in the payment of succeeding installments as follows:
 Section 3. In all transactions or contracts involving the sale or financing of real estate
on installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under Republic Act Numbered
Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three
hundred eighty-nine, where the buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults in the payment of succeeding
installments:
o To pay, without additional interest, the unpaid installments due within the
total grace period earned by him which is hereby fixed at the rate of one
month grace period for every one year of installment payments made:
Provided, That this right shall be exercised by the buyer only once in every five
years of the life of the contract and its extensions, if any.
o If the contract is canceled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty per cent of
the total payments made, and, after five years of installments, an additional
five per cent every year but not to exceed ninety per cent of the total
payments made: Provided, That the actual cancellation of the contract shall
take place after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act and
upon full payment of the cash surrender value to the buyer.
 Down payments, deposits or options on the contract shall be included in the
computation of the total number of installment payments made.
 Sec. 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.
 In this case, Valbueco has paid less than two years of installments; therefore, Section 4
of R.A. No. 6552 applies.
 Court of Appeals held that even if Valbueco defaulted in its full payment of the purchase
price of the subject lots, the conditional deeds of sale remain valid and subsisting,
because there was no valid notice of notarial rescission to Valbueco, as the notice was
sent to the wrong address, that is, to Mahogany Products Corporation, and it was
received by a person employed by Mahogany Products Corporation and not Valbeuco.
 The appellate court held that there was insufficient proof that Valbueco actually
received the notice of notarial rescission of the conditional deeds of sale; hence, the
unilateral rescission of the conditional deeds of sale cannot be given credence.
 upon review of the records of this case, the Court finds that Valbueco had been served a
notice of the notarial rescission of the conditional deeds of sale when it was furnished
with Manuel’s Answer, dated February 16, 1995.
 It appears that after Valbueco filed its first Complaint for specific performance and
damages with the RTC of Antipolo City on November 28, 1994, Manuel filed an Answer
and attached thereto a copy of the written notice dated March 17, 1978 and copies of
the notarial acts of rescission dated March 15, 1978, and that Valbueco received a copy
of the said Answer with the attached notices of notarial rescission. However, to reiterate,
the first Complaint was dismissed without prejudice.
 Valbueco is deemed to have had notice of the notarial rescission of the two conditional
deeds of sale when it received Manuel’s Answer to its first complaint filed with the RTC
of Antipolo, since Manuel’s Answer included notices of notarial rescission of the two
conditional deeds of sale.
 Since Valbueco already received notices of the notarial rescission of the conditional
deeds of sale, together with Manuel’s Answer to the first Complaint five years before it
filed this case, it can no longer deny having received notices of the notarial rescission in
this case, as Valbueco admitted the same when it attached the notices of notarial
rescission to its Reply in this case. Consequently, Valbueco is not entitled to the relief
granted by the Court of Appeals.
 Under R.A. No. 6552, the right of the buyer to refund accrues only when he has paid at
least two years of installments. In this case, respondent has paid less than two years of
installments; hence, it is not entitled to a refund.
32
254. Sps Sebastian vs. BPI Family Bank
G.R. No. 160107, October 22, 2014
TOPIC: Rep. Act 6552, An Act To Provide Protection To Buyers Of Real Estate On
Installment Payments
PONENTE: Bersamin J. | Author: Laureta
Doctrine: The protection of Republic Act No. 6552 (Realty Installment Buyer Protection Act)
does not cover a loan extended by the employer to enable its employee to finance the
purchase of a house and lot. The law protects only a buyer acquiring the property by
installment, not a borrower whose rights are governed by the terms of the loan from the
employer.
1. Emergency Recit: Petitioner Sps Sebastian worked for BPI Family Bank. They
availed themselves of a housing loan from BPI as one of the benefits extended to
its employees. They were both terminated from work. A year after their
termination Sps received a demand letter from BPI requiring them to pay their
total outstanding obligation that had become due and demandable upon their
separation. BPI instituted a petition for the foreclosure of the REM. BPI asserted
that the loan was a special privilege granted to its employees; that the privilege
was coterminous with the tenure of the employees with the company; and that
the foreclosure of the mortgaged property was justified by the petitioners’ failure
to pay their past due loan balance. Sps. invoke the protection of RA 6552, in that
they were entitled to the grace period within which to settle the unpaid
amortizations. Denied. SC: RA 6552provisions could not extend to a situation
bereft of any seller-buyer relationship (in this case it was lender – borrower).
Facts:
2. Petitioner Sps Sebastian used to work for BPI Family. Jaime was the Branch
Manager and Evangeline was a bank teller.
3. On October 30, 1987, they availed themselves of a housing loan from BPI Family as
one of the benefits extended to its employees.
4. Loan amounted to P273,000.00, and was covered by a Loan Agreement, payable in
108 equal monthly amortizations of P3,277.57; and that the monthly amortizations
would be deducted from his monthly salary.
a. To secure the payment of the loan, they executed REM over the property
situated in Bulacan.
b. Jaime also signed an letter-memorandum addressed to BPI Family,
authorizing the automatic salary deduction and: In the event I leave,
resign or am discharged from the service or my employment with BPI
Family Bank is terminated, I also authorize you to apply any amount due
me from BPI Family Bank to the payment of the outstanding principal
amount of the aforesaid loan and the interest accrued thereon which
shall thereupon become entirely due and demandable on the effective
 date of such discharge, resignation or termination without need of notice
of demand, and to do such other acts as may be necessary under the
circumstances.
5. The petitioners’ monthly loan amortizations were regularly deducted from Jaime’s
monthly salary. On December 14, 1989, however, Jaime received a notice of
termination from BPI, informing him that he had been terminated from
employment due to loss of trust and confidence Evangeline also received a notice
of termination dated February 23, 1990, telling her of the cessation of her
employment on the ground of abandonment. Both notices contained a demand for
the full payment of their outstanding loans from BPI Family.
6. About a year after their termination from employment, the petitioners received a
demand letter from BPI Family’s counsel requiring them to pay their total
outstanding obligation amounting to P221,534.50 that had become due and
demandable upon their separation from BPI Family.
7. BPI Family instituted a petition for the foreclosure of the REM.
8. To prevent the foreclosure of their property, the petitioners filed against the
respondents their complaint for injunction and restraining order in the RTC
Malolos.
a. They alleged that their obligation was not yet due and demandable
considering that the legality of their dismissal was still pending resolution
by the labor court; hence, there was yet no basis for the foreclosure of
the mortgaged property; and that the property sought to be foreclosed
was a family dwelling in which they and their four children resided.
9. BPI Family asserted that the loan extended to the petitioners was a special privilege
granted to its employees; that the privilege was coterminous with the tenure of the
employees with the company; and that the foreclosure of the mortgaged property
was justified by the petitioners’ failure to pay their past due loan balance.
10. RTC dismissed. CA affirmed.
11. On MR the petitioners for the first time contended that their rights under Republic
Act No. 6552 (Realty Installment Buyer Protection Act) had been disregarded,
considering that Section 3 of the law entitled them to a grace period within which
to settle their unpaid installments without interest; and that the loan agreement
was in the nature of a contract of adhesion that must be construed strictly against
the one who prepared it, that is, BPI Family itself.
Issue: W/N Maceda Law (RA 6552) can be invoked by petitioners?
Held: No. The petitioners purchased the real estate from PHILVILLE Realty, not from BPI
Family. Without the buyer-seller relationship between them and BPI Family, the provisions
of Republic Act No. 6552 were inapplicable and could not be invoked by them against BPI
Family.
Ruling:
1. Petitioners’ reliance on RA 6552 was misplaced because its provisions could not
extend to a situation bereft of any seller-buyer relationship. Hence, they could not escape the
33
consequences of the maturity of their obligation by invoking the grace period provided in
Section 3.
2. The CA correctly found that there was basis to declare the petitioners’ entire
outstanding loan obligation mature as to warrant the foreclosure of their mortgage.
3. Here, the records show that the petitioners were defaulting borrowers, a fact that
the CA found.
4. Having paid monthly amortizations for two years and four months, the petitioners
now insist that they were entitled to the grace period within which to settle the unpaid
amortizations without interest provided under Section 3. Otherwise, the foreclosure of the
mortgaged property should be deemed premature in as much as their obligation was not yet
due and demandable.
5. The petitioners’ insistence would have been correct if the monthly amortizations
being paid to BPI Family arose from a sale or financing of real estate. In their case, however,
the monthly amortizations represented the installment payments of a housing loan that BPI
Family had extended to them as an employee’s benefit.
a. The monthly amortizations they were liable for was derived from a loan
transaction, not a sale transaction, thereby giving rise to a lender-borrower relationship
between BPI Family and the petitioners.
b. It bears emphasizing that RA 6552 aimed to protect buyers of real estate on
installment payments, not borrowers or mortgagors who obtained a housing loan to pay the
costs of their purchase of real estate and used the real estate as security for their loan.
c. The "financing of real estate in installment payments" referred to in Section 3,
supra, should be construed only as a mode of payment vis-à-vis the seller of the real estate,
and excluded the concept of bank financing that was a type of loan.
d. Accordingly, Sections 3, 4 and 5, supra, must be read as to grant certain rights only
to defaulting buyers of real estate on installment, which rights are properly demandable only
against the seller of real estate.
6. The foreclosure of a mortgage is but the necessary consequence of the non-
payment of an obligation secured by the mortgage.
Republic Act No. 6552 protections accorded to the buyers are embodied in Sections 3, 4 and
5 of the law, to wit:
Section 3. In all transactions or contracts, involving the sale or financing of real estateon
installment payments, including residential condominium apartments but excluding industrial
lots, commercial buildings and sales to tenants, where the buyer has paid at least two years
of installments, the buyer is entitled to the following rights in case he defaults in the payment
of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due within the total grace
period earned by him which is hereby fixed at that rate of one month grace period for every
one year of installment payments made; provided, That this right shall be exercised by the
Buyer only once in every five years of the life of the contract and its extensions, if any.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of
the payments on the property equivalent to fifty percent of the total payments made, and,
after five years of installments, an additional five per cent every year but not to exceed ninety
per cent of the total payments made; Provided, That the actual cancellation or the demand
for rescission of the contract by a notarial act and upon full payment of the cash surrender
value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation of
the total number of installment payments made.
SECTION 4. In case where less than two years of installments were paid, the seller shall give
the buyers a grace period of not less than sixty days from the date the installment become
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.
SECTION 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the
same to another person or to reinstate the contract by updating the account during the grace
period and before actual cancellation of the contract. The deed of sale or assignment shall be
done by notarial act.
34
255. Tagaytay Realty v. Gacutan
G.R. No. 160033 | 1 JULY 2015| J. BERSAMIN
Topic: RA 6552: An Act Provide to Protection to Buyers of Real Estate on Installment
Payments
Doctrine:
Under Section 20 of Presidential Decree No. 957, all developers, including the petitioner, are
mandated to complete their subdivision projects, including the amenities, within one year
from the issuance of their licenses.
The buyer has the option to demand the reimbursement of the total amounts paid, or to
await the further development of the subdivision; when the buyer opts for the latter
alternative, he may suspend the payment of his installments until the time when the
developer has fulfilled its obligation to him; should the developer persist in refusing to
complete the facilities
ER:
Gacutan and Tagaytay Realty entered into a contract to sell to be paid by 84 installments with
12% annual interest. Gacutan suspended the amortizations because Tagaytay failed to
complete the construction of amenities. Instead, Tagaytay sent Gacutan the account of the
balance price plus interest and penalty. Gacutan contended that he is not liable for the
interest and the penalty. SC held that he is liable for the interest but not for the penalty
because Tagaytay failed to complete its undertaking in the construction of the said amenities.
Facts:
On 1976, Respondent-Gacutan entered into a contract to sell with Petitioner-Tagaytay Realty
for the purchase on installment of a residential lot in the Foggy Heights Subdivision.
Tagaytay Realty executed an express undertaking which provides that it will complete the
development of the roads, drainage, water and electrical systems, and amenities within 2
years from 15 July 1976, and that the 84 monthly installments to be paid by Gacutan should
include interest at the rate of 12% per annum.
On 1979, Gacutan notified Tagaytay Realty that he was suspending his amortizations because
the amenities had not been constructed in accordance with the undertaking. Tagaytay Realty
did not reply.
Instead, it sent Gacutan a statement of account, demanding the balance of the price plus
interest and penalty. Gacutan, however, refused to pay the interest and penalty.
Respondent sued the petitioner for specific performance in the HLURB, praying that the
petitioner be ordered to accept his payment of the balance of the contract without interest
and penalty, and to deliver to him the title of the property.
HLURB ruled in favor of Respondent. The OP and the CA affirmed the decision of the HLURB.
Petitioner contends that it must be discharged because extraordinary and unforeseeable
circumstances had rendered its duty to perform its obligation so onerous that to insist on the
performance would have resulted in its economic ruin. The Court should consider the
practical circumstances surrounding the construction of the luxurious amenities of the
project.
Issue/s: Whether or not Respondent should pay the annual interest and the penalty
Held:
Respondent should only pay the 12% Interest but not the penalty.
Ruling:
1. The imposition of the annual or amortization interest on the price for the purchase of a lot
on installment was valid and enforceable. The annual interest was designed to compensate
the petitioner for waiting seven years before receiving the total principal amount.
The penalty could not be enforced against the respondent because the petitioner waived the
penalty should the subdivision development not be completed by July 15, 1978.
In this case, the respondent initially opted to suspend the payment of his amortizations, but
then offered to complete the payment upon realizing that the petitioner did not anymore
intend to build the amenities. His payments from October 6, 1976 to October 6, 1979
corresponded to 36 monthly amortizations totaling P14,974.20, leaving 48 installments
unpaid totaling P19,965.60.
2. Under Section 20 of PD 957, all developers, including the petitioner, are mandated to
complete their subdivision projects, including the amenities, within one year from the
issuance of their licenses.
In this case, there is no question that Tagaytay Realty did not comply with its
legal obligation to complete the construction of the subdivision project,
including the amenities, within 1 year from the issuance of the license (under
Sec. 20 of PD 957), or within 2 years from 15 July 1976 (under the contract).
The Court has held that the buyer has the option to demand the reimbursement of the total
amounts paid, or to await the further development of the subdivision; when the buyer opts
for the latter alternative, he may suspend the payment of his installments until the time when
the developer has fulfilled its obligation to him; should the developer persist in refusing to
complete the facilities, the National Housing Authority may take over or cause the
development and completion of the subdivision at the expense of the developer.
35
In this case, Gacutan initially opted to suspend the payment of his amortizations, but then
offered to complete the payment upon realizing that Tagaytay Realty did not anymore intend
to build the amenities.
256 BUTTE v MANUEL UY & SONS, INC.
G.R. No. L-154499; 28 December 1962
Topic: Redemption - NCC 1619-1623 | Ponente: J. Reyes J.B.L. | Author: Pagcaliwagan
Doctrine: A co-owner of an undivided share is necessarily a co-owner of the whole.
Wherefore, any one of the Ramirez heirs, as such co-owner, became entitled to exercise the
right of legal redemption (retracto de comuneros) as soon as another co-owner (Marie
Garnier Vda. de Ramirez) had sold her undivided share to a stranger, Manuel Uy & Sons,
Inc. This right of redemption vested exclusively in consideration of the redemptioner’s
quality of co-owner, independently of the size of the redemptioner’s share which the law
nowhere takes into account.
The notice which became operative is that given by Mrs. Chambers, in her capacity as
attorney-in-fact of the vendor Marie Garnier Vda. de Ramirez. Under date of December 11,
1958, she wrote the Administrator Bank of the Philippine Islands that her principal’s one-
sixth (1/6) share in the Sta. Cruz property had been sold to Manuel Uy & Sons, Inc. for
P500,000.00. The Bank received this notice on December 15, 1958, and on the same day
endorsed it to Mrs. Butte, care of Delgado, Flores and Macapagal (her attorneys), who
received the same on December 16, 1958. Mrs. Butte tendered redemption and upon its
refusal, judicially consigned the price of P500,000 on January 15, 1959. The latter date was
the last one of the thirty days allowed by the Code for the redemption, counted by
excluding December 16, 1958 and including January 15, 1959, pursuant to Article 13 of the
Civil Code. Therefore, the redemption was made in due time.
Emergency Recit: Plaintiff Butte was instituted as an heir in the will of Jose Ramirez of his 1/6
share of the disputed property. Marie Ramirez, a co-owner of the property sold her 1/6
undivided share to Manuel Uy & Sons, Inc. Issue is WON Butte can exercise the right of legal
redemption. Court held YES. (See Doctrine)
Facts:
 Jose Ramirez, during his lifetime, was a co-owner of a house and lot issued in the
name of the following co-owners: Marie Ramirez 1/6; Jose Ramirez 1/6; Jose
Ramirez 1/6; Belen Ramirez 1/6; Rita Ramirez; and Jose Ramirez 1/6.
 Jose Ramirez died. Special Proceedings was instituted to settle his estate (included
his 1/6 share in the co-owned property).
  In his will, he bequeathed his estate to his children and grandchildren and 1/3 of
the free portion to Angela Butte.
o Will was admitted to probate, the estate proceedings are still pending on
account of the claims of creditor which exceed the assets of the
deceased.
o BPI was appointed judicial administrator.
 Marie Ramirez, one of the co-owners, sold her undivided share to Manuel Uy &
Sons, Inc. for P500K.
 After the execution by her attorney-in-fact, of an affidavit to the effect that formal
notices of the sale had been sent to all possible redemptioners, the deed of sale
was duly registered and TCT was cancelled and a new one was issued in the name
of vendee.
o Same day, Manuel Uy & Sons sent a letter to BPI as judicial administrator
of the estate informing it of the sale.
o Letter was forwarded by BPI to Butte.
o Aside from this letter, vendor wrote BPI confirming vendee’s letter
regarding the sale of her 1/6 share.
 Angela Butte sent a letter and a PNB check to Manuel Uy & Sons offering to redeem
the 1/6 share sold by Marie Ramirez.
o Tender was refused, on same day Butte consigned the amount inc court
and filed action for legal redemption.
Issue/s: WON Angela Butte, having been bequeathed 1/3 of the free portion of the estate of
Jose V. Ramirez, can exercise the right of legal redemption over the 1/6 share sold by Mrs.
Marie Garnier Vda. de Ramirez despite the presence of the judicial administrator and pending
the final distribution of her share in the testate proceeding.
Held: Yes.
Ruling:
That the appellant Angela M. Butte is entitled to exercise the right of legal redemption is
clear. As testamentary heir of the estate of J. V. Ramirez, she and her co-heirs acquired an
interest in the undivided one-sixth (1/6) share owned by her predecessor (causante) in the
Santa Cruz property, from the moment of the death of the aforesaid co-owner, J. V. Ramirez.
By law, the rights to the succession of a deceased person are transmitted to his heirs from the
moment of his death, and the right of succession includes all property rights and obligations
that survive the decedent.
As a consequence of this fundamental rule of succession, the heirs of Jose V. Ramirez
acquired his undivided share in the Sta. Cruz property from the moment of his death; and
from that instant, they became co-owners in the aforesaid property, together with the
original surviving co-owners of their decedent (causante). A co-owner of an undivided share
is necessarily a co-owner of the whole. Wherefore, any one of the Ramirez heirs, as such
co-owner, became entitled to exercise the right of legal redemption (retracto de
36
comuneros) as soon as another co-owner (Marie Garnier Vda. de Ramirez) had sold her
undivided share to a stranger, Manuel Uy & Sons, Inc. This right of redemption vested
exclusively in consideration of the redemptioner’s quality of co-owner, independently of
the size of the redemptioner’s share which the law nowhere takes into account.
The situation is in no wise altered by the existence of a judicial administrator of the estate of
Jose V. Ramirez. While under the Rules of Court the administrator has the right to the
possession of the real and personal estate of the deceased, so far as needed for the payment
of the decedent’s debts and the expenses of administration (sec. 3, Rule 85), and the
administrator may bring or defend actions for the recovery or protection of the property or
rights of the deceased (sec. 2, Rule 88), such rights of possession and administration do not
include the right of legal redemption of the undivided share sold to Uy & Company by Mrs.
Garnier Ramirez. The reason is obvious: this right of legal redemption only came into
existence when the sale to Uy & Sons, Inc. was perfected, eight (8) years after the death of
Jose V. Ramirez, and formed no part of his estate. The redemption right vested in the heirs
originally, in their individual capacity; they did not derivatively acquire it from their decedent,
for when Jose V. Ramirez died, none of the other co-owners of the Sta. Cruz property had as
yet sold his undivided share to a stranger. Hence, there was nothing to redeem and no right
of redemption; and if the late Ramirez had no such right at his death, he could not transmit it
to his own heirs. Much less could Ramirez acquire such right of redemption eight years after
his death, when the sale to Uy & Sons, Inc. was made; because death extinguishes civil
personality, and, therefore, all further juridical capacity to acquire or transmit rights and
obligations of any kind (Civil Code of the Phil., Art. 42).
All that the law requires is that the legal redemptioner should be a co-owner at the time
the undivided share of another co-owner is sold to a stranger. Whether or not the
redemptioner will continue being a co-owner after exercising the legal redemption is
irrelevant for the purposes of the law.
Nor can it be argued that if the original share of Ramirez is sold by the administrator, his heirs
would stand in law as never having acquired that share. This would only be true if the
inheritance is repudiated or the heir’s quality as such is voided. But where the heirship is
undisputed, the purchaser of hereditary property is not deemed to have acquired the title
directly from the deceased Ramirez, because a dead man cannot convey title, nor from the
administrator who owns no part of the estate; the purchaser can only derive his title from the
Ramirez heirs, represented by the Administrator, as their trustee or legal representative.
The right of appellant Angela M. Butte to make the redemption being established, the next
point of inquiry is whether she had made or tendered the redemption price within the 30
days from notice as prescribed by law. This period, be it noted, is peremptory, because the
policy of the law is not to leave the purchaser’s title in uncertainty beyond the established 30-
day period.
In considering whether or not the offer to redeem was timely, we think that the notice given 257. SPS. CONEJERO v. CA, V. RAFFINAN, ENRIQUE TORRES
by the vendee (buyer) should not be taken into account. The text of Article 1623 clearly and G.R. No. L-21812; 29 APRIL 1966
expressly prescribes that the thirty days for making the redemption are to be counted from Topic: redemption | Ponente: J. JBL Reyes | Author: Pineda
notice in writing by the vendor. Under the old law (Civ. Code of 1889, Art. 1524), it was
immaterial who gave the notice; so long as the redeeming co-owner learned of the alienation
in favor of the stranger, the redemption period began to run. It is thus apparent that the Doctrine:
Philippine legislature in Article 1623 deliberately selected a particular method of giving Written notice is indispensable. Mere knowledge of the sale, acquired in some other manner
notice, and that method must be deemed exclusive . by the redemptioner, does not satisfy the statute

The notice which became operative is that given by Mrs. Chambers, in her capacity as
Requisites of redemption: The offer must be valid and effective, and accompanied by an
attorney-in-fact of the vendor Marie Garnier Vda. de Ramirez. Under date of December 11, actual tender of an acceptable redemption price
1958, she wrote the Administrator Bank of the Philippine Islands that her principal’s one-
sixth (1/6) share in the Sta. Cruz property had been sold to Manuel Uy & Sons, Inc. for
P500,000.00. The Bank received this notice on December 15, 1958, and on the same day
Emergency Recit: The SC did not allow Conejero, co-owner of subject property, to redeem
endorsed it to Mrs. Butte, care of Delgado, Flores and Macapagal (her attorneys), who
the interest sold to Raffinan through the exercise of the right of redemption because
received the same on December 16, 1958. Mrs. Butte tendered redemption and upon its
Conejero failed to make valid tender of payment of redemption price. SC considered such
refusal, judicially consigned the price of P500,000 on January 15, 1959. The latter date was
requirement to be mandatory.
the last one of the thirty days allowed by the Code for the redemption, counted by
excluding December 16, 1958 and including January 15, 1959, pursuant to Article 13 of the
Civil Code. Therefore, the redemption was made in due time.
Facts:
The date of receipt of the vendor’s notice by the Administrator Bank (December 15) cannot
be counted as determining the start of the thirty days; for the Administrator of the estate was  Paz Torres-Conejero (petitioner) and Enrique Torres (respondent) inherited the
not a proper redemptioner, since, as previously shown, the right to redeem the share of subject property from parents. Enrique sold his half interest to Raffinan, with right
to repurchase within one year. Paz Conejero was not informed of the sale.
Marie Garnier did not form part of the estate of Jose V. Ramirez.
 When Paz’s husband Conejero was informed by Enrique about the deed of sale,
Sps. Conejero went to the buyers, offering to redeem Enrique’s share at P34,000.
They only offered P10,000 in check, with a promise that they will obtain a loan to
cover the rest of the price.

 Sps. Conejero filed an action to compel Raffinan and Torres to permit redemption of
half interest of Enrique.

 Raffinan argues: Conejero lost right of redemption for failing to exercise it within
statutory period of 30 days from notice

o Raffinan argues: Conejero knew of sale as early as 3 April 1951 (the date
of sale);

o Conejero argues: no notice; sale was discovered only on 19 August 1952,

on which date they immediately made an offer to redeem; other offers
were made subsequently on 7 and 8 September 1952; no tender of
redemption price required

37

Issue/s: W/N there was a valid offer to redeem
Held: No. Conejero failed to make valid tender of payment of complete redemption price, as
required by the law.
Ruling:
Written notice is indispensable
 Written notice is indispensable. Mere knowledge of the sale, acquired in some
other manner by the redemptioner, does not satisfy the statute.
o The written notice was obviously exacted by the Code to remove all
uncertainty as to the sale, its terms and its validity, and to quiet any
doubts that the alienation is not definitive.
o There is no particular form. Once the redemptioner is notified in writing
of the sale and the particulars thereof, the 30 days for redemption start
running, and the redemptioner has no real cause to complain.
Alternative arguments: tender of price not required when redemption price is excessive –
SC rejected this argument
 In the case at bar, the redemptioners (Conejero) admit that on August 19, 1952 the
co-owner-vendor, Enrique showed and gave Conejero a copy of the 1951 deed of
sale in favor of Raffiñan. The furnishing of this copy was equivalent to the giving of
written notice required by law: it came from the vendor and made available in
writing the details and finality of the sale.
o As a necessary consequence, the 30-day period for the legal redemption
by co-owner Paz Torres began to run its course from and after August 19,
1952, ending on September 18, of the same year. Thus, no prescription
yet.
Resolution of MR Denied by SC
Failure to make tender offer of redemption price renders redemption ineffective
 The law grants unto the co-owner of a property the right of redemption.
 Requisites of redemption:
o The offer must be valid and effective
o Accompanied by an actual tender of an acceptable redemption price
 Conejero failed to make a valid tender of the price. Conejero merely offered a
P10,000 check, which is not even legal tender and which Raffinan rejected. Raffinan
38
cannot be compelled to accept payment by installment from Conejero, a
redemptioner, as it would ultimately result in an indefinite extension of the 30-day
redemption period, when the purpose of the law in fixing a short and definite term
is clearly to avoid prolonged and anti-economic uncertainty as to ownership of the
thing sold
o The offer was not in pursuance of a legal and effective exercise of the
right of redemption as contemplated by law; hence, refusal of the offer
on the part of Raffinan is justified. The conditions precedent for the valid
exercise of the right do not exist.
 A buyer cannot be expected to entertain an offer of redemption without attendant
evidence that the redemptioner can, and is willing to accomplish the repurchase
immediately. A different rule would leave the buyer open to harassment by
speculators or crackpots, as well as to unnecessary prolongation of the redemption
period, contrary to the policy of the law. While consignation of the tendered price is
not always necessary because legal redemption is not made to discharge a pre-
existing debt a valid tender is indispensable, for the reasons already stated.
 The right of a redemptioner to pay a reasonable price under Article 1620 does not
excuse him from the duty to make proper tender of the price that can be honestly
deemed reasonable under the circumstances, without prejudice to final arbitration
by the courts; nor does it authorize said redemptioner to demand that the vendee
accept payment by installments.
 At any rate, Conejeros, in making their offer to redeem, never contested the
reasonableness of the price recited in the deed of sale.
 While the co-owner's right of legal redemption (retracto legal de comuneras) is a
substantial right, it is exceptional in nature, limited in its duration and subject to
strict compliance with the legal requirements. One of these is that the
redemptioner should tender payment of the redemption money within 30 days
from written notice of the sale by the co-owner, and, as we have ruled, the buyer of
the co-owner's share cannot be compelled, nor is he obligated, to accept payment
in installments. Otherwise, the 30-day limitation fixed by law for the exercise of the
right to redeem would be nullified, or be indefinitely evaded.
 Whether or not the petitioners exercised diligence in asserting their willingness to
pay is irrelevant. Redemption by the co-owners of the vendor within 30 days is not
a matter of intent, but is effectuated only by payment, or valid tender, of the price
within said period.
 The offer of the redemption price is not bona fide where it is shown that the offerer 258 Alonzo v CA (supra, Family Relations)
could not have made payment in due time if the offer had been accepted. G.R. No. 72873 May 28, 1987| 28 MAY 1987| J. CRUZ | SAYO
TOPIC: Redemption

DOCTRINE: Where co-heirs filed action for redemption of co-heir's sold share only after
thirteen years had elapsed from the sale, they are deemed to have been actually informed
thereof sometime during those years although no written notice of sale was given to them.

ER: 5 siblings owned pro indiviso a parcel of land. One sibling sold his undivided share to
petitioner through sale. Another sold her share also to petitioners via Con Pacto de Retro
Sale. 13 years after the sale, another sibling sought to redeem the property. After another
year (14 years after sale) another sibling invoked same right. It is apparent that the action was
filed more than 30 days after the sale but without notice. SC held that written notice is
required by law to commence the counting of the prescriptive period. BUT, the spirit of the
law declares that Where co-heirs filed action for redemption of co-heir's sold share only after
thirteen years had elapsed from the sale, they are deemed to have been actually informed
thereof sometime during those years although no written notice of sale was given to them.

FACTS:
6. Five brothers and sisters inherited in equal pro indiviso shares a parcel of land
registered in the name of their deceased parents.

7. 1963- One of them (sibling 1/Celestino Padua) transferred his undivided share of
the herein petitioners by way of absolute sale.

8. A year later (1984) Eustaquia Padua (sibling 2) sold her own share to the same
vendees (petitioners Aonzo) via "Con Pacto de Retro Sale,".

9. By virtue of such agreements, the petitioners occupied the said lot representing the
portions sold to them.

10. On February 25, 1976, Mariano Padua (sibling 3), one of the five coheirs, sought to
redeem the area sold to the spouses Alonzo- dismisses because he was already a
US citizen

11. On May 27, 1977, however, Tecla Padua (sibling 4), another co-heir, filed her own
complaint invoking the same right of redemption claimed by her brother.

12. TC: dismissed, not filed within 30 days from the sale (although no notice, co-heirs
and petitioners are neighbors and friends. They also live in the same area. SO, alam
nila ung sale)

39
 13. CA: reversed; notice required by the said article was written notice and that actual
notice would not suffice as a substitute
ISSUE/S: WON action prescribed- YES. Although there was notice, respondents cannot invoke
ignorance of sale despite actual knowledge for it shall be against the spirit of the law.
HELD/RULING:
 Both parties invoked Art. 1088
Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the
partition, any or all of the co-heirs may be subrogated to the rights of the purchaser
by reimbursing him for the price of the sale, provided they do so within the period
of one month from the time they were notified in writing of the sale by the vendor.
 Thus, according to Justice J.B.L. Reyes, who was the ponente of the Court,
furnishing the co-heirs with a copy of the deed of sale of the property subject to
redemption would satisfy the requirement for written notice. "So long, therefore,
as the latter (i.e., the redemptioner) is informed in writing of the sale and the
particulars thereof," he declared, "the thirty days for redemption start running. "
 Butte v. UY,
Art. 1623. The right of legal pre-emption or redemption shall not be exercised
except within thirty days from the notice in writing by the prospective vendor, or by
the vendors, as the case may be. The deed of sale shall not be recorded in the
Registry of Property, unless accompanied by an affidavit of the vendor that he has
given written notice thereof to all possible redemptioners.
 In requiring written notice, Article 1088 seeks to ensure that the redemptioner is
properly notified of the sale and to indicate the date of such notice as the starting
time of the 30-day period of redemption. Considering the shortness of the period,
it is really necessary, as a general rule, to pinpoint the precise date it is supposed to
begin, to obviate any problem of alleged delays, sometimes consisting of only a day
or two.
 The instant case presents no such problem because the right of redemption was
invoked not days but years after the sales were made in 1963 and 1964. The
complaint was filed by Tecla Padua in 1977, thirteen years after the first sale and
fourteen years after the second sale. The delay invoked by the petitioners extends
to more than a decade, assuming of course that there was a valid notice that tolled
the running of the period of redemption.
 In the face of the established facts, we cannot accept the private respondents'
pretense that they were unaware of the sales made by their brother and sister in
1963 and 1964. By requiring written proof of such notice, we would be closing our
eyes to the obvious truth in favor of their palpably false claim of ignorance, thus
exalting the letter of the law over its purpose. The purpose is clear enough: to make
sure that the redemptioners are duly notified. We are satisfied that in this case the
other brothers and sisters were actually informed, although not in writing, of the
sales made in 1963 and 1964, and that such notice was sufficient.

 Article 1623 deliberately selected a particular method of giving notice, and that
notice must be deemed exclusive," the Court held that notice given by
the vendees and not the vendor would not toll the running of the 30-day period.

 BUT. It is a cardinal rule that, in seeking the meaning of the law, the first concern of
the judge should be to discover in its provisions the intent of the lawmaker.

 The spirit, rather than the letter of a statute determines its construction, hence, a
statute must be read according to its spirit or intent. For what is within the spirit is
within the letter but although it is not within the letter thereof, and that which is
within the letter but not within the spirit is not within the statute. Stated differently,
a thing which is within the intent of the lawmaker is as much within the statute as if
within the letter; and a thing which is within the letter of the statute is not within
the statute unless within the intent of the lawmakers.

40
259 HEIRS OF JOSE REYES, NAMELY MAGDALENA REYES v AMANDA REYES, ET AL
G.R. No. 158377 | 13 August 2010 | J. Bersamin | TIGLAO
TOPIC: Redemption
Note: Omg sobrang detailed talaga ng case na to… I cannot huhuhu sorry in advance… I tried
 the property and paid the RPT.
DOCTRINE: Considering that sa oras na silay makinabang, the period of redemption stated in
the Kasulatan ng Biling Mabibiling Muli, signified that no definite period had been stated,
the period to redeem should be ten years from the execution of the contract, pursuant to
Articles 1142 and 1144 of the Civil Code and upon the expiration of said 10-year period,
mortgagees Spouses Francia or their heirs should have foreclosed the mortgage, but they did
not do so.
ER: Leoncia and children sold a land which they owned to Spouses Francia under a
Kasulatang Mabibiling Muli with a right to repurchase sa oras na sila’y makinabang. Despite
the sale, Teofilo and Jose Jr remained in possession of the property. They failed to repurchase
the property. Alejandro, the son of Jose Sr, paid the redemption price. Heirs of Francia
consolidated title under Alejandro’s name. Together with Leoncia and Jose Sr, Alejandro
executed a Magkakalakip na Salaysay acknowledging the right of Leoncia and children to
repurchase the property at any time. When Alejandro died, his wife, Amanda, asked the Heirs
of Teofilo and Jose Jr, who were in possession of the property, to vacate it. The Heirs argue
that the very first sale to Spouses Francia was an equitable mortgage and not a pacto de retro
sale; hence, Heirs of Francia could not have sold the property to Alejandro. RTC ruled in favor
of Amanda Reyes. CA ruled that the failure of petitioners to move for reformation of the
instrument has effectively barred them from claiming that it is an equitable mortgage. The
issue is whether or not petitioners’ may still redeem the property.
Supreme Court ruled in the affirmative. Heirs of Reyes are not barred from claiming that it is
an equitable mortgage by their failure to redeem the property for a long period of time.
Although they failed to pay by July 9, 1965 and having failed to foreclose the mortgage upon
the expiration of the 10 year period, the mortgagees Sps Francias or their heirs did not do so.
Instead, they accepted Alejandro’s payments until the debt was fully satisfied. The acceptance
of payments even beyond the 10 year period of redemption estopped the mortgagees’ heirs
from insisting the period to redeem the property had already expired.
FACTS:
15. Antonio Reyes and Leoncia Reyes were owners of a parcel of land where they
constituted their dwelling.
16. They had four children, namely: Jose Sr., Teofilo, Jose, Jr., and Potenciana.
17. Antonio Reyes died intestate and was survived by Leoncia and three sons and Heirs
of Potenciana, the latter having predeceased Antonio.
41
18. On 09 July 1955, Leoncia and her three sons executed a deed denominated
Kasulatan ng Biling Mabibiling Muli, whereby they sold the land to Spouses Francia
subject to the seller’s right to repurchase oras na sila’y makinabang.
19. Despite this sale, Teofilo and Jose, Jr and their families remained in possession of
20. Spouses Francia died intestate without Leoncia and children redeeming the
property. Alejandro Reyes, son of Jose Sr, paid the redemption price to Heirs of
Francia, who by reason of payment, transferred and conveyed to Alejandro all the
rights and interests to Alejandro.
21. On 21 August 1970, Alejandro executed a Kasulatan ng Pagmeme-ari declaring that
he had acquired all the rights and interests of the Heirs of Francia after the sellers’
failed to repurchase within the redemption period.
22. On 17 October 1970, Alejandro, Leoncia, and Jose Sr, executed a Magkakalakip na
Salaysay which acknowledges the right of Leoncia, Jose Jr and Jose Sr to repurchase
the property at any time for the same amount.
23. Leoncia died intestate and was survived by Jose Sr, Teofilo, Jose Jr, and the Heirs of
Potenciana.
24. Alejandro, likewise died intestate survived by his wife, Amanda Reyes, and her
children.
25. Amanda asked the Heirs of Teofilo and Jose Jr (petitioners) to vacate the property
because she and her children needed it.
26. After petitioners failed to comply, she filed a complaint seeking their eviction.
27. Amanda Reyes filed an action for quieting of title and reconveyance in the RTC.
They alleged that Alejandro acquired ownership of the property by virtue of the
deed Pagsasa-ayos ng Pag-aari at Pagsasalin executed by the Heirs of Sps Francia.
Based on that deed, Alejandro had consolidated his ownership over that property.
Further, the Magkasanib na Salaysay where Alejandro granted to Leoncia, his
father, and uncles, the right to repurchase the property but they failed to do so.
28. Heirs of Reyes argued that the Kasulatan ng Biling Mabibiling Muli was an
equitable mortgage, not a pacto de retro sale; that the mortgagors had retained
ownership of the property; that the heirs of the Spouses Francia could not have
validly sold the property to Alejandro through the Pagsasaayos ng Pag-aari at
Pagsasalin; that Alejandro’s right was only to seek reimbursement of the P500.00
he had paid from the co-owners, namely: Leoncia, Teofilo, Jose, Jr. and Jose, Sr. and
the heirs of Potenciana; and that Alejandro could not have also validly consolidated
ownership through the Kasulatan ng Pagmeme-ari, because a consolidation of
ownership could only be effected via a court order.
29. RTC: In favor of respondents. It declared that Alejandro had acquired ownership of
the property upon the failure of the petitioners’ predecessors to repurchase the
property; that the joint affidavit executed by Alejandro, Leoncia and Jose, Jr. and
Jose, Sr., to extend the period of redemption was inefficacious, because there was
no more period to extend due to the redemption period having long lapsed by the
time of its execution; and that the action should be dismissed insofar as the heirs of
Potenciana were concerned, considering that Potenciana, who had predeceased
her parents, had no successional rights in the property.
 30. CA: Ruled that petitioners’ failure to file an action for reformation of the Kasulatan
ng Biling Mabibiling Muli to reflect the true intention of the parties within ten
years from the deed’s execution barred them from claiming that the transaction
executed between Leoncia and children and Sps Francia was an equitable
mortgage. The CA agreed with the RTC that the Salaysay did not effectively extend
the period for Leoncia and her children to repurchase the property considering that
the period to repurchase had long lapsed by the time the agreement to extend it
was executed.
ISSUE/S:
1. W/N the petitioners are barred from claiming that the transaction entered into by
their predecessors-in-interest was an equitable mortgage and not a pacto de retro
sale. – NO, they are not barred.
2. W/N the CA erred in affirming the findings of the court a quo that the Magkasanib
ng Salaysay executed by Alejandro, Leoncia, and Jose, Jr., wherein Leoncia and her
children were granted by Alejandro the right to repurchase the property at anytime
for the amount of Php 500.00, was of no legal significance – NO
HELD/RULING:
The CA correctly concluded that the true agreement of the parties vis--vis the Kasulatan ng
Biling Mabibiling Muli was an equitable mortgage, not a pacto de retro sale. There was no
dispute that the purported vendors had continued in the possession of the property even
after the execution of the agreement; and that the property had remained declared for
taxation purposes under Leoncias name, with the realty taxes due being paid by Leoncia,
despite the execution of the agreement.
Are the petitioners now barred from claiming that the transaction under the Kasulatan ng
Biling Mabibiling Muli was an equitable mortgage by their failure to redeem the property for
a long period of time?
The petitioners contend that prescription, if it must apply to them, should as well be applied
to the respondents, who had similarly failed to enforce their right under the equitable
mortgage within ten years from its execution on July 9, 1955. Consequently, they urge the
upholding of the original intention of the parties to the Kasulatan ng Biling Mabibiling Muli,
without taking prescription into account, because both parties did not enforce their
respective rights within the ten-year prescriptive period, is more in keeping with fairness and
equity.
We agree with the petitioners.
Considering that “sa oras na silay makinabang”, the period of redemption stated in the
Kasulatan ng Biling Mabibiling Muli, signified that no definite period had been stated, the
period to redeem should be ten years from the execution of the contract, pursuant to Articles
1142 and 1144 of the Civil Code. Thus, the full redemption price should have been paid by
July 9, 1955; and upon the expiration of said 10-year period, mortgagees Spouses Francia or
42
their heirs should have foreclosed the mortgage, but they did not do so. Instead, they
accepted Alejandro’s payments, until the debt was fully satisfied by August 11, 1970.
The acceptance of the payments even beyond the 10-year period of redemption estopped
the mortgagee’s heirs from insisting that the period to redeem the property had already
expired. Their actions impliedly recognized the continued existence of the equitable
mortgage. The conduct of the original parties as well as of their successors-in-interest
manifested that the parties to the Kasulatan ng Biling Mabibiling Muli really intended their
transaction to be an equitable mortgage, not a pacto de retro sale.
In Cuyugan v. Santos, the purported buyer under a so-called contract to sell with right to
repurchase also accepted partial payments from the purported seller. We held that the
acceptance of partial payments was absolutely incompatible with the idea of irrevocability of
the title of ownership of the purchaser upon the expiration of the term stipulated in the
original contract for the exercise of the right of redemption. Thereby, the conduct of the
parties manifested that they had intended the contract to be a mortgage, not a pacto de retro
sale.
EQUALLY IMPORTANT:
What was the effect of the Magkasanib na Salaysay?
Both the trial court and the CA declared that the Magkasanib na Salaysay, which extended
the redemption period of the mortgaged property, was inefficacious, because the period to
redeem could no longer be extended after the original redemption period had already
expired.
In contrast, the petitioners submit that disregarding the Magkasanib na Salaysay made no
sense, considering that the respondents predecessors-in-interest admitted therein that the
petitioners had a right to redeem the property.
The respondents and the lower courts positions cannot be sustained.
The provisions of the Civil Code governing equitable mortgages disguised as sale contracts,
like the one herein, are primarily designed to curtail the evils brought about by contracts of
sale with right to repurchase, particularly the circumvention of the usury law and pactum
commissorium. Courts have taken judicial notice of the well-known fact that contracts of sale
with right to repurchase have been frequently resorted to in order to conceal the true nature
of a contract, that is, a loan secured by a mortgage. It is a reality that grave financial distress
renders persons hard-pressed to meet even their basic needs or to respond to an emergency,
leaving no choice to them but to sign deeds of absolute sale of property or deeds of sale with
pacto de retro if only to obtain the much-needed loan from unscrupulous money lenders.[30]
This reality precisely explains why the pertinent provision of the Civil Code includes a peculiar
rule concerning the period of redemption, to wit:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:

xxx

(3) When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;

Ostensibly, the law allows a new period of redemption to be agreed upon or granted even
after the expiration of the equitable mortgagors right to repurchase, and treats such
extension as one of the indicators that the true agreement between the parties is an
equitable mortgage, not a sale with right to repurchase. It was indubitable, therefore, that
the Magkasanib na Salaysay effectively afforded to Leoncia, Teofilo, Jose, Sr. and Jose, Jr. a
fresh period within which to pay to Alejandro the redemption price of P500.00.

43

260 Sps. Hojas v. Phil Amanah Bank, and Kue
G.R. No. 193453 June 5, 2013| J. Mendoza| Valera
TOPIC: Redemption
DOCTRINE:
The general rule in redemption is that it is not sufficient that a person offering to redeem
manifests his desire to do so. The statement of intention must be accompanied by an actual
and simultaneous tender of payment. This constitutes the exercise of the right to
repurchase
ER: Petioners obtained a loan from PAB for 450k secured by a mortgage. They failed to pay
PAB thus foreclosure sale, PAB obtained the property. The OIC president of PAB sent a letter
to Petitioners stating that they are offering that they pay the redemption price by Dec
rather than April when the redemption period would lapse if they would be part of the
incentive program which would be in term payment. PAB sent a letter to Petitioners stating
that the property would be again sold in a public sale and by Nov 1988 the property was
sold to Kue via apublic auction. PAB and Kue sent demands to vacate to Petitioners.
Petitioners filed a case for nullity of the foreclosure sale on the grounds that the
redemption period was extended thus the sale was premature. The RTC dismissed the
complaint CA affirmed SC affirmed holding that the letter did not extend the 1 yr
redemption period and that even if they did signify their intention to redeem it was not
perfected because it was not accompanied with complete tender of payment.
FACTS:
7. Petitioners alleged that they secured a loan from Respondent(PAB) in the amount
of 450k which was secured by a mortgage covering personal and real properties.
8. From May 14, 1981 to June 27, 1986, they have made various payments, but
however they assert that PAB did not properly credit their payments as only 13
payments were only credited erroneously amounting to 317k.
9. For failure to pay the loan, PAB extrajudicially forclosed the mortgage, there after a
public auction occurred on April 21, 1987 where PAB acquired the said property.
10. Petitioners allege that on March 9, 1988 through the interventions of Sen. Aquilino
Pimintel and Carpizo(OIC pres of PAB) they wrote a letter to Petitioner’s son
informing him that although the one-year redemption period would expire on April
21, 1988, by virtue of the bank’s incentive scheme, the redemption period was
extended until December 31, 1988
11. That despite the letter PAB wrote Petitioner that the real properties acquired
wouldb e sold in a public bidding before the end of aug 1988.
12. That on Nov 4 1988, a public bidding was conducted, the property was awarded to
Kue.
44
 Subsequently they received a letter from PAB informing tham that they had 15
days to vacate.
13. Petitioners filed an action for “Determination of True Balance of Mortgage Debt,
Annulment/Setting Aside of Extrajudicial Foreclosure of Mortgage and Damages,
with Prayer for Preliminary Injunction" against PAB”
14. RTC dismissed the complaint ruling that:
a. PAB was not guilty of bad faith in conducting the extrajudicial foreclosure as it,
at one time, even suspended the conduct of the foreclosure upon the request
of petitioners, who, nevertheless, failed to exert effort to settle their accounts.
b. because petitioners failed to redeem their properties within the period
allowed, PAB became its absolute owner and, as such, it had the right to sell
the same to Kue, who acquired the property for value and in good faith
c. the subsequent foreclosure and auction sale having been conducted above
board and in accordance with the requisite legal procedure, collusion between
PAB and Kue was certainly alien to the issue
15. CA affirmed the RTC ruling holding that the period of redemption was never
extended. The date "December 31, 1988" was not an extension of the redemption
period. It was merely the last day for the availment of the liberalized payment for
the repossession of foreclosed assets under PAB’s incentive scheme. PAB, through
said letter, did not make an unqualified representation to petitioners that it had
extended the redemption period. As such, PAB could not be said to have violated
the principle of estoppel when it conducted a public sale on November 4, 1988
16. SC arguments
Petitioners: PAB was estopped because they made it appear that the 1 yr
redemption period was extended by the Incentive scheme
PAB: the purpose of the incentive scheme was to give previous owners the chance
to redeem their properties on easy term payments, the letter was an invitation for
Petitioners to submit a proposal to PAB not to extend the one-year redemption
period.
ISSUE/S:
2. W/N there was an extension of the redemption period.
HELD/RULING;
 Estoppel would not lie against one who in the first place did not make any
representation.
 perusal of the letter, on which petitioners based their position that the
redemption period had been extended, shows otherwise
 As correctly held by the RTC and upheld by the CA, the date "December 31,
1988" refers to the last day when owners of foreclosed properties, like
petitioners, could submit their payment proposals to the bank. The letter was
very clear. It was about the availment of the liberalized payment scheme of the
bank. On the last day for redemption, the letter was also clear. It was April 21,
1988. It was never extended.
 The opportunity given to the petitioners was to avail of the liberalized
payment scheme which program would expire on December 31, 1988. As
 explained by Abraham Iribani (Iribani), the OIC of the Project Development  Even the complaint instituted by respondents cannot aid their plight because
Department of PAB, it was to give a chance to previous owners to repossess the institution of an action to annul a foreclosure sale does not suspend the
their properties on easy term basis, possibly by condonation of charges and running of the redemption period.
penalties and payment on instalment. The letter of Carpizo was an invitation to  In the case at bench, the record is bereft of concrete evidence that would
the petitioners to come to the bank with their proposal. It appears that the show that, aside from the fact that petitioners manifested their intention to
petitioners could not come up with a proposal acceptable to the bank avail of the scheme, they were also ready to pay the redemption price. Hence,
 Here, there is no estoppel to speak of. The letter does not show that the Bank as they failed to exercise their right of redemption and failed to take advantage
had unqualifiedly represented to the Hojases that it had extended the of the liberalized incentive scheme, PAB was well within its right to sell its
redemption period to December 31, 1988. Thus, the Hojases have no basis in property in a public sale
positing that the public sale conducted on November 4, 1988 was null and void
for having been prematurely conducted.
 Moreover, petitioners’ allegation that they had signified their intention to avail of
the incentive scheme (which they have equated to their intention to redeem the
property), did not amount to an exercise of redemption precluding the bank from
making the public sale.
 The general rule in redemption is that it is not sufficient that a person offering
to redeem manifests his desire to do so. The statement of intention must be
accompanied by an actual and simultaneous tender of payment. This
constitutes the exercise of the right to repurchase
 In several cases decided by the Court where the right to repurchase was held
to have been properly exercised, there was an unequivocal tender of payment
for the full amount of the repurchase price. Otherwise, the offer to redeem is
ineffectual. Bona fide redemption necessarily implies a reasonable and valid
tender of the entire repurchase price, otherwise the rule on the redemption
period fixed by law can easily be circumvented.
- Moreover, jurisprudence also characterizes a valid tender of payment as
one where the full redemption price is tendered. Consequently, in this
case, the offer by respondents on July 24, 1986 to redeem the foreclosed
properties for ₱1,872,935 and the subsequent consignation in court of
₱1,500,000 on August 27, 1986, while made within the period of
redemption, was ineffective since the amount offered and actually
consigned not only did not include the interest but was in fact also way
below the ₱2,782,554.66 paid by the highest bidder/purchaser of the
properties during the auction sale.
 Further Art 616 of the Civil Code provides that the Vendor cannot avail himself
od the right to repurchase w/o returning to the vendee the proce of the sale.
 Respondents' repeated requests for information as regards the amount of loan
availed from the credit line and the amount of redemption, and petitioner's failure
to accede to said requests do not invalidate the foreclosure. Respondents can find
other ways to know the redemption price. For one, they can examine the Certificate
of Sale registered with the Register of Deeds to verify the purchase price, or upon
the filing of their complaint, they could have moved for a computation of the
redemption price and consigned the same to the court. At any rate, whether or not
respondents '"were diligent in asserting their willingness to pay is irrelevant.
Redemption within the period allowed by law is not a matter of intent but a
question of payment or valid tender of the full redemption price within said period.

45

261 SPS. MONTANO and MERLINDA TOLOSA v. UNITED COCONUT PLANTERS BANK
G.R. No. 183058, April 3, 2013
Topic: Redemption| Ponente: J. Perez| Author: Acido
Doctrine: At any rate, the exception made in Sulit had been held inapplicable where, as here,
the period to redeem has already expired or when the ownership over the property had
already been consolidated in favor of the mortgagee-purchaser. Having consolidated its
ownership over the subject properties after the Sps. Tolosa failed to exercise their right of
redemption, UCPB was correctly found by the CA entitled to a writ of possession.
ER: Sps. Tolosa mortgaged 4 properties to UCPB. When they failed to pay, UCPB foreclosed,
raising 17.24M credited against the Sps.’ 24.25M obligation. Sps. Tolosa failed to exercise
their right of redemption within the one-year period, so UCPB consolidated its ownership and
asked for a writ of possession. Sps. Tolosa opposed on the ground that there was a pending
case for annulment of the foreclosure sale. RTC ruled in their favor, but CA ruled for UCPB. SC
held that having consolidated its ownership over the subject properties after the Sps. Tolosa
failed to exercise their right of redemption, UCPB was correctly found by the CA entitled to a
writ of possession.
Facts:
14. Petitioners Sps. Tolosa entered into a Credit Agreement with respondent UCPB for
the purpose of availing of the latter’s credit facilities. To secure their credit
availments, the Sps. Tolosa executed deeds of real estate mortgage over 4
properties in Aklan.
15. For failure of the Sps. Tolosa to pay their principal obligation which amounted to
₱13.3M exclusive of interests, penalties, and other charges, UCPB foreclosed the
mortgage on the aforesaid realties and filed a petition for the extra-judicial sale
thereof on 22 October 1999.
16. After the due notice and publication, the mortgaged properties were sold on 4
January 2000 at a public auction where UCPB tendered the highest bid of ₱17.24M.
The proceeds of the sale were credited towards the partial satisfaction of the Sps.
Tolosa’s mortgage obligation which, inclusive of interests, penalties, and other
charges, was pegged at ₱24,253,847.64.
17. For failure of the Sps. Tolosa to exercise their right of redemption within the
prescribed one-year period, UCPB went on to consolidate its ownership over the
subject realties on 22 January 2001. On 2 September 2004, UCPB filed an ex-parte
petition for issuance of a writ of possession in a cadastral case.
18. Sps. Tolosa opposed, calling the RTC’s attention to the pendency of a complaint for
declaration of nullity of promissory notes, foreclosure of mortgage and certificate
of sale as well as accounting and damages which they instituted against UCPB. They
alleged that UCPB misled them into signing the Credit Agreement, Promissory
Notes, and REM sued upon. In addition to not releasing the full amount of their
loans, UCPB was likewise faulted for supposedly failing to disclose the actual
46
interests it charged and for causing the extrajudicial foreclosure of the mortgage
despite the Sps. Tolosa’s overpayment of their loans.
19. RTC: Held in abeyance the issuance of writ of possession, citing equity and
substantial justice. CA: Nullified RTC decision and issued writ of possession; pending
complaint cannot defeat UCPB’s right to writ of possession (ministerial nature of
issuance)
Issue: Whether UCPB is entitled to the writ of possession.
Held/Ratio: Yes. Petition denied.
 A writ of possession is simply an order by which the sheriff is commanded by the court
to place a person in possession of a real or personal property.
 Under Section 7 of Act No. 3135, as amended, a writ of possession may be issued in
favor of a purchaser in a foreclosure sale either
(1) within the one-year redemption period, upon the filing of a bond; or
(2) after the lapse of the redemption period, without need of a bond.
 Within the one-year redemption period, the purchaser may apply for a writ of
possession by filing a petition in the form of an ex parte motion under oath, in the
registration or cadastral proceedings of the registered property. The law requires only
that the proper motion be filed, the bond approved and no third person is involved.
After the consolidation of title in the buyer’s name for failure of the mortgagor to
redeem the property, entitlement to the writ of possession becomes a matter of right.
 The record shows that UCPB caused the extrajudicial foreclosure of the mortgage on the
subject realties as a consequence of the Sps. Tolosa’s default on their mortgage
obligation. As the highest bidder at the 4 January 2000 foreclosure sale, UCPB
consolidated its ownership on 22 January 2001 or upon failure of the Sps. Tolosa to
exercise their right of redemption within the one-year period therefor prescribed.
UCPB complied with the requirements under Act 3135 by filing its ex-parte petition for
issuance of a writ of possession before the RTC on 2 September 2004. Since UCPB had
already become the absolute and registered owner of said properties, the CA correctly
ruled that it was the ministerial duty of the RTC to issue the writ of possession in favor of
the former.
 GENERAL RULE: RTC has ministerial duty to issue the writ of possession after the
purchaser has consolidated its ownership
One XPN: The mortgagee’s failure to deliver the surplus from the proceeds of the
foreclosure sale was sufficient justification for the non-issuance of the writ of possession
(Sulit v. CA)
 Here, there is no surplus (17M from sale against 24M obligation). At any rate, the
exception made in Sulit had been held inapplicable where, as here, the period to
redeem has already expired or when the ownership over the property had already
been consolidated in favor of the mortgagee-purchaser. Having consolidated its
ownership over the subject properties after the Sps. Tolosa failed to exercise their right
of redemption, UCPB was correctly found by the CA entitled to a writ of possession.

262 GOLDENWAY MERCHANDISING CORP. V. EQUITABLE PCI BANK
G.R. No. 195540. March 13, 2013| J. Villarama, Jr. | Castro
TOPIC: Redemption
DOCTRINE: Under the new law (General Banking Law of 2000), which amended Act No. 3135,
juridical persons are allowed to exercise the right of redemption only “until, but not after, the
registration of the certificate of foreclosure sale” and in no case more than three (3) months
after foreclosure, whichever comes first.
ER: Goldenway executed a real estate mortgage in favor of Equitable over its properties to
secure its loan obligation. Equitable extra-judicially foreclosed the mortgage after
Goldenway’s default. Equitable bought the properties and the Certificate of Sale was
registered on Jan. 26, 2001. In March 2001, Goldenway wanted to exercise its right of
redemption, alleging that it had one year to redeem the property. Equitable said it can no
longer exercise the right since under the new law, the redemption period was shortened for
juridical persons: “until, but not after the registration of the certificate of foreclosure sale”.
Here, SC said that Goldenway can no longer exercise its right of redemption as the certificate
of sale had already been registered.
FACTS:
 In 1985, Goldenway executed a Real Estate Mortgage, which was duly registered, in favor
of Equitable PCI Bank over its real properties in Valenzuela to secure its P2 million loan.
 Equitable extra-judicially foreclosed the mortgage on Dec. 13, 2000 when Goldenway
failed to settle its obligation. The properties were sold to Equitable for P3.5M. The
Certificate of Sale was registered on Jan. 26, 2001.
 In March 2001, Goldenway tendered a check worth P3.5M to Equitable to exercise its
right of redemption, which the latter refused as the certificate of sale had already been
registered and a new TCT issued in its name.
 Goldenway filed a complaint for specific performance and damages against Equitable,
asserting that the one-year period of redemption under Act No. 3135 should apply and
not the shorter redemption period provided under the new General Banking Law. It
further alleged that the said law is unconstitutional for it violates the non-impairment of
contracts and equal protection clauses. [Court upheld the constitutionality]
ISSUE: Whether Goldenway can still exercise its right of redemption
HELD: No, the certificate of sale had already been registered
RATIO: The law governing cases of extrajudicial foreclosure of mortgage is Act No. 3135,
which provides: The one-year period of redemption is counted from the date of the
registration of the certificate of sale. In this case, the parties provided in their real estate
mortgage contract that upon petitioner’s default and the latter’s entire loan obligation
47
becoming due, respondent may immediately foreclose the mortgage judicially in accordance
with the Rules of Court, or extra-judicially in accordance with Act No. 3135, as amended.
However, Section 47 of R.A. No. 8791 otherwise known as “The General Banking Law of
2000” which took effect on June 13, 2000, amended Act No. 3135. Therefore,
notwithstanding Act 3135, juridical persons whose property is being sold pursuant to an
extrajudicial foreclosure, shall have the right to redeem the property in accordance with this
provision until, but not after, the registration of the certificate of foreclosure sale with the
applicable Register of Deeds which in no case shall be more than three (3) months after
foreclosure, whichever is earlier. Owners of property that has been sold in a foreclosure sale
prior to the effectivity of this Act shall retain their redemption rights until their expiration.
Under the new law, an exception is thus made in the case of juridical persons which are
allowed to exercise the right of redemption only “until, but not after, the registration of the
certificate of foreclosure sale” and in no case more than three (3) months after foreclosure,
whichever comes first.
This amendment may be validly applied in this case where the real estate mortgage contract
was executed in 1985 and the mortgage was foreclosed when R.A. No. 8791 was already in
effect. Section 47 did not divest juridical persons of the right to redeem their foreclosed
properties but only modified the time for the exercise of such right by reducing the one-year
period originally provided in Act No. 3135. The new redemption period commences from the
date of foreclosure sale, and expires upon registration of the certificate of sale or three
months after foreclosure, whichever is earlier. There is likewise no retroactive application of
the new redemption period because Section 47 exempts from its operation those properties
foreclosed prior to its effectivity and whose owners shall retain their redemption rights under
Act No. 3135.
The difference in the treatment of juridical persons and natural persons was based on the
nature of the properties foreclosed―whether these are used as residence, for which the
more liberal one-year redemption period is retained, or used for industrial or commercial
purposes, in which case a shorter term is deemed necessary to reduce the period of
uncertainty in the ownership of property and enable mortgagee-banks to dispose sooner of
these acquired assets. It must be underscored that the General Banking Law of 2000, crafted
in the aftermath of the 1997 Southeast Asian financial crisis, sought to reform the General
Banking Act of 1949 by fashioning a legal framework for maintaining a safe and sound
banking system. In this context, the amendment introduced by Section 47 embodied one of
such safe and sound practices aimed at ensuring the solvency and liquidity of our banks. It
cannot therefore be disputed that the said provision amending the redemption period in Act
3135 was based on a reasonable classification and germane to the purpose of the law.
 stipulated that "in order to save payment of high and multiple taxes considering
that the x x x subject matter of this sale is mortgaged with DBP, Baguio City, and
263 David v David, G.R. No. 162365, January 15, 2014 sold [to Roberto], Edwin will execute the necessary Deed of Absolute Sale in favor
G.R. No. 162365 |January 15, 2014| BERSAMIN, J.| De Leon of [the Spouses Go], in lieu of [Roberto]." The Spouses Go then deposited the
TOPIC: Sale of Movables - NCC 1484 - 1486 amount of ₱10,000,000.00 to Roberto’s account.
 After the execution of the MOA, Roberto gave Eduardo ₱2,800,000.00 and returned
DOCTRINE: In sales with the right to repurchase, the title and ownership of the property to him one of the truck tractors and trailers subject of the deed of sale. Eduardo
sold are immediately vested in the vendee, subject to the resolutory condition of demanded for the return of the other truck tractor and trailer, but Roberto refused
repurchase by the vendor within the stipulated period.23 Accordingly, the ownership of the to heed the demand.
affected properties reverted to Eduardo once he complied with the condition for the  Thus, Eduardo initiated this replevin suit against Roberto, alleging that he was
repurchase, thereby entitling him to the possession of the other motor vehicle with trailer. exercising the right to repurchase under the deed of sale; and that he was entitled
to the possession of the other motor vehicle and trailer.
ER: Eduardo sold lot and others (trucks etc) to Roberto (2M + pay 4M to DBP), with right to ISSUE/S: W/N Eduardo has a right to repurchase
repurchase. There was a memorandum of agreement where they sold the lot for 10M to
 HELD/RULING; Yes.
third parties. Roberto gave the 2.8M to Eduardo out of 10M. Eduardo is claiming the trucks
A sale with right to repurchase is governed by Article 1601 of the Civil Code, which
as he exercised the right to repurchase. SC held that Eduardo had complied with the
provides that: "Conventional redemption shall take place when the vendor reserves
conditions stipulated in the deed of sale and prescribed by Article 1616 of the Civil Code to
the right to repurchase the thing sold, with the obligation to comply with the
repurchase. From the Php10 Million purchase price which was directly paid to the
provisions of Article 1616 and other stipulations which may have been agreed
defendant, the latter deducted his expenses plus interests and the loan, and the remaining
upon." Conformably with Article 1616,the seller given the right to repurchase may
amount he turned over to the plaintiff. This only means that this is the excess amount
exercise his right of redemption by paying the buyer: (a) the price of the sale, (b)
pertaining to plaintiff and co-heirs after the defendant deducted the repurchase price of
the expenses of the contract, (c) legitimate payments made by reason of the sale,
Php2.0 Million plus interests and his expenses. Add to that is the fact that defendant
and (d) the necessary and useful expenses made on the thing sold.
returned one of the trucks and trailers subject of the Deed of Sale with Assumption of
 The CA and the RTC both found and held that Eduardo had complied with the
Mortgage to the plaintiff.
conditions stipulated in the deed of sale and prescribed by Article 1616 of the Civil
Code. Pertinently, the CA stated:
FACTS:
 It should be noted that the alleged repurchase was exercised within the stipulated
 Eduardo and his brother Edwin C. David (Edwin) (Plaintiff), acting on their own and
period of three (3) years from the time the Deed of Sale with Assumption of
in behalf of their co-heirs, sold their inherited properties to Roberto (Defendant),
Mortgage was executed. The only question now, therefore, which remains to be
specifically: (a) a parcel of land with an area of 1,231 square meters, together with
resolved is whether or not the conditions set forth in the Deed of Sale with
all the improvements existing thereon, located in Baguio City and covered by
Assumption of Mortgage, i.e. the tender of the purchase price previously agreed
Transfer Certificate of Title No. T-22983 of the Registry of Deeds of Baguio City
upon, which is Php2.0 Million, plus 12% interest per annum, and the amount paid
(Baguio City lot); and (b) two units International CO 9670 Truck Tractor with two Mi-
by the defendant to DBP, had been satisfied.
Bed Trailers.3 A deed of sale with assumption of mortgage (deed of sale)4
 From the testimony of the defendant himself, these preconditions for the exercise
embodied the terms of their agreement, stipulating that the consideration for the
of plaintiff's right to repurchase were adequately satisfied by the latter. Thus, as
sale was ₱6,000,000.00, of which ₱2,000,000 was to be paid to Eduardo and Edwin,
stated, from the Php10 Million purchase price which was directly paid to the
and the remaining ₱4,000,000.00 to be paid to Development Bank of the
defendant, the latter deducted his expenses plus interests and the loan, and the
Philippines (DBP) in Baguio City to settle the outstanding obligation secured by a
remaining amount he turned over to the plaintiff. This testimony is an unequivocal
mortgage on such properties. The parties further agreed to give Eduardo and Edwin
acknowledgement from defendant that plaintiff and his co-heirs exercised their
the right to repurchase the properties within a period of three years from the
right to repurchase the property within the agreed period by satisfying all the
execution of the deed of sale based on the purchase price agreed upon, plus 12%
conditions stipulated in the Deed of Sale with Assumption of Mortgage. Moreover,
interest per annum.
defendant returned to plaintiff the amount of Php2.8 Million from the total
Roberto and Edwin executed a memorandum of agreement (MOA)5 with the
purchase price of Php10.0 Million. This only means that this is the excess amount
Spouses Marquez and Soledad Go (Spouses Go), by which they agreed to sell the
pertaining to plaintiff and co-heirs after the defendant deducted the repurchase
Baguio City lot to the latter for a consideration of ₱10,000,000.00. The MOA
48
 price of Php2.0 Million plus interests and his expenses. Add to that is the fact that
defendant returned one of the trucks and trailers subject of the Deed of Sale with
Assumption of Mortgage to the plaintiff. This is, at best, a tacit acknowledgement of
the defendant that plaintiff and his co-heirs had in fact exercised their right to
repurchase.
On Novation (Just in case)
The issue of novation involves a question of fact, as it necessarily requires the factual
determination of the existence of the various requisites of novation, namely: (a) there must
be a previous valid obligation; (b) the parties concerned must agree to a new contract; (c) the
old contract must be extinguished; and (d) there must be a valid new contract.22 With both
the RTC and the CA concluding that the MOA was consistent with the deed of sale, novation
whereby the deed of sale was extinguished did not occur. In that regard, it is worth repeating
that the factual findings of the lower courts are binding on the Court.
49
264 DBP V GARCIA
G.R. No. 207748 |MARCH 25, 2015|THIRD DIVISION| DELFIN
TOPIC: REDEMPTION
DOCTRINE:
The Court has repeatedly emphasized that the policy of the law is liberality in favor of
redemption. Redemptions should be looked upon with favor and where no injury is to follow,
a liberal construction will be given to our redemption laws as well as to the exercise of the
right of redemption.
This flows from the intention of the law to protect the rights of the original owner and to aid,
rather than defeat, the owner's claim over his or her property. In line with the foregoing
policies, the Court finds that the Sps. Garcia validly redeemed their property from petitioner.
EMERGENCY RECIT:
Sps Garcia took a loan from DBP with REM. They failed to pay so DBP foreclosed the property.
On the last day of the redemption period, Sps Garcia redeemed the property. However, they
failed to include the interest in the redemption price but paid it immediately the next day.
They were issued by the sheriff a certificate of redemption. DBP contends that price paid was
insufficient, they asked for the supposed balance but Sps failed to pay. They then
consolidated the ownership of the property. Sps Garcia separated. Mr. Garcia entered into a
compromise agreement with the DBP to sell the property to Coloma, daughter of Mr. Garcia’s
common law wife. They sale became final. Mrs. Garcia filed for the annulment of sale
contending that the redemption was valid this making her the owner. DBP contends its
invalid because the interest was paid late and insufficient price paid. SC held redemption is
valid. Redemption must be liberally applied. Inadequacy of redemption price not proved.
FACTS:
1. Garcia and her estranged husband obtained a loan from DBP secured by mortgage over
a lot registered in their names. When they failed to pay the loan, DBP foreclosed the
mortgage in an auction sale where it was also the highest bidder. Two months after the
sale, the certificate was registered and annotated on the TCT.
2. On Sept 10 1987, 1 year after the registration of sale, Sps Garcia redeemed the property
by tendering to the sheriff p62K representing the purchase price in the auction. They
however, paid accrued interest the following day.
3. The sheriff issued a certificate of redemption in favor of the Sps and turned over the
money to DBP through its branch manager who issued a provisional receipt.
4. After a week, DBP sent a letter to Sps Garcia alleging that the redemption is not proper
as the amount tendered was insufficient. DBP is claiming P192K.
5. Mr. Garcia replied and avers that their obligation is P41K only and the purchase price of
the property in the auction is P62K. As such the claim of DBP as to amount had no basis.
6. DBP consolidated its ownership of the property in 1992. A new TCT was issued. Garcia avoid injustice, courts may, by reasonable construction, allow redemption
caused the annotation if its adverse claim in the new TCT. notwithstanding the actual expiration of the period· fixed in the statute.
7. In 1993, DBP tried to return the redemption money but Sps Garcia did not accept. Sps  We likewise agree with the CA's declaration that the redemption being valid, all acts and
Garcia then filed for consignation which was dismissed. proceedings thereafter done by DBP with respect to the subject property and all
8. Sps Garcia subsequently separated. Mr. Garcia continued to live in the property with his issuances issued relative thereto were null and void.
common law spouse.  As regard the contention on the insufficiency of the repurchase price, we confirm the
9. In 2002, DBP filed an action for Declaration of Nullity of Certificate of Redemption and appellate court's finding that there is nothing in the records substantiating the claim that
recovery of possession against Sps Garcia. Sps Garcia should have paid P192K. There were no documents presented to substantiate
10. RTC rendered a decision based on a compromise agreement of the parties to sell and actual computation.
dispose the property. Coloma purchased the property. (daughter of Mr. Garcia’s common
law wife). The redemption money was returned to Mr. Garcia.
11. Mrs. Garcia filed a complaint for annulment of title and recover of ownership and
possession against Coloma and that she be restored to the ownership of the property.
12. The RTC ruled that no valid redemption took place. As such the cancellation of the title
of Garcia and subsequent sale to Coloma were valid.
13. It further held that the redemption was made after the period prescribed by law
because the accrued interest was paid one day late as such the payment did not cover
the full redemption price.
14. It also noted the redemption price paid was not sufficient and despite the time given,
the Sps did not utilize such period to complete redemption price.
15. CA reversed the trial court. It declared the redemption valid. It stated that there was
nothing in the records to support that the redemption price should be P192K. It also
held that the day late payment of the interest must not be construed strictly to defeat
the policy of the right of redemption.

ISSUE/S:
WON a valid redemption took place? - YES

HELD:
 The records show that the Sps. Garcia paid P62,800 to Sheriff Santos on September 10,
1987, and then P7,536, as accrued interest, one day after the expiration of the
redemption period on September 11, 1987. Nevertheless, applying the protection given
by redemption laws to original owners, we find that invalidating the redemption in the
instant case simply because the same was exercised a day late would defeat the very
policies this Court is duty bound to uphold.
 The Court, in a number of cases, allowed parties to perfect their right of redemption
even beyond the period prescribed by law. In De las Reyes v. Intermediate Appellate.
Court, the redemption was allowed beyond the redemption period because a valid
tender was made by the original owners within the redemption period.
 In Doronila v. Vasquez elucidated that while redemption must be effected within the
time prescribed, there are indeed cases where, having in view the purpose sought to be
achieved by statutory provisions of this kind, and principally to promote justice and

50

265 CEBU STATE COLLEGE OF SCIENCE AND TECHNOLOGY (CSCST) v. MISTERIO et.al.
G.R. No. 179025; June 17, 2015
Topic: Redemption | Ponente: J. Papa Peralta | Author: Enriquez
Note: Kindly read the full text (aka the digest itself)
Doctrine: Art. 1606. The right referred to in Article 1601, in the absence of an express
agreement, shall last four years from the date of the contract. Should there be an agreement,
the period cannot exceed ten years.
Emergency Recitation: On Dec. 1956, Respondent’s mother sold a land in favor of Sudlon
Agricultural High School (SAHS). The sale was subject to the right of the vendor to repurchase
the property after SAHS shall have ceased to exist (1 st suspensive condition) or shall have
transferred its school site elsewhere (2 nd suspensive condition). On June 1983, BP 142 was
enacted which transferred all properties of SAHS to Petitioner CSCST. More than 5 years after,
Respondents informed Petitioner of their intention to exercise their right to repurchase based
on the 1st suspensive condition. Petitioner CSCST refused and this remained pending in the
SC. While it was pending before the SC, Respondents, on Feb. 2001, filed an Amended
Complaint before the RTC alleging that pursuant to petitioner’s transfer of its school site,
their right of redemption on said condition became operative (2 nd suspensive condition). In
ruling that the Respondents cannot redeem the property, the SC said that Since the parties
did not agree on any period for the exercise of the right to repurchase the property herein,
Respondents may use said right within 4 years from the happening of the conditions (yung 2
na suspensive conditions) contained in their Deed of Sale. However, since it has been 5 years
when Respondents informed Petitioner of their intention to right to repurchase based on the
1st suspensive condition, it is barred by prescription. Also, Respondents cannot redeem based
on the 2nd suspensive condition since while the occurrence of the 2 nd suspensive condition
may give rise to a separate cause of action, the same must always be taken in conjunction
with the periods prescribed by law insofar as they frown upon the uncertainty of titles to real
property.
Facts:
38. On December 1956, the late Asuncion Sadaya, mother of the Respondents, executed a
Deed of Sale covering a parcel of land in favor of Sudlon Agricultural High School (SAHS).
The sale was subject to the right of the vendor to repurchase the property after SAHS
shall have ceased to exist or shall have transferred its school site elsewhere.
39. On June 1983, BP 142 was enacted. It incorporated and consolidated several schools in
the Province of Cebu, including the SAHS, as part of CSCST. The law also transferred all
personnel, properties, including buildings, sites, and improvements, records, obligations,
monies and appropriations of SAHS to the CSCST.
40. On August 1988 or more than 5 years after, Respondents informed petitioner of their
intention to exercise their right to repurchase under the Deed of Sale on the ground that
the SAHS had ceased to exist. However, Petitioner informed Respondent’s that SAHS still
existed as only the name of the school was changed.
51
41. Respondents filed a Complaint before the RTC for Nullity of Sale and/or Redemption
against Petitioner.
42. RTC ruled in favor of Respondent’s since SAHS having ceased to exist and ordering the
Petitioner to deliver and reconvey the same to Respondents.
43. The CA reversed the decision of the RTC, ruling that while it agrees with the RTC’s finding
that the SAHS had ceased to exist when BP Blg. 412 took effect, Respondents are barred
by prescription from exercising their right to repurchase the subject property, which
expired in June 1987, or four years from the effectivity of BP Blg. 412.
44. The SC affirmed the CA and held that that the four-year period for the respondents to
repurchase the property was not suspended merely and solely because there was a
divergence of opinion between the petitioners, on the one hand, and the respondents,
on the other, as to the precise meaning of the phrase "after the SAHS shall cease to
exist" in the deed of sale. Verily, the existence of the respondents’ right to repurchase
the property was not suspended for being dependent upon the prior final interpretation
by the court of the said phrase.
45. However, on Feb. 2001, while the said SC case was pending, Respondents filed an
Amended Complaint with the RTC impleading the Province of Cebu and the Register of
Deeds, essentially alleging that pursuant to petitioner’s transfer of its school site, their
right of redemption on said condition became operative. That pursuant to a Deed of
Reversion, ownership of the subject property had already been transferred in the name
of the Province of Cebu. Thus, Respondents assert their right to redeem the subject
property and pray that the title in the name of the Province of Cebu be cancelled.
46. RTC dismissed respondents’ Amended Complaint. However, the CA reversed the RTC. CA
stated that the right to repurchase as stated in the deed of sale can only be exercised on
the occurrence of either of the two suspensive conditions: 1. if SAHS shall have ceased
to exists; or 2. if SAHS shall have transferred its school site elsewhere.
Issue/Held: Whether the Respondent’s can redeem the property? No.
Ratio:
 In cases of conventional redemption when the vendor a retro reserves the right to
repurchase the property sold,27the parties to the sale must observe the parameters set
forth by Article 1606 of the New Civil Code, which states:
Art. 1606. The right referred to in Article 1601, in the absence of an express agreement, shall
last four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty days from the
time final judgment was rendered in a civil action on the basis that the contract was a true
sale with right to repurchase. (Emphasis supplied)
 Since the parties did not agree on any period for the exercise of the right to repurchase
the property herein, respondents may use said right within four (4) years from the
happening of the allocated conditions contained in their Deed of Sale: (a) the cessation
of the existence of the SAHS, or (b) the transfer of the school to other site. However, due
 to respondents’ failure to exercise their right to redeem the property within the required
four (4) years from the time when SAHS had ceased to exist, or from June 10, 1983, the
date of effectivity of BP Blg. 412, this Court held that respondents are barred by
prescription.
 Despite this, Respondents nevertheless insist on the redemption of the subject property
pursuant to the second suspensive condition, namely, Petitioner’s transfer of its school
site.
 Citing Umale v. Fernandez, et. al, the SC said that the period of redemption agreed upon
by the parties may be extended after the four (4)-year period so long as the total period
does not exceed ten (10) years from the date of the contract.
 While the counting of this four-year period shall begin from the execution of the
contract, where the right is suspended by agreement until after a certain time, event or
condition, the period shall be counted from the time such right could be exercised, but
not exceeding ten (10) years from the execution of the contract.
 In the instant case, while the four(4)-year period was counted from the time the right to
repurchase could be exercised or when the SAHS ceased to exist, even beyond ten (10)
years from the execution of the deed of sale, one must not nevertheless lose sight of the
fundamental spirit and intent of the law which have been upheld in jurisprudence.
 A long term for redemption renders the tenure of property uncertain and redounds to
its detriment, for neither does the precarious holder cultivate the ground with the same
interest as the owner, nor does he properly attend to the preservation of the building,
and owing to the fact that his enjoyment of the property is temporary, he endeavours
above all to derive the greatest benefit therefrom, economizing to that end even the
most essential expenses.
 Hence, while the occurrence of the second suspensive condition may give rise to a
separate cause of action, the same must always be taken in conjunction with the periods
prescribed by law insofar as they frown upon the uncertainty of titles to real property.
Otherwise, vendors may simply impose several resolutory conditions, the happening of
each will practically extend the life of the contract beyond the parameters set forth by
the Civil Code. This is certainly not in line with the spirit and intent of the law.
 To permit Respondents to exercise their right to repurchase upon the happening of the
second condition, when they utterly failed to timely exercise the same upon the
happening of the first, would effectively result in a circumvention of the periods
expressly mandated by law.
 It would be rather absurd to permit respondents to repurchase the subject property
upon the occurrence of the second suspensive condition, particularly, the relocation of
SAHS on October 3, 1997, the time when petitioner ceded the property to the Province
of Cebu, which is nearly forty-one (41) years after the execution of the Deed of Sale on
December 31, 1956. This Court must, therefore, place it upon itself to suppress these
kinds of attempts in keeping with the fundamentally accepted principles of law.
52
266 ROJALES v DIME
G.R. No. 194548| 10 February 2016 | J. Peralta | Garcia
TOPIC: REDEMPTION
DOCTRINE:
the nomenclature used by the contracting parties to describe a contract does not determine
its nature. The decisive factor is their intention — as shown by their conduct, words, actions
and deeds — prior to, during, and after executing the agreement. Thus, even if a contract is
denominated as a pacto de retro, the owner of the property may still disprove it by means of
parole evidence provided that the nature of the agreement is placed in issue by the pleadings
filed with the trial court.
ER: Vda de Rojales and Dime entered into a pacto de retro contract for a piece of land. She
denied the execution of such contract. She claimed that the document presented by Dime
was falsified since the fingerprint appearing therein was not hers. The NBI concluded that the
fingerprint was her. The issue here is whether there was a pacto de retro contract. The Court
said Yes. Vda de Rojales failed to specifically allege in all her pleadings that she did not intend
to sell her property to Dime, instead, she maintained that there was no pacto de retro sale
because her thumbmark and the notary public’s signature were falsified. She should have
raised the issue that Dime merely borrowed the title from her and promised to pay her in her
pleadings and not belatedly claimed the same after the NBI ruled that the thumbmark in the
contract was hers.
FACTS:
1. Vda de Rojales owned a parcel of land. Dime filed a petition to consolidate title
alleging that Vda de Rojales conveyed under a pacto de retro contract the subject
property, with petitioner reserving the right to repurchase the property within a
period of 9 months.
2. Despite several demands, this right was refused to be exercised.
3. Vda de Rojales denied the execution of the pacto de retro sale in favor of Dime and
alleged that she had not sold the subject property.
4. She claimed that the document presented by Dime was falsified since the fingerprint
appearing therein was not hers and the signature of the Notary Public Modesto S. Alix
was not his. She also averred that she filed falsification and use of falsified documents
charges against Dime.
5. She claimed that she mortgaged the subject property with the Batangas Savings and
Loan Bank for P100,000.00 when her daughter Violeta Rojales Rufo needed the money
for application of overseas work; Antonio Barcelon redeemed the property.
 6. Barcelon entered the mayoralty race, he demanded payment of the debt, then
mortgaged the title of the subject property with Dime; and the signatures appearing in
the documents were falsified
7. NBI submitted a copy of Dactyloscopic Report FP Case No. 2000-349 by Fingerprint
Examiner Eriberto B. Gomez, Jr. to the court. It was concluded therein that the
questioned thumbmark appearing on the original-duplicate copy of the
notarized pacto de retro sale and the standard right thumbmark, taken by Police
Officer Marcelo Quintin Sosing, were impressed by and belong to the same person,
Vda de Rojales.
8. When Dime passed away, his heirs substituted him.
9. The heirs filed a Manifestation and Motion to Dismiss on the ground that it was
Villamin, Dime’s common law wife, who was the source of the fund in purchasing the
subject property.
10. They alleged that the consolidation of ownership would be prejudicial to Villamin and
would unjustly enrich them.
11. RTC dismissed the case saying that Villamin should have been the one who filed the
case being the indispensable party.
12. However, RTC reconsidered and eventually set the case for hearing and said that it was
erroneous on their end to rule on the case considering that the suit was not filed by
Villamin
We have consistently decreed that the nomenclature used by the contracting parties to
describe a contract does not determine its nature. The decisive factor is their intention — as
shown by their conduct, words, actions and deeds — prior to, during, and after executing the
agreement. Thus, even if a contract is denominated as a pacto de retro, the owner of the
property may still disprove it by means of parole evidence provided that the nature of the
agreement is placed in issue by the pleadings filed with the trial court.
Vda de Rojales failed to specifically allege in all her pleadings that she did not intend to sell
her property to Dime, instead, she maintained that there was no pacto de retro sale because
her thumbmark and the notary public’s signature were falsified. She should have raised the
issue that Dime merely borrowed the title from her and promised to pay her in her pleadings
and not belatedly claimed the same after the NBI ruled that the thumbmark in the contract
was hers.
In light of her inconsistent and bare allegations and the conflicting testimony of her other
witness, we rule that she failed to overcome the presumption of regularity of the notarized
contract of Pacto de Retro sale. Moreover, this Court is unconvinced that She has successfully
proven that her agreement with Dime was not a pacto de retro sale but a contract of loan
secured by a mortgage of the subject property.

ISSUE/S: W/N there was a valid pacto de retro sale. YES

HELD/RULING:
Vda de Rojales failed to present clear and convincing evidence to overcome such presumption
of regularity of a public document.
Records disclose that after she admitted to being bound with conclusion of the NBI regarding
the issue on the thumbmark, Vda de Rojales did not present any evidence to rebut the due
execution of the notarized contract of sale con pacto de retro. Instead, she presented her
testimony and the testimony of her daughter Josefina Rojales to prove that she never
intended to sell her property.
Vda de Rojales admitted, as reflected in the pretrial order, that she once mortgaged her
property to the bank. However, she denied the same during the trial and further claimed that
it was Dime who mortgaged the title with the bank.
To prove her lack of intention to sell the property, she maintained that Dime borrowed the
title from her. She herself took the witness stand and testified during the direct and cross-
examination.
Her daughter Josefina claimed otherwise. She averred that her mother has previously
mortgaged the property with the bank and that it was Barcelon who redeemed the property
from the bank. She admitted that Barcelon borrowed the title from her mother because there
was already a buyer. She also alleged that Barangay Captain Esguerra and his secretary Laila
Samonte, upon the instruction of Barcelon, took the title from them. Thus, her testimony
contradicts her mother’s claim that Dime borrowed the title from her.

53

267 SPS SERFINO vs. FAR EAST BANK AND TRUST COMPANY, INC
G.R. No. 171845 October 10, 2012
TOPIC: Assignment of Credits, NCC 1624-1635
PONENTE: Brion, J. | Author: Laureta
Doctrine: An assignment of credit is an agreement by virtue of which the owner of a credit,
known as the assignor, by a legal cause, such as sale, dation in payment, exchange or
donation, and without the consent of the debtor, transfers his credit and accessory rights to
another, known as the assignee, who acquires the power to enforce it to the same extent
as the assignor could enforce it against the debtor.
Emergency Recit: In a compromise judgement Sps Cortez bound themselves to pay the
judgement debt (P108K) out of the retirement benefits of Mardalena Cortez. After receiving
the amount from GSIS however, she deposited the amount in FEBTC (bank) savings account
of her daughter in law, Grace. The bank was informed that the deposit belong to Sps
Serfino by virtue of the assignment made by Sps Cortez. Despite this advise FEBTC allowed
Grace to withdraw P150K. Sps Serfino filed for recovery and damages. RTC held that bank
was not bound by compromise agreement as it was not a party to such. Sps Serfino asserts
that FEBTC should be deemed bound by the compromise judgment, since Article 1625 of
the Civil Code states that an assignment of credit binds third persons if it appears in a
public instrument. SC dismissed. The terms of the compromise judgment, did not convey an
intent to equate the assignment of Magdalena’s retirement benefits (the credit) as the
equivalent of the payment of the debt due the Sps Serfino (the obligation). There was
actually no assignment of credit; if at all, the compromise judgment merely identified the
fund from which payment for the judgment debt would be sourced.
Facts:
The case essentially involves a determination of the obligation of banks to a third party who
claims rights over a bank deposit standing in the name of another.
1. A compromise judgment was rendered by the RTC in an action for collection of sum
of money instituted by the petitioner Sps Serfino against the Sps Cortez. By way of
settlement, Sps Cortez acknowledged their indebtedness Sps Serfino in the amount
of P 108,245.71.
 To satisfy the debt, Magdalena Cortez bound herself "to pay in full the
judgment debt out of her retirement benefits" Payment of the debt shall
be made one (1) week after Magdalena has received her retirement
benefits from the GSIS. In case of default, the debt may be executed
54
against any of the properties of the Sps Cortez that is subject to
execution, upon motion of the Sps Serfino.
2. No payment was made. Instead, Mr. Serfino discovered that Magdalena deposited
her retirement benefits in the savings account of her daughter-in-law, Grace Cortez,
with the respondent, Far East Bank and Trust Company, Inc. (FEBTC).
 Sps Serfino’s counsel sent two letters to FEBTC informing the bank that
the deposit in Grace’s name was owned by Sps Serfino by virtue of an
assignment made in their favor by the Sps Cortez. The letter requested
FEBTC to prevent the delivery of the deposit to either Grace or the Sps
Cortez until its actual ownership has been resolved in court.
3. Sps Serfino instituted a civil case against Sps Cortez, Grace and FEBTC for the
recovery of money on deposit and the payment of damages, with a prayer for
preliminary attachment. However, Grace withdrew P150,000.00 from her savings
account with FEBTC.
4. During the pendency of Civil Case No. 95-9344, Sps Cortez manifested that they
were turning over the balance of the deposit in FEBTC (amounting to P 54,534.00)
to the Sps Serfino as partial payment of their obligation under the compromise
judgment. The RTC issued an order authorizing FEBTC to turn over the balance of
the deposit to Sps Serfino.
5. The RTC issued the assailed decision (a) finding Sps Cortez, Grace and Dante liable
for fraudulently diverting the amount due Sps Serfino, but (b) absolving FEBTC from
any liability for allowing Grace to withdraw the deposit.
 The RTC declared that FEBTC was not a party to the compromise
judgment; FEBTC was thus not chargeable with notice of the parties’
agreement, as there was no valid court order or processes requiring it to
withhold payment of the deposit. Given the nature of bank deposits,
FEBTC was primarily bound by its contract of loan with Grace. There was,
therefore, no legal justification for the bank to refuse payment of the
account, notwithstanding the claim of Sps Serfino as stated in their three
letters.
6. Sps Serfino appealed the RTC’s ruling absolving FEBTC from liability for allowing the
withdrawal of the deposit. They allege that the RTC cited no legal basis for declaring
that only a court order or process can justify the withholding of the deposit in
Grace’s name. FEBTC was informed of their adverse claim after they sent three
letters. Aside from the three letters, FEBTC should be deemed bound by the
compromise judgment, since Article 1625 of the Civil Code states that an
assignment of credit binds third persons if it appears in a public instrument.
 They conclude that FEBTC, having been notified of their adverse claim,
should not have allowed Grace to withdraw the deposit. By allowing
Grace to withdraw the deposit that is due them under the compromise
judgment, the Sps Serfino claim that FEBTC committed an actionable
wrong that entitles them to the payment of actual and moral damages.
Issue: W/N Sps Serfino are entitled to damages?
Held: No. Claim for actual damages not meritorious because there could be no pecuniary
loss that should be compensated if there was no assignment of credit.
The terms of the compromise judgment, did not convey an intent to equate the assignment
of Magdalena’s retirement benefits (the credit) as the equivalent of the payment of the
debt due the Sps Serfino (the obligation). There was actually no assignment of credit; if at
all, the compromise judgment merely identified the fund from which payment for the
judgment debt would be sourced.
Ruling:
The Sps Serfino’s claim for damages against FEBTC is premised on their claim of ownership of
the deposit with FEBTC. The deposit consists of Magdalena’s retirement benefits, which the
Sps Serfino claim to have been assigned to them under the compromise judgment. That the
retirement benefits were deposited in Grace’s savings account with FEBTC supposedly did not
divest them of ownership of the amount, as "the money already belongs to the [Sps Serfino]
having been absolutely assigned to them and constructively delivered by virtue of the x x x
public instrument. By virtue of the assignment of credit, the Sps Serfino claim ownership of
the deposit, and they posit that FEBTC was duty bound to protect their right by preventing
the withdrawal of the deposit since the bank had been notified of the assignment and of their
claim.
We find no basis to support the Sps Serfino’s claim of ownership of the deposit.
"An assignment of credit is an agreement by virtue of which the owner of a credit, known
as the assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and
without the consent of the debtor, transfers his credit and accessory rights to another,
known as the assignee, who acquires the power to enforce it to the same extent as the
assignor could enforce it against the debtor. It may be in the form of sale, but at times it may
constitute a dation in payment, such as when a debtor, in order to obtain a release from his
debt, assigns to his creditor a credit he has against a third person." As a dation in payment,
the assignment of credit operates as a mode of extinguishing the obligation; the delivery
and transmission of ownership of a thing (in this case, the credit due from a third person) by
the debtor to the creditor is accepted as the equivalent of the performance of the obligation.
The terms of the compromise judgment, however, did not convey an intent to equate the
assignment of Magdalena’s retirement benefits (the credit) as the equivalent of the payment
of the debt due the Sps Serfino (the obligation). There was actually no assignment of credit; if
at all, the compromise judgment merely identified the fund from which payment for the
judgment debt would be sourced:
(c) That before the plaintiffs file a motion for execution of the decision or order based [on
this] Compromise Agreement, the defendant, Magdalena Cortez undertake[s] and bind[s]
herself to pay in full the judgment debt out of her retirement benefits as Local [T]reasury
55
Operation Officer in the City of Bacolod, Philippines, upon which full payment, the plaintiffs
waive, abandon and relinquish absolutely any of their claims for attorney’s fees stipulated in
the Promissory Note (Annex "A" to the Complaint).
Only when Magdalena has received and turned over to the Sps Serfino the portion of her
retirement benefits corresponding to the debt due would the debt be deemed paid.
In Aquitey v. Tibong, the issue raised was whether the obligation to pay the loan was
extinguished by the execution of the deeds of assignment. The Court ruled in the affirmative,
given that, in the deeds involved, the respondent (the debtor) assigned to the petitioner (the
creditor) her credits "to make good" the balance of her obligation; the parties agreed to
relieve the respondent of her obligation to pay the balance of her account, and for the
petitioner to collect the same from the respondent’s debtors. The Court concluded that the
respondent’s obligation to pay the balance of her accounts with the petitioner was
extinguished, pro tanto, by the deeds of assignment of credit executed by the respondent in
favor of the petitioner.
In the present case, the judgment debt was not extinguished by the mere designation in the
compromise judgment of Magdalena’s retirement benefits as the fund from which payment
shall be sourced. That the compromise agreement authorizes recourse in case of default on
other executable properties of the Sps Cortez, to satisfy the judgment debt, further supports
our conclusion that there was no assignment of Magdalena’s credit with the GSIS that would
have extinguished the obligation.
The compromise judgment in this case also did not give the supposed assignees, the Sps
Serfino, the power to enforce Magdalena’s credit against the GSIS. In fact, the Sps Serfino are
prohibited from enforcing their claim until after the lapse of one (1) week from Magdalena’s
receipt of her retirement benefits.
An assignment of credit not only entitles the assignee to the credit itself, but also gives him
the power to enforce it as against the debtor of the assignor. Since no valid assignment of
credit took place, the Sps Serfino cannot validly claim ownership of the retirement benefits
that were deposited with FEBTC. Without ownership rights over the amount, they suffered
no pecuniary loss that has to be compensated by actual damages. The grant of actual
damages presupposes that the claimant suffered a duly proven pecuniary loss.
  Petitioners won, as MeTC and RTC found the existence of lessor-lessee relationship.
CA reversed decision.
268. TAN SIOK KUAN AND PUTE CHING v. HO, et.al.
o Note: Bombita et.al. considered to have impliedly admitted lessor-lessee
G.R. No. 175085; 1 June 2016 relationship.
Topic: definition of lease | Ponente: J. Perez| Author: Pineda

Notes: W/N there was a lessor-lessee relationship

In the unlawful detainer cases filed, there were several defendants. The respondents in this Held: NO. Thus, ejectment not proper.
case are composed of four out of the seven defendants. The three others (referred to as
Bombita et.al.) did not appeal.

Also, the case did not provide definition of lease. I took the definition from another source. Ruling:

 Except for petitioners' bare claims, they have not shown any evidence of a lease
between them and respondents, be it express or implied. There was no mention of
Doctrine: A contract of lease is a consensual, bilateral, onerous, and commutative contract by
how and when the alleged contract of lease started, there was no proof of prior
virtue of which one person binds himself to grant temporarily the use of a thing or to render
payment of rentals or any prior demand for such payment considering petitioners'
some service to another who undertakes to pay some rent.
allegation that respondents failed to pay rentals since 1997 and that the case was
instituted only in 2003.

 Bombita et.al.’s implied admission of lessor-lessee relationship does not bind

Respondents herein due to the principle or res inter alios acta.
Emergency Recit: Unlawful detainer case failed as Petitioners failed to establish existence of
lessor-lessee relationship.

Facts:

 Petitioners are owners of a parcel of land in QC. Petitioners leased portions of the
property to the defendants (Respondents in this case + Bombita et. al.) since 1972.
On 7 February 2003, petitioners notified defendants that they failed to pay rentals
from 1996/1997 up to December 2007. Defendants were given 10 days to pay the
rentals due or else vacate. Defendants refused.

 Petitioners filed 7 complaints for unlawful detainer against defendants.

o Bombita et. al.: lease agreements void ab initio because Petitioners are
Chinese nations who are not entitled to own real property

o Respondents: they have been in possession of the subject premises for

37 years without any rentals being paid to any landlord or his agents,
and that there are no existing lease contracts between respondents and
petitioners

56
269 MANLAPAT V SALAZAR
52 OG NO.2, P 802/ L-8221 | JAN 31, 1956 |REYES| DELFIN
TOPIC: Rights and Obligations of Lessor and Lessee
DOCTRINE:
In an assignment of lease, the lessee makes an absolute transfer of his interest as such lessee,
thus dissociating himself from the original contract of lease, so that his personality disappears
and there remains only in the juridical relation two persons, the lessor and the assignee, who
Is converted into a lessee; whereas, if he retains a reversionary interest, however small, the
transfer is deemed a mere sublease.
EMERGENCY RECIT:
The co-owners of the fishpond leased the same to Enriquez until June 1, 1967. Enriquez died,
his widow subleased the fishpond to Salazar until May 31, 1967. When the co-owners died,
Manlapat, their heir, filed an action to recover the fishpond before the expiration of the lease.
He argues that the sublease between the widow and Salazar is actually an assignment of
lease. As such having made without the consent of the original lessors is void. The court held
that the sublease is valid. It stated that the reservation of the sublessor of interest in the
property however small, makes it a sublease and not assignment of lease. It also found
several conditions in the agreement that made it a sublease.
FACTS:
1. The fishpond subject of the dispute belonged to three co-owners who ha taken turns in
leasing it to Bernardo Enriquez. The last lease was signed in 1931 to last until June 1,
1967.
2. When Enriquez died, his widow subleased the fishpond to Dr. Cruz and thereafter to
Salazar. The period of the sublease was May 31, 1947 – May 31, 1967.
3. In 1952, the heir of the co-owners Manlapat filed an action to recover possession of the
fishpond from Salazar alleging that the lease and sublease was null and void. He further
argues that the arrangement between the widow of Enriquez and Salazar was not really
a sublease but an assignment of lease.
4. He contends that the Civil Code only allows sublease even without the consent of the
lessor but not assignment of lease which needs consent. (The original contract of lease
does not prohibit sublease).
ISSUE/S:
WON the contract is a sub-lease or assignment of lease? - SUBLEASE
HELD:
 The examination of the terms of the agreement between the widow of Enriquez and
Salazar revealed that the it a sublease. The court found the the sublease is for a shorter
57
period than the original lease. (May 31, 1967 vs June 1, 1967). The reservation of even
so short a period as the last say of the term is enough to make the transfer a sublease.
 The mere fact that the lessor is to receive a surrender of the premises on the last day of
the term prevents the transfer from being an assignment.
 The court found conditions in the agreement that would show inconsistency with the
idea that the widow of Enriquez had entirely given up her interest in the estate which
are as follows:
a. The agreement contained a condition that binds the original lessor to respect the
sublease and to pay damages should she again sublease the fishpond to another
person.
b. The Sublessor (widow) binds herself to pay land taxes and other assessed taxes for
the fishpond.
c. Sublessee is forbidden to cut trees without the written consent of the sublessor.
d. Sublessee is required to return the fishpond in good condition to the sublessor
upon the expiration of the sublease.
 Thus having ruled that the sublease is valid, the court did not err in ruling that Manlapat
cannot regain possession of the property before the expiration of the lease.
Note:
Hindi sinabi sa case but I think the argument (and relation to the topic), is that in assignment
of lease, consent of the lessor must be obtained, if not the lessor ca rescind (kasi
contravention na of the tenor). But since its not an assignment but sublease, valid and cannot
rescind. See applicable provisions below.
Article 1649. The lessee cannot assign the lease without the consent of the lessor, unless
there is a stipulation to the contrary.
Article 1650. When in the contract of lease of things there is no express prohibition, the
lessee may sublet the thing leased, in whole or in part, without prejudice to his
responsibility for the performance of the contract toward the lessor.
270 Nava v Yaptinchay – PINEDA (built on Valcos’ facts, ruling)
44 O.G. No. 9, p. 3332 | Oct. 21, 1947
Rights and obligations of lessor, lessee
ER:
Parties:
Mr. Quillen – owner of property; lessor
Nava – lessee b. Mr. Quillen and Yaptinchay entered into a different agreement.

Yaptinchay – sublessee

Nava allowed Yaptinchay to exercise his right of occupancy over Mr. Quillen’s property.
Yaptinchay eventually started to fail to pay his monthly dues to Nava. Nava filed collection
suit. Yaptinchay argues he owes nothing to Nava because (1) sublease contract prohibited
under lease agreement and (2) there was cession, thus Yaptinchay is now solely obligated to
Mr. Quillen.
SC considered Nava-Yaptinchay contract to be that of sublease, given the nature thereof.
Sublease was not prohibited, and in any case, Mr. Quillen allowed it. Further, it is not a
cession because Mr. Quillen did not consent thereto.
ISSUE: WON the contract entered into by Nava and Yaptinchay was a sublease – YES. Pay back
rentals to Nava.
RULING: In the contract, Nava’s personality as lessee does not disappear. Nava does not
absolutely transmit his rights and obligations to Yaptinchay and Yaptinchay does not have any
direct action to Mr. Quillen as lessor. THUS, it is a sublease and not a cession.

DOCTRINE: In the contract of sublease, the personality of the lessee does not disappear; the
lessee does not transmit absolutely his rights and obligations to the sub-lessee; and the sub-
lessee does not have any direct action against the owner of the premises as the lessor, to
require the compliance of the obligations contracted with the lessee, or vice-versa. Moreover,
the alleged assignment of cession could not have been held valid in this case, because the
owner of the premises did not give his consent to the substitution of the sub-lessee in lieu of
the lessee.
FACTS:
1. Sps. Quillen own a property located along Taft. Mr. Quillen formally leased the house to
Nava, for which the latter paid the corresponding rent for 3 months, it having been
understood that Nava can stay there for 1 year.
It was a sublease.
 In the agreement, it was provided that all rents to be paid to the owner within the
period of 10 months shall be for the account of Nava, thereby making Nava responsible
directly to Mr. Quillen for obligations arising out of the agreement.
 Whether Nava had the right to sublease the premises is not a proper defense for
Yaptinchay not only because Yaptinchay is a stranger to the lease contract between Nava
and the owner Mr. Quillen, but also because Yaptinchay, for being privy of Nava, cannot
attack the lease collaterally for the simple reason that the tenant is not permitted to
deny the title of his landlord.
 In order that prohibition to sublease may be held binding upon the lessee, the same
must be contained expressly in the contract of lease, which, in the instant case, did not
appear and if it did, was waived by the owner of the premises in question when he
allowed the sublessee to stay in the said premises and accepted the rentals from him.

2. Yaptinchay proposed to buy Nava’s right of occupancy to the house. Nava accepted the
offer.

3. Their agreement was Yaptinchay will buy Nava’s right to the actual and physical
It was not a cession of lease.
occupancy of the apartment for a period of 10 months.

4. Pursuant to the agreement, Yaptinchay paid the first installment of P1,600 but failed to
satisfy the balance.  The alleged assignment or cession could not have been valid in this case, because the
owner of the premises did not give his consent to the substitution of the sublessee in
5. Nava filed a collection suit.
lieu of the lessee. Absent consent of Mr. Quillen, there is no cession.
6. Yaptinchay position: Basically, Yaptinchay argues sublease is void so he is not obligated to
pay rent to Nava. Alternatively, what transpired was cession of lease, not sublease,
Difference between sublease and cession of lease
a. Mr. Quillen (owner of property) objected to Yaptinchay’s stay as he did not
consent to the sublease, thus Yaptinchay’s contract with Nava was cancelled.
58
 Commenting on the essential difference between a contract of cession of lease and a
contract of sublease, in their juridical consequences, Manresa said: In the case of
cession, the lessee transmits absolutely his rights, his personality disappears, there only
remains in the juridical relation two persons, the lessor and the assignee, who is
converted into a lessee. In the case of sublease, no personality disappears. There are
two leases and two distinct juridical relations, although intimately connected and related
to each other. In the contract of sublease the personality of the lessee does not
disappear. The lessee does not transmit absolutely his rights and obligations to the
sublessee and the sublessee does not have any direct right against the owner of the
premises as lessor, to require the compliance of the obligations contracted with the
lessee, or vice versa.
271 Sime Darby v. Goodyear
G.R. No. 182148
Topic: RIGHTS AND OBLIGATIONS OF LESSOR AND LESSEE| Ponente: J. Mendoza | Author:
SAYO
Doctrine: The lessee cannot assign the lease without the consent of the lessor, unless there is
a stipulation to the contrary.
Emergency Recit: Petitioner (Sime Darby) had a lease contract with Macgraphics for a
billboard advertisement. Sime’s rights to the lease was assigned to Goodyear in exchange of
cash incidental to an asset purchase agreement. Goodyear and Macgraphics initially
negotiated as to the design of the billboard advertisement that Goodyear preferred. But,
Macgraphics sent a letter to Sime Darby that it refuses to give consent to the assignment.
Goodyear asked rescission and that he be substituted to sime’s rights against macgraphics.
The RTC held that Macgraphics is not liable to Goodyear despite allowing rescission because
it never consented to the assignment. SC affirmed and ruled that the lessee cannot assign the
lease without the consent of the lessor, unless there is a stipulation to the contrary.
Facts:
1. Macgraphics owned several billboards across Metro. The Magallanes billboard
was leased by Macgraphics to Sime Darby. (Sime paid deposits)
2. Subsequently, Sime Darby executed a Memorandum of Agreement (MOA) with
Goodyear, whereby it agreed to sell its tire manufacturing plants and other assets
to the latter (1.5B).
59
3. A day after, Goodyear improved its offer (1.6B) in consideration of the assignment
by Sime Darby of the receivables in connection with its billboard advertising.
4. A Deed of Assignmnet was executed through which Sime Darby assigned its
leasehold rights and deposits made to Macgraphics pursuant to its lease contract;
5. Initially, Macgraphics and Goodyear negotiated as to the intended advertisement
design of the latter.
6. BUT EVENTUALLY, Goodyear refused to give consent to the assignment (letter sent
to Sime) because the transfer of Sime Darbys leasehold rights to Goodyear would
necessitate drastic changes to the design and the structure of the neon display of
the Magallanes billboard and would entail the commitment of manpower and
resources that it did not foresee at the inception of the lease.
7. Macgraphics advised Goodyear that any advertising service it intended to get from
them would have to wait until after the expiration or valid pre-termination of the
lease then existing with Sime Darby.
8. Thus, Goodyear sent Sime Darby demanded partial rescission of the Deed of
Assignment and the refund of P1,239,000.00, the pro-rata value of Sime Darbys
leasehold rights over the Magallanes billboard.
9. As Sime Darby refused to accede to Goodyears demand for partial rescission, the
latter commenced a civil case with the RTC.
10. Goodyear alleged that Sime Darby [1] was unable to deliver the object of the Deed
of Assignment and [2] was in breach of its warranty (no consent of any third party
with whom Sime Darby has a contractual relationship is required in connection with
the execution and delivery of the MOA, or the consummation of the transactions
contemplated therein)
11. Including Macgraphics as an alternative defendant, Goodyear argued that should
the court find the partial rescission of the Deed of Assignment not proper, it must
be declared to have succeeded in the rights and interest of Sime Darby in the
contract of lease.
12. RTC: consent of Macgraphics required. Thus, counterclaim against it must fail. But
rescission allowed.
13. CA: affirmed RTC in toto.
 14. Sime Darby insists that Goodyear has no right to rescind the Deed of Assignment as
Macgraphics impliedly consented to the assignment of the lease (Macgraphics
entertained Goodyears request for a quotation on the cost of a new design for the
Magallanes billboard.)
15. Sime Darby also asserts that Macgraphics, despite refusing to give its consent to the
assignment, still entertained Goodyears request to have its logo featured in the
Magallanes billboard.vFurther, Sime Darby argues that Macgraphics delay of 69
days before its July 11, 1996 letter declining to give its consent to the assignment is
unreasonably long.
Issue/s: WON lease rights was properly assigned to Goodyear- No.
Ruling:
The objective of the law in prohibiting the assignment of the lease without the lessor’s
consent is to protect the owner or lessor of the leased property.—Even if the Court should
sidestep this otherwise fatal miscue, the petition of Sime Darby remains bereft of any merit.
Article 1649 of the New Civil Code provides: Art. 1649.
The lessee cannot assign the lease without the consent of the lessor, unless there is a
stipulation to the contrary. (n) In an assignment of a lease, there is a novation by the
substitution of the person of one of the parties—the lessee. The personality of the lessee,
who dissociates from the lease, disappears. Thereafter, a new juridical relation arises
between the two persons who remain—the lessor and the assignee who is converted into the
new lessee. The objective of the law in prohibiting the assignment of the lease without the
lessor’s consent is to protect the owner or lessor of the leased property.
60
272 ALUDOS v SUERTE
G.R. No. 165285 | 18 June 2012 | J. Brion | TIGLAO
TOPIC: Rights and Obligations of Lessor and Lessee
Note: Please refer to the previous digest insofar as equitable mortgage is concerned.
DOCTRINE: Under Article 1649 of the Civil Code, [t]he lessee cannot assign the lease without
the consent of the lessor, unless there is a stipulation to the contrary.
ER: Lomises entered into an agreement with Suerte where the former would transfer all
improvements and rights over the two market stalls in Baguio. The issue is whether or not the
Lomises had the right to further assign the lease of the market stalls. Supreme Court ruled in
the negative. It said that since the Lomises were mere lessees of the market stalls and that it
was the Baguio City Government that was the owner-lessor of the stalls, the lessee (Lomises)
cannot assign the lease without the Government’s consent, unless there is a stipulation to the
contrary. As the permit issued to Lomises did not contain any provision that the lease of the
market stalls could further be assigned, and in the absence of the consent of the Baguio City
Government to the agreement, it is void.
FACTS:
1. Lomises acquired from Baguio City Government the right to occupy two stalls in the
Hangar Market in Baguio City.
2. They entered into an agreement with respondent Suerte for the transfer of all
improvements and rights over the two market stalls. Suerte gave a downpayment
to the Lomieses as evidenced by a receipt.
3. Before full payment could have been made, the Lomises backed out of the
agreement and returned the money to Suerte.
4. Suerte protested the return of his money and insisted on the continuation and
enforcement of his agreement with the Lomises.
 5. Suerte filed a complaint for specific performance with damages before the RTC
praying that the Lomises accept the balance and execute a final deed of sale and/or
transfer the improvements and rights over the two market stalls in his favor.
6. RTC: Nullfied the agreement. It ruled that the Lomises were mere lessees of the
market stalls and it was the Baguio City Government that was the owner-lessor of
the stalls. Under Article 1649 of the Civil Code, [t]he lessee cannot assign the
lease without the consent of the lessor, unless there is a stipulation to the
contrary. As the permit issued to Lomises did not contain any provision that the
lease of the market stalls could further be assigned, and in the absence of the
consent of the Baguio City Government to the agreement, the RTC declared the
agreement between Lomises and Johnny null and void.
7. Lomises appealed to the CA arguing that the real agreement between the parties
was merely a loan.
8. CA: Rejected Lomises claim. It found that the two agreements entered by Suerte
and the Lomises, one was for the assignment of leasehold rights and the other was
for the sale of improvements on the market stalls. Agreed with the RTC that the
agreement was void for lack of consent of the lessor.
273 VSD REALTY v. Uniwade Sales and Dolores Baello
ISSUE/S: W/N the agreement was valid – NO G.R. No. 170677 October 24, 2012| J. Peralta | Valera
TOPIC: Rights and Obligations of a Lessor and Lessee
HELD/RULING:
DOCTRINE: Uniwide cannot avail of the rights of a builder in good faith under Article 44849
Both the RTC and the CA correctly declared that the assignment of the leasehold rights over of the Civil Code, in relation to Article 546 of the same Code, which provides for full
the two market stalls was void since it was made without the consent of the lessor, the reimbursement of useful improvements and retention of the premises until reimbursement
Baguio City Government, as required under Article 1649 of the Civil Code. Neither party is made, as the said provisions apply only to a possessor in good faith who builds on land
appears to have contested this ruling. with the belief that he is the owner thereof. It does not apply where one’s only interest is
that of a lessee under a rental contract
Lomises, however, objects to the CA ruling upholding the validity of the agreement insofar as
it involved the sale of improvements on the stalls. Lomises alleges that the sale of the ER: VSD filed a complaint for annulment of title and recovery of possession of property
improvements should similarly be voided because it was made without the consent of the against respondents Uniwide and Baello. VSD asserted that its TCT is the correct title which
Baguio City Government, the owner of the improvements, pursuant to the May 1, 1985 lease covers the parcel of land being owned by Baello thru her TCT and which she leased to
contract. Lomises further claims that the stalls themselves are the only improvements on the Uniwide(Constructed improvements) RTC ruled in favor of VSD CA reversed. SC ruled in
property and a transfer of the stalls cannot be made without transferring the leasehold rights. favor of VSD holding that its TCT has the rights to the property and that Uniwide cannot be
Hence, both the assignment of leasehold rights and the sale of improvements should be reimbursed for the improvements that it made thru Art 546 of the Civil code as it is only
voided. applicable to a person holding the property in the concept of an owner amd not a lessee

FACTS:
17. VSD REALTY(VSD) filed a complaint for annulment of title and recovery of
possession of property against respondents Uniwide and Dolores Baello.
 Petitioner alleged that it is the registered owner of land covered by TCT No. T-
285312 in Caloocan, which ut purchased from Felica Bonifacio

61
  PEttioner alleged that respondent Baello is the holder and registered owner of
a parcel of land covered by TCT (35788) 12754 registered in Rizal. Baello claims
ownership and has possession of the property covered by VSD’s title and she
entered into a lease contract with respondent Uniwide.
 Petitioner alleged that its title is the correct valid and legal adocument that
covers the subject property.
18. RTC ruled in favor of VSD and declared Baello’s title null and void. Ordered Baello
and all persons claiming title under her, including Uniwide to convey and to return
the property to plaintiff VSD. And Baello and Uniwide is jointly and severally to pay
a just and reasonable compensation per month of 1.2m
19. CA reversed stating that the trial court erred in declaring Baello’s title as null and
void since a torrents title is a conclusive evidence of ownership and that VSD failed
to prove that Baello’s title was indeed spurious.
20. Petitioners appealed to the SC
ISSUE/S:
3. W/N – VSD is entitled to the recovery of possession of the subject property YES
4. W/N Uniwide may ask for compensation as a builder in good faith as a lessee of the
subject property? No. (TOPIC
HELD/RULING;
NOT TOPIC
 The Court holds that petitioner was able to establish through documentary
and testimonial evidence that the technical description of its Torrens title
covers the property that is being occupied by respondent Uniwide by virtue of
a lease contract with respondent Baello. A comparison of the technical
description of the land covered by the title of petitioner and the technical
description of the land covered by the title of Baello shows that they are not
the same
 As petitioner has proven that its title covers the property in dispute, it is
entitled to recover the possession thereof, the basis of which shall be
discussed subsequently. The recovery of possession of the subject property by
petitioner is not dependent on first proving the allegation that Baello’s title is
spurious and the annulment of Baello’s title, since Baello’s title does not cover
the subject property and petitioner has proven its title over the subject
property and the identity of the property.
TOPIC
 Considering that Uniwide constructed a building on the subject parcel of land,
is Uniwide entitled to recover from VSD the cost of its improvement on the
land?
 It is noted that when the contract of lease was executed, Uniwide was
unaware that the property leased by it was owned by another person other
than Dolores Baello. Nevertheless, Uniwide cannot avail of the rights of a
62
builder in good faith under Article 44849 of the Civil Code, in relation to Article
546 of the same Code, which provides for full reimbursement of useful
improvements and retention of the premises until reimbursement is made, as
the said provisions apply only to a possessor in good faith who builds on land
with the belief that he is the owner thereof. It does not apply where one’s only
interest is that of a lessee under a rental contract.
 Jurisprudence is replete with cases which categorically declare that Article 448
covers only cases in which the builders, sowers or planters believe themselves
to be owners of the land or, at least, have a claim of title thereto, but not when
the interest is merely that of a holder, such as a mere tenant, agent or
usufructuary. A tenant cannot be said to be a builder in good faith as he has no
pretension to be owner.
 a plethora of cases, this Court has held that Articles 448 of the Civil Code, in
relation to Article 546 of the same Code, which allows full reimbursement of
useful improvements and retention of the premises until reimbursement is
made, applies only to a possessor in good faith, i.e., one who builds on land
with the belief that he is the owner thereof. It does not apply where one’s only
interest is that of a lessee under a rental contract; otherwise, it would always
be in the power of the tenant to "improve" his landlord out of his property
 Based on the foregoing, Uniwide cannot recover the cost of its improvement
on the land from VSD under Article 448 of the Civil Code.
274 ANALITA P. INOCENCIO, substituting for RAMON INOCENCIO (Deceased) v. HOSPICIO DE
SAN JOSE (HDSJ)
G.R. No. 201787, September 25, 2013
Topic: Rights and Oblig of Lessor/Lessee| Ponente: J. Carpio| Author: Acido
Doctrine:
Cession/Assignment of Lease Rights (Art. Sublease (Art. 1650)
1649)
Personality of lessee disappears The lessee becomes in turn a lessor to a
sublessee. The sublessee then becomes
liable to pay rentals to the original lessee.
However, the juridical relation between the
lessor and lessee is not dissolved.
Only two persons remain in the juridical There are at least three parties and two
relation — the lessor and the assignee who is distinct juridical relations.
converted into the new lessee.
ER: German Inocencio leased land from HDSJ. Sec. 6 of the lease contract provided that it was
nontransferable unless prior consent of the lessor is obtained in writing. German constructed
2 buildings, subleased them, and made his son Ramon administrator. Letters from 1990
indicated HDSJ’s knowledge of the sublease. Eventually German died and HDSJ refused to
renew the lease contract, citing violation of Sec. 6. HDSJ filed for unlawful detainer; MeTC,
RTC, and CA all ruled in its favor. SC partially granted Ramon’s petition, holding that Sec. 6
refers to transfers inter vivos, not mortis causa. Further, Ramon had a right to sublease the
premises since the lease contract did not contain any stipulation forbidding subleasing.
Facts:
20. On 1 March 1946, HDSJ leased a parcel of land located in Pasay City to German
Inocencio, effective for one year and renewed for one-year periods several times.
Sec. 6 of the lease contract provides (translated from Spanish): This contract is
nontransferable unless prior consent of the lessor is obtained in writing.
21. In 1946, German constructed two buildings on the parcel of land which he
subleased. He also designated his son Ramon Inocencio to administer the said
property.
22. On 21 September 1990, German received a letter from HDSJ informing him that the
increased rentals shall take effect in November 1990 instead of August 1990, "to
give him ample time to make the necessary rental adjustments with his
sublessees."
23. German passed away in 1997. Ramon did not notify HDSJ of this. After German’s
passing, Ramon collected the rentals from the sublessees, and paid the rentals to
HDSJ, and the taxes on the property. On 1 March 2001, HDSJ’s property
administrator, Five Star Multi-Services, Inc., notified Ramon that HDSJ is terminating
the lease contract effective 31 March 2001.
24. Ramon then sent a letter to HDSJ dated 12 March 2001, suggesting that the lease
contract be renegotiated for the welfare of the sublessees occupying the parcel of
land. This was rejected by HDSJ, because Ramon has "continually subleased the
subject premises to about 20 families (in addition to a commercial establishment) x
x x without the knowledge and consent of the lessor, [HDSJ]." Thereafter, HDSJ
refused to accept Ramon’s tender of payment of rentals.
25. On 28 June 2005, HDSJ filed a Complaint before the MeTC-Pasay for unlawful
detainer against Ramon and his sublessees. The complaint alleged that Ramon and
his sublessees have been illegally occupying the leased premises since 31 March
2001. In his Answer, Ramon claimed, among others, that there is no prohibition
against subleasing in the lease contract. Thus, under Article 1650 of the Civil Code,
Ramon is permitted to sublease the premises. Further, the letters sent by HDSJ to
the Inocencios sometime in 1990 revealed that the former already knew that the
premises were being subleased.
26. MeTC, RTC, and CA all ruled in favor of HDSJ, holding that the lease contract could
not be transmitted to Ramon as German’s heir in view of the express stipulation
found therein. Since there was no lease contract between Ramon and HDSJ, Ramon
cannot sublease the property.
 A lease contract is not essentially personal in character. Thus, the rights and
obligations therein are transmissible to the heirs. The general rule, therefore, is that
heirs are bound by contracts entered into by their predecessors-in-interest except
when the rights and obligations arising therefrom are not transmissible.
 In the subject Contract of Lease, not only were there no stipulations prohibiting any
transmission of rights, but its very terms and conditions explicitly provided for the
transmission of the rights of the lessor and of the lessee to their respective heirs
and successors.
 Section 6 of the lease contract provides that "this contract is nontransferable
unless prior consent of the lessor is obtained in writing." Section 6 refers to
transfers inter vivos and not transmissions mortis causa. What Section 6 seeks to
avoid is for the lessee to substitute a third party in place of the lessee without the
lessor’s consent. This merely reiterates what Article 1649 of the Civil Code
provides.
 [SEE DOCTRINE] Ramon had a right to sublease the premises since the lease
contract did not contain any stipulation forbidding subleasing, following Article
1650 of the Civil Code. Therefore, we hold that the sublease contracts executed by
Ramon were valid.
 [JUST IN CASE] However, we find that the CA erred in not applying Article 1678 of
the Civil Code. The buildings were constructed before German’s demise, during the
subsistence of a valid contract of lease. It does not appear that HDSJ prohibited
German from constructing the buildings. Thus, HDSJ should have reimbursed
German (or his estate) half of the value of the improvements as of 2001. If HDSJ is
not willing to reimburse the Inocencios, then the latter should be allowed to
demolish the buildings.

Issue: Whether the sublease contracts were invalid.

Held/Ratio: No. Petition partially granted

63

275 ANTONIO LOCSIN II v. MEKENI FOOD CORPORATION
G.R. No. 192105. December 9, 2013| J. Del Castillo | Enriquez/Castro
TOPIC: Rights and Obligations of Lessor and Lessee
DOCTRINE: Installments made on the car plan may be treated as rentals only when there is
an express stipulation in the car plan agreement to such effect. It was therefore patent error
for the appellate court to assume that, even in the absence of express stipulation, petitioner’s
payments on the car plan may be considered as rentals which need not be returned.
ER: Locsin was the Regional Sales Manager of Mekeni wherein he was offered a car plan
under which one-half of the cost of the vehicle is to be paid by the company and the other
half to be deducted from his salary. When Locsin resigned, he made an offer to purchase the
vehicle by paying the outstanding balance. However, they could not agree. Thus, Locsin
returned the vehicle to Mekeni. Locsin then filed a complaint for the recovery of monthly
salary deductions which were earmarked for his cost-sharing in the car plan. CA treated the
monthly contributions as rentals for the use of the car and ruled that Locsin is not entitled to
the refund. The SC held that installments made on the car plan may be treated as rentals only
when there is an express stipulation in the car plan agreement to such effect. Therefore,
Locsin is entitled to the refund under the principle of unjust enrichment.
FACTS:
 Mekeni offered Locsin (Regional Sales Manager) a car plan, under which one-half of the
cost of the vehicle is to be paid by the company and the other half to be deducted from
his salary.
 When Locsin resigned, he offered to purchase his service vehicle by paying the
outstanding balance, but as they could not agree, Locsin returned the vehicle to Mekeni.
 Locsin filed against Mekeni a Complaint for the recovery of monetary claims consisting
of unpaid salaries, commissions, sick/vacation leave benefits, and recovery of monthly
salary deductions which were earmarked for his cost-sharing in the car plan.
 Labor Arbiter: directed Mekeni to turn-over to Locsin the subject vehicle upon the said
Locsin’s payment to them of the sum of ₱100,435.84.
 NLRC: Reversed the LA and held that Locsin’s amortization payments on his service
vehicle amounting to ₱112,500.00 should be reimbursed; if not, unjust enrichment
would result, as the vehicle remained in the possession and ownership of Mekeni.
 CA: Modified NLRC’s decision. It stated that in the absence of evidence as to the
stipulations of the car plan arrangement between Mekeni and Locsin, the monthly
contributions should be treated as rentals for the use of his service vehicle for the
duration of his employment with Mekeni. The appellate court applied Articles 1484-
1486 of the Civil Code, and added that the installments paid by petitioner should not be
returned to him inasmuch as the amounts are not unconscionable.
64
ISSUE/HELD: Whether the installments made by Locsin on the car plan can be treated as
rentals – NO.
RATIO: From the evidence on record, it is seen that the Mekeni car plan offered to petitioner
was subject to no other term or condition than that Mekeni shall cover one-half of its value,
and petitioner shall in turn pay the other half through deductions from his monthly salary.
Mekeni has not shown, by documentary evidence or otherwise, that there are other terms
and conditions governing its car plan agreement with petitioner. There is no evidence to
suggest that if petitioner failed to completely cover one-half of the cost of the vehicle, then
all the deductions from his salary going to the cost of the vehicle will be treated as rentals
for his use thereof while working with Mekeni, and shall not be refunded. Indeed, there is
no such stipulation or arrangement between them.
It was made clear that installments made on the car plan may be treated as rentals only
when there is an express stipulation in the car plan agreement to such effect. It was
therefore patent error for the appellate court to assume that, even in the absence of express
stipulation, petitioner’s payments on the car plan may be considered as rentals which need
not be returned.
Indeed, the Court cannot allow that payments made on the car plan should be forfeited by
Mekeni and treated simply as rentals for petitioner’s use of the company service vehicle. Nor
may they be retained by it as purported loan payments, as it would have this Court believe. In
the first place, there is precisely no stipulation to such effect in their agreement. Secondly, it
may not be said that the car plan arrangement between the parties was a benefit that the
petitioner enjoyed; on the contrary, it wasan absolute necessity in Mekeni’s business
operations, which benefit edit to the fullest extent: without the service vehicle, petitioner
would have been unable to rapidly cover the vast sales territory assigned to him, and sales or
marketing of Mekeni’s products could not have been booked or made fast enough to move
Mekeni’s inventory. Poor sales, inability to market Mekeni’s products, a high rate of product
spoil age resulting from stagnant inventory, and poor monitoring of the sales territory are the
necessary consequences of lack of mobility. Without a service vehicle, petitioner would have
been placed at the mercy of inefficient and unreliable public transportation; his official
schedule would have been dependent on the arrival and departure times of buses or jeeps,
not to mention the availability of seats in them. Clearly, without a service vehicle, Mekeni’s
business could only prosper at a snail’s pace, if not completely paralyzed. Its cost of doing
business would be higher as well.

276 Jusayan vs. Sombilla, G.R. No. 163928, January 21, 2015
G.R. No. 163928 | January 21, 2015| BERSAMIN, J.| De Leon
TOPIC: RIGHTS AND OBLIGATIONS OF LESSOR AND LESSEE
DOCTRINE: Section 7 of Republic Act No. 3844 provides that once there is an agricultural
tenancy, the agricultural tenant’s right to security of tenure is recognized and protected.
The landowner cannot eject the agricultural tenant from the land unless authorized by the
proper court for causes provided by law. Section 36 of Republic Act No. 3844, as amended
by Republic Act No. 6389, enumerates the several grounds for the valid dispossession of the
tenant.35It is underscored, however, that none of such grounds for valid dispossession of
landholding was attendant in Jorge’s case.
ER: Wilson designated Jorge as his agent to farm his land. Wilson sold Land to Timoteo,
Jorge and TImoteo verbally agreed that Jorge will retain possession of the land. And that
Jorge will deliver 110 cavans of palay annually to TImoteo. When the lands was transferred
to Timoteo’s sons, Timoteo wanted to eject Jorge. The Court held that Timoteo cannot eject
because Jorge is an agricultural tenant, therefore (doctrine)
FACTS:
 Wilson Jesena (Wilson) owned four parcels of land situated in New Lucena, Iloilo.
On June 20, 1970, Wilson entered into an agreement with respondent Jorge
Sombilla (Jorge), wherein Wilson designated Jorge as his agent to supervise the
tilling and farming of his riceland in crop year 1970-1971. On August 20, 1971,
before the expiration of the agreement, Wilson sold the four parcels of land to
Timoteo Jusayan (Timoteo). Jorge and Timoteo verbally agreed that Jorge would
retain possession of the parcels of land and would deliver 110 cavans of palay
annually to Timoteo without need for accounting of the cultivation expenses
provided that Jorge would pay the irrigation fees. From 1971 to 1983, Timoteo and
Jorge followed the arrangement. In 1975, the parcels of land were transferred in
the names of Timoteo’s sons, namely; Manuel, Alfredo and Michael (petitioners). In
1984, Timoteo sent several letters to Jorge terminating his administration and
demanding the return of the possession of the parcels of land.
65
 Due to the failure of Jorge to render accounting and to return the possession of the
parcels of land despite demands, Timoteo filed on June 30, 1986 a complaint for
recovery of possession and accounting against Jorge in the RTC. Following Timoteo’s
death on October 4, 1991, the petitioners substituted him as the plaintiffs.
 In his answer, Jorge asserted that he enjoyed security of tenure as the agricultural
lessee of Timoteo; and that he could not be dispossessed of his landholding
without valid cause.
ISSUE/S: W/N Jorge can be ejected
HELD/RULING; No
 The claim of Timoteo that Jorge was his agent contradicted the verbal agreement
he had fashioned with Jorge. By assenting to Jorge’s possession of the land sans
accounting of the cultivation expenses and actual produce of the land provided that
Jorge annually delivered to him 110 cavans of palay and paid the irrigation fees
belied the very nature of agency, which was representation. The verbal agreement
between Timoteo and Jorge left all matters of agricultural production to the sole
discretion of Jorge and practically divested Timoteo of the right to exercise his
authority over the acts to be performed by Jorge. While in possession of the land,
therefore, Jorge was acting for himself instead of for Timoteo. Unlike Jorge,
Timoteo did not benefit whenever the production increased, and did not suffer
whenever the production decreased. Timoteo’s interest was limited to the delivery
of the 110 cavans of palay annually without any concern about how the cultivation
could be improved in order to yield more produce.
 On the other hand, to prove the tenancy relationship, Jorge presented handwritten
receipts indicating that the sacks of palay delivered to and received by one Corazon
Jusayan represented payment of rental. In this regard, rental was the legal term for
the consideration of the lease.16 Consequently, the receipts substantially proved
that the contractual relationship between Jorge and Timoteo was a lease.
 Agricultural lease v Civil Lease
 in both civil law lease of an agricultural land and agricultural lease, the lessor gives
to the lessee the use and possession of the land for a price certain. Although the
purpose of the civil law lease and the agricultural lease may be agricultural
cultivation and production, the distinctive attribute that sets a civil law lease apart
from an agricultural lease is the personal cultivation by the lessee. An agricultural
lessee cultivates by himself and with the aid of those of his immediate farm
household. Conversely, even when the lessee is in possession of the leased
 agricultural land and paying a consideration for it but is not personally cultivating
the land, he or she is a civil law lessee.
 The only issue remaining to be resolved is whether or not Jorge personally
cultivated the leased agricultural land.
 Jorge, as the one claiming to be an agricultural tenant, had to prove all the
requisites of his agricultural tenancy by substantial evidence. In that regard, his
knowledge of and familiarity with the landholding, its production and the instances
when the landholding was struck by drought definitely established that he
personally cultivated the land. His ability to farm the seven hectares of land despite
his regular employment as an Agricultural Technician at the Municipal Agriculture
Office was not physically impossible for him to accomplish considering that his
daughter, a member of his immediate farm household, was cultivating one of the
parcels of the land. Indeed, the law did not prohibit him as the agricultural lessee
who generally worked the land himself or with the aid of member of his immediate
household from availing himself occasionally or temporarily of the help of others in
specific jobs. In short, the claim of the petitioners that the employment of Jorge as
an Agricultural Technician at the Municipal Agriculture Office disqualified him as a
tenant lacked factual or legal basis.
 Section 7 of Republic Act No. 3844 provides that once there is an agricultural
tenancy, the agricultural tenant’s right to security of tenure is recognized and
protected. The landowner cannot eject the agricultural tenant from the land
unless authorized by the proper court for causes provided by law. Section 36 of
Republic Act No. 3844, as amended by Republic Act No. 6389, enumerates the
several grounds for the valid dispossession of the tenant.35It is underscored,
however, that none of such grounds for valid dispossession of landholding was
attendant in Jorge’s case.
66
277 SPS AQUINO V SPS AGUILAR
G.R. No. 182754 |June 29, 2015|SERENO| DELFIN
TOPIC: Rights and Obligations of Lessor and Lessee
DOCTRINE:
Article 1678 of the Civil Code applies only to lessees who build useful improvements on the
leased property. It does not apply to those who possess property by mere tolerance of the
owners, without a contractual right.
Article 1678 provides:
If the lessee makes, in good faith, useful improvements which are suitable to the use for
which the lease is intended, without altering the form or substance of the property leased,
the lessor upon the termination of the lease shall pay the lessee one-half of the value of the
improvements at that time. Should the lessor refuse to reimburse said amount, the lessee
may remove the improvements, even though the principal thing may suffer damage thereby.
He shall not, however, cause any more impairment upon the property leased than is
necessary.
EMERGENCY RECIT:
Sps Aquino owned a property which Sps Aguilar was occupying with the consent and approval
of Sps Aquino. Sps Aguilar introduced improvements in the property. When Sps Aquino
needed the property, they asked Sps Aguilar to vacate, Sps Aguilar refused. They claimed that
since they introduced improvements, they are co-owners. CA held that they are analogous to
tenants or lessee and thus entitled to reimbursement of expenses by virtue of Article 1678.
The SC held Article 1678 is not applicable. Sps Aguilar are not tenants because they occupied
the property by mere tolerance of Sps Aquino. The analogy that the CA is referring to is only
in the implied obligation of a lessee and a person occupying by mere tolerance to vacate the
premises upon demand and not as to application of Article 1678.
FACTS:
1. Sps Aquino owned a property in Guadalupe occupied by Teresa Aquino’s sister Josefina
Aguilar and her family (Sps Aguilar) since 1981 with the consent and approval of Sps
Aquino who were resifing in the US.
2. While Sps Aguilar possessed the property, the house previously constructed therein was
demolished and a 3-storey building was built in its place. They occupied the 3 rd flr for the
next 20 yrs without paying rent.
3. Sps Aquino informed Sps Aguilar that they needed the property and asked them to
vacate. Sps Aguilar refused, thus Sps Aquino filed for ejectment. The two tried to settle
but failed.
4. Sps Aquino them filed a complaint praying for Sps Aguilar to vacate the property and pay
rent from the time the formal demand to vacate was made.
5. Sps Aguilar contends that they contributed to the improvements of the property and the time notify the defendant that "they now need the two parcels of land in
construction, both in money and supervision. As such they claim to be co-owners of the question" and requested him to vacate the same. In allowing several years to
property and have the right to be compensated for their contribution. pass without requiring the occupant to vacate the premises nor filing an action
6. MTC ruled in favor of Sps Aquino stating they had the right to enjoy possession of the to eject him, plaintiffs have acquiesced to defendant's possession and use of
property as the registered owners. It also declare Sps Aguilar to be builders in bad faith the premises. It has been held that a person who occupies the land of
not entitled to recover expenses. another at the latter's tolerance or permission, without any contract
7. RTC and CA affirmed the decision of the lower court. CA however ruled that Sps Aguilar between them, is necessarily bound by an implied promise that he will
should be reimbursed for necessary and useful expenses pursuant to Article 1678 and vacate upon demand, failing which a summary action for ejectment is the
548 of the civil code. As such, it ordered the case to be remanded for determination of proper remedy against them. The status of defendant is analogous to that of
the costs to be reimbursed. a lessee or tenant whose term of lease has expired but whose occupancy
8. continued by tolerance of the owner. In such a case, the unlawful deprivation
or withholding of possession is to be counted from the date of the demand
ISSUE/S: to vacate.
WON Article 1678 is applicable in this case? - NO  It is clear from the above that Calubayan is not sufficient basis to confer the status and
rights of a lessee on those who occupy property by mere tolerance of the owner.
HELD:  In this case, there is absolutely no evidence of any lease contract between the parties. In
 In its Decision, the CA found that respondents were occupants of the property by mere fact, Sps Aguilar themselves never alleged that they were lessees of the lot or the
tolerance or generosity of petitioners and were bound by an implied promise to vacate building in question. Quite the opposite, they insisted that they were co-owners of the
the premises upon demand. building and builders in good faith under Article 448 of the Civil Code.
 Based on this finding, the CA held that "the status of petitioners is analogous to that of a
lessee or a tenant whose term of lease has expired but whose occupancy continued by DECISION:
tolerance of owner"58 pursuant to this Court's ruling in Calubayan v. Pascual, As a result, Pursuant to Article 452 of the Civil Code, a builder in bad faith is entitled to recoup the
the CA concluded that Articles 1678 and 546 of the Civil Code must be applied to allow necessary expenses incurred for the preservation of the land. The CA correctly ruled that
respondents to be reimbursed for their necessary and useful expenses. respondents in this case are similarly entitled to this reimbursement. However, being builders
 We disagree. By its express provision, Article 1678 of the Civil Code applies only to in bad faith, they do not have the right of retention over the premises.
lessees who build useful improvements on the leased property. It does not apply to
those who possess property by mere tolerance of the owners, without a contractual
right.
 A careful reading of the statement made by this Court in Calubayan would show that it
did not, as it could not, modify the express provision in Article 1678, but only noted an
"analogous" situation. According to the Court, the analogy between a tenant whose
term of lease has expired and a person who occupies the land of another at the latter's
tolerance lies in their implied obligation to vacate the premises upon demand of the
owner. The Court stated:
o To begin with, it would appear that although the defendant is regarded by the
plaintiffs as a "squatter" his occupancy of the questioned premises had been
permitted or tolerated even before the Philippine Realty Corporation sold the
lots to the plaintiffs. Otherwise, the latter would not have found him on the
premises. It may be true that upon their acquisition of the parcels of land in
1957, plaintiffs notified and requested defendant to see them, but despite
defendant's failure to heed these requests, plaintiffs did not choose to bring an
action in court but suffered the defendant instead to remain in the premises
for almost six years. Only on February 2, 1963, did the plaintiffs for the first

67

278 Comglasco vs. Santos Car Check Center
G.R. No. 202989 March 25, 2015
Topic: Rights and Obligations of Lessor and Lessee | Ponente: J. Reyes| Author: Enriquez
editing Valera’s digest
Doctrine:
 Payment of lease rentals does not involve a prestation “to do” envisaged in Articles
1266 and 1267 which has been rendered legally or physically impossible without the
fault of the obligor-lessor. Article 1267 speaks of a prestation involving service which
has been rendered so difficult by unforeseen subsequent events as to be manifestly
beyond the contemplation of the parties.
Emergency Recit: On August 2000, Santos leased out a showroom to Comgalsco for 5 years.
The lease contract contract permits pre-termination with cause in the 1 st 3 years and w/o
cause after the 3rd year. More than a year after, Comglasco advised Santos that it was pre-
terminating their lease contract effective December 2001. Comglasco cited business reverses
incurred to the 1997 Asian financial crisis, Comglasco insists that under Art. 1267 of the Civil
Code, it is exempted from its obligation under the contract because its business setback is the
cause contemplated in their lease agreement which authorized it to pre-terminate. A month
after advising Santos, Comglasco vacated the premises and stopped paying further rent.
Santos sent 4 demand letters which were all ignored. Thus, Santos filed an action for breach
of contract. In ruling that the pre-termination by Comglasco has no valid cause, the SC said
that the Asian currency crisis befell the region from July 1997 and for sometime thereafter,
but Comglasco cannot be permitted to blame its difficulties on the said crisis because it
entered into the subject lease only on August 16, 2000, more than three years after it began,
and by then Comglasco had known what business risks it assumed when it opened a new
shop in Iloilo City.
Facts:
 On August 2000, Santos Car Check (Santos) leased out a showroom in Iloilo City to
Comglasco for a period of 5 years (August 2000)
 On October 2001, Comglasco advised Santos that it was pre-terminating their lease
contract effective Dec 1, 2001
 Santos refused and reminded that their contract was for 5 years
68
 On Jan 15, 2002, Comglasco vacated the leased premises and stopped paying any
further rent.
 Santos sent several demand letters which was ignored by Comglasco
 Santos sent a final demand letter on Sept 2003, which Comglasco also ignored
 On Oct 20, 2003, Santos filed a suit for breach of contract
 RTC ruled on favor of Santos(Judgement on the pleadings)
 Santos moved for execution pending Comglasco’s appeal.
 On appeal to the CA, Comglaso raised the issue on W/N material issues were raised
in its answer?
 CA affirmed RTC decision
 In the SC, it was noted that par 15. Of the lease contract permits pre-termination
with cause in the 1st 3 years and w/o cause after the 3rd year.
 Citing business reverses incurred to the 1997 Asian financial crisis, Comglasco
insists that under Art. 1267 of the Civil Code it is exempted from its obligation
under the contract because its business setback is the cause contemplated in
their lease agreement which authorized it to pre-terminate.
 Art. 1267. When the service has become so difficult as to be manifestly
beyond the contemplation of the parties, the obligor may also be released
therefrom, in whole or in part.
 Comglasco argues that it cannot be said to have admitted in its answer the
material allegations of the complaint because it invoked a valid cause for its
decision to pre-terminate the lease before the lapse of 3 years in view of its
pleaded “cause for pre-termination(1997 Asian Financial Crisis) the RTC should
have ordered reception of evidence for this purpose thus a summary
judgement would be proper and not a judgement on the pleadings. That the
prevailing business climate which ensued after the 1997 currency crisis
resulted in great difficulty on its part to comply with the terms of the lease as
to be manifestly beyond the contemplation of the parties thus they should be
deemed released from the lease.
Held: Whether Comglasco’s “cause” is a valid cause for pre-termination?- NO
Ruling:
 The court cited the case of PNCC vs. CA which also involves the termination of a
lease by the lessee due to financial as well as technical difficulties.
 The obligation to pay rentals or deliver the thing in a contract of lease falls
within the prestation “to give”; hence, it is not covered within the scope of
Article 1266. At any rate, the unforeseen event and causes mentioned by
petitioner are not the legal or physical impossibilities contemplated in said
article. Besides, petitioner failed to state specifically the circumstances
brought about by “the abrupt change in the political climate in the country”
except the alleged prevailing uncertainties in government policies on
infrastructure projects.
  The principle of rebus sic stantibus neither fits in with the facts of the case.
Under this theory, the parties stipulate in the light of certain prevailing
conditions, and once these conditions cease to exist, the contract also ceases
to exist. This theory is said to be the basis of Article 1267 of the Civil Code This
article, which enunciates the doctrine of unforeseen events, is not, however,
an absolute application of the principle of rebus sic stantibus, which would
endanger the security of contractual relations. The parties to the contract
must be presumed to have assumed the risks ofunfavorable developments. It
is therefore only in absolutely exceptional changes of circumstances that
equity demands assistance for the debtor
 Relying on Article 1267 of the Civil Code to justify its decision to pre-terminate its
lease with Santos, Comglasco invokes the 1997 Asian currency crisis as causing it
much difficulty in meeting its obligations.
 In the case of PNCC, the Court held that the payment of lease rentals does not
involve a prestation “to do” envisaged in Articles 1266 and 1267 which has
been rendered legally or physically impossible without the fault of the obligor-
lessor. Article 1267 speaks of a prestation involving service which has been
rendered so difficult by unforeseen subsequent events as to be manifestly
beyond the contemplation of the parties.
 To be sure, the Asian currency crisis befell the region from July 1997 and for
sometime thereafter, but Comglasco cannot be permitted to blame its difficulties
on the said regional economic phenomenon because it entered into the subject
lease only on August 16, 2000, more than three years after it began, and by then
Comglasco had known what business risks it assumed when it opened a new shop
in Iloilo City.
 Concerning, now, whether Comglasco's alleged rental deposit and advance rentals
of P309,000.00 should be credited to Comglasco's account, let it suffice to state
that it never raised this matter in its answer to the complaint, nor in its appeal to
the CA. Certainly, it cannot do so now.

69
 17. Raval came into the picture after Flaviano Jr. assigned to him via a Deed of Assignment
all his interests, rights and participation in the subject properties for a consideration of
279 PERALTA V. RAVAL ₱500,000.00.
G.R. No. 188467| 29 March 2017 | J. Reyes | Garcia 18. Peralta refused to recognize the validity of the assignment to Raval, prompting him to
TOPIC: Rights and Obligations of Lessors and Lessees still deposit his rental payments for the account of Flaviano Jr.,more specifically to
bank accounts that were opened by Peralta's wife, Gloria Peralta, under the name
DOCTRINE: "Gloria F. Peralta [in-trust-for] (ITF): Flaviano Arzaga, Jr."
Article 1659. If the lessor or the lessee should not comply with the obligations set forth in 19. Raval eventually filed a complaint for recission of the lease (1998).
Articles 1654 and 1657, the aggrieved party may ask for the rescission of the contract and 20. RTC dismissed the case. CA granted in part Raval’s appeal. It granted in his favor an
indemnification for damages, or only the latter, allowing the contract to remain in force. award of unpaid rental payments but denied the plea for rescission.
Article 1654 referred to in Article 1659 pertains to the obligations of a lessor in a lease ISSUE/S:
agreement. Article 1657, on the other hand, enumerates the obligations of a lessee, as it  W/N Raval has rights and interests over the disputed properties (in llight of Flaviano Jr.’s
provides: assignment). YES
Article 1657. The lessee is obliged:  W/N the filing of the action for rescission has already prescribed. NO
(1) to pay the price of the lease according to the terms stipulated;
 W/N Raval was entitled to Damages. NO
(2) To use the thing leased as a diligent father of a family, devoting it to the use stipulated;
 W/N Peralta’s counterclaim should be granted. NO.
and in the absence of stipulation, to that which may be inferred from the nature of the thing
leased, according to the custom of the place;
(3) To pay expenses for the deed of lease.
HELD/RULING:
ER:
Rights and Interests of Raval
Sps. Arzaga and Peralta entered into a contract of Lease. Flaviano Jr. (heir of sps. Arzaga) in a
The issue raised by Peralta that the Deed of Assignment is simulated and void ab initio, would
deed of assignment, assigned all his interests, rights and participation in the subject
necessarily also raise the issue of the validity of TCT Nos. T-30107 and T-30108. This issue
properties to Raval. Despite Raval’s demand, Spouses Arzaga refused to acknowledge his
cannot be collaterally attacked. There is no question that the titles of the properties covered
rights. Whether or not the lease can be rescinded. NO. already moot and academic. But with
by the Deed of Assignment had already been issued in favor of Raval. Well-settled is the rule
regard to other matters that are intertwined with the filing of rescission (like prescription
that a certificate of title cannot be altered, modified cancelled except in a direct proceeding
-related to the topic), the Court ruled that the filing for rescission has not yet prescribed.
in accordance with law. In the instant case, it is obvious that any attack on the Deed of
Raval's complaint specified the violations that were allegedly committed by Peralta as a
Assignment is also an attack upon Raval's title. In this case, it is being made collaterally as a
lessee, Specifically, rescission was sought because of Peralta's alleged refusal to render an
defense to the action for rescission. This cannot be done. It is only when the object of the
accounting of unpaid monthly rentals, to vacate the second storey of the house, to remove
action or proceeding is to nullify the title, and thus challenge the judgment pursuant to which
the improvements constructed on the areas not covered by the lease, to operate and provide
the title was decreed, that such an action can be considered a direct attack and, therefore,
a water system and to refund the taxes paid by Flaviano Jr. These violations happened either
allowable x x x. Otherwise, a collateral attack would not prosper as it is improper in this
immediately prior to Raval's repeated extrajudicial demands that began in August 1995; or
action.
after Peralta's refusal to heed to the demands. There was no indication that the violations
dated back from the first few years of the lease agreement's effectivity in the 1970s. Clearly,
Rescission of Lease Contract
the filing of the action for rescission in 1998 was within the 10-year prescriptive period that
The Agreement had already terminated in 2014 – Already Moot and Academic
applies to the suit
Article 1659. If the lessor or the lessee should not comply with the obligations set forth in
FACTS:
Articles 1654 and 1657, the aggrieved party may ask for the rescission of the contract and
14. Spouses Arzaga, as lessors, entered into a Contract of Lease with Peralta, as lessee,
indemnification for damages, or only the latter, allowing the contract to remain in force.
over the subject lots and the improvements thereon. (1974 - For 40 years)
Article 1654 referred to in Article 1659 pertains to the obligations of a lessor in a lease
15. Flaviano Jr., being an adopted son and heir of the Spouses Arzaga, filed with the RTC a
agreement. Article 1657, on the other hand, enumerates the obligations of a lessee, as it
complaint for anullment of lease contract against Peralta, who allegedly breached in
provides:
his obligations under the contract of lease.
Article 1657. The lessee is obliged:
16. RTC dismissed the case and was later affirmed by the CA.
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(1) to pay the price of the lease according to the terms stipulated;
(2) To use the thing leased as a diligent father of a family, devoting it to the use stipulated;
and in the absence of stipulation, to that which may be inferred from the nature of the thing
leased, according to the custom of the place;
(3) To pay expenses for the deed of lease.
Given the rules that exclusively apply to leases, the other provisions of the NCC that deal with
the issue of rescission may not be applicable to contracts of lease. To illustrate, Peralta's
reference to Article 1389, when he argued that Raval's action had already prescribed for
having been filed more than four years. after the execution of the lease contract in 1974, is
misplaced. For the same reason, Peralta erred in arguing that Raval's action should only be
deemed a subsidiary remedy, such that it could not have been validly instituted if there were
other legal means for reparation. Article 1389 applies to rescissions in Articles 1380 and 1381,
which are distinct from rescissions of lease under Article 1659.

Unpaid Rentals and Moral Damages

Peralta began depositing his rental payments in an account that was maintained "in trust for"
Flaviano Jr. The RTC provided the following factual findings in its Decision dated May 17,
2005.

There is no question that the money for the rental was in the bank. So to speak, 'it was there
for the taking'. It was therefore, incumbent upon Flaviano Jr. and Raval to arrange between
them on how to withdraw the money from the bank, to be paid to the rightfu1 payee or
beneficiary. From the standpoint of lessee, he has already complied with his obligation to pay
the monthly rentals due to the fact that his mode of payment was earlier sustained as proper
by the CA in the precursor case.

All payments made by Peralta through the bank accounts in trust for Flaviano Jr. shall be
deemed valid payments for the monthly rentals.1âwphi1 Since the records confirmed that
Peralta has been paying his monthly rentals up to the time and even after the complaint for
rescission was filed in 1998, the prayer in the complaint for unpaid rentals should have been
denied. Accordingly, the CA's award of monthly rentals is deleted.

The award of moral damages is likewise deleted. "Moral damages are not recoverable simply
because a contract has been breached. They are recoverable only if the party from whom it is
claimed acted fraudulently or in, bad faith or in wanton disregard of his contractual
obligations. The breach must be wanton, reckless, malicious or in bad faitl1, and oppressive
or abusive.

Counterclaim
It is clear that the action for rescission: was not filed purposely to humiliate or harass Peralta,
but to seek redress for what Raval believed was a violation of his rights as the new owner of
the subject lots, and lessor to Peralta.

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