SALES

(Year 1990-2006)
(Art. 1624; 1475. CC; Rodriguez v. CA, et al, G. R No. 84220,
March 25. 1992 207 SCRA 553).
ALTERNATIVE ANSWER:
Assignment of Credit vs. Subrogation (1993) No, the defense of Peter Co will not prosper. Hadji Butu
Peter Co, a trader from Manila, has dealt business with Allied validly acquired his right by an assignment of credit under
Commodities in Hongkong for five years. All through the Article 1624 of the Civil Code. However, the provisions on the
years, Peter Co accumulated an indebtedness of P500,000.00 contract of sale (Article 1475 Civil Code) will apply, and the
with Allied Commodities. Upon demand by its agent in transaction is covered by the Statute of Frauds. (Art. 1403 par.
Manila, Peter Co paid Allied Commodities by check the (2) Civil Code)
amount owed. Upon deposit in the payee's account in Manila,
the check was dishonored for insufficiency of funds. For and Conditional Sale vs. Absolute Sale (1997)
in consideration of P1.00, Allied Commodities assigned the Distinguish between a conditional sale, on the one hand, and
credit to Hadji Butu who brought suit against Peter Co in the an absolute sale, on the other hand.
RTC of Manila for recovery of the amount owed. Peter Co SUGGESTED ANSWER:
moved to dismiss the complaint against him on the ground A CONDITIONAL SALE is one where the vendor is granted
that Hadji Butu was not a real party in interest and, therefore, the right to unilaterally rescind the contract predicated on the
without legal capacity to sue and that he had not agreed to a fulfillment or non-fulfillment, as the case may be, of the
subrogation of creditor. Will Peter Co's defense of absence of prescribed condition. An ABSOLUTE SALE is one where the
agreement to a subrogation of creditor prosper? title to the property is not reserved to the vendor or if the
vendor is not granted the right to rescind the contract based on
SUGGESTED ANSWER: the fulfillment or nonfulfillment, as the case may be, of the
No, Co's defense will not prosper. This is not a case of prescribed condition.
subrogation, but an assignment of credit. ASSIGNMENT
OF CREDIT is the process of transferring the right of the Contract of Sale vs. Agency to Sell (1999)
assignor to the assignee. The assignment may be done either A granted B the exclusive right to sell his brand of Maong pants
gratuitously or onerously, in which case, the assignment has in Isabela, the price for his merchandise payable within 60 days
an effect similar to that of a sale (Nyco Sales Corp.v.BA from delivery, and promising B a commission of 20% on all
Finance Corp. G.R No.71694. Aug.16, 1991 200 SCRA 637). As a sales. After the delivery of the merchandise to B but before he
result of the assignment, the plaintiff acquired all the rights of could sell any of them, B’s store in Isabela was completely
the assignor including the right to sue in his own name as the burned without his fault, together with all of A's pants. Must B
legal assignee. In assignment, the debtor's consent is not pay A for his lost pants? Why? (5%)
essential for the validity of the assignment
SUGGESTED ANSWER:
The contract between A and B is a sale not an agency to sell
because the price is payable by B upon 60 days from delivery
even if B is unable to resell it. If B were an agent, he is not
bound to pay the price if he is unable to resell it.

As a buyer, ownership passed to B upon delivery and, under

Art. 1504 of the Civil Code, the thing perishes for the owner.
Hence, B must still pay the price.

Contract of Sale; Marital Community Property; Formalities

(2006)
Spouses Biong and Linda wanted to sell their house. They
found a prospective buyer, Ray. Linda negotiated with Ray for
the sale of the property. They agreed on a fair price of P2
Million. Ray sent Linda a letter confirming his intention to buy
the property. Later, another couple, Bernie and Elena, offered
a similar house at a lower price of P 1.5 Million. But Ray
insisted on buying the house of Biong and Linda for
sentimental reasons. Ray prepared a deed of sale to be signed
by the couple and a manager's check for P2 Million. After
receiving the P2 Million, Biong signed the deed of sale.
However, Linda was not able to sign it because she was abroad.
On her return, she refused to sign the document saying she
changed her mind. Linda filed suit for nullification of the deed
of sale and for moral and exemplary damages against Ray.
Will the suit prosper? Explain. (2.5%)
ALTERNATIVE ANSWER:
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
No, the suit will not prosper. The contract of sale was In a CONTRACT OF SALE, ownership is transferred to
perfected when Linda and Ray agreed on the object of the the buyer upon delivery of the object to him while in a
sale and the price [Art. 1475, New Civil Code]. The consent CONTRACT TO SELL, ownership is retained by the seller
of Linda has already been given, as shown by her agreement until the purchase price is fully paid. In a contract to sell,
to the price of the sale. There is therefore consent on her part delivery of the object does not confer ownership upon the
as the consent need not be given in any specific form. Hence, buyer. In a contract of sale, there is only one contract
her consent may be given by implication, especially since she executed between the seller and the buyer, while in a contract
was aware of, and participated in the sale of the property to sell, there are two contracts, first the contract to sell (which
(Pelayo v. CA, G.R. No. 141323, June 8, 2005). Her action for is a conditional or preparatory sale) and a second, the final
moral and exemplary damages will also not prosper because deed of sale or the principal contract which is executed after
the case does not fall under any of those mentioned in Art. full payment of the purchase price.
2219 and 2232 of the Civil Code.
ALTERNATIVE ANSWER: Contract to Sell; Acceptance; Right of First Refusal (1991)
The suit will prosper. Sale of community property requires A is the lessee of an apartment owned by Y. A allowed his
written consent of both spouses. The failure or refusal of married but employed daughter B, whose husband works in
Linda to affix her signature on the deed of sale, coupled with Kuwait, to occupy it. The relationship between Y and A
her express declaration of opposing the sale negates any valid soured. Since he has no reason at all to eject A, Y, in
consent on her part. The consent of Biong by himself is connivance with the City Engineer, secured from the latter an
insufficient to effect a valid sale of community property (Art. order for the demolition of the building. A immediately filed
96, Family Code; Abalos v. Macatangay, G.R. No. 155043, an action in the Regional Trial Court to annul the order and
September 30, 2004). to enjoin its enforcement. Y and A were able to forge a
compromise agreement under which A agreed to a twenty
Does Ray have any cause of action against Biong and percent (20%) increase in the monthly rentals. They further
Linda? Can he also recover damages from the spouses? agreed that the lease will expire two (2) years later and that in
Explain. (2.5%) the event that Y would sell the property, either A or his
Considering that the contract has already been perfected and
daughter B shall have the right of first refusal. The
taken out of the operation of the statute of frauds, Ray can
Compromise Agreement was approved by the court. Six (6)
compel Linda and Biong to observe the form required by law
months before the expiration of the lease, A died. Y sold the
in order for the property to be registered in the name of Ray property to the Visorro Realty Corp. without notifying
which can be filed together with the action for the recovery B. B then filed an action to rescind the sale in favor of the
of house [Art. 1357 New Civil Code]. In the alternative, he corporation and to compel Y to sell the property to her since
can recover the amount of Two million pesos (P2,000,000.00) under the Compromise Agreement, she was given the right
that he paid. Otherwise, it would result in solutio indebiti or of first refusal which, she maintains is a stipulation pour atrui
unjust enrichment. under Article 1311 of the Civil Code. Is she correct?
Ray can recover moral damages on the ground that the action SUGGESTED ANSWER:
filed by Linda is clearly an unfounded civil suit which falls B is not correct. Her action cannot prosper. Article 1311
under malicious prosecution {Ponce v. Legaspi, G.R. No. requires that the third person intended to be benefited must
79184, May 6,1992). communicate his acceptance to the obligor before the
revocation. There is no showing that B manifested her
Contract to Sell (2001) acceptance to Y at any time before the death of A and before
Arturo gave Richard a receipt which states: the sale. Hence, B cannot enforce any right under the alleged
Receipt Received from Richard as down payment for my stipulation pour atrui.
1995 Toyota Corolla with plate No. XYZ-1 23..............
P50.000.00 Double Sales (2001)
On June 15, 1995, Jesus sold a parcel of registered land to
Jaime. On June 30, 1995, he sold the same land to Jose. Who
Balance payable: 12/30/01........ P50 000.00 has a better right if: a) the first sale is registered ahead of the
second sale,
September 15, 2001. with knowledge of the latter. Why? (3%) b) the second sale is
registered ahead of the first sale,
(Sgd.) Arturo Does this receipt evidence a with knowledge of the latter? Why? (5%)
contract to sell? Why? (5%) SUGGESTED ANSWER:
SUGGESTED ANSWER: (a) The first buyer has the better right if his sale was first to
It is a contract of sale because the seller did not reserve be registered, even though the first buyer knew of the second
ownership until he was fully paid. sale. The fact that he knew of the second sale at the time of
his registration does not make him as acting in bad faith
Contract to Sell vs. Contract of Sale (1997) because the sale to him was ahead in time, hence, has a
State the basic difference (only in their legal effects) Between priority in right. What creates bad faith in the case of double
a contract to sell, on the one hand, and a contract of sale, on sale of land is knowledge of a previous sale.
the other.
SUGGESTED ANSWER:
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
b) The first buyer is still to be preferred, where the second (2) years, or until 3 June 1973. It is further stated therein
sale is registered ahead of the first sale but with knowledge of that should the Vendor (Juliet) fail to exercise her right to
the latter. This is because the second buyer, who at the time redeem within the said period, the conveyance shall be
he registered his sale knew that the property had already been deemed absolute and irrevocable. Romeo did not take
sold to someone else, acted in bad faith. (Article 1544, C.C.) possession of the property. He did not pay the taxes thereon.

Double Sales (2004) Juliet died in January I973 without having repurchased the
JV, owner of a parcel of land, sold it to PP. But the deed of property. Her only surviving heir, her son X, failed to
sale was not registered. One year later, JV sold the parcel repurchase the property on or before 3 June 1973. In 1975,
again to RR, who succeeded to register the deed and to Romeo sold the property to Y for P50,000.00. Upon learning
obtain a transfer certificate of title over the property in his of the sale, X filed an action for the nullification of the sale
own name. Who has a better right over the parcel of land, and for the recovery of the property on the ground that the
RR or PP? Why? Explain the legal basis for your answer. so-called deed of absolute sale executed by his mother was
(5%) merely an equitable mortgage, taking into account the
SUGGESTED ANSWER: inadequacy of the price and the failure of Romeo to take
It depends on whether or not RR is an innocent purchaser possession of the property and to pay the taxes thereon.
for value. Under the Torrens System, a deed or instrument Romeo and Y maintain that there was a valid absolute sale
operated only as a contract between the parties and as and that the document signed by the former on 3 June 1973
evidence of authority to the Register of Deeds to make the was merely a promise to sell. a) If you were the Judge, would
registration. It is the registration of the deed or the you uphold the theory of
instrument that is the operative act that conveys or affects X? b) If you decide in favor of Romeo and Y, would you
the land. (Sec. 51, P.D. No. 1529).
uphold the validity of the promise to sell?
SUGGESTED ANSWER:
In cases of double sale of titled land, it is a well-settled A. I will not uphold the theory of X for the nullification of
rule that the buyer who first registers the sale in good faith the sale and for the recovery of the property on the ground
acquires a better right to the land. (Art. 1544, Civil Code). that the so-called sale was only an equitable mortgage. An
equitable mortgage may arise only if, in truth, the sale was
Persons dealing with property covered by Torrens title one with the right of repurchase. The facts of the case state
are not required to go beyond what appears on its face. that the right to repurchase was granted after the absolute
(Orquiola v. CA 386, SCRA 301, [2002]; Domingo v. Races 401 deed of sale was executed. Following the rule in Cruzo vs.
SCRA 197, [2003]). Thus, absent any showing that RR knew Carriaga (174 SCRA 330), a deed of repurchase executed
about, or ought to have known the prior sale of the land to independently of the deed of sale where the two stipulations
PP or that he acted in bad faith, and being first to register are found in two instruments instead of one document, the
the sale, RR acquired a good and a clean title to the property right of repurchase would amount only to one option granted
as against PP. by the buyer to the seller. Since the contract cannot be upheld
as a contract of sale with the right to repurchase, Art. 1602 of
Equitable Mortgage the Civil Code on equitable mortgage will not apply. The rule
(1991)On20 December 1970, Juliet, a widow, borrowed could have been different if both deeds were executed on the
from Romeo P4,000.00 and, as security therefore, she same occasion or date, in which case, under the ruling in
executed a deed of mortgage over one of her two (2) spouses Claravall v. CA (190 SCRA 439), the contract may still
registered lots which has a market value of P15,000.00. The be sustained as an equitable mortgage, given the
document and the certificate of title of the property were circumstances expressed in Art. 1602. The reserved right to
delivered to Romeo. repurchase is then deemed an original intention.
On 2 June 1971, Juliet obtained an additional sum of P3,000
from Romeo. On this date, however, Romeo caused the B. If I were to decide in favor of Romeo and Y, I would not
preparation of a deed of absolute sale of the above property, uphold the validity of the promise to sell, so as to enforce it
to which Juliet affixed her signature without first reading the by an action for specific performance. The promise to sell
document. The consideration indicated is P7,000.00. She would only amount to a mere offer and, therefore, it is not
thought that this document was similar to the first she signed. enforceable unless it was sought to be exercised before a
When she reached home, her son X, after reading the withdrawal or denial thereof.
duplicate copy of the deed, informed her that what she
signed was not a mortgage but a deed of absolute sale. On Even assuming the facts given at the end of the case, there
the following day, 3 June 1971, Juliet, accompanied by X, would have been no separate consideration for such promise
went back to Romeo and demanded the reformation it, to sell. The contract would at most amount to an option
Romeo prepared and signed a document wherein, as vendee which again may not be the basis for an action for specific
in the deed of sale above mentioned, he obligated and bound performance.
himself to resell the land to Juliet or her heirs and successors Equitable Mortgage vs. Sale (2005)
for the same consideration as reflected in the deed of sale On July 14, 2004, Pedro executed in favor of Juan a Deed of
(P7,000) within a period of two Absolute Sale over a parcel of land covered by TCT No.
Page 93 of 119
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
6245. It appears in the Deed of Sale that Pedro received X sold a parcel of land to Y on 01 January 2002, payment
from Juan P120,000.00 as purchase price. However, Pedro and delivery to be made on 01 February 2002. It was
retained the owner's duplicate of said title. Thereafter, Juan, stipulated that if payment were not to be made by Y on 01
as lessor, and Pedro, as lessee, executed a contract of lease February 2002, the sale between the parties would
over the property for a period of one (1) year with a monthly automatically be rescinded. Y failed to pay on 01 February
rental of Pl,000.00. Pedro, as lessee, was also obligated to pay 2002, but offered to pay three days later, which payment X
the realty taxes on the property during the period of lease. refused to accept, claiming that their contract of sale had
already been rescinded. Is X’s contention correct? Why? 5%
SUGGESTED ANSWER:
Subsequently, Pedro filed a complaint against Juan for the No, X is not correct. In the sale of immovable property, even
reformation of the Deed of Absolute Sale, alleging that the though it may have been stipulated, as in this case, that upon
transaction covered by the deed was an equitable mortgage. failure to pay the price at the time agreed upon the rescission
In his verified answer to the complaint, Juan alleged that the of the contract shall of right take place, the vendee may pay,
property was sold to him under the Deed of Absolute Sale, even after the expiration of the period, as long as no demand
and interposed counterclaims to recover possession of the for rescission of the contract has been made upon him either
property and to compel Pedro to turn over to him the judicially or by a notarial act (Article 1592, New Civil code).
owner's duplicate of title. Resolve the case with reasons. (6%) Since no demand for rescission was made on Y, either
judicially or by a notarial act, X cannot refuse to accept the
SUGGESTED ANSWER: payment offered by Y three (3) days after the expiration of
The complaint of Pedro against Juan should be dismissed. the period.
The instances when a contract — regardless of its ANOTHER SUGGESTED ANSWER:
nomenclature — may be presumed to be an equitable This is a contract to sell and not a contract of absolute sale,
mortgage are enumerated in Article 1602 of the Civil Code: since as there has been no delivery of the land. Article 1592 of
"Art. 1602. The contract shall be presumed to be an equitable the New Civil code is not applicable. Instead, Article 1595 of
mortgage, in any of the following cases: the New Civil Code applies. The seller has two alternative
1 When the price of a sale with right to repurchase is remedies: (1) specific performance, or (2) rescission or
unusually inadequate: resolution under Article 1191 of the New Civil code. In both
2 When the vendor remains in possession as lessee or remedies, damages are due because of default.
otherwise; ALTERNATIVE ANSWER:
3 When upon or after the expiration of the right to Yes, the contract was automatically rescinded upon Y’s failure
to pay on 01 February 2002. By the express terms of the
repurchase another instrument extending the period of redemption

or granting a new period is executed; contract, there is no need for X to make a demand in order
4 When the purchaser retains for himself a part of the for rescission to take place. (Article 1191, New Civil Code, Suria
purchase price; v. IAC 151 SCRA 661 [1987]; U.P. v. de los
5 When the vendor binds himself to pay the taxes on the Angeles 35 SCRA 102 [1970]).
thing sold; Maceda Law (2000)
6 In any other case where it may be fairly inferred that the Priscilla purchased a condominium unit in Makati City from
real intention of the parties is that the transaction shall secure the the Citiland Corporation for a price of P10 Million, payable
payment of a debt or the performance of any other obligation. P3 Million down and the balance with interest thereon at 14%
per annum payable in sixty (60) equal monthly installments of
P198,333.33. They executed a Deed of Conditional Sale in
"In any of the foregoing cases, any money, fruits, or other
which it is stipulated that should the vendee fail to pay three
benefit to be received by the vendee as rent or otherwise shall
(3) successive installments, the sale shall be deemed
be considered as interest which shall be subject to the usury
automatically rescinded without the necessity of judicial action
laws."
and all payments made by the vendee shall be forfeited in
Article 1604 states that "the provisions of article 1602 shall favor of the vendor by way of rental for the use and
also apply to a contract purporting to be an absolute sale." occupancy of the unit and as liquidated damages. For 46
months, Priscilla paid the monthly installments religiously, but
For Articles 1602 and 1604 to apply, two requisites must on the 47th and 48th months, she failed to pay. On the 49th
concur: 1) the parties entered into a contract denominated as a month, she tried to pay the installments due but the vendor
contract of sale; and 2) their intention was to secure an existing refused to receive the payments tendered by her. The
debt by way of mortgage. (Heirs of Balite v. Lim, following month, the vendor sent her a notice that it was
G.R. No. 152168, December 10, 2004)
rescinding the Deed of Conditional Sale pursuant to the
stipulation for automatic rescission, and demanded that she
In the given case, although Pedro retained possession of the vacate the premises. She replied that the contract cannot be
property as lessee after the execution of the Deed of Sale, there rescinded without judicial demand or notarial act pursuant to
is no showing that the intention of the parties was to secure an Article 1592 of the Civil Code. a) Is Article 1592 applicable?
existing debt by way of mortgage. Hence, the complaint of (3%) b) Can the vendor rescind the contract? (2%)
Pedro should be dismissed.
SUGGESTED ANSWER:
Immovable Property; Rescission of Contract (2003)
Page 94 of 119
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
a) Article 1592 of the Civil Code does not apply to a
conditional sale. In Valarao v. CA, 304 SCRA 155, the Option Contract (2002)
Supreme Court held that Article 1592 applies only to a Explain the nature of an option contract. (2%)
contract of sale and not to a Deed of Conditional Sale where SUGGESTED ANSWER:
the seller has reserved title to the property until full payment An OPTION CONTRACT is one granting a privilege to buy
of the purchase price. The law applicable is the Maceda Law. or sell within an agreed time and at a determined price. It
must be supported by a consideration distinct from the price.
SUGGESTED ANSWER: (Art. 1479 and 1482, NCC)
b) No, the vendor cannot rescind the contract under the
circumstances. Under the Maceda Law, which is the law Option Contract; Earnest Money (1993)
applicable, the seller on installment may not rescind the LT applied with BPI to purchase a house and lot in Quezon
contract till after the lapse of the mandatory grace period of City, one of its acquired assets. The amount offered was
30 days for every one year of installment payments, and only Pl,000,000.00 payable, as follows: P200,000.00 down payment,
after 30 days from notice of cancellation or demand for the balance of P800,000.00 payable within 90 days from June
rescission by a notarial act. In this case, the refusal of the 1, 1985. BPI accepted the offer, whereupon LT drew a check
seller to accept payment from the buyer on the 49th month for P200,000.00 in favor of BPI which the latter thereafter
was not justified because the buyer was entitled to 60 days deposited in its account. On September 5, 1985, LT wrote
grace period and the payment was tendered within that BPI requesting extension until October 10, 1985 within which
period. Moreover, the notice of rescission served by the seller to pay the balance, to which BPI agreed. On October 5, 1985,
on the buyer was not effective because the notice was not by due to the expected delay in the remittance of the needed
a notarial act. Besides, the seller may still pay within 30 days amount by his financier from the United States, LT wrote BPI
from such notarial notice before rescission may be effected. requesting a last extension until October 30, 1985, within
All these requirements for a valid rescission were not which to pay the balance. BPI denied LTs request because
complied with by the seller. Hence, the rescission is invalid. another had offered to buy the same property for
P1,500,000.00. BPI cancelled its agreement with LT and
offered to return to him the amount of P200,000.00 that LT
Maceda Law; Recto Law (1999) had paid to it. On October 20, 1985, upon receipt of the
What are the so-called "Maceda" and "Recto" laws in amount of P800,000.00 from his US financier, LT offered to
connection with sales on installments? Give the most pay the amount by tendering a cashier's check therefor but
important features of each law. (5%) which BPI refused to accept. LT then filed a complaint against
SUGGESTED ANSWER:
BPI in the RTC for specific performance and deposited in
The MACEDA LAW (R.A. 655) is applicable to sales of
court the amount of P800,000.00. Is BPI legally correct in
immovable property on installments. The most important
canceling its contract with LT?
features are (Rillo v. CA, 247 SCRA 461):
(1) After having paid installments for at least two years, the SUGGESTED ANSWER:
buyer is entitled to a mandatory grace period of one month BPI is not correct in canceling the contract with LT. In Lina
for every year of installment payments made, to pay the Topacio v Court of Appeals and BPI Investment (G. R No.
unpaid installments without interest. 102606, July 3. 1993, 211 SCRA 291) the Supreme Court held
that the earnest money is part of the purchase price and is
If the contract is cancelled, the seller shall refund to the proof of the perfection of the contract. Secondly, notarial or
buyer the cash surrender value equivalent to fifty percent judicial rescission under Art. 1592 and 1991 of the Civil Code
(50%) of the total payments made, and after five years of is necessary (Taguba v. de Leon, 132 SCRA 722.)
installments, an additional five percent (5%) every year but ALTERNATIVE ANSWER:
not to exceed ninety percent (90%) of the total payments BPI is correct in canceling its contract with LT but BPI must
made. do so by way of judicial rescission under Article 1191 Civil
Code. The law requires a judicial action, and mere notice of
(2) In case the installments paid were less than 2 years, the rescission is insufficient if it is resisted. The law also provides
seller shall give the buyer a grace period of not less than 60 that slight breach is not a ground for rescission (Song Fo &
days. If the buyer fails to pay the installments due at the Co, vs, Hawaiian Phil Co., 47 Phils. 821), Delay in the
expiration of the grace period, the seller may cancel the fulfillment of the obligation (Art. 1169, Civil Code) is a
contract after 30 days from receipt by the buyer of the notice ground to rescind, only if time is of the essence. Otherwise,
of cancellation or demand for rescission by notarial act. The the court may refuse the rescission if there is a just cause for
RECTO LAW (Art. 1484} refers to sale of movables the fixing of a period.
payable in installments and limiting the right of seller, in case
of default by the buyer, to one of three remedies: a) exact Perfected Sale; Acceptance of Earnest Money (2002)
fulfillment; b) cancel the sale if two or more installments Bert offers to buy Simeon’s property under the following
have not terms and conditions: P1 million purchase price, 10% option
money, the balance payable in cash upon the clearance of the
been paid; property of all illegal occupants. The option money is
c) foreclose the chattel mortgage on the things sold, promptly paid and Simeon clears the property of illegal
also in case of default of two or more installments, with no occupants in no time at all. However, when Bert tenders
further action against the purchaser. payment of the balance and ask Simeon for the deed
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
for absolute sale, Simeon suddenly has a change of heart, May Adela still exercise her right of redemption? Explain.
claiming that the deal is disadvantageous to him as he has (5%)
found out that the property can fetch three time the agreed SUGGESTED ANSWER:
purchase price. Bert seeks specific performance but Simeon Yes, Adela may still exercise her right of redemption
contends that he has merely given Bert an option to buy and notwithstanding the lapse of more than 30 days from notice
nothing more, and offers to return the option money which of the sale given to her because Article 1623 of the New Civil
Bert refuses to accept. Code requires that the notice in writing of the sale must come
B. Will Bert’s action for specific performance prosper? from the prospective vendor or vendor as the case may be. In
Explain. (4%) this case, the notice of the sale was given by the vendee and
C. May Simeon justify his refusal to proceed with the sale by the Register of Deeds. The period of 30 days never tolled. She
the fact that the deal is financially disadvantageous to him? can still avail of that right.
Explain. (4%) ALTERNATIVE ANSWER:
SUGGESTED ANSWER: Adela can no longer exercise her right of redemption. As
B. Bert’s action for specific performance will prosper because co-owner, she had only 30 days from the time she received
there was a binding agreement of sale, not just an option written notice of the sale which in this case took the form of a
contract. The sale was perfected upon acceptance by Simeon copy of the deed of sale being given to her (Conejero v. CA, 16
of 10% of the agreed price. This amount is in really earnest SCRA 775 [1966]). The law does not prescribe any particular
money which, under Art. 1482, ―shall be considered as part of form of written notice, nor any distinctive method for
the price and as proof of the perfection of the contract.‖ notifying the redemptioner (Etcuban v. CA, 148 SCRA 507
(Topacio v. CA, 211 SCRA 291 [1992]; Villongco Realty v. [1987]). So long as the redemptioner was informed in writing,
Bormaheco, 65 SCRA 352 [1975]). he has no cause to complain (Distrito v. CA, 197 SCRA 606, 609
[1991]). In fact, in Distrito, a written notice was held
C. Simeon cannot justify his refusal to proceed with the sale by unnecessary where the co-owner had actual knowledge of the
the fact that the deal is financially disadvantageous to him. sale, having acted as middleman and being present when the
Having made a bad bargain is not a legal ground for pulling vendor signed the deed of sale.
out a biding contract of sale, in the absence of some actionable
wrong by the other party (Vales Right of First Refusal; Lessee; Effect (1996)
v. Villa, 35 Phil 769 [1916]), and no such wrong has been Ubaldo is the owner of a building which has been leased by
committed by Bert. Remigio for the past 20 years. Ubaldo has repeatedly assured
Remigio that if he should decide to sell the building, he will
Redemption; Legal; Formalities (2001) give Remigio the right of first refusal. On June 30, 1994,
Betty and Lydia were co-owners of a parcel of land. Last Ubaldo informed Remigio that he was willing to sell the
January 31, 2001, when she paid her real estate tax, Betty building for P5 Million. The following day, Remigio sent a
discovered that Lydia had sold her share to Emma on letter to Ubaldo offering to buy the building at P4.5 Million.
November 10, 2000. The following day, Betty offered to Ubaldo did not reply. One week later, Remigio received a
redeem her share from Emma, but the latter replied that letter from Santos informing him that the building has been
Betty's right to redeem has already prescribed. Is Emma sold to him by Ubaldo for P5 Million, and that he will not
correct or not? Why? (5%) renew Remigio's lease when it expires. Remigio filed an action
SUGGESTED ANSWER: against Ubaldo and Santos for cancellation of the sale, and to
Emma, the buyer, is not correct. Betty can still enforce her compel Ubaldo to execute a deed of absolute sale in his favor,
right of legal redemption as a co-owner. Article 1623 of the based on his right of first refusal. a) Will the action prosper?
Civil Code gives a co-owner 30 days from written notice of Explain. b) If Ubaldo had given Remigio an option to
the sale by the vendor to exercise his right of legal purchase the
redemption. In the present problem, the 30-day period for the
exercise by Betty of her right of redemption had not even building instead of a right of first refusal, will your
begun to run because no notice in writing of the sale appears answer be the same? Explain.
to have been given to her by Lydia.
SUGGESTED ANSWER:
Redemption; Legal; Formalities (2002) No, the action to compel Ubaldo to execute the deed of
Adela and Beth are co-owners of a parcel of land. Beth sold absolute sale will not prosper. According to Ang Yu v. Court
her undivided share of the property to Xandro, who promptly of Appeals (238 SCRA 602), the right of first refusal is not
notified Adela of the sale and furnished the latter a copy of the based on contract but is predicated on the provisions of
deed of absolute sale. When Xandro presented the deed for human relations and, therefore, its violation is predicated on
registration, the register of deeds also notified Adela of the sale, quasi-delict. Secondly, the right of first refusal implies that
enclosing a copy of the deed with the notice. However, Adela the offer of the person in whose favor that right was given
ignored the notices. A year later, Xandro filed a petition for the must conform with the same terms and conditions as those
partition of the property. Upon receipt of summons, Adela given to the offeree. In this case, however, Remigio was
immediately tendered the requisite amount for the redemption. offering only P4.5 Million instead of P5 Million.
Xandro contends that Adela lost her right of redemption after ALTERNATIVE ANSWER:
the expiration of 30 days from her receipt of the notice of the No, the action will not prosper. The lessee's right of first
sale given by him. refusal does not go so far as to give him the power to dictate
on the lessor the price at which the latter should sell
 CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
his property. Upon the facts given, the lessor had sufficiently SUGGESTED ANSWER:
complied with his commitment to give the lessee a right of first 1) A can exercise his right of repurchase within four (4)
refusal when he offered to sell the property to the lessee for P5 years from the date of the contract (Art. 1606, Civil Code).
Million, which was the same price he got in selling it to Santos.
He certainly had the right to treat the lessee's counter-offer of SUGGESTED ANSWER:
a lesser amount as a rejection of his offer to sell at P5 Million. 2} I would advise B to file an action for consolidation of title
Thus, he was free to find another buyer upon receipt of such and obtain a judicial order of consolidation which must be
unacceptable counter-offer (Art. 1319. NCC). recorded in the Registry of Property (Art. 1607. Civil Code).

SUGGESTED ANSWER: Transfer of Ownership; Non-Payment of the Price (1991)

Yes, the answer will be the same. The action will not prosper Pablo sold his car to Alfonso who issued a postdated check in
because an option must be supported by a consideration full payment therefor. Before the maturity of the check,
separate and distinct from the purchase price. In this case there Alfonso sold the car to Gregorio who later sold it to Gabriel.
is no separate consideration. Therefore, the option may be When presented for payment, the check issued by Alfonso
withdrawn by Ubaldo at any time. (Art. 1324, NCC) was dishonored by the drawee bank for the reason that he,
Alfonso, had already closed his account even before he issued
his check. Pablo sued to recover the car from Gabriel alleging
Right of First Refusal; Lessee; Effect (1998) that he (Pablo) had been unlawfully deprived of it by reason
In a 20-year lease contract over a building, the lessee is of Alfonso's deception. Will the suit prosper?
expressly granted a right of first refusal should the lessor
SUGGESTED ANSWER:
decide to sell both the land and building. However, the lessor
No. The suit will not prosper because Pablo was not
sold the property to a third person who knew about the lease
unlawfully deprived of the car although he was unlawfully
and in fact agreed to respect it. Consequently, the lessee brings
deprived of the price. The perfection of the sale and the
an action against both the lessor-seller and the buyer
delivery of the car was enough to allow Alfonso to have a
(a) to rescind the sale and (b) to compel specific performance
right of ownership over the car, which can be lawfully
of his right of first refusal in the sense that the lessor should
transferred to Gregorio. Art. 559 applies only to a person
be ordered to execute a deed of absolute sale in favor of the
who is in possession in good faith of the property, and not to
lessee at the same price. The defendants contend that the
the owner thereof. Alfonso, in the problem, was the owner,
plaintiff can neither seek rescission of the sale nor compel
and, hence, Gabriel acquired the title to the car.
specific performance of a "mere" right of first refusal. Decide
the case. [5%]
SUGGESTED ANSWER: Non-payment of the price in a contract of sale does not
The action filed by the lessee, for both rescission of the render ineffective the obligation to deliver. The obligation to
offending sale and specific performance of the right of first deliver a thing is different from the obligation to pay its
refusal which was violated, should prosper. The ruling in price. EDCA Publishing Co. v. Santos (1990)
Equatorial Realty Development, Inc. vs. Mayfair Theater, Inc.
(264 SCRA 483), a case with similar facts, sustains both rights of Transfer of Ownership; Risk of Loss (1990)
action because the buyer in the subsequent sale knew the D sold a second-hand car to E for P150,000.00 The
existence of right of first refusal, hence in bad faith. agreement between D and E was that half of the purchase
price, or P75,000.00, shall be paid upon delivery of the car to
ANOTHER ANSWER: E and the balance of P75,000.00 shall be paid in five equal
The action to rescind the sale and to compel the right to first monthly installments of P15,000.00 each. The car was
refusal will not prosper. (Ang Yu Asuncion vs. CA, 238 SCRA delivered to E, and E paid the amount of P75.000.00 to D.
602). The Court ruled in a unanimous en banc decision that the Less than one month thereafter, the car was stolen from E's
right of first refusal is not founded upon contract but on a garage with no fault on E's part and was never recovered. Is E
quasi-delictual relationship covered by the principles of human legally bound to pay the said unpaid balance of P75.000.00?
relations and unjust enrichment (Art. 19, et seq. Civil Code). Explain your answer.
Hence the only action that will prosper according to the SUGGESTED ANSWER:
Supreme Court is an "action for damages in a proper forum for Yes, E is legally bound to pay the balance of P75,000.00. The
the purpose." ownership of the car sold was acquired by E from the
moment it was delivered to him. Having acquired ownership,
Right of Repurchase (1993) E bears the risk of the loss of the thing under the doctrine of
On January 2, 1980, A and B entered into a contract whereby A res perit domino. [Articles 1496. 1497, Civil Code).
sold to B a parcel of land for and in consideration of
P10.000.00. A reserving to himself the right to repurchase
the same. Because they were friends, no period was agreed LEASE
upon for the repurchase of the property. 1) Until when must
A exercise his right of repurchase? 2) If A fails to redeem the
property within the allowable period, what would you advise Extinguishment; Total Distruction; Leased Property (1993) A
B to do for his better protection? is the owner of a lot on which he constructed a building in
the total cost of P10,000,000.00. Of that amount B
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
contributed P5,000,000.00 provided that the building as a phenomenon are still unpredictable despite the advances in
whole would be leased to him (B) for a period of ten years science, the phenomenon is considered unforeseen.
from January 1. 1985 to December 31, 1995 at a rental of
P100,000.00 a year. To such condition, A agreed. On Leasee & Lessor; Rights and Obligations (1990)
December 20, 1990, the building was totally burned. Soon A vacant lot several blocks from the center of the town was
thereafter, A's workers cleared the debris and started leased by its owner to a young businessman B for a term of
construction of a new building. B then served notice upon A fifteen (15) years renewal upon agreement of the parties.
that he would occupy the building being constructed upon After taking possession of the lot, the lessee built thereon a
completion, for the unexpired portion of the lease term, building of mixed materials and a store. As the years passed,
explaining that he had spent partly for the construction of the he expanded his business, earning more profits. By the tenth
building that was burned. A rejected B's demand. Did A has a (10th) year of his possession, he was able to build a three
right in rejecting B's demand? (3)-story building worth at least P300,000.00. Before the end
SUGGESTED ANSWER: of the term of the lease, B negotiated with the landowner for
Yes. A was correct in rejecting the demand of B. As a result its renewal, but despite their attempts to do so, they could not
of the total destruction of the building by fortuitous event, agree on the new conditions for the renewal. Upon the
the lease was extinguished. (Art. 1655, Civil Code.) expiration of the term of the lease, the landowner asked B to
vacate the premises and remove his building and other
Implied New Lease (1999) improvements. B refused unless he was reimbursed for
Under what circumstances would an implied new lease or a necessary and useful expenses. B claimed that he was a
tacita reconduccion arise? (2%) possessor and builder in good faith, with right of retention.
SUGGESTED ANSWER: This issue is now before the court for resolution in a pending
An implied new lease or tacita reconduccion arises if at the litigation. a) What are the rights of B? b) What are the rights
end of the contract the lessee should continue enjoying the of the landowner?
thing leased for 15 days with the acquiescence of the lessor,
and unless a notice to the contrary by either parties has SUGGESTED ANSWER:
previously been given (Art. 1670). In short, in order that a) B has the right to remove the building and other
there may be tacita reconduccion there must be expiration of improvements unless the landowner decides to retain the
the contract; there must be continuation of possession for 15 building at the time of the termination of the lease and pay
days or more; and there must be no prior demand to vacate. the lessee one-half of the value of the improvements at that
time. The lessee may remove the building even though the
principal thing may suffer damage but B should not cause any
Lease of Rural Lands (2000) more impairment upon the property leased than is necessary.
In 1995, Mark leased the rice land of Narding in Nueva Ecija The claim of B that he was a possessor and builder in good
for an annual rental of P1,000.00 per hectare. In 1998, due to faith with the right of retention is not tenable. B is not a
the El Nino phenomenon, the rice harvest fell to only 40% builder in good faith because as lessee he does not claim
of the average harvest for the previous years. Mark asked ownership over the property leased.
Narding for a reduction of the rental to P500.00 per hectare SUGGESTED ANSWER:
for that year but the latter refused. Is Mark legally entitled to b) The landowner/lessor may refuse to reimburse 1/2 of the
such reduction? (2%) value of the improvements and require the lessee to remove
SUGGESTED ANSWER: the improvements. [Article 1678, Civil Code),
No, Mark is not entitled to a reduction. Under Article 1680 of
the Civil Code, the lessee of a rural land is entitled to a Leasee; Death Thereof; Effects (1997)
reduction of the rent only in case of loss of more than 1/2 of Stating briefly the thesis to support your answer to each of
the fruits through extraordinary and unforeseen fortuitous the following cases, will the death - a) of the lessee extinguish
events. While the drought brought about by the "El Nino" the lease agreement?
phenomenon may be classified as extraordinary, it is not SUGGESTED ANSWER:
considered as unforeseen. No. The death of the lessee will not extinguish the lease
ALTERNATIVE ANSWER: agreement, since lease is not personal in character and the
Yes, Mark is entitled to a reduction of the rent. His loss was more right is transmissible to the heirs. (Heirs of Dimaculangan vs.
than 1/2 of the fruits and the loss was due to an extraordinary and
unforeseen fortuitous event. The "El Nino" phenomenon is IAC, 170 SCRA 393).
extraordinary because it is uncommon; it does not occur with
regularity. And neither could the parties have foreseen its Option to Buy; Expired (2001)
occurrence. The event should be foreseeable by the parties so that On January 1, 1980, Nestor leased the fishpond of Mario for
the lessee can change the time for his planting, or refrain from a period of three years at a monthly rental of P1,000.00, with
planting, or take steps to avoid the loss. To be foreseeable, the time
and the place of the occurrence, as well as the magnitude of the an option to purchase the same during the period of the lease
adverse effects of the fortuitous event must be capable of being for the price of P500,000.00. After the expiration of the
predicted. Since the exact place, the exact time, and the exact three-year period, Mario allowed Nestor to remain in the
magnitude of the adverse effects of the "El Nino" leased premises at the same rental rate. On June 15, 1983,
Nestor tendered the amount of P500,000.00 to Mario and
demanded that the latter execute a deed of absolute sale of
the fishpond in his favor. Mario refused, on the ground that
Nestor no longer had an option to buy the fishpond.
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
Nestor filed an action for specific performance. Will the sublessee can invoke no right superior to that of his
action prosper or not? Why? (5%) sublessor, the moment the sublessor is duly ousted from the
SUGGESTED ANSWER: premises, the sublessee has no leg to stand on. The sublessee's
No, the action will not prosper. The implied renewal of the right, if any, is to demand reparation for damages from his
sublessor, should the latter be at fault.
lease on a month-to-month basis did not have the effect of
extending the life of the option to purchase which expired at (Heirs ofSevilla v. Court of Appeals G.R. No. 49823, February
the end of the original lease period. The lessor is correct in 26, 1992).
refusing to sell on the ground that the option had expired.

Sublease; Delay in Payment of Rentals (1994)

Sublease vs. Assignment of Lease; Rescission of Contract In January 1993, Four-Gives Corporation leased the entire
(2005) twelve floors of the GQS Towers Complex, for a period of
Under a written contract dated December 1, 1989, Victor ten years at a monthly rental of P3,000,000.00. There is a
leased his land to Joel for a period of five (5) years at a provision in the contract that the monthly rentals should be
monthly rental of Pl,000.00, to be increased to Pl,200.00 and paid within the first five days of the month. For the month of
Pl,500.00 on the third and fifth year, respectively. On January March, May, June, October and December 1993, the rentals
1, 1991, Joel subleased the land to Conrad for a period of were not paid on time with some rentals being delayed up to
two (2) years at a monthly rental of Pl,500.00. ten days. The delay was due to the heavy paper work
involved in processing the checks.
On December 31, 1992, Joel assigned the lease to his
compadre, Ernie, who acted on the belief that Joel was the Four-Gives Corporation also subleased five of the twelve
rightful owner and possessor of the said lot. Joel has been floors to wholly-owned subsidiaries. The lease contract
faithfully paying the stipulated rentals to Victor. When Victor expressly prohibits the assignment of the lease contract or
learned on May 18, 1992 about the sublease and assignment, any portion thereof. The rental value of the building has
he sued Joel, Conrad and Ernie for rescission of the contract increased by 50% since its lease to Four-Gives Corporation.
of lease and for damages. 1) Can the building owner eject Four-Gives Corporation on
a) Will the action prosper? If so, against whom? grounds of the repeated delays in the payment of the rent? 2}
Explain. (2%) Can the building owner ask for the cancellation of the
SUGGESTED ANSWER: contract for violation of the provision against assignment?
Yes, the action of for rescission of the contract of lease and for SUGGESTED ANSWERS:
damages will prosper. Under Article 1659 of the Civil Code, "if the 1) a) The "repeated delays" in the payment of rentals would,
lessor or the lessee should not comply with the obligations set forth at best, be a slight or casual breach which does not furnish a
in Articles 1654 and 1657, the aggrieved party may ask for rescission ground for ejectment especially because the delays were only
of the contract and indemnification for damages, or only the latter, due to heavy paper work. Note that there was not even a
allowing the contract to remain in force." Article 1649 of the same demand for payment obviously because the delay lasted for
Code provides that "the lessee cannot assign the lease without the only a few days (10 days being the longest), at the end of
consent of the lessor, unless there is a stipulation to the contrary." which time payments were presumably made and were
Consent is necessary because assignment would cause novation by accepted. There was, therefore, no default. Note also that
the substitution of one of the parties. there was no demand made upon the lessee to vacate the
premises for non-payment of the monthly rent. There is,
(Bangayan v. Court of Appeals, G.R. No. 123581, August 29, therefore, no cause of action for ejectment arising from the
1997) However, the rule is different in the case of subleasing. "repeated delays".
When there is no express prohibition in the Contract of Lease,
the lessee may sublet the thing leased. (Art. 1650, Civil Code) b) The building owner cannot eject Four-Gives Corporation
on the ground of repeated delays in the payment of rentals.
The delay in the payment of the rentals is minimal and cannot
In the given case, when Joel assigned the lease to Ernie, the be made the basis of an ejectment suit. The delay was due to
same was done without the consent of Victor. The assignment the heavy paperwork involved in processing the checks. It
is void. However, there is no indication that in the written would be otherwise if the lease contract stated that in the
contract of lease between Victor and Joel, that subleasing the payment of rentals within the first five days of the month, time
premises is prohibited. Hence, the sublease of Joel with is of the essence or that the lessee will be in delay if he falls to
Conrad is valid. In view of the foregoing, Victor can file the pay within the agreed period without need of demand. In this
case of rescission and damages only against Joel and Ernie but case he can judicially eject the tenant on the ground of lack of
he cannot include Conrad. payment of the price stipulated after a demand to vacate,
(Article 1673(2), New Civil Code),
b) In case of rescission, discuss the rights and
obligations of the parties. (2%)
SUGGESTED ANSWER: c) No. Resolution of a contract will not be permitted for a
Rescission of the lease necessarily requires the return of the thing
to the lessor. Hence, the judgment granting rescission of the
slight or casual breach, but only for such substantial and
contract should also order the lessee to vacate and return the fundamental breach as would defeat the very object of the
leased premises to the lessor. However, since the parties in making the agreement.(Zepeda v. CA, 216 SCRA
293]. The delay of ten (10)) days is not such a substantial
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
and fundamental breach to warrant the resolution of the A, and that he has not been remiss in the payment of rent.
contract of lease specially so when the delay was due to the Will the action prosper? (3%)
heavy paperwork in processing the checks. SUGGESTED ANSWER:
Yes, the action will prosper. Under Article 1651 of the Civil
SUGGESTED ANSWER: Code, the sublessee is bound to the lessor for all acts which
2) a) No. Sublease is different from assignment of lease. refer to the use and preservation of the thing leased in the
Sublease, not being prohibited by the contract of lease is manner stipulated between the lessor and the lessee.
therefore allowed and cannot be invoked as a ground to
cancel the lease, Sublease; Validity; Assignment of Sublease (1990)
A leased a parcel of land to B for a period of two years. The
b) No, the lessor cannot have the lease cancelled for alleged lease contract did not contain any express prohibition against
violation of the provision against assignment. The lessee did the assignment of the leasehold or the subleasing of the
not assign the lease, or any portion thereof, to the subsidiaries. leased premises. During the third year of the lease, B
It merely subleased some floors to its subsidiaries. Since the subleased the land to C. In turn, C, without A's consent,
problem does not state that the contract of lease contains a assigned the sublease to D. A then filed an action for the
prohibition against sublease, the sublease is lawful, the rule rescission of the contract of lease on the ground that B has
being that in the absence of an express prohibition a lessee violated the terms and conditions of the lease agreement. If
may sublet the thing leased, in whole or in part, without you were the judge, how would you decide the case,
prejudice to his/its responsibility to the lessor for the particularly with respect to the validity of:
performance of the contract. (a) B's sublease to C? and
(b) C's assignment of the sublease to D?
Sublease; Sublessee; Liability (1999) SUGGESTED ANSWER:
May a lessee sublease the property leased without the consent (a) B's sublease to C is valid. Although the original period
of the lessor, and what are the respective liabilities of the of two years for the lease contract has expired, the lease
lessee and sub-lessee to the lessor in case of such sublease? continued with the acquiescence of the lessor during the third
(3%) year. Hence, there has been an implied renewal of the contract
SUGGESTED ANSWER: of lease. Under Art. 1650 of the Civil Code, the lessee may
Yes, provided that there is no express prohibition against sublet the thing leased, in whole or in part, when the contract
subleasing. Under the law, when in the contract of lease of of lease does not contain any express prohibition. [Articles
things there is no express prohibition, the lessee may sublet 1650, 1670 Civil Code). A's action for rescission should
the thing leased without prejudice to his responsibility for the not prosper on this ground.
performance of the contract toward the lessor. [Art, 1650) In
case there is a sublease of the premises being leased, the SUGGESTED ANSWER:
sublessee is bound to the lessor for all the acts which refer to (b) C's assignment of the sublease to D is not valid. Under
the use and preservation of the thing leased in the manner Art. 1649, of the Civil Code, the lessee cannot assign the lease
stipulated between the lessor and the lessee. (Art. 1651} The without the consent of the lessor, unless there is a stipulation
sublessee is subsidiarily liable to the lessor for any rent due to the contrary. There is no such stipulation in the contract.
from the lessee. However, the sublessee shall not be If the law prohibits assignment of the lease without the
responsible beyond the amount of the rent due from him. consent of the lessor, all the more would the assignment of a
(Art. 1652) As to the lessee, the latter shall still be responsible sublease be prohibited without such consent. This is a
to the lessor for the rents; bring to the knowledge of the lessor violation of the contract and is a valid ground for rescission
every usurpation or untoward act which any third person may by A.
have committed or may be openly preparing to carry out upon
the thing leased; advise the owner the need for all repairs; to
return the thing leased upon the termination of the lease just
as he received it, save what has been lost or impaired by the
lapse of time or by ordinary wear and tear or from an
inevitable cause; responsible for the deterioration or loss of
the thing leased, unless he proves that it took place without his
fault.

Sublease; Sublessee; Liability (2000)

A leased his house to B with a condition that the leased premises
shall be used for residential purposes only. B subleased the
house to C who used it as a warehouse for fabrics. Upon learning
this, A demanded that C stop using the house as a warehouse,
but C ignored the demand, A then filed an action for ejectment
against C, who raised the defense that there is no privity of

contract between him and

 Sales
Condominium Act; Partition of a advanced for her employees (biyaheros). She

Condominium (2009) required them to surrender TCT of their

properties and to execute the corresponding
No.XVIII. The Ifugao Arms is a condominium Deeds of Sale in her favor. Domeng Bandong
project in Baguio City. A strong earthquake was not required to post any security but
occurred which left huge cracks in the outer when Eulalia discovered that he incurred
walls of the building. As a result, a number shortage in cattle procurement operation, he
of condominium units were rendered unfit was required to execute a Deed of Sale over
for use. May Edwin, owner of one of the a parcel of land in favor of Eulalia. She sold
condominium units affected, legally sue for the property to her grandneice Jocelyn who
partition by sale of the whole project? thereafter instituted an action for ejectment
Explain. (4%) against the Spouses Bandong.

SUGGESTED ANSWER: To assert their right, Spouses Bandong filed

Yes, Edwin may legally sue for partition an action for annulment of sale against
by sale of the whole condominium project Eulalia and Jocelyn alleging that there was
under the following conditions: no sale intended but only equitable mortgage
2. the damage or destruction caused by for the purpose of securing the shortage
the earthquake has rendered one-half incurred by Domeng in the amount of P 70,
(1/2) or more of the units therein 000.00 while employed as "biyahero" by
untenantable, and (b) that the Eulalia. Was the Deed of Sale between
condominium owners holding an Domeng and Eulalia a contract of sale or an
aggregate of more than thirty percent equitable mortgage? Explain. (5%)
(30%) interests of the common areas are
opposed to the restoration of the SUGGESTED ANSWER:

condominium project (Sec 8 [b], Republic

The contract between Domeng Bandong
Act No. 472 “Condominium Act”).
and Eulalia was an equitable mortgage
rather than a contract of sale. The
purported deed of sale was actually
Mortgage; Equitable Mortgage (2012)
intended to merely secure the payment of
the shortage incurred by Domeng in the
No.VI. (b) Eulalia was engaged in the
business of buying and selling large cattle. conduct of the cattle-buying operations.

In order to secure the financial capital, she Under Art 1602, Civil Code,

“Never Let The Odds Keep You From Pursuing What You Know In Your Heart You Were Meant To Do.”-Leroy Satchel Paige
Page 99 of 180
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the contract shall be presumed to be an offering P800,000 in ready cash for the land.
equitable mortgage when it may be fairly When Roberto confirmed that he could pay
inferred that the real intention of the in cash as soon as Sergio could get the
parties is simply to secure the payment of documentation ready, Sergio decided to
a debt or the performance of any other withdraw his offer to Marcelo, hoping to just
obligation. The present transaction was explain matters to his friend. Marcelo,
clearly intended to just secure the however, objected when the withdrawal was
shortage incurred by Eulalia because communicated to him, taking the position
Bandung remained in possession of the that they have a firm and binding agreement
property inspite of the execution of the that Sergio cannot simply walk away from
sale. because he has an option to buy that is duly
supported by a duly accepted valuable
consideration.

Option Contract; Liquor & “Pulutan” as

3. Does Marcelo have a cause of action
Consideration (2013)
against Sergio? (5%)

No.III.Sergio is the registered owner of a 500-

SUGGESTED ANSWER:
square meter land. His friend, Marcelo, who
has long been interested in the property, Yes. Marcelo has a cause of action against
succeeded in persuading Sergio to sell it to Sergio.
him. On June 2, 2012, they agreed on the
purchase price of P600,000 and that Sergio Under Art. 1324, when the offerer has
would give Marcelo up to June30, 2012 allowed the offeree a certain period to
within which to raise the amount. Marcelo, accept, the offer may be withdrawn at any
in a light tone usual between them, said that time before acceptance by
they should seal their agreement through a communicating such withdrawal, except
case of Jack Daniels Black and P5,000 when the option is founded upon
"pulutan" money which he immediately consideration, as something paid or
handed to Sergio and which the latter promised.
accepted. The friends then sat down and
drank the first bottle from the case of An accepted unilateral promise to buy or

bourbon. sell a determinate thing for a price

certain is binding upon him if the promise
On June 15, 2013, Sergio learned of another is supported by a consideration distinct
buyer, Roberto, who was from the price (Art. 1479).

“Never Let The Odds Keep You From Pursuing What You Know In Your Heart You Were Meant To Do.”-Leroy Satchel Paige
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Consideration in an option contract may The Statute of Frauds covers an

be anything of value,, unlike in sale where agreement for the sale of real property or
it must be the price certain in money or of an interest therein. Such agreement is
its equivalent (San Miguel Properties Inc. unenforceable by action, unless the same,
v. Spouses Huang, G.R. No. 137290, July or some note or memorandum, thereof, be
31, 2000). in writing, (Art. 1403 (e), Civil Code).
Here, Marcelo and Sergio merely entered
Here, the case of Jack Daniels Black and into an Option Contract, which refers to
the P5,000.00 “pulutan” money was a a unilateral promise to buy or sell, which
consideration to “seal their agreement,” need not be in writing to be enforceable
an agreement that Marcelo is given until (Sanchez v. Rigos, G.R. No. L-25494, June
June 30, 2012 to buy the parcel of land. 14, 1972, citing Atkins, Kroll and Co. Inc.
There is also no showing that such v. Cua Hian Tek and Southwestern Sugar
consideration will be considered part of & Molasses Co. v. Atlantic Gulf & Pacific
the purchase price. Thus, Sergio’s Co.).
unilateral withdrawal of the offer violated
the Option Contract between him and ALTERNATIVE ANSWER:
Marcelo.
No. Sergio’s claim has no legal basis.
2. Can Sergio claim that whatever they
might have agreed upon cannot be enforced The contract of sale has already been

because any agreement relating to the sale partially executed which takes it outside

of real property must be supported by the ambit of the Statute of Frauds is

evidence in writing and they never reduced applicable only to executory contracts,

their agreement to writing? (3%) not to contracts that are totally or

partially performed (Carbonnel v. Poncio,
SUGGESTED ANSWER: G.R. No. L-11231, May 12, 1958).

No. Sergio’s claim has no legal basis.

The contract at issue in the present case Right of First Refusal; Lessee; Effect
is the option contract, not the contract of (2008)
sale for the real property. Therefore, Art.
1403 does not apply. No.XVI. Dux leased his house to Iris for a
period of 2 years, at the rate of P25,000.00

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monthly, payable annually in advance. The refusal. This makes the mother a buyer in
contract stipulated that it may be renewed bad faith, hence giving more ground for
for another 2-year period upon mutual rescission of the sale to her (Equatorial
agreement of the parties. The contract also Realty, et al. v. Mayfair Theater, G.R. No.
granted Iris the right of first refusal to 106063, 21 Nov. 1996).
purchase the property at any time during the
lease, if Dux decides to sell the property at ALTERNATIVE ANSWER:

the same price that the property is offered

No, Iris cannot seek rescission of the sale
for sale to a third party. Twenty-three
of the property to Dux’s mother because
months after execution of the lease contract,
the sale is not one of those rescissible
Dux sold breach of her right of first refusal.
contracts under Art. 1381 of the Civil
Dux said there was no breach because the
Code.
property was sold to his mother who is not a
third party. Iris filed an action to rescind the
(B). Will the alternative prayer for extension
sale and to compel Dux to sell the property
of the lease prosper? (2%)
to her at the same price. Alternatively, she
asked the court to extend the lease for SUGGESTED ANSWER:
another 2 years on the same terms.
No. The contract stipulated that it may be
(A). Can Iris seek rescission of the sale of the renewed for another 2-year period upon
property to Dux's mother? (3%) mutual agreement of the parties.
Contracts are binding between the
SUGGESTED ANSWER:
parties; validity or compliance cannot be
left to the will of one of the parties (Art.
Yes, because the right of first refusal is
1308, Civil Code).
included in the contract signed by the
parties. Only if the lessee failed to
ALTERNATIVE ANSWER:
exercise the right of first refusal could the
lessor lawfully sell the subject property to It depends. The alternative prayer for the
others, under no less than the same terms extension of the lease may prosper if
and conditions previously offered to the (a) there is a stipulation in the contract
lessee. Granting that the mother is not a of sale; (b) Dux's mother is aware of the
third party, this would make her privy to existing contract of lease; or (c) the lease
the agreement of Dux and Iris, aware of is recorded in the Registry of Property
the right of first (Art. 1676, Civil Code).

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Lease reimbursed the value of the improvements

he introduced. (4%)

Builder; Good Faith; Useful

SUGGESTED ANSWER:
Improvements (2013)

Boboy’s claim that he is a builder in good

No.IV.Anselmo is the registered owner of a
faith has no basis. A builder in good faith
land and a house that his friend Boboy
is someone who occupies the property in
occupied for a nominal rental and on the
concept of an owner. The provisions on
condition that Boboy would vacate the
builder-planter-sower under the Civil
property on demand. With Anselmo's
Code cover cases in which the builder,
knowledge, Boboy introduced renovations
planter and sower believe themselves to
consisting of an additional bedroom, a
be owners of the land, or at least, to have
covered veranda, and a concrete block fence,
a claim of title thereto.
at his own expense.

As Boboy is a lessee of the property, even

Subsequently, Anselmo needed the property
if he was paying nominal rental, Art.
as his residence and thus asked Boboy to
1678, Civil Code, is applicable. Under this
vacate and turn it over to him. Boboy,
provision, if the lessee
despite an extension, failed to vacate the
makes, in good faith, useful
property, forcing Anselmo to send him a
improvements which are suitable to the
written demand to vacate.
use for which the lease is intended,

In his own written reply, Boboy signified that without altering the form or substance of

he was ready to leave but Anselmo must first the property leased, the lessor upon the

reimburse him the value of the termination of the lease, shall pay the

improvements he introduced on the property lessee one-half of the value of

as he is a builder in good faith. Anselmo improvements at that time. Should the

refused, insisting that Boboy cannot ask for lessor refuse to reimburse said amount,

reimbursement as he is a mere lessee. Boboy the lessee may remove the

responded by removing the improvements improvements, even though the principal

and leaving the building in its original state. thing may suffer damage thereby.

(IVa) Resolve Boboy's claim that as a builder

in good faith, he should be

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(IVb) Can Boboy be held liable for damages for removing the improvements over Anselmo's
objection? (4%)

SUGGESTED ANSWER:

No. Boboy cannot be held liable for damages.

The lessor, Anselmo, refused to reimburse one-half of the value of the improvements, so
the lessee, Boboy, may remove the same, even though the principal thing may suffer
damage thereby. If in removing the useful improvements Boboy caused more impairment
in the property leased than is necessary he will be liable for damages (Art. 1678, Civil
Code).

Lease; Caveat Emptor (2009)

No.VIII. Jude owned a building which he had leased to several tenants. Without informing his
tenants, Jude sold the building to Ildefonso. Thereafter, the latter notified all the tenants that he
is the new owner of the building. Ildefonso ordered the tenants to vacate the premises within
thirty
(d) days from notice because he had other plans for the building. The tenants refused to vacate,
insisting that they will only do so when the term of their lease shall have expired. Is Ildefonso
bound to respect the
lease contracts between Jude and his tenants? Explain your answer. (3%)

SUGGESTED ANSWER:
Yes, Ildefonso must respect the lease contracts between Jude and his tenants. While it is
true that the said lease contracts were not registered and annotated on the title to the
property, Ildefonso is still not an innocent purchaser for value. He ought to know the
existence of the lease because the building was already occupied by the tenants at the
time he bought it. Applying the principle of caveat emptor, he should have checked and
known the status of the occupants of their right to occupy the building before buying it.