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37 PHIL 982 JOHNSON; April 1, 1918

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Chapter 5: PERFECTION OF THE CONTRACT:

NATURE Appeal from a judgment of a lower court (no mention of particular court in electronic copy) FACTS - On the 15th day of November, 1912, Antonio Diaz (defendant/petitioner) granted an option to Antonio Enriquez (plaintiff/respondent), to purchase his hacienda at Pitogo consisting of 100 and odd hectares, within the period necessary for the approval and issuance of a Torrens title thereto by the Government, for which he may pay either the sum of thirty thousand pesos (P30,000), Philippine currency, in cash, or within the period of six (6) years, beginning with the date of the purchase, the sum of forty thousand pesos (P40,000), Philippine currency, at six per cent interest per annum, with due security for the payment of the said P40,000 in consideration of the sale. - Antonio Enriquez accepted the grant of option, with a condition that a surveyor will be sent to survey the said property, and to apply to the Government for a Torrens title, and that he shall pay the purchase price in conformity with the letter of option after the Torrens title shall have been officially approved. - Soon after the execution of said contract, and in partial compliance with the terms thereof, the defendant presented two petitions in the Court of Land Registration, each for the purpose of obtaining the registration of a part of the "Hacienda de Pitogo." - Said petitions were granted; the parcels were registered, and certificates of title under the Torrens system were issued to the defendant. - The defendant offered to transfer to the plaintiff one of said parcels only, which was a part of said "hacienda." - The plaintiff refused to accept said certificate for a part only of said "hacienda" upon the ground (a) that it was only a part of the "Hacienda de Pitogo," and (b) under the contract, he was entitled to all said "hacienda. Petitioners Claim The contract of sale of said "Hacienda de Pitogo" included only 100 hectares, more or less, of said "hacienda," and that by offering to convey to the plaintiff a portion of said "hacienda" composed of "100 hectares, more or less," he thereby complied with the terms of the contract Respondents Comment He had purchased all of said "hacienda," and that the same contained, at least, 100 hectares, more or less. - Lower court sustained the contention of the plaintiff, to wit, that the sale was a sale of the "Hacienda de Pitogo" and not a sale of a part of it, and rendered a judgment requiring the defendant to comply with the terms of the contract by transferring to the plaintiff, by proper deeds of conveyance, all said "hacienda," or to pay in lieu thereof the sum of P20,000 damages, together with 6 per cent interest from the date upon which said conveyance should have been made. - From that judgment the defendant appealed ISSUE WON the defendant was obliged to convey to the plaintiff all of said "hacienda" HELD YES - Appellant assigns a number of errors to the lower court, to wit:1. (a) that the lower court committed an error in declaring the contract a valid obligation, for the reason that the same was null for a failure of consideration; 2. in not declaring that the action was premature, for the reason that the plaintiff had not paid nor offered to pay the price agreed upon, under the conditions named, for the land in question; 3. in not declaring

that the defendant was not obligated to sell the "Hacienda de Pitogo" to the plaintiff for nonfulfillment, renunciation, abandonment and negligence of plaintiff himself, etc.; 4. in not declaring that the contract of sale was not in effect a contract of sale (he alleges that the contract was, in fact, a contract by virtue of which the plaintiff promised to find a buyer for the parcel of land in question). - To all these, the Court just said that it was not raised in the lower court and it is improperly presented for the first time. It recognized that the only dispute between the parties in the lower court was whether or not the defendant was obliged to convey to the plaintiff all of said "hacienda." ***Unfortunately, the SC did not interpret the contract to find out whether the plaintiff was right in insisting that the contract entitled him to a conveyance of all of said "hacienda," or if the defendant, as contended, complied with the terms of his contract by offering to convey to the plaintiff a part of the said "hacienda" only. But because it affirmed the decision of the lower court, it agreed with the plaintiff that it included all. ***Obiter in discussion as regards the first assignment of error (because it disposed of it by saying that it wasnt raised in the lower court) - A promise made by one party, if made in accordance with the forms required by the law, may be a good consideration (causa) for a promise made by another party. (Art. 1274, Civil Code.) In other words, the consideration (causa) need not pass from one to the other at the time the contract is entered into. For example, A promises to sell a certain parcel of land to B for the sum of P70,000. A, by virtue of the promise of B to pay P70,000, promises to sell said parcel of land to B for said sum, then the contract is complete, provided they have complied with the forms required by the law. The consideration need not be paid at the time of the promise. The one promise is a consideration for the other. - In the present case, the defendant promised to convey the land in question to the plaintiff as soon as the same could be registered. The plaintiff promised to pay to the defendant P70,000 therefor in accordance with the terms of their contract. The plaintiff stood ready to comply with his part of the contract. The defendant, even though he had obtained a registered title to said parcel of land, refused to comply with his promise. All of the conditions of the contract on the part of the defendant had been concluded, except delivering the deeds of transfer. - The said contract (Exhibits A and B) was not, in fact, an "optional contract" as that phrase is generally used. Reading the said contract from its four corners it is clearly an absolute promise to sell a definite parcel of land for a fixed price upon definite conditions. The defendant promised to convey to the plaintiff the land in question as soon as the same was registered under the Torrens system, and the plaintiff promised to pay to the defendant the sum of P70,000, under the conditions named, upon the happening of that event. The contract was not, in fact, what is generally known as a "contract of option." It differs very essentially from a contract of option. - An optional contract is a privilege existing in one person, for which he had paid a consideration, which gives him the right to buy, for example, certain merchandise of certain specified property, from another person, if he chooses, at any time within the agreed period, at a fixed price. A contract of option is a contract by virtue of the terms of which the parties thereto promise and obligate themselves to enter into contract at a future time, upon the happening of certain events, or the fulfillment of certain conditions.

45 SCRA 368 CONCEPCION; June 14, 1972

NATURE Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court of Appeals FACTS

SANCHEZ V RIGOS

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NATURE Petition for Review on Certiorari of CA decision

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- April 3, 1961 Sanchez and Rigos executed an instrument called Option to Purchase - Rigos committed to sell to Sanchez a parcel of land in Nueva Ecija for the sum of P1,510.00. - Within two years from the said date, if Sanchez shall not exercise his right to buy the property, the option shall be terminated - Within the said period, Sanchez made several attempts to pay P1,510.00 to Rigos but Rigos rejected these payments - March 12, 1963 Sanchez deposited the amount in the Court of First Instance in Nueva Ecija - Feb. 28, 1964 Rigos ordered by the lower court to accept the payments of Sanchez and to execute in Sanchezs favor the deed of conveyance for the property. Petitioners Claim - By virtue of the document executed, Rigos had agreed and committed to sell the property and he, in turn, agreed and committed to buy. - Thus the promise contained in the contract is reciprocally demandable. Respondents Comments - The contract is a unilateral promise to sell. - The contract was unsupported by any valuable consideration and is thus null and void when viewed in the light of the Civil Code. ISSUE WON a promise to buy and sell existed between the parties involved HELD YES Ratio An accepted unilateral promise' can only have a binding effect if supported by a consideration, which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. Since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. Reasoning - The case is dependent on A1479 of the Civil Code which states that: An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. - The document drawn between Rigos and Sanchez does not require Sanchez to purchase the property. It is not a contract to buy and sell. - Rigos committed to sell the property to Sanchez but the document does not state that the promise or undertaking is supported by consideration distinct from the price stipulated. - The lower court relied on A1354. The Supreme Court however makes the following notes with regard to the use of that provision vis--vis A1479: - A1354 applies to contracts in general whereas A1479 refers to sales in particular (specifically to a unilateral promise to buy and sell), making A1479 the controlling provision. - For the unilateral promise to be binding, there must be a concurrence of a condition, that it be supported by a consideration distinct from price. The promise cannot compel the promisor to comply with the promise unless there is the existence of that distinct consideration. In this case, this was not alleged by Sanchez. - Rigos stated that there was indeed the absence of that consideration which Sanchez did not oppose - Despite this differences, later jurisprudence states that A1354 and A1479 have no differences and can actually be harmonized.

FACTS - Lourdes LIMSON alleged that spouses DE VERA, through their agent, offered to sell to her a parcel of land situated in Barrio San Dionisio, Paraaque. She agreed to buy it at the price of P34/sq.m. and she gave the sum of P20T as "earnest money." - The couple signed a receipt and gave her a 10-day option period to purchase it. They informed her that it was mortgaged to Emilio and Isidro RAMOS. Mr. de Vera then asked her to pay the balance of the purchase price to enable him and his wife to settle their obligation. - They were supposed to meet at the Office of the Registry of Deeds of Makati to consummate the transaction but the couple did not appear. In the next scheduled mtg, she claimed that she was willing and ready to pay the balance but the transaction again did not materialize as the spouses failed to pay the back taxes of the property. - A month later, she was surprised to learn from the spouses agent that the same property was the subject of a negotiation for sale to Sunvar Realty Development Corporation (SUNVAR). She discovered that although respondent spouses purchased the property from the Ramoses about 8 years ago, it was only now that a TCT was issued to the spouses. - She filed an Affidavit of Adverse Claim with the Office of the Registry of Deeds of Makati. On this same date, the Deed of Sale between spouses and SUNVAR was also executed with Limsons Adverse Claim annotated thereon. - She claimed that this Deed of Sale should be annulled and that a new one be executed between her and the spouses upon her payment of the balance. When spouses sold the property to SUNVAR, her valid and legal right to purchase it was ignored if not violated. Also, SUNVAR was in bad faith as it knew of her "contract" to purchase the property. The spouses agent informed a member of the BOD of SUNVAR that property was already sold to her. - DE VERAS claimed that the option to buy the property had long expired and that there was no perfected contract to sell between them. - RTC ruled in favor of petitioner. Deed of Sale was ordered to be executed in her favor. CA completely reversed RTC decision. ISSUE 1. WON it was only a contract of option (not a contract to sell) 2. WON petitioner accepted the offer within the 10-day option period 3. WON SUNVAR was aware of the perfected sale between Limson and the De Veras, thus making respondent SUNVAR a buyer in bad faith HELD 1. YES Ratio An option is a continuing offer or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a time certain, or under, or in compliance with, certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale. - Until acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or agree to transfer, any title to, or any interest or right in the subject matter. Reasoning - The Receipt that contains the contract between petitioner and respondent spouses shows that they only entered into a contract of option. The agreement imposed no binding obligation on petitioner, aside from the consideration for the offer. Proof: (1) P20T was referred to as "earnest money" but after a careful examination of the words used, this actually meant option money since there was nothing in the Receipt which indicated that this was part of the purchase price. (2) It was stated in the contract that should the transaction of the property not

LIMSON V CA (DE VERA)

375 SCRA 209 BELLOSILLO; April 20, 2001

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materialize without fault of petitioner as buyer, respondent de Vera obligates himself to return the full amount of P20T "earnest money" with option to buy or forfeit the same on the fault of petitioner. (3) There was a guarantee that petitioner or her representative would be notified in case the property was sold or encumbered to a third person. (4) The Receipt provided for a period within which the option to buy was to be exercised. Obiter Difference between Earnest money and Option money (a) Earnest money is part of the purchase price, while option money is the money given as a distinct consideration for an option contract; (b) Earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected; and, (c) When earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy, but may even forfeit it depending on the terms of the option. 2. NO Ratio Except where a formal acceptance is not required, although acceptance must be affirmatively and clearly made and evidenced by some acts or conduct communicated to the offeror, it may be made either in a formal or an informal manner, and may be shown by acts, conduct or words by the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. Reasoning - There is nothing that clearly manifested a present intention on Limsons part to accept the offer to buy the property. The only occasion within the option period when she could have demonstrated her acceptance was when she allegedly agreed to meet the spouses at the Register of Deeds. But this is not conclusive of acceptance. - After expiration of the period, the subsequent meetings and negotiations between the parties only showed the desire of respondent spouses to sell their property to her. Also, when spouses sent her a telegram demanding full payment of the purchase price, this simply demonstrated an inclination to give her preference to buy. Collectively, these did not indicate that petitioner still had the exclusive right to purchase subject property. Extension must not be implied but categorical and must show the clear intention of the parties. 3. NO - The option period having expired and acceptance was not effectively made by petitioner, the purchase of subject property by respondent SUNVAR was perfectly valid and entered into in good faith. There is no evidence of bad faith. Disposition Petition DENIED. CA decision ordering Register of Deeds of Makati City to lift the adverse claim and such other encumbrances petitioner Limson may have filed or caused to be annotated on TCT is AFFIRMED, with the MODIFICATION that the award of nominal and exemplary damages as well as attys fees is DELETED.

latter have been in possession and enjoyment of the produce of the said land. - Sometimes after the signing of the deed, SORIANO and DE JESUS gave the sum of P450 pursuant to the conditions agreed upon in the deed (portion of the amount loaned?) to the SPS, which the SPS returned after 2 years. However, before paying the P450, SORIANO and DE JESUS, through their lawyer, sent the SPS a letter informing them that they have decided to buy the land pursuant to paragraph5. - SPS refused to comply with the demand so SORIANO and DE JESUS filed civil case praying that they be allowed to consign or deposit the sum of P1650 as the balance of the purchase price of the parcel of land in question (P1650 =P3000 purchase price P1800 initial amount loaned P450 paid sometime after the execution of the deed), that judgment be rendered ordering the SPS to execute an absolute deed of sale, plus damages. - SPS filed a complaint against SORIANO and DE JESUS, which was initially dismissed for lack of jurisdiction, then filed again, praying that the appellants would accept the payment of the principal obligation and they be released from the mortgage. CFI: SPS to execute deed of sale + pay attys fees ISSUE WON SORIANO and DE JESUS are entitled to specific performance consisting of the execution by the SPS of the deed of sale, having seasonably advised the SPS that they had decided to buy the land in question HELD YES - The mortgagors' promise to sell is supported by the same consideration as that of the mortgage itself, which is distinct from that which would support the sale, an additional amount having been agreed upon, to make up the entire price of P3,900.00, should the option be exer. cised. The mortgagors' promise was in the nature of a continuing offer, non-withdrawable during a period of two years, which upon acceptance by the mortgagees, gave rise to a perfected contract of purchase and sale. - ON RIGHT TO REDEEM: While the transaction is undoubtedly a mortgage and contains the customary stipulation concerning redemption, it carries the added special provision aforequoted, which renders the mortgagors' right to redeem defeasible at the election of the mortgagees. It is simply an option to buy, sanctioned by Article 14791 of the Civil Code. Disposition The judgment appealed from is affirmed, with costs.

EQUATORIAL REALTY DEVT INC V MAYFAIR THEATER INC

264 SCRA 483 HERMOSISIMA JR; November 21, 1996

NATURE Petition for review of the decision of the Court of Appeals. FACTS - Carmelo owned a parcel of land, together with two 2-storey buildings constructed thereon located at Claro M. Recto Avenue, Manila. - On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the latters lease of a portion of the second floor and mezzanine of the two-storey building, for use by Mayfair as a motion picture theater and for a term of twenty (20) years. Mayfair thereafter constructed on the leased property a movie house known as Maxim Theatre. - On March 31, 1969, Mayfair entered into a second contract of lease with Carmelo for the lease of another portion of Carmelos property, to wit: a portion of the second floor of the two-storey building, the 2 store spaces at the ground floor and mezzanine, for similar use as a movie theater and for a similar term of twenty

6 SCRA 946 MAKALINTAL; December 29, 1962

NATURE APPEAL from a judgment of the Court of First Instance of Rizal (Pasig) FACTS - Sps. BAUTISTA are the absolute and registered owners of a parcel of land in Teresa Rizal. The said spouses signed the KASUNDUAN NG SANGLAAN on May 1956 in favor of RUPERTO SORIANO and OLIMPIA DE JESUS, where one of the paragraphs (paragraph5) provided, as translated: "That it has likewise been agreed that if the financial condition of the mortgagees will permit, they may purchase said land absolutely on any date within the two-year term of this mortgage at the agreed price of P3,900.00." With the signing of the deed, the SPS. transferred the possession of the land to SORIANO and DE JESUS, and the

BAUTISTA V SORIANO

1 Art. 1479, NCC - A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or
to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price.

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(20) years. Mayfair put up another movie house known as Miramar Theatre on this leased property. - Both contracts of lease provides (sic) identically worded paragraph 8, which reads: That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days exclusive option to purchase the same. In the event, however, that the leased premises is sold to someone other than the LESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulate in the Deed of Sale thereof that the purchaser shall recognize this lease and be bound by all the terms and conditions thereof. - In August 1974, Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, that Carmelo was desirous of selling the entire Claro M. Recto property. Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to buy the whole property for $1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the property for P6-7 M. - On August 23, 1974, Mayfair replied through a letter reminding them the 30-days exclusive option to purchase granted to Mayfair under the contract of lease. Carmelo did not reply to this letter. - On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express interest in acquiring not only the leased premises but the entire building and other improvements if the price is reasonable. However, both Carmelo and Equatorial questioned the authenticity of the second letter. - On July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and building, which included the leased premises housing the Maxim and Miramar theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum of P11,300,000.00. - In September 1978, Mayfair instituted the action for specific performance and annulment of the sale of the leased premises to Equatorial. In its Answer, Carmelo alleged as special and affirmative defense (a) that it had informed Mayfair of its desire to sell the entire C.M. Recto Avenue property and offered the same to Mayfair, but the latter answered that it was interested only in buying the areas under lease, which was impossible since the property was not a condominium; and (b) that the option to purchase invoked by Mayfair is null and void for lack of consideration. - Equatorial pleaded as special and affirmative defense that the option is void for lack of consideration and is unenforceable by reason of its impossibility of performance because the leased premises could not be sold separately from the other portions of the land and building. It counterclaimed for cancellation of the contracts of lease, and for increase of rentals in view of alleged supervening extraordinary devaluation of the currency. - The trial court adjudged the identically worded paragraph 8 found in both aforecited lease contracts to be an option clause which however cannot be deemed to be binding on Carmelo because of lack of distinct consideration therefor. Upon appeal, the CA reversed the court a quo. ISSUE WON the option clause in the contracts of lease is actually a right of first refusal provision HELD YES - Contractual stipulation provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option contract. - An option contract is one necessarily involving the choice granted to another for a distinct and separate consideration as to whether or not to purchase a determinate thing at a predetermined fixed price. - Bouvier: OPTION CONTRACT- A contract by virtue of which A, in consideration of the payment of a certain sum to B, acquires the privilege of buying from, or selling to B, certain securities or properties within a limited time at a specified price. - An agreement in writing to give a person the option to purchase lands within a given time at a named price is neither a sale nor an agreement to sell. It is simply a contract by which the owner of property agrees with another person that he shall

have the right to buy his property at a fixed price within a certain time. He does not sell his land; he does not then agree to sell it; but he does sell something; that is, the right or privilege to buy at the election or option of the other party. The second party gets in praesenti, not lands, nor an agreement that he shall have lands, but he does get something of value; that is, the right to call for and receive lands if he elects. The owner parts with his right to sell his lands, except to the second party, for a limited period. The second party receives this right, or, rather, from his point of view, he receives the right to elect to buy. - The two definitions above cited refer to the contract of option, or, what amounts to the same thing, to the case where there was cause or consideration for the obligation, the subject of the agreement made by the parties; while in the case at bar there was no such cause or consideration. - The rule so early established in this jurisdiction is that the deed of option or the option clause in a contract, in order to be valid and enforceable, must indicate the definite price at which the person granting the option, is willing to sell. - Article 1458 of the Civil Code provides: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. - When the sale is not absolute but conditional, such as in a Contract to Sell where invariably the ownership of the thing sold is retained until the fulfillment of a positive suspensive condition (normally, the full payment of the purchase price), the breach of the condition will prevent the obligation to convey title from acquiring an obligatory force. - An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on the parties, and compliance therewith may accordingly be exacted. - An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of option. This contract is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code: An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. - However, the option is not the contract of sale itself. The optionee has the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings. - To elucidate: A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. These relations, until a contract is perfected, are not considered binding commitments. Thus, at any time prior to the perfection of the contract, either negotiating party may stop the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal. Where a period is given to the offeree within which to accept the offer, the following rules generally govern: (1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw the offer before its acceptance, or, if an acceptance has been made, before the offerors coming to know of such fact, by communicating that withdrawal to the offeree. The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the Civil Code which ordains that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.

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(2) If the period has a separate consideration, a contract of option is deemed perfected, and it would be a breach of that contract to withdraw the offer during the agreed period. The option, however, is an independent contract by itself, and it is to be distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-offeree, the latter may not sue for specific performance on the proposed contract (object of the option) since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option. x x x. - In the light of the foregoing disquisition and in view of the wording of the questioned provision in the two lease contracts involved in the instant case, it is held that no option to purchase in contemplation of the second paragraph of Article 1479 of the Civil Code, has been granted to Mayfair under the said lease contracts. - An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. It is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported by consideration.i[22] In the instant case, the right of first refusal is an integral part of the contracts of lease. The consideration is built into the reciprocal obligations of the parties. - To rule that a contractual stipulation such as that found in paragraph 8 of the contracts is governed by Article 1324 on withdrawal of the offer or Article 1479 on promise to buy and sell would render ineffectual or inutile the provisions on right of first refusal so commonly inserted in leases of real estate nowadays. Paragraph 8 was incorporated into the contracts of lease for the benefit of Mayfair which wanted to be assured that it shall be given the first crack or the first option to buy the property at the price which Carmelo is willing to accept. It is not also correct to say that there is no consideration in an agreement of right of first refusal. The stipulation is part and parcel of the entire contract of lease. The consideration for the lease includes the consideration for the right of first refusal. Thus, Mayfair is in effect stating that it consents to lease the premises and to pay the price agreed upon provided the lessor also consents that, should it sell the leased property, then, Mayfair shall be given the right to match the offered purchase price and to buy the property at that price. In reciprocal contract, the obligation or promise of each party is the consideration for that of the other. - Both Carmelo and Equatorial acted in bad faith. Carmelo knowingly and deliberately broke a contract entered into with Mayfair. It sold the property to Equatorial with purpose and intend to withhold any notice or knowledge of the sale coming to the attention of Mayfair. All the circumstances point to a calculated and contrived plan of non-compliance with the agreement of first refusal. On the part of Equatorial, it cannot be a buyer in good faith because it bought the property with notice and full knowledge that Mayfair had a right to or interest in the property superior to its own. Carmelo and Equatorial took unconscientious advantage of Mayfair. Disposition PETITION is DENIED. The Deed of Absolute Sale between petitioners Equatorial Realty Development, Inc. and Carmelo & Bauermann, Inc. is deemed rescinded; petitioner Carmelo & Bauermann is ordered to return to petitioner Equatorial Realty Development the purchase price. The latter is directed to execute the deeds and documents necessary to return ownership to Carmelo & Bauermann of the disputed lots. Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc. to buy the aforesaid lots for P11,300,000.

- Defendant Catalina Santos is the owner of 8 parcels of land in Paranaque. On Nov. 28, 1977, Frederick Chua leased the said property from Santos; the lease was registered in the Register of Deeds. On Feb. 12, 1979, Chua assigned all his rights, interest and participation in the leased property to Lee Ching Bing, by virtue of a deed of assignment. In turn, Lee Ching Bing assigned all his rights to Paranaque Kings Enterprises, Inc. again by virtue of a duly registered deed of assignment. - Par. 9 of the contract provides among other things that in case the properties are sold or encumbered, the buyer or mortagee shall be bound to the terms of the lease agreement as if they are the lessors and in case of sale, the lessee shall have first option to buy the properties. - Santos later sold the properties to defendant Raymundo for P5M. The said sale was in contravention of the contract of lease as the plaintiff was not offered first option to buy. Santos wrote a letter informing the plaintiff of the sale. Upon reading it, plaintiffs representative wrote to Santos, requesting her to rectify this and she later had it reconveyed for P5M. Santos then offered the property for sale to plaintiff by the defendant for P15M and to make good on their offer within 10 days. The offer expired and new offer with the same tenor was sent. Before it expired, plaintiffs counsel wrote to Santos counsel offering to buy at the original P5M price. Before they replied, another deed of sale was executed in favor of Raymundo for P9M, again violating the contract. Santos claimed that the period had lapsed and that plaintiff was no longer privy to the contract. - Plaintiff alleges that the fact that defendants had the same counsel who represented both of them in their exchanges with plaintiffs counsel and the same rent collector (Santos brother-inlaw) lead to the conclusion that a collusion existed between respondents; that the coalition was meant to mislead plaintiff into thinking the propertys price was higher than it was and that plaintiff suffered P3M in losses in the form of improvements on the property as well as moral damages of P5M. Plaintiff prayed for relief but instead of filing answers, respondents filed motions to dismiss on the grounds of lack of cause of action, claiming the issue raised was purely factual. They also stated estoppel and laches as grounds for dismissal, claiming that petitioners payment of rentals to Raymundo from 1988-89 was an acknowledgment of Raymundo as the new owner-lessor. - The TC dismissed the complaint for lack of cause of action, arguing that Santos had complied with Par. 9 of the contract but that plaintiff had refused the 2 offers. An appeal with the CA yielded the same results, the Court adding that plaintiff could not force its desired price on Santos. Petitioner moved for reconsideration but was denied, hence this petition. ISSUES Procedural 1. WON the petition should be dismissed for failure to file copies of brief Substantive 2. WON the alleged breach of the contractual right of first option was a valid cause of action 3. WON there was full compliance with the contractual right granting petitioner the first option to purchase HELD Procedural 1. NO - If non-compliance with the Rules of Court (in this case, the furnishing of 12 copies of plaintiffs brief) is not intended for delay or doesnt result in prejudice to the adverse party, dismissal of the appeal on mere technicalities may be stayed. Substantive 2. YES - The question of the validity of a cause of action assumes the facts alleged in the complaint are true, thus the determination is one of law and not purely factual as defendants alleged. In determining whether allegations of a complaint are sufficient to support a cause of action, the complaint need not allege facts proving existence of a cause outright. To prove otherwise requires one to show that the claim for relief does not exist, rather than

PARAAQUE KINGS ENTERPRISES INC V CA (SANTOS, PROTACIO and RAYMUNDO)

268 SCRA 722 PANGANIBAN; Feb. 26, 1997

FACTS

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that a claim is ambiguous or indefinite. Also, a defendant moving to dismiss a complaint on the ground of lack of cause of action is regarded as having hypothetically admitted all the averments thereof. - A cause of action exists if the following elements are present: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right, and (3) an act or omission on the part of such defendant violative of the right of plaintiff or constituting a breach of the obligation of defendant to the plaintiff for which the latter may maintain an action for recovery of damages. - An examination of the complaint shows that these requirements are present in the instant case. 3. NO - The TC and CA argue that Santos had made an offer to petitioner before the final sale to Raymundo and that with this, Santos had complied with her obligation to grant the right of first refusal to petitioner. However, this Court holds that there should be identity of terms and conditions offered to all prospective buyers in so that right of first refusal (or first option) is not rendered illusory. Only after the optionee fails to exercise its right under the same terms within the given time, can the owner validly offer to sell to a 3rd person under the same terms. - Having come to the conclusion that the complaint states a valid cause of action, further matters require the presentation/determination of facts and must be remanded to the trial court to allow respondents to have their day in court. Disposition Petition is GRANTED. The assailed decisions of the TC and CA are REVERSED and SET ASIDE. The case is REMANDED to the RTC of Makati.

238 SCRA 602 VITUG; December 2, 1994

FACTS - Ann Yu filed a Complaint for Specific Performance against Cu Unjieng alleging, among others, that plaintiffs are tenants or lessees of residential and commercial spaces owned by defendants in Binondo, Manila; that they have occupied said spaces since 1935 and have been religiously paying the rental and complying with all the conditions of the lease contract; that on several occasions before October 9, 1986, defendants informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same; that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs thereafter asked the defendants to put their offer in writing to which request defendants acceded; that in reply to defendant's letter, plaintiffs wrote them on October 24, 1986 asking that they specify the terms and conditions of the offer to sell; that when plaintiffs did not receive any reply, they sent another letter dated January 28, 1987 with the same request; that since defendants failed to specify the terms and conditions of the offer to sell and because of information received that defendants were about to sell the property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them. - While the case was pending, the Cu Unjieng spouses executed a Deed of Sale transferring the property in question to herein petitioner Buen Realty and Development Corporation. ISSUE WON all previous transactions involving the property notwithstanding the issuance of another title to Buen Realty Corporation should be set aside because plaintiffs right of first refusal has been breached HELD NO Ratio In fine, petitioners are aggrieved by the failure of private respondents to honor the right of first refusal. However, breach

ANG YU V CA

of right of first refusal cannot justify correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an action for specific performance without thereby negating the indispensable element of consensuality in the perfection of contracts. The remedy is not a writ of execution on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose. Reasoning - Justice Vitug pointed out some fundamental precepts that may find some relevance to the discussion of the case. Here is the outline: 1 Definition of obligation juridical necessity to give, to do, or not to do (Art 1165) 2 Contract one source of obligation a. Definition meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service (Art. 1305, Civil Code). b. Stages (1) Negotiation - covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded (perfected). (2) Perfection of the contract - takes place upon the concurrence of the essential elements thereof. (3) Consummation - begins when the parties perform their respective undertakings under the contract culminating in the extinguishment thereof. - Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees. 3 contract of sale a. absolute - where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public document) of the property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would prevent such perfection. 3 If the condition is imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale (Art. 1545, Civil Code). b. conditional. - the ownership of the thing sold is retained until the fulfillment of a positive suspensive condition (normally, the full payment of the purchase price) - the breach of the condition will prevent the obligation to convey title from acquiring an obligatory force. - a sale is still absolute

4
5

An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on the parties, and compliance therewith may accordingly be exacted. contract of option - an accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price. This contract is legally binding. - But the option is not the contract of sale itself. The optionee has the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings. - If with period, the following rules will apply:

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(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdrawal the offer before its acceptance, or, if an acceptance has been made, before the offeror's coming to know of such fact, by communicating that withdrawal to the offeree. (2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it would be a breach of that contract to withdraw the offer during the agreed period. The option, however, is an independent contract by itself, and it is to be distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-offeree, the latter may not sue for specific performance on the proposed contract ("object" of the option) since it has failed to reach its own stage of perfection. The optionerofferor, however, renders himself liable for damages for breach of the option. In these cases, care should be taken of the real nature of the consideration given, for if, in fact, it has been intended to be part of the consideration for the main contract with a right of withdrawal on the part of the optionee, the main contract could be deemed perfected; a similar instance would be an "earnest money" in a contract of sale that can evidence its perfection (Art. 1482, Civil Code). 6 Right of first refusal - it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its normal concept, per se be brought within the purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 9 of the same Code. An option or an offer would require, among other things, a clear certainty on both the object and the cause or consideration of the envisioned contract. In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct.

Respondents Claim: The petitioner is estopped from assailing the validity of the deed of sale as the respondent already recognized her as owner of the property when it merely asked for the renewal of the lease and even a grace period to vacate the premises when the petitioner did not agree in the renewal. - RTC extended the lease for another 7 years - CA affirmed RTCs judgment with modifications ordering TRCDC to vacate the leased premises immediately. CA acknowledged the right of TRCDC to purchase the property, however to only applied to strangers and not to Faustos relatives. ISSUE WON the CA committed serious error in holding that the contractual stipulation giving the petitioner the priority right to purchase the leased premises shall only apply to strangers HELD YES Ratio A sale made in violation of a right of first refusal is valid. However, it may be rescinded or may be a subject of an action for specific performance. Reasoning - When a lease contract contains a right to first refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it. It is an integral and indivisible part of the contract of lease and is inseparable form the whole contract. Since it is part of the consideration fro the lease, it is built into the reciprocal obligation of the parties. - When terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon. The stipulation does not qualification that such right may be exercised only when the sale is made to strangers or persons other than Fuastos kin. - CA also made an error when it ruled that it would be useless to annul the sale between Fausto and the respondent because the property would still remain with the respondent after the death of her mother by virtue of succession, as in fact, Fausto died Mar 1996, and the property now belongs to the respondent, being Fausto;s heir. - With the death of Fausto, the rights and obligations over the property, including those in the lease contract were transmitted to the heirs by way of succession. The lease contract is not essentially personal in character; therefore the rights and obligations are transmissible to the heirs. The heirs are bound by contracts entered into by predecessors-in-interest except when the rights and obligations arising therefrom are not transmissible by (1) their nature, (2) stipulation or (3) by provision of law. 2 In this case, the nature of the rights and obligations are, by nature, transmissible. - The contract of lease continues even after Faustos death. The respondent, as heir, is bound to fulfill all its terms and conditions. - Essential elements of estoppel are: (1) conduct of a party amounting to false representation or concealment of material facts or at least calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) intent, or at least expectation, that this conduct shall be acted upon by, or at least influence, the other party; and (3) knowledge, actual or constructive, of the real facts. There was nothing in the records that the petitioner waived his right of first refusal. When the petitioner asked for the renewal of the terms of lease, he was working on the assumption that the title of the property still belonged to Fausto. In a meeting of the stockholders of the petitioner, the possibility of sale was considered, but the respondent refused to sell the land. After the respondent refused

TANAY RECREATION CENTER AND DEVT CORP V FAUSTO

455 SCRA 436

AUSTRIA-MARTINEZ; April 12, 2005

NATURE An appeal from a judgment of the Court of First Instance disallowing the claim of the plaintiff for P1,000 against the estate of the deceased James P. McElroy. FACTS - TRCDCV is a lessee of a property owned by Catalina Matienzo Fuasto under a contract of lease of 20 years. On the property stands the Tanay Coleseum Cockpit operated by the petitioner. The contract is subject to renewal within 60 days prior its expiration. The contract also provided for petitioners priority right to purchase should Fuasto decide to sell the property - When the petitioner was about to renew the contract, Anunciacion Pacunayen, daughter of Fausto, asked the petitioner to remove the improvements on the said property. It appears that Fausto sold to Pacunayen the said property

Art 1311 CC Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.

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to sell the land, it was then that petitioner filed for the complaint for the annulment of sale, specific performance and damages. - The Contract of sale of the said property between Fausto and the petitioner must be rescinded. However, due to Faustos death, her heirs now substitute her as respondent. The Court cannot declare Pacunayen as the sole heir. The right of petitioner may only be enforced against the heirs of the deceased Fausto, represented by respondent Pacunayen. Disposition Petition for Review is PARTIALLY GRANTED. CA is MODIFIED as follows: (1) the Kasulatan ng Bilihan Patuluyan ng Lupa dated August 8, 1990 between Catalina Matienzo Fausto and respondent Anunciacion Fausto Pacunayen is hereby deemed rescinded; (2) The Heirs of the deceased Catalina Matienzo Fausto who are hereby deemed substituted as respondents, represented by respondent Anunciacion Fausto Pacunayen, are ORDERED to recognize the obligation of Catalina Matienzo Fausto under the Contract of Lease with respect to the priority right of petitioner Tanay Recreation Center and Development Corp. to purchase the subject property under reasonable terms and conditions; (3) Transfer Certificate of Title No. M-35468 shall remain in the name of respondent Anunciacion Fausto Pacunayen, which shall be cancelled in the event petitioner successfully purchases the subject property; (4) Respondent is ORDERED to pay petitioner Tanay Recreation Center and Development Corporation the amount of Twenty Thousand Pesos (P20,000.00) as actual damages, plus interest thereon at the legal rate of six percent (6%) per annum from the filing of the Complaint until the finality of this Decision. After this Decision becomes final and executory, the applicable rate shall be twelve percent (12%) per annum until its satisfaction; and, (5) Respondent is ORDERED to pay petitioner the amount of Ten Thousand Pesos (P10,000.00) as attorneys fees, and to pay the costs of suit. (6) Let the case be remanded to the Regional Trial Court, Morong, Rizal (Branch 78) for further proceedings on the determination of the reasonable terms and conditions of the offer to sell by respondents to petitioner, without prejudice to possible mediation between the parties. The rest of the unaffected dispositive portion of the CA Decision is AFFIRMED.

HELD NO - The case of the Fidelity and Deposit Company against Wilson lays down a doctrine which is decisive of this case. In that case it was held that the ownership of personal property can not be transferred to the prejudice of third persons except by delivery of the property itself; and that a sale without delivery gives the would-be purchaser no rights in said property except those of a creditor. The bill of sale in the case at bar, under the circumstances of this case, could have no effect against a person dealing with the property upon the faith of appearances. - The defendant Macke & Chandlre, having purchased the property at an execution sale, property conducted, obtained a good title to the property in question as against the plaintiff in this case. Disposition The judgment of the court below is, therefore, affirmed, with costs against the appellant.

LUZON BROKERAGE CO INC V MARITIME BUILDING CO INC

43 SCRA 93 REYES; August 18, 1972

Chapter 6: TRANSFER OF OWNERSHIP KUENZLE V MACKE

FACTS - On 24 March 1961, Maritime had requested a "suspension" or "moratorium" in its monthly payments until the close of 1961, allegedly because "we are encountering some unusual expenses with the warehouses, but this request was turned down on 29 March 1961 by the Myers Corporation advising George Schedler, the son of Edmund Schedler, main stockholder of Maritime, that his request "can not be granted as I have specific instructions from the Board (of Myers Co.) not to agree to any suspension of payments under any condition". - Schedler, on behalf of Maritime, insisted on suspending its payments alleging for the first time that the late F. H. Myers had "agreed to indemnify and hold me harmless from the Luzon Labor Union claims which are in litigation" and giving notice that "my wife and I intend to withhold any further payments to the Myers Building Co. or Estate ...". This intention was reiterated in a letter wherein it was added that "if the Myers people will deposit in trust with Mr. C. Parsons 25,000 pesos to cover my costs to date, I will then deposit with Mr. Parsons in trust 15,000 pesos for March, April and May ...". ISSUES 1. WON Maritimes obligation had been substantially performed in good faith 2. WON Art1191 can be applied to the case 3. WON the stipulated forfeiture of the monthly payments already made is a penalty, and the same should be equitably reduced 4. WON rescission of the contract of sale is proper HELD 1. NO - Maritime was obligated to make monthly payments to Myers Building Co. under its contract, until the price of the building was paid in full and yet it repeatedly refused to do so, on the pretext that the late F. H. Myers had obligated himself to indemnify Edmund Schedler from the labor claims against the Luzon Stevedoring Co., that Myers had sold to Schedler in a totally separate contract. - F. H. Myers was not the vendor Myers Building corporation; moreover, he had already died and his estate had been closed without Schedler or Maritime having filed any contingent claim before closure of the estate proceedings, as required by Revised Rule 88, The claims of Schedler or Maritime were, therefore, already barred, even assuming that there was any truth to the alleged promise of the late Myers, which is not supported by any reliable evidence. And even then, the claim was at the most payable by the heirs of F. H. Myers, but not by the Myers corporation, which had no duty to assume the guarantee. - The non-payment for March, April and May, 1961, due to the corporation, was intentional and deliberate non-performance,

14 PHIL 610 MORELAND; December 16, 1909

FACTS - On or about January, 1907, Stanley & Krippendorf (SK) was the owner of the Oregon Saloon in Cavite consisting of bar, furniture, furnishings, and fixtures, of the value of 1,000 pesos. Jose Desiderio, as sheriff, levied upon such property by virtue of an execution issued upon a judgment secured by the defendant Macke & Chandler (MC), against (SK). (SK) notified the sheriff, in the manner provided by law, that it was the owner of said goods and forbade the sale thereof under said execution. However, the sheriff still sold the goods. It was purchased by (MC) and Bachrach, Elser, and Gale (BEG), were the sureties. BEG allege that the property was not the property of MC but was the property of SK who was in possession of the same at the time of such levy. And during this same month of January, SK being deeply indebted to MC attempted to sell to it by an instrument in writing the property in question. The written instrument was not recorded and was a private document. The property was also not delivered under this said sale but remained in the possession of SK. ISSUE WON the said instrument of sale had any effect in transferring the property in question from SK to MC

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designed to extrajudicially force Myers corporation to grant the moratorium originally solicited and rejected, thus constituting, as held in the main decision, dolo (in the performance, in solvendo) and not mere culpa or negligence. - Nor is it admissible that there had been substantial performance by it or that the offer to deposit in trust the missing amounts were equivalent to payment. When Maritime suspended its payments for March-May, 1961, there was a balance of P319,300.65 on the principal of its obligation, plus interest, i.e., nearly 1/3 of the original indebtedness. And as to the offer to deposit the payments due in trust or in escrow, it can not be considered payment since it was a conditional tender, and would have left the creditor (Myers corporation) unable to make use of the money rightfully due to it. - A tender to be valid must be unconditional; and even then, a tender alone is not a mode of extinguishing obligations, unless followed by consignation. - For Myers to accept the proposed deposit of the monthly payments in trust or escrow would be equivalent to an admission on its part of the validity or truthfulness of Maritime's claim and of Myers Corporation's liability for an obligation of an individual stockholder. Nor is there any justification on record to warrant the disregard of the corporate personality of Myers Building Corporation in the present case. 2. NO - Myers obligation to convey the property was expressly made subject to a suspensive (precedent) condition of the punctual and full payment of the balance of the purchase price. This is apparent from clauses (d) and (i) of the contract of sale which make it crystal clear that the full payment of the price (through the punctual performance of the monthly payments) was a condition precedent to the execution of the final sale and to the transfer of the property from Myers to Maritime; so that there was to be no actual sale until and unless full payment was made. - The upshot of all these stipulations is that in seeking the ouster of Maritime for failure to pay the price as agreed upon, Myers was not rescinding (or more properly, resolving) the contract, but precisely enforcing it according to its express terms. In its suit Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of), such restoration being the logical consequence of the fulfillment of a resolutory condition, express or implied (article 1190); neither was it seeking a declaration that its obligation to sell was extinguished. What it sought was a judicial declaration that because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to repossess the property object of the contract, possession being a mere incident to its right of ownership. 3. NO - Maritime intentionally risked the penalty by deliberately refusing to make the monthly payments for March to May 1961, and trying to inject into its contract with Myers corporation the totally unconnected personal promise of F. H. Myers to indemnify it for eventual liability to the Luzon Labor Union, allegedly made on the occasion of the sale of the Luzon Brokerage to E. Schedler by F. H. Myers, and trying to extrajudicially force Myers corporation to assume responsibility for such liability; - Under Article 1234 of the present Civil Code, an obligation must be substantially performed in good faith, for such performance to stand in lieu of payment; Maritime, on the contrary, acted with dolo or bad faith, and is not in a position to invoke the benefits of the article. - Maritime's loss of the forfeited payments was more than balanced by the rentals it received from the Luzon Brokerage as lessee of the building for the corresponding periods, at a rate double the monthly payments required of Maritime under its contract with Myers. 4. YES - Even granting that the contract is a plain sale of real property with deferred payment of the price, as contended by Maritime, its position will not be imposed. By Article 1592 of the Civil Code

of the Philippines, though it may have been stipulated that upon the failure to pay the price at the time agreed upon, the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the Court may not grant him a new term. - The answer filed by Myers in the court below to the Luzon Brokerage's complaint for interpleader constituted in effect a judicial demand for rescission of the contract of sale, and for repossession of the real estate sold. Hence, Maritime can not demand further time to pay, and must conform to the rescission of the contract and the surrender of the premises, with all the consequences stipulated in the original contract. Being an article specifically applicable to sales of real property, this Article 1592 controls the general principles expressed by Article 1198 on reciprocal obligations.

SEPARATE OPINION BARREDO [dissent]

- Maritime's failure to pay the March, April and May, 1961 installments did not constitute default in the absence of a demand in accordance with Article 1100 of the Old Civil Code. (found in modified form in Art. 1169 of the New Civil Code) - The sole and only demand made upon Maritime by Myers for the payment of the March, April and May, 1961 installments was contained in the latter's letter of May 16, 1961, Myers, and importantly, for reasons which Myers evidently considered irrelevant because it has not shown in the record any that may adversely affect Maritime's position, this communication was not received by Maritime or returned unclaimed. The subsequent letter of Myers to Maritime of June 5, 1961, Myers, was no longer a demand; it was already a notification that Myers had unilaterally cancelled the Deed in controversy. - Assuming there was no need for demand, Maritime's failure to actually pay the installments in question cannot be considered asa breach in bad faith (dolo). - From the point of view of Myers, Schedler's and Senator Padilla's letters to Parsons were not addressed to Myers, since it does not appear that Parsons was not authorized to act for and on its behalf. Worse, they referred to matters with which Myers professed not to have anything to do. Consequently, on the other hand, whatever Parsons said in them for Myers should also not have any color of authority. In this sense, it would appear that Myers had no knowledge whatsoever why Maritime did not pay. How could it charge Maritime with bad faith? - There has been substantial compliance and Article 1234 may be applied. - There is no clear basis in the evidence for comparing how much Maritime had paid as rentals with how much it had paid as installments as of June, 1961. In any event, for purposes of equity, I do not believe We should disregard the property itself in this comparison, hence We should not overlook that Maritime stands to lose not only the P973,000 it had paid, but the property itself and the future rentals it is supposed to earn therefrom, which after all, constituted part of its consideration in entering into the contract and acquiring the property in question. - Assuming otherwise than as above discussed, Article 1504 of the Old Civil Code is applicable to this case. - When Myers filed its cross-claim against Maritime in its answer to Luzon's interpleader complaint, that in a sense Myers made a judicial demand, Maritime's offers of payment thru Schedler made to Parsons should be considered as a substantial compliance with its obligation to pay the installments for March, April and May, under Article 1504 of the Old Civil Code; hence it cannot be held to have lost its right to pay subsequent installments which reason, the cancellation of the contract by Myers on June 8, 1961 was uncalled for, unjustified and without legal basis. - The "Deed" in question is not a promise to sell it is a sale. - According to Justice Laurel, in as much as the parties in such sale on installment of real proper or immovable had provided in their agreement for an option in favor of the vendor that in case

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the vendee should fail to pay any installment, the former may either recover in action at law the whole balance unpaid which shall be considered immediately due and demandable or recover possession of the subject property and considering all installments already paid as rentals, these stipulations may legally be enforced according to their terms, considering that such stipulations are not contrary to law, morals or public policy. Stated differently the Court held that such stipulations are comprehended within the freedom of contract. - Justice Laurel's opinion is at variance with Spanish authorities who appear to be more logical. - We all know that automatic cancellation of a contract of sale resulting in the forfeiture of all moneys already paid just because of one default in the payment of the balance is a harsh and oppressive condition, precisely because it is tantamount to the obnoxious pactum commissorium. For this reason, the law explicitly gives the buyer in Article 1504 an opportunity to pay even after default so long as the seller has not made a formal demand for cancellation thru a notary public or in court. The very wording of the provision negates the freedom of the parties to stipulate otherwise, since it already clearly says, "even though it may have been stipulated that default of the payment of the price within the time agreed upon etc." It is to me absurd to contend that not withstanding this express mandate of the law, the partes are still free to stipulate otherwise. Indeed, from this point of view, and independent of my discussion above of the applicability to the case of the Bayla ruling by Justice Ozaeta, it is my position that the intended waiver of formal demand, if any such intention can be inferred, in the provision of Paragraph (d) of the "Deed" in question that "this deed ... shall automatically and without any further formality, become null and void," is contrary to the letter and intent of Article 1504 as well as public policy. It being obvious as already shown above that no demand of whatever kind for resolution had been made upon Maritime before the letter of cancellation of June 5, 1961, it follows necessarily that said cancellation was unwarranted and contrary to rather than an implementation of the terms of the "Deed" in controversy. - The stipulation providing for transfer of title only after full payment did not stamp the transaction with the character of a mere promise to sell full payment was a suspensive condition for the execution of the final deed as the form of tradition of title it while non-payment was a resolutory condition with confiscation as to penalty clause. - What renders the idea of a promise to sell with reservation more perplexing to me is that in the Spanish law on sales, as contradistinguished from the concept of sales American law, a contract of sale is purely consensual and does not necessarily involve the transfer of title except when it is so stipulated or when the sale is made in a public instrument, since the latter is in itself a form of delivery or tradition of title over immovable property. - It was only in Manuel v Rodriguez, 109 Phil. 1, that this Court "created" the concept of a "a contract to sell or promise to sell", where title remains with the vendor until fulfillment to a positive suspensive condition, such as full payment of the price. - I insist that the so-called suspensive condition affecting the transfer of title only after full payment of the price, an admittedly licit one, does not detract from the character of the contract here in question as a perfected contract of sale indeed, partially consummated by the delivery of possession of "the thing" (per Manresa). For that matter, neither does the condition that upon failure of Maritime to pay any installment, the contract would be cancelled, all past payments forfeited and Myers would be entitled to recover possession vary a bit the real nature of the contract. - I would, therefore, separate the so-called suspensive condition regarding the delivery of title as affecting solely the obligation to deliver title which is not of immediate juridical essence in a perfected contract of sale from the breach, allegedly committed by Maritime, of the terms of payment which is the one that would justify the cancellation made by Myers, if such breach did occur in legal contemplation.

- The promise to sell has a distinct connotation in Spanish, law which I feel cannot square with the contract here in controversy. - At the risk of stating the obvious, the concept of a sale or purchase and sale in Spanish law is defined in Article 1445 and the moment of the perfection of such a contract is fixed in Article 1450. On the other hand, precisely to avoid confusion of concepts, since commercial usages resort to varied forms of transactions revolving around the juridical idea of exchanging things for money, and it is not unusual for merchants to enter into preparatory agreements for business and other reasons before finalizing their deals, Article 1451 lays down specific rules regarding promises in regard to sales. - For the purposes of Article 1504, and under the circumstances of this case, may the cross-claim interposed by Myers in its answer to the interpleader complaint of Luzon be deemed as the judicial demand that should foreclose any right on the part of Maritime to continue paying under the "Deed in question?" My answer is no. - I reiterate that the proviso of Article 1504 (1592) allowing payment by the vendee even after he has undisputably defaulted in his obligation stipulated in the terms of the agreement is a legislative remedy intended to temper a la Portia the harshness of the enforcement of the condition of the parties amount to a pactum commissorium which is generally frowned upon. Accordingly, it is my understanding that in the application of this proviso, We should not be restricted to a literal interpretation thereof.

OCEJO, PEREZ CO V INTL BANKING CORP

37 PHIL 631 FISHER; 1918

NATURE Appeal from a decision of the Manila CFI FACTS - Chua Teng Chong on March 7, 1914 executed and delivered to the defendant a promissory note payable one month from the said date. As security Chong deposited with the bank 5,000 piculs of sugar which were held in a warehouse located at 1008 Calle Toneleros, Binondo, Manila. It would appear that the bank did not take possession of the sugar and that Chong continued to retain the sugar in his possession and control until the 16th April. It was also noted that the alleged pledge was not recorded in a public document. The money represented by the promissory does not appear to have been delivered. - Plaintiffs, on the other hand, entered into a contract with Chong for the sale of a lot of sugar on March 24, 1914. The agreement calls for delivery during the month of April with the sugar to be weighed at the buyers warehouse. In compliance with the agreement, 5,000 piculs of sugar was delivered to Chongs warehouse at 119 Muelle dela Industria on April 16, 1914. The following day, the plaintiff presented for collection its account but the buyer at this point refused to make payment. - On the day the sugar was delivered by Ocejo, a representative of the bank went to the other warehouse at 1008 Calle Toneleros and discovered that the sugar therein did not exceed 1,800 piculs. The representative, together with a lawyer from the bank, went to Chong to inquire as to the shortfall. Chong pointed them to the warehouse at 119 Muelle dela Industria. The bank representative went to the said warehouse and found the sugar. He thereafter closed the warehouse with the banks padlock effectively taking possession of the sugar as per the agreement earlier mentioned. - The sale contract between plaintiff and Chong apparently did not include the time and the place when payment for the sugar was to be effected. The trial court however found that the payment was to be made upon the completion of the delivery. The plaintiff proved to the Court that in sales of this kind it is customary for the seller to deliver the merchandise to buyers warehouse for inspection and verification of weights. The payment is due on demand thereafter. - Ocejo tried to recover possession of the sugar but the Bank which then had possession refused to deliver the same to Ocejo.

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On the same day that Ocejo made the demand to the bank, Chong was judicially declared insolvent. Francisco Chua Seco was appointed as assignee of the insolvency (receiver or liquidator in todays parlance). - Also on April 24, 1914, Ocejo filed a replevin case against the bank alleging that the bank was unlawfully holding the sugar which was delivered to chong and which has not been paid. The sugar was sold by agreement of the parties with the proceed deposited in the bank, subject to the order of the court upon finally disposition. Interestingly enough, Seco filed a complaint in intervention asserting preferential rights over the sugar contending that the sugar is the property of Chong by virtue of the delivery of the same by Ocejo. Intervenor claims that sugar is the property of Chong and therefore of the insolvent estate now represented by him. The lower court rendered judgment in favor of the plaintiff. Hence the Appeal. ISSUES 1. WON the title to the sugar passed to the buyer upon delivery 2. WON the failure to pay by Chong authorize the seller to rescind the sale 3. WON the commencement of the replevin suit was equivalent to the rescission of the sale 4. WON the pledge to the bank can be sustained HELD 1. YES - Article 1450 (now Art 1496 and 1497) provides that the buyer acquires ownership of the thing once the same has been delivered to him or placed under his control and possession. The contention of Ocejo that title to the sugar did not pass to the buyer due Chongs non payment cannot hold. Ruling otherwise will cause havoc to the entire business community In the absence of any stipulation in the contract that title will only pass upon payment, then it was held that the title, in the case at bar, had it fact passed to the buyer 2. NO - Chapter 7 of title V1 of the Civil Code (particularly Article 1600) provides that contracts of sale may be rescinded for the same causes as all other obligations. However, the right to rescind the sale for non performance on the part of the buyer is not absolute. The law subordinates it to the rights of third parties to whom bad faith is not imputable. 3. NO - The action for rescission is a judicial matter. Hence, until after the ownership issue has been determined, the action for replevin cannot be maintained. 4. NO - It was shown by evidence that the sugar subject of the agreement between the bank and Chong was at the warehouse at 1088 Calle Tneleros and not at the Muelle dela Industria warehouse. Disposition The lower court decision is reversed. The Assignee of the bankruptcy of Chong is entitled to the product of the sale of the sugar. The right of the seller to file his claim in the insolvency proceedings is reversed.

BEAN V CADWALLADER
10 PHIL 606 JOHNSON; March 26, 1908

FACTS - June 4, 1906 > Bean, administrator of the estate of George Case, brought an action in CFI Manila to recover from Cadwallader Company the following sums: (a) P7,356.80, with 6% per annum interest, from the December 6, 1905, as balance for timber sold and delivered by the CASE (BEAN) to CADWALLADER (b) P2,782.75, balance for timber sold and delivered by CASE to CADWALLADER (c) P810 as actual damage suffered by CASE by reason of the violation of said agreements (a) and (b) - September 6, 1905 by CADWALLADER TO CASE (A)

> to confirm our acceptance of your verbal offer to furnish us a cargo of ipil and molave (the molave to consist of 10 logs, more or less), said cargo to comprise from eight thousand to ten thousand cubic feet, English measurement, and the same to be delivered alongside our vessel at Basilan, for the sum of sixty cents (60 cents), Philippine currency, per English cubic foot. > to pay the forestry dues at Manila to be charged against you > delivery is to be made within three months from date of this letter > notify by telegraph when delivery can be made. - January 3, 1906 CASE TO CADWALLADER (B) > propose to furnish native timber at the prices and under the conditions herein expressed + Calantas, at twenty-five (25) cents per English cubic foot, all forestry charges to be paid by me. + Calantas, short and crooked, at ten (10) cents per English cubic foot, all forestry charges to be paid by you. + Ipil, at sixty (60) cents per English cubic foot, all forestry charges to be paid by me. + Ipil, short pieces, at fifteen (15) cents per English cubic foot, all forestry charges to be paid by you. + Mangachupay, No. 1, at twenty-five (25) cents per English cubic foot, all forestry charges to be paid by me. > These prices include delivery alongside ship or barge at Basilan, > I will furnish the necessary men to load same, and you to furnish steam gear to assist in loading > the cargo to be mixed and consisting of approximately fifteen thousand cubic feet > Delivery to be made within three months from this date. Plaintiff Claims > within three months from September 6, 1905 (A), deliver at the port of Basilan, a cargo of native logs, consisting of 16,428 English cubic feet of ipil, and duly notified the defendant by telegram of such delivery; that the value of said logs so delivered at the price stipulated was P9,856.50; that on the December 29, 1905, the defendant paid to the plaintiff the sum of P2,500 to apply on the said account, and that there was still due from the defendant to the plaintiff, upon said contract as represented by Exhibit A, the sum of P7,356.80, with interest at the rate of 6% from the December 6, 1905. > within three months from January 3, 1906 (B), deliver at the port of Basilan, 15,131 English cubic feet of mangachupay and calantas, and did notify the defendant of such delivery; that the value of said timber so delivered at the price agreed upon was P3,782.75; that on the February 6, 1906, the defendant paid to the plaintiff, to apply on said account, the sum of P1,000, and that there is still due and owing to the plaintiff by the defendant the sum of P2,782.75, with interest at the rate of 6 per cent from the 3d day of April, 1906. > by reason of the violation on the part of the defendant of said contracts as represented by A and B, he was obliged to borrow money from third persons and incur expenses in traveling, amounting to the sum of P810, and that, by reason of the violation of the said contracts on the part of the defendant, this sum was due and payable as damages by the defendant to the plaintiff. Defendant Claims > the plaintiff had made certain misrepresentations concerning the character of the costs of the Island of Basilan; that the plaintiff had represented that the harbor of said Island of Basilan, where said logs were to be delivered, was a safe harbor, and that it was easily practicable for a vessel to come alongside the land, whereas, in fact, said harbor was unsafe, and that it was impossible for the defendant to enter said harbor with the boats and to load said logs (anchor chain broke two times and waters were unsettled) > the plaintiff had not, as a matter of fact, delivered to it the logs or timber, nor any part of the same, as represented by said contracts, and asked for a judgment against the plaintiff for the sum of P3,500, the money paid by the defendant to the plaintiff, and interest on the sum of P2,500 from the 29th of December, 1905, and interest on P1,000 from the 6th of February, 1906, at the rate of 10 per cent.

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- CFI: in favor of the plaintiff and against the defendant for the sum of P10,033.39, with interest at 6 per cent from the 3rd day of April, 1906, and costs. - clearly established by the testimony: (a) That the plaintiff cut the logs required by the contract. (b) That plaintiff transported said logs to the beach. (c) That plaintiff had said logs measured by the representative of the Forestry Bureau of Government of the Philippine Islands. (d) That plaintiff placed said logs in rafts to be floated alongside a vessel to be sent to the point of delivery by the defendant. (e) That plaintiff did actually place the said logs along-side the vessel known as the Juanita in the month of April, 1906. (f) That the crew of the Juanita did in fact actually proceed to place said logs on board said vessel, but failed because the anchor chain was not strong enough to sustain a 1 ton skid, which the crew were trying to pull in place. ISSUE WON there is real delivery HELD YES Reasoning - The evidence shows beyond peradventure of doubt that at the time the said Juanita, the vessel of the defendant, was at Basilan, some of the logs were placed alongside of the vessel, in accordance with the terms of the contract. It is denied that all of the logs to be furnished by the plaintiff under the terms of the contract were placed in rafts in the water at or near the point of delivery. Certainty the plaintiff can not be required to show that he placed each log alongside the vessel, after he has shown that he had all the logs rafted in the water at the point of delivery and had placed some of them alongside the vessel in accordance with the terms of the contract. He could not be required to place others alongside the vessel until after the first had been loaded. (Whitcomb vs. Whitney) The fact is not disputed that the plaintiff duly notified the defendant, within the period prescribed in the contract, that the said logs were ready for delivery. - Actual manual delivery of an article sold is not essential to the passing of the title thereto (A1450, Civil Code) unless made so by the terms of the contract or by an understanding of the parties. The parties to the contract may agree when and on what conditions the property in the subject of the contract was passed to the prospective owner. (Andrews vs. Durant) In the present case the parties agreed that the delivery of the logs should be made alongside a vessel of the defendant. That was done by the plaintiff. The vessel of the defendant was sent to the point of delivery and the said defendant attempted to load on said vessel the logs delivered along its side by the plaintiff. It is a rule well established that a mere contract for the sale of goods, where nothing remains to be done by the seller before making delivery, transfers the right of property, although the price has not been paid, nor the thing sold actually delivered to the purchaser. (Olyphant vs. Baker; A1450, Civil Code.) - The evidence shows that, when the Juanita arrived at the point of delivery, the parties in charge of said boat placed or attempted to place skids on said boat for the purpose of loading the logs. Certainly they believed that the logs had been delivered, or else why would they have actually made preparation for the loading of the same? The logs were fully at the disposal of the defendant, and the latter thereby became liable for the price of the same under the contract. (A339, Code of Commerce; Noyes vs. Marlott) - Nicholas vs. Morse > in an action for goods sold and delivered, if the plaintiff proves delivery at the place agreed and that there remained nothing further for him to do, he need not show actual acceptance by the defendant. The mere fact that the defendant, by reason of the improper equipment of the vessel, was unable to take said logs aboard such vessel, can not relieve the latter from responsibility under the contract. No burden rested upon the plaintiff to furnish proper equipment for the vessel of the defendant with which to put on board said logs. That was the

responsibility of the defendant. The responsibility of the plaintiff ceased when he placed the logs alongside the vessel of the defendant. - Condition of the Port of Basilan: > it was perfectly feasible of the defendant, with proper apparatus, to take on board the logs in question at the point of delivery. We presume that at almost every point upon the coast of the Philippine Archipelago there are days when conditions are such as to prevent the loading of cargo upon vessels. This is true even in the Bay of Manila. However, it would not be just to conclude that, because on certain days it is impossible to load and unload ships might be loaded and unloaded in said bay had made misrepresentations, because of the fact that on a particular day ships could not be loaded or unloaded by reason of the conditions of the sea resulting from wind or storm. Obiter - Suppose, for example, that after the vessel of the defendant had arrived at the point where the logs were delivered along its side, and the logs had actually been delivered at the side, as is claimed by the plaintiff in the present case, the plaintiff had thereafter sold the said logs to third persons. Could the defendant have maintained replevin for the same? If the title had not passed, he could not. If it had, he could. If the title had not passed at that moment the plaintiff might have sold said logs to a third person in the very presence of the defendant, even after defendant's vessel had arrived to take the logs away. If the title had not passed, the plaintiff would thus have subjected himself to an action for damages upon his contract upon a failure to perform it. We are of the opinion, however, that, if the plaintiff had sold said logs to a third person after the arrival of the vessel of the defendant, the defendant might have claimed and recovered said logs upon the theory that have properly said to another purchaser of said logs: "These logs are mine; they have been delivered to me under a contract; everything has been done under said contract which the circumstances will permit of for the passing of the title of the same to me, and whoever buys said logs buys something which has not only been previously bought by me but which has been set apart for me ands placed at my disposal by the most unequivocal acts, and I am, therefore, vested with the title to the same which I have a right to maintain and enforce." And we believe that the law would have sustained the defendant in this contention. (Whitcomb vs. Whitney; Hatch vs. Oil Company; A339, Code of Commerce; Noyes vs. Marlott,) Disposition plaintiff is entitled to a confirmation of the judgment of the lower court. It is therefore, hereby ordered that a judgment be entered in favor of the plaintiff and against the defendant for the sum of P10,033.39, with interest at the rate of 6 per cent per annum from the 3rd day of April, 1906, and costs.

366 SCRA 395 (2001) QUISUMBING; October 2, 2001

NATURE Petition for review seeks to annul and set aside the decision dated March 10, 1998 of the Court of Appeals that affirmed the decision of the Regional Trial Court of Manila, Branch 48, dated March 17, 1993, declaring the deed of sales null and void. FACTS - Petitioner Zenaida M. Santos is the widow of Salvador Santos, a brother of private respondents Calixto, Alberto, Antonio, all surnamed Santos and Rosa Santos-Carreon. - The spouses Jesus and Rosalia Santos owned a parcel of land registered under TCT No. 27571 with an area of 154 square meters, located at Sta. Cruz Manila. On it was a four-door apartment administered by Rosalia who rented them out. The spouses had five children, Salvador, Calixto, Alberto, Antonio and Rosa. - On January 19, 1959, Jesus and Rosalia executed a deed of sale of the properties in favor of their children Salvador and Rosa. TCT No. 27571 became TCT No. 60819. Rosa in turn sold her share to Salvador on November 20, 1973 which resulted in the issuance of

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a new TCT No. 113221. Despite the transfer of the property to Salvador, Rosalia continued to lease and receive rentals from the apartment units. - On November 1, 1979, Jesus died. Six years after or on January 9, 1985, Salvador died, followed by Rosalia who died the following month. Shortly after, petitioner Zenaida, claiming to be Salvadors heir, demanded the rent from Antonio Hombrebueno, a tenant of Rosalia. When the latter refused to pay, Zenaida filed an ejectment suit against him with the Metropolitan Trial Court of Manila, Branch 24, which eventually decided in Zenaidas favor. - On January 5, 1989, private respondents instituted an action for reconveyance of property with preliminary injunction against petitioner in the Regional Trial Court of Manila, where they alleged that the two deeds of sale executed on January 19, 1959 and November 20, 1973 were simulated for lack of consideration. They were executed to accommodate Salvador in generating funds for his business ventures and providing him with greater business flexibility. - In her Answer, Zenaida denied the material allegations in the complaint and as special and affirmative defenses, argued that Salvador was the registered owner of the property, which could only be subjected to encumbrances or liens annotated on the title; that the respondents right to reconveyance was already barred by prescription and laches; and that the complaint stated no cause of action. - On March 17, 1993, the trial court decided in private respondents favor. Upon appeal, the Court of Appeals affirmed the trial courts decision dated March 10, 1998. It held that in order for the execution of a public instrument to effect tradition, as provided in Article 1498 of the Civil Code, the vendor shall have had control over the thing sold, at the moment of sale. It was not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. The subject deeds of sale did not confer upon Salvador the ownership over the subject property, because even after the sale, the original vendors remained in dominion, control, and possession thereof. Petitioners Arguments - She argues that tax declarations are not conclusive evidence of ownership when not supported by evidence. She avers that Salvador allowed his mother to possess the property out of respect to her in accordance with Filipino values. Petitioner in her memorandum invokes Article 1477 of the Civil Code which provides that ownership of the thing sold is transferred to the vendee upon its actual or constructive delivery. Article 1498, in turn, provides that when the sale is made through a public instrument, its execution is equivalent to the delivery of the thing subject of the contract. Petitioner avers that applying said provisions to the case, Salvador became the owner of the subject property by virtue of the two deeds of sale executed in his favor. ISSUES 1. WON payments of realty taxes and retention of possession indicate continued ownership by the original owners 2. WON a sale through a public instrument is tantamount to delivery of the thing sold HELD 1. NO - It is true that neither tax receipts nor declarations of ownership for taxation purposes constitute sufficient proof of ownership. They must be supported by other effective proofs. These requisite proofs we find present in this case. As admitted by petitioner, despite the sale, Jesus and Rosalia continued to possess and administer the property and enjoy its fruits by leasing it to third persons. Both Rosa and Salvador did not exercise any right of ownership over it. Before the second deed of sale to transfer her 1/2 share over the property was executed by Rosa, Salvador still sought the permission of his mother. Further, after Salvador registered the property in his name, he surrendered the title to his mother. These are clear indications that ownership still remained with the original owners. In

Serrano vs. CA, 139 SCRA 179, 189 (1985), we held that the continued collection of rentals from the tenants by the seller of realty after execution of alleged deed of sale is contrary to the notion of ownership. 2. NO - Nowhere in the Civil Code, however, does it provide that execution of a deed of sale is a conclusive presumption of delivery of possession. The Code merely said that the execution shall be equivalent to delivery. The presumption can be rebutted by clear and convincing evidence.ii[16] Presumptive delivery can be negated by the failure of the vendee to take actual possession of the land sold. - In Danguilan vs. IAC, 168 SCRA 22, 32 (1988), we held that for the execution of a public instrument to effect tradition, the purchaser must be placed in control of the thing sold. When there is no impediment to prevent the thing sold from converting to tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy nor make use of it himself or through another in his name, then delivery has not been effected. - As found by both the trial and appellate courts and amply supported by the evidence on record, Salvador was never placed in control of the property. The original sellers retained their control and possession. Therefore, there was no real transfer of ownership. Disposition Petition is DENIED. The assailed decision dated March 10, 1998 of the Court of Appeals, which sustained the judgment of the Regional Trial Court dated March 17, 1993, in favor of herein private respondents, is AFFIRMED.

20 PHIL 388 ARELLANO; October 24, 1911

NATURE Appeal from judgment of CFI Ilocos Sur FACTS - Foz (seller) executed a contract, ratified before a notary, wherein he sells, cedes, and conveys to Florendo (buyer) his house and camarin, together with the lots on which they are erected, for P6000. Of this price, Foz had already received P2000, and (as indicated in the contract) Florendo will pay the remaining P4000 when he (Foz) goes to Vigan during this or the next month. - The contract also provides: In case of my being unable to go to Vigan, I authorize Florendo to pay my debt to the church at that place, as well also (that is, I authorize him) to obtain the title papers of the house that is the subject matter of this sale, and the said Florendo shall send the remainder to me here in Manila. Record is also made in this instrument that the rents of the said properties may be collected by me only up to and including the month of June; after such period, I shall have no further right to said rents and Seor Florendo may then begin to collect them. - When Foz went to Vigan, Florendo paid the remaining P4000, but payment was refused by Foz. Florendo instead deposited the P4000 with the Municipal Treasurer as payment. Foz contended that the true price was P10,000, and that he was made to believe that the price indicated in the contract was P10,000 and not P6000. He alleged that the contract was just read out to him. - Florendo sued. CFI ruled in his favor, ordering Foz to comply with the contract, pay the rents due to Florendo, accept the remainder of the P4000 (after paying debt to the church). Foz appealed. ISSUE WON contract of sale was valid, thereby requiring Foz to deliver possession to Florendo HELD YES

FLORENDO V FOZ

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Ratio Absent any deceit in obtaining consent to the contract, the same is held to be valid and effective. Reasoning - It was not proved, nor was it attempted to be proved, that the instrument, before being signed by Foz, was read to him by another person; nor that such other person was Florendo himself; nor that any person read one thing for another, as being what was stipulated in the instrument. For these reasons it was the conclusion of the trial court that neither the deceit alleged by the defendant to have been employed by the plaintiff in the execution of the contract, nor the falsity of the instrument executed, was proved. - Consequently, the instrument of contract is valid and effective. From the validity and force of the contract is derived the obligation on the part of the vendor to deliver the thing sold. Art. 1466 CC: the vendor shall not be bound to deliver the thing sold, if the vendee should not have paid the price, or if a period for the payment has not been fixed in the contract. If in, the contract a period has been fixed for the payment, the vendor must deliver the thing sold. - The provision above contain a rule and an exception: the rule is that the thing shall not be delivered, unless the price be paid; and the exception is that the thing must be delivered, though the price be not first paid, if a time for such payment has been fixed in the contract. In the contract in question, a period was fixed for the payment, thus making the contract fall under the exception. - It is the material delivery of the property sold which Foz must make in compliance with the contract, inasmuch as the formal delivery de jure was made, according to the provisions of article 1462, 2nd par: When the sale should be made by means of a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if in said instrument the contrary does not appear or may be clearly inferred. - As the contrary does not appear nor is to be inferred from the contract, its execution was really a formal or symbolical delivery of the property sold and authorized the plaintiff (Florendo) to use the title of ownership as proof that he was thenceforth the owner of the property. Disposition Petition denied. Decision of CFI AFFIRMED.

44 PHIL 924 ROMUALDEZ; September 18, 1922

FACTS - The house in dispute in this case was sold by the spouses Venancio Alcantara and Vicenta Capulong to Generosa Aviles for the sum of P497, it having been stipulated that during four months from the 10th of October, 1917, the vendors would continue in possession of the house, the expenses for repairs, land and other tax to be for their account, as well as the payment of the rent for the lot on which it is erected. -In a document dated March 13, 1918 the same property was sold by the same spouses Venancio Alcantara and Vicente Capulong for P500 to the spouses Fortunato de Leon and Segunda Arcega, who took possession of the property, Generosa Aviles never took possession thereof. ISSUE WON title to the house in dispute was transferred to Arcega HELD YES - Since none of the two sales appears to have been registered; therefore the question at issue is, which of these purchasers was the first to take possession (art. 1473, Civil Code). - We have already seen that the first purchaser, the plaintiff, never took possession of the house, while the second purchasers, the defendant spouses, did. Under the Civil Code,

AVILES V ARCEGA

the conclusion is inevitable that the titles to the house was transmitted not to the plaintiff but to the defendants. - The plaintiff cannot invoke symbolic delivery by the execution of the public document of sale, inasmuch as there was not, nor could there have been, such delivery, the same being prevented by the express stipulation contained in the deed of sale, to the effect that the vendors did not part with the possession of the house but would continue therein for four months. It cannot be said that after the lapse of the four months following, during which the vendors were to continue in possession of the house, according to the stipulation, any symbolic delivery subsisted. Nothing can subsist that did not exist before. - Article 1462 of the Civil Code says: If the sale should be made by means of a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the subject-matter of the contract unless the contrary appears or may be clearly inferred from such instrument. - As we understand the law, there is symbolic delivery when the sale is made in a public document, and nothing appears therein to the contrary either expressly or impliedly; and no such symbolic delivery can be held to take place when, as in the instant case, there is in the document a stipulation to the contrary. - We do not hesitate to term symbolic such delivery of the thing as is supposed to be made by the execution of the document, as provided in article 1462, although in that case it must be considered to take place partly by operation of law. This kind of tradition finds its precedent in law which provides that "when one grants another any property or thing, the latter acquires possession thereof, if the grantor delivers to him the letters whereby the same is made, or makes a new one and hands it to him, although he is not given physical possession of the thing." - This kind of tradition, however, is, as to its efficaciousness, subject to the terms of the document, for if it appears therein, or can be inferred therefrom, that it was not the intention of the parties to make delivery, no tradition can be deemed to have taken place. Such would be the case, for instance, where a certain date is fixed when the purchaser should take possession of the thing, or where in the case of a sale by installments, it is stipulated that until payment of the last installment is made, the title to the property should not be deemed to have been transmitted, or where the vendor reserves the right to use and enjoy the property until the gathering of the pending crops. (10 Manresa, Codigo Civil, p. 129.) - The instant case is one of those above mentioned by the eminent commentator Mr. Manresa. To use the phraseology of the above quoted passage, a certain date was fixed (namely, at the end of four months, because id certum est quod certum reddi potest), when the purchaser should take possession of the thing. - Neither can it be said that the house must be presumed to have been delivered to the first purchaser after the lapse of the four months aforesaid, for such a presumption is overthrown by the fact stipulated by the parties that this first purchaser never took possession of the house. - The defendants therefore has rights to the house in question, with absolute exclusion of the plaintiffs.

SEPARATE OPINION ARAULLO [dissent]

- Article 1473 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 personal property. Should it be real property, it shall belong to the purchaser who first recorded it in the registry of deeds. Should it not be recorded, the property shall belong to the person who first took possession of it in good faith, or, in default of possession, to the person who present the oldest title, provided there is good faith. - Applying this provision to the instant case, there is no doubt that the ownership was transferred to the purchaser who first gained

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possession in good faith. But who was the first to gain possession? The defendants, according to the opinion of the majority. But with all the respect due to the authoritative opinion of the majority, the undersigned think that it was the plaintiffs.

PHIL SUBURBAN DEVT CORP V AUDITOR GENERAL

63 SCRA 397 ANTONIO; April 18, 1975

NATURE Appeal by certiorari from the decision dated December 11, 1961, of then Auditor General Pedro M. Gimenez, disallowing the request of petitioner for the refund of real estate tax in the amount of P30,460.90 paid to the Provincial Treasurer of Bulacan. FACTS - On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting on the reports of the Committee created to survey suitable lots for relocating squatters in Manila and suburbs, and of the Social Welfare Administrator together with the recommendation of the Manager of the Government Service Insurance System, approved in principle the acquisition by the People's Homesite and Housing Corporation of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan for relocating the squatters who desire to settle north of Manila, and of another area either in Las Pias or Paraaque, Rizal, or Bacoor, Cavite for those who desire to settle south of Manila. The project was to be financed through the flotation of bonds under the charter of the PHHC in the amount of P4.5 million, the same to be absorbed by the Government Service Insurance System. The President, through the Executive Secretary, informed the PHHC of such approval by letter bearing the same datE. - On June 10, 1960, the Board of Directors of the PHHC passed Resolution No. 700 authorizing the purchase of the unoccupied portion of the Sapang Palay Estate at P0.45 per square meter. PHHC entered into a contract with the owner of the estate Philippine denominated deed of absolute sale which however was not registered immediately. Nevertheless, PHHC with the consent of the owner acquired possession of the property, to enable the said PHHC to proceed immediately with the construction of roads in the new settlement and to resettle the squatters and flood victims in Manila who were rendered homeless by the floods or ejected from the lots which they were then occupying. - On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of P30,099.79 from the purchase price to be paid by it to the Philippine Suburban Development Corporation. Said amount represented the realty tax due on the property involved for the calendar year 1961 (Annex "G"). Petitioner, through the PHHC, paid under protest the abovementioned amount to the Provincial Treasurer of Bulacan and thereafter, or on June 13, 1961, by letter, requested then Secretary of Finance Dominador Aytona to order a refund of the amount so paid. Petitioner claimed that it ceased to be the owner of the land in question upon the execution of the Deed of Absolute Sale on December 29, 1960. The Finance Sec refused the request of petitioner. Hence, this case. ISSUE WON Philippine Suburban is still liable for taxes for the year 1961 despite the execution of the deed of sale in 1960 because the same was not registered and that therefore ownership was not transferred to PHHC HELD NO Ratio It is not the fact of registration which transmits ownership of real property but that of delivery. From the time that that Philippine Suburban delivered possession to PHHC, it

was no longer the owner and therefore not liable for taxes levied thereafter. Reasoning - Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe actual (real tradition) or constructive (constructive tradition). When the sale of real property is made in a public instrument, the execution thereof is equivalent to the delivery of the thing object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. - In other words, there is symbolic delivery of the property subject of the sale by the execution of the public instrument, unless from the express terms of the instrument, or by clear inference therefrom, this was not the intention of the parties. Such would be the case, for instance, when a certain date is fixed for the purchaser to take possession of the property subject of the conveyance, or where, in case of sale by installments, it is stipulated that until the last installment is made, the title to the property should remain with the vendor, or when the vendor reserves the right to use and enjoy the properties until the gathering of the pending crops, or where the vendor has no control over the thing sold at the moment of the sale, and, therefore, its material delivery could not have been made. - In the case at bar, there is no question that the vendor had actually placed the vendee in possession and control over the thing sold, even before the date of the sale. The condition that petitioner should first register the deed of sale and secure a new title in the name of the vendee before the latter shall pay the balance of the purchase price, did not preclude the transmission of ownership. In the absence of an express stipulation to the contrary, the payment of the purchase price of the good is not a condition, precedent to the transfer of title to the buyer, but title passes by the delivery of the goods. - The Court failed to see the merit in respondent's insistence that, although possession was transferred to the vendee and the deed of sale was executed in a public instrument on December 29, l960, the vendor still remains as owner of the property until the deed of sale is actually registered with the Office of the Register of Deeds, because the land sold is registered under the Torrens System. In a long line of cases already decided by this Court, the constant doctrine has been that, as between the parties to a contract of sale, registration is not necessary to make it valid and effective, for actual notice is equivalent to registration. 7 Indeed, Section 50 of the Land Registration Act provides that, even without the act of registration, a deed purporting to convey or affect registered land shall operate as a contract between the parties. The registration is intended to protect the buyer against claims of third persons arising from subsequent alienations by the vendor, and is certainly not necessary to give effect to the deed of sale, as between the parties to the contract. Disposition Appealed decision is hereby reversed, and the real property tax paid under protest to the Provincial Treasurer of Bulacan by petitioner Philippine Suburban Development Corporation, in the amount of P30,460,90, is hereby ordered refunded.

GR 12449 FISHER; November 13 1918

NATURE Action for forcible entry and detainer FACTS - It was alleged in the complaint that on June 12 1915, the defendant Maria Cesar by force and intimidation deprived plaintiff of the possession of the land in suit and since that time withheld it from him to his damage in the sum of P25. The defendant denied this allegation stating that the land in question is her property and has been in her possession without interruption for more than 20 years. TC gave judgment in favor of plaintiff - From the evidence taken at the trial it appears that the defendant had been in possession of the land in question for a long period prior to the occurrence of the incidents out of which

MASALLO V CESAR

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this litigation arose. ON March 8 1915, while the defendant was in possession of the land in question, one Matea Crispino executed a deed to the plaintiff whereby she undertook to sell and transfer to him the land in question. Crispino admitted that she has not been in possession of the land since the cessation of the Spanish sovereignty in these islands. She stated however that the land in question had been mortgaged by her to one Eugenia Perez, who testified on behalf of plaintiff that she, Perez had been in possession of the land from 1889 until 1914. After MAtea Crispino executed her deed to the plaintiff, the latter went upon the land with his laborers and commenced to plow it. Not long after, the defendant approached accompanied by her daughter, and insisting that the land was hers and in her possession, ordered the plaintiff and his men away (the defendant, who is a woman 80 years of age, took a bolo and cut the rope traces by which his carabao was attached to the plow. The result of the dispute was that the plaintiff and his men withdrew and that an action was shortly after commenced in the court of justice of the peace against the defendant plaintiff for the possession of the land. The evidence shows conclusively that until he went upon the land for the purpose of plowing it, acting on the strength of his deed from Matea Crispino, plaintiff had never been in possession of this property ISSUE WON plaintiff can claim ownership over the land in question by virtue the deed of sale between her and a third party (Matea Crispino)

FACTS - January 18, 1949, plaintiff bought from defendant two parcels of land for P5,000; that after the sale, plaintiff tried to take actual physical possession of the lands but was prevented from doing so by one Martin Deloso who claims to be the owner thereof; plaintiff instituted an action before the Tenancy Enforcement Division of the DOJ to oust Martin Deloso from the possession of the lands, which action she later abandoned for reasons known only to her; plaintiff wrote defendant asking the latter either to change the lands sold with another of the same kind and class or to return the purchase price together with the expenses she had incurred in the execution of the sale, plus 6 per cent interest; - April 11, 1957, the trial court rendered judgment declaring the deed of sale rescinded, and ordering the latter to pay the former the sum of P5,000, representing the purchase price of the lands, plus the amount of P50.25 which plaintiff spent for the execution and registration of the deed of sale, with legal interest on both sums - plaintiff thus filed a complaint in the CFI of Zambales praying for the rescission of the contract of sale executed between her and defendant for failure of the latter to place the former in the actual physical possession of the lands she bought. ISSUES 1. WON the execution of the deed of sale in a public document is equivalent to delivery of possession of the lands sold to appellee thus relieving her of the obligation to place appellee in actual possession thereof 2. WON plaintiff can rescind the contract of sale in view of defendant's failure to deliver the possession of the lands HELD 1. NO Ratio When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to reality the delivery has not been effected. Reasoning - it can be clearly seen in the stipulation in the sale that the vendor intended to place the vendee in actual possession of the lands immediately as can be inferred from the stipulation that the vendee "takes actual possession thereof ... with full rights to dispose, enjoy and make use thereof in such manner and form as would be most advantageous to herself." The possession referred to in the contract evidently refers to actual possession and not merely symbolical inferable from the mere execution of the document. There was, however, no such possession by the vendee. - the thing sold shall be deemed delivered when the vendee is placed in the control and possession thereof, which situation does not here obtain because from the execution of the sale up to the present the vendee was never able to take possession of the lands. And although it is postulated in the same article3 that the execution of a public document is equivalent to delivery, this legal fiction only holds true when there is no impediment that may
3

HELD NO Ratio As Mateo Crispino admits that she did not have possession of the land when she executed and delivered her deed to plaintiff, the mere execution and delivery of the deed did not constitute a delivery of possession Reasoning - The plaintiff in an action of this character must prove a prior possession in himself, which means that as between the two contending parties the right of action is conceded to be in the party whose actual and peaceful possession antedates that of the other. In this case the defendant Maria Cesar is shown to have had the prior peaceful possession of the disputed parcel of ground for an indefinite period of time in the past. Therefore, when the plaintiff, after acquiring a deed to the land from a third person, entered upon the premises with his laborers and began pliwing the land, it was he who was guilty of the wrongful serizure of the property; and the defendant undoubtedly then had a perfect right to maintain an action of unlawful detainer against the plaintiff to regain possession. Instead of instituting such an action, as the defendant was well entitled to do, she warned the plaintiff off, or as he would have us believe, ejected him by force, intimidation and violence. Availing himself of the situation thus created, the plaintiff now seeks to turn the tables upon the original possessor , and founding his right upon the transitory possession which he had wrongfully acquired, he would now employ against the defendant the same remedy which might properly have been used against himself if he had not vacated the premises - According to Section 80 of the Code of Civ Pro, where a dispute over possession arises between 2 persons, the person first having actual possession, as between them, is the one who is entitled to maintain the action. Disposition The decision of the trial court is reversed and the action dismissed, plaintiff to pay the costs of both instances

108 PHIL 900 BAUTISTA ANGELO; June 30, 1960

NATURE

SARMIENTO V LESACA

ART. 1461. The vendor is bound to deliver and warrant the thing which is the subjectmatter of the sale. ART. 1462. The thing sold shall be deemed delivered when the vendee is placed in the control and possession thereof. If the sale should be made by means of a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the subject-matter of the contract unless the contrary appears or is clearly to be inferred from such instrument. From the above it is clear that when a contract of sale is executed the vendor is bound to deliver to the vendee the thing sold by placing the vendee in the control and possession of the subject-matter of the contract. However, if the sale is executed by means of a public instrument, the mere execution of the instrument is equivalent to delivery unless the contrary appears or is clearly to be inferred from such instrument.

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prevent the passing of the property from the hands of the vendor into those of the vendee - It is not enough to confer upon the purchaser the ownership and right of possession. The thing sold must be placed in his control. 2. YES Ratio Undoubtedly in a contract of purchase and sale the obligation of the parties is reciprocal, and, as provided by the law, in case one of the parties fails to comply with what is incumbent upon him to do, the person prejudiced may either exact the fulfillment of the obligation or rescind the sale. Since plaintiff chose the latter alternative, it cannot be disputed that her action is in accordance with law. Reasoning - This action is based on Art.1124 which provides that the right to resolve reciprocal obligations, in case one of the obligors should fail to comply with that which is incumbent upon him, is deemed to be implied. The person prejudiced may choose between exacting the fulfillment of the obligation or its resolution with indemnity for losses and payment of interest in either case. He may also demand the resolution of the obligation even after having elected its fulfillment, should the latter be found impossible. Disposition Wherefore the decision appealed from is affirmed

additional pieces of steel matting [the difference between the number stated in the recovery report (13,107) and the number in the inventory (11,167)]. Floro opposed the Boards petition and claimed that the steel mattings listed had become the property of Legaspi by virtue of a deed of sale executed by Floro pursuant to the latters contract with M. The CFI denied the Boards petition, declaring that M had acquired ownership over the steel mattings under his contract with the Board; that Floro was properly authorized to dispose of the steel mattings under his contract with M; and that the sale to Eulalio Legaspi was valid and not contrary to the Insolvency Law. - The Board appealed to the CA which certified the case to the SC, there being only questions of law involved. ISSUES 1. WON the contract between M and the Board had vested M with title to and ownership of the steel mattings 2. WON the contract ceased to have any force and effect after non-renewal of the bond required for the extension of the contract 3. WON there was a novation 4. WON the sale to Floro by Legaspi was void as a fraudulent transfer under Sec. 70 of the Insolvency Law HELD 1. YES Ratio Art.1498 CC: When a 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. Reasoning - The contract between M and the Board had the effect of vesting M with title to, or ownership of, the steel mattings in question as soon as they were brought up from the bottom of the sea. This is shown by the following provisions of the contract:
10. For and in consideration of the assignment by the BOARD OF LIQUIDATORS to the CONTRACTOR (M) of all right, title and interest in and to all surplus properties salvaged by the CONTRACTOR under this contract, the CONTRACTOR shall pay to the Government NINETY PESOS (P90.00) per long ton (2,240 lbs.) of surplus properties recovered. 11. Payment of the agreed price shall be made monthly during the first ten (10) days of every month on the basis of recovery reports of sunken surplus properties salvaged during the preceding month, duly verified and audited by the authorized representative of the BOARD OF LIQUIDATORS.

BOARD OF LIQUIDATOS V FLORO

110 PHIL 482 REYES JBL; December 29, 1960

NATURE Appeal from an order of the CFI of Manila FACTS - On June 14, 1952 Melecio Malabanan (M) and the Board of Liquidators [the Board, a government agency which took over the functions of the defunct Surplus Property Liquidating Committee] entered into an agreement for the salvage of surplus properties sunk in territorial waters off the provinces of Mindoro, La Union, and Batangas. By its terms, M was to commence operations within 30 days from execution of said contract, which was to be effective for a period of 1 year from the start of operations, extendible for a total period of not more than 6 months. On June 10, 1953, M requested for an extension of 1 year for the salvage in waters of Mindoro and Batangas which was approved by the Board, extending his contract up to Nov. 30, 1953. He later requested a 2nd extension for 1 more year for the waters of Occidental Mindoro, which the Board again approved, hence extending his contract up to Aug. 31, 1954. On July 26, 1954, M submitted a recovery report stating that he had recovered a total of 13, 107 pieces of steel mattings. - 4 months previously or on March 31, 1954: M entered into an agreement with Exequiel Floro, wherein the latter would advance to M certain sums of money, not to exceed P25,000, repayment thereof being secured by quantities of steel mattings which M would consign to Floro; that said advances were to be paid within a certain period, and upon default, Floro was authorized to sell whatever steel mattings were in his possession under said contract, in an amount sufficient to satisfy the advances, which Floro claims to have amounted to P24, 224.50. Because M was not able to repay the advances, Floro, through a document dated Aug. 4, 1954, sold 11, 047 pieces of steel mattings to a certain Eulalio Legaspi for P24,303.40 - Aug. 21, 1954: M filed in the CFI of Manila a petition for voluntary insolvency. Attached thereto was a Schedule of Accounts, in which the Board and Floro were listed as creditors, as well as an Inventory of Properties, a list in which were included 11, 167 pieces steel mattings with an alleged estimated value of P33,501. - Soon after, the Board, claiming to be the owner of the listed steel mattings, filed a petition to exclude the mattings from the inventory; and to make the insolvent account for 1,940

- While there can be reservation of title in the seller until full payment of the price (Art.1478), or, until fulfillment of a condition (Art.1505) and while execution of a public instrument amounts to delivery only when from the deed the contrary does not appear or cannot clearly be inferred (Art. 1498), there is nothing in the said contract which may be deemed a reservation of title, or from which it may clearly be inferred that delivery was not intended. Thus, the contention that there was no delivery is incorrect. While there was no physical tradition, there was one by agreement (traditio longa manu) in conformity with Art.1499 of the Civil Code. 2. NO - M filed a bond on June 10, 1952 effective for 1 year. The principal contract, executed on June 14, 1952 was first extended to Nov. 30, 1953, and finally to Aug.31, 1954. As can be seen, there was no longer any bond from June 11, 1953 to Aug. 31, 1954. The lapse of the bond did not extinguish the contract. The requirement that a bond be posted was already complied with when M filed the bond dated June 10th. A bond merely stands as a guaranty for a principal obligation which may exist independently of said bond which is merely an accessory contract. In none of the resolutions extending the contract was there a requirement that the bond be renewed. 3. NO - Novation is never presumed, the intent to novate must be expressed clearly and unequivocally, or that the terms of the new agreement be incompatible with the old contract. Here there was neither express novation nor incompatibility. A mere extension of the term (period) for payment or performance is not novation. 4. The court below held that the sale to Legaspi was valid; but there having been no proceedings to determine whether the sale

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was fraudulent, we think it was premature for the court below to decide this point, especially because under sec.36 No. 8 of the Insolvency Act, all proceedings to set aside fraudulent transfers should be brought and prosecuted by the assignee, who can legally represent all the creditors of the insolvent. To allow a single creditor to bring such a proceeding would invite a multiplicity of suits, since the resolution of his case would not bind the other creditors, who may refile the same claim independently, with diverse proofs, and possibly give rise to contradictory rulings by the courts. Disposition The order appealed from is affirmed in so far as it declares the disputed goods to be the property of the insolvent; but without prejudice to the right of the assignee in insolvency to take whatever action may be proper to attack the alleged fraudulent transfer of the steel matting to Eulalio Legaspi, and to make the proper parties account for the difference between the number of pieces of steel matting stated in the insolvent's recovery report (18,107) and that stated in his inventory (11,167)

ISSUE When will the five-year period within which plaintiffs may exercise their right of repurchase should begin to run - on August 7, 1953, when the Deed of Absolute Sale was executed, OR February 28, 1955, when the compromise "Agreement" was entered into OR May, 1955, upon full payment of the purchase price HELD August 7, 1953 - The law speaks of "five years from date of conveyance". Conveyance means transfer of ownership; it means the date when the title to the land is transferred from one person to another. The five-year should be reckoned from the date that defendants acquired ownership of the land. - Art. 1477 of the New Civil Code provides that ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof; and Art 1496 points out that ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in articles 1497 to 1501. Under Art. 1498, when the sale is made through a public instrument, as in this case 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 be clearly inferred. This manner of delivery of the thing through the execution of a public document is common to personal as well as real property. - defendants acquired ownership to the land in question upon the execution of the deed of sale on August 7, 1953. The Agreement of February 28, 1955 did not entirely abrogate the sale since it did not operate to revest the ownership of the land in the plaintiffs. - Even assuming that the Deed of Sale was null and void as plaintiffs claim, and did not serve to effectuate delivery of the property, the date of the Agreement, at the latest, may be considered as the time within which ownership vested in the defendants. Art. 1496 explicitly provides that ownership of the thing sold is acquired by the vendee from the moment it is delivered to him "in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee." The intention to give possession (and ownership) is manifest in the agreement (Annex "B") entered into by the parties specially considering the following circumstances: (1) the payment of part of the purchase price, there being no stipulation in the agreement that ownership will not vest in the vendees until full payment of the price; and (2) the fact that the agreement was entered into in consideration of plaintiffs' desistance, as in fact they did desist, in prosecuting their reivindicatory action, thereby leaving the property in the hands of the then and now defendants as owners thereof, necessarily. This was delivery brevi manu permissible under Articles 1499 and 1501 of the New Civil Code. The circumstance that full payment was made only, as plaintiffs allege, in May, 1955, does not alter the fact that ownership of the land passed to defendants upon the execution of the agreement with the intention of letting them hold it as owners. In the absence of an express stipulation to the contrary, the payment of the price is not a condition precedent to the transfer of ownership, which passes by delivery of the thing to the buyer. Disposition Petition dismissed

14 SCRA 759 BENGZON; July 30, 1965

NATURE Action for legal redemption FACTS - Section 119 of the Public Land Law provides that: "Every conveyance of land acquired under the free patent or homestead provisions, when proper, shall be subject to repurchase by the applicant, his widow, or legal heirs, for a period of five year's from the date of conveyance." - Laureano Abuan acquired a homestead and was passed after his death to his legal heirs, the plaintiff herein. Consequently, the original certificate of title in his name was cancelled, and another was issued in plaintiffs names. - On August 7, 1953, plaintiffs sold the parcel of land to defendants, evidenced by Deed of Absolute Sale. Transfer Certificate of Title No. T-5906 was issued to defendants. - Later, plaintiffs filed an action to recover the land, alleging that the deed of absolute sale had been executed through fraud, without consideration. However, the case was subsequently settled amicably, when the parties entered into an "Agreement" dated February 28, 1955, under the terms of which defendants paid P500.00 on that day as partial payment of the purchase price of the land, and promised to pay the balance of P1500.00 on or before April 30, 1955, with a grace period of thirty days. The parties also stipulated in said Agreement that it "shall supersede all previous agreements or contracts heretofore entered into and executed by and between plaintiffs and defendants, involving the same parcel of riceland . . ." - Claiming that full payment had been effected only sometime in May, 1955, plaintiffs instituted the present action on March 4, 1960. - Defendants moved to dismiss, on the ground that plaintiffs' right of action was already barred, because the five-year redemption period had already expired. - It is plaintiffs' contention that the prescriptive period should be counted from the full payment of the purchase price, that is, from May, 1955, since it was on this date that the contract was consummated. - Nueva Vizcaya court dismissed the complaint. Plaintiffs appealed to CA, which certified the case to this Court because only a legal issue remains to be determined.

ABUAN V GARCIA

BAUTISTA V SIOSON
39 PHIL 615 TORRES; Feb 11, 1919

NATURE Appeal from a judgment of the CFI Rizal FACTS - On Sept 4, 1912, the defendant Francisco Sioson and his wife Lorenza through a notarial instrument, sold to the plaintiff Rosalio Bautista a camarin or warehouse under the right of repurchase. It was stipulated that if w/in 2 yrs from the date of the contract the vendors or their successors in interest should not repurchase said

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properties, such sale should become absolute and the ownership in the properties sold should be consolidated. - On the same date, Bautista, through a notarial instrument, leased the properties sold to him to the vendors (Sioson), for the price of P100 per annum, for the period of 2 yrs. - On August 5, 1914, Sioson executed before a notary a document by w/c he sold under right of repurchase to the defendant Raymundo de la Cruz, the same camarin. And that if within the period of 6 months Sioson should not make the redemption stipulated, said sale should become absolute. - The two said alienations were both set forth in notarial instruments, and not recorded in the registry of property - Bautista claims that Sioson has not repurchased the camarin from him nor paid the price of the lease. - At the time of the complaint, de la Cruz was in possession of the camarin - CFI held (1) that Rosalio Bautista, the plaintiff, was by merger the owner of the properties; (2) ordered Raymundo de la Cruz to deliver to the plaintiff Bautista the camarin or warehouse; (3) ordered Francisco Sioson to pay to said plaintiff Bautista the sum of P200, the amount of the rent due; and ordered each of the defendants Francisco Sioson and Raymundo de la Cruz to pay one-half of the costs. ISSUE Who is the lawful owner Bautista or de la Cruz HELD Rosalio Bautista - It has been shown that Raymundo de la Cruz could not have acquired any right in the camarin involved in this suit; for Francisco Sioson, who sold to Cruz, occupied it as a mere tenant and not as owner, and, consequently, was unable to transmit to the purchaser any property right whatever nor lawful possession under title of owner. - Where the vendor on the same date on which the deed of sale is executed by means of a constitutum possessorium agreement converts himself into a tenant or lessee of the property that he sold, and continues in possession thereof as such tenant, the purchaser who acquired the property through delivery or symbolic tradition with all the consequent effects of a deed of conveyance is deemed to be in possession thereof by the express will of the contracting parties, and, therefore, it must be recognized that through such constitutum possessorium agreement, the purchaser who by that covenant became the lessor is in lawful possession of the leased property, and that the vendor by the same covenant, converted himself into the lessee and is in material possession of the leased property in the name and representation of the purchaser, its lawful owner. - It logically follows that the second purchaser who acquired the property from the lessee or tenant and who through the acts of the latter entered into the material possession of the property by virtue of the second sale could not have acquired any right of ownership therein, inasmuch as he received the property not from its lawful owner, but from a mere tenant or lessee who had no right whatever to dispose of it; therefore, the second purchaser's possession is merely precarious and was taken after the first purchaser had exercised his right of possession, and the possession of the second purchaser cannot prevail over that previously obtained by the first purchaser. Disposition Judgment affirmed

diligence tends to defeat the just and equitable provisions of the law.

BEHN, MEYER & CO V YANGCO

38 PHIL 602 MALCOLM; September 18, 1918

NATURE Appeal from a judgment of the Court of First Instance of Manila FACTS - A memorandum of agreement was executed between Behn, Meyer & Co. and Yangco. The contract of sale consisted of three components: 1. Subject matter and consideration The contract provided for 80 drums Caustic Soda 76% Carabao brand al precio de Dollar Gold Nine and 75/100 per 100-lbs. 2. The contract provided for c.i.f. Manila, pagadero against delivery of documents. 3. Time of delivery The contract provided for Embarque: March 1916. The merchandise was in fact shipped from New York on the Steamship Chinese Prince on April 12, 1916. - Payment would be effected upon delivery of the documents. - The steamship was detained by British authorities at Penang and part of the cargo, including 71 drums of caustic soda, was removed. Defendant refused to accept delivery of the remaining nine drums of soda on the ground that the goods were in bad order. - Defendant also refused the optional offer of the plaintiff of waiting for the remainder of the shipment until its arrival or of accepting the substitution of 71 drums of caustic soda of similar grade from plaintiffs stock. - The plaintiff sold, for the account of the defendant, 80 drums of caustic soda from which there was realized the sum of P6,352.89. Deducting this sum from the selling price of P10,063.86 leaves the amount claimed as damages for the breach of contract. ISSUE WON the warranty (the material promise) of the seller to the buyer has been complied with HELD YES Ratio The buyer may rescind the contract of sale because of a breach in the substantial particulars going to the essence of the contract. The vendee can demand the fulfillment f the contract and this being shown to be impossible, is relieved of his obligation. Reasoning - The following were the noted breaches: 1. Subject matter and consideration: > The specific merchandise was not tendered. The soda offered by plaintiff to defendant was not the Carabao brand. > The offer of drums of soda of another kind was not made within the time that a March shipment would normally have been available. 2. Place of delivery: > Determination of the place of delivery always resolves itself into a question of fact. If the contract is silent as to the person or mode by which the goods are to be sent, delivery by the vendor to a common carrier, in the usual and ordinary course of business, transfers the property to the vendee. > The letters c.i.f. in British contracts stand for costs, insurance and freight. They signify that the price fixed covers not only the cost of the goods but the expense of freight and insurance to be paid by the seller. > The letters F.O.B. stand for the words Free on Board. It means that the seller shall bear all expenses until the goods are delivered where they are to be F.O.B. > Both terms make rules of presumption. The word Manila in conjunction with the letters c.i.f must mean that the contract price, covering costs, insurance, and freight signifies delivery was to be made in Manila.

SEPARATE OPINION CARSON [dissent]

- Manresa, in his commentaries, on Article 1473 of the Civil Code, clearly indicates that the possession referred to in that article is the real, the physical possession of the property; and certain it is that to hold that the possession contemplated in this article may be secured without the performance of some act which will give notice to innocent subsequent purchasers, or of which subsequent purchasers may inform themselves by due

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> The bill of lading was for goods received from Neuss Hesslein and Co. as evidenced by the documents, not from New York. Disposition Judgment affirmed.

GENERAL FOODS CORP V NATL COCONUT CORP

100 PHIL 637 REYES; November 20, 1956
FACTS - General Foods Corporation is a foreign corporation organized under the laws of the State of Delaware, U. S. A., and licensed to do business in the Philippines - Appellee sold to appellant 1,500 (later reduced to 1,000) long tons of copra, at $164 (later reduced to $163) per ton of 2,000 pounds - Appellee shipped 1054.6278 short tons of copra to appellant on board the S. S. "Mindoro". - The weighing of the cargo was done by the Luzon Brokerage Co., in its capacity as agent of the General Superintendence Co., Ltd., of Geneva, Switzerland. - On the strength of the net weigh thus found, appellee prepared and remitted to appellant the corresponding bills of lading and other documents, and withdrew from the latter's letter of credit 95 per cent of the invoice value of the shipment, or a total of $136,686.95. - Upon arrival in New York, the net cargo was reweighed by appellant and was found to weigh only 898.792 short tons. - Deducting from the value of the shortage the sum of $8,092.02 received by appellant from the insurer for 58.25 long tons lost or destroyed even before the copra was loaded on board the vessel, appellant demanded from appellee the refund of the amount of $24,154.59. - Sometime after the receipt of appellant's demand, the appellee, through its officers-in-charge Jose Nieva, Sr., acknowledged in a letter liability for the deficiency in the outturn weights of the copra and promised payment thereof as soon as funds were available . Then appellee was already abolished and went into liquidation. - Appellant submitted its claim to the Board of Liquidators, which refused to pay the same; wherefore, it filed an action in the CFI of Manila. - The Court a quo found for the defendant and dismissed the complaint; hence, this appeal by plaintiff. Appellant's Claim Although the sale between the parties quoted a CIF New York price, the agreement contemplated the payment of the price according to the weight and quality of the cargo upon arrival in New York, the port of destination, and that therefore, the risk of the shipment was upon the seller. Appellees Comment The contract in question was an ordinary C. 1. F. agreement wherein delivery to the carrier is delivery to the buyer, and that the shipment having been delivered to the buyer and the latter having paid its price, the sale was consummated. ISSUE WON the appellee is liable to pay the appellant the amount of $24,154.59, which it had overdrawn from appellant's letter of credit HELD YES - There is no question that under an ordinary C.I.F. agreement, delivery to the buyer is complete upon delivery of the goods to the carrier and tender of the shipping and other documents required by the contract and the insurance policy taken in the buyer's behalf. There is equally no question that the parties may, by express stipulation or impliedly (by making the buyer's obligation depend on arrival and inspection of the goods), modify a CIF contract and throw the risk upon the seller until arrival in the port of destination.

- In the transaction now in question, despite the quoted price of CIF New York, and the right of the seller to withdraw 95 per cent of the invoice price from the buyer's letter of credit upon tender of the shipping and other documents required by the contract, the express agreement that the "Net Landed Weights" were to govern, and the provision that the balance of the price was to be ascertained on the basis of outturn weights and quality of the cargo at the port of discharge, indicate an intention that the precise amount to be paid by the buyer depended upon the ascertainment of the exact net weight of the cargo at the port of destination. That is furthermore shown by the provision that the seller could deliver 5 per cent more or less than the contracted quantity, such surplus or deficiency to be paid "on the basis of the delivered weight". - While the risk of loss was apparently placed on the appellant after delivery of the cargo to the carrier, it was nevertheless agreed that the payment of the price was to be according to the "net landed weight'. The net landed or outturn weight of the cargo, upon arrival in New York, was 898.692 short tons. Although the evidence shows that the estimated weight of the shipment when it left Manila was 1,054.6278 tons, the appellee had the burden of proof to show that the shortage in weight upon arrival in New York was due to risks of the voyage and not the natural drying up of the copra while in transit, or to reasonable allowances for errors in the weighing of the gross cargo and the empty bags in Manila. In the absence of such proof on the part of the shipper-appellee, the net landed weight of the shipment in New York should control, as stipulated in the agreement, and that therefore, the appellee should be held liable for the amount of $24,154.59 which it had overdrawn from appellant's letter of credit. - The provision regarding the ascertainment of the balance due based upon outturn weight and quality of the shipment at the port of discharge, should not be construed separately from the stipulation that the "net landed weight" was to control. - The manifest intention of the parties was for the total price to be finally ascertained only upon determining the net weight and quality of the goods upon arrival in New York, most likely because the cargo in question, being copra, by nature dries up and diminishes in weight during the voyage; that no bulk weigher was available in Manila so that the best that could be done was to get the gross weight of the shipment and deduct the average tare of the empty bags; and that the buyer in New York had no agent in Manila to represent it and protect its interest during the weighing of the cargo. - The intention of the parties to be bound by the outturn or net landed weight in New York is clearly shown in the letter of appellee's then officer-in-charge Jose Nieva, Sr., acknowledging liability for the deficiency in the outturn weight of the copra. Although this letter may not be considered an admission of liability on the part of appellee in the absence of a showing that Nieva was authorized to admit liability for the corporation, it is nevertheless competent evidence of the intention of the parties, particularly the NACOCO, to be bound by the net landed weight or outturn weight of the copra at the port of discharge. Dispostion The judgment appealed from WAS reversed and the appellee National Coconut Corporation WAS ordered to pay the appellant General Foods Corporation the equivalent in Philippine currency of the amount of $24,154.59, with legal interest from the time of the filing of the complaint. No pronouncement as to costs.

EXPRESS CREDIT V VELASCO

473 SCRA 590

37 PHIL 355 STREET; December 21, 1917

FACTS - For some time prior to the events which gave origin to the lawsuit, the house of Lichauco, or Lichauco Brothers, had offered for sale certain old machinery and boilers which were deposited and exposed for sale in a yard at Tanduay, in the city of Manila.

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- Marciano Rivera, alleges that upon January 8, 1912, he purchased some of this old material [two complete steamboilers, with chimneys; one steam motor (15 by 30 inches) complete; one pair of twin rice hullers complete, and a feeding pump (donkey) for boilers] for the price of P5,500, and received a receipt from Crisanto Lichauco showing that he had become such purchaser. The plaintiff, however, did not take possession of the property, which remained in the same place. - Upon February 9, 1912, Ong Che bought from Lichauco Brothers a lot of old iron, machinery, and junk for the sum of P1,100. This purchaser took immediate possession of the materials purchased by him. - Later, when Marciano Rivera appeared to take possession of the things of which he supposed himself to be the purchaser, under the receipt given by Crisanto Lichauco, he found that many of the accessory and auxiliary parts of the boilers, motor, and rice mill were wanting; and upon investigation it developed that these articles were held by the defendant, Ong Che, and were claimed by him as owner by virtue of the purchase effected by him upon February 9. The plaintiff Rivera thereupon instituted the present action to recover the articles in question alleging that he was the true owner thereof. - CFI Manila rendered judgment in favor of the defendant and the plaintiff has appealed. ISSUE WON Ong Che was a purchaser in good faith (thus giving him a better title the first purchaser who never had possession of the property subject of the sale) HELD -The defendant Ong Che was a purchaser of the articles in good faith. Under article 1473 of the Civil Code, where two different agents of the same owner successively negotiated sales to two different purchasers, the buyer who acquired possession by virtue of his purchase has a better title than the first purchaser, who has never had possession at all. In this view the case presented is that and it is obvious that, under the article of the Civil Code cited above, the second purchaser having acquired possession first must be declared the true owner. In our view of the facts - Problem: there is some conflict in the testimony upon the question as to who was the original owner of the items subject of the sale. From the testimony, it can be inferred that the house of Lichauco consists of Faustino Lichauco and Galo Lichauco, and it would seem that Crisanto Lichauco, who effected the sale to Rivera, is not a member of that establishment. Crisanto testified that the property sold by him to the plaintiff Rivera, including the articles which are now in dispute, was the property of Galo Lichauco. But the same witness admits that the machinery sold by him to Rivera had been taken out of an old mill owned by Lichauco Brothers in Dagupan; and it is not made clear that Galo Lichauco had ever become its exclusive owner. - Furthermore, the evidence submitted by the defendant tends to show that the things acquired by him, including the articles in dispute, were bought from Faustino Lichauco as property of the house. At any rate we find that, under the circumstances disclosed in this case, and even conceding that the property belong to Galo Lichauco, the house of Lichauco had authority to sell it. It was merely a case where a mistake was made by the house of Lichauco in selling something that had already been sold. - It was incumbent upon the plaintiff to prove title in himself, as against the defendant, by a preponderance of the evidence; and he could not recover merely upon the weakness of the defendant's title (Belen vs. Belen). The plaintiff had failed to prove title in himself. The defendant had, in his favor, the fact that he was a purchaser in good faith and had acquired lawful possession. There is a presumption arising from such possession that he was the owner (sec. 334 [10], Code of Civil Procedure); and the mere fact, if such it be, that the property originally belonged to Galo Lichauco was not sufficient, without more, to defeat a title acquired by the defendant through the house of

Lichauco. - Also, at the hearing the plaintiff himself did not appear as a witness. And no steps were taken, prior to the trial to secure the attendance of either Galo Lichauco or Faustino Lichauco, both of whom would have been most material witnesses for the plaintiff if his contention is correct. - The plaintiff was appraised from the nature of the issue raised that the question to be tried was that of ownership and he should have been ready with the witnesses to prove it. He was not entitled to a continuance on the ground of the absence of those important witnesses unless he showed that he had used reasonable diligence to secure their attendance. An application for a continuance of a cause is addressed to the sound legal discretion of the trial court, and its ruling thereon will not be disturbed, unless it clearly appears that such discretion has been abused, and that by the refusal of the continuance a party has been without his fault deprived of an opportunity of making his case or defense. Disposition Judgment of the lower court affirmed, costs against the appellant.

69 SCRA 99 MAKASIAR; January 26, 1976

FACTS - Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes Islands, was the owner of the parcel of land herein involved with improvements situated at San Juan Rizal, and subject to a mortgage in favor of the Republic Savings Bank for the sum of P1,500.00. Petitioner Rosario Carbonell, a cousin and adjacent neighbor of respondent Poncio. - On January 27, 1955, Jose Poncio executed a private memorandum of sale of the property in question in favor of Rosario Carbonell, a cousin and adjacent neighbor of respondent Poncio. Four days latter, or an January 31, 1955, Poncio in a private memorandum bound himself to sell the property for an improved price to one Emma Infante, and on February 2, 1955, he executed a formal registerable deed of sale in her (Infante's) favor. So, when the first buyer Carbonell saw the seller Poncio a few days afterwards, bringing the formal deed of sale for the latter's signature and the balance of the agreed cash payment, she was told that he could no longer proceed with formalizing the contract with her (Carbonell) because he had already formalized a sales contract in favor of Infante. - Since Carbonell (the first buyer) did not have a formal registerable deed of sale, she did the next best thing to protect her legal rights and registered on February 8, 1955 with the Register of Deeds her adverse claim as first buyer entitled to the property. The second buyer registered the sale in her favor with the Register of Deeds only on February 12, 1955, so that the transfer certificate of title issued in her favor carried the duly annotated adverse claim of Carbonell as the first buyer. - The trial court declared the claim of the second buyer Infante to be superior to that of the first buyer Carbonell. The Court of Appeals (Fifth Division) reversed the decision of the trial court, declaring the first buyer Carbonell to have a superior right to the land in question, and condemning the second buyer Infante to reconvey to the former, after reimbursement of expenses, the land in question and all its improvements. On motion for reconsideration, a special division of five of the said appeals court annulled and set aside the decision of the regular division and entered another judgment affirming in toto the decision of the court a quo. ISSUE WON the Carbonell is entitled to the property HELD YES - The Supreme Court reversed the decision of the Special Division of Five of the Court of Appeals and declared the first buyer Rosario Carbonell to have the superior right to the land in

CARBONELL V CA

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question. Article 1544, New Civil Code, which is decisive of this case, recites: "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" - It is essential that the buyer of realty must act in good faith in registering his deed of sale to merit the protection of the second paragraph of said Article 1544. - Unlike the first and third paragraphs of said Article 1544, which accord preference to the one who first takes possession in good faith of personal or real property, the second paragraph directs that ownership of immovable property should be recognized in favor of one "who in good faith first recorded" his right. Under the first and third paragraphs, good faith must characterize the prior possession. Under the second paragraph, good faith must characterize the act of anterior registration. - If there is no inscription, what is decisive is prior possession in good faith. If there is inscription, as in the case at bar, prior registration in good faith is a pre-condition to superior title. When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer thereof and the title of Poncio was still in his name solely encumbered by bank mortgage duly annotated thereon. Carbonell was not aware and she could not have been aware of any sale to Infante as there was no such sale to Infante then. Hence, Carbonell's prior purchase of the land was made in good faith. Her good faith subsisted and continued to exist when she recorded her adverse claim four (4) days prior to the registration of Infante's deed of sale. Carbonell's good faith did not cease after Poncio told her on January 31, 1955 of his second sale of the same lot to Infante, Because of that information, Carbonell wanted an audience with Infante, which desire underscores Carbonell's good faith. With an aristocratic disdain unworthy of the good breeding of a good Christian and good neighbor, Infante snubbed Carbonell like a leper and refused to see her. So Carbonell did the next best thing to protect her right she registered her adverse claim on February 8, 1955. - Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is shown by the following facts: (1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was informed by Poncio that he sold the lot to Infante but several days before Infante registered her deed of sale. (2) Carbonell was already in possession of the mortgage passbook [not Poncio's savings deposit passbook Exhibit "1" Infantes] and Poncio's copy of the mortgage contract, when Poncio sold the lot to Infante. (3) The fact that Poncio was no longer in possession of his mortgage passbook and that the said mortgage passbook was already in possession of Carbonell, should have compelled Infante to inquire from Poncio why he was no longer in possession of the mortgage passbook and from Carbonell why she was in possession of the same. (4) Carbonell registered on February 8, 1955 her adverse claim, which was accordingly annotated on Poncio's title four [4] days before Infante registered on February 12, 1955 her deed of sale executed on February 2, 1955. (5) In his answer to the complaint filed by Poncio, as defendant in the Court of First Instance, he alleged that both Mrs. Infante and Mrs. Carbonell offered to buy the lot at P15.00 per square meter, which offers he rejected as he believed that his lot is worth at least P20.00 per square meter. It is therefore logical to presume that Infante was told by Poncio and consequently knew of the offer of Carbonell which fact likewise should have put her on her guard and should have compelled her to inquire from Poncio whether or not he had already sold the property to Carbonell. Disposition The decision of CA is REVERSED.

- His concurrence proceeds from the same premise as the dissenting opinion of Justice Muoz Palma that both the conflicting buyers of the real property in question, namely, petitioner Rosario Carbonell as the first buyer and respondent Emma Infante as the second buyer may be deemed purchasers in good faith at the respective dates of their purchase.The answer to the question of who between the two buyers in good faith should prevail is provided in the second paragraph of Article 1544 of the Civil Code 1 (formerly Article 1473 of the old Civil Code) which ordains that "the ownership of the immovable property shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property." In the case at bar, the seller executed on January 27, 1955 the private memorandum of sale of the property in favor of the first buyer Carbonell. However, six days later on February 2, 1955, the seller sold the property for a second time for an improved price, this time executing a formal registrable deed of sale in favor of the second buyer Infante. So it was that when the first buyer Carbonell saw the seller a few days afterwards bringing the formal deed of sale for the seller's signature and the balance of the agreed cash payment, the seller told her that he could not proceed anymore with formalizing the first sale because he had already formalized the second sale in favor of the second buyer Infante. Since Carbonell (the first buyer) did not have a formal registrable deed of sale, she did the next best thing to protect her legal rights and registered on February 8, 1955 with the Rizal Register of Deeds her adverse claim as first buyer entitled to the property.

MUOZ PALMA [dissent]

- We are here confronted with a double sale made by Jose Poncio of his 195-square meter lot located at V. Agan St., San Juan, Rizal, covered by Transfer Certificate of Title No. 5040, the solution to which is found in Art. 1544 of the Civil Code, more particularly the second paragraph thereof which provides that should the thing sold be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. - The two purchasers, namely, petitioner Rosario Carbonell and respondent Emma Infante, are both purchasers in good faith. - That Rosario Carbonell is a buyer in good faith cannot be disputed for at the time negotiations for the purchase of the lot were being made between her and the vendor, Jose Poncio, as of January 27, 1955, there was no indication at all from the latter that another sale was being contemplated. - That Emma Infante is likewise a buyer in good faith is supported by: (a) an express finding of the trial court in its decision of January 20, 1965, to the effect that when the vendor and purchaser Infante consummated the sale on or about January 29, 1955, an examination of the original T.C.T. 5040 on file with the Register of Deeds of Rizal as well as the owner's duplicate revealed no annotation of any encumbrance or lien other than the mortgage in favor of the Republic Savings Bank (p. 92, Record on Appeal); (b) the findings of fact of the Court of Appeals given in the decision penned by then Justice Salvador V. Esguerra as well as in the first decision written by Justice Magno Gatmaitan which subsequently became the basis of the dissenting opinion to the majority - Inasmuch as the two purchasers are undoubtedly in good faith, the next question to be resolved is who of the two first registered her purchase or title in good faith. - In applying Art. 1544 of the Civil Code, it is not enough that the buyer bought the property in good faith, but that the registration of her title must also be accomplished in good faith. This requirement of good faith is not only applicable to the second or subsequent purchaser but to the first as well. Good faith means "freedom from knowledge and circumstances which ought to put a person on inquiry"; 3* it consists of an honest intention to abstain from taking any unconscientious advantage of another. On top of all these, equity is on the side of Emma Infante. Under the Majority Opinion, Emma Infante stands to lose the lot she bought

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in good faith which was fully paid for plus the building she erected thereon for which she spent the total sum of a little less than P14,000.00, or equivalent to about P40,000.00 at the time the case was decided by the Appellate Court, considering that Rosario Carbonell is being given the option either to order the removal of the house or to acquire it at P13,429.00.

CONSOLIDATED RURAL BANK (CAGAYAN VALLEY) INC V CA (HEIRS OF TEODORO DELA CRUZ)
448 SCRA 347 TINGA; January 17, 2005

NATURE Petition for Certiorari. FACTS - The Madrid brothers, were the registered owners of Lot No. 7036-A of plan Psd-10188, Cadastral Survey 211, situated in San Mateo, Isabela. Lot No. 7036-A was subdivided into several lots under subdivision plan Psd- 50390. One of the resulting subdivision lots was Lot No. 7036-A-7 with an area of 5,958 square meters. - August 15, 1957: Rizal Madrid sold part of his share identified as Lot No. 7036-A-7, to Gamiao and Dayag, by virtue of a Deed of Sale, to which his brothers Anselmo, Gregorio, Filomeno and Domingo offered no objection as evidenced by their Joint Affidavit dated 14 August 1957. - May 28, 1964: Gamiao and Dayag sold the southern half of Lot No. 7036-A-7, denominated as Lot No. 7036-A-7-B, to Teodoro dela Cruz, and the northern half, identified as Lot No. 7036-A-7-A, to Restituto Hernandez. Thereupon, Dela Cruz and Hernandez took possession of and cultivated the portions of the property respectively sold to them. - Hernandez donated the northern half to his daughter, Evangeline Hernandez-del Rosario, while the children of Dela Cruz continued possession of the southern half. - In a Deed of Sale the Madrid brothers conveyed all their rights and interests over Lot No. 7036-A-7 to Pacifico Marquez (hereafter, Marquez). The deed of sale was registered with the Office of the Register of Deeds of Isabela on 2 March 1982. - Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight (8) lots, (Lot Nos. 7036-A-7-A to 7036-A-7-H). On the same date, Marquez and his spouse, Mercedita Mariana, mortgaged Lots Nos. 7036-A-7-A to 7036-A-7-D to the Consolidated Rural Bank, Inc. of Cagayan Valley to secure a loan of P100K. February 6, 1985, Marquez mortgaged Lot No. 7036-A-7-E likewise to the Rural Bank of Cauayan (RBC) to secure a loan of P10K. - Marquez defaulted and the CRB caused the foreclosure of the mortgages to its favor, and bought it as the highest bidder. - On October 31, 1985, Marquez sold Lot No. 7036-A-7-G to Calixto - Edronel dela Cruz, filed a case for reconveyance and damages the southern portion of Lot No. 7036-A against Marquez, Calixto, RBC and CRB in December 1986. - CRB, as defendant, and co-defendant RBC insisted that they were mortgagees in good faith and that they had the right to rely on the titles of Marquez which were free from any lien or encumbrance. ISSUE WON V. Marquez and Romeo B. Calixto buyers in good faith and for value of Lot 7036-A-7 (therefore determining who owns the title to the Land) HELD Ratio Good faith is always presumed and he who imputes bad faith has the burden of proving the same. - In a situation where not all the requisites are present which would warrant the application of Art. 1544, the principle of he who is first in time is preferred in right, should apply. The only essential requisite of this rule is priority the only one who can invoke this is the first vendee.

- No one can give what one does not have. - One who purchases real property which is in actual possession of others should, at least, make some inquiry concerning the rights of those in possession. Reasoning - ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. x x x - The provision is not applicable in the present case. It contemplates a case of double or multiple sales by a single vendor. More specifically, it covers a situation where a single vendor sold one and the same immovable property to two or more buyers. It is necessary that the conveyance must have been made by a party who has an existing right in the thing and the power to dispose of it. The conveyor must have the right and the will to convey the thing. The intention to transfer is not sufficient; it only constitutes the will. - The subject property was not transferred to several purchasers by a single vendor. In the first deed of sale, the vendors were Gamiao and Dayag whose right to the subject property originated from their acquisition thereof from Rizal Madrid with the conformity of all the other Madrid brothers in 1957, followed by their declaration of the property in its entirety for taxation purposes in their names. On the other hand, the vendors in the other or later deed were the Madrid brothers but at that time they were no longer the owners since they had long before disposed of the property in favor of Gamiao and Dayag. - Court of Appeals held that Marquez failed to prove that he was a purchaser in good faith and for value. Marquez admitted having knowledge that the subject property was being taken by the Heirs at the time of the sale. The Heirs were also in possession of the land at the time. According to the Decision, these circumstances along with the subject propertys attractive locationit was situated along the National Highway and was across a gasoline stationshould have put Marquez on inquiry as to its status. Instead, Marquez closed his eyes to these matters and failed to exercise the ordinary care expected of a buyer of real estate. - The Court of Appeals found that RBC and CRB merely relied on the certificates of title of the mortgaged properties. They did not ascertain the status and condition thereof according to standard banking practice. For failure to observe the ordinary banking procedure, the Court of Appeals considered them to have acted in bad faith and on that basis declared null and void the mortgages made by Marquez in their favor. - Person is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it. Thus, there was no need for the appellate court to consider the issue of good faith or bad faith with regard to Teodoro dela Cruzs possession of the subject property. Disposition Petition is denied.

22 SCRA 1147 REYES J.B.L.; March 27, 1968

NATURE Appeal by certiorari from the decision of the CA affirming the lower court's decision FACTS - The entire lot involved in this suit was originally covered by Homestead Patent in the name of Anselmo Lacatan. After the death of Anselmo Lacatan, TCT No. T-728 was issued in the name his two sons and heirs, Vidal and Florentino. Vidal Lacatan died on August 27, 1950. On March 23, 1953, Vidal Lacatan's heirs, namely, Maximo, Tomas and Lucia, executed a deed of sale in favor of the spouses Romeo Paylago and Rosario Dimaandal, plaintiffs-petitioners herein, over a portion of the entire lot. On October 6, 1953, Florentino Lacatan also died, leaving as his heirs

PAYLAGO V JARABE

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his widow and three children, Felipe, Rosita and Florencia. On December 31, 1953, the said children of Florentino Lacatan likewise executed a deed of sale in favor of the same vendees over another portion of the lot. - On March 2, 1954, by virtue of the registration of the two deeds of sale, a new TCT was issued in favor of plaintiffspetitioners, the Paylago spouses. A subsequent subdivision survey disclosed that a portion of the total area purchased by plaintiffs-petitioners was being occupied by defendantrespondent. Hence, the action to recover possession and ownership of the said portion. - The trial court and the CA found that a portion of land in question was purchased by Hilario Jarabe, late husband of defendant-respondent, from one Apolonio Lacatan who, in turn, bought the same in 1936 from Anselmo Lacatan, the original registered owner; that the first deed of sale executed by Anselmo Lacatan in favor of Apolonio Lacatan was lost during the Japanese occupation; that the herein defendant-respondent has been in possession of the said portion continuously, publicly, peacefully and adversely as owner thereof from 1938 up to the present; and, that the herein plaintiffs-petitioners admitted in a deed of lease that defendant-respondent has been in possession of the premises since 1945. After trial, the lower court held that plaintiffs-petitioners were not purchasers in good faith and rendered judgment in favor of defendant-respondent, declaring the latter as owner of the land in question with the right to retain possession of the same. The decision was affirmed in toto by the Court of Appeals. ISSUE WON petitioner has a better right over the property subject of the double sale HELD NO Ratio As between two purchasers, the one who has registered the sale in his favor, in good faith, has a preferred right over the other who has not registered his title, even if the latter is in the actual possession of the immovable property. The New Civil Code, Article 1544, provides that if the same immovable property should have been sold to different vendees, "the ownership shall belong to the person acquiring it who in good faith first recorded it in the registry of 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; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects of the title of his vendor. It is now settled jurisprudence that knowledge of a prior transfer of a registered property by a subsequent purchaser makes him a purchaser in bad faith and his knowledge of such transfer vitiates his title acquired by virtue of the later instrument of conveyance. Disposition The appealed decision is AFFIRMED.

him. Amado Canuto is the older brother of the wife of the herein appellee, Amado Carumba. - On January 21, 1957, a complaint for a sum or money was filed by Santiago Balbuena against Amado Canuto and Nemesia Ibasco. On April 15, 1967, a decision was rendered in favor of Balbuena. On October 1, 1968, the ex-officio Sheriff issued a "Definite Deed of Sale of the property now in question in favor of Santiago Balbuena, which instrument of sale was registered before the Office of the Register of Deeds of Camarines Sur, on October 3, 1958. - The CFI, finding that after execution of the document Carumba had taken possession of the land, declared him to be the owner of the property under a consummated sale and held void the execution levy made by the sheriff - The CA declared that there having been a double sale of the land subject of the suit Balbuena's title was superior to that of his adversary under Article 1544 of the Civil Code of the Philippines, since the execution sale had been properly registered in good faith and the sale to Carumba was not recorded. ISSUE WON the CA erred in declaring that Balbuena is the owner of the land HELD YES - While under the invoked Article 1544 registration in good faith prevails over possession in the event of a double sale by the vendor of the same piece of land to different vendees, said article is of no application to the case at bar, even if Balbuena, the later vendee, was ignorant of the prior sale made by his judgment debtor in favor of petitioner Carumba. The reason is that the purchaser of unregistered land at a sheriff's execution sale only steps into the shoes of the judgment debtor, and merely acquires the latter's interest in the property sold as of the time the property was levied upon. When the levy was made by the Sheriff, therefore, the judgment debtor no longer had dominical interest nor any real right over the land that could pass to the purchaser at the execution sale.1 Hence, the latter must yield the land to petitioner Carumba. The rule is different in case of lands covered by Torrens titles, where the prior sale is neither recorded nor known to the execution purchaser prior to the levy, but the land here in question is admittedly not registered under Act No. 496. DIsposition Decision reversed

7 SCRA 452 Barrera; 28 February 1963

FACTS - Hanopol claims ownership of the land by virtue of a series of purchases effected in 1938 by means of private instruments, executed by the former owners Teodora, Lucia, Generosa, Sinforosa and Isabelo, all surnamed Siapo. Additionally, he invokes in his favor a decision rendered by the Court of First Instance of Leyte, against the same vendors, who, according to his own averments, took possession of the said property in December, 1945 through fraud, threat and intimidation, pretending falsely to be the owners thereof and ejecting the tenants of Hanopol thereon, and since then had continued to possess the land. Decision declaring him the exclusive owner of the land in question and ordering therein defendants to deliver possession thereof was rendered on September 21, 1958. - On the other hand, Pilapil asserts title to the property on the strength of a duly notarized deed of sale executed in his favor by the same owners on December 3, 1945, which deed of sale was registered in the Registry of Deeds of Leyte on August 20, 1948 under the provisions of Act No. 3344. - No testimonial evidence was given, only documentary evidence consisting, on the part of Hanopol, of the private instruments alluded to and a copy of the decision in the reivindicatory case, and on the part of Pilapil, the notarized deed of sale in his favor

HANOPOL V PILAPIL

CARUMBA V CA (BALBUENA)
31 SCRA 558 REYES; February 18, 1970

NATURE Petition for certiorari on the decision of the Court of Appeals FACTS - On April 12, 1955, spouses Amado Canuto and Nemesia Ibasco sold a parcel of land, partly residential and partly coconut land, to the spouses Amado Carumba and Benita Canuto. The deed of sale was never registered in the Office of the Register of Deeds of Camarines Sur, and the Notary, Mr. Vicente Malaya, was not then an authorized notary public in the place. Besides, it has been expressly admitted by appellee that he is the brother-inlaw of Amado Canuto, the alleged vendor of the property sold to

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bearing annotation of its registration under Act No. 3344. As thus submitted, the trial court rendered the decision adverted to at the beginning of this opinion, mainly upon the authority of the second paragraph of Article 1544 of the New Civil Code, which is a reproduction of Article 1473 of the old Civil Code, the law in force at the time the transaction in this case took place. ISSUES 1. WON the judgment in the former case No. 412 against the vendors Siapos is binding upon the defendant-appellee as their successor-in-interest 2. WON the registration of the second deed of sale in favor of appellee Pilapil affects his right as the first vendee HELD 1. NO - From the documentary evidence that appellee Pilapil derived his right to the land from the sale to him of the said property on December 3, 1945, long before the filing of the complaint against the vendors in 1948. He was not made a party in the case against the Siapos, and there was not even a claim that he had knowledge of said litigation. He cannot, therefore, be bound by such judgment in view of the provision of paragraph (b), Section 44 of Rule 39 of the Rules of Court which speaks of the effect of judgment as follows: ... the judgment so ordered is, in respect to the matter directly adjudged, conclusive between the parties and their successors in interest by title subsequent to commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity. - Since Pilapil was not a party to the action and is not a successor-in-interest by title subsequent to the commencement of the action, having acquired his title in 1945 and the action filed in 1948, the decision in said case cannot be binding on him. 2. NO - No clear evidence of Hanopol's possession of the land in controversy, his complaint against the vendors, Hanopol alleged that the Siapos took possession of the same land under claim of ownership in 1945 and continued and were in such possession at the time of the filing of the complaint against them in 1948. Consequently, since the Siapos were in actual occupancy of the property under claim of ownership, when they sold the said land to Pilapil on December 3, 1945, such possession was transmitted to the latter, at least constructively, with the execution of the notarial deed of sale, if not actually and physically as claimed by Pilapil in his answer filed in the present case. Thus, even on this score, Hanopol cannot have a better right than appellee Pilapil who, according to the trial court, "was not shown to be a purchaser in bad faith". - The registration of Pilapil's notarized deed of sale in 1948 under Act No. 3344 "shall be understood to be without prejudice to a third party with a better right". He contends that since at the time the Siapos sold the land in question in 1945 to Pilapil, the former were no longer the owners as they had already sold the same to appellant since 1938, the first sale to him is a better right which cannot be prejudiced by the registration of the second sale. The quoted proviso in Act No. 3344 justifies appellant's contention. If his theory is correct, then the second paragraph of Article 1544 of the New Civil Code (formerly Article 1473 of the old Code) would have no application at all except to lands or real estate registered under the Spanish Mortgage Law or the Land Registration Act. Such a theory would thus limit the scope of that codal provision. But even if we adopt this latter view, that is, that Article 1544 (formerly Article 1473) only applies to registered land, still we cannot agree with the appellant that by the mere fact of his having a previous title or deed of sale, he has acquired thereby what is referred to in Act No. 3344 as the "better right" that would be unaffected by the registration of a second deed of sale under the same law. Under such theory, there would never be a case of double sale of the same unregistered property. An example of what could be a better right that is protected against the inscription of a subsequent sale is given in the case

of Lichauco v. Berenguer (39 Phil. 643). The facts in that case are succinctly stated in the syllabus thereof as follows: .... In 1882 B sold to S a piece of land. After the sale B continued in the possession of the land in the capacity of lessee of S through payment of rent, and continued as such until his death when he was substituted by the administrator of his property. In 1889 B sold again the same piece of land to L who leased it to B himself under certain conditions. Both sales were executed in a public instrument, the one executed in favor of L being registered only in 1907. Thus, S and L acquired possession of the land through the same vendor upon the latter's ceasing to be the owner and becoming the lessee of said S and L, respectively. HELD: (1) That, with reference to the time prior to 1907, the preference should be in favor of the purchaser who first took possession of the land, because this possession, according to the law in force prior to the promulgation of the Civil Code, constituted the consummation of the contract, and also because afterwards the Civil Code expressly establishes that possession in such cases transfers the ownership of the thing sold. (2) That, when a person buys a piece of land and, instead of taking possession of it, leases it to the vendor, possession by the latter after the sale is possession by the vendee, and such possession, in case of a double sale, determines the preference in favor of the one who first took possession of it, in the absence of inscription, in accordance with the provision of article 1473 of the Civil Code, notwithstanding the material and personal possession by the second vendee. (Bautista vs. Sioson, 39 Phil. Rep., 615) .... Because L had to receive his possession from B who was a mere lessee of S and as such had no possession to give, inasmuch as his possession was not for himself but in representation of S, it follows that L never possessed the land.. .... The effect which the law gives to the inscription of a sale against the efficacy of the sale which was not registered is not extended to other titles which the other vendee was able to acquire independently as, in this case, the title by prescription. - It thus appears that the "better right" referred to in Act No. 3344 is much more than the mere prior deed of sale in favor of the first vendee. In the Lichauco case just mentioned, it was the prescriptive right that had supervened. Or, as also suggested in that case, other facts and circumstances exist which, in addition to his deed of sale, the first vendee can be said to have better right than the second purchaser. Disposition WHEREFORE, finding no error in the decision appealed from, the same is hereby affirmed, with costs against the appellant. So ordered.

DAGUPAN TRADING CO V MACAM

14 SCRA 179 DIZON; May 31, 1965

NATURE Appeal from a decision of the CA FACTS - Sammy Maron and his seven siblings owbed a parcel of unregistered land located in Binmaley, Pangasinan. While their application for registration of said land under Act No. 496 was pending, they executed, on June 19 and September 21, 1955, two deeds of sale conveying the property to appellee, Rustico Macam. He took possession and made substantial improvements therein. A month later, certificate of registration of the land was issued in the name of the Maron's, free from all liens and encumbrances. - On August 4, 1956, by virtue of a civil case of final judgment in favor of the Municipal Court of Manila against Sammy Maron, levy was made upon whatever interest he had in the property in question, and thereafter said interest was sold at public auction to the judgment creditor. The corresponding notice of levy, certificate of sale and the Sheriff's certificate of final sale in favor of the Manila Trading and Supply Co. because nobody exercised the right of redemptions were duly registered. On March 1, 1958, the latter sold all its rights and title to the property to appellant, Dagupan Trading.

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- Actions were filed as to who had the better right over the property. ISSUE WON the sale of the land in question, unregistered at that time, to appellee Macam, should prevail over a conflicting sale, executed after the land was registered, to Manila Trading which was acquired therefrom by appellant Dagupan Trading HELD YES Ratio Where for a considerable time prior to the levy on execution interest of the owner of the land levied upon had already been conveyed to another who took possession thereof and introduced improvements thereon, the said levy is void. The prior sale, although, unregistered, cannot be defeated by subsequent execution sale and registration of or issuance of Title over the land. Reasoning [1] In this case, what should determine the issue are the provisions of the last paragraph of Section 35, Rule 39 of the Rules of Court, to the effect that upon the execution and delivery of the final certificate of sale in favor of the purchaser of land sold in an execution sale, such purchaser "shall be substituted to and acquire all the right, title, interest and claim of the judgment debtor to the property as of the time of the levy." [2] At the time of the levy, Sammy Maron had no more interest and claim over the said land in question because for a considerable time prior to the levy, his interest had already been conveyed to appellee Macam, fully and retrievably, as the CA held. So, subsequent levy made on the property to satisfy the judgment against Sammy Maron in favor of the Manila Trading Company was void and of no effect [3] The unregistered sale and the consequent conveyance of title and ownership in favor of appellee could not have been cancelled and rendered of no effect upon the subsequent issuance of the Torrens title over the entire parcel of land; and [4] Upon the execution of the deed of sale in his favor by Sammy Maron, appellee took possession of the land conveyed as owner thereof, and introduced considerable improvements thereon. To deprive him now of the same by sheer force of technicality would be against both justice and equity. Disposition Decision appealed is affirmed.

40 PHIL 614 AVANCEA; December 20, 1919

FACTS - On July 1, 1910, Ciriaco Fernandez sold a piece of land to the spouses Marcelino Gomez and Narcisa Sanchez under pacto de retro for the period of one year. This was executed in a public instrument. Marcelino Gomez and Narcisa Sanchez never took material possession of the land. The period for repurchase elapsed without the vendor making use of it. On July 3, 1912, Ciriaco Fernandez again sold the same land, by means of a private document, to Roque Ramos who immediately took material possession thereof - Sanchez sought to recover land which was in possession of Ramos - By applying article 1473 of the Civil Code, the trial court declared preferable the sale executed to the defendant and absolved him from the complaint ISSUE WON land should be in the possession of Sanchez HELD YES - ART. 1473. If the same thing should have been sold to different vendees, the ownership shall be transferred to

SANCHEZ V RAMOS

(1) the person who may have first taken possession thereof in good faith, if it should be personal property. (2) Should it be real property, it shall belong to the purchaser who first recorded it in the registry of deeds. (3)Should it not be recorded, the property shall belong to the person who first took possession of it in good faith, or, in default of possession, to the person who presents the oldest title, provided there is good faith. - By the same article applied by the lower court, We are of the opinion that the sale executed to the plaintiff must be declared preferable - Possession is acquired by the material occupancy of the thing or right possessed (material), or by the fact that the latter is subjected to the action of our will (symbolic), or by the appropriate acts and legal formalities established for acquiring possession (art. 438, Civil Code.) - it appears that, because the law (Art.1437) does not mention to which of these kinds of possession the article refers, it must be understood that it refers to all of these kinds - The proposition (by the TC) that this article refers to the material possession and excludes the symbolic does not seem to be founded upon a solid ground. - In the gradation of the causes of preference between several sales, fixes, first, possession and then the date of the title. As a public instrument is a title, it is claimed that the inference is that the law (Art. 1473) has deliberately intended to place the symbolic possession, which the execution of the public document implies after the material possession -This argument, however, would only be forceful if the title, mentioned by this article, includes public instruments, and this would only be true if public instruments are not included in the idea of possession spoken of in said article: Should it not be recorded, the property shall belong to the person who first took possession of it in good faith, or, in default of possession, to the person who presents the oldest title, provided there is good faith: - Consequently, the argument is deficient for it is begging the same question, because if this possession includes the symbolic, which is acquired by the execution of a public instrument, it should be understood that the title, mentioned by the law as the next cause of preference, does not include public instruments. - MEANING: POSSESSION=TITLE based on the argument that material possession comes first than symbolic possession (which the Court does adhere to) - Our interpretation of this article 1473 is more in consonance with the principles of justice - The execution of a public instrument is equivalent to the delivery of the realty sold (art. 1462, Civil Code) and its possession by the vendee (art. 438). - Sale is considered consummated and completely transfers to the vendee all of the vendor's rights of ownership including his real right over the thing - As the thing is considered delivered, the vendor has no longer the obligation of even delivering it. If he continues taking material possession of it, it is simply on account of vendee's tolerance and, in this sense, his possession is vendor's possession - This means that after the sale of a realty by means of a public instrument, the vendor, who resells it to another, does not transmit anything to the second vendee and if the latter, by virtue of this second sale, takes material possession of the thing, he does it as mere detainer, and it would be unjust to protect this detention against the rights to the thing lawfully acquired by the first vendee

SEPARATE OPINION STREET [dissent]

- In my judgment the possession referred to in article 1473 of the Civil Code is the actual, material and physical possession of the thing sold; and in applying that provision no account should ever be taken of the symbolic possession which is supposed to be acquired by the purchaser, under article 1463 of the Civil Code, when the sale is proved by a public document.

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-The question as to who has the material possession of a parcel of real property can usually be ascertained by inspection or inquiry among person living in the neighborhood, and although the information thus obtained is less certain and absolute than that which would be revealed by the registration of title; nevertheless there is a presumption of ownership from the fact of possession, and a purchaser who, relying on the evidence supplied by his eyes, pays his money to one who is believed to be the true owner and takes the material possession from him, should be protected as against any prior purchaser except the one who may have registered his title. This was without doubt the intention of the codifiers. Otherwise the third paragraph of article 1473 would have been so drawn as to read as follows: -Should it not be recorded, the property shall belong to the person whose purchase is proved by a public instrument, and if neither sale be thus proved , to the person who first took possession of it in good faith, or, in default of possession, to the person who presents the oldest title, provided there is good faith.

QUIMSON V ROSETE
87 PHIL 159 TUASON; August 9, 1950

NATURE Appeal by certiorari from a decision of the Court of Appeals reversing the judgment of the Court of First Instance of Zambales. The case involves a dispute over a parcel of land sold to two different persons. FACTS - On June 7, 1932, Dionisio Quimson executed a deed of conveyance of the land to his daughter Tomasa. - On April 5, 1937, original vendors (spouses Manzano) sold same land to defendant Rosete with the condition of pacto de retro. - Rosete immediately took possession of the land. Before he can register the deed of sale, plaintiff instituted her action. - The trial court found for the plaintiff. CA reversed the decision. ISSUE WON the defendant had first possession of the land in question HELD Ratio The execution of the public instrument is equivalent to the delivery of the realty sold (art. 1462, Civil Code ) and its possession by the vendee (art. 438). Reasoning - Under these conditions the sale is considered consummated and completely transfers to the vendee all of the thing. The vendee by virtue of this sale has acquired everything and nothing, absolutely nothing, is left to the vendor. From this moment the vendor is a stranger to the thing sold like any other who has never been its owner. As the obligation of even delivering it, if he continues taking possession of it, is simply on account of the vendee's tolerance and, in this sense, his possession is vendor's possession. And if the latter should have to ask him for the delivery of this materials possession it would not be by virtue of the sale, because this has been already consummated and has produced all its effects, but by virtue of the vendee's ownership in the same, and not the vendor. This means that after the sale of the realty by means of public instruments, the vendor, who resells it to another, does not transmit anything in the second sale. If he takes possession of the thing, he does it as mere detainer, and it would be unjust to protect this detention against the rights to the thing lawfully acquired by the first vendee. - The findings that a deed of conveyance was made by Dionisio Quimson in favor of his daughter could have no other meaning, in the absence of any qualifying statement, than that the land was sold by the father to his daughter. Furthermore, this was the trial court's explicit finding which was not reversed by the Court of Appeals and stand as the fact of the case.

- The expression in the court's decision in the case of Cruzado vs. Escaler (34 Phil., 17), cited by the CA, to the effect that physical possession by the purchaser is essential to the consummation of a sale of real of estate, is at best obiter dictum; for the court distinctly found that the sale to plaintiff's Cruzado's father was a sham, execution with the sole purpose of enabling the senior Cruzado to mortgage the property and become procurador. And with reference to the failure of the second vendee, Escaler, to register his purchase, the court disregarded the omission as well as the entry of the first sale in the registry because that entry was made by the plaintiff, son and heir of the first supposed vendee, more than a score years after the alleged transaction, when the plaintiff was no longer or had any right therein (in the land). Because it already belonged to the defendant Escaler, its lawful owner." When Escaler, the second purchase was sued he had become the owner of the land by prescription. The defendant's possession in the present case fell far short of having ripened into title by prescription when the plaintiff commenced her action. Disposition For the reasons above stated, we are constrained to set aside the decision of the Court of Appeals. Because the Appellate Court found for the defendant, it made no findings on damages for the latter's used of the property in controversy. Not being authorized in this appeal to examine the evidence we have to accept the trials court's appraisal of the damages. Judge Llanes assessed the damages of P 180 for the occupation of the agricultural years 143-44,1944-45 and 1945-46, and P 60 a year thereafter until the possession of the property was restituted to the plaintiffs. Let judgment be entered in accordance with the tenor of this decision, with costs against the defendant.

Chapter 7: RISK OF LOSS OR DETERIORATION ROMAN V GRIMALT

6 PHIL 96 TORRES; April 11, 1906

NATURE Appeal from judgment FACTS Plaintiff alleges - between June 13 and 23, 1904, he and defendant verbally agreed upon the sale of the schooner Santa Marina - that the defendant had agreed to purchase the schooner, and to pay in 3 installments of P500, on July 15, September 15, and November 15, and that if the plaintiff accepted the plan, the sale would become effective on the following day - that the next day, the plaintiff notified the defendant of his acceptance, and that from that day, the vessel was at his disposal, and offered to deliver the schooner to the defendant if so desired - that the contract having been closed and the vessel being ready for delivery to the purchaser, it was sunk about 3 pm, June 25, in the harbor of Manila, because of a severe storm - That on June 30, demand was made upon the defendant for payment of the purchase price in the manner stipulated - That defendant failed to pay Defendant claims - Plaintiff stated that the vessel belonged to him - Defendant accepted the offer of sale on condition that the title papers were found to be satisfactory, and that the vessel was in seaworthy condition - That they called Reyes, a notary public, who said the documents provided were insufficient to show the ownership of the vessel and to transfer the title - That plaintiff then promised to perfect his title, and on June 23 he called on the defendant to close the sale, and the defendant believing that the plaintiff had perfected his title, wrote to set the 24th for the execution of the contract, but upon finding that the plaintiff had done nothing to perfect his title, he insisted he would buy the vessel only when the title papers were perfected and the vessel duly inspected.

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*The court below found that the parties had no arrived at a definite understanding. ISSUE WON the sale had been perfected, making the defendant liable for the purchase price of the schooner HELD NO - A sale shall be considered perfected and binding as between vendor and vendee when they have agreed as to the thing which is the object of the contract and as to the price, even though neither has been actually delivered. (Art. 1450 of the Civil Code.) - Ownership is not considered transmitted until the property is actually delivered and the purchaser has taken possession of the value and paid the price agreed upon, in which case the sale is considered perfected. - When the sale is made by means of a public instrument the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract. (Art. 1462 of the Civil Code.) - Pedro Roman, the owner, and Andres Grimalt, the purchaser, had agreed upon the sale of the vessel for the sum of 1,500 pesos, payable in three installments, provided the title papers to the vessel were in proper form. It is so stated in the letter written by the purchaser to the owner on the 23rd of June. - The sale of the schooner was not perfected and the purchaser did not consent to the execution of the deed of transfer for the reason that the title of the vessel was in the name of one Paulina Giron and not in the name of Pedro Roman, the alleged owner. Roman promised, however, to perfect his title to the vessel, but he failed to do so. The papers presented by him did not show that he was the owner of the vessel. - If no contract of sale was actually executed by the parties the loss of the vessel must be borne by its owner and not by a party who only intended to purchase it and who was unable to do so on account of failure on the part of the owner to show proper title to the vessel and thus enable them to draw up the contract of sale. - The vessel was sunk in the bay on the afternoon of the 25th of June, 1904, during a severe storm and before the owner had complied with the condition exacted by the proposed purchaser, to wit, the production of the proper papers showing that the plaintiff was in fact the owner of the vessel in question. - The defendant was under no obligation to pay the price of the vessel, the purchase of which had not been concluded. The conversations had between the parties and the letter written by defendant to plaintiff did not establish a contract sufficient in itself to create reciprocal rights between the parties. - It follows, therefore, that article 1452 of the Civil Code relative to the injury or benefit of the thing sold after a contract has been perfected and articles 1096 and 1182 of the same code relative to the obligation to deliver a specified thing and the extinction of such obligation when the thing is either lost or destroyed, are not applicable to the case at bar. Disposition The judgment of the court below is affirmed and the complaint is dismissed with costs against the plaintiff. After the expiration of twenty days from the date hereof let judgment be entered in accordance herewith and ten days thereafter let the case be remanded to the Court of First Instance for proper action.

The price of P7,500.00 was payable by means of a Letter of Guaranty from the DBP, which Norkis'Branch Manager Labajo agreed to accept. It was extended to Nepales for the price of the motorcycle payable by DBP upon release of his motorcycle loan. As security for the loan, Nepales would execute a chattel mortgage on the motor cycle in favor of DBP. Labajo issued a sales invoice showing that the contract of sale of the motorcycle had been perfected. Nepales signed the sales invoice to signify his conformity with the terms of the sale. In the meantime, however, the motorcycle remained in Norkis' possession. The motorcycle was registered in the Land Transportation Commission in the name of Alberto Nepales. Nepales paid for the registration. On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who was allegedly the agent of Alberto Nepales but the latter denies it. The record shows that Alberto and Julian Nepales presented the unit to DBP's Appraiser-Investigator Ernesto Arriesta at the DBP offices. The motorcycle met an accident on February 3,1980. An investigation conducted by the DBP revealed that the unit was being driven by a certain Zacarias Payba at the time of the accident. The unit was a total wreck, was returned, and stored inside Norkis' warehouse. DBP released the proceeds of private respondent's motorcycle loan to Norkis in the total sum of P7,500. As the price of the motorcycle later increased, Nepales paid the difference of P328 and demanded the delivery of the motorcycle. When Norkis could not deliver, he filed an action for specific performance with damages against Norkis in the RTC. He alleged that Norkis failed to deliver the motorcycle which he purchased, threby causing him damages. Norkis answered that the motorcycle had already been delivered to private respondent before the accident, hence, the risk of loss or damage had to be borne by him as owner of the unit. RTC rendered a decision in favor of private respondent. CA affirmed the decision but deleted award for damages. Norkis MOR was denied, hence this petition.

ISSUE WON there had already been a transfer of ownership of the motorcycle to Nepales at the time it was destroyed HELD NO Ratio In all forms of delivery, it is necessary that the act of delivery whether constructive or actual, be coupled with the intention of delivering the thing. The act, without the intention, is insufficient. Reasoning - The issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer. An invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold and has been considered not a bill of sale - When the motorcycle was registered by Norkis in the name of private respondent, Norkis did not intend yet to transfer the title or ownership to Nepales, but only to facilitate the execution of a chattel mortgage in favor of the DBP for the release of the buyer's motorcycle loan. The execution in DBPs favor of a chattel mortgage over the purchased vehicle is a pre-requisite for the approval of the buyer's loan. If Norkis would not accede to that arrangement, DBP would not approve private respondent's loan application and, consequently, there would be no sale. - In other words, the critical factor in the different modes of effecting delivery, which gives legal effect to the act, is the actual intention of the vendor to deliver, and its acceptance by the vendee. Without that intention, there is no tradition (Abuan vs. Garcia, 14 SCRA 759). - The thing is considered to be delivered when it is'placed in the hands and possession of the vendee.'(Civil Code, Art. 1462). It is

NORKIS DISTRIBUTORS, INC V CA (ALBERTO NEPALES)

193 SCRA 694 GRINO-AQUINO; February 7, 1991

NATURE PETITION for review of the decision of the Court of Appeals. FACTS Alberto Nepales bought from the Norkis-Bacolod branch a brand new Yamaha Wonderbike motorcycle.

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true that the same article declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to reality-the delivery has not been effected. The Court of Appeals correctly ruled that the purpose of the execution of the sales invoice and the registration of the vehicle in the name of plaintiff-appellee was not to transfer to Nepales the ownership and dominion over the motorcycle, but only to comply with the requirements of the DBP for processing private respondent's motorcycle loan. Article 1496 of the Civil Code - "in the absence of an express assumption of risk by the buyer, the things sold remain at seller's risk until the ownership thereof is transferred to the buyer." - The risk of loss should be borne by the seller, Norkis, which was still the owner and possessor of the motorcycle when it was wrecked. Disposition Decision of the CA AFFIRMED.

expressly so stipulate, the phrase "for any cause" used in the contract did not indicate any intention of the parties that the loss of the unit due to fortuitous event is to be included within the responsibility of the vendor. ISSUE WON the phrase "for any cause" used in the agreement may be interpreted to include a fortuitous event absolutely beyond the control of the appellant Perez HELD YES Ratio The agreement making the buyer responsible for any loss whatsoever, fortuitous or otherwise, even if the title to the property remains in the vendor is neither contrary to law, morals or public policy. Reasoning - Where goods are sold and delivered to the vendee under an agreement that the title is to remain in the vendor until payment, the loss or destruction of the property while in the possession of the vendee before payment, without his fault, does not relieve him from the obligation to pay the price, and he, therefore, suffers the loss. In accord with this rule are the provisions of the Uniform Sales Act and the Uniform Conditional Sales Act. There are several bases for this rule. First is the absolute and unconditional nature of the vendee's promise to pay for the goods. The promise is nowise dependent upon the transfer of the absolute title. Second is the fact that the vendor has fully performed his contract and has nothing further to do except receive payment, and the vendee received what he bargained for when he obtained the right of possession And use of the goods and the right to acquire title upon making full-payment of the price. A third basis advanced for the rule is the policy of providing an incentive to care properly for the goods, they being exclusively under the control and dominion of the vendee. Disposition Decision of the CFI is AFFIRMED.

SUN BROTHERS APPLIANCES V PEREZ

7 SCRA 977 LABRADOR; April 30, 1963

FACTS - Sun Brothers brought this action to recover from defendant, Damaso Perez the sum of P1,404, the price of one Admiral Air Conditioner, Slim Style, plus stipulated interest of 12% until the same is fully paid, together with P200 as Attorney's fees, and costs. Sun Brothers contend that Perez, after making a down payment of P274, did not pay any of the monthly installments of P78 thereafter, leaving a balance of P1,404. Perez answered that the air-conditioner in question was delivered to him and installed in his office at Gardiner St., Lucena, Quezon on December 14, 1959 but it was totally destroyed by fire on December 28, 1968 at 2am. Perez further claimed that the machine was destroyed by force majeure, not by his fault and/or negligence and, therefore, he is not liable under the conditional sale which the parties had executed. - The conditional sale contained the following stipulation: "2. Title to said property shall vest in the Buyer only upon full payment of the entire account, as herein provided, and only upon complete performance of all the other conditions herein specified; "3. The Buyer shall keep said property in good condition and properly protected against the elements, at his/its address above stated, and undertakes that if said property or any part thereof be lost, damaged, or destroyed for any cause, he shall suffer such loss, or repair such damage, it being distinctly understood and agreed that said property remains at Buyer's risk after delivery;" - CFI ruled for Sun Brothers. Perez appealed to the SC as involving only a question of law. He argued that inasmuch as the title to the property sold shall vest in the buyer only upon full payment of the price, the loss of the air conditioner should be for the exclusive account of the vendor. Also, the phrase "for any cause" may not be interpreted to include a fortuitous event absolutely beyond the control of the appellant; and that although Article 1174 of the new Civil Code recognizes the exception on fortuitous event when the parties to a contract

LAWYERS COOPERATIVE V TABORA

121 PHIL 737 BAUTISTA, ANGELO; April 30, 1965

NATURE Appeal from CFI decision FACTS - May 3, 1955, Perfecto A. Tabora bought from the Lawyers Cooperative Publishing Company one complete set of American Jurisprudence consisting of 48 volumes with 1954 pocket parts, plus one set of American Jurisprudence, General Index, consisting of 4 volumes, for a total price of P1,675.50 which, in addition to the cost of freight of P6.90, makes a total of P1,682.40. Tabora made a partial payment of P300, leaving a balance of P1,382.40, payable on installment basis. The books were duly delivered and receipted for by Tabora on May 15, 1955 in his law office Ignacio Building, Naga City. - It was provided in the contract that "title to and ownership of the books shall remain with the seller until the purchase price shall have been fully paid. Loss or damage to the books after delivery to the buyer shall be borne by the buyer." - In the midnight of the same date, the law office and library of Tabora was burned along with other buildings. - This unfortunate event was immediately reported by Tabora to the company in a letter he sent on May 20, 1955. On May 23, the company replied and as a token of goodwill it sent to Tabora free of charge volumes 75, 76, 77 and 78 of the Philippine Reports. As Tabora failed to pay he monthly installments agreed upon on the balance of the purchase price notwithstanding the long time that had elapsed, the company demanded payment of the installments due, and having failed, to pay the same, it commenced the present action before the Court of First Instance of Manila for the recovery of the balance of the obligation. Plaintiff also prayed that defendant be ordered to pay 25% of the amount due as liquidated damages, and the cost of action.

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- CFI ordered the defendant to pay the sum of P1,382.40, with legal interest thereon from the filing of the complaint, plus a sum equivalent to 25% of the total amount due as liquidated damages, and the cost of action. Respondents Comments He contends that since it was agreed that the title to and the ownership of the books shall remain with the seller until the purchase price shall have been fully paid, and the books were burned or destroyed immediately after the transaction, appellee should be the one to bear the loss for, as a result, the loss is always borne by the owner. Moreover, even assuming that the ownership of the books were transferred to the buyer after the perfection of the contract the latter should not answer for the loss since the same occurred through force majeure. ISSUE WON Tabora should bear the loss of the books HELD YES - As a rule the loss of the object of the contract of sale is borne by the owner or in case of force majeure the one under obligation to deliver the object is exempt from liability. However, the law on the contract entered into on the matter argues against it. It is true that in the contract entered into between the parties the seller agreed that the ownership of the books shall remain with it until the purchase price shall have been fully paid, but such stipulation cannot make the seller liable in case of loss not only because such was agreed merely to secure the performance by the buyer of his obligation but in the very contract it was expressly agreed that the "loss or damage to the books after delivery to the buyer shall be borne by the buyer." Any such stipulation is sanctioned by Article 1504 of our Civil Code. - Neither can appellant find comfort in the claim that since the books were destroyed by fire without any fault on his part he should be relieved from the resultant obligation under the rule that an obligor should be held exempt from liability when the loss occurs thru a fortuitous event. This rule only holds true when the obligation consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case of fortuitous event. The obligation herein does not refer to a determinate thing, but is pecuniary in nature, and the obligor bound himself to assume the loss after the delivery of the goods to him. In other words, the obligor agreed to assume any risk concerning the goods from the time of their delivery, which is an exception to the rule provided for in Article 1262 of our Civil Code. - The appellant should not be made to pay any damages because his denial to pay the balance of the account is not due to bad faith. Disposition Decision appealed from is modified by eliminating liquidated damages

sued Evangelista, Lundberg and the latter's company, for refund. The defendants filed separate answers, Lundberg alleging nonliability for the refund since the same was purely a personal account between Katigbak and Evangelista. Evangelista claimed that while there was an agreement and that Katigbak advanced the payment for the spare parts, Katigbak refused to comply with his contract to purchase; that as a result, he was forced to sell the winch to a third person for only P10,000.00, thus incurring a loss of P2,000.00, which amount Katigbak should be ordered to pay, plus damages. ISSUE WON vendee should be liable HELD YES - The herein petitioner failed to take delivery of the winch, subject matter of the contract and such failure or breach was, according to the Court of Appeals, attributable to him, a fact which is binding upon this Court. The right to resell the equipment, therefore, cannot be disputed. It was also found by the appellate court that in the subsequent sale of the winch to a third party, the vendor thereof lost P2,000.00, said difference to be borne by the supposed vendee who failed to take delivery and/or pay the price.

Chapter 10: PERFORMANCE OF CONTRACT SMITH, BELL & CO. V SOTELO MATTI
44 PHIL 874 ROMUALDEZ; 1922

NATURE APPEAL from a judgement of the CFI of Manila FACTS - August, 1918: Plaintiff Corporation Smith, Bell & Co., and defendant Sotelo entered into contract: - Plaintiff obligated itself to sell (and the defendant to purchase) 1) 2 steel tanks, to be shipped from New York and delivered at Manila within 3 or 4 months; 2) 2 expellers to be shipped from San Francisco in the month of September, 1918, or as soon as possible; 3) 2 electric motors to be delivered Approximate delivery within ninety days. This is not guaranteed. - tanks arrived at Manila April 27, 1919 - expellers arrived October 26, 1918 - motors arrived Feb. 27, 1919. -The plaintiff corporation notified Sotelo of the arrival of these goods, but Sotelo refused to receive them and to pay the prices stipulated. - The court below absolved the defendants from the complaint insofar as the tanks and electric motors were concerned, but rendered judgment against them for the expellers, ordering them to receive the aforesaid expellers and pay the plaintiff the price of the said goods - both parties appeal Petitioners' Claim - petitioner immediately notified the defendant of the arrival of the goods - defendant refused to receive and pay the price - expellers and motors in good conditions Respondents' Comments - denied the allegations as to the shipment and arrival of the goods - denied the notification and the refusal and the good conditions of the goods - alleged as special defense: Sotelo made the contracts in question as manager of the intervenor, the Manila Oil Refining and ByProducts Co. - it was only in May, 1919, that it notified the intervenor that goods had arrived, incomplete and long after the date stipulated

Chapter 9: REMEDIES OF AN UNPAID SELLER KATIGBAK V CA (EVANGELISTA AND LUNDBERG)

4 SCRA 243 PAREDES; January 31, 1962

NATURE Appeal by certiorari FACTS - Katigbak, thru Lundberg, entered into agreement with Evangelista to purchase winch for P12,000.00, payable at P5,000.00 upon delivery and the P7,000.00 w/in 60 days. As winch needed some repairs, which could be done in shop of Lundberg, it was stipulated that amt necessary for repairs will be advanced by Katigbak, deductible fr initial payment. Repairs were undertaken, P2,029.85 for spare parts was advanced by Katigbak. For one reason, sale wasnt consummated, Katigbak

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- as a consequence of the delay, the intervenor suffered damages in the sum of P116,783.91 for the nondelivery fo the tanks, and P21,250 for the expellers and motors arriving late. ISSUES 1. WON, under the contracts entered into and the circumstances established in the record, the plaintiff has fulfilled, in due time, its obligation to bring the goods in question to Manila 2. WON the intervenor has right of action HELD 1. YES - The plaintiff has not been guilty of any delay in the fulfillment of its obligation, and it could not have incurred any of the liabilities mentioned by the intervenor in its counterclaim. Ratio When no definite date has been fixed for the delivery of goods, the obligor shall not be held guilty of delay in the fulfillment of its obligation if it delivers the goods within a reasonable time. Reasoning - The obligation is regarded as conditional: the term which the parties attempted to fix is so uncertain that one cannot tell just whether those articles could be brought to Manila or not. *They were executed at the time of the world war when there existed rigid restrictions on the export from the US of articles like the machinery in question, and transportation was difficult. - When the delivery is subject to the fulfillment of a condition dependent on the will of third persons who could in no way be compelled to fulfill the condition (like in this case), the obligor will be deemed to have sufficiently performed his part of the obligation, if he has done all that was in his power, even if the condition has not been fulfilled in reality- and he has the right to demand performance of the contract by the other party. - In such cases, delivery must be made within reasonable time. - What is reasonable time? to be determined by the circumstances attending the particular transaction, such as the character of the goods, the purpose for which they are intended, the ability of the seller to produce the goods if they are to be manufactured, the facilities available for transportation, and the distance the goods must be carried, and the usual course of business in the particular trade. 2. NO Ratio When an agent acts in his own name, the principal shall have no right of action against the persons with whom the agent has contracted. Reasoning - When the agent transacts business in his own name, it shall not be necessary to state who is the principal and he shall be directly liable, as if the business were for his own account. (Code of Com., art 246) Disposition the judgment appealed from is modified, and the defendant sentenced to accept and receive from the plaintiff the tanks, expellers, motors, and to pay the plaintiff the sum of P96,000, with legal interest, and the costs of both instances.

43 PHIL 529 ROMUALDEZ; June 20, 1922

NATURE Appeal FACTS - Soler had agreed with Wm. H. Anderson and Co., for the purchase of certain machinery agreement. - Terms and conditions of their agreement: The foregoing machinery is to be invoiced at manufacturers' price, plus all charges such as freight, insurance, interest and exchange, arrastre, landing charges, delivery, internal revenue, etc., plus a buying commission of 5 per cent. - Their terms of payment: - 50% deposit to be made upon arrival of the machinery, and the balance 90 days after delivery of the machinery.

SOLER V CHESLEY

-And in he event that Soler shall fail to live up to the terms of this agreement, such failure by him will be sufficient cause to terminate the contract, and any payments made by him under and by virtue of the contract shall be and remain the exclusive property of Wm. H. Anderson and Co. -The title of the machinery in question is to remain in the name of Wm. H. Anderson and Co. until payment in full has been made, at which time transfer of all right and title to the above mentioned machinery will be made to the Soler. -Their agreement is contingent upon strikes, fire, accidents, extraordinary shipping and other conditions imposed on account of war and other causes unavoidable or beyond the control of the party of the first part. - It is strictly understood that the quotations made to Mr. Andres Soler under date of February 27, 1919, were approximated and were subject to change without notice TF there is no guarantee as to prices and delivery, it being understood that prices charged will be those shown on the invoices of the manufacturers, and shipment will be made by first possible opportunity. - Nov 16, 1918: Soler sold to the Chesley all his rights and interest in a contract of sale. - At that time, a part of the aforesaid machinery was on the way, the other part being already in the city of Manila, the price of which has not as yet been paid by Mr. Soler to Messrs. Wm. H. Anderson and Co. - It was said too in the contract that Chesley made Mr. Soler a proposition whereby the latter should transfer it(the machineries) to him, and he would assume the obligation to pay Messrs. Wm. H. Anderson and Co. the amount of the invoices thereof, and that Mr. Soler was to be relieved from his contract with Messrs. Wm. H. Anderson and Co. (and that the Co. has actual knowledge of this sale of the machinery, as well as of Mr. Chesley being subrogated to the rights and obligations created by the agreement) - Also, it was stated that Mr. Chesley shall pay Mr. Soler the difference which may be found to exist between the amount of the invoices of the machinery and the sum of 100l php immediately upon the arrival of said machinery at this city of Manila; provided that if any part of the machinery not affecting the expellers is found lacking, a proportional deduction shall be made from the amount which Mr. Soler may have received from Mr. Chesley. - Of the parts of the machinery covered by these contracts, only the "filter press," the "cooker" and the "chains" were in Manila on November 16, 1918, but the most important parts, such as the "oil expellers" and the "grinding mills" were not then yet in this city. - These "oil expellers" were shipped for Manila on the 12th of December, 1918, the motors on the 8th of January, 1919, the machinery on the 16th of January 1919 and the grinding mills on the 21st of February, 1919, all of which arrived at Manila on February 13, March 8, April 27, and August 23, 1919, respectively. - These effects were received and paid for by Chesley under protest, on account of the fact that they were not delivered within the period stipulates in the contract. - Soler was then advised by Chesley s lawyer that their contract to was rescinded, it appearing that the parts of the machinery, which the Soler asserted in said contract were on the way, were not at the time and it was only several days later that they were shipped for Manila. - Solder commenced this action asking that Chesley be sentenced to pay him the sum of P30,546.03 with interest thereon, which sum was the difference between the P100,000, the consideration of the contract, and the price of the aforesaid machinery which had been paid by the Chesley, plus the incidental expenses, as stipulated in the said contract. - The defendant answered, denying generally and specifically the allegations of the complaint and setting up a special defense and a counterclaim. - In his special defense, Chesley alleges that he had accepted and signed the contract on the assertion therein contained that of the machinery, which was the subject matter of the said contract, a part was already in Manila, and the other part on the way, and also on the promises, assertions, and contemporary and previous acts of the plaintiff to the same effect, by means of which the

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latter succeeded in inducing the defendant to make and sign the aforesaid contract; that the parts of the machinery which, on the date of the contract, were said to be on the way, were not in fact in, and did not arrive at, Manila but long thereafter; that if he signed the contract, it was because he was desirous of having the machinery, and the defendant assured him that it would be delivered to him, immediately or within a short time - TC sentenced Chesley to pay the Soler P30,546.03, with legal interest thereon from October 16, 1919, and the costs, and absolved the plaintiff from the set-off and the counterclaim. ISSUES 1. WON TC erred in not holding that time was an essential element of the contract 2. WON TC erred in giving judgment in favor of the plaintiff 3. WON TC erred in dismissing the counterclaim of the defendant HELD 1. YES - The arrival of the machinery within a reasonable time was an essential element of the contract, such time to be determined by taking into account the fact that is was then on the way to Manila. - It appears sufficiently established in the record that if the Soler gave his consent to this contract, it was because he expected that said machinery would arrive within a short time, the time reasonably necessary for such machinery to reach Manila from America, as the plaintiff asserted in the document itself that said machinery was then on the way. The act of the defendant in insisting that this guaranty as to the arrival of the machinery be stated in the contract, his repeated complaints and protests when he afterwards made payments as the parts arrived, and his letter of April 25, 1919, leave no room for doubt that the arrival of said machinery within a reasonably short time was one of the determining elements of his consent. - These acts of the defendant disclose the fact that he intented the arrival of the machinery to be an essential element of the contract (art. 1282, Civil Code). - The fact that the plaintiff had no control of the prompt transportation of the said machinery to Manila, does not relieve the plaintiff from making good the guaranty inserted in the contract that said machinery was already on the way to Manila. - The plaintiff elected to bind himself in that way, although he knew, as he ought to have known that, had his rights not been transferred to the defendant, he could not have charged Messrs. Anderson and Co. so much, who in the (first) contract did not guarantee the delivery nor the amount of the price. - The plaintiff having bound himself in favor of the defendant for more than what Messrs. Anderson and Co. had bound themselves for in favor, we entertain no doubt that he acted in good faith, encouraged by the information of Messrs. Anderson and Co. (although the most that the expellers, only the expellers, had been sent out by the factory), but it was he, not Messrs. Anderson and Co., who contracted the obligation, and, therefore, he is the only one to be responsible for the obligation arising from the contract. He who contracts and assumes an obligation is presumed to know the circumstances under which said obligation can be complied with (Ferrer vs. Ignacio, 39 Phil., 446). - True, the plaintiff id not specify the date or time of the arrival of said mechanical devices; but he did assert that they were on the way on the date of the contract. But it did not happen as asserted 2. YES - The plaintiff has failed to carry out his obligation incurred under the contract and has, therefore, no right to compel the defendant to comply with his obligation to pay the plaintiff the sum claimed in the complaint (art. 1124, Civil Code). 3. NO - It appears from the record that he sold the aforesaid machinery to a third person, the Philippine Refining Co. In cases like this, the rescission of the contract does not lie (art. 1295, Civil Code).

- As to the damages claimed by the defendant: Evidence adduced is insufficient to fix the true amount thereof. Disposition Judgment Reversed, and the defendant absolved from the complaint, and the plaintiff from the counterclaim and other claims of the defendant

94 Phil 52 PARAS; November 28, 1953

NATURE Appeal from a decision of the CFI holding Litton liable FACTS - The Government sent out a proposal for bids for the delivery of padlocks and stationeries for election purposes to be delivered not later than March 1, 1946. - Litton Co. bound itself to deliver the said articles on or before March 1 - It is stipulated that should Litton fail to deliver, the Government is allowed to impose a penalty, and to make open-market purchases as needed. - Litton only made partial delivery. As a result, the Government needed to make open-market purchases, much higher than the rates stipulated with Litton, thereby the Government incurred losses equivalent to the difference. - Litton argues that on-time delivery is contingent on the release of the export permit from the U.S., the release of which is a condition to be fulfilled by the Government ISSUE WON Litton can be held liable for not being able to deliver in time for the elections, considering the contingency of release of the export permit HELD YES Ratio It is clear that Litton undertook to deliver the articles not later than March 1 - The purpose of delivery (for elections) and the latest time of delivery (March 1) appear unequivocally in the Governments proposal for bids. It is then preposterous to suppose that delivery after the elections would ever be contemplated or accepted. - Litton's contract with the plaintiff was unconditional. - Litton filed 2 performance bonds warranting that the articles would be delivered on time. Disposition Judgment appealed from is affirmed

REPUBLIC V LITTON

ASIAN V JALANDONI
[PAGE 9]

52 PHIL 599 VILLAMOR; December 29, 1928

FACTS - January 17, 1921, the plaintiff sold two parcels of lands to the defendant for the lump sum of P47,000, payable in installments. - The conditions of the payment were: P5,000 at the time of signing the contract Exhibit A; P20,000 upon delivery by the vendor to the purchaser of the Torrens title to the first parcel described in the deed of sale, P10,000 upon delivery by the vendor to the purchaser of Torrens title to the second parcel; and lastly the sum of P12,000 one year after the delivery of the Torrens title to the second parcel. - The vendee paid P5,000 to the vendor when the contract was signed. The vendor delivered the Torrens title to the first parcel to

AZARRAGA V GAY

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the vendee who, pursuant to the agreement, paid him P20,000. In the month of March 1921, Torrens title to the second parcel was issued and forthwith delivered by the vendor to the vendee who, however, failed to pay the P10,000 as agreed, neither did she pay the remaining P12,000 one year after having received the Torrens title to the second parcel. - The plaintiff here claims the sum of P22,000, with legal interest from the month of April 1921 on the sum of P10,000, and from April 1922 on the sum of P12,000, until full payment of the amounts claimed. - Defendant admits that she purchased the two parcels of land referred to by plaintiff, but alleges in defense: (a) That the plaintiff knowing that the second parcels of land he sold had an area of 60 hectares, by misrepresentation lead the defendant to believe that said second parcel contained 98 hectares, and thus made it appear in the deed of sale and induced the vendee to bind herself to pay the price of P47,000 for the two parcels of land, which he represented contained an area of no less than 200 hectares, to which price the defendant would not have bound herself had she known that the real area of the second parcel was 60 hectares, and, consequently, she is entitled to a reduction in the price of the two parcels in proportion to the area lacking which ought to be reduced to P38,000 - The lower court, having found no fraud when the parties agreed to the lump sum for the two parcels of land described in the deed Exhibit A, following article 1471 of the Civil Code, ordered the defendant to pay the plaintiff the sum of P19,300 with legal interest at 8 per cent per annum from April 30, 1921 on the sum of P7,300, and from April 30, 1922, on the sum of P12,000. ISSUE WON there was fraud in the circumstances leading to the agreement in the contract HELD NO - There is no evidence of record that the plaintiff made representation to the defendant as to the area of said second parcel, and even if he did make such false representations as are now imputed to him by the defendant, the latter accepted such representations at her own risk and she is the only one responsible for the consqunces of her inexcusable credulousness. In the case of Songco vs. Sellner (37 Phil., 254), the court said: The law allows considerable latitude to seller's statements, or dealer's talk; and experience teaches that it as exceedingly risky to accept it at its face value. Assertions concerning the property which is the subject of a contract of sale, or in regard to its qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high price and are always understood as affording to buyers no grund from omitting to make inquires. A man who relies upon such an affirmation made by a person whose interest might so readily prompt him to exaggerate the value of his property does so at his peril, and must take the consequences of his own imprudence. - The defendant had ample opportunity to appraise herself of the condition of the land which she purchased, and the plaintiff did nothing to prevent her from making such investigation as she deemed fit, and as was said in Songco vs. Sellner, supra, when the purchaser proceeds to make investigations by himself, and the vendor does nothing to prevent such investigation from being as complete as the former might wish, the purchaser cannot later allege that the vendor made false representations to him. - "One who contracts for the purchase of real estate in reliance on the representations and statements of the vendor as to its character and value, but after he has visited and examined it for himself, and has had the means and opportunity of verifying such statements, cannot avoid the contract on the ground that they were false or exaggerated."- She did not complain of the difference in the area of said second parcel until the year 1926.

- More so, it appears that by the contract Exhibit A, the parties agreed to the sale of two parcels of land, the first one containing 102 hectares, 67 ares and 32 centares, and the second one containing about 98 hectares, for the lump sum of P47,000 payable partly in cash and partly in installments. Said two parcels are defind by means of the boundaries given in the instrument. Therefore, the case falls within the provision of article 1471 of the Civil Code, which reads as follows: ART. 1471. In case of the sale of real estate for a lump sum and not at the rate of a specified price for each unit of measure, there shall be no increase or decrease of the price even if the area be found to be more or less than that stated in the contract. - As the hectares were paid due to a lump sum and not based of a defined unit of measure if the sale was made for a price per unit of measure or number, the consideration of the contract with respect to the vendee, is the number of such units, or, if you wish, the thing purchased as determined by the stipulated number of units. But if, on the other hand, the sale was made for a lump sum, the consideration of the contract is the object sold, independently of its number or measure, the thing as determined by the stipulated boundaries, which has been called in law a determinate object. - From all this, it follows that the provisions of article 1471 concerning the delivery of determinate objects had to be materially different from those governing the delivery of things sold a price per unit of measure or number. - The reason for the regulation is clear and no doubts can arise from its application. It is concerned with determinate objects. The consideration of the contract, and the thing to be delivered is a determinate object, and not the number of units it contains. The price is determined with relation to it; hence, its greater or lesser area cannot influence the increase or decrease of the price agreed upon. We have just learned the reason for the regulation, bearing in mind that the Code has rightly considered an object as determinate for the purposes now treated, when it is a single realty as when it is two or more, so long as they are sold for a single price constituting a lump sum and not for a specified amount per unit of measure or number.

18 SCRA 173 REYES, JBL; December 17, 1966

NATURE Appeal from the decision of the CA, reversing the decision of the CFI of Bulacan FACTS - The Sta. Ana spouses owned 115,850 sqm parcel of land. They sold two portions of the land to Hernandez for a single price of P11k. The portions of land were described as follows: "Bahaguing nasa gawing Hilagaan. Humahanga sa Hilaga, kina Maria Perez, at Aurelio Perez; sa Timugan, sa lupang kasanib; sa Silanganan, kay Mariano Flores at Emilio Ignacio; sa Kanluran, kay Cornelio Ignacio; Mayroong (12,500), m.c. humigit kumulang." "Bahaguing nasa gawing Silanganan. Humahanga sa Hilagaan, sa kay Rosa Hernandez; sa Silanganan, kay Domingo Hernandez at Antonio Hernandez; sa Timugan, sa Sta. Maria-Tigbi Road; at sa Kanluran, sa lupang kasanib (Josa Sta. Ana, Jr.), mayroong (26,500) metros cuadrados, humigit kumulang." - The spouses sold two more portions to other buyers. Then they had a subdivision plan prepared by a surveyor. The other vendees agreed to the plan; but Hernandez did not, and refused to vacate the land. Instead, she had a different subdivision plan prepared. The spouses filed suit against Hernandez for occupying 17,000 sqm more than what she bought. - The CFI found that the land sold was without clear boundaries but with exact areas and sold at P0.29 per sqm. The CA found that the area in the document is not the one to prevail but the area that Hernandez knew was hers because they were separated from the rest of the property by a long and continuous pilapil (dike); the sale was for a lump sum.

STA. ANA V HERNANDEZ

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HELD YES - Art. 1542 of the CC states: "In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be greater or less area or number than that stated in the contract. "The same rule shall be applied when two or more immovables are sold for a single price; but if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated." - The two parcels of land sold to Rosa Hernandez were identified by the conspicuous boundaries consisting in a long and continuous pilapil or dike that separated the lands in question from the rest of the property. On the basis of such findings, that cannot be questioned at this stage (SC wont disturb factual findings of CA unless they are glaringly erroneous as to constitute grave abuse of discretion), it is unquestionable that the sale made was of a definite and identified tract, a corpus certum, that obligated the vendors to deliver to the buyer all the land within the boundaries, irrespective of whether its real area should be greater or smaller than what is recited in the deed. And this is particularly true where, as in the case now before this court, the area given is qualified to be approximate only "humigit kumulang", i.e., more or less. - To hold the buyer to no more than the area recited on the deed, it must be made clear therein that the sale was made by unit of measure at a definite price for each unit. The ruling of the Supreme Court of Spain, in construing Article 1471 of the Spanish Civil Code (copied verbatim in our Article 1542) is highly persuasive that as between the absence of a recital of a given price per unit of measurement, and the specification of the total area sold, the former must prevail and determines the applicability of the norms concerning sales for a lump sum. Disposition Petition denied. CA affirmed.

restrictions, the Salvadors concomitantly executed a special power of attorney authorizing the Bernabes to construct a residential house on the lot and to transfer the title of the property in their names. - The Bernabes, on the other hand, without making any improvement, contracted to sell the parcel of land to the spouses Mario and Elizabeth Torcuator (Torcuators, for brevity) sometime in September of 1986. Then again, confronted by the Ayala Alabang restrictions, the parties agreed to cause the sale between the Salvadors and the Bernabes cancelled, in favor of (a) a new deed of sale from the Salvadors directly to the Torcuators; (b) a new Irrevocable Special Power of Attorney executed by the Salvadors to the Torcuators in order for the latter to build a house on the land in question; and (c) an Irrevocable Special Power of Attorney from the Salvadors to the Bernabes authorizing the latter to sell, transfer and convey, with power of substitution, the subject lot. - The Torcuators thereafter had the plans of their house prepared and offered to pay the Bernabes for the land upon delivery of the sale contract. For one reason or another, the deed of sale was never consummated nor was payment on the said sale ever effected. Subseuqently, the Bernabes sold the subject land to Leonardo Angeles, a brother-in-law. The document however is not notarized. As a result, the Torcuators commenced the instant action against the Bernabes and Salvadors for Specific Performance or Rescission with Damages. - The trial court dismissed petition of Tocuators saying that they (Tocuators) did not suffer any real damage in that they could have purchased another lot in Ayala Alabang, and use the architectural plans they commissioned Arch. Selga to prepare . CA affirmed. Tocuators filed before the SC. ISSUES 1. WON the agreement is a contract to sell as the trial court ruled, or a contract of sale as petitioners insist 2. WON the transaction violated the Uniform Currency Act, Republic Act No. 529 3. WON the agreement is void for being contrary to good customs and morals 4. WON the agreement violated the law as it deprived the government of capital gains tax HELD 1. Contract to sell - The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early as 1951, we held that in a contract of sale, title passes to the buyer upon delivery of the thing sold, while in a contract to sell, ownership is reserved in the seller and is not to pass until the full payment of the purchase price is made. In the first case, non-payment of the price is a negative resolutory condition; in the second case, full payment is a positive suspensive condition. Being contraries, their effect in law cannot be identical. In the first case, the vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale is itself resolved and set aside. In the second case, however, the title remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time specified in the contract. In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full payment of the price or the fulfillment of some other conditions either of which is a future and uncertain event the non-happening of which is not a breach, casual or serious, but simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. We have carefully examined the agreement between the parties and are far from persuaded that it was a contract of sale. - Firstly, the agreement imposed upon petitioners the obligation to fully pay the agreed purchase price for the property. That ownership shall not pass to petitioners until they have fully paid the price is implicit in the agreement. Notably, respondent Remigio Bernabe testified, without objection on the part of petitioners, that he specifically informed petitioners that the transaction should be completed, i.e., that he should receive the full payment for the property, before he left for the United States.

TOCUATOR V BERNABE
459 SCRA 439. TINGA; June 8, 2005

FACTS - The subject of this action is a lot of the Ayala Alabang Village, Muntinlupa, Metro-Manila. The lower court found that the above parcel of land was purchased by the spouses Diosdado and Lourdes Salvador (Salvadors, for short) from the developers of Ayala Alabang subject, among others, to the following conditions: "It is part of the condition of buying a lot in Ayala Alabang Village (a) that the lot buyer shall deposit with Ayala Corporation a cash bond (about P17,000.00 for the Salvadors) which shall be refunded to him if he builds a residence thereon within two (2) years of purchase, otherwise the deposit shall be forfeited, (b) architectural plans for any improvement shall be approved by Ayala Corporation, and (c) no lot may be resold by the buyer unless a residential house has been constructed thereon. - Evidences on record further reveal that on December 18, 1980, the Salvadors sold the parcel of land to the spouses Remigio and Gloria Bernabe (Bernabes, for expediency). Given the above

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Moreover, the deed of sale would have been issued only upon full payment of the purchase price, among other things. Petitioner Mario Torcuator acknowledged this fact when he testified that the deed of sale and original special power of attorney were only to be delivered upon full payment of the purchase price. As correctly observed by the trial court, the Salvadors did not execute a deed of sale in favor of petitioners, and instead executed a special power of attorney authorizing the Bernabes to sell the property on their behalf, in order to afford the latter a measure of protection that would guarantee full payment of the purchase price before any deed of sale in favor of petitioners was executed. Remarkably, the records are bereft of any indication that petitioners ever attempted to tender payment or consign the purchase price as required by law. On this score, even assuming that the agreement was a contract of sale, respondents may not be compelled to deliver the property and execute the deed of absolute sale. In cases such as the one before us, which involve the performance of an obligation and not merely the exercise of a privilege or right, payment may be effected not by mere tender alone but by both tender and consignation. The rule is different in cases which involve an exercise of a right or privilege, such as in an option contract, legal redemption or sale with right to repurchase, wherein mere tender of payment would be sufficient to preserve the right or privilege. Hence, absent a valid tender of payment and consignation, petitioners are deemed to have failed to discharge their obligation to pay. - Secondly, the parties clearly intended the construction of a residential house on the property as another suspensive condition which had to be fulfilled. The parties undoubtedly understood that they had to contend with the Ayala stipulation which is why they resorted to the execution of a special power of attorney authorizing petitioners to construct a residential building on the property in the name of the Salvadors. - Thirdly, there was neither actual nor constructive delivery of the property to petitioners. Apart from the fact that no public document evidencing the sale was executed, which would have been considered equivalent to delivery, petitioners did not take actual, physical possession of the property - The special power of attorney does not contain the essential elements of the purported contract and, more tellingly, does not even refer to any agreement for the sale of the property. Considering the ruling that the agreement was a contract to sell, respondents were not obliged to convey title to the property before the happening of 2 suspensive conditions, namely: full payment of the purchase price and construction of a residence on the property. They were acting perfectly within their right when they considered the agreement cancelled after unsuccessfully demanding payment from petitioners. 2. NO - The argument is Moot. The contract having been cancelled, any resolution regarding the validity of the stipulation requiring payment of the purchase price in foreign currency would not serve any further purpose. 3. NO - It should be emphasized that the proscription imposed by Ayala Corporation was on the resale of the property without a residential house having been constructed thereon. The condition did not require that the original lot buyer should himself construct a residential house on the property, only that the original buyer may not resell a vacant lot. In view of our finding that the agreement between the parties was a mere contract to sell, no violation of the condition may be inferred from the transaction as no transfer of ownership was made. In fact, the agreement in this case that petitioners will construct a residential house on the property in the name of the Salvadors (who retained ownership of the property until the fulfillment of the twin conditions of payment and construction of a residence) was actually in compliance with or obeisance to the condition. 4. NO - Wholly irrelevant. Having declared that the contract to sell in this case was aborted by petitioners' failure to comply with the twin suspensive conditions of full payment and construction of a residence, the obligation to pay taxes never arose.

BARENG V CA (ALEGRIA & RUIZ)

107 PHIL 641 REYES; April 25, 1960

NATURE Appeal by certiorari from a decision of the CA FACTS - On November 29, 1951, Bareng purchased from respondent Alegria cinematographic equipment for the sum of P15,000. - P10,000 was paid, and for the balance, Bareng signed four promissory notes falling due on separate dates. - The first promissory note was duly paid but shortly before the second note fell due, the other respondent, Agustin Ruiz informed petitioner that he was a co-owner of the equipment - Several days after, Ruiz instructed petitioner to suspend payments to Alegria as he was not agreeable to the sale. - Alegria sought to collect upon the second note, but petitioner refused to pay on account of Ruiz's claims. - Only P400 was paid on the second note and thereafter, petitioner refused to make any more payments to Alegria until the latter had settled his dispute with Ruiz. - On March 31, 1952, Ruiz filed suit against Alegria and petitioner Bareng for his share in the price of the cinema equipment. (Civil Case No. 1527) - On May 21, 1952, Alegria and Ruiz reached a compromise, wherein the former recognized the latter as co-owner of the equipment, and promised to pay him 2/3 of whatever amount he could recover - On May 28, 1952. Alegria sued Bareng for the amount of P13,500 representing the unpaid balance of the price of said equipment. (Civil Case No. 1554) - Bareng answered the complaint, alleging that only P3,600 had not been paid, and praying for the rescission of the sale for supposed violation by Alegria of certain express warranties, and asked for payment of damages. - The lower court, rendered judgment declaring Alegria and Ruiz co-owners of the cinema equipment, and dismissing the complaint against Bareng without prejudice to the co-owners' filing another action for the balance of the price of said equipment. - On appeal to the CA by both parties, the decision in Civil Case No. 1554 was reversed in and instead, Bareng was ordered to pay Alegria the sum of P3,600 plus legal interest from the filing of the complaint; and in Civil Case No. 1527, Alegria was ordered to pay Ruiz 2/3 of the total amount he would recover from Bareng in Civil Case No. 1554. - Petitioner appeals that part of the decision making him liable for legal interests on the principal amount due to Alegria ISSUE WON petitioner is liable for legal interests HELD YES - Petitioner Bareng claims he is not liable to pay interests to Alegria because he was justified in suspending payment from the time he learned of Ruiz' adverse claims over said equipment - The right of a vendee to suspend payment of the price of the thing sold in the face of any danger that he might be disturbed in its possession of ownership is conferred by Article 15904 - Petitioner Bareng had the right to suspend payment of the balance to his vendor, respondent Alegria, from the time he was informed by Ruiz of the latter's claims of coownership thereof, especially upon his receipt of Ruiz' telegram wherein the latter asserted that he was not agreeable to the sale.
4

ART. 1590. Should the vendee he disturbed in the possession or ownership of the thing acquired, or should he have reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price until the vendor has caused the disturbance or danger to cease xxx

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Disposition Appealed judgment is AFFIRMED.

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- Nevertheless, said right of Bareng ended as soon as "the vendor has caused the disturbance or danger to cease". - In this case, respondent Alegria had caused the disturbance or danger to petitioner's ownership or possession to cease when he (Alegria) reached a compromise with Ruiz in Civil Case No. 1527 whereby Ruiz expressed his conformity to the sale to Bareng, subject to the payment of his share in the price by Alegria. - From the time Alegria and Ruiz reached this settlement, there was no longer any danger of threat to Bareng's ownership and full enjoyment of the equipment he bought from Alegria. - Petitioner admitted his indebtedness to Alegria in the amount of P3,600, yet he did not tender payment of said amount nor did he deposit the same in court, but instead sought to have the sale rescinded upon claims of violations of warranties by Alegria, that the Court of Appeals found not to have been proved or established. - Petitioner Bareng was in default on the unpaid balance of the price of the equipment in question from the date of the filing of the complaint by Alegria, and under Article 2209 of the Civil Code, he must pay legal interests thereon from said date. - If petitioner had wanted to free himself from any responsibility for interests on the amount he had always acknowledged he still owed his vendor, he should have deposited the same in Court at the very start of the action. Disposition The decision appealed from is affirmed in toto.

333 SCRA 643 GONZAGA-REYES; June 16, 2000

NATURE Petition for Review on Certiorari seeking the reversal of the Decision of the Court of Appeals FACTS - The heirs of the late Francisco Laforteza executed a Special Power of Attorney in favor of Roberto Laforteza and Gonzalo Laforteza, appointing both as their Attorney-in-fact and authorizing them to JOINTLY sell the subject house and lot in Paraaque and sign any document for the settlement of the estate of the late Francisco Laforteza. In all the agency instruments, there was a provision wherein the signature of BOTH attorneys-in-fact must be affixed in any document or paper to exercise the special power of attorney granted. - The heirs entered into a Memorandum of Agreement (Contract to Sell) with Alonzo Machuca over the subject property for P630,000, with P30k payable as earnest money (forfeited if sale is not effected due to the fault of Machuca) and P600k payable upon the issuance of the new certificate of title in the name of the late Francisco Laforteza and upon execution of an extra-judicial settlement of the decedents estate with sale in favor of the Machuca. The MOA also contained a provision wherein upon the issuance of the new title, the Lafortezas would inform Machuca and the latter would have 30 days to produce the P600k which shall be paid to the Lafortezas upon execution of Extrajudicial Settlement with sale. During the period of the extrajudicial settlement, Machuca would be leasing the subject property for 6 months at P3500 per month. If the extrajudicial settlement would be through before 6 months, Machuca would only pay for the rent from the execution of the MOA to the date of the execution of the extrajudicial settlement. If settlement would still not be done after 6 months, Machuca would occupy the property without rent. - Machuca paid the earnest money. In September 1993 (almost 8 months after MOA execution), the Lafortezas wrote a letter to Machuca furnishing a copy of the reconstituted title to the subject property, reminding him that he had 30 days to produce P600k. After 30 days, Machuca sent to the Lafortezas a letter requesting the extension of the 30-day deadline to another 27 days within which to produce the balance. ONLY ROBERTO LAFORTEZA signed his conformity to the plaintiffs letter, Gonzalo did not appear to have approved the letter. - after 27 days, Machuca informed the Lafortezas that he already had the P600k. The Lafortezas however refused to accept the balance, saying that property is no longer for sale. They later cancelled the MOA although Machuca requested to tender payment of the balance. The Lafortezas insisted on the rescission of the MOA. - TC: in favor of Machuca - CA: in favor of Machuca - MFR denied, CA deci modified to absolve Gonzalo Laforteza from liability Petitioners arguments: (1) The MOA is merely a lease agreement with an option to purchase; (2) CA erred in ruling out rescission; (3) the MOA is a contract to sell, with a suspensive condition that Machuca would pay the price in full in order for transfer of ownership and possession to happen; (4) CA erred in holding that the nonpayment of P600k was only a slight/casual breach which would not allow for a rescission; (5) CA erred in ruling that they are not ready to comply with their obligation to transfer the property to Machuca when the power of attorney to execute a deed of sale was sufficient and necessarily included the power to execute an extrajudicial settlement, which the latter recognized by requesting for an extension to pay; and (5) the allegation that they did not want to sell the property because someone else wants to buy it at a higher price is hearsay and should not be given evidentiary weight.

LAFORTEZA V MACHUCA

98 SCRA 43 BENGZON; November 29, 1955

NATURE Petition for review of CFI Antique decision FACTS - Eusebio DELA CRUZ sued Apolonio LEGASPI and his wife to compel delivery of the parcel of land they had sold to him. It was alleged that defendants refused to accept the payment of the P450 agreed purchase price which DELA CRUZ tendered. Therefore, the spouses had no excuse to retain the property. - LEGASPI spouses admitted the sale and the price but they alleged that before the document was made, the plaintiff agreed to pay the defendants the amount of P450 right after the document is executed. Instead, plaintiff refused to do so. They claimed that document of sale should be annulled for lack of consideration and for deceit. - CFI ordered DELA CRUZ to pay P450 and the LEGASPI spouses to receive such price and deliver possession of property. ISSUE WON the contract became null and void for lack of consideration HELD NO Ratio Subsequent non-payment of the price at the time agreed upon did not convert the contract into one without cause or consideration: a nudum pactum. The situation was rather one in which there is failure to pay the consideration, with its resultant consequences. Reasoning - It cannot be denied that when the document was signed the cause or consideration existed, and this was P450. The document specifically said so, and this was undoubtedly the agreement. At most, there was default on his part for failing to pay the said amount. Defendants right was to demand interest (legal interest) for this delay OR to demand rescission in court. - NO stipulation that failure to pay ipso facto resolves contract. - NO agreement or allegation that payment on time was essential. - Even if contract expressly provided for automatic rescission upon failure to pay the price, contract is still enforceable because defendants had not made a previous demand (for rescission) on him, by suit or notarial act.

DELA CRUZ V LEGASPI

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ISSUES 1. WON the MOA was a lease agreement with an option to purchase 2. WON the failure of the respondent to pay the balance of the purchase price within the period allowed is fatal to his right to enforce the agreement 3. WON the Lafortezas were guilty of bad faith, and therefore the award for moral damages was justified HELD 1. NO - The MOA was a perfected contract of sale and lease. The 6month period during which Machuca would be in possession of the property as lessee, was clearly not a period within which to exercise an option Ratio A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. From that moment the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds; (2) determinate subject matter and (3) price certain in money or its equivalent. - An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. An option contract is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. An option must be supported by consideration. Reasoning - WHY PERFECTED CONTRACT OF SALE AND LEASE? The Lafortezas obligated themselves to transfer the ownership of and deliver the house and lot and Machuca would pay the price amounting to P600k. All the elements of a contract of sale were thus present. However, the balance of the purchase price was to be paid only upon the issuance of the new certificate of title in lieu of the one in the name of the late Francisco Laforteza and upon the execution of an extrajudicial settlement of his estate. This condition (issuance of new certificate of title and execution of extrajudicial settlement) was imposed only on the performance of the obligation (that the Lafortezas would deliver and transfer ownership of house and lot). Considering however that the condition already happened, Machuca already had a right to demand fulfillment of the obligation of the Lafortezas. - also, Machuca already paid P30k as EARNEST MONEY. Earnest money is something of value to show that the buyer was really in earnest, and given to the seller to bind the bargain. Whenever earnest money is given in a contract of sale, it is considered as part of the purchase price and proof of the perfection of the contract. [Article 1482, Civil Code.] - WHY NO OPTION TO PURCHASE? The 6-month period merely delayed the demandability of the contract of sale and did not determine its perfection for after the expiration of the 6-month period; there was an absolute obligation on the part of the petitioners and the respondent to comply with the terms of the sale. The parties made a "reasonable estimate" that the reconstitution of the lost title of the house and lot would take approximately six months and thus presumed that after six months, both parties would be able to comply with what was reciprocally incumbent upon them. The fact that after the expiration of the six-month period, the respondent would retain possession of the house and lot without need of paying rentals for the use therefor, clearly indicated that the parties contemplated that ownership over the property would already be transferred by that time. - THE MOA WAS NOT A CONTRACT TO SELL: A contract to sell is where the prospective seller would explicitly reserve the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the full payment of the price, such payment being a positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event which prevented the obligation from acquiring any obligatory force. There is clearly no express reservation of title made by the petitioners over the property, or

any provision which would impose non-payment of the price as a condition for the contract's entering into force. A deed of sale is absolute in nature although denominated a conditional sale in the absence of a stipulation reserving title in the petitioners until full payment of the purchase price. In such cases, ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof. The mere fact that the obligation of the respondent to pay the balance of the purchase price was made subject to the condition that the petitioners first deliver the reconstituted title of the house and lot does not make the contract a contract to sell for such condition is not inconsistent with a contract of sale. 2. NO - The Lafortezas were also not yet ready to comply with their obligation, and if ever they were, they did not make a judicial or notLarial demand for rescission for Machuca to be in delay. Ratio In reciprocal obligations, neither party incurs in delay if the other party does not comply or is not ready to comply in a proper manner with what was incumbent upon him. Rescission of a contract will not be permitted for a slight or casual breach, but only such substantial and fundamental breach as would defeat the very object of the parties in making the agreement. Reasoning - The failure of Machuca to pay within the period allotted was a breach and the extension which he requested was ineffective since it was only granted by 1 attorney-in-fact. However, the Lafortezas were also not ready to comply with their obligation to deliver the reconstituted title of the house and lot within the period they allotted (almost 8 months have passed before they informed Machuca of the reconstituted title and demanded payment). Therefore, since both of the parties were not yet ready to comply with their obligations, there is no delay. - granted that the Lafortezas were indeed ready to comply with their obligation, they still could not rescind the contract because they did not make a judicial or notarial demand in accordance with Article 1592, NCC, which governs the rescission of sale of immovable property. Machuca already offered to pay the balance when they demanded for rescission so under the same Article, their demand for rescission would not prosper. There was also no stipulation in the MOA expressly authorizing the Lafortezas to automatically cancel the contract without court intervention. - since the contract was not yet rescinded when Machuca first failed to pay and the 27 days delay in his payment was also due to the mistaken belief that the Lafortezas granted him an extension, there is no substantial breach as would defeat the very object of the parties in making the agreement. 3. YES Ratio Moral damages may be awarded in case of a breach of contract where the defendant acted in bad faith. Reasoning - CA found that the Lafortezas refused to comply with their obligation because they were offered a higher price for the house and lot. It was even found that their lawyer offered Machuca P100k to relinquish his rights over the property. Disposition Decision of the Court of Appeals in CA G.R. CV No. 47457 is AFFIRMED and the instant petition is hereby DENIED.

VALARAO V CA (ARELLANO)
394 SCRA 155 PANGANIBAN, J.; March 3, 1999

NATURE Petition for review assailing the decision of the CA FACTS - On September 4, 1987, spouses Abelardo and Gloriosa Valarao, thru their son Carlos Valarao as their attorney-in-fact, sold to Meden Arellano under a Deed of Conditional Sale a parcel of land situated in Diliman, QC with an area of 1,504 sq.m, for the sum of P3,225,000 payable under a schedule payment stated therein. - In the same Deed of Conditional Sale, the vendee obligated herself to encumber by way of real estate mortgage in favor of

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vendors her separate piece of property with the condition that upon full payment of the balance of P2,225,000.00, the said mortgage shall become null and void and without further force and effect. It was further stipulated upon that should the vendee fail to pay 3 successive monthly installments or any 1 year-end lump sum payment within the period stipulated, the sale shall be considered automatically rescinded without the necessity of judicial action and all payments made by the vendee shall be forfeited in favor of the vendors by way of rental for the use and occupancy of the property and as liquidated damages. All improvements introduced by the vendee to the property shall belong to the vendors without any right of reimbursement. - Arellano alleged that as of September 1990, she had already paid the amount of P2,028,000, although she admitted having failed to pay the installments due in October and November 1990. Arellano, however, tried to pay the installments due in the said months, including the amount due in the month of December 1990 on December 30&31, 1990, but was turned down by the petitioners thru their maid, Mary Gonzales, who refused to accept the payment offered. Arellano maintains that on previous occasions, the same maid was the one who received payments tendered by her. It appears that Gonzales refused to receive payment allegedly on orders of her employers who were not at home. - Arellano then reported the matter to, and sought the help of, the local barangay officials. Efforts to settle the controversy before the barangay proved unavailing as petitioners never appeared in the meetings arranged by the barangay lupon. Arellano tried to get in touch with petitioners over the phone and was able to talk with Gloriosa Valarao who told her that she would no longer accept the payments being offered and that Arellano should instead confer with her lawyer, a certain Atty. Tuazon. When all her efforts to make payment were unsuccessful, Arellano sought judicial action by filing this petition for consignation on January 4, 1991. - On the other hand, petitioners, thru counsel, sent Arellano a letter on January 4, 1991 notifying her that they were enforcing the provision on automatic rescission as a consequence of which the Deed of Conditional Sale was deemed null and void, and all payments made, as well as the improvements introduced on the property, were thereby forfeited. The letter also made a formal demand on Arellano to vacate the property, and to sign a contract of lease for her continued stay in the property, should she not heed the demand of petitioners. In reply, Arellano denied that she refused to pay the installments due in the months of October, November and December, and countered that it was petitioners who refused to accept payment, thus constraining her to file a petition for consignation before the RTC of QC. - Notwithstanding their knowledge of the consignation case against them, petitioners, through counsel, sent the Arellano another letter denying the allegations of her attempts to tender payment on December 30 and 31, 1990, and demanding that Arellanovacate and turnover the property and pay a monthly compensation for her continued occupation of the of the subject property rate of P20,000.00, until she shall have vacated the same. - The RTC ruled in favor of petitioners. Upon appeal, the CA reversed the RTC, ruling that: The refusal of petitioners "to accept the tender of payment was unjustified." The CA ordered: (1) Arellano to pay the amount of P1.197M in favor of petitioners, with legal interest thereon from December 31, 1992; (2) and petitioners to execute in favor of Arellano, upon receipt of the aforesaid amount, the final and absolute deed of sale of the subject property with all the improvements. ISSUES 1. WON the automatic forfeiture clause is valid and binding between the parties 2. WON rescission can be effected HELD 1. YES

We concede the validity of the automatic forfeiture clause, which deems any previous payments forfeited and the contract automatically rescinded upon the failure of the vendee to pay three successive monthly installments or any one yearend lump sum payment. However, petitioners failed to prove the conditions that would warrant the implementation of this clause. - Both the CA and the RTC agree that the facts are as stated by Arellano. It is clear from said facts that petitioners were not justified in refusing to accept the tender of payment made by Arellano on December 30 and 31, 1990. Had they accepted it on either of said dates, she would have paid all three monthly installments due. In other words, there was no deliberate failure on her part to meet her responsibility to pay. The Court takes notes of her willingness and persistence to do so, and, petitioners cannot now say otherwise. The fact is: they refused to accept her payment and thus have no reason to demand the enforcement of the automatic forfeiture clause. They cannot be rewarded for their own misdeed. - Because their maid had received monthly payments in the past, it is futile for petitioners to insist now that she could have accepted the aforementioned tender of payment, on the ground that she did not have a special power of attorney to do so. Clearly, they are estopped from denying that she had such authority. Under Article 1241 of the Civil Code, payment through a third person is valid "If by the creditor's conduct, the debtor has been led to believe that the third person had authority to receive the payment." 2. NO - It would be inequitable to allow the forfeiture of the amount of more than P2M already paid by private respondent, a sum which constitutes two thirds of the total consideration. Because she did make a tender of payment which was unjustifiably refused, petitioners cannot enforce the automatic forfeiture clause of the contract. Application of the Maceda Law - The rescission of the contract and the forfeiture of the payments already made could not be effected, because the case falls squarely under Republic Act No. 6552, otherwise known as the "Maceda Law." Section 3 of said law provides: "SEC. 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 payments 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 the rate of one month grace period for every year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any. "(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 percent every year but not to exceed ninety percent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. "Down payments, deposits or options on the contract shall be included in the computation of the total number of installments made." - Hence, the private respondent was entitled to a one-month grace period for every year of installments paid, which means that she had a total grace period of three months from December 31, 1990. Indeed, to rule in favor of petitioner would result in patent injustice and unjust enrichment. This tribunal is not merely a court of law, but also a court of justice.

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Disposition Petition is DENIED and the dispositive portion of the appealed decision of the CA is AFFIRMED.

ACTIVE REALTY & DEVT CORP V DAROYA

382 SCRA 152 PUNO; May 9, 2002

NATURE Petition for review on certiorari FACTS - Petitioner, Active Realty, is the owner and developer of Town & Country Hills Executive Village in Antipolo, Rizal. On Jan. 2, 1985, it entered into a Contract to Sell with respondent Daroya, a contract worker in the Middle East, whereby the latter agreed to buy a 515 sq.m. lot for P224,025 in petitioners subdivision - The contract to sell stipulated that the respondent shall pay the initial amount of P53,766 upon execution of the contract and the balance of P170,259 in 60 monthly installments of P4,893.35, adding up to P346,367, an amount higher than the stated price. - After a few months, respondent was in default of 3 monthly amortizations, prompting petitioner to send a notice of cancellation of their contract to sell. When respondent offered to pay the balance, petitioner refused as it allegedly sold the lot to another buyer. - Respondent then filed a complaint for specific performance and for damages against petitioner before the Arbitration Branch of thebHolusing and Land Use Regulatory Board (HLURB), seeking the execution of a final Deed of Absolute Sale after offering to pay the balance, considering she had already paid most of the total sum which was already more than the stated contract price. The HLURB arbiter ruled that since the subject lot was already sold to a third party and the respondent agreed instead to a full refund, petitioner was ordered to refund all of respondents payments with 12% interest per annum from the date of the filing of the complaint plus attorneys fees. - On appeal, the HLURB Board of Commissioners set aside the decision, instead finding that since both parties were at fault (i.e. respondent incurred delay in installments, petitioner failed to send notarized notice of cancellation), petitioner was ordered to pay only half of the total amount already paid to her, akin to the remedy provided under the Maceda Law (RA 6552) - On appeal with the Office of the President, the decision was modified as it was found that petitioner did not comply with the legal requisites for a valid contract and was ordered to deliver the lot upon payment of respondents balance. However, as the lot had been sold to a third person, petitioner was ordered to refund respondent P875,000, the true and actual value of the lot as of the date of the contract plus 12% p.a. or a substitute of the respondents choice. Both its petition for review and MFR were denied, the former for insufficiency of fomr and substance, and the latter for untimely filing. Hence this petition, impugning the CAs decision on the ff procedural issues: ISSUE WON the petitioner can be compelled to refund to the respondent the value of the lot or deliver a substitute lot at the respondents option HELD YES - The contract to sell in this case is governed by RA 6552 (Realty Installment Buyer Protection Act), better known as the Maceda Law. Its declared public policy is to protect buyers of real estate on installment basis against onerous and oppressive conditions. Most of these contracts of adhesion (take it or leave it basis), drawn exclusively by the developers, entrap innocent buyers by requiring cash deposits for reservation agreements which often include, in fine print, onerous default clauses where all the installment payment already made will be forfeited upon failure to pay any installment, even though several, if not most

payments have already been made, thus giving real estate developers an unfair advantage over these exploited buyers. - More specifically, Section 3 of R.A. No. 6552 provides for the rights of the buyer in case of default in the payment of succeeding installments, where he has already paid at least two (2) years of installments, thus: "(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made; x x x (b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made; provided, that the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer." - in the case at bar, respondent had already paid 4 years worth of installments, which added up to P90,000 more than the price stated in the contract. Petitioner refused to accept respondents subsequent payment as it had already sold the lot to a third party; however, records show that petitioner failed to comply with the mandatory twin requirements of a valid cancellation, (1) failing to send a notarized notice of cancellation (2) refund the cash surrender value. - Thus, for failure to cancel the contract in accordance with the law, the contract remained subsisting. Following RA 6552, respondent has the right to offer to pay the balance without interest. However, since the lot had been sold to a third party, it is only just and equitable that petitioner be ordered to refund to respondent the actual value of the lot resold at P875,000 +12% interest p.a. from the filing of the complaint or to deliver a substitute lot at the respondents option. - On a final note, the HLURBs decision to grant respondent only half of the amount paid would not be equitable as it punished respondents delinquent payments but disregarded petitioners failure to comply with the requisites of cancellation. The decision to refund the original price would also be inequitable since respondent is entitled to the lot purchased, depriving her of what was rightfully hers. Disposition Decision of the Office of the President is AFFIRMED

Chapter 11: WARRANTIES

37 PHIL 254 STREET; December 4, 1917
FACTS - In Dec. 1915, the defendant George Sellner, was the owner of a sugar farm at FloridaBlanca, Pampanga adjacent to another sugar farm owned by plaintiff Lamberto Songco. Sellner wished to mill his cane at a sugar central in nearby Dinalupijan but the owners of the mill would not promise to take it. Sellner found out that the central was going to mill Songcos cane and decided to buy it and run his own cane at the same time the latters cane was to be milled. Sellner also desired to get a right of way over Songcos land for converting his own cane to the central. He bought the cane for an agreed sum of P12,000 and executed 3 promissory notes of P4,000, paying for two; an action was instituted to recover the 3rd for which a judgment was rendered in favor of the plaintiff and to which defendant has appealed. - The defendant denied all allegations of the complaint, further asserting by way of special defense that the defendant obtained the note by means of fraudulent representations. The note, on which the action was brought, was admitted in court as evidence. ISSUES

SONGCO V SELLNER

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1. WON the court erred in admitting the note as evidence even though its genuineness and due execution were not proven 2. WON plaintiff is guilty of false representation HELD 1. NO - Under Sec 103 of the Code of Civil Procedure, it is necessary that the genuineness and due execution of a written instrument be specifically denied by the defendant under oath before such an issue is raised. The answer to the effect that the note was procured by fraudulent representation is actually an admission of its genuineness and due execution since it seeks to avoid the instrument on a ground not affecting either. Furthermore, the defendant admits the notes execution in his answer. 2. NO - Songco estimated that his cane would produce 3,000 piculs of sugar but instead produced 2,017. Although Songco had grossly exaggerated his estimate, the court finds that Sellner is still bound to pay the price stipulated. Matters of opinion, judgment, probability or expectation are not actionable deceits and cannot void a contract. Jurisprudence dictates that one may not rely on a vendors misrepresentations as to the value of his goods if that person is given an ample opportunity to investigate/examine the goods. Using expert knowledge to take advantage of the ignorance of another may be grounds for relief; however, the court finds Sellners relative inexperience lacking. - An incident to the action was that the plaintiffs sued out an attachment against the defendant on the ground that he was disposing of his property in fraud of his creditors. This was refuted upon a showing that defendant had not attempted to convey away his property, and thus damages were awarded to him equal to the cost of procuring the dissolution of the attachment. The defendant assigns error to the courts refusal to award further damages, claiming that the attachment caused a creditor to withhold credit, forcing him to sell sugar at lower prices and losing money. The damages were remote and speculative; the plaintiff cannot be held accountable for such complications leading to said damages. Disposition From what has been said it follows that the judgment of the court below must be affirmed, with costs against the appellant.

No. 2 in which the shipment in question was carried. Samples were taken and submitted to Bureau of Science for analysis. - On the arrival of the Acme at Norfolk, the Portsmouth Cotton Oil Refining Corporation refused to accept the oil on the ground that it was contaminated with cottonseed oil and, in accordance with the contract between the Parties the matter was submitted to the New York Produce Exchange Arbitration Committee for arbitration. Samples alleged to have been taken from the shipment were tested by the Bureau of Chemistry of the New York Produce Exchange through the so-called Halphen test, and were found to be contaminated with cottonseed oil. - Because of this, the Committee, with the knowledge of Go Jucco, placed the oil in the hands of Zimmermann Alderson Carr Company for sale and sale was effected two days later to Messrs. Proctor & Gamble Company. - Though the price at which the oil was sold to Proctor & Gamble Co. was considerably higher than the price agreed upon with the Portsmouth Cotton Oil Refining Corporation, the expenses for rent of cars, transportation, brokerage, etc., greatly exceeded the difference and the plaintiff maintains that it suffered a loss of P21,263.04. Thus, PMC instituted a Civil Action against Go Jucco to recover damages. ISSUE WON Go Jucco is liable to pay damages HELD NO - There are three possible causes of action against Go Jucco, namely; (1) action on an express warranty; (2) action on an implied warranty; (3) action on fraud under article 344 of the Code of Commerce. However, the Court Go Jucco not liable in any of the three actions. - On action on an express warranty Assuming that such contamination existed, we would still be of the opinion that the plaintiff has established no cause of action. The comparatively small quantity of kapok oil alleged to have been mixed with the coconut oil can only be regarded as an impurity and did not change the essential character of the merchandise; In contradistinction to the contract between the plaintiff and the Portsmouth Cotton Oil Refining Corporation, the contract of sale between the plaintiff and the defendant contains no express warranty against impurities aside from the stipulation that not more than 5 per cent of free fatty acid would be allowed. This is, therefore, not an action on an express warranty. Besides, PMC examined the oil at the time of its delivery and it conceded without admitting that the oil was defective in quality. - On action on an implied warranty Ratio In the absence of an examination of the oil by the plaintiff, the latter might have had a right of action on an implied warranty under article 336 of the Code of Commerce, which in part reads as follows: "A purchaser who, at the time of receiving the merchandise, fully examines the same, shall not have a right of action against the vendor, alleging a defect in the quantity or quality of the merchandise." - As it appears that the plaintiff examined the oil to his satisfaction, it is evident that he cannot now rely on this article for his cause of action. - The result will be the same if we regard the impurity complained of as a latent defect which could not be discovered by an ordinary examination. The case would then come under article 342 of the Code of Commerce, but the right of action mentioned in that article was extinguished by the failure of the plaintiff to present his claim within thirty days from the delivery of the merchandise - On action on fraud Go Jucco is not guilty of fraud. Ratio Article 344 of the Code of Commerce provides that, "Commercial sales shall not be rescinded by reason of lesion; but the contracting party who acted with malice or fraud, in the contract or in its fulfillment, shall indemnify for loss and damage, without prejudice to the criminal action which may be proper." - Fraud is defined as "a false representation of fact, made with a knowledge of its falsehood, or recklessly, without belief in its

PHILIPPINE MANUFACTURING CO V GO JOCCO

48 PHIL 621 OSTRAND; January 21, 1926

FACTS - The plaintiff and the defendant entered into the contract of sale of 500 tons of oil coconut oil for 27 centavos per kilo ex tanque. However, before the payment was given by the PMC, it ordered the taking of samples of oil from the tanks for analysis. The tests yielded satisfactory results, thus the full amount of P137,500.00 was paid by PMC. - On the following month, PMC sold the oil by contract in writing to the Portsmouth Cotton Oil Refining Corporation at the price of $7.50, United States currency, per 100 pounds, C. I. F., Norfolk, Virginia, the contract containing the following provision as to the quality of the oil: - "Coconut Oil bases 5 per cent free fatty acid, Maximum 7 per cent free fatty acid shall be fair average of the season of the country in which it is pressed, and shall be sold on basis 5 per cent free fatty acid, one per cent moisture and impurities; provided, however, that any oil which exceeds 5 per cent free fatty acid but does not exceed 7 per cent free fatty acid, shall not be rejected but shall be reduced in price one half of one per cent for each one per cent excess acidity over 5 per cent, fractions in proportion." - The oil was drawn from the tanks by the plaintiff and brought aboard the tank steamer Acme for shipment to the Portsmouth Cotton Oil Refining Corporation at Norfolk, Virginia. Mr. Ericksen, marine and cargo surveyors, surveyed the ship's tank

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truth, with the intention that it should be acted upon by the complaining party, and actually inducing him to act upon it." - Concealment of the truth is sometimes equivalent to false representations, and it is here argued that the defendant in not disclosing the existence of kapok oil in the oil sold to the plaintiff, was guilty of fraud. In regard to such concealments or nondisclosures, Mechem, citing authorities, says: "The concealment which shall amount to a false represention is that only which may properly be designated as active. Mere passive non-disclosure which, as has been seen, may suffice to vitiate a contract uberrimae fidei, will not be sufficient here; 'there must be an active attempt to deceive, either by a statement which is false or which is true so far as it goes, but is accompanied with such a suppression of facts as to convey a misleading impression.' 'There must be some active misstatement of fact, or, at all events, such a partial and fragmentary statement of fact as that the withholding of that which is not stated makes that which is stated absolutely false.' . . Reasoning - There is nothing from which we can presume that the defendant intended to mislead the plaintiff to his prejudice. It is not disputed that at the time the sale was made, kapok oil commanded a higher price in the market than did coconut oil and the defendant may well have been under the impression that a slight admixture of kapok oil did not substantially impair the general market value of the oil purchased. Indeed, there is nothing in the evidence to show that for ordinary purposes, the coconut oil suffered any material impairment in value from the mixture and it is to be observed that the defendant was not advised of the fact that the oil was sold to the Portsmouth Cotton Oil Refining Corporation under an express warranty against impurities and possibly for a special purpose. That it was still of good merchantable quality clearly appears from the fact that it was bought by Proctor & Gamble Co. at current market prices. And when it is further considered that the plaintiff, before purchasing, was given full opportunity to examine the oil and actually did so, it seems obvious that the evidence is not sufficient to overcome the presumption of good faith and to establish fraud on the part of the vendor. In commercial sales, the fact that the vendor does not volunteer detailed statements of all he knows, whether important or not, in regard to the goods sold by him, is not fraud per se.

ISSUE WON the plaintiff may recover the value of the coconut trees stipulated in the contract HELD - Misrepresentation of the number of the trees on the said lot was not proven. It does not appear in the record that the defendant deliberately violated the truth in stating his belief that there were such a number of coconut trees on said lands. Furthermore, it was shown that the plaintiff viewed the lands and he estimated that there were there more than six thousand coconut trees. - The facts considered in the light of the provisions contained in Art 1484 CC, made applicable to this case by Art1541 CC, prevent us from holding the action brought by the plaintiffs to be of any merit. They have not established their alleged right to the judgment prayed for in their complaint. - As to the cross-complaint and counterclaim of the defendant, we find that in the deed executed by the plaintiffs in favor of the defendant, the former agreed to reimburse the latter what he might pay in connection with perfecting his title to the property in Pasay, exchanged for that of the defendant in Masbate, provided that the sum thus spent should exceed P1,500.The plaintiffs also admitted the fact that for perfecting his title to the property, the defendant had spent the total sum of P1,914; there being, therefore, an excess of P414 which the plaintiffs are under obligation to pay unto the defendant. Disposition Wherefore the judgment appealed from is affirmed so far as it absolves the defendant from the complaint, but reversed so far as it dismisses the cross-complaint and counterclaim, and it is ordered that the plaintiffs pay the defendant the sum of P414, without special finding as to costs.

MENDOZA V CAPARROS
94 PHIL 317 PABLO; January 30, 1954

47 Phil 687 ROMUALDEZ; March 20, 1925

NATURE A petition to recover a sum of 17,655 for coconut trees and attys fees. Counterclaim for P1,914 paid by the defendants and which must be paid by the plaintiffs FACTS - The plaintiffs had purchased a land of the Pasay Estate by installments. The defendant was the owner of two parcels of land situated in Masbate. Both parites agreed to exchange their respective properties, but before the final execution of the contract of exchange, the plaintiff Gochangco went to Masbate to make an examination of the parcels of land offered for exchange by the defendant. - The contract of exchange was later executed. In the deed, the defendant stated, among other things: "It is also declared that the said described property is sold with all coconut trees growing on it, and I declared that I believe there are more than 6,000 coconut trees so growing, together with any and all improvements of any kind whatsoever existing on the said land including all movable goods, chattel, etc., found thereof." - The plaintiffs allege that defendant made them false and fraudulent representations as to the existence of 6,000 coconut trees on his lands.

GOCHANGCO V DEAN

FACTS - On June 11, 1921, Agapito Ferrera sold to Paulino Pelejo 2 parcels of land located in Camagon, Quezon for P3, 650. On Feb. 15, 1932, Pelejo sold the same land to spouses Victorian Mendoza and Bernabela Tolentino. The spouses passed away and their heirs Pedro, Leandro, and Justiniano (all Mendozas) did an extrajudicial partition. - In 1935, Ferreras obtained th original certificate title. When he died, his heirs trasferred the title and had an extra-judicial partition. ISSUE WON Mendozas are the real owners of the land and not Ferrerass wodiw Caparros and their daughters HELD YES The court sustained the decision of the lower court to cancel the certificate of transfer and register it under the Mendozas. It was said that neither suits for annulment of sale, or title, or document affecting property operate to abate ejectment actions respecting the same property. Disposition Judgment affirmed.

14 Phil 294 MORELAND; October 19, 1909

FACTS

RODRIGUEZ V FINDLAY

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- Plaintiff was the owner of a freight ship called the Constancia, then in course of construction in plaintiff's shops in the city of Manila. - William Swann was the consulting engineer of the defendant, in charge of its machinery department. - The plaintiff was acquainted with Swann and knew him to be an engineer and naval architect of long experience. On the date referred to Rogaciano Rodriguez, acting for and on behalf of the plaintiff and as his agent, made a written contract with Swann, acting for and on behalf of the defendant and as its agent, wherein and whereby the plaintiff agreed to purchase of the defendant, and the defendant agreed to sell and deliver to the plaintiff, certain machinery, complete, for the ship Constancia. - During the negotiations, Swann, the agent of the defendant, visited the shipyard of the plaintiff and inspected the steamship Constancia, then being constructed. This he did several different times. The inspections were made for the purpose of determining the kind and nature of the machinery which would be suitable to the ship referred to. Neither the plaintiff nor his agent, Rogaciano Rodriguez, was a marine or other engineer and they knew little or nothing about the kind of machinery which should be placed in the ship they were building. They relied entirely upon the recommendations, knowledge, and experience of the engineer Swann. - Before the contract was entered into, the plaintiff delivered to Swann, as the defendant's agent, a plan of the hull of said vessel. Thereafter Swann delivered to the plaintiff a plan of the entire vessel, showing the machinery placed therein. The plans in question showed length and breadth of the hull, its general outline and the number of feet of water which it drew. These plans also showed location and outline of the sternpost and rudderpost of said ship. - In the process of manufacturing the propeller the defendant thought it discovered that the propeller described in the contract would not give the speed required by the contract and notified the plaintiff to that effect, and at the same time asked permission to put in its place a propeller 10 feet in diameter. This the plaintiff declined to permit. - The machinery was delivered. Certain other articles of small value, necessary for the completion of the machinery, seem not to have been delivered, but concerning these there is very little dispute between the parties. - The machinery was duly installed in the vessel upon its delivery. Upon the trial of the ship, after the installation of its machinery, it was found that all of the machinery worked well except the propeller. This, instead of giving the ship a speed of about 9 knots an hour, gave a speed of less than 7 knots an hour. - Plaintiff: the defendant was obliged to furnish a propeller 8 feet in diameter which would give the Constancia a speed of 9 knots an hour, and that, failing in that, the contract was broken and the defendant should be held liable for all damages resulting. - Defendant: the machinery was to be according to the specifications in the contract and that, if these specifications were complied with, it does not matter what may be the actual speed of the vessel. It had nothing to do with the construction of the steamship or the placing therein of the machinery. There was no guaranty of speed, and that, if the propeller was 8 feet in diameter and of brass, it would fulfill the terms of the contract even though the speed of the vessel should not exceed a knot an hour. ISSUE WON the defendant failed to comply with the terms of the contract in respect to the propeller therein describe, and the plaintiff, in consequence, is entitled to recover appropriate damages by reason thereof HELD YES - The contract, by its words, expressly requires that the defendant must furnish a propeller which shall give to the steamship Constancia a speed of about 9 knots per hour.

- The language of the contract is so plain, and the negotiations leading up to the execution of the contract point in one direction so clearly, that there ought to be little need of discussion. But the parties have insisted so strongly upon the justice of their several contentions that a detailed discussion is considered advisable. - Swann was a naval architect and marine engineer of long experience, which fact was known to the plaintiff and his agent, and the general details relative to the kind and character of the machinery were left to the defendant. The thing mainly insisted upon by the plaintiff was the result that should be produced. The plaintiff himself testifies, and this is undisputed by the defendant, that he relied upon Swann in these particulars, especially in reference to the propeller and the pitch which it should have; and, by reason of the reliance, the pitch in feet and inches which the propeller should have when placed in the ship was not stated in the contract. Instead, the plaintiff placed in the contract what the propeller should do, rather than what it should be. - The contention of the defendant that the propeller was so constructed as to have a speed of 11 knots an hour is absurd. In other words, the contention of the defendant is that a guaranty in a contract to give a ship a speed of 20 knots an hour is complied with if there is furnished to that ship a propeller with a pitch, which, multiplied by certain figures and divided by others, would produce twenty somethings at the conclusions of the calculation, and this absolutely regardless of whether the ship on which the propeller is to be placed is a war ship or a pleasure yacht, whether it is 100 or 1,000 feet long, 10 feet or 100 feet wide, whether it draws 5 feet or 60 feet of water and wholly regardless of the form of the vessel's hull. It is recognized by all authorities upon the construction of steamships that "the most important point to be considered in propulsive efficiency is the shape of the vessel's hull." In respect of speed this is one of the greatest problems and one of the most perplexing with which marine engineers have to deal. The defendant, by its contention, avoids all the trouble of figuring out this difficult problem by simply giving a speed to its propeller. - Before the contract was signed, the defendant, and it agent, Swann, were furnished with a plan or plans of the bull of the vessel, showing the sternpost and the rudderpost fully and fairly; that Swann had himself inspected the vessel several times at the yard where it was being built and knew all about the said sternpost and rudderpost and their relative locations. Yet, with that plan in his hand and with that knowledge in his head, he nevertheless, made a contract in which he agreed to furnish a propeller which would give a speed of 9 knots an hour to that very ship. - The events proved the contentions of the expert Swann to be wholly unfounded when he claimed that the reason why the propeller would not work was because of its position between the sternpost and the rudderpost. The trial of the propeller furnished by the defendant having demonstrated that it was ineffective and that its pitch was too coarse and it area too great for the purposes specified in the contract, the plaintiff placed in the steamship another propeller in exactly the same position in the vessel as the other, with a diameter only 6 inches more than the diameter of the propeller furnished by the defendant, and the vessel immediately attained a speed of 9 knots, or thereabouts, per hour. It is thus apparent that the expert Swann again made a serious mistake in claiming that the failure of speed was due solely to the place in which the propeller worked. - The damages recoverable of a manufacturer or dealer for the breach of warranty of machinery which he contracts to furnish or place in operation for a value of the machinery as warranted and as it proves to be, but include such consequential damages as are the direct, immediate, and probable result of the breach (30 Am. and Eng. Ency. of Law, p. 217, and cases there cited.) - The loss of the buyer's time and of that of his laborers resulting from he breach is recoverable where the circumstances of the sale were such as to have put the seller upon notice that such a loss would probably result from a breach. - Indemnity for losses and damages includes not only the amount of the loss which may have been suffered, but also that of the profit which the creditor may have failed to realize. (Art. 1106, Civil Code.)

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- The losses and damages for which a creditor in good faith is liable are those foreseen, or which may have been foreseen, at the time of constituting the obligation, and which may be a necessary consequence of its non-fulfillment. (Art. 1107, Civil Code.) - In an action against a manufacturer or dealer for a breach of warranty upon a sale of goods, which he knew at the time of the sale were intended to be used for a particular purpose, the measure damages is not limited to the difference in value of the goods as warranted, and as they prove to be, as in cases where like articles are sold as merchandise for general purposes; but profits lost and expenses incurred, because of the breach, may be recovered. - Plaintiff is entitled to recover P375, the value of 30 tons of coal consumed in the trials necessarily made to determine whether or not the propeller had the qualities specified in the contract; also the sum of P707, the wages of employees and other necessary expenses incurred during said trials. - The plaintiff not having presented competent proof as to the loss he sustained by reason of his ship being out of commission during the time intervening between the trial of the first propeller and the installation of the second, nothing can be awarded him as damages in relation thereto. He is, however, entitled to be allowed as damages the sum of P2,770.36, the amount paid by him for the first propeller, as its purchase price, the same being worthless to him for the purpose of which he bought it said propeller to be and remain the property of the defendant, with the right to retake the same if it has not already done so.

- Songco estimated that his cane would produce 3,000 piculs of sugar but instead produced 2,017. Although Songco had grossly exaggerated his estimate, the court finds that Sellner is still bound to pay the price stipulated. Matters of opinion, judgment, probability or expectation are not actionable deceits and cannot void a contract. Jurisprudence dictates that one may not rely on a vendors misrepresentations as to the value of his goods if that person is given an ample opportunity to investigate/examine the goods. Using expert knowledge to take advantage of the ignorance of another may be grounds for relief; however, the court finds Sellners relative inexperience lacking. - An incident to the action was that the plaintiffs sued out an attachment against the defendant on the ground that he was disposing of his property in fraud of his creditors. This was refuted upon a showing that defendant had not attempted to convey away his property, and thus damages were awarded to him equal to the cost of procuring the dissolution of the attachment. The defendant assigns error to the courts refusal to award further damages, claiming that the attachment caused a creditor to withhold credit, forcing him to sell sugar at lower prices and losing money. The damages were remote and speculative; the plaintiff cannot be held accountable for such complications leading to said damages. Disposition From what has been said it follows that the judgment of the court below must be affirmed, with costs against the appellant.

Chapter 12: BREACH OF CONTRACT

37 PHIL 254 STREET; December 4, 1917
FACTS - In Dec. 1915, the defendant George Sellner, was the owner of a sugar farm at FloridaBlanca, Pampanga adjacent to another sugar farm owned by plaintiff Lamberto Songco. Sellner wished to mill his cane at a sugar central in nearby Dinalupijan but the owners of the mill would not promise to take it. Sellner found out that the central was going to mill Songcos cane and decided to buy it and run his own cane at the same time the latters cane was to be milled. Sellner also desired to get a right of way over Songcos land for converting his own cane to the central. He bought the cane for an agreed sum of P12,000 and executed 3 promissory notes of P4,000, paying for two; an action was instituted to recover the 3rd for which a judgment was rendered in favor of the plaintiff and to which defendant has appealed. - The defendant denied all allegations of the complaint, further asserting by way of special defense that the defendant obtained the note by means of fraudulent representations. The note, on which the action was brought, was admitted in court as evidence. ISSUES 1. WON the court erred in admitting the note as evidence even though its genuineness and due execution were not proven 2. WON plaintiff is guilty of false representation HELD 1. NO - Under Sec 103 of the Code of Civil Procedure, it is necessary that the genuineness and due execution of a written instrument be specifically denied by the defendant under oath before such an issue is raised. The answer to the effect that the note was procured by fraudulent representation is actually an admission of its genuineness and due execution since it seeks to avoid the instrument on a ground not affecting either. Furthermore, the defendant admits the notes execution in his answer. 2. NO

SONGCO V SELLNER

LEVY HERMANOS V GERVACIO

69 Phil 52 MORAN; 1939

NATURE Appeal from a decision of the Manila CFI FACTS - On March 15, 1937, appellant sold to defendant a Packard car. The defendant, after making an initial payment, executed a promissory note for the balance of P2,400 payable on or before June 15, 1937. As security for the PN, defendant mortgaged the car to the appellant. Defendant failed to pay the note on maturity snd the plaintiff foreclosed the mortgage and the car was sold at a public auction for P800.00. The present action is for collection of the balance of P1,600 plus interest thereon. The lower court ruled in favor of the defendant applying the provision which stated that in the contract for the sale of personal property payable in installments, failure to pay two or more installments shall confer upon the seller the right to cancel the sale or foreclose the mortgage if one has been given on the property, without reimbursing the buyer for any amounts already paid. It was lakewise state in the provision that should the mortgaged property be foreclosed , the buyer shall have no more recourse to the buyer for recovery of any unpaid balance. ISSUE WON the appellant is still entitled to recover balance of the note HELD YES - From the terms of the agreement, the SC held that the sale is not on installment but rather on straight term. The balance after the initial payment should be paid in its totality at the time specified in the PN. The prohibition on recovery of the balance after foreclosure is not applicable. Disposition The lower court decision is reversed.

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BORBON V SERVICEWIDE SPECIALISTS, INC

NATURE Appeal from decision of CA which affirmed RTC Manila decision which confirmed the disputed possession of a motor vehicle in favor of respondent and ordered payment of liquidated damages FACTS - December 7, 1984, Daniel L. Borbon and Francisco Borbon signed a promissory note stating > I/We jointly and severally promised to pay Pangasinan Auto Mart, Inc. P122,856.00 without need or notice or demand, in installments of P10,238.00 monthly for 12 months due and payable on the 7th day of each month starting January 1985, with late payment charge of 3% per month to be added, default charge entailing attorney's services is 25% of the total sum due and liquidated damages amounting to 25% of the total sum due. Acceptance of payment of any installment after due date shall not be considered as extending the time for the payment nor shall failure to exercise any right constitute a waiver of such rights - to secure the Promissory Note, the Borbons executed a Chattel mortgage on a brand new Isuzu Crew Cab - December 10, 1984 - rights of Pangasinan Auto Mart, Inc. was assigned to Filinvest Credit Corporation with notice to the Borbons - March 21, 1985 - Filinvest Credit Corporation assigned all its rights, interest and title over the Promissory Note and the chattel mortgage to Servicewide Specialists - Borbons failed to comply with their obligation thus Servicewide Specialists demanded from Borbons the payment of their installments due in January 29, 1985 by telegram - Servicewide Specialists sent a demand letter to Borbons for them to pay their entire obligation which, as of March 12, 1985, totaled P185,257.80 - For their defense, Borbpns claim that what they intended to buy from Pangasinan Auto mart was a jeepney type Isuzu Cab but through misinterpretation and machination Pangasinan Motor Inc. delivered an Isuzu crew cabthe only available unit Borbons claim: > they are not in default of their obligation because Pangasinan Auto Mart was the first guilty party by not fulfilling its obligation in the contract > neither party incurs delay if the other does not comply with his obligation [A1169 CC] - In their appeal to this Court, petitioners merely seek a modification of the decision of the appellate court insofar as it has upheld the award of liquidated damages and attorney's fees in favor of Servicewide Specialists. Borbons invoke A1484 CC which reads: Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage or 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. ISSUE WON A1484 CC applies to attorneys fees and liquidated damages HELD YES - remedies under Article 1484 of the Civil Code are not cumulative but alternative and exclusive

> Nonato vs. Intermediate Appellate Court and Investor's Finance Corporation . . . Should the vendee or purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or seller has the option to avail of any of these three remedies either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as alternative, not cumulative, that the exercise of on e would bar the exercise of the others. - The creditor may not thereafter exercise any other option, unless the chosen alternative proves to be innefectual or unavailing due to no fault on his part. For instance, in A1484 CC, it is only when there has been a foreclosure of the chattel mortgage that the vendee-mortgagor would be permitted to escape from a deficiency liability. - A1484 CC: the vendor-mortgagee or its assignees loses any right "to recover any unpaid balance of the price" and any "agreement to the contrary (would be) void. > Macondray & Co. vs. Eustaquio: , we have said that the phrase "any unpaid balance" can only mean the deficiency judgment to which the mortgagee may be entitled to when the proceeds from the auction sale are insufficient to cover the "full amount of the secured obligations which include interest on the principal, attorney's fees, expenses of collection, and the costs." > Luneta Motor Co. vs. Salvador: legislative intent is not to merely limit the proscription of any further action to the "unpaid balance of the principal" but to all other claims that may be likewise be called in for in the accompanying promissory note against the buyer-mortgagor or his guarantor, including costs and attorney's fees. > Filipinas Investment & Finance Corporation vs. Ridad: mortgagor unjustifiably refused to surrender the chattel subject of the mortgage upon failure of two or more installments, or if he concealed the chattel to place it beyond the reach of the mortgagee, that thereby constrained the latter to seek court relief, the expenses incurred for the prosecution of the case, such as attorney's fees, could rightly be awarded. - Given the circumstances, we must strike down the award for liquidated damages made by the court a quo but we uphold the grant of attorney's fees which we, like the appellate court, find it to be reasonable. Disposition Appealed decision is MODIFIED by deleting the award for liquidated damages; in all other respects, the judgment of the appellate court is AFFIRMED

MANILA TRADING AND SUPPLY CO V SANTOS

62 Phil 461 IMPERIAL; September 26, 1938

NATURE The defendants appealed from the decision of the court sentencing them to pay the plaintiff the sum of P1,897.55 for the deficiency between the amount of the actual debt and the proceeds from the auction. FACTS - On October 3, 1933, the plaintiff sold to the defendants a "Ford Truck chassis, Model BB, 157-WB, L. S. Dual Wheels standard equipment." For the unpaid balance of the price amounting to P2,200, the defendants executed twenty promissory notes, the first three for P150 each and the others for P100 each, payable successively on the 16th of every month beginning November 16, 1933. The defendants also bound themselves to pay interest at 12 per cent per annum. To secure these promissory notes, the defendants mortgaged to the plaintiff the "Ford Truck chassis" and accordingly executed on the same date the corresponding instrument which was acknowledged before a notary public on the 9th of the same month and later registered in the office of the registrar of deeds. As the defendants failed to pay any of the promissory notes, the plaintiff attached the chattel mortgaged, which was sold by the sheriff at public auction on February 24,

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1934, in accordance with Act No. 1508, for the sum of P700 in favor of said plaintiff who was the highest bidder. The plaintiff credited the defendants with said amount, as a result of which the latter still owed P1,897.55. The plain-tiff instituted the present action for the purpose of collecting this balance with its interest. In their answer the defendants set up the special defense that plaintiff's action cannot prosper because it is contrary to Act No. 4122. ISSUES 1. WON 4122 has a retroactive effect 2. WON the plaintiff is entitled to a deficiency judgment in accordance with Act No. 1508 HELD 1. NO - It is a legal principle embodied in article 3 of the Civil Code that laws have no retroactive effect unless it is otherwise provided therein. It is conceded that there is nothing in Act No. 4122 which states that its provisions have retroactive effect. In criminal law the principle of irretroactivity equally applies, except when the penal provisions are favorable to the accused (article 22, Revised Penal Code). As a corollary principle, rights and obligations are governed by the law by which they are created (article 1090, Civil Code). Rights and obligations arising from contracts have the force of law between the contracting parties and are governed by their stipulations (article 1091, Civil Code), and consensual agreements are binding provided they are not contrary to law, morals or public order (article 1255, Civil Code). In accordance with the rule of irretroactivity, Act No. 4122 is not applicable to this case, for the reason that the mortgage which gave rise to the plaintiff's rights was executed on October 3, 1933 and the aforesaid Act took effect only on December 9, 1933. The contention that said Act must be applied because the present action was instituted when it was already effective, cannot be sustained. The action is the correlative of a right and is nothing more than a remedy conceded by law to protect that right. If the plaintiff was entitled to a deficiency judgment under Act No. 1508, this right already existed when Act No. 4122 was approved and cannot be affected by the prohibition contained in the latter Act. 2. Section 14 of Act No. 1508 provides, with regard to the application of the proceeds of the sale of the chattels mortgaged, as follows: . . . The proceeds of such sale shall be applied to the payment, first, of the costs and expenses of keeping and sale, and then to the payment of the demand or obligation secured by such mortgage, and the residue shall be paid to persons holding subsequent mortgages in their order, and the balance, after paying the mortgages, shall be paid to the mortgagor or person holding under him on demand. - Which simply shows that the contention of the appellant is untenable. - But where the same question now raised by the appellant was directly solved is in Bank of the Philippine Islands vs. Olutanga Lumber Co. (47 Phil., 20). In that case there was raised the question whether or not a creditor, holding a chattel mortgage as security for the payment of the debt, may maintain an action for the recovery of the balance remaining unpaid after the foreclosure of the mortgage. This court decided this question in the affirmative. In the body of the decision the court said: "The theory of the court a quo evidently is, that a chattel mortgage is a conditional sale of the property, and, in case of a failure of the condition, to wit: to pay the debt, the sale becomes absolute and the creditor is obliged to resort to the mortgaged property for a payment of this debt, and the foreclosure of the mortgage is his sole recourse. "While it is true that section 3 of Act No. 1508 provides that "a chattel mortgage is a conditional sale," it further provides that it "is a conditional sale of personal property as security for the payment of a debt, or for the performance of some other obligation specified therein." The lower court overlooked the fact that the chattels included in the chattel mortgage are

only given as a security and not as a payment of the debt, in case of a failure of payment. . . . "The theory of the lower court would lead to the absurd conclusion that if the chattels mentioned in the mortgage, given as security, should sell for more than the amount of the indebtedness secured, that the creditor would be entitled to the full amount for which it might be sold, even though that amount was greatly in excess of the indebtedness. Such a result certainly was not contemplated by the legislature when it adopted Act No. 1508. There seems to be no reason supporting that theory under the provision of the law. The value of chattels changes greatly from time to time, and sometimes very rapidly. If, for example, the chattels should greatly increase in value and a sale under that condition should result in largely overpaying the indebtedness, and if the creditor is not permitted to retain the excess, then the same token would require the debtor to pay the deficiency in case of a reduction in the price of the chattels between the date of the contract and a breach of the condition. "Mr. Justice Kent, in the 12th edition of his commentaries, as well as other authors on the question of chattel mortgages, have said, that "in case of a sale under a foreclosure of a chattel mortgage, there is no question that the mortgagee or creditor may maintain an action for the deficiency, if any should occur." And the fact that Act No. 1508 permits a private sale, such sale is not, in fact, a satisfaction of the debt, to any greater extent than the value of the property at the time of the sale. The amount received at the time of the sale, of course, always requiring good faith and honestly in the sale, is only a payment, pro tanto, and an action may be maintained for a deficiency in the debt." Disposition We hold, in conclusion, that the court did not err in declaring Act No. 4122 to be inapplicable and in ruling that the plaintiff is entitled to a deficiency judgment in accordance with Act No. 1508.

CRUZ V FILIPINAS INVESTMENT

23 SCRA 791 REYES JBL; May 27, 1968

NATURE Appeal from judgment of CFI Quezon City FACTS - Cruz and Reyes purchased from Far East Motor Corp (FEMC) an Isuzu Diesel Bus for P44,616.24, payable on installment for 30 months (P1,487.20/mo.), with 12% p.a. interest. As evidence, a promissory note was executed. To secure payment, Cruz executed a chattel mortgage over the bus, in favor of FEMC. As no down payment was made, FEMC required an additional security, as compliance of which Reyes executed a second mortgage on her parcel of land in Bulacan. - Some time after, FEMC assigned all its rights and interest to the chattel and real estate mortgages to Filipinas Investment Corp, with notice to Cruz and Reyes. - Cruz defaulted in payment of the promissory note. In fact, the only sum ever paid was P500, which was applied to the partial payment of interest. Despite demands by Filipinas, Cruz made no payment. Thus, Filipinas took steps to foreclose the chattel mortgage on the bus, which was sold at a foreclosure sale for P15,000. As the proceeds of the sale were insufficient to cover the principal obligation, Filipinas took steps in foreclosing the land (in the 2nd mortgage). First, it paid the mortgage indebtedness of the land to DBP (it was mortgaged to FEMC with an outstanding mortgage to DBP) to free the said property from any attachment. Filipinas then requested the sheriff to sell the land. - Reyes filed an action to prevent the sale of her land, basing her contentions on: ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the ff. remedies:

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(1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should vendee's failure to pay cover 2 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 2 or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. - The sheriff held in abeyance the said sale on the mortgaged real property pending the result of this action. ISSUE WON Filipinas may foreclose the real estate mortgage, although it already foreclosed the chattel mortgage to satisfy the balance of the obligation of Cruz HELD NO Ratio The remedies provided have been recognized as alternative, not cumulative, that the exercise of one would bar the exercise of the others. Reasoning - The aforequoted provision is clear and simple: should the vendee or purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or seller has the option to avail of any one of these three remedies: either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. - The rule is to the effect that the foreclosure and actual sale of a mortgage chattel bars further recovery by the vendor of any balance on the purchaser's outstanding obligation not so satisfied by the sale. - Bachrach Motor v Milian: object of the provision is to remedy abuses connected with the foreclosure of chattel mortgages. It prevents mortgagees from seizing mortgaged property, buying it at a foreclosure sale at a very low price, and then bringing suit for a deficiency judgment. Otherwise, the invariable result would be that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. Thus, if the vendor avails himself of the right to foreclose the mortgage, this amendment prohibits him from bringing an action against the purchaser for the unpaid balance. - However, Reyes must reimburse Filipinas for the payment made to DBP in order to free the land from any encumbrance. Obiter - Re: the contention that the word action refers to judicial proceedings only, the court said the contention is untenable. The word actually refers to any judicial or extrajudicial proceeding by virtue of which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the debt. Disposition Decision appealed from is modified, ordering Reyes to reimburse Filipinas for payment made to DBP. In other aspects, decision AFFIRMED.

- Spouses Tajanlangit bought, from the Southern Motors Inc. 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 from May 18, 1953 December 10, 1955. 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. - The spouse failed to meet any installment. They were sued for the amount of the promissory note. The spouses defaulted, and the court entered judgment for it in the sum of P24,755.75 together with interest. 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 the Southern Motors (highest bidder) for P10,000. - Since the amount was not sufficient, Southern Motors asked and obtained for an alias writ of execution. The provincial sheriff then levied attachment on the Tajanlangits' rights and interests in certain real properties with a view to another sale on execution. - To prevent such sale, the Tajanlangits instituted this action in the Iloilo court of first instance for the purpose of annulling the alias writ of execution and all proceedings subsequent thereto. "What is being sought in this present action" say appellants "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." ISSUES 1. WON there was a foreclosure of the chattel mortgage (remedy #3 on Art 1484) or a foreclosure sale which should bar Southern Motors from further collecting the unpaid balance (which was not covered by the proceeds of the sale) 2. WON upon the return of the same chattels and due acceptance of the same by the vendor-mortgagee, the conditional sale is ipso facto cancelled HELD 1. NO - There has been no foreclosure of the chattel mortgage nor a foreclosure sale therefore the prohibition against further collection [Art 1484 (3) ]does not apply. -"Our law" provides, ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (New Civil Code.) - Southern Motors elected to sue on the note exclusively, i.e. to exact fulfillment of the obligation to pay[Art 1484 (1)]. 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. - As the plaintiff has chosen to exact the fulfillment of the defendant's obligation, the former may enforce execution of the judgement rendered in its favor on the personal and real properties of the latter not exempt from execution sufficient to satisfy the judgment. 2. NO - 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

TAJANLANGIT V SOUTHERN MOTORS

101 Phil 606 BENGZON; May 28, 1957

NATURE Appellants seek to reverse the order of Hon. Pantaleon Pelayo, Judge of the Iloilo court of first instance refusing to interfere with the alias writ of execution issued in Civil Case No. 2942 pending in another sala of the same court. FACTS

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acceptance and cancellation, asserting the goods, were deposited in its shop when the sheriff attached them in pursuance of the execution. Its assertion is backed up by the sheriff, of whose credibility there is no reason to doubt. Anyway this cancellation or settlement theory may not be heeded now, because it would contravene the decision in Civil Case No. 2942 it would show the Tajanlangits owned nothing to Southern Motors Inc. Such decision is binding upon them, unless and until they manage to set it aside in a proper proceeding.

SPOUSES NONATO V IAC (INVESTOR'S FINANCE CORP)

ESCOLIN; 1985
FACTS - On June 28, 1976, defendant spouses Restituto Nonato and Ester Nonato purchased one (1) unit of Volkswagen Sakbayan from the People's Car, Inc., on installment basis. To secure complete payment, the defendants executed a promissory note and a chattel mortgage in favor of People's Car, Inc. People's Car, Inc., assigned its rights and interests over the note and mortgage in favor of plaintiff Investor's Finance Corporation (FNCB) Finance). For failure of defendants to pay two or more installments, despite demands, the car was repossessed by plaintiff on March 20, 1978. - Despite repossession, plaintiff demanded from defendants that they pay the balance of the price of the car. Finally, on June 9, 1978, plaintiff filed before the Court of First Instance of Negros Occidental the present complaint against defendants for the latter to pay the balance of the price of the car, with damages and attorney's fees. - In their answer, the spouses Nonato alleged by way of defense that when the company repossessed the vehicle, it had, by that act, effectively cancelled the sale of the vehicle. It is therefore barred from exacting recovery of the unpaid balance of the purchase price, as mandated by the provisions of Article 1484 of the Civil Code. - The trial court as well as the appellate court ruled against the Nonatos. ISSUE WON the vendor, or his assignee, who had cancelled the sale of a motor vehicle for failure of the buyer to pay two or more of the stipulated installments, may also demand payment of the balance of the purchase price HELD NO Ratio A vendor or his assignee who has availed of one of the remedies under Article 1484 of the Civil Code is barred from availing of the other remedies mentioned therein. The choice of the vendor in the said law is alternative, not cumulative. Reasoning - The applicable law in the case at bar, involving as it does a sale of personal property on installment, is Article 1484 of the Civil Code which provides: "In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void." - The meaning of the aforequoted provision has been repeatedly enunciated in a long line of cases. Thus; "Should the vendee or

purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or seller has the option to avail of any of these three remedies - either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as alternative, not cumulative, that the exercise of one would bar the exercise of the others." - It is not disputed that the respondent company had taken possession of the car purchased by the Nonatos on installments. But while the Nonatos maintain that the company had, by that act, exercised its option to cancel the contract of sale, the company contends that the repossession of the vehicle was only for the purpose of appraising its value and for storage and safekeeping pending full payment by the Nonatos of the purchasing price. The company thus denies having exercised its right to cancel the sale of the repossessed car. The records show otherwise. - The receipt issued by the respondent company to the Nonatos when it took possession of the vehicle states that the vehicle could be redeemed within fifteen [15] days. This could only mean that should petitioners fail to redeem the car within the aforesaid period by paying the balance of the purchase price, the company would retain permanent possession of the vehicle, as it did in fact. - Indeed, the acts performed by the corporation are wholly consistent with the conclusion that it had opted to cancel the contract of sale of the vehicle. It is thus barred from exacting payment from petitioners of the balance of the price of the vehicle which it had already repossessed. It cannot have its cake and eat it too. Disposition Decision of IAC reversed

DELTA MOTOR SALES CORP V NIU KIM DUAN

NOCON; September 2 1992
assailing NATURE Appeal by decision

defendants-appellants

the

trial

courts

FACTS - On July 5, 1975, the defendants purchased from the plaintiff 3 units of Daikin air conditioner all valued at P 19,350 as evidenced by the deed of conditional sale. The Deed of sale had the following terms and conditions: a.) defendants shall pay a down payment of P774 and the balance of P18,576 shall be paid by them in 24 installments; b.) the title to the properties purchased shall remain with the plaintiff until the purchase price thereof is fully paid; c.) if any 2 installments are not paid by the defendants on their due dates, the whole of the principal sum remaining unpaid shall become due, with interest at the rate of 14% per annum: and d.) in case of a suit, the defendants shall pay an amount equivalent to 25% of the remaining unpaid obligation as damages, penalty and attorneys fees; that to secure the payment of the balance of P18,576 the defendants jointly and severally executed in favor of the plaintiff a promissory note; that the 3 air conditioners were delivered to and received by the defendants as shown by the delivery receipt; that after paying the amount of P6966, the defendants failed to pay at least 2 monthly installments; that as of January 6 1977, the remaining unpaid obligation of the defendants amounted to P12,920.08; that statements of accounts were sent to the defendants and the plaintiffs collectors personally went to the former to effect collections but they failed to do so; that because of the unjustified refusal of the defendants to pay their outstanding account and their wrongful detention of the properties in question, plaintiff tried to recover the said properties extra-judicially but it failed to do so. - the matter was later referred by the plaintiff to its legal counsel for legal action. In its verified complaint dated January 28 1977,

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the plaintiff prayed for the issuance of a writ of replecvin, which the Court granted in its order dated February 28 1977. The plaintiff, by virtue of the aforesaid writ, succeeded in retrieving the properties in question. As of Octover 3 1988, the outstanding account of the defendants is only in the amount of P6,188.29 as shown by the computation. In view of the failure of the defendants to pay their obligations, the amount of P6966 which had been paid by way of installments were treated as rentals for the units in question for 2 years pursuant to the provisions of par 5 of the Deed of Conditional Sale. The trial court ruled in favor of plaintiff-appellee. - Defendants assail the Deed of Conditional Sale as being contrary to law, morals, good custom, public order or public policy. IN particular, they point to the contracts par 5 & 7 as iniquitous which paragraphs state that: 5. should buyer fail to pay any of the monthly installments when due, or otherwise fail to comply with any of the terms and conditions herein stipulated, this contract shall automatically become null and void and all sums so paid by buyer by reason thereof shall be considered as rental and the seller shall then and there be free to take possession thereof without liability for trespass or responsibility for any article left in or attached to the property. 7. Should seller rescind this contract for any of the reasons stipulated in the preceding paragraph, the buyer, by these presents obligates himself to peacefully deliver the property to the seller in case of rescission and should a suit be brought in court by seller to seek judicial declaration of rescission and take possession of the property, the buyer hereby obligates himself to pay all the expenses to be incurred by reason of such suit and in addition to pay the sum equivalent to 25% of the remaining unpaid obligation as damages, penalty and attorneys fees. - Defendants claim that for the use of the plaintiff-appellees 2 air conditioners, from July 5 1975 to April 4 1977, or for a period of about 22 months, they, in effect, paid rentals in the amount of P6,429.92 or roughly one-third of the entire price of said airconditioners which was P19,350. They also complain that for the said period the trial court is ordering them to pay P6188.29 as the balance due for the 3 air conditioners repossessed. They satirically pointed out that by putting a few touches here and there, the same units can be sold again to the next imprudent customer by plaintiff appellee (thus unjustly enriching them) ISSUES 1. WON the terms and conditions of the Deed of Conditional Sale is unconscionable 2. WON Delta Motor is barred from exacting payment from defendants of the balance of the price of the 3 air-conditioners which it had already repossessed HELD 1. NO - A stipulation in a contract that the installments paid shall not be returned to the vendee is valid insofar as the same may not be unconscionable under the circumstances as sanctioned by Art 1486 of the New Civil Code. The monthly installment payable by defendants-appellants was P774. the P5,655.92 installment payments correspond only to 7 monthly installments. Since they admit having used the air-conditioners for 22 months, this means that they did not pay 15 monthly installments on the said air-conditioners and were thus using the same free for said period to the prejudice of plaintiff-appellee. Under the circumstances, the treatment of the installment payments as rentals cannot be said to be unconscionable. 2. YES - The vendor in a sale of personal property payable in installments may exercise one of 3 remedies, namely a.) exact the fulfillment of the obligation, should the vendee fail to pay b.) cancel the sale upon the vendees failure to pay two or more installments c.) foreclose the chattel mortgage, if one has been constituted on the property sold, upon the vendees failure to pay two or

more installments. The third option of remedy, however is subject to the limitation that the vendor cannot recover any unpaid balance of the price and any agreement to the contrary is void. The 3 remedies are alternative and not cumulative. If the creditor chooses one remedy, he cannot avail himself of the other two. It is not disputed that the plaintiff-appellee had taken possession of the 3 air conditioners through a writ of replevin when defendantsappellants refused to extra0judicially surrender the same. This was done pursuant to par 5 and 7 of its deed of conditional sale when defendants appellants failed t pay at least 2 monthly installments, so much so that as of January 6 1977, the total amount they owed plaintiff-appellee, inclusive of interest, was P12,920.08. The case plaintiff-appellee filed was to seek a judicial declaration that it had validly rescinded the Deed of Conditional Sale. Clearly, plaintiff-appellee chose the second remedy of Art 1484 in seeking enforcement of its contract with defendantsappellants. This is shown from the fact that it showed the computation of the outstanding account of defendants-appellants as of Oct 3 1977 took into account the value of the units repossessed. Having done so, it is barred from exacting payment from defendants-appellants of the balance of the price of the 3 air-conditioning units which it had already repossessed. Disposition The judgment of the trial court is set aside and the complaint filed by Delta Motor is dismissed

NORTHERN MOTORS INC V SAPINOSO

33 SCRA 356 VILLAMOR; May 29, 1970

NATURE Direct appeal on questions of law from the portion of the judgment of the CFI of Manila FACTS - Casiano Sapinoso purchased from Northern Motors, Inc. an Opel Kadett car for the price of P12,171.00, making a down payment and executing a promissory note for the balance of P10,540.00 payable in installments with interest at 12% pa, as follows: P361.00 on July 5, 1965, and P351.00 on the 5th day of each month beginning August, 1965, up to and including December, 1967. To secure the payment of the promissory note, Sapinoso executed in favor of Northern Motors, Inc. a chattel mortgage on the car. The mortgage contract provided, among others, that upon default by the mortgagor in the payment of any part of the principal or interest due, the mortgagee may elect any of the following remedies: (a) sale of the car by the mortgagee; (b) cancellation of the contract of sale; (c) extrajudicial foreclosure; (d) judicial foreclosure; (e) ordinary civil action to exact fulfillment of the mortgage contract. It was further stipulated that whichever remedy is elected by the mortgagee, the mortgagor expressly waives his right to reimbursement by the mortgagee of any and all amounts on the principal and interest already paid by him." - Sapinoso failed to pay the first to fifth installments. Several payments were, however, made reducing the balance unpaid to P10,218.10. - The vendee-mortgagor having failed to make further payments, Northern Motors filed the present complaint against Sapinoso and a certain "John Doe." - Northern Motors stated that it was availing itself of the option given it under the mortgage contract of extrajudicially foreclosing the mortgage, and prayed that a writ of replevin be issued upon its filing of a bond for the seizure of the car and for its delivery to it - Subsequent to the commencement of the action, but before the filing of his answer, defendant Sapinoso made two payments on the promissory note, the first for P500.00, and the second for P750.00 (1,250 total). - upon the plaintiff's filing of a bond, a writ of replevin was issued by the court; the sheriff executed the seizure warrant by seizing the car from defendant Sapinoso and turning over its possession to the plaintiff

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- defendant Sapinoso filed an answer admitting the allegations. He alleged, however, that he had paid the total sum of P4,230.52, leaving a balance of only P5,987.58; that upon demand he immediately surrendered the possession of the car to the plaintiff's representative; and that the value of the car was only about P5,000.00, and not P10,000.00 as alleged in the complaint. As special defenses the said defendant alleged that he failed to pay the installments due because the car was defective, and the plaintiff failed to have it fixed although he had repeatedly called the plaintiff's attention - CFI held that defendant Sapinoso having failed to pay more than 2 installments, Northern Motors acquired the right to foreclose the chattel mortgage by filing an action of replevin to secure possession of the mortgaged car as a preliminary step to the foreclosure sale; and that the foreclosure of the chattel mortgage and the recovery of the unpaid balance of the price are alternative remedies which may not be pursued conjunctively, so that in availing itself of its right to foreclose the chattel mortgage Northern Motors thereby renounced whatever claim it may have had on the promissory note, and, therefore,... should return to defendant Sapinoso the sum of P1,250.00 which the plaintiff had received from the latter after having filed the present case on, and elected to foreclose the chattel mortgage. - In this appeal Northern Motors claims that the court a quo erred in ordering it to reimburse to Sapinoso the P1,250.00 which the latter had paid; that under Art.1484 of the Civil Code it is the exercise, not the mere election, of the remedy of foreclosure that bars the creditor from recovering the unpaid balance of the debt; that what said article prohibits is "further action" to collect payment of the deficiency after the creditor has foreclosed the mortgage ISSUE WON it is the exercise, not the mere election, of the remedy of foreclosure that bars the creditor from recovering the unpaid balance of the debt HELD YES Ratio That the ultimate object of the action is the foreclosure of the chattel mortgage, is of no moment, for it is the fact of foreclosure and actual sale of the mortgaged chattel that bar further recovery by the vendor of any balance on the purchaser's outstanding obligation not satisfied by the sale. Reasoning - In issuing a writ of replevin, and, after trial, in upholding NMs right to the possession of the car, and ratifying and confirming its delivery to the said plaintiff-appellant, the court below correctly considered the action as one of replevin to secure possession of the mortgaged vehicle as a preliminary step to this foreclosure sale. - The said court however erred in concluding that the legal effect of the filing of the action was to bar plaintiff-appellant from accepting further payments on the promissory note. What Art.1484(3) prohibits is "further action against the purchaser to recover any unpaid balance of the price" - there has not yet been a foreclosure sale resulting in a deficiency. The payment of the sum of P1,250.00 by defendantappellee Sapinoso was a voluntary act on his part and did not result from a "further action" instituted by plaintiff-appellant. - there is no reason why a mortgage creditor should be barred from accepting, before a foreclosure sale, payments voluntarily tendered by the debtor-mortgagor who admits a subsisting indebtedness. Disposition The judgment appealed from is modified by setting aside the portion thereof which orders plaintiff-appellant to pay defendant-appellee Sapinoso the sum of P1,250.00.

NATURE Appeal by Spouses Ridad from decision of CFI (a replevin suit), awarding Filipinas Investment (appellee) the amount of P163.65 as actual expenses and P300 as attys fees. FACTS - Spouses Ridad (appellants) bought a Ford sedan for P13, 371.40 from the Supreme Sales and Devt Corp, the appellees assignorin-interest. The sum of P1,160 was paid on delivery, the balance of P12, 211.50 being payable in 24 equal monthly installments with interest at 12% per annum, secured by a promissory note and a chattel mortgage on the car. The spouses failed to pay 5 consecutive installments on a remaining balance of P5, 274.53. The appellee instituted a replevin suit for the seizure of the car, or the recovery of the unpaid balance in case delivery could not be effected. The car was then seized by the sheriff of Manila and possession thereof was awarded to the appellee. During the progress of the case, the appellee instituted extrajudicial foreclosure proceedings, as a result of which, the car was sold at a public auction with the appellee as the highest bidder and purchaser. - In view of the failure of appellant spouses to appear at the scheduled hearing, allegedly due to non-receipt of the summons, they were declared in default, with judgment ordering them to pay appellee P500 as attys fees and P163.65 as actual expenses relative to the seizure of the car. - The Spouses then moved to set aside the order of default. After this was denied, they appealed to the CFI but the same merely lowered the attys fees to P300. They now appeal to the SC contending that the CFI erred in condemning the appellants to pay P300 for attys fees and P163.65 for expenses incurred in the seizure of the car ISSUE WON the lower court was correct in granting the award for actual expenses and attys fees incurred by appellee in this replevin suit despite having the chattel mortgage foreclosed HELD YES Ratio The mortgagor who has unjustifiably failed and refused to surrender the chattel mortgage shall bear the necessary expenses incurred by the mortgagee in the prosecution of the action for replevin to regain possession of the chattel. Such expenses would include those properly incurred in effecting seizure of the chattel and reasonable attys fees in prosecuting the action for replevin. Reasoning (The Court examined jurisprudence on the interpretation of the Recto Law or Art.1484 specifically Par.3 and also gave reasons why it overturned the previous decisions) - Macondray v. Eustaquio, held that in all proceedings for the foreclosure of a chattel mortgage, executed on chattels which have been sold on an installment plan, the mortgagee is limited to the property mortgaged and is not entitled to attys fees and costs of suit. - In Luneta Motor Co. v. Salvador et al, the court held that the plaintiff renounced whatever claim it may have had under the promissory note by seizing the truck and foreclosing the mortgage at the progress of the suit. Consequently, he has no more cause of action against the promissor and the guarantor and has no more right either to the costs and the attys fees that would go with the suit. - Scrutiny of the doctrine enunciated in the cited cases will reveal that its ultimate and salutary purpose is to prevent the vendor from circumventing the Recto Law. Congress sought to protect the buyers on installment who have been victimized by sellers who succeeded in unjustly enriching themselves at the expense of the buyers, because aside from recovering the goods sold, upon default of the buyer in the payment of 2 installments, still retained for themselves all amounts already paid and in addition, were adjudged entitled to damages, such as attys fees, expenses of litigation and costs. It would appear from the decisions adverted to that in no instance whatsoever may the mortgagee recover from the mortgagor any amount or sum after the foreclosure of

FILIPINAS INVESTMENT V RIDAD

30 SCRA 546 CASTRO; November 28, 1969

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the mortgage, for, as we understand it, the philosophy of the Recto Law is that the underprivileged mortgagors must be afforded full protection against the rapacity of the mortgagees. - But while we unconditionally concur in, and give our approval to the basic philosophy of the Recto Law, we view with no small amount of circumspection the implication necessarily drawn from the above discussion, that the mortgagee is not entitled to protection against perverse mortgagors. Where the mortgagor plainly refuses to deliver the chattel subject of the mortgage upon his failure to pay 2 or more installments, or if he conceals the chattel to place it beyond the reach of the mortgagee, what then is the mortgagee expected to do? No man can take the law into his own hands; so it is not to be supposed that the legislature intended that the mortgagee should wrest or seize the chattel forcibly from the control and possession of the mortgagor, even to the extent of using violence which is unwarranted by law. Since the mortgagee would enforce his rights through the means and within the limits delineated by law, the next step in such situations being the filing of an action for replevin to the end that he may recover immediate possession of the chattel and, thereafter, enforce his rights in accordance with the contractual relationship between him and the mortgagor as embodied in their agreement, then it logically follows, as a matter of common sense, that the necessary expenses incurred in the prosecution by the mortgagee of the action for replevin so that he can regain possession of the chattel, should be borne by the mortgagor. Recoverable expenses would, in our view, include expenses properly incurred in effecting seizure of the chattel and reasonable attorney's fees in prosecuting the action for replevin. And we declare that in this case before us, the amounts awarded by the court a quo to the mortgagee (appellee) are reasonable. - To the extent that our pronouncement here conflicts with the ruling announced and followed in the cases herein discussed, the latter must be considered pro tanto (to a certain extent) qualified. Disposition Judgment a quo is affirmed

further payments. The account thus shows that he owed petitioners the sum of P1, 311.72 on account of the balance of the purchase price (principal) of the two lots (in the total sum of P3,000.00), although he had paid more than the stipulated purchase price of P1,500.00 for one lot. - Almost five years later, on February 2, 1961 just before the filing of the action, respondent wrote petitioners stating that his desire to build a house on the lots was prevented by their failure to introduce improvements on the subdivision as "there is still no road to these lots," and requesting information of the amount owing to update his account as "I intend to continue paying the balance due on said lots." - Petitioners replied in their letter of February 11, 1961 that as respondent had failed to complete total payment of the 120 installments by May, 1958 as stipulated in the contracts to sell, "pursuant to the provisions of both contracts all the amounts paid in accordance with the agreement together with the improvements on the premises have been considered as rents paid and as payment for damages suffered by your failure," 2 and "Said cancellation being in order, is hereby confirmed." - TC sustained petitioners cancellation of the contracts and dismissed respondents complaint. CA reversed the lower court's judgment and ordered petitioners "to deliver to the plaintiff possession of one of the two lots, at the choice of defendants, and to execute the corresponding deed of conveyance to the plaintiff for the said lot" Respondents comments: - he suspended payments because the lots were not actually delivered to him, or could not be, due to the fact that they were completely under water; and also because the defendants-owners failed to make improvements on the premises, such as roads, filling of the submerged areas, etc., despite repeated promises of their representative, the said Mr. Cenon. - no demand has been made upon him regarding the unpaid installments, and for this reason he could not be declared in default so as to entitle the defendants to cancel the said contracts. ISSUE WON CA committed error in rendering judgment HELD NO - the appellate court's judgment finding that of the total sum of P3,582.06 (including interests of P1,889.78) already paid by respondent (which was more than the value of two lots), the sum applied by petitioners to the principal alone in the amount of P1, 682.28 was already more than the value of one lot of P1,500.00 and hence one of the two lots as chosen by respondent would be considered as fully paid, is fair and just and in accordance with law and equity. - J.M. Tuason & Co. Inc. vs. Javier: this is applicable to the present case, with the respondent at bar being granted lesser benefits, since no rescission of contract was therein permitted. There, where the therein buyer-appellee identically situated as herein respondent buyer had likewise defaulted in completing the payments after having religiously paid the stipulated monthly installments for almost eight years and notwithstanding that the seller-appellant had duly notified the buyer of the rescission of the contract to sell, the Court upheld the lower court's judgment denying judicial confirmation of the rescission and instead granting the buyer an additional grace period of sixty days from notice of judgment to pay all the installment payments in arrears together with the stipulated 10% interest per annum from the date of default, apart from reasonable attorney's fees and costs, which payments, the Court observed, would have the plaintiffseller "recover everything due thereto, pursuant to its contract with the defendant, including such damages as the former may have suffered in consequence of the latter's default." Court held that "Regardless, however, of the propriety of applying said Art. 1592 thereto, We find that plaintiff herein has not been denied substantial justice, for, according to Art. 1234 of said Code: 'If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and

55 SCRA 324 TEEHANKEE; January 28, 1974

NATURE Petition to review decision of CA FACTS - The action originated as a complaint for delivery of two parcels of land in Sampaloc, Manila and for execution of the corresponding deed of conveyance after payment of the balance still due on their purchase price. - Saldana entered into two written contracts with petitioner Legarda Hermanos as subdivision owner, whereby the latter agreed to sell to him Lots Nos. 7 and 8 of block No. 5N of the subdivision with an area of 150 square meters each, for the sum of P1, 500.00 per lot, payable over the span of ten years divided into 120 equal monthly installments of P19.83 with 10% interest per annum, to commence on May 26, 1948, date of execution of the contracts. - Subsequently, Legarda Hermanos partitioned the subdivision among the brothers and sisters, and the two lots were among those allotted to co-petitioner Jose Legarda who was then included as co-defendant in the action. - Saldana faithfully paid for eight continuous years about 95 (of the stipulated 120) monthly installments totalling P3,582.06 up to the month of February, 1956, which as per petitioners' own statement of account, was applied to respondent's account (without distinguishing the two lots), as follows: "To interests P1,889.78 "To principal P1,682.28 Total P3,582.06" after February, 1956 up to the filing of respondent's complaint in the Manila court of first instance in 1961, Saldana did not make

LEGARDA V SALDANA

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complete fulfillment, less damages suffered by the obligee,'" and "that in the interest of justice and equity, the decision appealed from may be upheld upon the authority of Article 1234 of the Civil Code." Disposition Decision of CA affirmed

'the sound of belated and hindsight attempt to cover up the default for which contract cancellation would be the necessary consequence.' ISSUES 1. WON Secs 23 and 24 of PD 957 apply in this case 2. WON the notice requirement of Sec 23 has been complied with 3. WON the private appellees were in default HELD 1. YES - The case falls squarely within the purview of both Secs. 23 and 24 of P.D. No. 957. - Private respondent's refusal to continue paying the amortization is thus based on two principal grounds: nondevelopment of the subdivision and encumbrance of the property subject of the sale which became apparent to the buyer only after conducting his own investigation. 2. YES - OP: petitioners claim that appellees had failed to give the required notice before demanding for refund, is not borne out by the evidence. Records show that Dennis Sevilla already gave notice to appellant regarding, among other things, the nondevelopment of the subdivision, and therein demanded for refund. To our mind, Section 23 does not require that a notice be given first before a demand for refund can be made. The notice and the demand can be made in the same letter or communication, and this is what the appellees did. - SC: Public respondent's conclusions are hereby affirmed. This decreewas issued in the wake of numerous reports that many real estate subdivision owners, developers, operators and/or sellers "have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems and other basic requirements" for the health and safety of home and lot buyers. It was designed to stem the tide of "fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to buyers or titles free from liens and encumbrances." Should the notice requirement provided for in Sec. 23 be construed as required to be given before a buyer desists from further paying amortizations as in this case, the intent of the law to protect subdivision lot buyers, such as private respondents, will tend to be defeated. 3. NO - The general rule is that an obligor incurs in delay (default) only after a demand, judicial or extrajudicial, has been made from him for the fulfillment of his obligation. - Article 1169 CC: 'Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.' - Here, there was no such demand by the appellant. The letters it sent to appellees were the usual remind letters that are ordinarily sent by creditors to late-paying debtors. They are not the demand contemplated by law."

CASA FILIPINA REALTY V OFFICE OF THE PRES (SEVILLA)

241 SCRA 165 ROMERO; Feb 1995

FACTS - The Sevilla spouses agreed to purchase a parcel of land from Casa Filipina Realty Corp (CFRC). The parties agreed in a contract to sell that the purchase price will be paid in installments for the period of 5 years, w/ 28% amortization interest per annum. - The spouses failed to pay the amortizations on time. They paid penalties. - Almost a year later, Dennis Sevilla wrote to CFRC calling its attention to the absence of any improvement in the subdivision and his discovery that, upon checking with the Register of Deeds, the mother title of the subdivision was under lis pendens and mortgaged to ComSavings Bank. - Sevilla requested a refund of all installment payments made on account of the contract. - The Sevilla spouses filed a complaint vs. CFRC with the Office of Appeals, Adjudication and Legal Affairs (OAALA) of the Human Settlements Regulatory Commission. They prayed for the refund of P70,431.12 w/c was the total amount they had paid CFRC. - The OAALA found CFRC to be w/o license to sell the subdivision involved. OAALA held that, even assuming that CFRC had a license to sell, it was still liable for violation of Sec. 20 of PD No. 957 as it had failed to develop the subdivision. The OAALA ordered CFRC to refund the Sevilla couple the said amount and P3,000.00 as administrative fine for violation of Sec. 20 of P.D. No. 957. - Said decision was affirmed by the Housing and Land Use Regulatory Board (HLURB) . - CFRC appealed. The Office of the President dismissed it for lack of merit and affirmed the decision of the HLURB. CFRC filed a MFR of the decision of the OP but it was denied. CFRCs claim: 1) petition should not have been dismissed as it involves the interpretation and/or application of provisions of law as the Court has to determine whether it is Sec. 23 or 24 of P.D. No. 957 w/c should be applied in the instant case. 2) since private respondents desisted from paying the agreed installments, they should have notified the CFRC of such desistance in accordance with Sec. 235. 3) since private respondent's desistance from further paying the amortization was due to litis pendentia and the mortgage of the mother title of the subdivision, Sec. 246 should have been applied in the case. 4) when the Sevillas demanded a refund of installments paid, they were already in default, and that their said demand had
5
"SEC. 23. Non-Forfeiture of Payments. - No installment payment made by a buyer in a subdivision or condominium project for a lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate.

144 SCRA 693 FERIA; October 10, 1986

NATURE Appeal by certiorari from the decision of the Court of Appeals FACTS - On Feb 28, 1977, petitioner Luisa F. McLaughlin and private respondent Ramon Flores entered into a contract of conditional sale of real property. Paragraph 1 of the deed of conditional sale fixed the total purchase price of P140,000.00 payable as follows: a) P26,550.00 upon the execution of the deed; and b) the balance of P113,450.00 to be paid not later than May 31, 1977. The parties also agreed that the balance shall bear interest at the rate of 1% per month to commence from Dec 1, 1976, until the full purchase price was paid.

MCLAUGHLIN V CA

SEC. 24. Failure to pay installments. - The rights of the buyer in the event of his failure to pay the installments due for reasons other than failure of the owner or developer to develop the project shall be governed by Republic Act No. 6552."

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- On June 19, 1979, petitioner filed a complaint for the rescission of the deed of conditional sale due to the failure of Flores to pay the balance due on May 31, 1977. - On Dec 27, 1979, the parties submitted a Compromise Agreement on the basis of which the court rendered a decision on Jan 22, 1980. In said compromise agreement, Flores acknowledged his indebtedness to petitioner under the deed of conditional sale in the amount of P119,050.71, and the parties agreed that said amount would be payable as follows: a) P50,000.00 upon signing of the agreement; and b) the balance of P69,059.71 in two equal installments on June 30, 1980 and Dec 31, 1980. - As agreed upon, Flores paid P50,000.00 upon the signing of the agreement and he also paid an "escalation cost" of P25,000.00. - Under paragraph 3 of the Compromise Agreement, private respondent agreed to pay P1,000 pesos monthly rental beginning Dec 5, 1979 until the obligation is duly paid, for the use of the said property - Paragraphs 6 and 7 of the Compromise Agreement further state: "That the parties are agreed that in the event the defendant (Flores) fails to comply with his obligations herein provided, the plaintiff (Mclaughlin) will be entitled to the issuance of a writ of execution rescinding the Deed of Conditional Sale of Real Property. In such eventuality, defendant (Flores) hereby waives his right to appeal to (from) the Order of Rescission and the Writ of Execution which the Court shall render in accordance with the stipulations herein provided for. "That in the event of execution all payments made by defendant (private respondent) will be forfeited in favor of the plaintiff (petitioner) as liquidated damages." - On Oct 15, 1980, McLaughlin wrote to private respondent demanding that he pay the balance of P69,059.71 on or before Oct 31, 1980. This demand included not only the installment due on June 30, 1980 but also the installment due on Dec 31, 1980. - On Oct 30, 1980, Flores sent a letter to petitioner signifying his willingness and intention to pay the full balance of P69,059.71 - On Nov 7, 1980, petitioner filed a Motion for Writ of Execution alleging that Flores failed to pay the installment due on June 1980 and that since June 1980 he had failed to pay the monthly rental of P1,000.00. Petitioner prayed that a) the deed of conditional sale of real property be declared rescinded with forfeiture of all payments as liquidated damages; and b) the court order the payment of P1,000.00 back rentals since June 1980 and the eviction of private respondent. - TC granted the motion for writ of execution. - CA held that the Song Fo v Hawaian Ruling is applicable in the case at bar Recission will not be permitted for slight breach of contract. ISSUES 1. WON contract should be rescinded 2. WON respondent is liable for the P76,059.71 he attempted to pay to the petitioner but the petitioner did not accept (even though the 30-day period provided by R.A. 6552 has not yet expired) HELD 1. NO - SC agrees with the CA that it would be inequitable to cancel the contract of conditional sale and to have the amount of P101,550.00 (P148,126.97 according to private respondent in his brief) already paid by him under said contract, excluding the monthly rentals paid, forfeited in favor of petitioner, particularly after private respondent had tendered the amount of P76,059.71 in full payment of his obligation. - Private respondent had substantially complied with the terms and conditions of the compromise agreement. - Section 4 of RA No. 6552 which took effect on Sept14, 1972 provides as follows:

"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 the cancellation or the demand for rescission of the contract by a notarial act." - Petitioner demanded payment of the balance of P69,059.71 on or before October 31, 1980, petitioner could cancel the contract after 30 days from receipt by private respondent of the notice of cancellation. Considering petitioner's motion for execution filed on November 7, 1980 as a notice of cancellation, petitioner could cancel the contract of conditional sale after 30 days from receipt by private respondent of said motion. Private respondent's tender of payment of the amount of P76,059.71 together with his motion for reconsideration on November 17, 1980 was, therefore, within the thirty-day period granted by R.A.6552. 2. YES - The tender made by private respondent of a certified bank manager's check payable to petitioner was a valid tender of payment. The certified check covered not only the balance of the purchase price in the amount of P69,059.71, but also the arrears in the rental payments from June to December, 1980 (P7,000.00) or a total of P76,059.71. Section 49, Rule 130 of the Revised Rules of Court provides that: "An offer in writing to pay a particular sum of money or to deliver a written instrument or specific property is, if rejected, equivalent to the actual production and tender of the money, instrument, or property." - However, although private respondent had made a valid tender of payment which preserved his rights as a vendee in the contract of conditional sale of real property, respondent did not follow it with a consignation or deposit of the sum due with the court. The Manager's Check tendered by private respondent on November 17, 1980 was subsequently cancelled and converted into cash, but the cash was not deposited with the court. - According to Article 1256 (Civil Code), if the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due, and that consignation alone shall produce the same effect in the five cases enumerated therein; Article 1257 provides that in order that the consignation of the thing (or sum) due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation; and Article 1258 provides that consignation shall be made by depositing the thing (or sum) due at the disposal of the judicial authority and that the interested parties shall also be notified thereof. - Soco vs. Militante: "Tender of payment must be distinguished from consignation. Tender is the antecedent of consignation, that is, an act preparatory to the consignation, which is the principal, and from which are derived the immediate consequences which the debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while consignation is necessarily judicial, and the priority of the first is the attempt to make a private settlement before proceeding to the solemnities of consignation. - Although private respondent had preserved his rights as a vendee in the contract of conditional sale of real property by a timely valid tender of payment of the balance of his obligation which was not accepted by petitioner, he remains liable for the payment of his obligation because of his failure to deposit the amount due with the court. - Inasmuch as petitioner did not accept the aforesaid amount, it was incumbent on private respondent to deposit the same with the court in order to be released from responsibility. Since private respondent did not deposit said amount with the court, his obligation was not paid and he is liable in addition for the payment of the monthly rental of P1,000.00 from January 1, 1981 until said obligation is duly paid, in accordance with paragraph 3 of the Compromise Agreement. Upon full payment of the amount of P76,059.71 and the rentals in arrears, private respondent shall be entitled to a deed of absolute sale in his favor of the real property in question.

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Disposition Decision of the CA AFFIRMED w/ the modifications: (a) Petitioner ordered to accept from private respondent the Metrobank Cashier's Check in the amount of P76,059.71 (b) Private respondent ordered to pay petitioner the rentals in arrears of P1,000.00 a month from Jan 1, 1981 until full payment; and (c) Petitioner ordered to execute a deed of absolute sale in favor of private respondent over the real property upon full payment of the amounts .

Chapter 13: EXTINGUISHMENT OF THE SALE

449 SCRA 284 CARPIO; January 26, 2005
NATURE Petition for review on certiorari of a decision of the Court of Appeals FACTS - Pedro Quio owned a parcel of land (Lot 1916-D-3) under TCT 28905 in Mandaue, Cebu. - April 11, 1990 Quio executed a Deed of Absolute Sale of the said property in favor of Renato Mencias who was married to Myrna, the formers niece. The said deed of sale excluded the house standing on the land. - March 11, 1991 another Deed of Absolute Sale was issued by Quio in favor of Mencias and this time, there was no provision excluding the house from the sale. TCT 28905 was replaced by TCT 30248 which was issued in Renatos name. - March 30, 1993 Renato executed a Deed of Absolute Sale of the abovementioned property in favor of Lourdes Arrofo. TCT 30248 was cancelled and replaced with TCT 33304 under the name of Arrofo. - July 6, 1994 Quio filed an action for Reconveyance of Property with Annulment of Deeds of Sale and Damages against the spouses Mencias and Arrofo. - The trial court ruled against Quio and upheld the validity of the abovementioned deeds but the Court of Appeals reversed the decision. Petitioners Claim: - Arriofo contents tat the amount paid to Quio is adequate considering the market and the assessed values of the land. Respondents Comments: - Quio claimed that his transaction with Renato was a mortgage and not an absolute sale. - He allegedly borrowed P15,000 from Renato and the property served as security for the loan. - The agreement was that the Deed of Absolute Sale he signed should only be registered with the Register of Deeds should he fail to pay his P15,000 loan plus interest of 7% every month within 5 years from April 11, 1990. ISSUES 1. WON respondent Court of Appeals correctly ruled that the Deed of Sale of April 11, 1990 was one of equitable mortgage 2. WON Arrofo was a buyer in good faith HELD 1. YES - The contract was an equitable mortgage. Ratio The decisive factor in evaluating such agreement is the intention of the parties, as shown not necessarily by the terminology used in the contract but by all the surrounding circumstances. Reasoning - A1602,CC in relation to A1604,CC states that a contract purporting to be an absolute sale is deemed an equitable mortgage in any of the following cases: a. when the price of the sale with a right to repurchase is unusually inadequate

ARROFO V QUIO

b. when the vendor remains in possession as lessee or otherwise c. 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 d. when the purchaser retains for himself a part of the purchase price e. when the vendor binds himself to pay the taxes on the thing sold - The following circumstances lead to this conclusion: a. Renato and Myrna did not take possession of the property as evidenced by a testimony from Moralde, a tenant of Quio who testified that he was told to pay the rent to Myrna but he was informed of such only after the property had been sold to Arrofo. b. Neither the first nor second Deed of Absolute Sale reflects the real intention of the parties based on the testimony og Fiscal Mabanto, a signatory to the first deed of sale. He testified that even if a deed of absolute sale was executed, it was the agreement of the parties that registry of the property in the Registry of Deeds would occur only if Quio failed to pay his loan. c. The consideration paid to Quio is unusually inadequate. Arrofo testified that the market value of the land was pagged at P8,300 while the assessed market value is P2,400. > Myrna allegedly paid her uncle Quio P160,000 . > The first and second deeds of sale state that price is P50,000. If Quio sold the property for P160,000, it would seem impossible that Renato would resell the same property for less than half the amount he paid for. d. Myrnas claim that the first deed of Absolute Sale is erroneous. 2. NO - Arrofo was not a buyer in good faith. Reasoning - Arrofo failed to buy as a buyer in good faith. She asked her daughter to verify in the Register of Deeds. - She conducted an ocular inspection of the property and lived in the same town as Arrofo so it is impossible for her not to have known. Disposition Petition denied.

TAN V VALDEHUEZA
66 SCRA 61 CASTRO; August 6, 1975

FACTS - The parcel of land described in the first cause of action was the subject matter of the public auction sale wherein the plaintiff LUCIA TAN was the highest bidder . - Due to the failure of defendant Arador Valdehueza to redeem the said land within the period of one year as being provided by law, MR. VICENTE D. ROA who was then the Ex-Officio Provincial Sheriff executed an ABSOLUTE DEED OF SALE in favor of the plaintiff LUCIA TAN. - That defendants ARADOR VALDEHUEZA and REDICULO VALDEHUEZA have executed two documents of DEED OF PACTO DE RETRO SALE in favor of the plaintiff herein, LUCIA TAN of two portions of a parcel of land which is described in the second cause of action with the total amount of P1,500.00. - On the basis of the stipulation of facts and the annexes, the trial court rendered judgment, declaring Lucia Tan the absolute owner of the property described in the first cause of action and as regards the land covered by deed of pacto de retro the defendants Arador Valdehueza and Rediculo Valdehueza were ordered to pay the plaintiff the amount of P300 with legal interest of 6% from August 15, 1966, the said land serving as guaranty of the said amount of payment; - The Valdehuezas appealed. ISSUE WON the lower court erred in making a finding on the second cause of action that the transactions between the parties were

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simple loan, instead, it should be declared as equitable mortgage HELD YES - The trial court treated the registered deed of pacto de retro as an equitable mortgage but considered the unregistered deed of pacto de retro "as a mere case of simple loan, secured by the property thus sold under pacto de retro," on the ground that no suit lies to foreclose an unregistered mortgage. It would appear that the trial judge had not updated himself on law and jurisprudence; he cited, in support of his ruling, article 1875 of the old Civil Code and decisions of this Court circa 1910 and 1912. - Under article 1875 of the Civil Code of 1889, registration was a necessary requisite for the validity of a mortgage even as between the parties, but under article 2125 of the new Civil Code (in effect since August 30,1950), this is no longer so. If the instrument is not recorded, the mortgage is nonetheless binding between the parties. (Article 2125, 2nd sentence). - The Valdehuezas having remained in possession of the land and the realty taxes having been paid by them, the contracts which purported to be pacto de retro transactions are presumed to be equitable mortgages, whether registered or not, there being no third parties involved. Disposition The judgment was modified.

judgment in favor of the Adiarte and denied MFR. Hence, this appeal. ISSUES 1. WON the promise to sell signed by the late Cirilo Agudong in his lifetime is lawful and valid 2. WON the order to the appellant to accept the sum of P1,100 tendered by the appelee is valid without the three heirs of the deceased Cirilo Agudong having been made party defendants HELD 1. YES - The promise to sell made by Cirilo Agudong, not being contrary to law, morals, or public order or public policy, is lawful, valid and enforceable. It not only binds him and his estate, now that he is dead, but also his wife because of the presumption that the property, having been acquired during the marriage, is conjugal property; and the principle that contracts made by the husband as regards conjugal property binds the wife. - After the lapse of the ten-year period agreed upon in the deed of sale with the right to repurchase executed by Adiarte, the appellant Tumaneg and her husband Cirilo Agudong became the absolute owners of the two parcels of land sold to them. The promise to sell and convey the same parcels of land made by Cirilo Agudong, after he and his wife had become absolute owners thereof, cannot be regarded as a promise to resell by virtue of the right to repurchase reserved by the vendor. That right was lost to the latter after her failure to repurchase during the ten years agreed upon. There is therefore no room for the application of the provisions of article 1508 of the Civil Code which prohibit an agreement or stipulation for redemption of the property sold beyond ten years from the date of the contract. - The term recomprar (repurchase) is usually and ordinarily used to refer to a sale or conveyance of real or personal property if the vendee had been the former owner thereof. - The promise to sell, upon which Adiarte rests her right to demand the specific performance thereof, cannot be deemed a novation. Novation is brought about when there is an existing contract, substituted or replaced by another, either by the change of the subject matter, or by substantial alterations of the terms, or by substitution of another for the debtor, or by subrogation of another to the rights of the creditor. In this case, the original contract of sale with the right to repurchase reserved by the vendor no longer existed at the time the promise to resell was made by the purchaser who had already become the absolute owner of the property. 2. YES - But only because the ponente believes there seems to be no defense which may be pleaded or set up by the children and heirs of the late Cirilo Agudong except the one set up by the Agudongs widow, Emiliana Tumaneng. - Adiarte is directed to amend her complaint by impleading the children and heirs of the late Cirilo Agudong; to serve them or their guardians with copies of the complaint; and if within 15 days from service of a copies of the amended complaint, no answer be filed, or if an answer be filed setting up no other defense than the one already set up by their mother, then the judgment appealed from is affirmed, with costs against the appellant. If the answer/s filed by the heirs or their guardian/s set up a new valid defense, then the judgment appealed from is set aside, without costs, and the trial court is directed to hear such evidence as the new party defendants may desire to present, and after hearing to render judgment in the case.

ADIARTE V TUMANENG 88 PHIL 333 PADILLA; March 15, 1951

NATURE Appeal from a judgment of the CFI Ilocos Norte. FACTS - Amanda Madamba Vda. de Adiarte was the owner of two parcels of land situated in Bo. Tabtabagan, Banna, Ilocos Norte [3,296 sq. m. (P220) and 6,592 sq. m. (P350)]. - 25 February 1929: for and in consideration of P1,100, the owner sold the two parcels of land to the spouses Cirilo Agudong and Emiliana Tumaneng, reserving for her the right to repurchase them within ten years. - 25 February 1939: lapse of the ten year right to repurchase. - 29 February 1944: the vendee spouses presented for registration under and pursuant to the provisions of Act 3344 the deed of sate with the right to repurchase in the office of the Registrar of Deeds in and for the Province of Ilocos Norte. - 6 April 1944: the vendor Adiarte called on the vendee spouses at their residence in Sarrat, Ilocos Norte, offering to repurchase the two parcels of land. At first Cirilo Agudong refused to resell, but later on, at about noon of that day, he called on Adiarte, who was taking lunch in the house of Lorenzo Pasion, and told her that he had changed his mind and that he was then decided to resell the parcels of land on condition that he would have them in his possession for the following two years. To show his good faith he wrote (in Ilocano dialect) a letter which the ponencia interpreted to evidence a promise to resell to the vendor the property sold a retro. - In October 1944, Cirilo Agudong died. On or after 6 April 1946, the vendor Adiarte offered to repurchase the two parcels of land from one of the vendees, the widow of the late Cirilo Agudong, as promised by the latter during his lifetime in the abovementioned letter, but Tumaneng (widow of the deceased) refused to receive the sum of P1,100 tendered to her by the vendor Adiarte and to resell the two parcels of land. - Hence, this action was brought to compel Emiliana Tumeneng, widow of the late Cirilo Agudong, to accept the sum of P1,100 tendered by the plaintiff Adiarte and to execute in favor of the latter a deed of sale of the two parcels of land. Adiarte prays also for damages and for costs. - Tumaneng denies knowledge of any agreement entered into by and between her late husband and Adiarte. TC rendered

SEPARATE OPINION PABLO and MONTEMAYOR [dissent]

- Considering the circumstances that surrounded the execution of Agudongs letter, it appears that the parties, ignorant of the pertinent provisions of the law, extended or attempted to extend the period of redemption or repurchase by at least two years, Cirilo agreeing to the extension reluctantly and because of fear of being denounced to the Japanese and being accused of non-

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cooperation and refusal to accept the Japanese military currency. - The agreement evidenced by the letter signed by Cirilo Agudong should be declared void and of no effect for two reasons: A. The consent of Agudong was obtained through threat and intimidation, and consequently, there was no real consent. -The Court should take judicial notice of the tragedies brought about by the Pacific war and the Japanese occupation when, under threats, and fear of punishment and incarceration, innocent vendees of real properties were induced and compelled to resell them to the vendors in the cheap and greatly depreciated Japanese military currency, even long after the expiration of the agreed period of repurchase, because refusal would be interpreted by the Japanese invaders as rejection and non-acceptance of the paper money printed and issued by them without any backing. -The 10-year period for repurchase agreed upon by the parties in the year 1929 (when Adiarte sold the land to Cirilo Agudong and his wife Emiliana Tumaneng) had long expired in April 1944, when Adiarte conceived the idea and had the effrontery to demand that despite the expiration of the ten-year period, she be allowed to repurchase the land. April 1944 was a time in history when the Japanese military notes had already depreciated in value (that time, accdg to the Ballantyne schedule, one Philippine peso was equivalent to nine pesos, Japanese military notes). It was but natural for Agudong to flatly reject Adiartes proposition to redeem the land. It appears that what made Agudong change his mind was the threat made by Adiarte: If you do not like to let me redeem this land, it is up to you, I will report the matter to the Japanese. B. It is in violation of article 1508 of the Civil Code which prohibits any agreement to repurchase beyond ten years as the parties here did or attempted to do. - Manresa: if the extension is made after the expiration of the period, then it is void and of no effect because there is nothing to extend. - In no part of Agudongs letter do we see any word or expression of intention to sell on the part of Agudong, or desire to buy on the part of Adiarte. Agudong does not say in that document that he would sell the land but rather that he was permitting or he would permit Amanda to repurchase the land. - In the very complaint of Adiarte, she speaks of her desire and her vain attempts to repurchase the land. She was referring to a supposed right to repurchase, born and contained in the original deed of sale executed in 1929, the period for whose exercise was said to have been extended by Agudongs letter, and not to a new right based on a new and independent agreement, containing a supposed promise to sell or an option to buy. - Agudongs letter is not an option to buy or a promise to sell. Such a contract must necessarily contain a description of the property to be sold or purchased, the condition or conditions of the sale, and the price, independent of any other agreement, so that it could stand alone. In this case, Agudongs letter to describe the land has to refer to the parcel that Cirilo had bought, and, instead of fixing and stating the price in pesos, it has to refer to the price at which it was sold to him. Agudongs letter without reference to the original contract of sale with right to repurchase executed in 1929, cannot stand alone and would be unintelligible. - A promise to sell [an agreement wherein the owner of real estate promises to sell it to another party] is a short term contract popularly called "option to buy." It must necessarily be of short duration for otherwise it will unduly tie up and freeze the parcel to the prejudice of the owner who may miss other opportunities to sell, or who may suffer loss caused by an unearned increase in the value of the property. With these considerations, Agudongs letter can not be regarded as a promise to sell: a.) there is no consideration (no earnest money); b.) the contract contains no description of land promised to be sold, or its sales price, except by reference to another contract, that of 1929;

c.) the term or period is very long, nay, even endless. - Decision appealed from should be reversed and the complaint dismissed.

PASCUAL V CRISOSTOMO HEIRS OF ARCHES V DIAZ

50 SCRA 440 MAKALINTAL; April 30, 1973

NATURE Appeal from the order of the CFI of Capiz dismissing the complaint and from the order denying the motion for reconsideration FACTS - Maria B. Vda. de Diaz executed in favor of the late Jose A. Arches a deed of sale with pacto de retro over a parcel of land for and in consideration of P12,500.00. Arches during his lifetime filed a petitionto consolidate ownership over the lot. The defendant opposed the petition alleging among other things that the said deed of sale with pacto de retro did not express the true intention of the parties, which was merely to constitute a mortgage on the proper security for a loan. After hearing the case on the merits trial court denied the petition holding in effect that the contract was an equitable mortgage. Arches appealed to the Court of Appeals, which on December 29, 1964 rendered judgment affirming the order of the trial court. Arches filed in this Court a petition for certiorari to review the decision of the appellate court but this Court dismissed the petition on the ground that the issues involved were factual - In addition to the consideration mentioned in the deed of sale a retro, Jose A. Arches spent P1,543.70 in connection with the reconstitution of the title in the name of the vendor and in paying the real estate taxes on said lot for the years 1951 to 1960. Jose A. Arches died before he could file an action in court for the collection of the aforestated sums. - The petitioners, as forced heirs of the deceased Jose A. Arches, demanded from defendant the payment of the sum of P12,500.00 and reimbursement of the sum of P1,543.70. The defendant failed and refused to pay. Petitioners pray among things that the defendant be ordered to pay the aforementioned sums, plus damages. ISSUES 1. WON petition is barred by res judicata 2. WON petitioners cause of action has prescribed 3. WON petitioners may collect from defendant aforementioned sums, plus damages

the

HELD 1. NO Ratio Res judicata as a ground to dismiss was waived by the appellee when she failed to include it in her motion for that purpose. Rule 15, Section 8, of the Rules of Court provides that "(A) motion attacking a pleading or proceeding shall include all objections then available, and all objections not so included shall be deemed waived." 2. NO Ratio The 10-year prescriptive period commenced on August 29, 1965, when the resolution of this Court dismissing the petition for certiorari filed by the late Jose A. Arches became final and executory, and not from January 21, 1955, the date the one-year period of repurchase expired, as claimed by the defendant. 3. YES Ratio This Court recognizes the right of the plaintiff to enforce his lien in a separate proceeding notwithstanding the fact that he had failed to obtain judgment declaring him the sole and absolute owner of the parcels of land in question. Reasoning - Plaintiff has the right "within sixty days after final judgment, for a failure to pay the amount due and owing him, to foreclose his mortgage in a proper proceeding to satisfy his debt."

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Disposition Orders appealed from are REVERSED and the case REMANDED to the trial court for further proceedings.

GARGOLLO V DUERO
1 SCRA 1311 BARRERA; April 19, 1961

- Since the plaintiff does not want to reimburse the defendants for the value of improvements, the latter may not lawfully be ordered compelled to vacate and deliver said land to plaintiff. Disposition Decision reversed

NATURE Petition for review of the decision of the CFI of Iloilo FACTS - On May 20, 1953, the plaintiff sold to the defendants with pacto de recto a parcel of land for P400, which was subsequently increased to P750. According to the deed, the plaintiff can redeem the loton or before 1962. - On September 1958, she verbally notified that she would redeem the property on October. On October 18, 1958, she, thru her attorney, gave the defendants written notice to accept the redemption amount of P750.00, but the latter refused to accept. Later that month, she deposited the said amount with the clerk of court. - The reason the defendants refused is because of the promise of the plaintiff to definitely sell the land to them for the sum of P1,000.00, which promise was not carried out, they made improvements on the land by planting bananas and other fruit trees and converting a portion of the land into rice paddies, thereby incurring expenses in the amount of not less than P200.00, aside from planting seasonal crops of rice, corn, etc., which were not yet ready for harvest, and paying delinquent taxes in the amount of P25.00. - Upon pre-trial, the defendants agreed to turn over the property, subject to payment of the purchase price plus the improvements and other expenses. For one reason or another, the plaintiff and the defendants failed to agree as to the person to undertake said assessment, much less, as to the value of the said improvements. Hearing was set, however, the parties manifested that they want to enter into a amicable settlement. No settlement was reached. - On June 8, 1959, the plaintiff filed a motion and manifested her intention not to exercise the option to refund the defendants' expenses or pay the increase in value of the land in question as provided in paragraph 2 of Article 546 of the Civil Code, thereby claiming the right given her by Article 547 of the same code. the defendants filed a written reply to the aforesaid motion stating among other things, that according to the provisions of Article 1616 of the Civil Code, "the vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale and in addition: (1) the expenses of the contract, and any other legitimate payments made by reason of the sale; (2) the necessary and useful expenses made on the thing sold." The CFI ruled in favor of the plaintiff. ISSUE WON the defendants can be compelled to vacate and return the land to the plaintiff HELD - The judgment of the trial court is predicated on the ground that, according to Article 547 in relation to Article 5462 of the Civil Code, defendants "are not entitled to retain the land, but only to remove the said improvements therefrom, if the same can be done without damage thereto." - But the provision applicable is not A547 but A1616, which deals specifically with conventional redemption. It is clear in this provision that for a vendor a retro to be entitled to exercise his right of redemption, he must reimburse the vendee a retro, not only (1) the price of the sale, but also (2) the expenses of the contract and any other legitimate payments made by reason of the sale, and (3) the necessary and useful expenses made on the thing sold. The vendor a retro is not given an option to require the vendee a retro to remove the useful improvements on the land subject to sale a retro.

16 SCRA 775 REYES JBL; April 29, 1966

NATURE Petition for Review FACTS - Paz Torres and Enrique Torres were co-owners pro indiviso of a lot and building in Cebu City that both had inherited from their deceased parents. Enrique Torres sold his half interest to the Raffinan spouses for P13,000, with right to repurchase within one year. Subsequent advances by the vendees a retro increased their claims against Enrique Torres and finally, on April 3, 1951 (six months after the expiration of the right to repurchase), said Enrique executed a deed of absolute sale of the same half interest in the property in favor of the Raffinans for P28,00. This deed of absolute sale had not been brought to the attention of Enrique's sister and co- owner, Paz Torres de Conejero, nor of her husband, until August 19, 1952, when Enrique Torres showed his brother-inlaw, Enrique Conejero, a copy of the deed of absolute sale of his share of the property in favor of the Raffinans. Conejero forthwith went to the buyers, offering to redeem his brother-in-law's share, which offer he later raise to P29,000.00 and afterwards to P34,000. Amicable settlement not having been attained, the Conejeros filed a complaint in the Court of First Instance of Cebu, seeking to be declare entitled to redeem the half interest of Enrique Torres; Raffinan claimed absolute title to the property in dispute and pleading that plaintiffs lost their right of redemption because they failed to exercise it within the statutory period. The court of first instance declared the plaintiffs Conejero entitled to redeem Enrique's half interest for P34,000. Court of Appeals reversed the decision of the court of first instance stating that 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 vendor, as the case may be ( part of Art. 1623). ISSUES 1. WON there a valid and effective offer to redeem 2. WON no written notice of the sale has been given by Enrique Torres to his sister and co-owner, Paz T. de Conejero 3. WON petitioners effectuate all the steps required for the redemption 4. WON under the provisions of the Civil Code of the Philippines, a valid tender of the redemption (or repurchase) price is not required 5. WON the tender of the price is excused because Article 1620 of the New Civil Code allows the redemptioner to pay only a reasonable price if the price of alienation is grossly excessive, and that the reasonableness of the price to be paid can only be determined by the courts HELD 1. NO - The evidence shows that the appellees had offered only P10,000.00 in check with which to redeem the property with a promise to pay the balance by means of a loan which they would apply for and obtain from the bank. SC held that 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 the appellants is justified. The conditions precedent for the valid exercise of the right do not exist. 2. YES - No written notice of sale was given directly to Paz BUT Article 1623 does not prescribe any particular form of notice, nor any distinctive method for notifying the redemptioner. So long, therefore, as the latter is informed in writing of the

CONEJERO V CA

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sale and the particulars thereof, the 30 days for redemption start running, and the redemptioner has no real cause to complain. The redemptioners admit that Enrique Torres, showed and gave Enrique Conejero (who was acting for and on behalf of his wife, Paz Torres) a copy of the 1951 deed of sale in favor of respondents Raffinans. 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. It served all the purposes of the written notice, in a more authentic manner than any other writing could have done. As a necessary consequence, the 30-day period for the legal redemption by coowner Paz Torres (retracto de comuneros) began to run its course from and after August 19, 1952, ending on September 18, of the same year. 3. NO - They did not, for they failed to make a valid tender of the price of the sale paid by the Raffinans within the period fixed by law. Conejero merely offered a check of P10,000, which was not even legal tender and which the Raffinans rejected, in lieu of the price of P28,000 recited by the deed of sale. The factual finding of the Court of Appeals to this effect is final and conclusive. Nor were the vendees obligated to accept Conejero's promise to pay the balance by means of a loan to be obtained in future from a bank. Bona fide redemption necessarily imports a reasonable and valid tender of the entire repurchase price, and this was not done. There is no cogent reason for requiring the vendee to accept payment by installments from 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 antieconomic uncertainty as to ownership of the thing sold. 4. NO - The Supreme Court just held that a judicial demand, by action filed within the redemption period and accompanied by consignation in Court of the redemption price, can take the place of a personal tender to the vendee of the redemption money under the Civil Code of 1889, because the nine-day redemption period allowed thereunder was so short as to render it impractical that in every case the redemptioner should be required to seek out and offer the redemption price personally to the buyer. Under the present Civil Code, the urgency is greatly lessened by the prolongation of the repurchase period to 30 days, instead of the 9 previously allowed; and the petitioners herein have neither filed suit within the 30-day redemption period nor made consignation of the price. While they received copy of the deed of sale on August 19, 1952, complaint was only filed on October 4, 1952. 5. NO - 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, as petitioners have sought to do. At any rate, the petitioner, in making their offer to redeem, never contested the reasonableness of the price recited in the deed of sale. In fact, they even offered more, and were willing to pay as much as P34,000. It is not difficult to discern why the redemption price should either be fully offered in legal tender or else validly consigned in court. Only by such means can the buyer become certain that the offer to redeem is one made seriously and in good faith. A buyer can not 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 preexisting debt (Asturias Sugar Central versus Cane Molasses Co., 60 Phil. 253), a valid tender is indispensable, for the reasons

already stated. Of course, consignation of the price would remove all controversy as to the petitioner's ability to pay at the proper time. Disposition We find no substantial error in the decision appealed from, and the same is hereby affirmed. Petitioners Conejero shall pay the costs.

4 SCRA 526 REYES JBL; February 28, 1962

NATURE Appeal from a decision of CFI Manila FACTS - Jose V. Ramirez, during his lifetime, was a co-owner of a house and lot located at Sta. Cruz, Manila. Other co-owners are: Marie Garnier Vda. de Ramirez, 1/6; 1/6; Jose E. Ramirez, 1/6; Belen T. Ramirez, 1/6; Rita De Ramirez, 1/6; and Jose Ma. Ramirez, 1/6. - In 1951, Jose V. Ramirez died. In his last will and testament, he bequeathed his estate to his children and grandchildren and 1/3 of the free portion to Mrs. Angela M. Butte, plaintiff-appellant. The estate proceedings are still pending up to the present on account of the claims of creditors which exceed the assets of the deceased. BPI was appointed judicial administrator. - Meanwhile, on Dec. 9,1958, Mrs. Marie Garnier Vda. de Ramirez, one of the co-owners sold her undivided 1/6 share to Manuel Uy & Sons, Inc., defendant-appellant herein, for the sum of P500K. On the same day Manuel Uy & Sons, Inc. sent a letter to BPI as judicial administrator of the estate of the late Jose V. Ramirez informing it of the above- mentioned sale. Mrs. Butte received this on Dec. 11 or 12, 1958. Vendor Marie Garnier, thru her attorneyin-fact wrote BPI on Dec. 11, 1958 confirming vendee's letter regarding the sale of her 1/6 share in the Sta. Cruz property for the sum of P500K. Said letter was received by the bank on Dec. 15, 1958 and having endorsed it to Mrs. Butte's counsel, the latter received the same on Dec. 16, 1958. Appellant received the letter on Dec. 19, 1958. - On Jan. 15, 1959, Butte sent a letter and a PNB cashier's check in the amount of P500Kto Manuel Uy & Sons, Inc. offering to redeem the 1/6 share sold by Mrs. Marie Garnier Vda. de Ramirez. This tender having been refused, plaintiff on the same day consigned the amount in court and filed the corresponding action for legal redemption. Without prejudice to the determination by the court of the reasonable and fair market value of the property sold which she alleged to be grossly excessive, plaintiff prayed for conveyance of the property, and for actual, moral and exemplary damages ISSUES 1. WON plaintiff-appellant 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 Marie Garnier Vda. de Ramirez despite the presence of the judicial administrator and pending the final distribution of her share in the testate proceeding 2. WON Butte exercised the right of legal redemption within the period prescribed by law HELD 1. YES

BUTTE V MANUEL UY

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CASTILLO V SAMONTE
106 PHIL 1023 REYES JBL; April 30, 1960

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- From A1620 and A1623 CC , these applicable provisions clearly show that Angela Butte is entitled to legal redemption. [a] 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 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. [b] The situation is in no wise altered with the existence of a judicial administrator, since such rights of the judicial administrator do not include the right of legal redemption of the undivided share sold to Uy & Company by Mrs. Garnier Ramirez. [c] Although it is true that the final distribution of her share in the testate proceeding is still pending, the fact would remain that so long as that undivided share remains in the estate, the heirs of Jose V. Ramirez own it. As co owners, heirs of J.V. Ramirez became personally vested with right of legal redemption when Marie. Garnier sold her share. Even if subsequently, the undivided share of Ramirez (and of his heirs) should eventually be sold to satisfy the creditors of the estate, it would not destroy their ownership of it before the sale, but would only convey or transfer it as of the time the share that originally belonged to Ramirez is in turn sold (if it actually is sold) to pay his creditors. Hence, the right of any of the Ramirez heirs to redeem the Garnier share will not be retroactively affected. 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 third person. 2. YES - In considering if the offer to redeem was timely, the notice given by the vendee (buyer) should not be taken into account. The text of A1623 CC clearly and expressly prescribes that the thirty days for making the redemption are to be counted from notice in writing by the vendor. Rationale: The seller of an undivided interest is in the best position to know who are his coowners that under the law must be notified of the sale. Also, the notice by the seller removes all doubts as to fact of the sale, its perfection, and its validity, the notice being a reaffirmation thereof; so that the party notified need not entertain doubt that the seller may still contest the alienation. This assurance would not exist if the notice should be given by the buyer. - In this case, the notice which became operative is that given by Marie Garnier attorney-in-fact. Under date of Dec.11, 1958, she wrote BPI that her principal's 1/6 share in the Sta. Cruz property had been sold to Manuel Uy & Sons for P500K. BPI received this notice on Dec. 15, 1958, and on the same day endorsed it to Mrs. Butte, care of her attorneys, who received the same on Dec. 16, 1958. Mrs. Butte tendered redemption and upon its refusal, judicially consigned the price of P500K on Jan. 15, 1959. The latter date was the last one of the 30 days allowed by the Code for the redemption, counted by excluding Dec.16, 1958 and including Jan. 15, 1959, pursuant to A13 of CC. Thus, redemption was made in due time. - The date of receipt of the vendor's notice by BPI (Dec 15) cant be counted as determining the start of the 30; for the Administrator Bank of the estate was not a proper redemptioner, since, as previously shown, the right to redeem the share of Marie Garnier did not form part of the estate of Jose V. Ramirez. Disposition Judgment appealed is reversed and set aside.

FACTS - in September, 1944, Clemente del Castillo died intestate in Pasay City. In October, 1944, his widow, Luisa Vda. de del Castillo, sold to defendant Isabel S. de Samonte 2,000 shares of stock in the Ma-ao Sugar Central Co. - On December 15, 1945, Luisa A. Vda. de del Castillo was appointed Administratrix of the estate *this is the important part of the case: -On September 18, 1951, the buyer Isabel S. de Samonte filed a petition in the probate court alleging that she had caused to be served on all the heirs of the estate of Clemente del Castillo a copy of the Administratrix's petition of October 10, 1950, together with his own petition, with notice that the same would be submitted for consideration and approval of the Court on September 29, 1951. Samonte's petition, with attached copy of Administratrix's petition of October 10, 1950, prayed that this latter petition by the Administratrix be given due course. - On September 29, 1951, the heirs of Clemente del Castillo did not attend, and the probate court, after a hearing conducted, confirmed and approved the sale of Certificates of Stock Nos. 1704 and 1706 to defendant-appellee Isabel S. de Sa - Court of Appeals in C.A.-G.R. No. 9189-R, affirmed the order of the probate court of September 29, 1951, confirming the sale of Certificates of Stock Nos. 1704 and 1706. A petition for a writ of certiorari filed in the Supreme Court was dismissed for lack of merit . - after sale of said stocks, heirs of the late Clemente Castillo filed a case for recovery of interest of the shares (which is subject of present case) . - On July 31, 1957, judgment was rendered by the trial court dismissing plaintiffs' complaint, based mainly on its opinion that the decision of the Court of Appeals in C.A.-G.R. No. 9189-R, affirming the order of the probate court of September 29, 1951, is res judicata in the present case. Hence, the instant appeal ISSUE WON they can recover interest HELD NO - one of the assigned errors of the plaintiffs was : That the confirmation of the sale is null and void because the Administratrix's Petition of October 10, 1950 and the notice given by Samonte in his motion of September 18, 1951, are not sufficient compliance with paragraphs (a) and (b), Section 7, Rule 90 of the Rules of Court - regarding this issue which is the pertinent part in our outline Court said: It is claimed further for plaintiffs-appellants that there is no identity of parties in C.A.-G.R. No. 9189-R and the present case. This is untenable. As to the heir Sergio del Castillo, since he was the one who appealed the order of the probate court, and the decision of the Court of Appeals aforementioned is now final, he is bound by said decision and may not raise the question again. As to the other heirs joined as plaintiffs-appellants in this case, they could have also appealed the order of the probate court approving the sale of Stock Certificates 1704 and 1706, because an interested party may appeal in special proceedings from an order of the court where the order is a final determination of his rights. (Rule 105, sec. 1(e); Tambunting De Tengco vs. Hon. San Jose, 97 Phil., 491). ). Since an order of the probate court relating to sale of property of the decedent is of final character and appealable (Dais vs. Carduo, 49 Phil., 165), the failure of the other heirs to appeal therefrom makes the order final and conclusive as to them also.

ART. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one. Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common. ART. 1623. The right of legal preemption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners. The right of redemption of co-owners excludes that of adjoining owners

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DOROMAL V CA (JAVELLANA)
66 SCRA 575 BARREDO; September 5, 1975

NATURE Petition for review of decision of CA FACTS - Lot was in the name of Antonio Horilleno but before he died, he made last will and testament that it was a co-ownership bet himself and bros and sisters Luis, Soledad, Fe, Rosita, Carlos, Esperanza. Since Esperanza died, she was succeeded by daughter Javellana. - Co-owners led by Carlos wanted to sell their shares, or if possible if Javellana were agreeable, to sell the entire property. Doromal Sr. and Jr. were interested. - Since the co-owners were scattered in various parts of Phils, they executed various powers of attorney in favor of niece Mary Jimenez. They also caused power of attorney for signature by Javellana. Carlos informed her that price was P4/sqm. Later, Carlos received in check as earnest money fr Doromal Jr P5000 and price was P5/sqm. In another letter of Carlos to Javellana, he told that the Doromals gave the earnest money at P6/sqm. At any rate, Javellana did not sign the power of attorney and the co-owners went to sell their 6/7 share. - A new title was issued TCT No. 23152, in the name of Horillenos to 6/7 and Javellana to 1/7, only to be cancelled under TCT No. 23153, in the names of Doromals for 6/7 and to Javellana, 1/7. Doromals paid unto Carlos by check, P97,000,00 but besides this amount, Doromals according to evidence still paid additional cash of P18,250.00 since agreed price was P5.00 a square meter. - Javellana made formal offer to repurchase the 6/7 undivided share, the Doromals refused and Javellana filed case, sought to show that as co-owner, she had the right to redeem at the price stated (P30K). Defendants said Javellana had no more right to redeem and that if she should have, it should be at the true price (P115,250). Trial judge believed defendants. - It was found that the consideration of P30,000.00 only was placed in the deed of sale to minimize the payment of the registration fees, stamps, and sales tax. - CA reversed, and held that though Javellana was informed of the proposal to sell, she was never notified of the actual execution and registration. The intermediate court ruled that redemption price should be that in the deed P30K despite evidence that actual price paid was much more. ISSUE WON Javellana has right of redemption, and if yes, WON the price should be the actual price of the price stated in the deed HELD YES - Petitioners do not question Javellanas right to redeem. Their first point is that for purposes of Article 1623, which requires notice in writing to possible redemptioners, the letters by Carlos to Javellana constituted the required notice. But to start with, there is no showing that the letters were in fact received by Javellana. Also, between the two letters, they did not point which one is the required notice. And neither of the letters referred to a consummated sale. And it being beyond dispute that Javellana has never been notified in writing of the execution of the deed of sale by which petitioners acquired the property, it follows that her tender to redeem the same was well within the period prescribed by law. - The redemption price should be that stated in the deed, even if amount actually paid was much more.

- The practice of understating considerations of transactions for evading taxes must be condemned. - First, legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of the one who acquires a thing by purchase or dation in payment or by any other transaction where ownership is transferred by onerous title. - Second, if the price paid is 'grossly excessive' redemptioner is required to pay only a reasonable one; not that actually paid by the vendee, going to show that the law seeks to protect redemptioner and converts his position into one not that of a contractually but of a legally subrogated creditor as to the right of redemption, if the price is not 'grossly excessive'. Notice must have been intended to state the truth and if vendor and vendee should have instead, decided to state an untruth therein, it is they who should bear the consequences. - All the elements of equitable estoppel are here since the requirement of the law is to submit the affidavit of notice to all possible redemptioners. - Lastly, if this would be enrichment on Javellana, this is not unjust but just enrichment, because permitted by law. What she is seeking to enforce is not an abuse but a mere exercise of a right.

SEPARATE OPINION TEEHANKEE [concur]

- For the tax evaders to invoke in court their very act of tax evasion and to ask the courts to sanction the same by declaring that the understated stipulated price was only for purposes of tax evasion but that for the exercise of the legal right of redemption, respondent must be ordered by the courts to pay them the larger amount they had actually paid but falsely understated in the deed would be to put a premium on criminal conduct and frank cynicism in gross derogation of the law, morals, good customs and public policy. - Doromals and the co-owners-sellers should be criminally charged for falsification of public documents besides being held liable by the proper authorities for the full amount of taxes.

38 SCRA 276 BARREDO; March 31, 1971

NATURE Appeal from a decision of the Court of First Instance of Camarines Sur dismissing an action filed by herein appellant Ortega, owner of a parcel of land in Iriga, Camarines Sur occupied and used as school site by the Saint Anthony Academy, against herein appellees Orcine and Esplana, for the purpose of enforcing an alleged right of legal redemption under Art. 1622, CC over an adjoining 4,452 sqm parcel of land. FACTS - Appellant originally based his claim on Art. 1621 (legal redemption of rural lands) but amended it into Art. 1622 after appellees filed for a motion for clarification. - Art. 1622: Whenever a piece of urban land which is so small and situated that a major portion thereof cannot be used for any practical purpose within a reasonable time, having been bought merely for speculation, is about to be re-sold, the owner of any adjoining land has a right of pre-emption at a reasonable price. If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a reasonable price. When two or more owners of adjoining lands wish to exercise the right of pre-emption or redemption, the owner whose intended use of the land in question appears best justified shall be preferred. - The CFI found that: - The land sold to Esplana was a ricefield (rural) - After the same was sold, Esplana had it filled with earth and

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subdivided into lots for residential purposes (became urban) - Likewise, Santiagos land was formerly agricultural but at the time Orcine sold the land in point to Esplana, Santiagos land was already being used by a private school (urban) - Santiago cannot redeem the land under Art. 1622 ISSUE WON appellant may claim under Art. 1622 on legal redemption of urban land said land in question HELD NO Ratio In applying Art. 1622, it must be ascertained that the land sought to be redeemed is 1) urban and 2) so small and so situated that a major portion thereof cannot be used for any practical purpose. Reasoning - Whereas the objective of the right of redemption of adjoining rural lands under the Civil Code is to encourage maximum development and utilization of agricultural lands, it is evident that the purpose in allowing the right of redemption of adjoining urban land is to discourage speculation in real estate and the consequent aggravation of the housing problems in centers of population. - It is clear that the term urban in this provision does not necessarily refer to the nature of the land itself nor to the purpose to which it is devoted, but to the character of the community or vicinity in which it is found. The facts on record do not sufficiently show where the land is situated. But granted that appellants land is a school site whereas the one in question was turned into a subdivision, it is safe to conclude that both lands are in the populated section of the town and are accordingly urban. - Considering that the land sought to be redeemed is 4,452 sqm in area, it is far from being so small and situated that a major portion thereof cannot be used for any practical purpose for quite the contrary, it has been turned into a subdivision. Also, it cannot be said that Esplana bought the same for mere speculation when in the 8 months since he bought it, he had developed it into a subdivision for re-sale, which shows that he must have had a definite purpose in mind in buying the same. Disposition WHEREFORE, the decision appealed from is affirmed, with costs against appellant.

names and addresses of his creditors and the amounts of indebtedness due and owing them, as required by law. - Bulk Sales Law (Act No 3952) Section 3: It shall be the duty of every person who shall sell, mortgage, transfer, or assign any stock of goods, wares, merchandise, provisions or materials in bulk, for cash or on credit, before receiving from the vendee, mortgagee, or his, or its agent or representative any part of the purchase price thereof, or any promissory note, memorandum, or other evidence therefore, to deliver to such vendee, mortgagee, or agent, or if the vendee, mortgagee, or agent be a corporation, then to the president, vice-president, treasurer, secretary or manager of said corporation, or, if such vendee or mortgagee be a partnership firm, then to a member thereafter provided, of the names and addresses of all creditors to whom said vendor or mortgagor may be indebted, together with the amount of indebtedness due or owing, or to become due or owing by said vendor or mortgagor to each of said creditors, which statement shall be verified by an oath to the ISSUE WON Wong violated Section 3 of the Bulk Sales Law HELD NO Reasoning - Wong was pressed to sign the deed of sale by his creditor Ocampo. With threats of closing the shop and court action for eviction, the accused was practically forced into signing the deed of sale. - BUT, even if he hadnt been forced to sign the deed, he still would not be criminally liable. Act No. 3925 is penal in nature and should be construed strictly against the State. The object of sale was not covered by the provision. What was sold was the shop itself, together with the goodwill, credits, equipments, tools, machineries, which are not the stock of merchandise, goods, wares, provisions or materials in bulk contemplated in the provision. - Meaning of merchandise according to a couple of American cases: Something that is sold everyday, and is constantly going out of the store and being replaced by other goods; must be construed to mean such things as are usually bought and sold in trade by merchants - Meaning of stock: The common use of the term stock when applied to goods in a mercantile house refers to htose which are kept for sale. A foundry shop, which does not sell merchandise, is not included in said law. Disposition We are of the opinion that the guilt of the appellant Wong Szu Tung has not been proven beyond reasonable doubt; consequently, the judgment appealed from is reversed, and the said appellant acquitted, with costs de officio.

Chapter 14: BULK SALES LAW PEOPLE V WONG SZU TUNG

50 OG 4876 PAREDES; March 26, 1954

NATURE Appeal from a judgment of the CFI of Manila FACTS - Accused Tung (Chinese) was the owner of the Kim Tay Seng Foundry Shop in Caloocan, Rizal, built on the land of Ocampo. - Tung owed Ocampo over P2000 for rental of the lands, which he failed to pay, despite demands. - Ocampo threatened to sue Wong, and ordered the closing of the shop so that no one could anything from it. - When someone (Lim Guan) offered to buy the shop, Ocampo had his lawyer prepare the deed of sale, which Wong signed. Ocampo received the P2500 from the sale and applied it as payment for the rentals in arrears. - Wong was also indebted to Shurdut Mills Supply Co., Inc., for P1,591.25. A complaint was filed to recover that amount, and judgment was obtained against Wong. When a representative of the Company went to the shop to demand payment, the shop had already been sold to Lim Guan. = Trial Court found Wong guilty of violating Section 3 of the Bulk Sales Law, declaring that he willfully and voluntarily sold his shop, and that he received the purchase price thereof, without delivering to Guan a written statement containing the

LIWANAG V MENGHRAJ
72 PHIL 410

73 Phil 678 BOCOBO; September 21, 1942

FACTS - Felipe Mapoy and R.M. Maipid were charged with violation of the Bulk Sales Law in that they mortgaged all of their stock of goods, etc., without any notice to Daido Boeki Ksisha, Ltd., one of the offended parties, to which they were indebted in the sum of P2,568.85. - They pleaded guilty and each sentenced by the Court of First Instance of Manila to pay a fine of P100, and the costs, and to indemnify Daido Boeki Kaisha, Ltd., jointly and severally in the sum of P2,568.85, with subsidiary imprisonment in case of insolvency.

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ISSUE WON the trial court erred in considering the indebtedness as a liability arising from the crime charged HELD YES Reasoning - It was an error for the trial court to consider said indebtedness as a liability arising from the crime charged, and to order defendants to indemnify Daido Boeki Kaisha, Ltd., in the sum of P2,568.85, with subsidiary imprisonment in case of insolvency. - Inasmuch as under section 4 of the Bulk Sales Law, the mortgage in question was fraudulent and void, and there being no proof that the mortgaged goods have disappeared, the same are still subject to attachment for the satisfaction of creditors' lawful claims against the defendants. Daido Boeki Kaisha, Ltd. may still bring a separate civil action against Mapoy and Maipid for the collection of any indebtedness that may be due and if they will not pay the judgment in such civil case, the goods involved in the instant case may be seized and sold. - Therefore, the obligation of Mapoy and Maipid to pay Daido Boeki Kaisha, Ltd., the sum of P2,568.85, which was already existing when the mortgage was signed was not the result of the violation of the Bulk Sales Law, nor was it affected by said violation. Disposition Decision of the CFI is MODIFIED.

4 SCRA 792 BAUTISTA ANGELO; March 31, 1962

NATURE Appeal from decision of the CFI of Manila FACTS - Macario King, a naturalized Filipino citizen, bought a grocery wholesale and retail business from the Philippine Cold Stores, Inc. - King sought permission from the President of the Philippines to retain the services of the three Chinese employees, one having been employed as purchaser and the other two as salesmen, pursuant to Section 2-A of Commonwealth Act 108. - King's request was disapproved on the ground that aliens may not be appointed to operate or administer a retail business under Section 1 of RA 11808 which requires that its capital be wholly owned by citizens of the Philippines, the only exception thereto being the employment of technical personnel which may be allowed after securing to that effect an authorization from the President. The positions occupied by the three Chinese employees are not technical positions within the meaning of Section 2-A of CA 108, as amended by RA. 134. - King and his three Chinese employees filed a petition for declaratory relief, injunction and mandamus on against the Secretary of Commerce and Industry and the Executive
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Republic Act No. 1180, in relation to Section 2-A, Commonwealth Act 108, as amended by Republic Act No. 134. SEC 1. No person who is not a citizen of the Philippines, and no association, partnership, or corporation the capital of which is not wholly owned by citizens of the Philippines, shall engage directly or indirectly in the retail business SEC. 2-A. Any person, corporation, or association which, having in its name or under its control, a right, franchise, privilege, property or business, the exercise or enjoyment of which is expressly reserved by the Constitution or the laws to citizens of the Philippines, or of any other specific country, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, permits or allows the use, exploitation or enjoyment thereof by a person, corporation or association not possessing the requisites prescribed by the Constitution or the laws of the Philippines; or leases, or in any other way transfers or conveys said right, franchise, privilege, property or business to a person, corporation or association not otherwise qualified under the Constitution, or the provisions of the existing laws; or in any manner permits or allows any person, not possessing the qualifications required by the Constitution or existing laws to acquire, use, exploit or enjoy a right, franchise, privilege, property or business, the exercise and enjoyment of which are expressly reserved by the Constitution or existing laws to citizens of the Philippines or of any other specific country, to intervene in the management, operation, administration or control thereof, whether as an officer, employee or laborer therein, with or without remuneration except technical personnel whose employment may be specifically authorized by the President of the Philippines upon recommendation of the Department Head concerned . . . ."

KING V HERNAEZ

Secretary before the CFI of Manila praying that they be given relief. - Lower court held that King may employ any person, although not a citizen of the Philippines or of the United States of America, including the three petitioners herein in any position in his retail business not involving participation, or intervention in the management, operation, administration or control of said business; that the three Chinese employees are entitled to continue as purchaser and salesmen in the Kings or in any other retail establishment. Petitioners Claims Petitioners contend that their employment is not prohibited either by the Retail Trade Law or the Anti-Dummy Law since they do not intervene in the management, operation, administration or control of the retail establishment. Respondents Comments Respondents hold that the language of the Anti-Dummy Law bans aliens' employment in both control and non-control positions; that the words management, operation, administration and control, followed by and blended with the words "whether as an officer, employee or laborer therein", signify the legislative intent to cover the entire scale of personnel activity so that even laborers are excluded from employment, the only exemption being technical personnel whose employment may be allowed with the previous authorization of the President. This contention results from the application of the rule known in statutory construction as redendo singula singulis. This means that the antecedents "management, operation, administration an control" and the consequents "officers, employee, and laborer" should be read distributively to the effect that each word is to be applied to the subject to which it appears by context most properly relate and to which it is most applicable. ISSUE WON the employment of aliens in non-control position in a retail establishment or trade prohibited by the Anti-Dummy Law HELD YES - With regard to the Retail Trade Law, this Court has held that the same is valid. The purpose of the enactment of the Retail Trade Law is to translate the general preoccupation of the Filipinos against the threat and danger to our national economy caused by alien dominance and control of the retail business by weeding out such threat and danger and thus prevent aliens from having a strangle hold upon our economic life. But in so doing the legislature did not intend to deprive aliens of their means of livelihood. - The law seems to be clear on what its extent and scope seem to prohibit but also because the same is in full accord with the main objective that permeates both the Retail Trade Law and the AntiDummy Law. The one advocates the complete nationalization of the retail trade by denying its ownership to any alien, while the other limits its management, operation, administration and control to Filipino citizens. The prevailing idea is to secure both ownership and management of the retail business in Filipino hands. It is imperative that the law be interpreted in a manner that would stave off any attempt at circumvention of this legislative purpose. - It is hard to see how the nationalization of employment in the Philippines can run counter to any provision of our Constitution considering that its aim is on exactly to deprive citizen of a right that he may exercise under it but rather to promote enhance and protect those that are expressly accorded to a citizen such as the right to life, liberty and pursuit of happiness. The nationalization of an economic measure when founded on grounds of public policy cannot be branded as unjust, arbitrary or oppressive or contrary to the Constitution because its aim is merely to further the material progress and welfare of the citizens of a country - Since the Anti-Dummy Law is but a mere complement of the Retail Trade Law in the sense that it is designed to make effective its aims and purposes and both tend to accomplish the same objective either by excluding aliens from owning any retail trade or by banning their employment if the trade is owned by Filipinos,

SALES!

- A2010 -

Prof. Jardeleza

Page 94

and the target of both is "the removal and eradication of the shackles of foreign economic control and domination" thru the nationalization of the retail trade both in ownership and employment, the pronouncement made in one regarding its constitutionality applies equally if not with greater reason to the other both being complementary one to the other. Disposition Decision appealed from reversed. Preliminary injunction issued by the trial court is lifted. The petition for mandamus is dismissed, with costs against appellees.

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