Digest Compilation: Civil Code: Sales

DIGESTS COMPILATION
Civil Code Sales- Atty. Maylon

CIVIL CODE: SALES
School Year: 2020- 2021 First Semester
DIGEST COMPILATION
START OF COMPILATION PROPER
Fact:
This action was instituted by plaintiff against defendants for the specific performance of a
supposed contract for the sale of land and the improvements thereon for one million four
hundred thousand pesos. Defendants are the owners of 3 lots at 245 Buendia Avenue, Makati,
Rizal. There were negotiations for the sale of the said lots and the improvements thereon
between the parties. Defendants made a written offer to plaintiff for the sale of the property
with conditions; Plaintiff in its letter of March 4, 1964 made a counter- offer for the purchase
of the property with the check for P100,000 as earnest money which was received by
Cervantes. In the voucher-receipt evidencing the delivery the broker indicated in her
handwriting that the earnest money. Then, unexpectedly, in a letter dated March 30, 1964,
or twenty-six days after the signing of the contract of sale, defendant returned the earnest
money, with interest. In a letter dated April 7, 1964 plaintiff returned the two checks to
Bormaheco, Inc., stating that the condition for the cancellation of the contract had not arisen
and at the same time announcing that an action for breach of contract would be filed against
Defendants, Hence this case.
Issue: Whether the Contract of Sale was perfected between the Parties?
Held: Yes, Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and
law” (Art. 1315, Civil Code). Consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. The offer must
be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer”
(Art. 1319, Civil Code). “An acceptance may be express or implied”. Bormaheco’s acceptance
of Villonco Realty Company’s offer to purchase the Buendia Avenue property, indubitably
proves that there was a meeting of minds upon the subject matter and consideration of the
sale. Therefore, on that date the sale was perfected. Not only that Bormaheco’s acceptance
of the part payment of one hundred thousand pesos shows that the sale was conditionally
consummated or partly executed subject to the purchase by Bormaheco, Inc. of the Punta
property.
Obligations and Contracts, Sources of an Obligation, LisPendens,

Art. 1156, Civil Code
FACTS: A complaint for Specific Performance was filed by Ang Yu Asuncion et al., against
Bobby Cu Unjieng and Jose Tan. The plaintiffs were tenants or lessees of residential and
commercial spaces owned by defendants in Binondo. On several conditions defendants
informed the plaintiffs that they are offering to sell the premises and are giving them priority
to acquire the same.
During negotiations, Cu Unjieng offered a price of P6- million while plaintiffs made a counter
of offer of P5-million. Plaintiff thereafter asked the defendants to put their offer in writing to
which the defendants acceded. In reply to defendants’ letter, plaintiffs wrote, asking thatthey
specify the terms and conditions of the offer to sell. When the plaintiffs did not receive any
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reply, they sent another letter with the same request. Since defendants failed to specify the
terms and conditions of the offer to sell and because of information received that the
defendants were about to sell the property, plaintiffs were compelled to file the complaint to
compel defendants to sell the property to them.
The court dismissed the complaint on the ground that the parties did not agree upon the
terms and conditions of the proposed sale, hence, there was no contact of sale atall. The Cu
Unjieng spouses executed a Deed of Sale transferring the property inquestion to Buen Realty
and Development Corporation. Buen Realty, as the new owner of the subject property, wrote
to the lessees demanding the latter to vacate the premises. In its reply, it stated that Buen
Realty and Development Corporation brought the property subject to the notice of lispendens.
ISSUE: Can Buen Realty be bound by the writ of execution by virtue of the notice of
lispendens?
RULING: No. An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil
Code). The obligation is upon the concurrence of the essential elements thereof, viz:
(a) the vinculum juris or juridical tie which is the efficient cause established by the various
sources of obligations; (b) the object which is the prestation or conduct, required to be
observed; and (c) the subject-persons who, viewed demandability of the obligation are the
active (oblige) andthe passive (obligor) subjects.
Among the sources of an obligation is a contract (Art. 1157), which is a meeting of minds
between two persons whereby one binds himself, with respect to the other, to give something
or to render some service.
A contract undergoes various stages that include its negotiation or preparation, its perfection
and, finally, its consummation. Until the contract is perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation. In sales, particularly, to which the
case at bench belongs, 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.
The registration of lispendens must be independently addressed in appropriate proceedings.

Therefore, Buen Realty cannot be held subject to the writ of execution issued by the
respondent Judge, let alone ousted from the ownership and possession of the property,
without first being duly afforded its day in court.
Fact: Private respondent instituted a case for “Specific Performance of a Deed of Sale with
Damages” against Fortunato and his wife Petitioner. It was alleged in the complaint that on
11 April 1971, private respondent and Fortunato entered into a contract of sale of land under
which for a consideration of P5,000.00, Fortunato agreed to sell his share in Lot No. 2319 to
private respondent. The agreement was contained in a receipt prepared by private
respondent’s son-in-law, Andres Flores, at her behest. Fortunato and petitioner denied the
material allegations of the complaint and claimed that Fortunato never sold his share in Lot
No. 2319 to private respondent and that his signature appearing on the purported receipt was
forged. She also stated in her testimony that her husband was an illiterate and only learned
how to write his name in order to be employed in a sugar central.
Issue: Whether a contract of sale exist between the Petitioner and Defendant?
Held: No, A contract of sale is a consensual contract, thus, it is perfected by mere consent of
the parties. It is born from the moment there is a meeting of minds upon the thing which is
the object of the sale and upon the price. Upon its perfection, the parties may reciprocally
demand performance, that is, the vendee may compel the transfer of the ownership and to
deliver the object of the sale while the vendor may demand the vendee to pay the thing sold.
For there to be a perfected contract of sale, however, the following elements must be present:
consent, object, and price in money or its equivalent. In this case, as private respondent is
the one seeking to enforce the claimed contract of sale, she bears the burden of proving that
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the terms of the agreement were fully explained to Fortunato Ape who was an illiterate. This
she failed to do. While she claimed in her testimony that the contents of the receipt were
made clear to Fortunato, such allegation was debunked by Andres Flores himself when the
latter took the witness stand. As can be gleaned from Flores’s testimony, while he was very
much aware of Fortunato’s inability to read and write in the English language, he did not
bother to fully explain to the latter the substance of the receipt. He even dismissed the idea
of asking somebody else to assist Fortunato considering that a measly sum of thirty pesos
was involved. Evidently, it did not occur to Flores that the document he himself prepared
pertains to the transfer altogether of Fortunato’s property to his mother-in-law. It is precisely
in situations such as this when the wisdom of Article 1332 of the Civil Code readily becomes
apparent which is “to protect a party to a contract disadvantaged by illiteracy, ignorance,
mental weakness or some other handicap. The Court annulled the contract of sale between
Fortunato and private respondent on the ground of vitiated consent.
DOCTRINE:
A contract of sale is a consensual contract, thus, it is perfected by mere consent of the parties.
It is born from the moment there is a meeting of minds upon the thing which is the object of
the sale andupon the price.
FACTS:
Cleopas Ape was the registered owner of a parcel of land particularly known as Lot No. 2319
of the Escalante Cadastre of Negros Occidental. When she died, the property was informally
divided by his wife and 11 children, one of the children is Fortunato.
The Spouses Lumayno alleged that Fortunato entered into a contract of sale of land in
exchange for P5,000.00 and that Fortunato agreed to sell his share in Lot No. 2319 to private
respondent. A receipt was given to Fortunato, indicating that Lumayno paid P30 as an advance
payment.
In 1973, Lumayno filed a case for "Specific Performance of a Deed of Sale with Damages"
against Fortunato and his wife Perpetua. Lumayno compelled Fortunato to make the delivery
of a deed of sale over Fortunato’s portion on Lot No. 2319. Fortunato, on the other hand,
claimed that he never sold his share in Lot No. 2319 to Lumayno and that his signature
appearing on the purported receipt was forged. The Petitioner claimed that her husband was
illiterate and only learned how to write his name in order to be employed in a sugar central.
CA concluded that private respondent did not have the right to demand the delivery to her of
the registrable deed of sale over Fortunato's portion of Lot No. 2319. CA, however, rejected
Fortunato and petitioner's claim that they had the right of redemption over the shares
previously sold to Lumayno.Hence, this petition.
ISSUE:
WHETHER OR NOT the receipt signed by Fortunato proves the existence of a contract of sale
between him and private respondent.
DECISION:
No. Fortunato was illiterate; hence, the burden of proving the terms of the agreement bears
on the private respondent---which she failed to do. A contract of sale is a consensual contract,
thus, it is perfected by mere consent of the parties. It isborn from the moment there is a
meeting of minds upon the thing which is the object of the sale and upon the price. Upon its
perfection, the parties may reciprocally demand performance, that is, the vendee may compel
the transfer of the ownership and to deliver the object of the sale while the vendor may
demand the vendee to pay the thing sold. For there to be a perfected contract of sale, however,
the following elements must be present: consent, object, and price in money or its equivalent.
To be valid, consent must meet the following requisites: (a) it should be intelligent, or with
an exact notion of the matter to which it refers; (b) it should be free and (c) it should be
spontaneous. Intelligence in consent is vitiated by error; freedom by violence, intimidation or
undue influence; spontaneity by fraud
Hence, the Court annuls the contract of sale between Fortunato and private respondent on
the ground of vitiated consent.
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VERSION 2
DOCTRINE:
Article 1623 of the Civil Code provides 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.
FACTS:
Cleopas Ape was the registered owner of a parcel of land known as Lot No. 2319 When she
died, theproperty was informally divided by his wife and 11 children, one of the children is
Fortunato. The Spouses Lumayno alleged that Fortunato entered into a contract of sale of
land in exchange for P5,000.00. Fortunato agreed to sell his share in Lot No. 2319 to private
respondent. A receipt, prepared by Andres Flores, was given to Fortunato, indicating that
Lumaynopaid P30 as an advance payment. In 1973, Lumayno compelled Fortunato to make
the delivery of a deed of sale over Fortunato’s portion on Lot No. 2319. Fortunato claimed
that he never sold his share in Lot No. 2319. But Lumayno assailed that she and her husband
had purchased from Fortunato's co-owners, as evidenced by various written instruments.
They insisted that Fortunato was no longer a co-owner of Lot No. 2319 thus and his right of
redemption no longer existed. CA rejected Fortunato and petitioner's claim that they had the
right of redemption over the shares previously sold to Lumayno. Fortunato died before this
case was resolved. Petitioner claimed that the CA erred in sustaining the trial court’s decision
that she could no longer redeem the portion of the land since there was no written notice of
said sales was furnished to them.
According to her, the CA unduly expanded the scope of the law by equating Fortunato's receipt
with the written notice requirement of Article 1623. Hence, this petition.
ISSUE:
Whether or not Fortunato was furnished with a written notice of sale of the shares of his co-
owners as required by Article 1623 of the Civil Code
DECISION/ DISCUSSION:
The petition is partly meritorious. Article 1623 of the Civil Code provides 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. 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.
Art. 1623 of the Civil Code is clear in requiring that the written notification should come from
the vendor or prospective vendor, not from any other person.
In this case, the records show that Fortunato was not given any written notice of prospective
or consummated sale. The 30 day redemption period under the law, therefore, has not
commenced to run.
However, the Court still ruled that petitioner could no longer invoke her right to redeem from
private
respondent for the exercise of this right "presupposes the existence of a co-ownership at the
time the conveyance is made by a co-owner and when it is demanded by the other co-owner
or co-owners.”
As legal redemption is intended to minimize co-ownership once the property is subdivided

and distributed among the co-owners, the community ceases to exist and there is no more
reason to sustain any right of legal redemption.
In this case, records reveal that although Lot No. 2319 has not yet been formally subdivided,
still, the
particular portions belonging to the heirs of Cleopas Ape had already been ascertained and
they in fact took possession of their respective parts.
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Facts: The subject of this action is Lot 17, Block 5 of the Ayala Alabang Village, Muntinlupa,
Metro-Manila, The lower court found that the above parcel of land was purchased by the
Salvadors, from the developers of Ayala Alabangsubject to Conditions. The Salvadors sold
the parcel of land to the Defendant. The Defendant, on the other hand, without making any
improvement, contracted to sell the parcel of land to the Plaintiff who 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 evereffected. Subseuqently, the Defendant sold the subject
land to another. As a result, the Torcuators commenced the instant action against the
Bernabes and Salvadors for Specific Performance or Rescission with Damages.
Issue: Whether the Contract entered by the parties was a Contract to Sell?
Held: Yes, The differences between a contract to sell and a contract of sale is 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.
B. Essential Elements
One-Liner: A contract of sale, being consensual in nature, is deemed perfected upon mere
meeting of the minds. Principle: A qualified acceptance or one that involves a new proposal
constitutes a counter-offer and a rejection of the original offer.
Facts:
Petitioner, owner of a 8,015 square meter parcel of land located in Mandaluyong City, secured
a P900,000.00 loan from Philippine National Bank (PNB) by executing a real mortgage over
the lot. Respondent PNB later granted petitioner a new credit accommodation of
P1,000,000.00. On March 31, 1981, petitioner secured another loan of P653,000.00 from
respondent PNB, payable in quarterly installments of P32,650.00, plus interests and other
charges. On August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of
the real estate mortgage and sought to have the property sold at public auction for
P911,532.21. Property was sold where respondent PNB was declared the winning bidder for
P1,000,000.00. Meanwhile, the Special Assets Management Department (SAMD) had
prepared a statement of account, and as of June 25, 1984 petitioner's obligation amounted
to P1,574,560.47. When apprised of the statement of account, petitioner remitted
P725,000.00 to respondent PNB as "deposit to repurchase," and Official Receipt was issued
to it. SAMD recommended to the management of respondent PNB that petitioner be allowed
to repurchase the property for P1,574,560.47 . The PNB management informed petitioner
that it was rejecting the offer and the recommendation of the SAMD, proposing that petitioner
purchase the property for P2,660,000.00, its minimum market value to which petitioner
disagreed. Petitioner then filed a complaint against respondent PNB for "Annulment of
Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages."
Issue: Whether or not there was a perfected contract for petitioner to repurchase the
property from respondent.
Ruling: No. The Supreme Court affirmed the decisions of the appellate court that there was
no perfected contract of sale between the parties; hence, petitioner had no cause of action
for specific performance against respondent. There was clearly no meeting of the minds
between parties as to the price or consideration of the sale, and as such, negotiation has not
ripened to perfection. The petitioner’s offer was not accepted by respondent PNB, and in fact
made a counter-offer to which petitioner did not agree. The P725,000.00 remitted by
petitioner was a deposit, not a downpayment. A qualified acceptance or one that involves a
new proposal constitutes a counter-offer and a rejection of the original offer. The statement
of account prepared by the SAMD stating that the net claim of respondent as of June 25, 1984
was P1,574,560.47 cannot be considered an unqualified acceptance to petitioner's offer to
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purchase the property. The statement is but a computation of the amount which petitioner
was obliged to pay in case respondent would later agree to sell the property, including
interests, advances on insurance premium, advances on realty taxes, publication cost,
registration expenses and miscellaneous expenses. There is no evidence that the SAMD was
authorized by respondent's Board of Directors to accept petitioner's offer and sell the property
for P1,574,560.47. Any acceptance by the SAMD of petitioner's offer would not bind
respondent. A corporation can only execute its powers and transact its business through its
Board of Directors and through its officers and agents when authorized by a board resolution
or its by-law.
Callejo, Sr., J.:
Facts:
Petitioner was the owner of 8,015 square meters of parcel of land located in Mandaluyong
City, Metro Manila. To secure a P900,000.00 loan it had obtained from respondent Philippine
National Bank, petitioner executed a real estate mortgage over the lot. Respondent PNB later
granted petitioner a new credit accommodation. On August 5, 1982, respondent PNB filed a
petition for extrajudicial foreclosure of the real estate mortgage and sought to have the
property sold at public auction. After due notice and publication, the property was sold at
public action where respondent PNB was declared the winning bidder. Petitioner sent a letter
to PNB, requesting it to be granted an extension of time to redeem/repurchase the property.
Some PNB personnel informed that as a matter of policy, the bank does not accept “partial
redemption”. Since petitioner failed to redeem the property, the Register of Deeds cancelled
TCT No. 32098 and issued a new title in favor of PNB.
Meanwhile, the Special Asset Management Department (SAMD) had prepared a statement of
account of petitioner’s obligation. It also recommended the management of PNB to allow
petitioner to repurchase the property for P1,574,560.oo. PNB rejected the offer and
recommendation of SAMD. It instead suggested to petitioner to purchase the property for
P2,660,000.00, in its minimum market value. Petitioner declared that it had already agreed
to SAMD’s offer to purchase for P1,574,560.47 and deposited a P725,000.00.
Issue:
Whether or not petitioner and respondent PNB had entered into a perfected contract for
petitioner to repurchase the property for respondent.
Ruling:
The SC affirmed the ruling of the appellate court that there was no perfected contact of sale
between the parties.
A contract is meeting of minds between two persons whereby one binds himself, with respect
to the other, to give something or to render some service. Under 1818 of the Civil Code, there
is no contract unless the following requisites concur:
1. Consent of the contracting parties;
2. Objection certain which is the subject matter of the contract;
3. Cause of the obligation which is established.
Contract is perfected by mere consent which is manifested by the meeting of the offer and
the acceptance upon the thing and causes which are to constitute the contract. Once perfected,
the bind between other contracting parties and the obligations arising therefrom have the
form of law between the parties and should be complied in good faith. The absence of any
essential element will negate the existence of a perfected contract of sale.
The court ruled in Boston Bank of the Philippines vs Manalo:
“A definite agreement as to the price is an essential element of a binding agreement to sell

personal or real property because it seriously affects the rights and obligations of the parties.
Price is an essential element in the formation of a binding and enforceable contract of sale.
The fixing of the price can never be left to the decision of one of the contracting parties. But
a price fixed by one of the contracting parties, if accepted by the other, gives rise to a
perfected sale.”
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In the case at bar, the parties to the contract is between Manila Metal Container Corporation
and Philippine National Bank and not to Special Asset Management Department. Since the
price offered by PNB was not accepted, there is no contract. Hence it cannot serve as a binding
juridical relation between the parties.
FACTS:
Manila Metal Corp. executed a real estate mortgage (TCT. 32098) as a security for its loan
from PNB amounting to 900,000 php, later on 1,000,000 php and 653,000 php
Aug. 5, 1982: PNB filed a petition for extrajudicial foreclosure for the property to be sold at a
public auction 911,532.21 php (outstanding as of June 30) + interest + attorney's fees. Sept.
2, 1982: PNB won the public auction at 1,000,000 php .Feb. 17, 1983: Certificate of Sale was
issued and registered at the Registry of Deeds and was annotated at the dorsal portion of the
title (Redeemable until Feb 17,1983)
Petitioner requested 1-year extension until Feb 17,1984 but was rejected by PNB saying it is
their policy not to accept partial redemption
Jun. 1,1984: Since petitioner failed to redeem, TCT. 32098 was cancelled and a new title was
issued in favor of PNB
Meanwhile, Special Assets Management Department (SAMD) had prepared a statement of

account as of Jun 25,1984 amounting to 1,574,560.47 php (bid price + interest + advances
of insurance premiums + advances on relaty taxes + reg. exp. +misc. exp + piblication
cost)Petitioner deposited 725,000 php as deposit to repurchase and was issued an O.R.
-PNB management rejected the recommendation of SAMD and demanded that petitioner pay
the markt value of 2,660,000 php.
Jun 24, 1984: PNB informed petitioner that its B.O.D had agreed to accept its offer to purchase
but at 1,931,389.53 less the 725,000 php.
PNB President did not conform to the letter but merely indicated that he has received it.
Petitioner rejected this since PNB has already accepted its downpayment so it can no longer
increase the price.
PNB also rejected petitioners payment for the balance.
Petitioner filed a complaint against PNB for Annulment of Mortgage and Mortgage Foreclosure,
Delivery of Title, or Specific Performance with Damages
CA affirmed RTC: Favored PNB and demanded that it refund the 725,000 php (no sale because
no meeting of the minds in terms of price)
Lot was later transferred to its PNB President Bayani Gabriel
Petitioner filed a petition for certiorari
ISSUE:
W/N the statement of account by SAMD is only a recommendation subject to the approval of
the BOD - YES
W/N there was a contract of sale - NO
W/N earnest money establishes a contract of sale – NO
HELD:
Denied. Costs Against Petitioner.
YES. Art. 1318 of NCC: No contract unless the following requisites concur: (1) Consent of the
contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause
of the obligation which is established
perfected sale.
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When there is merely an offer by one party without acceptance of the other, there is no
contract.
3. NO. ART. 1482. Whenever earnest money is given in a contract of sale, it shall be
considered as part of the price and as proof of the perfection of the contract
The deposit of P725,000 was accepted by PNB on the condition that the purchase price is still
subject to the approval of the PNB Board
Absent proof of the concurrence of all the essential elements of a contract of sale, the giving
of earnest money cannot establish the existence of a perfected contract of sale.
FACTS: Sometime in June of 1989, Luna L. Sosa wanted to purchase a Toyota Lite Ace. It
was then a seller'smarket and Sosa had difficulty finding a dealer with an available unit for
sale. But upon contacting withthe petitioner Toyota Shaw, Inc., he was told that there was an
available unit. So on 14 June 1989, Sosaand his son, Gilbert, went to the Toyota office at
Shaw Boulevard, Pasig, Metro Manila. There they metPopong Bernardo, a sales representative
of Toyota. The respondent emphasize that he need the Toyotanot later than june 17 because
he and his family and a balik-guest will use it at next day 18 to go toMarinduque. He added
if he does not arrive with new car he would become a laughing stock. Bernardothe agent of
the petitioner assured that the vehicle would ready to be pick-up on June 17. The agent
signthe agreement and as well as the respondents. They also agreed that remaining balance
of the purchasingprice would be paid by the B.A financing. At the next day the respondents
went to the Toyota shaw anddeliver the down payment of 100k. Bernardo the agent
accomplished the VEHICLE SALE PROPOSAL(VSP) signed by son of the respondents. The
balance to be finance was 274,137. The space provided fordelivery terms was not filled up.On
the morning of june 29 inform that the vehicle would not ready to pick up, but at 2pm. After
waitingfor about an hour,bernardo told the respondents that the car could not be deliver
because “nasulotangunitngibangmalakas”.
The petitioner contends that the vehicle was not delivered to respondents because of the
disapproval by the financing company. Due to uncertainty of payment of the balance of the
purchase price, petitioner gives an option the respondent to purchase the unit by paying the
full price but the respondent refused. Then the petitioner return the 100k dp to respondents.
The respondent filed a complaint against petitioner and ask ifor damages. RTC ruled that the
agreement between bernardo the agent of petitioner and respondents valid perfected contract
of sale. Which the petitioner is bound to deliver the vehicle and claimed that petitioner acted
in bad faith by selling the unit already reserved for him. Petitioner appeal to CA but thelatter
affirmed the decision of the RTC.
ISSUE: WON THE VSP WAS THE TRUE AND DOCUMENTED UNDERSTANDING OR THE
PARTIES WHICH WOULD HAVE LED TO THE ULTIMATE CONTRACT OF SALE.?
HELD: NO. The vsp was not perfected contract of sale. The SC stress the art. 1458 of
NCC.Which provides the definition of sale.by the contract of sale the one of the parties
obligates himself to transfer ownershipto another and to deliver the determinate thing, and
the other pay therefore a price certain in money or it’s equivalent. And the art 1475 when it
deemed perfected. 145 the contract of sale Is perfected themoment there is meeting of mind
upon the thing which is the object of the contract and upon price. TheSC also ruled that a
definite agreement on the manner of payment of the price is an essential element inthe
formation of binding and enforceable contract of sale. Because disagreement on the manner
ofpayment is tantamount to a failure to agree on price. Definiteness as to the price is an
essential element of binding agreement to sell personal property. In this case, the agreement
between respondent and bernardo the agent of the petitioner was not aperfected sale. The
document may be considered as part of the initial phase of the generation or negotiation stage
of a contract of sale. There are three stages in the contract of sale, namely:=
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(a) preparation, conception, or generation, which is the period of negotiation

and bargaining, ending at the moment of agreement of the parties;
(b) perfection or birth of the contract, which is the moment when the parties
come to agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance of the terms

agreed upon in the contract.
Hence, no obligation on the part of petitioner to deliver the vehicle to respondent and
noobligation on the part of the latter to pay the price certain therein. The VSP mention nothing
about the fullpurchase price and the manner of installment were to be paid. Moreover the VSP
was a mere proposal which was aborted in lieu of subsequent events. Its follows vsp follow
no demandable legal right in favor of respondents for the delivery of the vehicle to him. And
it’s non- delivery did not cause any legalindemnifiable injury. Lastly the subject vehicle was
not delivered to the respondent due the disapproval of his applicationto the financing company
due to uncertainty of payment of balance of the purchase price. The petitionergave
respondents option to purchase the unit by paying full purchase price but he refused. The
issue thatpetitioner acted in bad faith is only an after though. Granted petition.
Fact: The contract was made in February, 1918 the draft was payable ninety days after date;
the first shipment of 213 bales arrived on April 26, and the second of 288 bales on May 18,
and the plaintiff the draft on May 21 1918, and the transaction between the parties then
became complete. On May 23, he cabled the defendant that the tobacco was unsatisfactory.
On June 13, he cabled that there would be a loss. On June 28, he wrote the letter above
quoted. September 5, the defendant wrote the New York Agency of the Philippine National
Bank that he would take the tobacco back on condition that there was not any shortage in
the number of bales. During all of this time, the defendant had the use of plaintiff’s money.
It is true that the defendant offered to take the tobacco back and refund the money, but this
offer was not actually made to the plaintiff until October, and was upon the condition that the
full amount of the 501 bales should be returned, which was an impossible condition for the
plaintiff to perform. But the plaintiff did offer to account to the defendant for the tobacco
which he had sold and to return all of the unsold tobacco which was then in his warehouse,
and the defendant declined the offer. As a business man, he knew that the plaintiff has then
purchased the tobacco for the purpose of a resale, and that the tobacco had arrived at New
York about five months before the offer was made, and he also knew that the plaintiff was
using every effort to sell it and convert it into money, and that he would sell the whole or any
part of it if a purchaser could be found at a reasonable price. At the time the defendant’s offer
was communicated to the plaintiff by the bank the plaintiff in turn offered to account to the
defendant for the entire proceeds of the 141 bales which he had already sold, and to deliver
to him all of the unsold tobacco. This was all that the plaintiff could do under the existing
conditions. The fact that the defendant did not accept this offer is strong evidence that he
was seeking an undue advantage, and that his offer to plaintiff was not made in good faith.
The second shipment arrived in New York on May 18, and the plaintiff could not be expected
to take any final action until the last shipment arrived. On learning the true condition of the
tobacco, the plaintiff cabled the defendant on May 23 that it was unsatisfactory, and again on
June 13, that there would be a substantial loss, which was followed by the letter of June 28th
above quoted.
Issue: Whether the word “sold” used in the written contract shows that the sale was
completed?
Held: No, Although the word “sold” is used in the written contract, the transaction shows that
the sale was not complete until the arrival of the goods in New York. The defects in the tobacco
were inherent and could not be ascertained without opening the bales and making a physical
examination. When this was done, the plaintiff promptly cabled the defendant that the tobacco
was not satisfactory. In the nature of things, the plaintiff could not then render the defendant
a statement of the amount of this claim. By the terms of the contract, the defendant
guaranteed the arrival of the tobacco in New York “in good condition.” The testimony is
conclusive that the plaintiff in good faith tried to sell the tobacco, and that he sold the 141
bales at the best obtainable price; that the only reason why he did not sell the remainder was
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because the tobacco was not “in good condition;” and that when he first knew that it was not
“in good condition,” he promptly cabled that defendant that it was unsatisfactory. As we
construe the record, after the tobacco was inspected, the plaintiff promptly advised the
defendant that it was unsatisfactory, and that he would have to sustain a loss, and in good
faith undertook to protect the defendant and to minimize the loss, and plaintiff’s claim is not
barred by the provisions of either article 336 or 342 of the Code of Commerce.
FACTS: In 1968, spouses Ricardo and FermaPortic acquired a parcel of land with a 3 door
apartment from spouses Alcantara even though they’re aware that the land was mortgaged
to the SSS. Portic defaulted in paying SSS. The Portics then executed a contract with
Anastacia Cristobal and the latter agreed to buy the said property for P200k. Cristobal’s down
payment was P45k and she also agreed to pay SSS.
Thereafter, a transfer Certificate of Title was executed in favor of Cristobal. However, on May
20, 1996, petitioners demanded from respondent the alleged unpaid balance of P55, 000.00,
but the latter refused to pay. This prompted the petitioners to file this instant civil case against
respondent to remove the cloud on the title. Petitioners claimed that they sold the subject
property to respondent on the condition that respondent shall pay the balance on or before
May 22, 1985; that in case of failure to pay, the sale shall be considered void and petitioners
shall reimburse respondent of the amounts already paid; that respondent failed to fully pay
the purchase price within the period; that on account of this failure, the sale of the subject
property by petitioners to respondent is void.
Respondent on her part claimed that her title over the subject property is already indefeasible;
that the true agreement of the parties is that embodied in the Deed of Absolute Sale with
Assumption of Mortgage; that respondent had fully paid the purchase price; that respondent
is the true owner of the subject property; that petitioners claim is already barred by laches.
ISSUE: Whether or not there was a contract of sale in this case.
RULING: NO. What transpired between the parties was a contract to sell. The provision of
the contract characterizes the agreement between the parties as a contract to sell, not a
contract of sale. Ownership is retained by the vendors, the Portics; it will not be passed to
the vendee, the Cristobals, until the full payment of the purchase price. Such payment is a
positive suspensive condition, and failure to comply with it is not a breach of obligation; it is
merely an event that prevents the effectivity of the obligation of the vendor to convey the
title. In short, until the full price is paid, the vendor retains ownership. Also, the mere
issuance of the Certificate of Title in favor of Cristobal did not vest ownership in her. Neither
did it validate the alleged absolute purchase of the lot. Registration does not vest, but merely
serves as evidence of title.
SUMMARY:
There are three elements in a contract of sale, namely: consent of the meeting of the minds,
that is, consent to transfer ownership in exchange for the price; determinate subject matter;
and price certain in money or its equivalent.
FACTS:
Gertrudis Wuthrich and her six other siblings were the co-owners of a parcel of land identified
as Lot No. 124 of the San Carlos City, Negros Occidental Cadastre, with an area of 1,729
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square meters and covered by Transfer Certificate of Title (TCT) No. 1453-R (T-29937)-38.
Over time, Gertrudis and two other co-owners sold each of their one-seventh (1/7) shares,
or a total area of 741 square meters, to Jesus Mascuñana. The latter then sold a portion of
his 140-square-meter undivided share of the property to DiosdadoSumilhig. Mascuñana later
sold an additional 160-square-meter portion to Sumilhig on April 7, 1961. In a Deed of
Absolute Sale executed on Aug. 21, 1961, Mascuñana, as vendor, sold an undivided 469-
square-meter portion of the property for ₱4,690.00, with ₱3,690.00 as down payment,with
the terms of payment which states that the balance of ₱1,000.00 shall be paid by Sumilhig
unto Mascunana as soon as the above-portions of Lot 124 shall have been surveyed in the
name of the Sumilhig and all papers pertinent and necessary to the issuance of a separate
Certificate of Title in the name of the Sumilhig shall have been prepared. Meanwhile,
Mascuñana died intestate on April 20, 1965 and was survived by his heirs, Eva M. Ellisin,
Renee Hewlett, CarmenVda. deOpeña, MarilouDy and Jose Ma. R. Mascuñana.
On April 24, 1968, Sumilhig executed a Deed of Sale of Real Property on a portion of Lot No.
124-B with an area of 469 square meters and the improvements thereon, in favor of Corazon
Layumas, the wife of Judge Rodolfo Layumas, for the price of ₱11,000.00. The spouses
Layumas, moreover, took possession of the property and caused the cutting of tall grasses
thereon. In January 1985, the spouses Layumas allowed AquilinoBarte to stay on a portion of
the property to ward off squatters.
On November 17, 1986, the heirs of Mascuñana filed a Complaint for recovery of possession
of Lot No. 124-B and damages with a writ of preliminary injunction, alleging that they owned
the subject lot by virtue of successional rights from their deceased father. They averred that
Barte surreptitiously entered the premises, fenced the area and constructed a house thereon
without their consent. In their answer, the spouses Layumas filed a Motion for Leave to
Intervene, alleging therein that they had a legal interest in Lot No. 124-B-1 as its buyers from
Sumilhig, who in turn purchased the same from Mascuñana. The petitioners appealed the
decision to the Court of Appeals. They claim that the contract between between their father
and Sumilhig was a mere contract to sell because at the time of the said sale, the late
Mascuñana was not yet the registered owner of Lot No. 124 or any of its portions. They assert
that Sumilhig could not have acquired any rights over the lot due to the fact that a person
can only sell what he owns or is authorized to sell, and the buyer can acquire no more than
what the seller can transfer legally. Finally, the petitioners insist that the document in
controversy was subject to a suspensive condition, not a resolutory condition, which is a
typical attribute of a contract of sale.
On May 5, 2003, the Court of Appeals affirmed the decision of the trial court. It ruled that the
contract between the petitioners’ father and Sumilhig was one of sale. Foremost, the CA
explained, the contract was denominated as a “Deed of Absolute Sale.” The stipulations in the
contract likewise revealed the clear intention on the part of the vendor Mascuñana to alienate
the property in favor of the vendee Sumilhig.
ISSUE: Whether or not the contract of alienation of Lot No. 124-B in favor of Sumilhig in
1961 was a contract of sale.
DECISION: YES. A contract of sale, which can be absolute or conditional, has three elements,
namely: consent or meeting of the minds, that is, consent to transfer ownership in exchange
for the price; determinate subject matter; and price certain in money or its equivalent. A deed
of sale is considered absolute in nature where there is neither a stipulation in the deed that
title to the property sold is reserved in the seller until full payment of the price, nor one giving
the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay
within a fixed period.
In the transaction between Jesus Mascunana and Diosdado Sumilhig, there was a meeting of
the minds between the vendor (Jesus Mascunana) and the vendee (Diosdado Sumilhig), when
the vendor undertook to deliver and transfer ownership over the property covered by the
deed of absolute sale to the vendee for the price of ₱4,690.00 of which ₱3,690.00 was paid
by the vendee to the vendor as down payment. The vendor undertook to have the property
sold, surveyed and segregated and a separate title therefore issued in the name of the vendee,
upon which the latter would be obliged to pay the balance of ₱1,000.00. There was no
stipulation in the deed that the title to the property remained with the vendor, or that the
right to unilaterally resolve the contract upon the buyer’s failure to pay within a fixed period
was given to such vendor. Art. 1477 provides that the ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive delivery thereof. Patently, the
contract executed by the parties is a deed of sale and not a contract to sell.
Even if Sumilhig was not yet able to pay his balance of P 1,000, it does not prevent the
contract of sale to be of full force and effect. This is because, in the contract, there is no
reservation of ownership nor a stipulation providing for a unilateral rescission by either party
on the grounds of failure to pay this balance.
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Facts: In January 1985, WinifredaUrsal and spouses Jesus and CristitaMoneset entered into
a “Contract to Sell Lot & House”. The amount agreed upon was P130, 000.00. Moreover, Ursal
is to pay P50, 000.00 as down payment and will continue to pay P3000.00 monthly starting
the next month until the balance is paid off. After 6 months, Ursal stopped paying the
Monesets for the latter failed to give her the transfer of certificate title.In November 1985,
the Monesets executed an absolute deed of sale with one Dr.Canora. Also, the Monesets
mortgaged the same property to the Rural Bank of Larena for P100, 000.00. Unfortunately,
the Monesets failed to pay the P100, 000; hence, the bank filed for foreclosure.
Trial ensued and the RTC ruled in favor of Ursal. The trial court ruled that there was fraud on
the part of the Monesets for executing multiple sales contracts. That the bank is not liable for
fraud, but preference to redeem should be given to Ursal. The Monesets are ordered to
reimburse Ursal plus to pay damages and fees. However, Ursal was not satisfied as she
believed that the bank was also at fault.
ISSUE: Whether or not the Contract to Sell vested ownership in Ursal.
RULING: NO. A contract to sell is a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property exclusively to the prospective buyer
upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.
Moreover, the prospective seller expressly reserves the transfer of title to the prospective
buyer, until the happening of an event, which in this case is the full payment of the purchase
price. What the seller agrees or obligates himself to do is to fulfill his promise to sell the
subject property when the entire amount of the purchase price is delivered to him.
Since the contract in this case is a contract to sell, the ownership of the property remained
with the Monesets even after petitioner had paid the down payment and took possession of
the property.
In this case, petitioner instituted an action for 'Declaration of Non-Effectivity of Mortgage with
Damages' four years from the date of her last installment and only as a reaction to the
foreclosure proceedings instituted by respondent Bank. After the Monesets failed to deliver
the TCT, petitioner merely stopped paying installments and did not institute an action for
specific performance, neither did she consign payment of the remaining balance as proof of
her willingness and readiness to comply with her part of the obligation. As we held in San
Lorenzo Development Corp. vs. Court of Appeals, [50] the perfected contract to sell imposed
on the vendee the obligation to pay the balance of the purchase price. There being an
obligation to pay the price, the vendee should have made the proper tender of payment and
consignation of the price in court as required by law. Consignation of the amounts due in
court is essential in order to extinguish the vendee's obligation to pay the balance of the
purchase price. [51] Since there is no indication in the records that petitioner even attempted
to make the proper consignation of the amounts due, the obligation on the part of the
Monesets to transfer ownership never acquired obligatory force.
In other words, petitioner did not acquire ownership over the subject property as she did not
pay in full the equal price of the contract to sell. Further, the Monesets' breach did not entitle
petitioner to any preferential treatment over the property especially when such property has
been sold to other persons.
Petitioner's rights were limited to asking for specific performance and damages from the
Monesets. Specific performance, however, is no longer feasible at this point as explained
above. This being the case, it follows that petitioner never had any cause of action against
respondent Bank. Having no cause of action against the bank and not being an owner of the
subject property, petitioner is not entitled to redeem the subject property.
Petitioner had lost her right to demand specific performance when the Monesets executed a
Deed of Absolute Sale in favor of Dr. Canora. Contrary to what she claims, petitioner had no
vested right over the property.
Indeed, it is the Monesets who first breached their obligation towards petitioner and are guilty
of fraud against her. It cannot be denied however that petitioner is also not without fault. She
sat on her rights and never consigned the full amount of the property. She therefore cannot
ask to be declared the owner of the property, this late, especially since the same has already
passed hands several times, neither can she question the mortgage constituted on the
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property years after title has already passed to another person by virtue of a deed of absolute
sale.
Ponente: J. Morales
Topic: Civil Law – Sales; Essential Elements
Facts: El Dorado Plantation, Inc. executed a Deed of Sale with Fernando Carrascoso, Jr.
through its board member LauroLeviste. The subject of the sale was a parcel of land with an
area of approximately 1,825 hectares. The petitioner was to pay P1.8M, P290,000 would be
paid to PNB to settle the mortgage upon said land. The remaining balance of P1.3M plus 10%
interest would be paid over the next 3 years.
The petitioner obtained a total of P1.07M as mortgage and used the same to pay the down
payment agreed upon the stipulation of the contract. The petitioner failed his obligation which
was supposed to be settled on March 25, 1975. LauroLeviste sent the petitioner letters to
make good his end of the contract, otherwise, petitioner will be litigated. El Dorado filed a
civil case against the petitioner where the RTC rule in favor of the latter.
The CA reversed the RTC ruling.
Issue: Whether or not the contract of sale was valid?
SC Ruling: YES. The Court held that the contract between El Dorado and Carrascoso was a
contract of sale.
It was perfected by their consent or meeting of minds and was consummated by the delivery
of the property to the buyer. El Dorado already performed its obligation through the execution
of the Deed of Sale of Real Property which effectively transferred ownership of the property
to Carrascoso. The latter failed to perform his correlative obligation of paying in full the
contract price in the manner and within the period agreed upon.
A contract of sale is a reciprocal obligation. The seller obligates itself to transfer the ownership
of land and deliver a determinate thing, and the buyer obligates itself to pay therefore a price
certain in money or its equivalent. Such failure to pay the price in the manner prescribed by
the contract of sale entitles the unpaid seller to sue for collection or to rescind the contract.
FACTS: Project Movers Realty and Development Corporation assigned, transferred and
conveyed to Keppel Bank Philippines, Inc. twenty-five properties consisting of townhouses,
condominium units and vacant lots by way of dacion en pago by virtue of the court-approved
Compromise Agreement. This is to partially settle PMRDC’s two hundred million
(200,000,000) outstanding obligation with Keppel Bank. It later turns out that one of the 25
units was actually occupied by respondent Philip Adao. Petitioner Keppel Bank then sent a
written demand to respondent on February 18, 2000 to vacate Unit 4 of Luxor Villas
Townhouse within 30 days from receipt of notice. Adao refused together with an offer to
purchase the unit which did not come into terms for the two parties.
Eight months after the written demand was sent, on October 19, 2000, petitioner sent a final
demand to vacate to the respondent, which the latter failed to give take notice of. Because of
this, an ejectment case was filed against respondent, docketed as Civil Case No. 8911.
Adao, contested that he had a Contract to Sell with PRMDC and that he made payment of
three million thereof. He also added the fact that he to purchase the unit with the
consideration of 2.5 million pesos. The MeTC, RTC, and CA ruled in favor of the respondent.
The lower courts upheld that the petitioner give respect to the contract to sell between Adao
and PRMDC since the way of transfer was dacion en page, which meant that Keppel Bank is
merely filling in the shoes of PRMDC.
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ISSUE: Whether or not Keppel Bank is bound by the Contract to Sell between Adao and
PRMDC.
RULING: No. Keppel Bank is not bound by the Contract to Sell. While it may be true that
Keppel Bank is not a purchaser in good faith for banks are required to exercise more care and
prudence than private individuals and that they should have sent representatives to examine
the properties involved so that it would have discovered that respondent was already
occupying one of the condominium units and that a contract to sell existed between
respondent and PMRDC, the petitioner should not be bound by the executed Contract to Sell
between Adao and PRMDC.
The Court also laid out the difference between the Contract of Sale and Contract to Sell
wherein in the latter it mentioned that there is yet no actual sale nor any transfer of title,
until and unless, full payment is made. The payment of the purchase price is a positive
suspensive condition, the failure of which is not a breach, casual or serious, but a situation
that prevents the obligation of the vendor to convey title from acquiring an obligatory force.
Clearly, Adao must need to have fully-paid the price before he can acquire title and retain
ownership of the property. However, respondent failed discharge the burden of proving
payment. This manifests the mere tolerance of the seller in his continuing possession of
property and that the moment he received demand to vacate, he should have left the property.
When the respondent decided to do the contrary, his stay in the unit became illegal.
Therefore, Keppel Bank is not bound to the Contract to Sell executed between respondent
and PRMDC and respondent is ordered to vacate the property.
Case Subject Matter/s:
A contract of sale is an agreement whereby one of the contracting parties obligates himself
to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore
a price certain in money or equivalent. There must be unequivocal consent on the part of the
seller to transfer and deliver, and on the part of the buyer to pay.;
The absence of definite terms of payment in a sale would preclude its judicial enforcement. A
requisite for the judicial enforcement of an obligation is that the same is due and demandable.
FACTS: Herein respondents were the owners of two (2) fishing vessels, the “Lady Lalaine”
and the “Lady Theresa.” On April 01, 1996, the respondents and herein petitioners executed
an untitled handwritten document which acknowledged the latter’s receipt of the foregoing
fishing vessels. The same document also declared that the agreed price for the vessels was
in the sum of Nine Hundred Thousand Pesos (PHP900,000.00), Philippine currency, and that
pertinent documents as to the sale and the facilitation of payments between the parties were
to follow.
Upon the signing of the document, the petitioners delivered four (4) post-dated checks
totaling One Hundred Forty Thousand Pesos (PHP140,000.00), Philippine currency to the
respondents. All checks were honored save for the fourth (4th), which was dishonored by
reason of a “stop payment” order. On June 03, 1996, the respondents filed before the RTC an
action against the petitioners for specific performance with damages, praying that the latter
be obliged to execute a deed of sale and to pay the balance of the vessels’ purchase price.
The respondents asserted that the abovementioned document had duly evinced a contract to
buy.
For their part, the petitioners contended that the original agreement was that the vessels
would be sold to them should they find the same profitable for business. The petitioners
claimed, however, that since the vessels were in dilapidated condition, they had to spend a
hefty sum on maintenance and repairs. This prompted them to back out from having
possession of the vessels. Judgement was rendered by the RTC on February 02, 1999 in favor
of the respondents, which was thereafter affirmed by the Court of Appeals.
ISSUE/S: Whether or not the untitled handwritten document executed by the parties
constituted a perfected contract of sale and had obligatory force.
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HELD: For lack of manifest agreement between the parties as to the terms of the sale of the
vessels, the Court ruled that the document in question was not a perfected contract of sale
and therefore had no obligatory force. A contract of sale is an agreement whereby one of the
contracting parties obligates himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefore a price certain in money or equivalent. There must be
unequivocal consent on the part of the seller to transfer and deliver, and on the part of the
buyer to pay.
In the case herewith, the document in question merely (1) acknowledged the purchase price
of the vessels and the hand-over of the vessels to the petitioners, and (2) confirmed the
parties’ commitment to subsequently accomplish pertinent documents. These subsequent
documents would have formalized the transfer of ownership and expressed the terms and
period of payment; however, none were ever executed. Hence, there was no unequivocal
consent or agreement between the parties as to their respective obligation to transfer
ownership of the vessels and to pay for the same. Although the document in question had in
fact stipulated the vessels’ purchase price, it still could not be considered tantamount to the
perfection of a contract of sale. Existing jurisprudence as in Swedish Match, AB v. Court of
Appeals, emphasizes that before a contract of sale can exist and be considered valid and
binding, the manner and period of payment must first be established.
Further, the absence of such a period indicated that at the time of the filing of the complaint,
the obligation to pay was not yet due and demandable, which therefore failed the requirement
for the judicial enforcement of an obligation. Accordingly, the absence of definite terms of
payment would preclude its judicial enforcement since a requisite for the judicial enforcement
of an obligation is that the same is due and demandable. While the respondents averred that
an agreement had been made for the payment of the
balance of the vessels’ purchase price on June 30, 1996, their filing of the Complaint before
the RTC on June 03, 1996 only proved the prematurity of their action. At that time, the
maturity date for the balance had not even arrived yet. Neither did the respondents avail of
the relief under Article 1197 of the Civil Code for the courts to fix the period of the obligation
in the absence of an agreement between the parties.
Subject Matter
Facts: This is a case brought about by a property which Spouses Romeo Martinez and Leonor
Suarez are registered owners. It turned out to be that one of the two parcels of fishpond
property which they bought was actually part of a creek. To resolve any legal impediments,
they sought the matter to the Committee on Rivers and Streams which gave them a favorable
decision. However, the municipal officials of Lubao, Pampanga refused to recognize the
decision. In a subsequent civil case where a writ of Preliminary Injunction was applied for,
the court ruled in favor of the petitioners and so proceeded to construct the dikes in the parcel
of land.
In 1958, while the Civil case was still pending, the Secretary of Public Works and Highways
ordered the removal of the dikes on the strength of the authority vested in him by Republic
Act No. 2056 approved on June 13, 1958, which gave the aforementioned
secretary authority to remove dikes in waterways. Another case was instituted, this time, for
the acts of the secretary by which the lower court ruled in favor of petitioners. In an apparent
appeal by Department of Public Works and Communications, the appellate court reversed the
judgement of the lower court which caused petitioners to file appeal by certiorari by alleging
that Court of Appeals’ erred in declaring the property in litigation as a river and that the
eventual cancellation of its registration constitutes a collateral attack on a Torens Title, that
the issue of the property being a river is already res judicata and them, being the seventh of
the innocent purchasers relied on the principle that the persons dealing with registered land
need not go behind the register to determine the condition of the property.
Issue: Whether or not the spouses are innocent purchasers and are in good faith of the parcel
of land alleged to be a public river.
Ruling: No, petitioners cannot be deemed as purchasers for value and in good faith because
before purchasing a parcel of land, it cannot be that the vendees did not know exactly the
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condition of the land that they were buying and the obstacles or restrictions thereon that may
be put up by the government in connection with their project of converting Lot No. 2 in
question into a fishpond. Nevertheless, they willfully and voluntarily assumed the risks
attendant to the sale of said lot. One who buys something with knowledge of defect or lack
of title in his vendor cannot claim that he acquired it in good faith. The Court further ruled
that relying on the registry to determine if there is no lien or encumbrances over the same,
cannot be availed of as against the law states that rivers are parts of the public domain for
public use and not capable of private appropriation or acquisition by prescription.
Facts: Juliana Melliza donated to the City of Iloilo, 9,000 square meters of Lot 1214, to serve
as site for the municipal hall. The donation was however revoked by the parties because the
area donated was found inadequate to meet the requirements of the development plan of the
City. On November 15, 1932 Juliana Melliza executed an instrument in favor of Iloilo City
without any caption. On January 14, 1938 Juliana Melliza sold her remaining interest in Lot
1214 to Remedios Sian Villanueva who thereafter obtained her own registered title. Remedios
in turn transferred her rights to said portion of land to Pio Sian Melliza.
The City of Iloilo donated the city hall site together with the building thereon, to the University
of the Philippines (Iloilo branch).The University of the Philippines enclosed the site donated
with a wire fence. PioSian Melliza thereupon made representations, thru his lawyer, with the
city authorities for payment of the value of the lot (Lot 1214-B). No recovery was obtained,
because as alleged by plaintiff, the City did not have funds. Pio Sian Melliza filed an action in
the Court of First Instance of Iloilo against Iloilo City and the University of the Philippines
for recovery of Lot 1214-B or of its value. The Court of First Instance rendered its decision
dismissing the complaint. Said court ruled that the instrument executed by Juliana Melliza in
favor of Iloilo municipality included in the conveyance Lot 1214-B.Pio Sian Melliza appealed
to the Court of Appeals. The Court of Appeals ruled in favour of the respondent.
Issue: Whether or not the conveyance by Juliana Melliza to Iloilo included that portion of Lot
1214 known as Lot 1214-B.
Ruling: Yes, the conveyance by Juliana Melliza to Iloilo included that portion of Lot 1214.
There is no question that the paramount intention of the parties was to provide Iloilo City
with lots sufficient or adequate in area for the construction of the Iloilo City hall site, with its
avenues and parks. For this matter, a previous donation for this purpose between the same
parties was revoked by them because of the inadequacy of the area of the lot donated.
Moreover, reading the public instrument in toto, shows that said instrument describes four
parcels of land by their lot numbers and area; and then it goes on to further describe, not
only those lots already mentioned, but the lots object of the sale, by stating that said lots are
the ones needed for the construction of the city hall site. It is therefore reasonable
interpretation, to view it as describing those other portions of land contiguous to the lots
aforementioned that will be found needed for the purpose at hand, the construction of the
city hall site. Furthermore, Pio Sian Melliza, from the stipulation of facts, was the notary public
of the public instrument. As such, he was aware of its terms. Said instrument was also
registered with the Register of Deeds and such registration was annotated at the back of the
corresponding title certificate of Juliana Melliza. From these stipulated facts, it can be inferred
that Pio Sian Melliza knew of the aforesaid terms of the instrument or is chargeable with
knowledge of them; that knowing so, he should have examined the Arellano plan in relation
to the public instrument Exhibit "D" ; that furthermore, he should have taken notice of the
possession first by the Municipality of Iloilo, then by the City of Iloilo and later by the
University of the Philippines of Lot 1214-B as part of the city hall site conveyed under that
public instrument, and raised proper objections thereto if it was his position that the same
was not included in the same. The fact remains that, instead, for twenty long years, Pio Sian
Melliza and his predecessors-in-interest, did not object to said possession, nor exercise any
act of possession over Lot 1214-B. Applying, therefore, principles of civil law, as well as laches,
estoppel, and equity, said lot must necessarily be deemed included in the conveyance in favor
of Iloilo municipality, now Iloilo City.
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FACTS: Fonacier decided to revoke the authority granted by him to Gaite to exploit and
develop the mining claims in question, and Gaite assented thereto subject to certain
conditions. As a result, a document entitled “Revocation of Power of Attorney and Contract”
was executed on December 8, 1954.
To secure the payment of the P65,000.00 balance, Fonacier promised to execute in favor of
Gaite a surety bond. However, Gaite refused to sign said unless another bond underwritten
by a bonding company was put up by defendants to secure the payment of the P65,000.00
balance of the price of the iron ore in the stockpiles in the mining claims. Hence, a second
bond, also dated December 8, 1954, was executed, but it provided that the liability of the
surety company would attach only when there had been an actual sale of iron ore by the
Larap Mines & Smelting Co. for an amount of not less than P65,000.00, and that, furthermore,
the liability of said surety company would automatically expire on December 8, 1955. Both
bonds were attached to the “Revocation of Power of Attorney and Contract”.
Up to December 8, 1955, when Fonacier and his sureties failed to pay as demanded by Gaite,
the latter filed the present complaint against them. Defendants claimed that the obligation
sued upon by Gaite was subject to a condition that the amount of P65,000.00 would be
payable out of the first letter of credit covering the first shipment of iron ore and/or the first
amount derived from the local sale of the iron ore by the Larap Mines & Smelting Co., Inc.;
that up to the time of the filing of the complaint, no sale of the iron ore had been made, hence
the condition had not yet been fulfilled; and that consequently, the obligation was not yet due
and demandable.
ISSUE: Whether or not the obligation of Fonacier to pay Gaite the P65,000.00 is one with a
period or term and not one with a suspensive condition, and that the term expired on
December 8, 1955.
DECISION: No. The court held that the obligation of the defendants to pay plaintiff the
P65,000.00 balance of the price of the approximately 24,000 tons of iron ore was one with a
term: i.e., that it would be paid upon the sale of sufficient iron ore by defendants, such sale
to be effected within one year or before December 8, 1955; that the giving of security was a
condition precedent to Gaite’s giving of credit to defendants; and that as the latter failed to
put up a good and sufficient security in lieu of the Far Eastern Surety bond which expired on
December 8, 1955, the obligation became due and demandable under Article 1198 of the New
Civil Code.
The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides: “if the contract
is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests.” and
there can be no question that greater reciprocity obtains if the buyer’s obligation is deemed
to be actually existing, with only its maturity (due date) postponed or deferred, that if such
obligation were viewed as non-existent or not binding until the ore was sold.
The only rational view that can be taken is that the sale of the ore to Fonacier was a sale on
credit, and not an aleatory contract where the transferor, Gaite, would assume the risk of not
being paid at all; and that the previous sale or shipment of the ore was not a suspensive
condition for the payment of the balance of the agreed price, but was intended merely to fix
the future date of the payment.
Stages
Fact:
Concepcion alleged that respondent-spouses Eugenia and Antonio owned a lot with an
unfinished residential house sometime in April 1987, she bought one-half of an undivided
portion of the property from her daughter, Eugenia and the latter’s husband, Antonio, for One
Hundred Thousand Pesos (P100,000.00). No Deed of Absolute Sale was executed to evidence
the transaction, but cash payment was received by the respondents, and ownership was
transferred to Concepcion through physical delivery to her attorney-in-fact and daughter.
Concepcion authorized Natividad and the latter’s husband to occupy the premises, and make
improvements on the unfinished building. Thereafter, Concepcion alleged that without her
consent, respondents caused the subdivision of the property into three portions and registered
it in their names in violation of the restrictions annotated at the back of the title. The Regional
Trial Court rendered judgment in favor of Concepcion. On appeal by the respondents, the
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Court of Appeals reversed the decision of the trial court, and declared the sale null and void.
Hence this case.
Issue: Whether the oral contract in the sale of the real property is legal and binding?
Held: Yes, The SC upheld the ruling of the lower court that the sale between Eugenia and
Concepcion was consummated when both contracting parties complied with their respective
obligations. Eugenia transferred possession by delivering the property to Concepcion who in
turn paid the purchase price. It also declared that the transfer of the property did not violate
the Statute of Frauds because a fully executed contract does not fall within its coverage. The
verbal contract of sale between Eugenia and Concepcion did not violate the provisions of the
Statute of Frauds that a contract for the sale of real property shall be unenforceable unless
the contract or some note or memorandum of the sale is in writing and subscribed by the
party charged or his agent. When a verbal contract has been completed, executed or partially
consummated, as in this case, its enforceability will not be barred by the Statute of Frauds,
which applies only to an executory agreement. Thus, where one party has performed his
obligation, oral evidence will be admitted to prove the agreement. In the instant case, the
oral contract of sale between Eugenia and Concepcion was evidenced by a receipt signed by
Eugenia. Antonio also stated that his wife admitted to him that she sold the property to
Concepcion.
FACTS: In her complaint for partition of real property, annulment of titles with damages,
Concepcion Ainza (Concepcion)alleged that respondent-spouses Eugenia (Eugenia) and
Antonio Padua (Antonio) owned a lot with an unfinishedresidential house located at Quezon
City. Sometime in April 1987, she bought one-half of an undivided portion of theproperty from
her daughter, Eugenia and the latter’s husband, Antonio, for P100,000.00.No Deed of
Absolute Sale was executed to evidence the transaction, but cash payment was received by
therespondents, and ownership was transferred to Concepcion through physical delivery to
her attorney-in-fact and daughter, NatividadTuliao (Natividad). Concepcion authorized
Natividad and the latter’s husband, CeferinoTuliao(Ceferino) to occupy the premises, and
make improvements on the unfinished building.
Thereafter, Concepcion alleged that without her consent, respondents caused the subdivision
of the property intothree portions and registered it in their names in violation of the
restrictions annotated at the back of the title.On the other hand, Antonio averred that he
bought the property in 1980 and introduced improvements thereon.Between 1989 and 1990,
he and his wife, Eugenia, allowed Natividad and Ceferino to occupy the premisestemporarily.
In 1994, they caused the subdivision of the property and three (3) separate titles were
issued.The trial court upheld the sale between Eugenia and Concepcion. It ruled that the sale
was consummated when bothcontracting parties complied with their respective obligations.
Eugenia transferred possession by delivering theproperty to Concepcion who in turn paid the
purchase price. It also declared that the transfer of the property did notviolate the Statute of
Frauds because a fully executed contract does not fall within its coverage.On appeal by the
respondents, decision of the trial court, and declared the sale null and void. Applying Article
124 ofthe Family Code, the Court of Appeals ruled that since the subject property is conjugal,
the written consent of Antonio must be obtained for the sale to be valid. It also ordered the
spouses Padua to return the amount ofP100,000.00 to petitioners plus interest.
ISSUE: The sole issue for resolution in this petition for review is whether there was a valid
contract of sale between Eugeniaand Concepcion even without the consent of Antonio.
HELD: A contract of sale is perfected by mere consent, upon a meeting of the minds on the
offer and the acceptancethereof based on subject matter, price and terms of payment.In this
case, there was a perfected contract of sale between Eugenia and Concepcion. The records
show that Eugeniaoffered to sell a portion of the property to Concepcion, who accepted the
offer and agreed to pay P100,000.00 asconsideration. The contract of sale was consummated
when both parties fully complied with their respectiveobligations. Eugenia delivered the
property to Concepcion, who in turn, paid Eugenia the price of One HundredThousand Pesos
(P100,000.00.In the instant case, the oral contract of sale between Eugenia and Concepcion
was evidenced by a receipt signed byEugenia. Antonio also stated that his wife admitted to
him that she sold the property to Concepcion.It is undisputed that the subject property was
conjugal and sold by Eugenia in April 1987 or prior to the effectivity ofthe Family Code on
August 3, 1988, Article 254 of which repealed Title V, Book I of the Civil Code provisions on
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theproperty relations between husband and wife. However, Article 256 thereof limited its
retroactive effect only to caseswhere it would not prejudice or impair vested or acquired rights
in accordance with the Civil Code or other laws. Inthe case at bar, vested rights of Concepcion
will be impaired or prejudiced by the application of the Family Code; hence, the provisions of
the Civil Code should be applied.
Facts: On September 27, 1961, petitioner Province of Cebu leased [4] in favor of Rufina
Morales a 210-square meter lot which formed part of Lot No. 646-A of the Banilad Estate.
Subsequently or sometime in 1964, petitioner donated several parcels of land to the City...
of Cebu.
On July 19, 1965, the city sold Lot No. 646-A-3 as well as the other donated lots at public
auction in order to raise money for infrastructure projects. The highest bidder for Lot No.
646-A-3 was Hever Bascon but Morales was allowed to match the highest bid since she had
a... preferential right to the lot as actual occupant thereof.
Morales thus paid the required deposit and partial payment for the lot. In the meantime,
petitioner filed an action for reversion of donation against the City of Cebu On May 7, 1974,
petitioner and the City of Cebu entered into a compromise agreement. The agreement
provided for the return of the donated lots to petitioner except those that have already been
utilized by the City of Cebu.
Quesada, together with the other nieces of Morales namely, respondents Nenita Villanueva
and Erlinda V. Adriano, as well as Morales' sister, Felomina V. Panopio, filed an action for
specific performance and reconveyance of property against... petitioner
Issues: WON the award at public auction of the lot to Morales was a valid and binding
contract?
Ruling: The City of Cebu was the owner of the lot when it awarded the same to... respondents'
predecessor-in-interest, Morales, who later became its owner before the same was
erroneously returned to petitioner under the compromise judgment.
The award is tantamount to a perfected contract of sale between Morales and the City of Cebu,
while partial... payment of the purchase price and actual occupation of the property by
Morales and respondents effectively transferred ownership of the lot to the latter.
This is true notwithstanding the failure of Morales and respondents to pay the balance of the
purchase price.
There is no merit in petitioner's assertion that there was no perfected contract of sale because
no "Contract of Purchase and Sale" was ever executed by the parties.
Subject to the provisions of the Statute of Frauds, a formal document is not necessary for the
sale transaction to acquire binding effect the fact that there was an agreed price... for the lot
proves that a contract of sale was indeed perfected between the parties. Failure to pay the
balance of the purchase price did not render the sale inexistent or invalid, but merely gave
rise to a right in favor of the vendor to either demand specific performance... or rescission of
the contract of sale.
In this case, respondents' predecessor had undoubtedly commenced performing her

obligation by making a down payment on the purchase price. Respondents could still tender
payment of the full purchase price as no demand for rescission had been made upon them,
either judicially or through notarial act.
Principles:
Whether Morales, as actual occupant and/or lessee of the lot, was qualified and had the right
to match the highest bid is... a foregone matter that could have been questioned when the
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award was made. When the City of Cebu awarded the lot to Morales, it is assumed that she
met all qualifications to match the highest bid.
It does not matter that Morales merely matched the bid of the highest bidder at the said
auction... sale. The contract of sale was nevertheless perfected as to Morales, since she
merely stepped into the shoes of the highest bidder.
For as long as the essential elements of a contract of... sale are proved to exist in a given
transaction, the contract is deemed perfected regardless of the absence of a formal deed
evidencing the same.
The stages of a contract of sale are as follows: (1) negotiation, covering the period from the
time the prospective contracting parties indicate interest in the contract to the time the
contract is perfected; (2) perfection, which takes place upon the concurrence... of the
essential elements of the sale which are the meeting of the minds of the parties as to the
object of the contract and upon the price; and (3) consummation, which begins when the
parties perform their respective undertakings under the contract of sale, culminating... in the
extinguishment thereof
Article 1592 allows the vendee to pay as long as no demand for rescission has been made.
Earnest money
Facts: The petitioner looking to expand business and add to its existing offices, respondent
–through its General Manager, Antonio Eleazar (Eleazar) sent a letter to the petitioner offering
to purchase the subject property at P6,000.00 per square meter. A series of telephone calls
ensued, but only between Eleazar and Young’s secretary; Eleazar likewise personally
negotiated with a certain Maria Remoso (Remoso), who was an employee of petitioner. At
this point, Eleazar was unable to personally negotiate with Young or the petitioner’s board of
directors. Sometime thereafter, Eleazar personally went to petitioner’s office offering to pay
for thesubject property in cash, which he already brought with him. However, Young declined
toaccept payment, saying that she still needed to secure her sister’s advice on the
matter.10She likewise informed Eleazar that prior approval of petitioner’s Board of
Directorswas required for the transaction, to which remark Eleazar replied that respondent
shallinstead await such approval.11On February 4, 2005, respondent sent a Letter of even
date to petitioner. It wasaccompanied by Philippine National Bank Check No. 24677, issued
for P100,000.00 andmade payable to petitioner. The check was eventually deposited with and
credited topetitioner’s bank account Thereafter, respondent through counsel demanded in
writingthat petitioner proceed with the sale of the property
Issue: Whether there is a contract of sale when the respondent accepted the supposed
earnest money.
Held: No. In the present case, the parties never got past the negotiation stage. There is no
sale to speak of. “When there is merely an offer by one party without acceptance of the other,
there is no contract.” To borrow a pronouncement in a previously decided case
The stages of a contract of sale are: (1) negotiation, starting from the time the prospective
contracting parties indicate interest in the contract to the time the contract is perfected; (2)
perfection, which takes place upon the concurrence of the essential elements of the sale; and
(3) consummation, which commences when the parties perform their respective undertakings
under the contract of sale, culminating in the extinguishment of the contract.
Nothing shows thatthe parties had agreed on any final arrangement containing the essential
elements of acontract of sale, namely, (1) consent or the meeting of the minds of the parties;
(2) objector subject matter of the contract; and (3) price or consideration of the sale.
Respondent’s subsequent sending of the February 4, 2005 letter and check to petitioner –
without awaiting the approval of petitioner’s board of directors and Young’s decision, or
without making a new offer – constitutes a mere reiteration of its original offer which was
already rejected previously; thus, petitioner was under no obligation to reply to the February
4, 2005 letter. It would be absurd to require a party to reject the very same offer each and
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every time it is made; otherwise, a perfected contract of sale could simply arisefrom the
failure to reject the same offer made for the hundredth time. Thus, saidletter cannot be
considered as evidence of a perfected sale, which does not exist in thefirst place; no binding
obligation on the part of the petitioner to sell its property arose as aconsequence. The letter
made no new offer replacing the first which was rejected.
Since there is no perfected sale between the parties, respondent had no obligation to make
payment through the check; nor did it possess the right to deliver earnest money to petitioner
in order to bind the latter to a sale. As contemplated under Art. 1482 of the Civil Code, “there
must first be a perfected contract of sale before we can speak of earnest money.” “Where the
parties merely exchanged offers and counter-offers, no contract is perfected since they did
not yet give their consent to such offers. Earnest money applies to a perfected sale.
Absolute Contract of Sale
FACTS: Petitioner (Sps. Ramos) owns a land which is made subject to an contract with
Respondent (Sps. Heruela. Petitioner claimed that the contract partakes the nature of a
contract of conditional sale while the respondent averred that it was a contract of sale on an
installment basis.
Sps. Ramos filed a complaint for Recovery of Ownership with damages because Sps Heruela
paid only Php 4,000 out of the Php15,000 consideration of the sale, and that the unjust refusal
to pay cancelled the Deed of Conditional Sale. Sps. Heruela occupied a portion of the land
and respondent's daughter and son-in-law built another house refusing to vacate the property
despite the demands. Respondent claimed and alleged that the contract is in the nature of
sale on installment basis, and that Sps Heruela expressed their willingness to pay, but
petitioners refused.
Trial court ruled that the contract is a sale on installment basis and that the spouses Ramos
failed to comply with Section 4 of Republic Act No. 6552 ("RA 6552"). Sps. Ramos filed a
motion for reconsideration, but it was denied. Hence, this Petition.
1ST ISSUE: Whether or not the agreement is a contract of sale.
COURT RULING: Yes. It is a contract of sale on an installment basis. A contract of sale is

absolute when title to the property passes to the vendee upon delivery of the thing sold. It is
absolute when there is no stipulation in the contract that title to the property remains with
the seller until full payment of the purchase price. The sale is also absolute if there is no
stipulation giving the vendor the right to cancel unilaterally the contract the moment the
vendee fails to pay within a fixed period. In this case, the agreement of the parties is embodied
in a one-page, handwritten document, which contains the term of sale which was torn in part
and only "LMENT BASIS" is legible on the title. It neither contain stipulations giving the vendor
the vendor the right to cancel unilaterally the contract the moment the vendee fails to pay
within a fixed period, nor was there stipulation that title to the property remains with the
seller until full payment of the purchase price.
2ND ISSUE: Whether or not the trial court correctly applied R.A. 6552 to an absolute sale of
land.
COURT RULING: Yes, the trial court correctly applied R.A. 6552 to the present case. Known
as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate
the right of the seller to cancel the contract upon non-payment of an installment by the buyer.
However, it also provides the right of the buyer on installments in case he defaults in the
payment of succeeding installments. Sec. 4 of R.A. 6552 provides that in case where less
than two years of installments were paid, the seller shall give the buyer a grace period of not
less than sixty days from the date the installment became due. If the buyer fails to pay the
installments due at the expiration of the grace period, the seller may cancel the contract after
thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission
of the contract by a notarial act. In this case, the spouses Heruela paid less than two years
of installments. Thus, Section 4 of RA 6552 applies.
3RD ISSUE: Whether or not spouses Ramos have a right to cancel the sale.
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COURT RULING: NO, there was neither a notice of cancellation nor demand for rescission by
notarial act to the spouses Heruela. In Olympia Housing, Inc. v. Panasiatic Travel Corp., the
Court provided that the vendor could demand judicial rescission in lieu of a notarial act of
rescission, but an action for reconveyance does not pave way for rescission. The judicial
rescission of a contract gives rise to mutual restitution which is not necessarily the situation
an action for reconveyance. In an action for rescission, unlike in an action for reconveyance
predicated on an extrajudicial rescission, the Court may authorize for a just cause the fixing
of a period. In the present case, there being no valid rescission of the contract to sell, the
action for reconveyance is premature. Hence, the spouses Heruela have not lost the statutory
grace period within which to pay.
Contract of Sale vs Contract to Sell
Facts: Petitioner Jaime Ong and respondents, Robles couple executed an “Agreement of
Purchase and Sale” with regard to 2 parcels of land, on which a rice mill and a piggery were
found and thus included. The terms and conditions of the contract included an initial payment,
payment for the loan of the sellers including interest, and the balance to be satisfied in 4
equal quarterly installments.
As agreed, petitioner took possession of the subject property and everything else thereon
upon satisfaction of the initial payment. However, petitioner failed to comply with the payment
for the loan. Plus, the checks that the petitioner issued to the couple as payment for the
balance were dishonored due to insufficient funds. To avoid foreclosure, the respondent couple
sold the rice mill with the knowledge and conformity of petitioner.
Respondents sought for the rescission of the properties due to the latter’s failure to comply
with the terms and conditions on the contract.
RTC ruled in favor of the Robles couple and ordered the restitution of the properties. The
couple were also ordered to return an amount, as determined by the court, to Ong.
CA affirmed the decision in contemplation of Article 1191 of The New Civil Code
Issue:
1. Whether the contract entered into by the parties may be validly rescinded under Article
1191 of the New Civil Code as distinguished to Article 1383 of the same.
2. Whether the parties had novated their original contract as to the time and manner of
payment.
HELD: The Contract entered into by the parties was a “Contract to Sell” which means that
the payment of the purchase price is a positive suspensive condition, the failure of which is
not a breach, casual or serious, but a situation that prevents the obligation of the vendor to
convey title from acquiring an obligatory force.
Respondents bound themselves to deliver a deed of absolute sale and clean title covering the
two parcels of land upon full payment by the buyer of the purchase price of P2,000,000.00
subject to the fulfillment of the suspensive condition of full payment of the purchase price by
the petitioner. Petitioner, however, failed to complete payment of the purchase price. The
non-fulfillment of the condition of full payment rendered the contract to sell ineffective and
without force and effect.
As to the issue on novation, in order for novation to take place, the concurrence of the
following requisites is indispensable: (1) there must be a previous valid obligation; (2) there
must be an agreement of the parties concerned to a new contract; (3) there must be the
extinguishment of the old contract; and (4) there must be the validity of the new contract.
25 The aforesaid requisites are not found in the case at bench.
FACTS: The case arose from a complaint for specific performance filed by private respondent
Alcaraz against petitioners to consummate the sale of a parcel of land in Quezon City. On
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January 19, 1985, petitioners executed a “Receipt of Down Payment” of P50,000 in favor of
plaintiff Ramona Alcaraz, binding themselves to transfer the ownership of the land in their
name from their deceased father, afterwhich the balance of P1,190,000 shall be paid in full
by Alcaraz. On February 6, 1985, the property was transferred to petitioners. On February 18,
1985, petitioners sold the property to Mabanag. For this reason, Concepcion, Ramona’s
mother, filed an action for specific performance.
ISSUE: Whether the contract between petitioners and private respondent was that of a
conditional sale or a mere contract to sell
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. In
a contract to sell, the prospective seller explicitly reserves 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 happening of an
event, which for present purposes we shall take as the full payment of the purchase price.
What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject
property when the entire amount of the purchase price is delivered to him. In other words
the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment
of which prevents the obligation to sell from arising and thus, ownership is retained by the
prospective seller without further remedies by the prospective buyer. A contract to sell may
thus be defined as a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery thereof to the prospective
buyer, binds himself to sell the said property exclusively to the prospective buyer upon
fulfillment of the condition agreed upon, that is, full payment of the purchase price.
It is essential to distinguish between a contract to sell and a conditional contract of sale

specially in cases where the subject property is sold by the owner not to the party the seller
contracted with, but to a third person, as in the case at bench. In a contract to sell, there
being no previous sale of the property, a third person buying such property despite the
fulfillment of the suspensive condition such as the full payment of the purchase price, for
instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the
relief of reconveyance of the property. There is no double sale in such case. Title to the
property will transfer to the buyer after registration because there is no defect in the owner-
seller’s title per se, but the latter, of course, may be used for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition,
the sale becomes absolute and this will definitely affect the seller’s title thereto.
The agreement could not have been a contract to sell because the sellers herein made no
express reservation of ownership or title to the subject parcel of land. Furthermore, the
circumstance which prevented the parties from entering into an absolute contract of sale
pertained to the sellers themselves (the certificate of title was not in their names) and not
the full payment of the purchase price. Under the established facts and circumstances of the
case, the Court may safely presume that, had the certificate of title been in the names of
petitioners-sellers at that time, there would have been no reason why an absolute contract of
sale could not have been executed and consummated right there and then. What is clearly
established by the plain language of the subject document is that when the said “Receipt of
Down Payment” was prepared and signed by petitioners Romeo A. Coronel, et al., the parties
had agreed to a conditional contract of sale, consummation of which is subject only to the
successful transfer of the certificate of title from the name of petitioners’ father, Constancio
P. Coronel, to their names.
The provision on double sale presumes title or ownership to pass to the first buyer, the
exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the
first buyer, and (b) should there be no inscription by either of the two buyers, when the
second buyer, in good faith, acquires possession of the property ahead of the first buyer.
Unless, the second buyer satisfies these requirements, title or ownership will not transfer to
him to the prejudice of the first buyer. In a case of double sale, what finds relevance and
materiality is not whether or not the second buyer was a buyer in good faith but whether or
not said second buyer registers such second sale in good faith, that is, without knowledge of
any defect in the title of the property sold. If a vendee in a double sale registers that sale
after he has acquired knowledge that there was a previous sale of the same property to a
third party or that another person claims said property in a previous sale, the registration will
constitute a registration in bad faith and will not confer upon him any right.
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FACTS: Juan San Andres was the registered owner of Lot No. 1914-B-2 situated in Liboton,
Naga City. On September 28, 1964, he sold a portion thereof, consisting of 345 square meters,
to respondent Vicente S. Rodriguez for P2, 415.00. The sale is evidenced by a Deed of Sale.
Upon the death of Juan San Andres on May 5, 1965, Ramon San Andres was appointed judicial
administrator of the decedent’s estate in Special Proceedings No. R-21, RTC, Branch 19, Naga
City. A survey was conducted on the lot abovementioned and it was found that respondent
had enlarged the area which he purchased from the late Juan San Andres by 509 square
meters. Thereafter, on November 24, 1987, the judicial administrator brought an action, in
behalf of the estate of Juan San Andres, for recovery of possession of the 509-square meter
lot.
The respondent alleged that apart from the 345-square meter lot which had been sold to him
by Juan San Andres on September 28, 1964, the latter likewise sold to him the following day
the remaining portion of the lot consisting of 509 square meters, with both parties treating
the two lots as one whole parcel with a total area of 854 square meters. Respondent alleged
that the full payment of the 509-square meter lot would be effected within five (5) years from
the execution of a formal deed of sale after a survey is conducted over said property. He
further alleged that with the consent of the former owner, Juan San Andres, he took
possession of the same and introduced improvements thereon as early as 1964.
ISSUE: Whether or not the document (exhibit "2") is a contract to sell despite its lacking one
of the essential elements of a contract, namely, object certain and sufficiently described.
RULING:
YES, it is a perfected contract of sale. As Art. 1475 of the Civil Code provides: “The contract
of sale is perfected at the moment there is a meeting of minds upon the thing which is the
object of the contract and upon the price. . ..” the contract of sale is perfected and was
confirmed by the former administrator of the estates, Ramon San Andres, who wrote a letter
to respondent on March 30, 1966 asking for P300.00 as partial payment for the subject lot.
The price is certain, which is P15.00 per square meter.
Evidently, this is a perfected contract of sale on a deferred payment of the purchase price.
Concomitantly, the object of the sale is certain and determinate. Under Article 1460 of the
New Civil Code, a thing sold is determinate if at the time the contract is entered into, the
thing is capable of being determinate without necessity of a new or further agreement
between the parties. Appellee’s Exhibit "A" (page 4, Records) affirmingly shows that the
original 345 sq. m. portion earlier sold lies at the middle of Lot 1914-B-2 surrounded by the
remaining portion of the said Lot 1914-B-2 on three (3) sides, in the east, in the west and in
the north. The northern boundary is a 12-meter road. Conclusively, therefore, this is the only
remaining 509 sq. m. portion of Lot 1914-B-2 surrounding the 345 sq. m. lot initially
purchased by Rodriguez. It is quite defined, determinate and certain. Thus, all of the essential
elements of a contract of sale are present, i.e., that there was a meeting of the minds between
the parties, by virtue of which the late Juan San Andres undertook to transfer ownership of
and to deliver a determinate thing for a price certain in money. WHEREFORE, the decision of
the Court of Appeals is AFFIRMED with the modification that respondent is ORDERED to
reimburse petitioners for the expenses of the survey.
Facts:
Petitioner Ali Akang sold to the Municipality of Isulan the subject lot under a Deed of Sale.
Respondent immediately took possession of the property and began construction of the
municipal building. Thirty-nine (39) years later, the petitioner and his wife led a civil action
for Recovery of Possession of Subject Property and/or Quieting Title and Damages against
respondent. The petitioner alleged that the agreement was one to sell, which was not
consummated as the purchase price was not paid. In answer, respondent denied the
petitioner’s allegations, claiming that petitioner’s cause of action was already barred by
laches; that the Deed of Sale was valid; and that it has been in open, continuous and exclusive
possession of the property for forty (40) years. RTC rendered judgement in favor of the
petitioner construing the Deed of Sale as a contract to sell, based on the wording of the
contract; payment of the purchase price was also found to have not been made by the
respondent. By virtue of the RTC decision, respondent’s title over the property was cancelled
and a new one was issued in the name of the petitioner. However, CA reversed the ruling of
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the RTC and sustained the respondent's arguments that the petitioner is not entitled to
recover ownership and possession of the property as the Deed of Sale already transferred
ownership thereof to the respondent. As regards the issue of whether payment of the price
was made, CA ruled that there was actual payment, as evidenced by the Municipal Voucher,
which the petitioner himself prepared and signed. The CA held that the doctrines of estoppel
and laches must apply against the petitioner for the reasons that: (1) the petitioner adopted
inconsistent positions; and (2) the petitioner did not raise the nullity of the sale at the earliest
opportunity and remained passive for 39 years.
Issue: WHETHER OR NOT THE PETITIONER IS ENTITLED TO RECOVER OWNERSHIP AND

POSSESSION OF THE PROPERTY IN DISPUTE.
Ruling: NO. The Deed of Sale executed by the petitioner and the respondent is a perfected
contract of sale, all its elements being present.
a. Consent - There was mutual agreement between them to enter into the sale, as shown by
their free and voluntary signing of the contract. There was also an absolute transfer of
ownership of the property by the petitioner to the respondent as shown in the stipulation:
". . . I [petitioner] hereby sell, transfer, cede, convey and assign as by these presents do
have sold, transferred, ceded, conveyed and assigned, . . . ."
b. Determinate Subject Matter - There was also a determinate subject matter, that is, the
two-hectare parcel of land as described in the Deed of Sale.
c. Price or Consideration - Lastly, the price or consideration is at Three Thousand Pesos

(P3,000.00), which was to be paid after the execution of the contract. The petitioner's
allegation of non-payment is of no consequence taking into account the Municipal Voucher
presented before the RTC, which proves payment by the respondent of Three Thousand Pesos
(P3,000.00). The petitioner, notwithstanding the lack of the Municipal Treasurer's approval,
admitted that the signature appearing on the Municipal Voucher was his and he is now
estopped from disclaiming payment. The fact that no express reservation of ownership or title
to the property can be found in the Deed of Sale bolsters the absence of such intent, and the
contract, therefore, could not be one to sell. Had the intention of the petitioner been otherwise,
he could have: (1) immediately sought judicial recourse to prevent further construction of the
municipal building; or (2) taken legal action to contest the agreement. The petitioner did not
opt to undertake any of such recourse. (3) Whether the petitioner's claim is barred by laches
YES. While the respondent may not be considered as having acquired ownership by virtue of
its long and continued possession, nevertheless, the petitioner's right to recover has been
converted into a stale demand due to the respondent's long period of possession and by the
petitioner's own inaction and neglect.
ONE LINER: A deed of sale is absolute in nature although dominated as a “Deed of

Conditional Sale” where nowhere in the contract in question is a proviso or stipulation to the
effect that title to the property sold is reserved in the vendor until full payment of the purchase
price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract
the moment the vendee fails to pay within a fixed period.
FACTS: The Dignos spouses sold a parcel of land in Opon, Lapu-Lapu City on June 7, 1965,
to Atilano Jabil (Jabil) for the sum of P28,000.00, payable in 2 installments, with an
assumption of indebtedness with the First Insular Bank of Cebu in the sum of P12,000.00,
which was paid and acknowledged by the vendors in the deed of sale (Exh. C), and the next
installment in the sum of P4,000.00 to be paid on or before September 15, 1965. On
November 25, 1965, the Dignos spouses sold the same land to Cabigas spouses, for a price
of P35,000.00 and executed a deed of absolute sale, which was registered in the Office of the
Register of Deeds. Refusal to accept payment of the balance and knowledge of the second
sale prompted Jabil to file a suit to declare null and void the second sale made to Spouses
Cabigas.
CFI favored Jabil and declared null and void the second sale, directing Dignos spouses to
return the P35,000, and Jabil to pay the balance of P4,000. Subsequently the Court of Appeals
affirmed the decision of the lower court, and the motion for reconsideration was denied as
well for lack of merit. Thereafter, filed a petition for a review on certiorari seeking reversal of
the decision contending that the Exh. C is a contract to sell, and not contract of sale anchored
their contention on the very terms and conditions of the contract, more particularly paragraph
four which reads, "that said spouses has agreed to sell the herein mentioned property to
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Atilano G. Jabil ..." and condition number five which reads, "that the spouses agrees to sign
a final deed of absolute sale over the mentioned property upon the payment of the balance
of P 4,000.
ISSUE: Whether or not the subject contract is deed of absolute sale or a contract to sell.
RULING: The contract between the parties is a contract of sale.
It has been held that a deed of sale is absolute in nature although dominated as a “Deed of
Conditional Sale” where nowhere in the contract in question is a proviso or stipulation to the
effect that title to the property sold is reserved in the vendor until full payment of the purchase
price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract
the moment the vendee fails to pay within a fixed period. A careful examination of the contract
shows that there is no such stipulation reserving the title of the property on the vendors nor
does it give them the right to unilaterally rescind the contract upon non-payment of the
balance thereof within a fixed period. Lastly, all the elements of a valid contract of sale under
Article 1458 of the Civil Code, are present, such as: (1) consent or meeting of the minds; (2)
determinate subject matter; and (3) price certain in money or its equivalent.
ONE LINER: An act of the vendor in delivering the possession of the property (land) to the
vendee contemporaneous with the contract (deed of sale in a private instrument) was an
indication that an absolute contract of sale was intended by the parties and not a contract to
sell.
FACTS:
The Dignos spouses sold a parcel of land in Opon, Lapu-Lapu City on June 7, 1965, to Atilano
Jabil (Jabil) for the sum of P28,000.00, payable in 2 installments, with an assumption of
indebtedness with the First Insular Bank of Cebu in the sum of P12,000.00, which was paid
and acknowledged by the vendors in the deed of sale (Exh. C), and the next installment in
the sum of P4,000.00 to be paid on or before September 15, 1965. Dignos spouses delivered
the possession of the land in question to Jabil as early as March 27,1965 so that the latter
could construct Sally's Beach Resort also known as Jabil's Beach Resort, and other resorts
subsequently. On November 25, 1965, the Dignos spouses sold the same land to Cabigas
spouses, for a price of P35,000.00 and executed a deed of absolute sale, which was registered
in the Office of the Register of Deeds. Refusal to accept payment of the balance and knowledge
of the second sale prompted Jabil to file a suit to declare null and void the second sale made
to Spouses Cabigas.
CFI favored Jabil and declared null and void the second sale, directing Dignos spouses to
return the P35,000, and Jabil to pay the balance of P4,000. Subsequently the Court of Appeals
affirmed the decision of the lower court, and the motion for reconsideration was denied as
well for lack of merit. Thereafter, filed a petition for a review on certiorari seeking reversal of
the decision contending that there is absolutely nothing in Exhibit "C" that indicates that the
vendors thereby sell, convey or transfer their ownership to the alleged vendee. Petitioners
insist that Exhibit "C" (or 6) is a private instrument and the absence of a formal deed of
conveyance is a very strong indication that the parties did not intend "transfer of ownership
and title but only a transfer after full payment"
ISSUE: Whether or the act of delivering the possession of the land, contemporaneous with
the contract (deed of sale in private instrument) is an indication of a contract of sale.
RULING:
YES, such act of delivering, contemporaneous with the contract which is in private instrument
is an indication of a contract of sale. Article 1477 of the Civil Code provides that "The
ownership of the thing sold shall be transferred to the vendee upon actual or constructive
delivery thereof." As applied in the case of Froilan v. Pan Oriental Shipping Co., et al. (12
SCRA 276), this Court held that in the absence of stipulation to the contrary, the ownership
of the thing sold passes to the vendee upon actual or constructive delivery thereof. While it
may be conceded that there was no constructive delivery of the land sold in the case at bar,
as subject Deed of Sale is a private instrument, it is beyond question that there was actual
delivery thereof. As found by the trial court, the Dignos spouses delivered the possession of
the land in question to Jabil as early as March 27,1965 so that the latter constructed thereon
Sally's Beach Resort also known as Jabil's Beach Resort in March, 1965; Mactan White Beach
Resort on January 15,1966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts
were admitted by petitioner spouses Moreover, the Court of Appeals in its resolution found
that the acts of petitioners, contemporaneous with the contract, clearly show that an absolute
deed of sale was intended by the parties and not a contract to sell.
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TOPIC: Rescission of Sale
ONE LINER: Where time is not of the essence of the agreement, a slight delay on the part
of one party in the performance of his obligation is not a sufficient ground for the rescission
of the agreement.
FACTS: The Dignos spouses sold a parcel of land in Opon, Lapu-Lapu City on June 7, 1965,
to Antonio Jabil (Jabil) for the sum of P28,000.00, payable in 2 installments, with an
assumption of indebtedness with the First Insular Bank of Cebu in the sum of P12,000.00,
which was paid and acknowledged by the vendors in the deed of sale (Exh. C), and the next
installment in the sum of P4,000.00 to be paid on or before September 15, 1965. On
November 25, 1965, the Dignos spouses sold the same land to Cabigas spouses, for a price
of P35,000.00 and executed a deed of absolute sale, which was registered in the Office of the
Register of Deeds. Refusal to accept payment of the balance and knowledge of the second
sale prompted Jabil to file a suit to declare null and void the second sale made to Spouses
Cabigas. Court of first instance favored the Jabil, and declared null and void the second sale
and directing Spouses Dignos to return the P35,000 and Jabil to pay the balance of P 4,000.
Subsequently the Court of Appeals affirmed the decision of the lower court on their appeal
and the motion for reconsideration was denied as well for lack of merit. Thereafter, filed a
petition for a review on certiorari seeking reversal of the decision “claiming that when they
sold the land to the Cabigas spouses, the contract of sale was already rescinded, and that
they were able to show a letter of Cipriano Amistad who, claiming to be an emissary of Jabil,
informed the Dignos spouses not to go to the house of Jabil because the latter had no money
and further advised petitioners to sell the land in litigation to another party. They gave
emphasis on the fact that Jabil had no money on the stipulated date of payment on September
15,1965 and was able to raise the necessary amount only by mid-October 1965.
ISSUE: Whether or not there was a valid rescission.
RULING: No, there was no valid rescission. Applying the rationale of the case of Taguba v.
Vda. de Leon (supra)in the case at bar, the contract of sale being absolute in nature is
governed by Article 1592 of the Civil Code, and also under Article 1358 of the Civil Code, it is
required that acts and contracts which have for their object the extinguishment of real rights
over immovable property must appear in a public document. It is undisputed that petitioners
never notified private respondents Jabil by notarial act that they were rescinding the contract,
and neither did they file a suit in court to rescind the sale. The most that they were able to
show is a letter of Cipriano Amistad who, claiming to be an emissary of Jabil, informed the
Dignos spouses not to go to the house of Jabil because the latter had no money and further
advised petitioners to sell the land in litigation to another party (Record on Appeal, p. 23). As
correctly found by the Court of Appeals, there is no showing that Amistad was properly
authorized by Jabil to make such extra-judicial rescission for the latter who, on the contrary,
vigorously denied having sent Amistad to tell petitioners that he was already waiving his rights
to the land in question. Also, "where time is not of the essence of the agreement, a slight
delay on the part of one party in the performance of his obligation is not a sufficient ground
for the rescission of the agreement" (Taguba v. Vda. de Leon, supra). Considering that private
respondent has only a balance of P4,000.00 and was delayed in payment only for one month,
equity and justice mandate as in the aforecited case that Jabil be given an additional period
within which to complete payment of the purchase price.
Contract to Sell vs Conditional Sale
FACTS: Spouses Bate and Julie Nabus were the owners of parcels of land situated in Pico, La
Trinidad, Benguet, duly registered in their names. The property was mortgaged by the
Spouses Nabus to the PNB, to secure a loan in the amount of P30,000.00. The Spouses Nabus
executed a Deed of Conditional Sale in favor of respondents Spouses Pacson for a
consideration of P170,000.00, which was duly notarized. Before the payment of the balance
of the mortgage amount with PNB, Bate Nabus died. The surviving spouse, Julie Nabus, and
their minor daughter, Michelle Nabus, executed a Deed of Extra Judicial Settlement over the
registered land. Meanwhile, respondents continued paying their balance, not in installments
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as agreed upon, but in various, often small amounts for a period of almost seven years. Julie
Nabus, with her second husband, approached Joaquin Pacson to ask for the full payment of
the lot. Joaquin Pacson agreed to pay and sent Julie and his daughter, Catalina, to Atty.
Elizabeth Rillera for the execution of the deed of absolute sale. Julie Nabus was required to
return in four days with the necessary documents. However, Julie Nabus did not return.
Getting suspicious, Catalina Pacson went to the Register of Deeds of the Province of Benguet
and found that the tile of land is still in the name of Julie and Michelle Nabus. After a week,
Catalina Pacson heard a rumor that the lot was already sold to petitioner Betty Tolero.
Respondents Joaquin and Julia Pacson filed with the Regional Trial Court of La Trinidad,
Benguet (trial court) a Complaint for Annulment of Deeds, with damages and prayer for the
issuance of a writ of preliminary injunction. Julie and Michelle Nabus alleged that respondent
Joaquin Pacson did not proceed with the conditional sale of the subject property when he
learned that there was a pending case over the whole property, and proposed that he would
rather lease the property. Hence, he did not affix his signature to the second page of a copy
of the Deed of Conditional Sale. Julie Nabus alleged that, due to her own economic needs and
those of her minor daughter, she sold the property to Betty Tolero, with authority from the
court.
ISSUES:
1. Whether or not the Deed of Conditional Sale was converted into a contract of lease.
2. Whether the Deed of Conditional Sale was a Contract to Sell or a Contract of Sale.
RULING:
1) The court held that the Deed of Conditional Sale was not converted into a contract of lease.
The 364 receipts issued to the Spouses Pacson contained either the phrase "as partial
payment of lot located in Km. 4" or "cash vale", evidencing sale under the contract and not
the lease of the property. Further, as found by the trial court, Joaquin Pacson’s non-signing
of the second page of a carbon copy of the Deed of Conditional Sale was through sheer
inadvertence, since the original contract and the other copies of the contract were all signed
by Joaquin Pacson and the other parties to the contract.
2) The Court held that the contract entered into by the Spouses Nabus and respondents was
a contract to sell, not a contract of sale.
A contract of sale is defined in Article 1458 of the Civil Code, “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 therefore a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.”
In Coronel v. Court of Appeals, “Sale, by its very nature, is a consensual contract because it
is perfected by mere consent. The essential elements of a contract of sale are the following:
a. Consent or meeting of the minds, that is, consent to transfer ownership in exchange for
the price; b. Determinate subject matter; and c. Price certain in money or its equivalent.”
Under this definition, a Contract to Sell may not be considered as a Contract of Sale because
the first essential element is lacking. In a contract to sell, the prospective seller explicitly
reserves 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 happening of an event, which for present purposes we shall take as the full
payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his
promise to sell the subject property when the entire amount of the purchase price is delivered
to him. In other words, the full payment of the purchase price partakes of a suspensive
condition, the non-fulfilment of which prevents the obligation to sell from arising and, thus,
ownership is retained by the prospective seller without further remedies by the prospective
buyer. A contract to sell may thus be defined as a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property despite delivery thereof
to the prospective buyer, binds himself to sell the said property exclusively to the prospective
buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase
price. It is not the title of the contract, but its express terms or stipulations that determine
the kind of contract entered into by the parties. In this case, the contract entitled "Deed of
Conditional Sale" is actually a contract to sell. The contract stipulated that "as soon as the full
consideration of the sale has been paid by the vendee the corresponding transfer documents
shall be executed by the vendor to the vendee for the portion sold." Where the vendor
promises to execute a deed of absolute sale upon the completion by the vendee of the
payment of the price, the contract is only a contract to sell." The aforecited stipulation shows
that the vendors reserved title to the subject property until full payment of the purchase price.
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in their
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favor was merely a contract to sell, the obligation of the seller to sell becomes demandable
only upon the happening of the suspensive condition. The full payment of the purchase price
is the positive suspensive condition, the failure of which is not a breach of contract, but simply
an event that prevented the obligation of the vendor to convey title from acquiring binding
force. Thus, for its non-fulfilment, there is no contract to speak of, the obligor having failed
to perform the suspensive condition which enforces a juridical relation. With this circumstance
there can be no rescission or fulfilment of an obligation that is still non-existent, the
suspensive condition not having occurred as yet. Emphasis should be made that the breach
contemplated in Article 1191 of the New Civil Code is the obligor’s failure to comply with an
obligation already extant, not a failure of a condition to render binding that obligation. Since
the contract to sell was without force and effect, Julie Nabus validly conveyed the subject
property to another buyer, petitioner Betty Tolero, through a contract of absolute sale, and
on the strength thereof, new transfer certificates of title over the subject property were duly
issued to Tolero. The Spouses Pacson, however, have the right to the reimbursement of their
payments to the Nabuses, and are entitled to the award of nominal damages. WHEREFORE,
the petition is GRANTED.
Arts. 1459-1465
Lawful
One Liner : The law requires that the subject matter must be licit or lawful, that is, it should
not be contrary to law, morals, good customs, public order, or public, and should not be
impossible.
Facts:
The controversy involves Lot No. 2204 located at Panghulo, Obando, Bulacan. The property
had been originally in the possession of Jose Alvarez, Eduardo’s grandfather. The lot is
adjacent to a fishpond owned by Ricardo Cruz, predecessor-in-interest of respondents
Consuelo Cruz and Rosalina Cruz-Bautista. Before the lot was titled, Eduardo sold a portion
with an area of 553 sqm to Ricardo. The sale is evidenced by a deed of sale which was signed
by Eduardo himself as vendor and his wife Engracia Aniceto with Santiago Enriquez signing
as witness. Another deed of sale covering 50sqm of the lot was executed by Eduardo in favor
of Ricardo. Later, Leon Banaag, Jr, as attorney-in-fact of his father-in-law Eduardo, executed
a mortgage with the Rural Bank of San Pascual, Obando Branch (RBSP), for P100,000 with
the subject lot as collateral. The Cruzes, were not immediately aware of the consummated
sale between Eduardo and Ricardo. Eduardo himself died and was survived by his heirs.
Neither did the heirs of Eduardo inform the Cruzes of the prior sale in favor of Ricardo. Yet
subsequently, the Cruzes came to learn about the sale and the issuance of the OCT in the
name of Eduardo. Upon learning the sale, the Cruzes tried to confront petitioners on the
mortgage and obtain the surrender of the OCT. Petitioners, however, were unwilling to
surrender the OCT. Having failed to physically obtain the title from petitioners, the Cruzes
instead went to RBSP which had custody of the owner’s duplicate certificate of the OCT, earlier
surrendered as a consequence of the mortgage. The Cruzes sought to borrow the owner’s
duplicate certificate for the purpose of photocopying the same and thereafter showing a copy
thereof to the Register of Deeds. Salazar allowed the Cruzes to bring the owner’s duplicate
certificate outside the bank premises when the latter showed the Kasulatan. They then
brought the copy of the OCT to Register of Deeds. After the Cruzes presented the owner’s
duplicate certificate, along with the deeds of sale and the subdivision plan, the Register of
Deeds cancelled the OCT and issued in lieu thereof covering the remaining 455 square meters
in the name of Eduardo. The Cruzes went back to the bank and surrendered to Salazar in the
name of Eduardo and retrieved the title they had earlier given as substitute collateral. After
securing the new separate titles, the Cruzes furnished petitioners with a copy of TCT No.
9327-P(M) through the barangay captain and paid the real property tax for 1989. Banaag
went to RBSP, intending to tender full payment of the mortgage obligation. It was only then
that he learned of the dealings of the Cruzes with the bank which eventually led to the
subdivision of the subject lot and the issuance of two separate titles thereon. In exchange for
the full payment of the loan, RBSP tried to persuade petitioners to accept TCT in the name of
Eduardo. After trial of the consolidated cases, the RTC of Malolos rendered a decision in favor
of the heirs of Eduardo. The trial court found that petitioners were entitled to the reliefs of
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reconveyance and damages. It found that petitioners were complacent and unperturbed,
believing that the title to their property, while serving as security for a loan, was safely vaulted
in the impermeable confines of RBSP. To their surprise and prejudice, said title was subdivided
into two portions, leaving them a portion of 455 square meters from the original total area of
1,058 square meters, all because of the fraudulent and negligent acts of respondents and
RBSP. It ruled that although the act of the Cruzes could be deemed fraudulent, still it would
not constitute intrinsic fraud. Neither the bank nor its manager had business entrusting to
strangers titles mortgaged to it by other persons for whatever reason. It was a clear violation
of the mortgage and banking laws, the trial court concluded.
Issue: Whether or not the first sale was valid
Held:
No. It is not valid. Eduardo was issued a title in 1976 on the basis of his free patent application.
Such application implies the recognition of the public dominion character of the land and,
hence, the five (5)-year prohibition imposed by the Public Land Act against alienation or
encumbrance of the land covered by a free patent or homestead should have been considered.
The deed of sale covering the fifty (50)-square meter right of way executed by Eduardo on
18 March 1981 is obviously covered by the proscription, the free patent having been issued
on 8 October 1976. However, petitioners may recover the portion sold since the prohibition
was imposed in favor of the free patent holder. While the law bars recovery in a case where
the object of the contract is contrary to law and one or both parties acted in bad faith, we
cannot here apply the doctrine of in pari delicto which admits of an exception. The sale of the
553 square meter portion is a different story. It was executed in 1954, twenty-two (22) years
before the issuance of the patent in 1976. Apparently, Eduardo disposed of the portion even
before he thought of applying for a free patent. Where the sale or transfer took place before
the filing of the free patent application, whether by the vendor or the vendee, the prohibition
should not be applied. In such situation, neither the prohibition nor the rationale therefor
which is to keep in the family of the patentee that portion of the public land which the
government has gratuitously given him, by shielding him from the temptation to dispose of
his landholding, could be relevant. Precisely, he had disposed of his rights to the lot even
before the government could give the title to him. The mortgage executed in favor of RBSP
is also beyond the pale of the prohibition, as it was forged in December 1981 a few months
past the period of prohibition.
Determinate or Determinable
Applicable Law:
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 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.
Facts: This is a Petition for Review on Certiorari of the Decision1 and Resolution2 of the Court
of Appeals in CA-G.R. No. CV-68318 dated March 19, 2003 and November 13, 2003,
respectively, reversing and setting aside the decision of the Regional Trial Court of Antique,
Sixth Judicial Region, Branch II, in Civil Case No. 2825 dated January 26, 1999.
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In view of the death of ZOILO, his children, LORETO, Efren Labiao (hereafter EFREN) and
Priscilla Espanueva (hereafter PRISCILLA) executed an Extrajudicial x xx Settlement of Estate
dated January 20, 1987, adjudicating the entire Lot No. 1253, covering 4,280 square meters,
to LORETO. On January 29, 1987, Transfer Certificate of Title (TCT) No. T-16693 was issued
in favor of LORETO, EFREN and PRISCILLA, but on even date, TCT No. T-16693 was cancelled
and TCT No. T-16694, covering the said property, was issued in the name of LORETO alone.
On September 21, 1988, [GABINO JR.] paid real estate taxes on the land he bought from
LORETO as per Tax Declaration No. 1038 where the property was specified as Lot No. 1253-
B. GABINO JR. thereafter sold the same lot to Wilfredo Vagilidad (hereafter WILFREDO) as
per Deed of Absolute Sale dated December 7, 1989. On even date, Deed of Absolute Sale of
a Portion of Land involving the opt-described property was also executed by LORETO in favor
of WILFREDO. The aforementioned deeds, which were both executed on December 7, 1989.
On September 29, 1995, spouses GABINO and Ma. Dorothy Vagilidad (hereafter DOROTHY),
as plaintiffs, filed a Complaint for Annulment of Document, Reconveyance and Damages, with
the Regional Trial Court of Antique, Sixth Judicial Region, Branch 11, against spouses
WILFREDO and Lolita Vagilidad (hereafter LOLITA), docketed as Civil Case No. 2825. The
plaintiffs claimed that they are the lawful owners of Lot No. 1253-B which was sold to him by
LORETO in 1986.
They alleged that [GABINO JR.] is a nephew of defendant WILFREDO. They likewise raised
that when GABINO SR. died, defendant WILFREDO requested GABINO JR. to transfer the
ownership of Lot No. 1253-B in defendant WILFREDO’s name for loaning purposes with the
agreement that the land will be returned when the plaintiffs need the same. They added that,
pursuant to the mentioned agreement, plaintiff GABINO JR., without the knowledge and
consent of his spouse, DOROTHY, executed the Deed of Sale dated December 7, 1989 in favor
of defendant WILFREDO receiving nothing as payment therefor. They pointed out that after
defendant WILFREDO was able to mortgage the property, plaintiffs demanded the return of
the property but the defendants refused to return the same. The plaintiffs claimed that the
same document is null and void for want of consideration and the same does not bind the
non-consenting spouse.
The trial court ruled in favor of petitioners WILFREDO and LOLITA and held that LORETO did
not validly convey Lot No. 1253-B to GABINO, JR. on May 12, 1986 since at that time, the
heirs of ZOILO had not partitioned Lot No. 1253.5 It ruled that LORETO could only sell at that
time his aliquot share in the inheritance. He could not have sold a divided part thereof
designated by metes and bounds. Thus, it held that LORETO remained the owner of the
subject lot when he sold it to WILFREDO on December 7, 1989. It further found that there
was no proof that WILFREDO knew of the sale that took place between LORETO and GABINO,
JR. on May 12, 1986.
GABINO, JR. and DOROTHY filed an appeal with the Court of Appeals. The appellate court
reversed and set aside the decision of the court a quo
The appellate court ruled that the sale made by LORETO in favor of GABINO, JR. on May 12,
1986 is valid. The rights of LORETO to succession are transmitted from the moment of ZOILO’s
death in 1931. Thus, when LORETO sold the 1,604-square meter portion of Lot No. 1253 to
GABINO JR., he already had the right as co-owner to his share to Lot No. 1253, even if at
that time the property had not yet been partitioned. Consequently, the sale made by LORETO
in favor of WILFREDO on December 7, 1989 is void because LORETO and FRANCISCA were
no longer the owners of Lot No. 1253-B as of that time. The appellate court also held
WILFREDO and LOLITA liable for moral damages for falsifying the fictitious deeds of sale on
December 7, 1989.
Issue: Whether or not the Honorable Court of Appeals erred in not applying the provision of
Article 1544 of the New Civil Code
Held: NO. The Honorable Court of Appeals DID NOT err in not applying the provision of Article
1544 of the New Civil Code
Petitioners’ title was issued pursuant to the purported Deed of Absolute Sale of Portion of
Land dated December 7, 1989. Second, WILFREDO did not see any encumbrance at the back
of the title of the subject lot when he purchased it from LORETO on December 7, 1989. Thus,
since he is not bound to go beyond the certificate of title, he has acquired the subject property
in due course and in good faith.
should be movable property.
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Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith 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.
Petitioners’ reliance on Article 1544 is misplaced. While title to the property was issued in
WILFREDO’s name on February 15, 1990, the following circumstances show that he registered
the subject parcel with evident bad faith.
Co-ownership is the right of common dominion which two or more persons have in a spiritual
part of a thing, not materially or physically divided. Before the partition of the property held
in common, no individual or co-owner can claim title to any definite portion thereof. All that
the co-owner has is an ideal or abstract quota or proportionate share in the entire property.
LORETO sold some 1,604 square meters of Lot No. 1253 to GABINO, JR. Consequently, when
LORETO purportedly sold to WILFREDO on December 7, 1989 the same portion of the lot, he
was no longer the owner of Lot No. 1253-B. Based on the principle that "no one can give what
he does not have," LORETO could not have validly sold to WILFREDO on December 7, 1989
what he no longer had. As correctly pointed out by the appellate court, the sale made by
LORETO in favor of WILFREDO is void as LORETO did not have the right to transfer the
ownership of the subject property at the time of sale.
Facts: Spouses Paulino Vivas and Engracia Lizardo are owners of a parcel of land situated in
Bo. San Francisco, Victoria, Laguna, sold for P30,000.00 the said property in favor of spouses
Melencio Magcamit and Nena. Cosico, and Amelita Magcamit are herein private respondents,
a sale was made absolute by the spouses Vivas and Lizardo in favor of the private respondents
for the sum of P90,000.00. Original Certificate of Title covering the property in question was
issued to and in the name of the spouses Vivas and Lizardo without the knowledge of the
private respondents and said Spouses executed a Special Power of Attorney in favor of Irenea
Ramirez authorizing the latter to mortgage the property with the petitioner which is the
National Grains Authority, the counsel for the petitioner is requesting for the extra-judicial
foreclosure of the mortgage covering the property involved in this case for unpaid
indebtedness The petitioner was the highest and successful bidder so that a Certificate of Sale
was issued in its favor on the same date by the Provincial Sheriff. Private respondents learned
that a title in the name of the Vivas spouses had been issued covering the property in question
and that the same property had been mortgaged in favor of the petitioner. Private respondent
offered to pay the petitioner NGA the amount of P40,000.00 which is the balance of the
amount due the Vivas spouses under the terms of the absolute deed of sale but the petitioner
refused to accept the payment. Petitioner in its reply informed counsel of private respondents
that the petitioner is now the owner of the property in question and has no intention of
disposing of the same. Private respondents filed a complaint against the petitioner and the
spouses Vivas and Lizardo, praying that they be declared the owners of the property in
question and entitled to continue in possession of the same, the petitioner maintained that
Pulino Vivas and Engracia Lizardo that it was purchase in good faith and for the value of the
property. The trial court rendered its decision declaring defendant National Grains Authority
the lawful owner of the property in question by virtue of its indefeasible title to the same. The
private respondents interposed an appeal but the appellate court sustained the decision of
the trial court. The petitioner filed a motion for reconsideration of the said decision but the
same was denied. Hence, this petition.
Issue: Whether or not there was violation of the terms of the agreement between the spouses
Vivas and Lizardo, the sellers, and private respondents, the buyers, to deliver the certificate
of title to the latter, upon its issuance, constitutes a breach of trust sufficient to defeat the
title and right acquired by petitioner NGA, an innocent purchaser for value.
Ruling: In this case, it will be noted that the third-party NGA, is a registered owner under
the Torrens System and has obviously a better right than private respondents and that the
deed of absolute sale with the suspensive condition is not registered and is necessarily binding
only on the spouses Vivas and Lizardo and private respondents. Private respondents claim a
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better right to the property in question by virtue of the Conditional Sale, later changed to a
deed of Absolute Sale which although unregistered under the Torrens System allegedly
transferred to them the ownership and the possession of the property in question. Time and
time again, this Court has ruled that the proceedings for the registration of title to land under
the Torrens System is an action in rem, not in personam, hence, personal notice to all
claimants of the res is not necessary in order that the court may have jurisdiction to deal with
and dispose of the res. Neither may lack of such personal notice vitiate or invalidate the
decree or title issued in a registration proceeding, for the State, as sovereign over the land
situated within it, may provide for the adjudication of title in a proceeding in rem or one in
the nature of or akin a proceeding in rem which shall be binding upon all persons, known or
unknown. Petitioner NGA was never a privy to this transaction. Neither was it shown that it
had any knowledge at the time of the execution of the mortgage, of the existence of the
suspensive condition in the deed of absolute sale, much less of its violation. Nothing appeared
to excite suspicion. The Special Power of Attorney was regular on its face; the OCT was in the
name of the mortgagor and the NGA was the highest bidder in the public auction.
Unquestionably, therefore, the NGA is an innocent purchaser for value, first as an innocent
mortgages under Section 32 of P.D. 1529 and later as innocent purchaser for value in the
public auction sale. As correctly declared by the trial court, the National Grains Authority is
the lawful owner of the property in question by virtue of its indefeasible title. As to private
respondents' alternative prayer that the declared owner be ordered to reconvey or transfer
the ownership of the property in their favor, it is clear that there is absolutely no reason why
petitioner, an innocent purchaser for value, should reconvey the land to the private
respondents.
Existing or Future or Contingent
FACTS: Lazardo Tañedo executed a notarized deed of absolute sale in favor of his eldest
brother, Ricardo Tañedo, and the latter’s wife, Teresita Barera. Private respondents recorded
the Deed of Sale in their favor in the Registry of Deeds and the corresponding entry was made
in Transfer Certificate of Title No. 166451.
On January 13, 1981, Lazaro executed another notarized deed of sale in favor of private
respondent. In February 1981, Ricardo learned that Lazaro sold the same property to his
children, petitioners herein, through a deed of sale dated December 29, 1980.
Petitioners on July 16, 1982, filed a complaint for rescission (plus damages) of the deeds of
sale executed by Lazardo in favor of private respondents covering the property inherited by
Lazaro from his father. Petitioners claimed that their father, Lazaro, executed an “Absolute
Deed of Sale” dated December 29, 1980.
ISSUES:
1. Is the sale of a future inheritance valid?
2. Was the subsequent execution on January 13, 1981 (and registration with the Registry of
Property) of a deed of sale covering the same property to the same buyers valid?
RULING:
1. No.
We hereby categorically rule that, pursuant to Article 1347 of the Civil Code, “(n)o contract
may be entered into upon a future inheritance except in cases expressly authorized by law.”
Consequently, said contract made in 1962 is not valid and cannot be the source of any right
nor the creator of any obligation between the parties.
Hence, the “affidavit of conformity” dated February 28, 1980, insofar as it sought to validate
or ratify the 1962 sale, is also useless and, in the words of the respondent Court, “suffers
from the same infirmity.” Even private respondents in their memorandum concede this.
2. Yes.
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Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple
sales, as follows:
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.
The property in question is land, an immovable, and following the above-quoted law,
ownership shall belong to the buyer who in good faith registers it first in the registry of
property. Thus, although the deed of sale in favor of private respondents was later than the
one in favor of petitioners, ownership would vest in the former because of the undisputed fact
of registration. On the other hand, petitioners have not registered the sale to them at all.
Transferability of Ownership
Facts: CDB and FEBTC extended a loan to Rodolfo Guansing in the amount of P90,000.00
and mortgaged a parcel of land situated at La Loma, Quezon City as security for the loan.
Guansing faulted in his payment, as result CDB foreclosed the mortgage and the lot was
eventually sold in a foreclosure sale with CDB as the highest bidder. The spouses Lim offered
to purchased the property and under the following terms and conditions; a.) 10% Option
Money; b.) Balance payable in cash; c.) Provided that the property shall be cleared of illegal
occupants or tenants. Lim paid the P30,000 option money and that later on discovered that
the title to the property had been restored in the name of Perfecto Guansing in a decision that
had been final and executory. Aggrieved by what she considered a serious misrepresentation
by CDB and FEBTC, on their ability to sell the subject property, Lim and her husband filed an
action for specific performance and damages against petitioners in the RTC of Quezon City
wherein the trial court rendered a decision in favor of the Lim spouses. The petitioners then
brought the matter to the Court of Appeals.
Issue: Whether or not the contract between the spouses Lim, CDB and FEBTC a contract of
sale?
Held: In the case, there is no evidence that CDB observed its duty of diligence in ascertaining
the validity of Rodolfo Guansing's title. Considering CDB's negligence, they sustain the award
of moral damages on the basis of Arts. 21 and 2219 of the Civil Code and our ruling in Tan v.
Court of Appeals that moral damages may be recovered even if a bank's negligence is not
attended with malice and bad faith. We find, however, that the sum of P250,000.00 awarded
by the trial court is excessive. Moral damages are only intended to alleviate the moral
suffering undergone by private respondent, not to enrich them at the expenses of the
petitioners. Accordingly, the award of moral damages must be reduced to P50,000.00.
Likewise, the award of P50,000.00 as exemplary damages, although justified under Art. 2232
of the Civil Code, is excessive and should be reduced to P30,000.00. The award of P30,000.00
attorney's fees based on Art. 2208, pars. 1, 2, 5 and 11 of the Civil Code should similarly be
reduced to P20,000.00. Wherefore, the decision of the Court of Appeals is affirmed with the
modification as to the award of damages as above stated. SO ORDERED.
FACTS: Apolinario Hermosilla, who was occupying a parcel of land in a homesite in Tunasan
San Pedro Laguna until his passing in 1964. The lot was subdivided into two lots namely Lot
12 and Lot 19 in which have the same area of 341 sq. m. The subject of the controversy is
the 65 sq. m. that form part of Lot 19 which is acquired by The Republic of the Philippines.
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Apolinario then executed a Deed of Assignment on April 30, 1962 transferring possession of
Lot 19 in favor of his grandson, herein respondent Jaime Remoquillo. Land Tenure
Administration (LTA) later discovered that Lot 19 was still available for disposition to qualified
applicants, Jaime, being the actual occupant, applied for its acquisition before the LTA on May
10, 1963. Apolinario conveyed Lot 12 to his son Salvador Hermosilla. Salvador then applied
to purchase the lot which was later granted by the LTA. Salvador and Jaime made a
Kasunduan (pact) whereby Jaime transferred ownership of the 65 sq. m. in Lot 19 in favor of
Salvador. The LTA awarded lot 19 to Jaime which he and his wife were issued a title. After
Apolinario’s death, his daughter Angela Hermosilla protested before the LTA that she is also
an heir of the deceased and is entitled to both lots. By a resolution, the NHA (formerly LTA)
dismissed the protest. Angela Hermosilla filed for the annulment of the title issued to the
spouses on the ground of fraud. The Trial court ruled that Angela et al. were co-owners of the
subject property. The Court Appeals proffered the Kasunduan void because at the time of its
execution, the Republic of the Philippines was still the owner of Lot 19, hence, no right was
transmitted by Jaime who was later awarded the lot and consequently there is no right
transmitted by Salvador through succession to petitioners.
ISSUE: Does Angela et al, acquired any right over the property via transferability of
ownership?
RULING: A transfer of property arising from a void contract does not confer title over it. The
transfer became one in violation of law citing the rules of PHHC, and therefore void ab initio.
Angela et. al. acquired no right over the lot from contract ab initio, no rights were created.
Estoppel cannot be applied as the petitioners postulated because it is built from an illegal act.
It is generally considered that as between the parties to a contract, validity cannot be given
to it by estoppel if it is prohibited by law or is against public policy. As previously stated, that,
however, when the Kasunduan was executed in 1972 by Jaime in favor of Salvador – where
petitioner’s predecessors-in-interest – lot 19, the property was still owned by the Republic.
Nemo dat quod non habet – Nobody can give what he does not possess. Jaime could not have
transferred anything to Salvador via Kasunduan. Angela et. al. go on to assume that if the
Kasunduan is void, it follows the Deed of assignment executed by Apolinario to Jaime is also
void stripping him of any legal basis for his occupation and acquisition. Angela et. al fails to
realize that as previously mentioned above that Jaime acquired Lot 19 in his own right,
independent from the Deed of Assignment. Since the property was previously a public land,
Angela et. al have no personality to impute the ground of fraud or misrepresentation against
the State or violation of the law. If the title was fraudulently obtained, it is the state that has
the proper cause of action to file suit to recover the property through the office of the Solicitor
General. The title originated from a grant by the government, hence, its cancellation is a
matter between the grantor and the grantee. At all events, for an action for reconveyance
based on fraud to prosper, the plaintiff must prove by clear and convincing evidence not only
his title to the property but also the fact of fraud. Fraud is never presumed. Intentional acts
to deceive and deprive another of his right, or in some manner injure him must be specifically
alleged and proved by the plaintiff by clear and convincing evidence. The petitioners failed to
discharge this burden and therefore, their petition is DENIED.
One-Liner: The thing must be licit and the vendor must have a right to transfer ownership
thereof at the time it is delivered.
Facts: The subject property in this case is a parcel of land identified as Lot No. 6-B allocated
to the late Spouses Marcelo Laquain and Constancia Socco. Upon their death, Constancia left
the parcel of land to her heirs – her three siblings, one of which is the respondent, Elena
Socco-Beltran. The parcel of land was partitioned into three lots pursuant to an unnotarized
document entitled “Extrajudicial Settlement of the Estate of the Deceased Constancia R.
Socco”. The Lot No. 6-B was adjudicated to the respondent, but no title had been issued in
her name. On June 25, 1998, the respondent filed an application for the purchase of the said
parcel of land to the Department of Agrarian Reform (DAR). The petitioners, Arturo Reyes’s
heirs, filed a protest against the petition of the respondent alleging that the subject property
was sold by the respondent’s brother Miguel R. Socco to their father, Arturo Reyes, as
evidenced by the Contract to Sell, dated September 5, 1954.
Issue: Whether or not petitioners acquired ownership over the disputed property by virtue
of the contract to sell?
Decision: No. Under Article 1459 of the Civil Code on Contracts of Sale, “The thing must be
licit and the vendor must have a right to transfer ownership thereof at the time it is delivered.”
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The law specifically requires that the vendor must have ownership of the property at the time
it is delivered. Petitioners claim that the property was constructively delivered to them in 1954
by virtue of the Contract to Sell. However, it was explicit in the Contract itself that, at the
time it was executed, Miguel R. Socco was not yet the owner of the property and was only
expecting to inherit as declared in the Contract to Sell. Hence, there was no valid sale from
which ownership of the subject property could have transferred from Miguel Socco to Arturo
Reyes. Without acquiring ownership of the subject property, Arturo Reyes also could not have
conveyed the same to his heirs, herein petitioners.
Art 1466-1468: AGENCY TO SELL

Topic: Distinction of Sale from Agency to Sell (Art. 1466)
FACTS: Plaintiff is Don Andres Quiroga, a manufacturer of beds, granted the defendant, J.
Parsons, the right to sell as an “agent” of Quiroga beds in the Visayas. The contract entered
into by the parties is in the following tenor: Parsons obliged to pay for the beds, at a discount
of 25% as his commission on the future sales of said beds. The payment had to be made
whether or not the defendant was able to sell the beds. The plaintiff filed a complaint on the
alleged violations of the contract, among others, that Parsons sold the beds at higher prices
than that agreed upon in the invoices. In addition, the plaintiff alleged that the Parsons is to
conduct himself as a mere agent/agency for the sale of Quiroga's beds in Iloilo, and that said
obligations are implied in a contract of commercial agency (agency to sell).
ISSUE: Whether the contract entered into between Quiroga & Parsons is a contract of sale,
or an agency to sell?
HELD: Clearly, the contract is a Contract of Sale. The law provides that in construing a
contract containing provisions characteristic of both the contract of sale and of the contract
of agency to sell, the essential clauses of the whole instrument shall be considered. (Art.
1466) Careful inspection on the given facts reveal, that there is an obligation to supply the
beds, and a reciprocal obligation to pay their price. An "agent/agency" does not pay the price,
he merely delivers it. If he is not able to sell, he returns the goods. This is not true in the
present contract, for a price was fixed and there was a duty to pay the same regardless as to
whether or not the defendant had sold the beds. The phrase “commission on sales” means
nothing more than a mere discount on the invoice price. The word “agent” simply means that
the defendant was the only one who could sell the plaintiff’s beds in the Visayas. Finally, it is
to be remembered that a contract is what the law defines it to be, and not what it is called by
the contracting parties.
FACTS: Petitioners spouses Dino, doing business under the trade name "Candy Claire Fashion
Garment" are engaged in the business of manufacturing and selling shirts. Respondent Sio is
part owner and general manager of a manufacturing corporation doing business under the
trade name "Universal Toy Master Manufacturing." Petitioners and respondent Sio entered
into a contract whereby the latter would manufacture for the petitioners 20,000 pieces of
vinyl frogs and 20,000 pieces of vinyl moose heads at P7.00 per piece in accordance with the
sample approved by the petitioners. These frogs and moose heads were to be attached to the
shirts petitioners would manufacture and sell. Respondent Sio delivered in several
installments the 40,000 pieces of frogs and moose heads. The last delivery was made on
September 28, 1988.Petitioner fully paid the agreed price. Subsequently, petitioners returned
to respondent 29,772 pieces of frogs and moose heads for failing to comply with the approved
sample. The return was made on different dates: the initial one on December 12, 1988
consisting of 1,720 pieces, the second on January 11, 1989, and the last on January 17, 1989.
Petitioners then demanded from the respondent a refund of the purchase price of the returned
goods in the amount of P208, 404.00. As respondent Sio refused to pay, petitioners filed on
July 24, 1989 an action for collection of a sum of money in the Regional Trial Court of Manila,
Branch 38 where it ruled in favor of the petitioners. Respondent Sio sought recourse in the
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Court of Appeals. In its April 30, 1993 decision, the appellate court affirmed the trial court
decision. Respondent then filed a Motion for Reconsideration and a Supplemental Motion for
Reconsideration alleging therein that the petitioners' action for collection of sum of money
based on a breach of warranty had already prescribed. On January 24, 1994, the respondent
court reversed its decision and dismissed petitioners' Complaint for having been filed beyond
the prescriptive period.
ISSUE: Whether or not the contract executed by and between the petitioners and the
respondent was a contract for a piece of work. Was there a breach of warranty committed by
respondent Sio.
RULING: We uphold the respondent's contention. The following provisions of the New Civil
Code are apropos:
"Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the
ordinary course of his business manufactures or procures for the general market, whether the
same is on hand at the time or not, is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order, and not for the general
market, it is a contract for a piece of work."
"Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece
of work for the employer, in consideration of a certain price or compensation. The contractor
may either employ only his labor or skill, or also furnish the material." As this Court ruled in
Engineering & Machinery Corporation v. Court of Appeals, et al., "a contract for a piece of
work, labor and materials may be distinguished from a contract of sale by the inquiry as to
whether the thing transferred is one not in existence and which would never have existed but
for the order of the person desiring it. In such case, the contract is one for a piece of work,
not a sale. On the other hand, if the thing subject of the contract would have existed and
been the subject of a sale to some other person even if the order had not been given then
the contract is one of sale. The contract between the petitioners and respondent stipulated
that respondent would manufacture upon order of the petitioners 20,000 pieces of vinyl frogs
and 20,000 pieces of vinyl moose heads according to the samples specified and approved by
the petitioners. Respondent Sio did not ordinarily manufacture these products, but only upon
order of the petitioners and at the price agreed upon. Clearly, the contract executed by and
between the petitioners and the respondent was a contract for a piece of work. At any rate,
whether the agreement between the parties was one of a contract of sale or a piece of work,
the provisions on warranty of title against hidden defects in a contract of sale apply to the
case at bar, viz: "Art. 1714. If the contractor agrees to produce the work from material
furnished by him, he shall deliver the thing produced to the employer and transfer dominion
over the thing. This contract shall be governed by the following articles as well as by the
pertinent provisions on warranty of title and against hidden defects and the payment of price
in a contract of sale." "Art. 1561. The vendor shall be responsible for warranty against the
hidden defects which the thing sold may have, should they render it unfit for the use for which
it is intended, or should they diminish its fitness for such use to such an extent that, had the
vendee been aware thereof, he would not have acquired it or would have given a lower price
for it; but said vendor shall not be answerable for patent defects or those which may be visible,
or for those which are not visible if the vendee is an expert who, by reason of his trade or
profession, should have known them." "Art. 1571. Actions arising from the provisions of the
preceding ten articles shall be barred after six months from the delivery of the thing sold."
(Emphasis supplied)
There is no dispute that respondent made the last delivery of the vinyl products to petitioners
on September 28, 1988. It is also settled that the action to recover the purchase price of the
goods petitioners returned to the respondent was filed on July 24, 1989, more than nine
months from the date of last delivery. Petitioners having filed the action three months after
the six-month period for filing actions for breach of warranty against hidden defects stated in
Art. 1571, the appellate court dismissed the action.
TOPIC: Agency to Sell
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FACTS: Arco Amusement Company is engaged in the business of cinematography. The latter
desiring to equipt its cinematograph with sound reproducing devices, approached Gonzalo
Puyat & Sons, Inc. to order sound reproducing equipments from Starr Piano Company of
Indiana, USA to which the former was acting as exclusive agents of the Philippines. After
some negotiations, it was agreed between the parties that Arco would pay the defendant, in
addition to the price of the equipment, a 10 per cent commission, plus all expenses, such as,
freight, insurance, banking charges, cables, etc. Three years later, Arco discovered that the
price given to them was not the net price but rather the list price which thereby convinced
them that the prices charged to them were too high including the out of pocket expenses. For
these, they sought to obtain for a reduction and reimbursement but has failed and thereby
brought action against Gonzalo and Sons, Inc. The latter now claims that the appellate court
erred in deciding the case in favor of Arco Company. A petition for issuance of a Writ of
Certioari was then filed by Gonzalo Puyat and Sons contending that the transaction between
the parties was that of a Contract of Sale and not that of an Agency to Sell.
ISSUE: Whether or not the contract between the parties was one of Purchase
and Sale and not Agency.
HELD: Yes. The transaction was that of a Conract of Purchase and Sale. The contract is the
law between the parties and should include all the things they are supposed to have been
agreed upon. What does not appear on the face of the contract should be regarded merely as
"dealer's" or "trader's talk", which can not bind either party. To hold Gonzalo Puyat and Sons,
Inc. responsible for the reduction and reimburement is incompatible with the pretended
relation of agency between the parties. In the Agency to Sell, the agent is exempted from all
liability in the discharge of his commission provided he acts in accordance with the instructions
received from his principal and the principal must indemnify the agent for all damages which
the latter may incur in carrying out the agency without fault or imprudence on his part. While
the petitioner was to receive ten per cent (10%) commission, this does not necessarily make
the petitioner an agent of the respondent, as this provision is only an additional price which
the respondent bound itself to pay, and which stipulation is not incompatible with the contract
of purchase and sale. Also, to hold the petitioner an agent of the respondent in the purchase
of equipment and machinery from the Starr Piano Company of Richmond, Indiana, is
incompatible with the admitted fact that the petitioner is the exclusive agent of the same
company in the Philippines. It is out of the ordinary for one to be the agent of both the vendor
and the purchaser. The facts and circumstances indicated do not point to anything but plain
ordinary transaction where the respondent enters into a contract of purchase and sale with
the petitioner, the latter as exclusive agent of the Starr Piano Company in the United States.
Facts: The then Commissioner of Internal Revenue Melecio R. Domingo assessed Ker & Co.
LTD the sum of P20,272.33 as the commercial broker's percentage tax, surcharge, and
compromise penalty for the period July 1, 1949 up to December 31, 1953. The assessment
arose from the petitioner’s contract between United States Rubber International designated
as the Company while petitioner being the Distributor. The petitioner requested for a
cancellation of the assessment, but it was turned down by the commission. Hence, petitioner
ensued to file a petition to review with the Court of Tax Appeals, but Commissioner Domingo
upheld that petitioner should be taxed with the amount being a commercial broker.
The contract of the petitioner with the Company includes the distribution of their products in
some parts of the country but petitioner is precluded from disposing it elsewhere without the
consent of the Company. It was also noted that the Company reserves all the rights in so far
as to the fixing of its prices,
discounts, terms of payments and other conditions. In other words, all the general terms and
conditions in the contract are subject to the approval of the United States Rubber International.
With this, the Court of Tax Appeals held petitioner taxable except for the compromise penalty.
Hence this petition.
Issue: Whether or not the relationship created between Ker & Co. and United States Rubber
International is one of vendor and vendee or of broker and principal?
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Ruling: The relationship between them is one of brokerage or agency. The court laid down
the distinction between a Contract of Sale and an Agency to Sell. Where, when the transfer
puts the transferee in the attitude or position of an owner and makes him liable to the
transferor as a debtor for the agreed price, and not merely as an agent who must account for
the proceeds of a resale, the transaction is a sale.
On the other hand, the essence of an agency to sell is the delivery to an agent, not as his
property, but as the property of the principal, who remains the owner and has the right to
control sales, fix the price, and terms, demand and receive the proceeds minus the agent's
commission of the sale made.
The mere disclaimer in a contract that an entity like Ker & Co. is not “the agent or legal
representative for any purpose whatsoever" does not serve to yield the conclusion that it is
an independent merchant if the control over the goods for resale of the goods consigned is
pervasive in character.
Lease of Service or Contract for a Piece of Work
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Topic: Contract of Sale vs Contract for a piece work
Principle: A contract for the delivery at a certain price of an article Which the vendor in the
ordinary course of his business manufactures or procures for the - general market, whether
the same is on hand at the time or not, is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order, and not for the general
market, it is a contract for a piece of work. (Article 1467 of the New Civil Code)
Facts: Arnoldus Carpentry Shop, Inc. (private respondent) is a domestic corporation engaged
in “preparing, processing, buying, selling, exporting, importing, manufacturing, trading and
dealing in cabinet shop products, wood and metal home and office furniture, cabinets, doors,
windows, etc., including their component parts and materials, of any and all nature and
description". These furniture, cabinets and other woodwork were sold locally and exported
abroad.
For this business venture, private respondent kept samples or models of its woodwork on
display from where its customers may refer to when placing their orders.
Petitioner Commissioner of Internal Revenue conducted an investigation of the business tax

liabilities of private respondent pursuant to Letter of Authority. As per the examination, the
total gross sales of private respondent for the year 1977 from both its local and foreign
dealings amounted to P5,162,787.59. From this amount, private respondent reported in its
quarterly percentage tax returns P2,471,981.62 for its gross local sales. The balance of
P2,690,805.97, which is 52% of the total gross sales, was considered as its gross export
sales.
Based on such an examination, BIR examiners made a report to the Commissioner classifying
private respondent as an "other independent contractor"
As a result thereof, the examiners assessed private respondent for deficiency tax in the
amount of EIGHTY EIGHT THOUSAND NINE HUNDRED SEVENTY TWO PESOS AND TWENTY
THREE CENTAVOS ( P88,972.23 ). Private respondent received a letter/notice of tax deficiency
assessment inclusive of charges and interest for the year 1977 in the amount of ONE
HUNDRED EIGHT THOUSAND SEVEN HUNDRED TWENTY PESOS AND NINETY TWO CENTAVOS
( P 108,720.92 ). This tax deficiency was a consequence of the 3% tax imposed on private
respondent's gross export sales which, in turn, resulted from the examiners' finding that
categorized private respondent as a contractor.
Against this assessment, private respondent filed a protest with the petitioner Commissioner
of Internal Revenue. In the protest letter, private respondent's manager maintained that the
carpentry shop is a manufacturer and therefor entitled to tax exemption on its gross export
sales under Section 202 (e) of the National Internal Revenue Code. He explained that it was
the 7% tax exemption on export sales which prompted private respondent to exploit the
foreign market which resulted in the increase of its foreign sales to at least 52% of its total
gross sales in 1977.
Issue: Whether or not private respondent is a manufacturer or a contractor.
SC Ruling: The petition is without merit.
Neither can Article 1467 of the New Civil Code help petitioner's cause. Article 1467 states:
A contract for the delivery at a certain price of an article Which the vendor in the ordinary
course of his business manufactures or procures for the - general market, whether the same
is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured
specially for the customer and upon his special order, and not for the general market, it is a
contract for a piece of work.
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As the Court of Tax Appeals did not err in holding that private respondent is a "manufacturer,"
then private respondent is entitled to the tax exemption under See. 202 (d) and (e) mow Sec.
167 (d) and (e)] of the Tax Code which states:
Sec. 202. Articles not subject to percentage tax on sales. The following shall be
exempt from the percentage taxes imposed in Sections 194, 195, 196, 197,
198, 199, and 201:
In the present case the respondent Tax Court did not err in classifying private respondent as
a "manufacturer". Clearly, the 'latter falls with the term 'manufacturer' mentioned in Art. 202
(d) and (e) of the Tax Code. As the only question raised by petitioner in relation to this tax
exemption claim by private respondent is the classification of the latter as a manufacturer,
this Court affirms the holding of respondent Tax Court that private respondent is entitled to
the percentage tax exemption on its export sales.
There is nothing illegal in taking advantage of tax exemptions. When the private respondent
was still exporting less and producing locally more, the petitioner did not question its
classification as a manufacturer. But when in 1977 the private respondent produced locally
less and exported more, petitioner did a turnabout and imposed the contractor's tax. By
classifying the private respondent as a contractor, petitioner would likewise take away the tax
exemptions granted under Sec. 202 for manufacturers. Petitioner's action finds no support in
the applicable law.
Lease with option to purchase
Topic: Article 1484 and 1485 of the New Civil Code or the Recto Law
Facts:
On December 4, 1996, petitioner PCI Leasing and respondent Giraffe-X entered into a Lease
Agreement, whereby the former leased out to the latter one set of Silicon High Impact
Graphics and accessories worth ₱3,900,00.00 and one unit of Oxberry Cinescan 6400-10
worth ₱6,500,000.00. The parties subsequently signed two separate documents, each
denominated as Lease Schedule. For the Silicon High Impact Graphics, Giraffe-X agreed to
pay ₱116,878.21 monthly, and for Oxberry Cinescan, ₱181.362.00 monthly. Giraffe-X must
pay monthly for thirty-six (36) months, exclusive of the 36% per annum late payment
charges. Giraffe-X defaulted in its monthly rental-payment obligations. And following a three-
month default, PCI Leasing, addressed a formal pay-or-surrender-equipment type of demand
letter to Giraffe-X. The demand was unheeded.
PCI Leasing instituted the instant case against Giraffe-X in the RTC of Quezon City. PCI
Leasing prayed for the issuance of a writ of replevin for the recovery of the leased property
and order the defendant to pay the balance of rental/obligation in the total amount of
₱8,248,657.47 inclusive of interest and charges thereon.
The trial court issued a writ of replevin. Giraffe-X filed a motion to dismiss arguing that
pursuant to Article 1484 of the Civil Code on installment sales of personal property, PCI
Leasing is barred from further pursuing any claim arising from the lease agreement and the
companion contract documents, adding that the agreement between the parties is in reality
a lease of movables with option to buy.
The trial court granted Giraffe’s motion to dismiss on the following premises: 1) the lease
agreement package, as memorialized in the contract documents, is akin to the contract
contemplated in Article 1485 of the Civil Code, and 2) Giraffe’s loss of possession of the leased
equipment consequent to the enforcement of the writ of replevin is "akin to foreclosure. With
its motion for reconsideration having been denied by the trial court in its resolution of February
15, 2000, petitioner has directly come to this Court via this petition for review
Issue: Whether Giraffe-X is liable to pay for the remaining balance of the machineries which
are considered foreclosed.
Ruling:
No, Giraffe-X shall not be held liable for the remaining balance.
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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 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.
ART. 1485. The preceding article shall be applied to contracts purporting to be leases of
personal property with option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing.
The Supreme Court agreed with the lower court that the enforcement of the writ of replevin
is akin to a foreclosure. In Elisco Tool Manufacturing Corp. v. Court of Appeals, the remedies
provided for in Article 1484 of the Civil Code are alternative, not cumulative.
Since PCI Leasing already chose the option of foreclosure, Giraffe-X cannot be held anymore
to pay for the remaining balance of the machineries.
FACTS: Private respondent Rolando Landan, entered into an agreement with his employer,
Elisco Tool Manufacturing Corp., to lease a Colt Lancer for a period of 5 years. The agreement
also states that after the 5year period, private respondent may have the option to purchase
the car and just pay the remaining balance and in the event that the private respondent fails
to pay 3 accumulated monthly payments, the company has the option to lease the car to
another employee. Private respondent will also have to return the car once he resigns or be
dismissed. In 1981, Elisco Tool Manufacturing Corp. ceased operations in which private
respondent Rolando Lantan was laid off. Nonetheless, he was able to pay a total of
P61,070.94.
On June 6, 1986, petitioner filed a replevin case against the private respondents for failure to
pay the monthly rentals despite demands. Petitioner then alleges that the private
respondent's failure to pay thereby entitles the petitioner to the possession of the car and
that in case private respondent could not return the card, they should be held liable for the
amount of P60,000 plus the accrued monthly rentals with interest at the rate of 14% per
annum, until fully paid. The trial court made their decision on favor of the private respondents,
Rolando Lantan and Rina Lantan. Court of appeals affirmed in toto the decision of the trial
court.
Issue : Whether or not spouses Rolando and Rina Lantan are the rightful owners of the car.
Decision: Yes, the private respondents are the righful owners of the car. In the case at bar,
although the agreement provides for the payment by private respondents of "monthly
rentals," the fifth paragraph thereof gives them the option to purchase the motor vehicle at
the end of the 5th year or upon payment of the 60th monthly rental when "all monthly rentals
shall be applied to the payment of the full purchase price of the car." It is clear that the
transaction in this case is a lease in name only. The so called monthly rentals are in truth
monthly amortizations on the price of the car. The contract being one of sale on installment,
Articles 1484 and 1485 of the Civil Code applies. However, the case should be considered as
one for specific performance, pursuant to Art. 1484(1). The prayer for a writ of replevin is
only for the purpose of ensuring specific performance by private respondents. However, the
respondents could no longer be held liable for the payment of interest on unpaid monthly
rentals since it was entered into in pursuance of a car plan adopted by petitioner for the
benefit of its deserving employees. Further, private respondents' default in paying
installments was due to the cessation of the operations of its sister company, Elizalde Steel
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Corporation. That petitioner accepted payments from private respondents more than 2 years
after the latter's employment have been terminated constitutes
ARTICLE 1469-74: Price
General Principles in agreement as to price
FACTS: The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City,
known as the Xavierville Estate Subdivision. Which was then offered for sale to individual lot
buyers. On September 8, 1967, XEI, through its General Manager, Antonio Ramos, as vendor,
and The Overseas Bank of Manila (OBM), as vendee, executed a "Deed of Sale of Real Estate.
Nevertheless, XEI continued selling the residential lots in the subdivision as agent of OBM.
Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of Engr.
Carlos Manalo, Jr. who was in business of drilling deep water wells and installing pumps.
Manalo, Jr. installed a water pump at Ramos’ residence. Manalo, Jr. then proposed to XEI,
through Ramos, to purchase a lot in the Xavierville subdivision, and offered as part of the
downpayment the ₱34,887.66 Ramos owed him. XEI, through Ramos, agreed. Ramos
requested Manalo, Jr. to choose which lots he wanted to buy so that the price of the lots and
the terms of payment could be fixed and incorporated in the conditional sale.
In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the
lots. He also pegged the price of the lots at ₱200.00 per square meter, or a total of
₱348,060.00, with a 20% down payment of the purchase price amounting to ₱69,612.00 less
the ₱34,887.66 owing from Ramos. the corresponding Contract of Conditional Sale would then
be signed on or before the same date, but if the selling operations of XEI resumed after
December 31, 1972, the balance of the downpayment would fall due then, and the spouses
would sign the aforesaid contract within five (5) days from receipt of the notice of resumption
of such selling operations. It was also stated in the letter that, in the meantime, the spouses
may introduce improvements thereon subject to the rules and regulations imposed by XEI in
the subdivision
The spouses Manalo took possession of the property on September 2, 1972, constructed a
house thereon, and installed a fence around the perimeter of the lots.
The spouses Manalo were notified of the resumption of the selling operations of XEI.9
However, they did not pay the balance of the downpayment on the lots because Ramos failed
to prepare a contract of conditional sale and transmit the same to Manalo for their signature,
the spouses were also informed that they were being billed for said unpaid interests.
Manalo, Jr. stated they had not yet received the notice of resumption of Lei’s selling
operations, and that there had been no arrangement on the payment of interests; hence,
they should not be charged with interest on the balance of the downpayment on the
property.14 Further, they demanded that a deed of conditional sale over the two lots be
transmitted to them for their signatures. However, XEI ignored the demands. Consequently,
the spouses refused to pay the balance of the downpayment of the purchase price
Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville Estate from OBM
CBM filed a complaint27 for unlawful detainer. CBM claimed that the spouses had been
unlawfully occupying the property without its consent and that despite its demands, they
refused to vacate the property. RTC ruled in favor of sps Manalo, which was affirmed by CA
ISSUE: WON there is a contract of sale or contract to sell
RULING: Petitioner insists that unless the parties had agreed on the manner of payment of
the principal amount, including the other terms and conditions of the contract, there would
be no existing contract of sale or contract to sell.
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Supreme Court agrees with petitioner’s contention that, for a perfected contract of sale or
contract to sell to exist in law, there must be an agreement of the parties, not only on the
price of the property sold, but also on the manner the price is to be paid by the vendee.
Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or conditional,
one of the contracting parties obliges himself to transfer the ownership of and deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent. A
contract of sale is perfected at the moment there is a meeting of the minds upon the thing
which is the object of the contract and the price. From the averment of perfection, the parties
are bound, not only to the fulfillment of what has been expressly stipulated, but also to all
the consequences which, according to their nature, may be in keeping with good faith, usage
and law. On the other hand, when the contract of sale or to sell is not perfected, it cannot, as
an independent source of obligation, serve as a binding juridical relation between the parties.
A definite agreement as to the price is an essential element of a binding agreement to sell

personal or real property because it seriously affects the rights and obligations of the parties.
Price is an essential element in the formation of a binding and enforceable contract of sale.
perfected sale.
It is not enough for the parties to agree on the price of the property. The parties must also
agree on the manner of payment of the price of the property to give rise to a binding and
enforceable contract of sale or contract to sell. This is so because the agreement as to the
manner of payment goes into the price, such that a disagreement on the manner of payment
is tantamount to a failure to agree on the price
Requisites
Effect if there is no consideration – null and void (non-existence of the contract)
FACTS: On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint
for Specific Performance with Damages against Jocelyn B. Doles (petitioner), docketed as Civil
Case No. 97-82716. Respondent alleged that petitioner was indebted to the former in the
concept of a personal loan amounting to P405,430.00 representing the principal amount and
interest; that on October 5, 1996, by virtue of a "Deed of Absolute Sale", petitioner, as seller,
ceded to respondent, as buyer, a parcel of land, as well as the improvements thereon, with
an area of 42 square meters, covered by Transfer Certificate of Title No. 382532,4 and located
at a subdivision project known as Camella Townhomes Sorrente in Bacoor, Cavite, in order to
satisfy her personal loan with respondent; that this property was mortgaged to National Home
Mortgage Finance Corporation (NHMFC) to secure petitioner’s loan in the sum of P337,050.00
with that entity.
ISSUE:Whether or not the contract of sale on the parcel of land was executed for a cause.
RULING: NO. Since the sale is predicated on that loan, then the sale is void for lack of
consideration.
In view of these anomalies, the Court cannot entertain the possibility that respondent agreed
to assume the balance of the mortgage loan which petitioner allegedly owed to the NHMFC,
especially since the record is bereft of any factual finding that petitioner was, in the first place,
endowed with any ownership rights to validly mortgage and convey the property. As the
complainant who initiated the case, respondent bears the burden of proving the basis of her
complaint. Having failed to discharge such burden, the Court has no choice but to declare the
sale void for lack of cause. And since the sale is void, the Court finds it unnecessary to dwell
on the issue of whether duress or intimidation had been foisted upon petitioner upon the
execution of the sale.
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ONE-LINER: Consideration, more properly denominated as cause, can take different forms,
such as the prestation or promise of a thing or service by another.
FACTS: Petitioners Antonia Torres and Emeteria Baring entered into a “joint venture
agreement” with Respondent Manuel Torres for the development of a parcel of land into a
subdivision. They executed a Deed of Sale covering the said parcel of land in favor of the
respondent, who then had it registered in his name. By mortgaging the property, respondent
obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture Agreement,
was to be used for the development of the subdivision. All three of them also agreed to share
the proceeds from the sale of the subdivided lot. However, the project did not push through,
and the land was subsequently foreclosed by the bank.
Subsequently, petitioners filed a criminal case for estafa against respondent and his wife but
failed. Thereafter, they filed a civil case to relieve themselves of their obligations but were
denied by the court for having formed a partnership saying that they should bear the loss as
a partner pursuant to Art. 1797 of the Civil Code.
The petitioners however contend that no partnership was formed due to the joint venture
agreement and the earlier Deed of Sale. They contend that the sale of land was an illegal
contract for wanting of valid consideration.
ISSUE: Whether or not the sale of land was valid?
RULING: Yes. The sale of land was valid because there was a valid consideration. The Joint
Venture Agreement clearly states that the consideration for the sale was the expectation of
profits from the subdivision project. Its first stipulation states that petitioners did not actually
receive payment for the parcel of land sold to respondent. Consideration, more properly
denominated as cause, can take different forms, such as the prestation or promise of a thing
or service by another.
In this case, the cause of the contract of sale consisted not in the stated peso value of the
land, but in the expectation of profits from the subdivision project, for which the land was
intended to be used. As explained by the trial court, "the land was in effect given to the
partnership as [petitioner's] participation therein. There was therefore a consideration for the
sale, the [petitioners] acting in the expectation that, should the venture come into fruition,
they [would] get sixty percent of the net profits.
Facts: This case is an appeal by certiorari. Hilario Mateum of Kawit, Cavite died on March 11,
1964, single without ascendants or descendants and survived only by collateral relatives of
whom petitioners herein, his first cousins were the nearest. Mateum left no will, no debts and
an estate consisting of twenty-nine parcels of land in Kawit and Imus Cavite, ten of which are
involved in this appeal.
On April 3, 1964, the private respondents collateral relatives of Mateum though more remote
in degree than the petitioners, registered with the Registry of Deeds for the Province of Cavite
two deeds of sale executed by Mateum in their flavor covering ten parcels of land. Both deeds
were in Tagalog save for the English descriptions of the lands conveyed under one of them
and each recited the reconsideration of the sale to be halagang ISANG PISO salaping Filipino
at mga naipaglingkod ipinaglilingkod sa aking kapakanan. One deed was dated February 6,
1963 and covered five parcels of land, and the other was dated March 4, 1963, covering five
other parcels, both, therefore, antedating Mateum's death by more than a year. It is asserted
by the petitioners, but denied by the respondents, that said sales notwithstanding, Mateum
continued in the possession of the lands purportedly conveyed until his death, that he
remained the declared owner thereof and that the tax payments thereon continued to be paid
in his name. Whatever the truth, however, is not crucial. What is not disputed is that on the
strength of the deeds of sale, the respondents were able to secure title in their favor over
three of the ten parcels of land conveyed thereby.
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On May 22,1964 the petitioners commenced suit against the respondents in the Court of First
Instance of Cavite, seeking annulment of the deeds of sale as fictitious, fraudulent or falsified,
or, alternatively, as donations void for want of acceptance embodied in a public instrument.
Claiming ownership pro indiviso of the lands subject of the deeds by virtue of being intestate
heirs of Hilario Mateum, the petitioners prayed for recovery of ownership and possession of
said lands, accounting of the fruits thereof and damages. Although the complaint originally
sought recovery of all the twenty-nine parcels of land left by Mateum, at the pre-trial the
parties agreed that the controversy be limited to the ten parcels subject of the questioned
sales, and the Trial Court ordered the exclusion of the nineteen other parcels from the action.
Of the ten parcels which remained in litigation, nine were assessed for purposes of taxation
at values aggregating P10,500 00. The record does not disclose the assessed value of the
tenth parcel, which has an area of 1,443 square meters.
Issue: Whether or not the sale is void?
Ruling: Yes, the sale is void. The appealed Decision of the Court of Appeals is reversed. The
questioned transfers are declared void and of no force or effect. Such certificates of title as
the private respondents may have obtained over the properties subject of said transfers are
annulled and said respondents are ordered to return to the petitioner’s possession of all the
properties involved in this action to account to the petitioners for the fruits during the period
of their possession and to pay the costs.
Facts: Petitioner filed a case against Respondent, because Responded refuses to vacate a lot
owned by Petitioner. On his Defense, Respondent claimed to be the owner of the lot as
Petitioners father sold it to Respondents father with partial payment, and has receipt for
evidence.
Issue: Whether or not the receipt would constitute as sale
Ruling: No, the essential requisites for Contract of Sale are not met. The essential elements
of a contract of sale are: a) consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price; b) determinate subject matter; and c) price certain in
money or its equivalent. The absence of any of the essential elements shall negate the
existence of a perfected contract of sale. Respondent wanted to prove the sale by a receipt
when it should be the receipt that should further corroborate the existence of the sale. At
best, his testimony only alleges but does not prove the existence of the verbal agreement.
The Court notes that while Respondent testified that the land subject of the sale consisted of
352 square meters, however, states that it’s more than 400 square meters. Moreover, the
receipt does not categorically declare the price certain in money. Neither does it state the
mode of payment of the purchase price and the period for its payment.
Facts: Petitioner Sa Miguel Properties Philippines, Inc. is a domestic corporation engaged in

the purchase and sale of real properties. Part of its inventory are two parcels of land totalling
1, 738 square meters. Properties were offered for sale for P52, 140,000 in cash. The offer
was made to Atty. Helena M. Dauz, who was acting for respondent spouses as undisclosed
principals. Atty. Dauz signified her clients interest in purchasing the properties under the
following terms:
 Sum of P500,000 would be given as earnest money and the balance would be paid in
eight equal monthly installments.
Petitioner refused the counter-offer.
Atty. Dauz wrote another letter proposing the following terms:
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 Enclosing herewith the sum of P1M representing earnest-deposit money. We will be

given the exclusive option to purchase the property within 30 days from date of your
acceptance of this offer.
 During said period, we will negotiate on the terms and conditions of the purchase.
 In the even that we do not come to an agreement on this transaction, the said amount
o P1M shall be refundable to us in full demand.
Earnest-money was accepted in behalf of San Miguel by Sobrecarey. Upon request of

respondent spouses, Sobrecarey ordered he removal “for sale” sign from the properties. Atty.
Dauz and Sobrecarey then commenced negotiations.
Petitioners had not yet acted on the counter-offer; and so Atty. Dauz asked for an extension
of 45 days within which to exercise her option to purchase the property, adding that within
that period, “we hope to finalize (our) agreement on the matter.” Request granted.
Petitioner informed Atty. Dauz that because the parties (Sps. Huang) failed to agree on the
terms and conditions of the sale despite the extension granted by petitioner, the latter was
returning the amount of P1M given as “earnest-deposit.”
Respondent spouses, wrote a demand to the petitioner of execution within 5 days of sale
covering the properties. Respondents attempted to return the “earnest- deposit” but
petitioner refused on the ground that respondents option to purchase had already expired.
Respondent spouses filed a complaint for specific performance against petitioner before the
Regional Trial Court.
Petitioner filed a motion to dismiss. Trial court granted petitioners motion and dismissed the
action. Respondents filed a motion for reconsideration, but it was denied by the trial court.
They then appealed to the Court of Appeals, which rendered a decision in reversing the
judgment of the trial court. The appellate court held that all the requisites of a perfected
contact of sale had been complied with as the offer was made. Petitioner filed a motion for
reconsideration but was denied.
Issue: W/n there was a perfected contract of sale between the parties?
Ruling: The decision of the appellate court was reversed, and the respondents’ complaint
was dismissed.The P1M “earnest-deposit” could not have been given as earnest money as
contemplated in Art. 1482 because, at the time when the petitioner accepted the terms of
respondents offer, their contract had not yet been perfected. This is evident from the following
conditions attached by respondents to their letter:
1. That they be given the exclusive option to purchase the property within 30 days from
the acceptance of the offer;
2. That during the option period, the parties would negotiate the terms and conditions of
the purchase;
3. Petitioner would secure the necessary approvals while respondents would hand the
documentation.
The first condition for an option period of 30 days sufficiently shows that a sale was never
perfected. Such option giving respondents the exclusive right to buy the properties within the
period agreed upon is separate and distinct from the contract of sale which the parties may
enter. All the respondents had was just the option to by the properties which privilege was
not. However, exercised by them because there was a failure to agree on the terms of
payment. No contract of sale may thus be enforced by respondents.
Even the option secured by the respondents from petitioner was fatally defective. Under the
second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate
thing for a price certain is binding upon the promisor only if the promise is supported by a
distinct consideration. Consideration in an option contract may be anything of value, unlike in
sale where it must be the price certain in money or its equivalent. There is no showing here
of any consideration for the option. Lacking any proof of such consideration, the option is
unenforceable.
Equally compelling as proof of the absence of a perfected sale is the second condition that,
during the option period, the parties would negotiate the terms and conditions of the
purchase. The stages on a contract of sale:
1. Negotiation- period from the time the prospective contracting parties indicate interest
in the contract to the time the contract is perfected;
2. Perfection- concurrence of the essential elements of the contract and upon the price;
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3. Consummation- begins when the parties perform their respective undertakings under
the contract of sale, culminating in the extinguishment thereof.
The parties never got past the negotiation stage. While the parties already agreed on the real
properties which were the objects of the sale and on the purchase price, the fact remains that
they failed to arrive at mutually accepted terms of payment, despite the 45-day extension
given by petitioner.
Ratio Decidendi: Thus, it is not the giving of earnest money, but the proof of the concurrence
of all the essential elements of the contract of sale which establishes the existence of a
perfected sale.
Facts: This case is an action instituted by Zacarias Robles against Lizarraga Hermanos, a
mercantile partnership organized under the laws of the Philippine Islands, for the purpose of
recovering compensation for improvements made by the plaintiff upon the hacienda
"Nahalinan" and the value of implements and farming equipment supplied to the hacienda by
the plaintiff, as well as damages for breach of contract. Upon hearing the cause the trial court
gave judgment for the plaintiff to recover of the defendant the sum of P14,194.42, with costs.
From this judgment the defendant appealed.
It appears that the hacienda "Nahalinan," situated in the municipality of Pontevedra,

Occidental Negros, belonged originally to the spouses Zacarias Robles and Anastacia de la
Rama, parents of the present plaintiff, Zacarias Robles. Upon the death of Zacarias Robles
several years ago, his widow Anastacia de la Rama was appointed administratrix of his estate;
and on May 20, 1913, as widow and administratrix, she leased the hacienda to the plaintiff,
Zacarias Robles, for the period of six years beginning at the end of the milling season in May,
1915, and terminating at the end of the milling season in May, 1920. It was stipulated that
any permanent improvements necessary to the cultivation and exploitation of the hacienda
should be made at the expense of the lessee without right to indemnity at the end of the term.
As the place was in a run-down state, and it was foreseen that the lessee would be put to
much expense in bringing the property to its productive capacity, the annual rent was fixed
at the moderate amount of P2,000 per annum.
The plaintiff accordingly entered upon the property, in the character of lessee; and, in order
to put the farm in good condition, he found it necessary to make various improvements and
additions to the plant. Substitution of a new hydraulic press; reconstruction of dwelling house;
construction of new houses for workmen; building of camarins; construction of chimney;
reconstruction of ovens; installment of new coolers; purchase of farming tools and many head
of carabao, with other repairs and improvements. All this expense was borne exclusively by
the lessee, with the exception that his mother and coheirs contributed P1,500 towards the
expense of the reconstruction of the dwelling house, which was one-half the outlay for that
item. The firm of Lizarraga Hermanos was well aware of the nature and extent of these
improvements, for the reason that the lessee was a customer of the firm and had purchased
from it many of the things that went into the improvements.
In 1916, or three years before the lease was to expire, Anastacia de la Rama died, leaving as
heirs Zacarias Robles, Jose Robles, Evarista Robles, Magdalena Robles, Felix Robles, Jose
Robles, and Evarista Robles acquired by purchase the shares of their coheirs in the entire
inheritance; and at this juncture Lizarraga Hermanos came forward with a proposal to buy
from these three all of the other properties belonging to the Robles estate.
In course of the negotiations an obstacle was encountered in the fact that the lease of Zacarias
Robles still had over two years to run. It was accordingly proposed that he should surrender
the last two years of his lease and permit Lizarraga Hermanos to take possession as purchaser
in June, 1918. A surrender of the two years of the lease would naturally involve a heavy
sacrifice on the part of Zacarias Robles not only because the rent which he was bound to pay
was low, but because he had already made most of the expenditures in outfitting the farm
which would be necessary for farming operations during the entire period of the lease.
The plaintiff alleges and the trial court found, upon what we believe to be sufficient proof,
that, in consideration that the plaintiff should shorten the term of his lease to the extent
stated, the defendant agreed to pay him the value of all betterments that he had made on
the hacienda and furthermore to purchase from him all that belonged to him personally on
the hacienda, including the crop of 1917-18, the cattle, farming implements and equipment,
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according to a valuation to be made after the harvest. The plaintiff agreed to this; and the
instrument of conveyance by which the three owners, Zacarias, Jose and Evarista Robles,
conveyed the property to Lizarraga Hermanos was accordingly executed on November 16,
1917.
Issue: Whether or not the lease may contest the validity of a written contract?
Ruling: Yes, the lease may contest the validity. In this case, Judgement appealed was
affirmed with costs against the appellant.
Facts: The plaintiff in this case is Askay, an illiterate Igorrote between 70 and 80 years of
age, residing in the municipal district of Tublay, Province of Benguet, who at various time has
been the owner of mining property. The defendant is Fernando A. Cosalan, the nephew by
marriage of Askay, and municipal president of Tublay, who likewise has been interested along
with his uncle in mining enterprises.
About 1907, Askay obtained title to the Pet Kel Mineral Claim located in Tublay, Benguet. On
November 23, 1914, if we are to accept defendant's Exhibit 1, Askay sold this claim to Cosalan.
Nine years later, in 1923, Askay instituted action in the Court of First Instance of Benguet to
have the sale of the Pet Kel Mineral Claim adhered null, to secure possession of the mineral
claim, and to obtain damages from the defendant in the amount of P10,500. Following the
presentation of various pleadings including the answer of the defendant, and following trial
before Judge of First Instance Harvey, judgment was rendered dismissing the complaint and
absolving the defendant from the same, with costs against the plaintiff. On being informed of
the judgment of the trial court, plaintiff attacked it on two grounds: The first, jurisdiction, and
the second, formal. Both motions were denied and an appeal was perfected.
On April 16, 1923, as appears from the Official Gazette, the Secretary of Justice authorized
and instructed the Honorable George R. Harvey, Judge of First Instance of the Ninth Judicial
District, to hold a special term of court in the City of Baguio, Mountain Province, beginning
May 2, 1923. Acting under the authority granted by the order of the Secretary of Justice,
Judge Harvey proceeded to hear the case of Askay vs. Cosalan, without protest from anyone
until after an adverse decision for the plaintiff and until after Judge Harvey had left the district.
Issue: Whether or not Judge George Harvey has jurisdiction of the case?
Ruling: Yes, Judge George Harvey has jurisdiction of the case since he had been ordered by
the Secretary of Justice to hold a special term of the court in the City of Baguio and that his
findings of fact are in accordance with the evidence, that no prejudicial error was committed
in the trial, and that the complaint was properly dismissed. As a result, judgment is affirmed
with costs against the appellant.
Facts: Domingo Carabeo (petitioner) entered into a contract (kasunduan) with spouses
Norberto and Susan Dingco (respondent) whereby petitioner agreed to sell his rights over a
648-square meter parcel of unregistered land situated in Purok III, Tugatog, Orani, Bataan
to respondents for Php 38,000.
Upon signing the contract, respondent tendered an initial payment of Php 10,000. When they
were about to hand in the balance of the purchase price, petitioner did not accept it as he
was yet to settle an "on-going squabble" over the land. Nevertheless, the petitioner still
requested that respondent to hand over small sums of money from time to time which totaled
to Php 9,100.
Petitioner insisted of paying the remaining balance of Php 18,900, but respondent refused
reasoning out that he would register the land first. However, when the alleged "squabble" had
already been settled and the registration of the land was made, the petitioner still declined to
accept the payment, prompting the respondent to file a complaint in the Katarungan
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Pambarangay. No settlement was reached, hence, respondent filed a complaint for specific
performance before the RTC.
In the petitioner's answer to the complaint, he alleged that the sale was void for lack of object
certainty, the kasunduan not having specified the metes and bounds of the land.
Issue: Whether or not an object certain is present in the case
Ruling: Yes. The pertinent portion of the kasunduan reads:
xxxx
Na ako ay may isang partial na lupa na matatagpuan sa Purok 111, Tugatog, Orani Bataan,
na may sukat na 27 x 24 metro kuwadrado, ang nasabing lupa ay may sakop na dalawang
punong santol at isang punong mangga, kaya’t ako ay nakipagkasundo sa mag-asawang
Norby Dingco at Susan Dingco na ipagbili sa kanila ang karapatan ng nasabing lupa sa
halagang ₱38,000.00.
xxxx
That the kasunduan did not specify the technical boundaries of the property did not render
the sale a nullity. The requirement that a sale must have for its object a determinate thing is
satisfied as long as, at the time the contract is entered into, the object of the sale is capable
of being made determinate without the necessity of a new or further agreement between the
parties. As the above-quoted portion of the kasunduan shows, there is no doubt that the
object of the sale is determinate.
Facts: On December 20, 1978 Lope Maglana Sr., while on his way to his work station met an
accident that resulted in his death. The heirs of Maglana sr., herein petitioners filed an action
for damages and attorney’s fees against Patricio and the Afisco Insurance Corporation before
the CFI of Davao.
On December 14, 1981, the lower court rendered a decision finding that Destrajo had not
exercised sufficient diligence as the operator of the jeepney. In the 2nd paragraph of the
dispositive portion of the decision, the lower court awarded the plaintiffs the sum of
P28,000.00 for loss of income, among others. Petitioners contend that the insurance company
is directly and solidarily liable with the negligent operator up to the extent of its insurance
coverage. Respondents on the other hand argued that since the Insurance Code does not
expressly provide for a solidary obligation, the presumption is that the obligation is joint.
Issue: Whether or not the lower court was correct in the computation for the loss of income.
Ruling: No, the lower court is not correct in the computation for the loss of income. While
the petition seeks a definitive ruling only on the nature of AFISCO's liability, we noticed that
the lower court erred in the computation of the probable loss of income. Using the formula:
2/3 of (80-56) x P12,000.00, it awarded P28,000.00. Upon recomputation, the correct amount
is P192,000.00. Being a "plain error," we opt to correct the same.
Under Art. 1469(3) of the New Civil Code, if the third person or persons acted in bad faith or
by mistake, the courts may fix the price.
FACTS: La Insular cigar and cigarette factory is a joint account association with a nominal
capital of P865, 000, 00 the plaintiff's share being P20, 000, 00 or 4/173 of the whole. On
March 14, 1910, the plaintiff's attorneys wrote the defendant's local representative a letter
offering to sell to the defendant plaintiff's participation in the factory. The result of the
correspondence between the parties and their representatives was that Exhibit G was duly
executed on May 3, 1910. In accordance with the terms of this exhibit a committee of
appraisers was appointed to ascertain and fix the actual value of La Insular. The net value
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was at P4,428,194.44. Of this amount 4/173 part represented the plaintiff‘s share on his P20,
000, 00 of the nominal capital. In Exhibit J which was executed on November 22, 1910, the
plaintiff acknowledged to have received from the defendant that amount. Subsequently to the
execution of Exhibit J, demand was made by the plaintiff upon the defendant for his share of
the profits from June 30, 1909, to November 22, 1910. This demand was refused and
thereupon this action was instituted to recover said profits. The plaintiff admits that if the
agreement of May 3, 1910, was a perfected sale he cannot recover any profits after that date;
while on the other hand defendant concedes that if the said agreement was only a promise
to sell in the future it, standing alone, would not prevent recovery in this action.
ISSUE: Whether the agreement executed by both parties on May 03, 1910 was a perfected
contract of sale?
HELD: Yes. Article 1450 of the Civil Code reads: "The sale shall be perfected between vendor
and vendees and shall be binding on both of them, if they have agreed upon the thing which
is the object of the contract and upon the price, even when neither has been delivered." This
is supplemented by article 1447 of the Code which reads as follows: "In order that the price
may be considered fixed, it shall be sufficient that it be fixed with regard to another
determinate thing also specific, or that the determination of the same be left to the judgment
of a specified person."
Under article 1450, there are two indispensable requisites in a perfected sale: (1) There must
be an agreement upon the thing which is the object of the contract; and (2) the contracting
parties must agree upon the price.
In the case at bar, the object of the contract was the whole of the plaintiff's right, title, and
interest in La Insular. This whole was 4/173 of the entire net value of the business. The parties
agreed that the price should be 4/173 of the total net value. The fixing of such net value was
unreservedly left to the judgment of the appraisers. As to the thing and the price the minds
of the contracting parties met, and all questions relating thereto were settled. Nothing was
left unfinished in so far as the contracting parties were concerned. Neither party could
withdraw from the contract without the consent of the other. The result is that the two
essential requisites necessary to constitute a perfected sale were present.
For the foregoing reasons, the judgment appealed from is REVERSED upon the merits and
the complaint DISMISSED without costs in either instance.
Facts: On August 27, 1901, the parties herein executed a written contract of the sale of a
tobacco and cigarette company “La Maria Cristina” which includes the trademark, stock of
tobacco, machinery and fixtures that belongs to the factory. On September 30, the parties
executed another contract in which the defendant acknowledge the receipt at the time of the
full purchase price of sale. These items were placed in 2 lots. In the first lot it is composed of
221 bale so fourth-class superior tobacco and of crop 1899 from Angadanan and on the second
lot it is composed of 76 bales of first-, second- and third-class crops from Isabela. In
December 1901, plaintiff with others, organized a company tow hich the plaintiff sold all the
tobacco which he bought from the defendant. Upon examination the new company found out
that the tobacco was not the quality indicated in the inventory. The plaintiff claimed that the
tobacco in the two lots was worthless and filed a case to recover what he had paid.
Issue: Whether or not the plaintiff can recover the amount he paid for the tobacco.
Ruling: No, he cannot recover the amount. The plaintiff was the owner of another business
in which he testified that he is planning to move his business in the building with the cigar
factory of the defendant. It would be impossible for him to get the building without buying
the tobacco from the defendant. In the document agreed by the parties in August 1901, it is
considered a completed contract of sale. In the case of Mascunana vs. Court of Appeals, G.R.
No. 15864, it provided the essential elements of the contract or sale with the consent or
meeting or mind as the first element. There must be a determinate subject matter and lastly
the price certain in money or its equivalent. In the case there was a meeting of minds and
the subject was determinate being the building with the tobacco. The price was also agreed
by both parties. It is agreed that the plaintiff would buy among other things, all the tobacco
in the factory. He is also bound to take all the tobacco belonging to the factory and pay the
defendant. It is not a conditional contract but it is considered to be and absolute contract in
which the plaintiff is obligated to pay the amount of tobacco.
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FACTS: Juan Rubiato is a resident of the Municipality of Nagcarlan, Province of Laguna. He

was the owner of various parcels of land having a pontential value approximately cause P
26,000.00. Rubiato was desirous of obtaining a loan of not exceed P 1,000.00. being in this
state of mind, two men, Manuel Gonzalez Vila and one Gregorio Azucena, and possibly
another, one Marlo Encarnacion, came to the house of Rubiato and there induced him to sign
the second page of a power of attorney in favor of Manuel Gonzalez Vila.
By reason of the power thus given, Manuel Gonzalez Vila on April 29, 1915, formulated the
document by which the lands of Rubiato were sold to Hilaria Aguilar of Manila, for the sum
of P800.00, with right of repurchase within one year. Rubiato to remain in the possession of
the land as lessee and to pay P 120.00 every three months as lease rent. Manuel Gonzalez
Vila received from Hilaria Aguilar the P 800.00 as the selling price of the land. Whether this
money was then passed on to Juan Rubiato is uncertain, although it is undeniable that Hilaria
Aguilar has never been paid the money she advanced.
The one year mentioned in the pacto de retro having expired without Hilaria Aguilar having
received the principal nor any part of the lease rent, she began action against Juan Rubiato
and Manuel Gonzalez Vila to consolidate the eight parcels of land in her name. The trial judge,
the Hon. Manuel Camus, rendered a decision. The court found that the power of attorney
only authorized Manuel Gonzalez Vila to obtain a loan subject to mortgage, and not to sell
the property. The judgment was to the effect that the plaintiff Hilaria Aguilar recover from
the defendant Juan Rubiato the sum of P 800.00 with interest at the rate of 6 per cent per
annum from April 29, 1915 until May 1, 1916, and with interest at the rate of 12 per cent
per annum from May 1, 1916 until the payment of the principal.
ISSUE: Whether or not Rubiato, through the Special Power of Attorney, is only responsible
to the plaintiff for a loan and not a contract to sell.
RULING: YES. The members of this court after most particular and cautious consideration,
having in view all the facts and all the naturals tendencies of mankind, consider that Rubiato
is only responsible to the plaintiff for the loan of P800.
It may well be that Vila and his partners, acting as middlemen, fabricated the document
which Rubiato signed, secured the money from Hilaria Aguilar, and then pocketed the same.
Yet as minor details somewhat corroborative of the result reached by the trial court, are the
undeniable facts that Rubiato admitted his desire to obtain a
loan, that Hilaria Aguilar made such a loan, and that while the testimony of Vila is not overly
truthful, in this one respect we do have his forceful statement that the money was paid over
to Rubiato. That payment of the sum of P800 was not explicity prayed for in the complaint,
does not deprive the court of power to render judgment for this amount, because it is a rule
of good pleading that "the demand in the complaint is no part of the statement of the cause
of action, and does not give it character. The facts alleged do this, and the plaintiff is entitled
to so much relief as they warrant.
Furthermore, it is — that the inadequacy of the price which Vila obtained for the eight parcels
of land belonging to Rubiato is so great that the minds revolts at it. It is an agreement which
a reasonable man would neither directly nor indirectly be likely to enter into or to consent to.
To hold that the power of attorney signed by Rubiato authorized Vila to enter into the instant
contract of sale would be equivalent to holding, if we may be permitted to use the language
of Lord Hardwicke, that "a man in his senses and not under delusion" would dispose of lands
worth P26,000 for P1,000, and would pay interest thereon at the rate of 60 per cent per
annum.
Principle: Article 1470: ‘Gross inadequacy of price does not affect a contract of Sale. Except
as may indicate a defect in the consent, or that the parties really intended a donation or some
other act or contract’ (Case on failure of consideration)
FACTS: Spouses Leonardo Joaquin and Feliciana Landrito (defendants) are the parents of the
plaintiffs Consolacion, Emma and Natividad as well as co-defendants Fidel, Tomas , Artemio,
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Felicitas , Fe, and Gavino all surnamed Joaquin. Plaintiffs sought to declare null and void ab
initio certain deeds of Sale of real property executed by defendant parents to their co-
defendants children.
Deeds of Sale executed to wit,
 Deed of absolute sale covering Lot 168-C-7 for P6,000.00

 Deed of absolute sale covering Lot 168-I-3 for P12000.00
 Deed of absolute sale covering Lot 168-I-1 for P54,300.00
 Deed of absolute sale covering Lot 168-I-2 for P54,300.00
In seeking the declaration of Nullity, plaintiffs averred First, there was no actual consideration
Second, assumption of the consideration presented, properties are more than three-folds
valuable than of the consideration presented.
ISSUE: Whether or not there is a valid contract for lack of consideration.
RULING: Yes. There is a valid contract. A contract of Sale is not a real contact but a
consensual contract. As a consensual contract, a contract of Sale becomes binding and valid
contract upon the meeting of the minds as to price. If there is a meeting of the minds of the
parties as to the price, the contract of sale is valid, despite the manner of payment, or even
the breach of the manner of payment. If the real price is not stated in the contract, then the
contract is valid but is subject for reformation. If there is no meeting of minds of the parties
as to the price because the prices stipulated is simulated, the contract is void
It is not the act of payment of the price that determines the validity of a contract of sale.
Payment of the price has nothing to do with the perfection of the contract. Payment of the
price goes into the performance of the contract. Failure to Pay the consideration is different
from lack of consideration.
Facts: A parcel of land was acquired by plaintiff Aurelio Roque and Maria Mesina during their
conjugal union. Maria died on August 28, 1966. On June 15, 1977, Aurelio filed a case for
partition. The trial court held that Aurelio is entitled to the ½ portion at his share in the
conjugal property, and 1/5 of the other half which formed part of Maria’s estate, divided
equally among him at his 4 children. The decision having become final and executory, the
Register of Deeds of Manila issued a transfer certificate of title on October 5, 1979 according
to the ruling of the court. On April 1, 1980, Aurelio sold his 6/10 share to spouses Aurora
Tuazon-Repuyan and Jose Repuyan, as evidenced by a deed of absolute sale. On June 21,
1980, Aurora caused the annotation of her affidavit of adverse claim. On August 20, 1980,
Aurelio filed a complaint for rescission of contract grounded on the buyers’ failure to pay the
balance of the purchase price. On February 4, 1982, another deed of absolute sale was
executed between Aurelio and his children, and herein petitioner Clara Balatbat, involving the
entire lot. Balatbat filed a motion for the issuance of writ of possession, which was granted
by the court on September 20, 1982, subject to valid rights and interests of third persons.
Balatbat filed a motion to intervene in the rescission case, but did not file her complaint in
intervention. The court ruled that the sale between Aurelio and Aurora is valid.
Issue: Whether the alleged sale to private respondents was merely executory
Held: Contrary to petitioner's contention that the sale dated April 1, 1980 in favor of private
respondents Repuyan was merely executory for the reason that there was no delivery of the
subject property and that consideration/price was not fully paid, we find the sale as
consummated, hence, valid and enforceable. The Court dismissed vendor's Aurelio Roque
complaint for rescission of the deed of sale and declared that the Sale dated April 1, 1980,
as valid and enforceable. No appeal having been made, the decision became final and
executory.
The execution of the public instrument, without actual delivery of the thing, transfers the
ownership from the vendor to the vendee, who may thereafter exercise the rights of an owner
over the same. In the instant case, vendor Roque delivered the owner's certificate of title to
herein private respondent. The provision of Article 1358 on the necessity of a public document
is only for convenience, not for validity or enforceability. It is not a requirement for the
validity of a contract of sale of a parcel of land that this be embodied in a public instrument.
A contract of sale being consensual, it is perfected by the mere consent of the parties.
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Delivery of the thing bought or payment of the price is not necessary for the perfection of
the contract; and failure of the vendee to pay the price after the execution of the contract
does not make the sale null and void for lack of consideration but results at most in default
on the part of the vendee, for which the vendor may exercise his legal remedies.
Facts: This case is a consolidated petition for review of the decision. Spouses Guillermo
Nombre and Victoriana Cari-an died without issue in 1924 and 1938. Nombre's heirs include
his nephews and grandnephews. Victoriana Cari-an was succeeded by her late brother's son,
Gregorio Cari-an. Declared as Victoriana's heir in the estate proceedings for Nombre and his
wife. After Gregorio died in 1971, his wife, Generosa Martinez, and children, Rodolfo, Carmen,
Leonardo and Fredisminda, all surnamed Cari-an, were also adjudged as heirs by
representation to Victoriana's estate. Leonardo Cari-an passed away, leaving his widow, Nelly
Chua vda. de Cari-an and minor son Leonell, as his heirs.
On September 15, 1978, Gregorio Cari-an's heirs, collectively referred to as private

respondents Cari-an, executed the Deed of Sale of Rights.
On September 16, 1982, the probate court approved a motion filed by the heirs of Cari-an
and Nombre to sell their respective shares in the estate. On September 21, 1982, private
respondents Cari-an, in addition to some heirs of Guillermo Nombre sold their shares in eight
parcels of land including Lot Nos. 1616 and 1617 to the spouses Ney Sarrosa Chua and Paquito
Chua for P1,850,000.00. One week later, the vendor-heirs, including private respondents
Cari-an, filed a motion for approval of sale of hereditary rights, the sale made on September
21, 1982 to the Chuas.
Private respondents Cari-an instituted this case for cancellation of sale against petitioners on
November 3, 1982. They complained of petitioners' failure to pay the balance of the purchase
price by May 31, 1979 and alleged that they only received a total of P132,551.00 in cash and
goods. Petitioners replied that the Cari-ans, having been paid, had no right to resell the
subject lots; that the Chuas were purchasers in bad faith; and that the court approval of the
sale to the Chuas was subject to their existing claim over said properties.
Issue: Whether or not the sale was a contract to sell and private respondents may rescind
the contract the moment the buyer fails to pay?
Ruling: Private respondents as sellers did not reserve unto themselves the ownership of the
property until full payment of the unpaid balance of P225,000.00.
There is no stipulation giving the sellers the right to unilaterally rescind the contract the
moment the buyer fails to pay within the fixed period. Petitioners were already in possession
of the subject property as lessees.
Petitions are granted. The decision of the Court of Appeals reversed and set aside. The case
is remanded to the Regional Trial Court of Negros Occidental and 1617 will be owned by each
party, at the option of petitioners. The trial court is directed to order the issuance of the
corresponding certificates of title in the name of the respective parties and to resolve the
matter of rental payments of the land not delivered to the Chua spouses subject to the rates
specified above with legal interest from date of demand.
EARNEST MONEY
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Facts: Caguiat offered to buy the lot owned by spouses Serrano. Caguiat gave P100K as
partial payment, in turn, sps. Serrano gave a receipt with a statement that respondent
promised to pay the balance of the purchase price. Sps. Serrano were leaving for abroad and
sought to cancel the transaction. Sps. Serran then contends that there is no perfected
contract as there was no clear agreement between the parties as to the amount of
consideration.
Issue:
 Whether or not there was a perfected contract of sale between the parties
 Whether or not the document entitled "Receipt for Partial Payment" signed by both
parties earlier mentioned is a contract to sell or a contract of sale.
Ruling (SC): In holding that there is a perfected contract of sale, both courts mainly relied
on the earnest money given by respondent to petitioners (Art. 1482). We are not convinced.
It is true that Article 1482 of the Civil Code provides that “Whenever earnest money is given
in a contract of sale, it shall be considered as part of the price and proof of the perfection of
the contract.” However, this article speaks of earnest money given in a contract of sale. In
this case, the earnest money was given in a contract to sell.
The "Receipt for Partial Payment" shows that the true agreement between the parties is a
contract to sell. The earnest money forms part of the consideration only if the sale is
consummated upon full payment of the purchase price. Now, since the earnest money was
given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply.
As previously discussed, the suspensive condition (payment of the balance by respondent)
did not take place. Clearly, respondent cannot compel petitioners to transfer ownership of the
property to him. Earnest money- it is something of value that the buyer was really in earnest
and given after the perfection of the contract. (part of the purchase price.)
Thesis: Escueta, Rubio and heirs of Baloloy filed a case to declare the nullity of the contract
of sale for the subject real property against Rufina Lim and pray for the declaration of sale
to Escueta as valid.
Facts: Rufina Lim purchased the hereditary shares of Ignacio E. Rubio and the heirs of Luz
Baloloy in the amount of 100K and 450K respectively as down payment in 1990. It was
stipulated that the balance would be paid upon the delivery of certificates of title, however,
the petitioners refused to comply their obligation based on the agreement because the
subject contract of sale has no more force and effect as far as the Baloloys are concerned,
since they have withdrawn their offer to sell for the reason that respondent failed to pay the
balance of the purchase price as orally promised on or before May 1, 1990.
RTC Decision on ex parte trial: RTC has rendered in favor of [respondent] and against
[petitioners, heirs] of Luz R. Balolo[y], namely: Alejandrino Baloloy and Bayani Baloloy. The
[petitioners] Alejandrino Baloloy and Bayani Baloloy are ordered to immediately execute an
[Absolute] Deed of Sale over their hereditary share in the properties covered by TCT No.
74392 and TCT No. 74394, after payment to them by [respondent] the amount of
P[1,050,000] or consignation of said amount in Court. Further[,] [petitioners] Alejandrino
Baloloy and Bayani Baloloy are ordered to jointly and severally pay [respondent] moral
damages in the amount of P[50,000] and P[20,000] for attorney’s fees. CA affirmed the trial
court’s order and partial decision, but reversed the later decision.
Issues: Whether or not the contract of sale between petitioners and respondent is valid.
Held: Yes. Art. 1317. A contract entered into in the name of another by one who has no
authority or legal representation, or who has acted beyond his powers, shall be unenforceable,
unless it is ratified, expressly or impliedly, by the person on whose behalf it has been
executed, before it is revoked by the other contracting party.
His acceptance and encashment of the check, however, constitute ratification of the contract
of sale and "produce the effects of an express power of agency. His action necessarily implies
that he waived his right of action to avoid the contract, and, consequently, it also implies the
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tacit, if not express, confirmation of the said sale effected" by Virginia Lim in favor of
respondent.
Baloloys have ratified the contract of sale when they accepted and enjoyed its benefits. "The
doctrine of estoppel applicable to petitioners here is not only that which prohibits a party
from assuming inconsistent positions, based on the principle of election, but that which
precludes him from repudiating an obligation voluntarily assumed after having accepted
benefits therefrom.
Article 1544 of the Civil Code, a second buyer of the property who may have had actual or
constructive knowledge of such defect in the seller’s title, or at least was charged with the
obligation to discover such defect, cannot be a registrant in good faith. Such second buyer
cannot defeat the first buyer’s title. In case a title is issued to the second buyer, the first
buyer may seek reconveyance of the property subject of the sale. Even the argument that a
purchaser need not inquire beyond what appears in a Torrens title does not hold water. A
perusal of the certificates of title alone will reveal that the subject properties are registered
in common, not in the individual names of the heirs.
All the elements of a valid contract of sale under Article 1458 of the Civil Code are present,
such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price
certain in money or its equivalent. Ignacio Rubio, the Baloloys, and their co-heirs sold their
hereditary shares for a price certain to which respondent agreed to buy and pay for the
subject properties. "The offer and the acceptance are concurrent, since the minds of the
contracting parties meet in the terms of the agreement.
Article 1477 of the same Code also states that "[t]he ownership of the thing sold shall be
transferred to the vendee upon actual or constructive delivery thereof. In the present case,
there is actual delivery as manifested by acts simultaneous with and subsequent to the
contract of sale when respondent not only took possession of the subject properties but also
allowed their use as parking terminal for jeepneys and buses. Moreover, the execution itself
of the contract of sale is constructive delivery.
In fact, earnest money has been given by respondent. "[I]t shall be considered as part of the
price and as proof of the perfection of the contract. It constitutes an advance payment to "be
deducted from the total price.
DOCTRINE: An option contract is 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.
FACTS: Respondent Lourdes Q. Del Rosario-Suarez (Lourdes) was the owner of a parcel of
land, containing more or less an area of 1,211 square meters located along Tandang Sora
Street, Barangay Old Balara, Quezon City and previously covered by Transfer Certificate of
Title (TCT) No. RT-56118 issued by the Registry of Deeds of Quezon City.
On June 24, 1994, petitioner Roberto D. Tuazon (Roberto) and Lourdes executed a Contract
of Lease over the abovementioned parcel of land for a period of three years. The lease
commenced in March 1994 and ended in February 1997. During the effectivity of the lease,
Lourdes sent a letter dated January 2, 1995 to Roberto where she offered to sell to the latter
subject parcel of land. She pegged the price at ₱37,541,000.00 and gave him two years from
January 2, 1995 to decide on the said offer.
On June 19, 1997, or more than four months after the expiration of the Contract of Lease,
Lourdes sold subject parcel of land to her only child, Catalina Suarez-De Leon, her son-in-law
Wilfredo De Leon, and her two grandsons, Miguel Luis S. De Leon and Rommel S. De Leon
(the De Leons), for a total consideration of only ₱2,750,000.00 as evidenced by a Deed of
Absolute Sale executed by the parties. TCT No. 177986 was then issued by the Registry of
Deeds of Quezon City in the name of the De Leons.
The new owners through their attorney-in-fact, Guillerma S. Silva, notified Roberto to vacate
the premises, but the latter refused. Roberto claims that Lourdes violated his right to buy
subject property under the principle of right of first refusal by not giving him notice and the
opportunity to buy the property under the same terms and conditions or specifically based on
the much lower price paid by the De Leons.
ISSUE: Whether or not Roberto had the right of first refusal.

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RULING: No. The case here involved what is known as an option contract. It is clear that an
option contract is entirely different and distinct from a right of first refusal in that in the former,
the option granted to the offeree is for a fixed period and at a determined price; Lacking these
two essential requisites, what is involved is only a right of first refusal.
Letter of Lourdes embodies an option contract as it grants Roberto a fixed period of only two
years to buy the subject property at a price certain of P37,541,000.00. It being an option
contract, the unilateral promise to buy or sell is a mere offer, which is not converted into a
contract except at the moment it is accepted. Before the promise is accepted, the promissor
may withdraw it at any time. Even if the promise was accepted, private respondent was not
bound thereby in the absence of a distinct consideration. In this case, it is undisputed that
Roberto did not accept the terms stated in the letter of Lourdes. There is therefore no contract
that was perfected between them. Roberto, thus, does not have any
right to demand that the property be sold to him at the price for which it was sold to the De
Leons neither does he have the right to demand that said sale to the De Leons be annulled.
Facts: This petition for review on certiorari seeks to annul the Decision dated August 7, 1996,
of the Court of Appeals in CA-G.R. CV No. 45956, and its Resolution dated September 12,
1996, denying reconsideration of the decision. In the questioned issuances, the Court of
Appeals affirmed the Decision dated June 8, 1993, of the Regional Trial Court of Manila,
Branch 3, in Civil Case No. 90-55437.
On June 7, 1985, the Bible Baptist Church (petitioner Baptist Church) entered into a contract
of lease with Mr. & Mrs. Elmer Tito Medina Villanueva (respondent spouses Villanueva). The
latter are the registered owners of a property located at No. 2436 (formerly 2424) Leon
Guinto St., Malate, Manila. The pertinent stipulations in the lease contract were:
 That the LESSOR lets and leases to the LESSEE a store space known as 2424 Leon Guinto Sr. St.,
Malate, Manila, of which property the LESSOR is the registered owner in accordance with the Land
Registration Act.
 That the lease shall take effect on June 7, 1985 and shall be for the period of Fifteen (15) years.
 That LESSEE shall pay the LESSOR within five (5) days of each calendar month, beginning Twelve
(12) months from the date of this agreement, a monthly rental of Ten Thousand Pesos
(P10,000.00) Philippine Currency, plus 10% escalation clause per year starting on June 7, 1988.
 That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum of Eighty Four
Thousand Pesos (P84,000.00) Philippine Currency. Said sum is to be paid directly to the Rural
Bank, Valenzuela, Bulacan for the purpose of redemption of said property which is mortgaged by
the LESSOR.
 That the title will remain in the safe keeping of the Bible Baptist Church, Malate, Metro Manila until
the expiration of the lease agreement or the leased premises be purchased by the LESSEE,
whichever comes first. In the event that the said title will be lost or destroyed while in the
possession of the LESSEE, the LESSEE agrees to pay all costs involved for the re-issuance of the
title.
 That the leased premises may be renovated by the LESSEE, to the satisfaction of the LESSEE to
be fit and usable as a Church.
 That the LESSOR will remove all other tenants from the leased premises no later than March 15,
1986. It is further agreed that if those tenants are not vacated by June 1, 1986, the rental will be
lowered by the sum of Three Thousand Pesos (P3,000.00) per month until said tenants have left
the leased premises.
 That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of the
lease. If the LESSEE decides to purchase the premises the terms will be: A) A selling Price of One
Million Eight Hundred Thousand Pesos (P1.8 million), Philippine Currency. B) A down payment
agreed upon by both parties. C) The balance of the selling price may be paid at the rate of One
Hundred Twenty Thousand Pesos (P120,000.00), Philippine Currency, per year.
Petitioner addressed the following error/s allegedly committed by the Court of Appeals:
Respondent Court of Appeals erred in finding that the option to buy granted the petitioner
under its contract of lease with the Villanuevas did not have a consideration and, therefore,
did not bind the latter;
In this case, petitioner seeks to buy the leased premises from the spouses Villanueva, under
the option given to them. Petitioners claim that the Baptist Church agreed to advance the
large amount needed for the rescue of the property but in exchange, it asked the Villanuevas
to grant it a long term lease and an option to buy the property for P1.8 million. They argue
that the consideration supporting the option was their agreement to pay off the Villanueva's
P84,000 loan with the bank, thereby freeing the subject property from the mortgage
encumbrance.
Issue: Whether or not the option to buy given to the Baptist Church is founded upon a
consideration Rulings:
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Ruling: The court finds no merit in these contentions. Article 1479 provides: 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
promissor if the promise is supported by a consideration distinct from the price.
For an option contract to be valid and enforceable against the promissor, there must be a
separate and distinct consideration that supports it. In Villamor v. Court of Appeals, the
Supreme Court defined consideration as "the why of the contracts, the essential reason which
moves the contracting parties to enter into the contract.” This definition illustrates that the
consideration contemplated to support an option contract need not be monetary. Actual cash
need not be exchanged for the option. However, by the very nature of an option contract, as
defined in Article 1479, the same is an onerous contract for which the consideration must be
something of value, although its kind may vary.
Villamor is distinct from the present case because, First, this Court cannot find that petitioner
Baptist Church parted with anything of value, aside from the amount of P84,000 which was
in fact eventually utilized as rental payments. Second, there is no document that contains an
agreement between the parties that petitioner Baptist Church's supposed rescue of the
mortgaged property was the consideration which the parties contemplated in support of the
option clause in the contract. As previously stated, the amount advanced had been fully
utilized as rental payments over a period of one year. While the Villanuevas may have them
to thank for extending the payment at a time of need, this is not the separate consideration
contemplated by law.
To summarize the rules, an option contract needs to be supported by a separate consideration.

The consideration need not be monetary but could consist of other things or undertakings.
However, if the consideration is not monetary, these must be things or undertakings of value,
in view of the onerous nature of the contract of option. Furthermore, when a consideration
for an option contract is not monetary, said consideration must be clearly specified as such
in the option contract or clause.
In view of this Court's finding that the option contract is not enforceable for being without
consideration, the respondents Villanueva spouses' refusal to comply with it cannot be the
basis of a claim for attorney's fees.
Hence, the Supreme Court agrees with as the Court of Appeals, which affirmed the findings
of the Regional Trial Court, that such claim is to be dismissed for lack of factual and legal
basis.
Facts: This case is a petition for review on certiorari.Miguel Tan is doing business under the
name and style of Manila Mandarin Marketing, was engaged in the business of selling electrical
materials. From August 19 to November 26, 1997, Manila Mining Corporation ordered and
received various electrical materials from Tan valued at 2,347,880 Pesos. Manila Mining
Corporation agreed to pay the purchase price within 30 days from delivery or be charged
interest of 18% per annum, and in case of suit to collect the same, to pay attorney’s fees
equal to 25% of the claim.
Manila Mining Corporation made partial payments in the amount of 464,636 Pesos. But
despite repeated demands, it failed to give the remaining balance of 1,883,244 Pesos which
was covered by nine invoices. On September 3, 2001, Tan filed a collection suit against Manila
Mining Corporation at the Manila Regional Trial Court.
After Tan completed presenting evidence, Manila Mining Corporation filed a Demurrer to
Evidence. On December 18, 2003, the Regional Trial Court issued an Order denying the
demurrer and directing Manila Mining Corporation to present evidence.
Manila Mining Corporation offered as sole witness Rainier Ibarrola, its accountant from year
2000 to 2002. Ibarrola confirmed that it was standard office procedure for a supplier to
present the original sales invoice and purchase order when claiming to be paid. He testified
that the absence of stamp marks on the invoices and purchase orders negated receipt of said
documents by Manila Mining Corporation’s representatives.
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On rebuttal, Tan presented Wally de los Santos, his sales representative in charge of Manila
Mining Corporation’s account. De los Santos testified that he delivered the originals of the
invoices and purchase orders to Manila Mining Corporation’s accounting department. As proof
he showed three customer’s acknowledgment receipts bearing the notation.
On appeal, the Court of Appeals affirmed the Regional Trial Court’s decision.
Petitioner contends that respondent’s claim for payment was premature as the original
invoices and purchase orders were not sent to its accounting department. Tan’s claims were
not verified and processed. Manila Mining Corporation believes that mere delivery of the goods
did not automatically give rise to its obligation to pay. It relies on Article 1545 of the Civil
Code to justify its refusal to pay
Issue: Whether or not Manila Mining Corporation should pay for the electrical materials
despite its allegation that Tan failed to comply with certain requisites for payment.
Ruling: Yes, Manila Mining Corporation should pay for the electrical materials. Petitioner
cannot evade its obligation to pay by claiming lack of consent to the perfected contracts of
sale.
Topic: Causes
FACTS: A property known as Lot 3504 situated in Poblacion La Paz, Iloilo City with an area of
about 2.5 hectares was originally decreed under the name of Justice Antonio Horilleno -
sometime in 1916. Prior to His death he executed a last will and testament attesting to the
fact that the land was a co-ownership between himself and his brothers and sisters by the
name of "Luis, Soledad, Fe, Rosita, Carlos and Esperanza,".
The siblings led by Carlos and Mary (Justice Horilleno’s successor) wanted to sell each of their
shares or the entire property if Filomena Javellana one of the siblings would also agree. With
this, they hired Crescencia Harder to look for buyers and the latter came to the Doromal’s
(Father and Son) as interested buyers. However, since the siblings were leaving far from each
other they all executed various Special-Power-of Attorney in favor of their niece (Mary H.
Jimenez) in preparation for the execution of the sale. The party likewise prepared a Special
Power of Attorney for Filomena’s signature. The special power of Attorney was then sent to
Filomena along with a letter from Carlos dated 18 January, 1968 informing her of the price at
P4.00 per square meter. Although as narrated, Carlos already received a check the sum of
P5,000.00 as earnest money from the Doromal’s and the price of P5.00 per square meter.
Although Filomena was not agreeable of the sale, the rest of the co-owners proceeded with
the sale of 6/7 of the property where the new title was issued to the buyer.
Because of this, Filomena sent an offer to repurchase the lot for the sum of P30,000.00 along
with a letter sent to the buyer to which they have refused – hence the filing of this case.
Lower Court: Dismissed the case for the reason that Filomena had no more right to redeem
as she was fully aware of her co-owners’ intent to sell the property and that the consideration
of P30,000.00 was only placed in the deed of sale to minimize the payment of the registration
fees, stamps, and sales tax.
Court of Appeals: Reversed the decision of the trial court and held that although she was
informed of the proposal to sell the property, but she was never informed of the actual
execution and registration of the corresponding deed of sale. Hence her right to redeem had
not yet expired at the time she made her offer and delivered it to the petitioners on even
date. It further ruled that the redemption price to be paid by respondent should be that
stated in the deed of sale which is P30,000 notwithstanding that the preponderance of the
evidence proves that the actual price paid by petitioners was P115,250.
ISSUE:
Whether or not the redemption price should be that stated in the Deed of Sale.
RULING: Yes. The law prefers that all the terms and conditions of the sale should be definite
and in writing. As appropriately observed by Justice Gatmaitan in the decision under review,
Article 1619 of the Civil Code confers unto a co-owner the right to redeem and to be
subrogated under the same terms and conditions stipulated in the contract, and to avoid any
controversy as to the terms and conditions under which the right to redeem may be exercised,
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it is best that the period therefore should not be deemed to have commenced unless the
notice of the disposition is made after the formal deed of disposal has been duly executed.
As clearly stated under Article 1619:
"Legal redemption is the right to be subrogated, upon the same terms and conditions
stipulated in the contract, in the place of one who acquires a thing by purchase or
dation in payment, or by any other transaction whereby ownership is transmitted by
onerous title." pp. 471-472, New Civil Code”
Hence, the court ruled that the redemption price should be that stated in the deed of sale
regardless of what might have been actually paid by petitioners. In the case at bar, the co-
owner in the name of Filomena Javellana by exercising her right of legal redemption should
only pay P30,000.00 although this amount is much higher than what is paid by the petitioners
Doromal.
Furthermore, the court also ruled that where the practice of understating considerations of
transactions for the purpose of evading taxes and fees due to the government must be
condemned and all parties guilty thereof must be made to suffer the consequences of their
ill-advised agreement to defraud the state. Where, in this case, the consideration of P30,000
only was placed in the deed of sale to minimize the payment of the registration fees, stamps
and sales tax. WHEREFORE, the decision of the Court of Appeals is affirmed
Topic: Earnest Money
FACTS: A property known as Lot 3504 situated in Poblacion La Paz, Iloilo City with an area
of about 2.5 hectares was originally decreed under the name of Justice Antonio Horilleno -
sometime in 1916. Prior to His death he executed a last will and testament attesting to the
fact that the land was a co-ownership between himself and his brothers and sisters by the
name of "Luis, Soledad, Fe, Rosita, Carlos and Esperanza,".
The siblings led by Carlos and Mary (Justice Horilleno’s successor) wanted to sell each of their
shares or the entire property if Filomena Javellana one of the siblings would also agree. With
this, they hired Crescencia Harder to look for buyers and the latter came to the Doromal’s
(Father and Son) as interested buyers. However, since the siblings were leaving far from each
other they all executed various Special-Power-of Attorney in favor of their niece (Mary H.
Jimenez) in preparation for the execution of the sale. The party likewise prepared a Special
Power of Attorney for Filomena’s signature. The special power of Attorney was then sent to
Filomena along with a letter from Carlos dated 18 January, 1968 informing her of the price at
P4.00 per square meter. Although as narrated, Carlos already received a check the sum of
P5,000.00 as earnest money from the Doromal’s and the price of P5.00 per square meter.
Although Filomena was not agreeable of the sale, the rest of the co-owners proceeded with
the sale of 6/7 of the property where the new title was issued to the buyer.
Because of this, Filomena sent an offer to repurchase the lot for the sum of P30,000.00 along
with a letter sent to the buyer to which they have refused – hence the filing of this case.
Lower Court: Dismissed the case for the reason that Filomena had no more right to redeem
as she was fully aware of her co-owners’ intent to sell the property and that the consideration
of P30,000.00 was only placed in the deed of sale to minimize the payment of the registration
fees, stamps, and sales tax.
Court of Appeals: Reversed the decision of the trial court and held that although she was
informed of the proposal to sell the property, but she was never informed of the actual
execution and registration of the corresponding deed of sale. Hence her right to redeem had
not yet expired at the time she made her offer and delivered it to the petitioners on even
date. It further ruled that the redemption price to be paid by respondent should be that
stated in the deed of sale which is P30,000 notwithstanding that the preponderance of the
evidence proves that the actual price paid by petitioners was P115,250.
ISSUE: Whether or not the P5,000.00 was considered an earnest money as contemplated
under Article 1482 of the Civil Code.
RULING: No. Earnest money is defined as something of value given by the buyer to the
seller to show that the buyer is really in earnest, and to bind the bargain. It is actually a
partial payment of the purchase price and is considered as proof of the perfection of the
contract. (Villongco Realty vs. Bormaecheco, 65 SCRA 352)
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Art. 1482 provides that whenever earnest money is given in a contract of sale, it shall be
considered as part of the price and as proof of the perfection of the contract.
In the case at bar, there is nothing to prove that the P5,000 earnest money paid to Carlos in
October 1967 was in the concept of the earnest money contemplated in Article 1482 of the
Civil Code, as signifying perfection of the sale. Accordingly, the court was more inclined to
believe that the P5,000 were paid in the concept of earnest money as the term was understood
under the Old Civil Code, that is, as a guarantee that the buyer would not back out,
considering that it is not clear that there was already a definite agreement as to the price and
that petitioners were decided to buy 6/7 only of the property should respondent Javellana
refuse to agree to part with her 1/7 share.
Thus, the earnest money provided was only a guarantee that the buyer would not back out.
This is not within the concept as contemplated under Article 1482 of the Civil Code where an
earnest money is given in a contract of sale which shall be considered as part of the price and
as a proof of the perfection of the contract and not as a guarantee.
FACTS: PNB, herein petitioner, doubly credited the private respondent’s account erroneously.
Petitioner then demanded the private respondent to return the amount in excess, equal to
P34, 340.58. Thereafter, remittances from abroad to the private respondent were coursed
through petitioner PNB. Without his knowledge and consent, the bank deducted P34, 340.58
from the remittances, by virtue of compensation. Private respondent averred contending that
the bank does not have a legal justification to make compensation on the remittances. The
trial and the CA ruled in favor of the private respondent and ordered the amount taken by
the petitioner to be returned the private respondent.
ISSUE:
ISSUE: WON a local correspondent bank can make compensation against remittances
coursed through it.
RULING: No. The Court affirms the decision of the lower courts. The trial court correctly ruled
that the petitioner and the private respondent are not debtors and creditors of each other.
Article 1279 of the Civil Code provides:
In order that compensation may prosper, it is necessary:
That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;
That both debts consist in a sum of money, or if the things due are consumable, they are
of the same kind, and also of the same quality if the latter has been stated;
That the two debts be due;
That they are liquidated and demandable;
That over neither of them there by any retention or controversy commenced by third
persons and communicated in due time to the debtor.
As to the relationship created by the telexed fund transfers from abroad: A contract between
a foreign bank and local bank asking the latter to pay an amount to a beneficiary is a
stipulation pour autrui. The parties are not both principally bound with respect to the
$2,627.11 from Jeddah; neither are they at the same time principal creditor of the other.
Therefore, as matters stand, the parties’ obligations are not subject to compensation or set
off under Art. 1279 of the Civil Code, for the reason that the defendant is not a principal
debtor nor, is the plaintiff a principal creditor insofar as the amount of $2,627.11 is concerned.
They are debtor and creditor only with respect to the double payments; but are trustee-
beneficiary as to the fund transfer of $2,627.11.
PRINCIPLE: OPTIONS CONTRACT IS NOT A CONTRACT OF SALE AND IT WILL BE

UNENFORCEABLE AS THERE IS NO PERFECTION OF THE SALE
TOPIC EARNEST MONEY VS OPTION CONTRACT
PONENTE MENDOZA, J.:
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1. Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged

in the purchase and sale of real properties. In February, the properties were
offered for sale for P52, 140,000.00 in cash. The offer was made to Atty. Helena
M. Dauz who was acting for respondent spouses as undisclosed principals.
2. Atty. Dauz, acting in behalf of Spouses Huang, wrote a letter proposal in interest
of purchasing the property. In the said letter, it was agreed that spouses Huang
will pay a sum of 1,000,000.00 pesos as earnest money in exchange of exclusive
option to purchase the property. It was also agreed that if the parties will come
into a final agreement, the earnest money shall be returned to the spouses.
3. The parties didn’t reach an agreement resulting the petitioners to return the
earnest money. Atty. Dauz and spouses Huang as for execution of the sale and
initiated returning the earnest money back to the petitioners but the petitioners
rejected.
4. Respondents filed a complaint for specific performance. They contend that the sale
has been perfected because an earnest money has been delivered and accepted
to the petitioners. They contend that the sale is perfected and used as legal basis
Art. 1482 of the Civil Code which provides that "whenever earnest money is given
in a contract of sale, it shall be considered as part of the price and as proof of the
perfection of the contract." RTC and CA Ruled in favor of the respondents. Thus,
this case filed by the petitioners in the Supreme Court.
5. The Petitioners contend that there is no perfection of the sale. The letter of
respondents, which petitioner accepted, merely resulted in an option contract,
albeit it was unenforceable for lack of a distinct consideration. Petitioner argues
that the absence of agreement as to the mode of payment was fatal to the
perfection of the contract of sale.
ISSUE: Whether or not the money deposited is considered an earnest money.
RULING: No, the money deposited is not an earnest money. Art. 1479, an accepted
unilateral promise to buy or sell a determinate thing for a price certain is binding
upon the prior only if the promise is supported by a distinct consideration.
In the case at bar, the P1 million “earnest money” cannot be considered as distinct
consideration and cannot be considered as an earnest money. The Proposal letter
submitted by Atty. Dauz to the Petitioner is an Option Contract and therefore they
are still in negotiation phase. An options contract is an agreement between a
buyer and seller that gives the purchaser of the option the right to buy or
sell a particular asset at a later date at an agreed upon price but it is not a
contract of sale. The stipulation in the contract entails that they are still in a
negotiation phase and there is no meeting of the minds yet. The parties not passing
the negotiation phase, there is no perfection of the contract and the P1 million cannot
be considered as an earnest money. Thus, the specific performance is unenforceable.
PRINCIPLE THE MANNER OF PAYMENT OF THE PURCHASES PRICE MUST BE

ESTABLISHED TO DETERMINE THE PERFECTION OF THE CONTRACT OF
SALE
TOPIC CAUSE OR CONSIDERATION
PONENTE TINGA, J.
FACTS:
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1. Respondent spouses Eduardo and Carmencita Ramos (respondents) are the

owners of two (2) fishing vessels, the "Lady Lalaine" and the "Lady Theresa."
On 1 April 1996, The Edradas bought the two vessels. Respondents and
petitioners executed an untitled handwritten document pertaining to the sale
and agreement of payments. The said agreement as follow:
“This is to acknowledge that Fishing Vessels ‘Lady Lalaine’ and ‘Lady Theresa’
owned by Eduardo O. Ramos are now in my possession and received in good
running and serviceable order. As such, the vessels are now my responsibility.
Documents pertaining to the sale and agreement of payments between me
and the owner of the vessel to follow. The agreed price for the vessel is
Nine Hundred Thousand Only (₱900,000.00).”
2. Upon the signing of the document, petitioners delivered to respondents four

(4) postdated checks. Three checks were honored except for one dishonored
check. June 1996, respondents filed an action against petitioners for specific
performance with damages before the RTC, praying that petitioners be obliged
to execute the necessary deed of sale of the two fishing vessels and to pay
the balance of the purchase price.
3. However, despite delivery of said vessels and repeated oral demands,

petitioners failed to pay the balance, so respondents further averred. The RTC
and CA ruled in favor of the Spouses Ramos and the Spouses Edradas are
asked to pay the remaining Balance.
4. The Edradas filed the case to Supreme Court with the contention that there
was no perfected contract of sale as distinguished from a contract to sell.
ISSUE:
1. Whether or not the payment of purchase price would conclude the contract of sale
has been perfected.
2. Whether or not there is perfected contract of Sale
RULING:
1. No. The payment of purchase price would not conclude the contract of sale
has been perfected. The Art 1475 Civil Code provides that a contract is
perfected when there is concurrence of the wills of the contracting parties with
respect to the object and the cause of the contract.
Jurisprudence also provides that (Swedish Match, AB v. Court of Appeals) before a

valid and binding contract of sale can exist, the manner of payment of the
purchase price must first be established, as such stands as essential to the
validity of the sale. In this case, the agreement merely acknowledges that a purchase
price had been agreed on by the parties however the mode of payment of
consideration was nowhere agreed in the said handwritten document signed
by the parties.
2. No. There is no perfected Contract of Sale. The Civil code provides that a
contract is perfected when there is concurrence of the wills of the contracting
parties with respect to the object and the cause of the contract. In the case
at bar, the agreement merely acknowledges that a purchase price had been
agreed on by the parties. There was no mutual promise to buy on the part of
petitioners and to sell on the part of respondents. Again, the foretasted proviso
in the agreement that documents pertaining to the sale and agreement of
payments between the parties will follow clearly manifests lack of agreement
between the parties as to the terms of the contract to sell, particularly the
object and cause of the contract.
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FACTS:
Pio Barretto and Sons, Inc. (BARRETTO & SONS) owned forty-three (43) parcels of registered
land with a total area of 18,500 square meters located at Carlos Palanca St., Quiapo, Manila,
which were mortgaged with the United Coconut Planters Bank (UCPB). In 1988, the obligation
of the corporation with UCPB remained unpaid making foreclosure of the mortgage imminent.
Goldenrod, Inc. (GOLDENROD), offered to buy the property from BARRETTO & SONS. On
May 25, 1988, through its president Sonya G. Mathay, petitioner wrote respondent Anthony
Que, President of respondent BARRETTO & SONS enclosed in the letter the earnest money of
P1 million which shall form part of the purchase price.
When the term of existence of BARRETTO & SONS expired, all its assets and liabilities
including the property located in Quiapo were transferred to respondent Pio Barretto Realty
Development, Inc. (BARRETTO REALTY). Petitioner’s offer to buy the property resulted in the
agreement with respondent BARRETTO REALTY that petitioner would pay the following: (a)
P24.5 million representing the outstanding obligations of BARRETTO REALTY with UCPB on
June 30, 1988; and (b) P20 million which was the balance of the purchase price of the property
to be paid in installments within a 3-year period with interest at 18% annum.
However, petitioner did not pay UCPB the P24.5 million loan obligation of BARRETTO REALTY
on the deadline set for payment instead it asked for an extension of one (1) month to settle
the obligation, which the bank granted. On the day of the payment, it asked again for another
extension of sixty (60) days to pay the loan. This time the bank demurred.
Because of this, the agent and broker of petitioner wrote Anthony Que, informing him on
behalf of GOLDENROD, that it could not go through with the purchase of the property due to
circumstances beyond its fault, i.e., the denial by UCPB of its request for extention. Also, it
demanded the refund of the earnest money of P1 million which petitioner gave to respondent
BARRETTO REALTY.
Since, private respondents didn’t heed the demand of the return of the earnest money, this
prompted petitioner to file a complaint with the Regional Trial Court for the return of the
amount of P1 million and the payment of damages including lost interest and profits. In their
answer, private respondents contended that it was the agreement of the parties that the
earnest money of P1 million would be forfeited to answer for losses and damages that might
be suffered by them in case of failure by respondent to comply with the terms of their
purchase agreement. The trial court ruled in favor of petitioner.
Dissatified with the decision, private respondents appealed to the Court of Appeals which
reversed the decision of the trial court and ordered the dismissal of the complaint.
Hence, this petition.
ISSUE:Whether or not the payment of the P1 million by petitioner was forfeited when
petitioner didn’t go through the purchase of the property?
RULING: No, it was not forfeited because it was intended to form part of the purchase price.
The Court held that under Article 1482 of the Civil Code, whenever earnest money is given in
a contract of sale, it shall be considered as part of the purchase price and as proof of the
perfection of the contract.
However, in the case at bar, there was no perfection of the contract of sale. The law provides
that the elements of the contract of sale (without which there can be no valid sale) includes
consent, determinate subject matter, and the price certain in money which is the cause or
consideration. When Goldenrod expressed to private respondent that it will no longer go
through with the purchase of property and demanded for the refund of the P1 million, there
is no longer a cause or consideration.
Hence, the P1 million was not forfeited given the fact that there was no perfection of the
contract of sale to begin with in the absence of a cause.
Ponente: Villarama, Jr., J.

One-liner statement of the decision of the case: “A decision or order issued by a department
or agency need not be appealed to the Office of the President when there is a special law that
provides for a different mode of appeal.”
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FACTS: On February 2, 2004, the late Emmanuel B. Moran, Jr. filed with the Consumer
Arbitration Office (CAO) a verified complaint against private respondent PGA Cars, Inc.
pursuant to the relevant provisions of Republic Act 7394 (RA 7394), otherwise known as the
Consumer Act of the Philippines. The complaint alleged that the private respondent should be
held liable for the product imperfections of a BMW car which it sold to complainant.
The CAO rendered a Decision in favor of complainant. Consequently, the private respondent
sought reconsideration of the Decision but the CAO denied the motion. Thus, the private
respondent appealed to the Secretary of the Department of Trade and Industry (DTI), the
quasi-judicial agency designated by Article 165 of RA 7394 to entertain appeals from the
adverse decisions and orders of the CAO.
However, the DTI Secretary dismissed the appeal of the private respondent who then filed an
appeal with the herein public respondent, Office of the President (OP).
The OP granted the appeal, reversed the DTI Secretary’s Resolution, and dismissed the
complaint on the ground that the DTI erred in holding the private respondent liable for product
defects. The complainant filed a motion for reconsideration with the OP but it was denied. So,
a petition for certiorari was filed with the Court of Appeals and alleged lack of jurisdiction on
the part of the OP for ruling cases involving a violation of RA 7394.
However, the CA dismissed the petition for certiorari on the ground that it was a wrong mode
of appeal. CA likewise denied the motion for reconsideration filed by the petitioner. Since the
original complainant Emmanuel Moran, Jr. passed away, his widow, Concordia Moran filed the
present petition for review on certiorari.
ISSUE: Whether or not there is an error of jurisdiction on the part of the Office of the
President?
RULING: Yes, there is an error of jurisdiction on the part of the Office of the President. The
procedure for appeals to the Office of the President is governed by Administrative Order No.
18, Series of 1987. Section 1 thereof provides:
SECTION 1. Unless otherwise governed by special laws, an

appeal to the Office of the President shall be taken within thirty (30) days
from receipt by the aggrieved party of the decision/resolution/order
complained of or appealed from . . . (Emphasis supplied.)
Furthermore, in the case of Phillips Seafood (Philippines) Corporation vs. The Board of
Investments, the Court held that “a decision or order issued by a department or agency need
not be appealed to the Office of the President when there is a special law that provides for a
different mode of appeal.”
In this case, a special law, RA 7394 expressly provided for immediate judicial relief from
decisions of the DTI Secretary by filing a petition for certiorari with the proper court.
One-liner statement of the decision of the case: “A Deed of Option or an optional contract
is a privilege existing in one person, for which he had paid a consideration and which gives
him the right to buy, for example, certain merchandise or certain specified property from
another person, if he chooses, at any time within the agreed period at a fixed price.”
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FACTS: Macaria Labingisa Reyes (Macaria) was the owner of a 600-square meter lot located
at Baesa, Caloocan City. On July 1971, she sold a portion of 300 square meters of the lot to
the Spouses Julio and Macaria Villamor (Spouses Villamor) for the total amount of P21, 000.
The Spouses Villamor bought the one-half portion of the land at P70.00 per square meter.
The price was greatly higher than the actual reasonable prevailing value of lands at the time.
In which Macaria stated in the “Deed of Option” she executed that the only reason that the
Spouses Villamor agreed to buy the lot at that price was because she and her husband agreed
to sell and convey the remaining portion to them under certain conditions: “whenever the
need of such sale arises, either on our part (private respondent) or on the part of the spouses
(Julio) Villamor and Marina V. Villamor, at the same price of P70.00 per square meter,
excluding whatever improvement may be foud thereon.”
According to Macaria, when her husband Roberto Reyes, retired in 1984, they offered to
repurchase the lot sold by them to the Villamor Spouses but Marina Villamor refused and
reminded them instead that the Deed of Option in fact gave them the option to purchase the
remaining portion of the lot.
The Spouses, on the other hand, claimed that they had expressed their desire to purchase
the remaining 300 square meter portion of the lot but the Reyeses had been ignoring them.
Thus, on July 13, 1987, after the conciliation proceedings in the barangay level failed, they
filed a complaint for specific performance against the Reyeses.
The trial court decided in favor of Spouses Villamor, but this was reversed by the Court of
Appeals (CA) on the ground that the Deed of Option is void for lack of consideration. Hence,
this petition.
ISSUE: Whether or not the CA erred in finding the deed of option as void for lack of
consideration even though the spouses paid an overpriced payment of P70.00 per square
meter?
RULING: Yes, the CA erred in finding the Deed of Option as void for lack of consideration.
The law provides that consideration is “the why of the contracts, the essential reason which
moves the contracting parties to enter into the contract” (Gonzales vs. Trinidad). It is clear
in the Deed of Option that the only reason why the Spouses Villamor agreed to buy the lot at
a price higher than the value of the lands at the time was because Macaria and her husband
agreed to sell and convey the remaining portion of the lot.
A Deed of Option or an optional contract is a privilege existing in one person, for which he
had paid a consideration and which gives him the right to buy, for example, certain
merchandise or certain specified property from another person, if he chooses, at any time
within the agreed period at a fixed price. (Enriquez de la Cavada vs. Diaz, G.R. No. L-11668,
April 1, 1918)
In distinction of earnest money and option contract, earnest money is applicable to a perfected
sale and it is part of the purchase price; also the buyer is required to pay the balance. On the
other hand, option contract is applicable to a sale not yet perfected and the money paid in
option contract is not part of the purchase price; the would-be buyer is not required to buy.
Doctrine: Option Contract

AZCUNA, J.:
Facts: On June 7, 1985, petitioner Bible Baptist Church entered into a contract of lease with
respondents Mr. & Mrs. Elmer Tito Medina Villanueva who own the subject property located
at No. 2436 Leon Guinto St., Malate, Manila. The pertinent stipulations in the lease contract
were:
That the lease shall take effect on June 7, 1985 and shall be for the period of Fifteen (15)
years. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum of Eighty
Four Thousand Pesos (P84, 000.00) Philippine Currency. Said sum is to be paid directly to the
Rural Bank, Valenzuela, Bulacan for the purpose of redemption of said property which is
mortgaged by the LESSOR. That the LESSEE has the option to buy the leased premises during
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the Fifteen (15) years of the lease. If the LESSEE decides to purchase the premises the terms
will be:
A) A selling Price of One Million Eight Hundred Thousand Pesos (P1.8 million), Philippine
Currency.
B) A down payment agreed upon by both parties.
C) The balance of the selling price may be paid at the rate of One Hundred Twenty Thousand
Pesos (P120, 000.00), Philippine Currency, per year.
Petitioner seeks to buy the leased premises from the spouses Villanueva, under the option
given to them. Petitioners claim that they (Baptist Church) agreed to advance the large
amount needed for the rescue of the property but, in exchange, it asked the Villanuevas to
grant it a long term lease and an option to buy the property for P1.8 million. However, the
respondents did not agree saying that there is no separate consideration. In this hand, the
petitioners argue that there is a consideration — the consideration supporting the option was
their agreement to pay off the Villanuevas P84, 000 loan with the bank, thereby freeing the
subject property from the mortgage encumbrance. That they would not have agreed to
advance such a large amount as it did to rescue the property from bank foreclosure had it not
been given an enforceable option to buy that went with the lease agreement. The Baptist
Church states that [t]rue, the Baptist Church did not pay a separate and specific sum of
money to cover the option alone. But the P84, 000 it paid the Villanuevas in advance should
be deemed consideration for the one contract they entered into the lease with option to buy.
Petitioners further insist that a consideration need not be a separate sum of money. They
posit that their act of advancing the money to rescue the property from mortgage and
impending foreclosure, should be enough consideration to support the option.
On the other hand, Respondents argue that the amount of P84,000 has been fully exhausted
and utilized by their occupation of the premises and there is no separate consideration to
speak of which could support the option. The RTC and CA agree with the respondent.
ISSUE: WON there is a separate consideration that would render the option contract valid and
binding.
HELD:
An option contract, to be valid and binding, needs to be supported by a separate consideration.
The consideration need not be monetary but could consist of other things or undertakings.
However, if the consideration is not monetary, these must be things or undertakings of value,
in view of the onerous nature of the contract of option. Furthermore, when a consideration
for an option contract is not monetary, said consideration must be clearly specified as such in
the option contract or clause.
Petitioners cannot insist that the P84,000 they paid in order to release the Villanuevas
property from the mortgage should be deemed the separate consideration to support the
contract of option. It must be pointed out that said amount was in fact apportioned into
monthly rentals spread over a period of one year, at P7,000 per month. Thus, for the entire
period of June 1985 to May 1986, petitioner Baptist Church’s monthly rent had already been
paid for, such that it only again commenced paying the rentals in June 1986. This is shown
by the testimony of petitioner Pastor Belmonte where he states that the P84,000 was advance
rental equivalent to monthly rent of P7,000 for one year, such that for the entire year from
1985 to 1986 the Baptist Church did not pay monthly rent.
First, this Court cannot find that petitioner Baptist Church parted with anything of value, aside
from the amount of P84,000 which was in fact eventually utilized as rental payments. Second,
there is no document that contains an agreement between the parties that petitioner Baptist
Church’s supposed rescue of the mortgaged property was the consideration which the parties
contemplated in support of the option clause in the contract. As previously stated, the amount
advanced had been fully utilized as rental payments over a period of one year. While the
Villanueva’s may have them to thank for extending the payment at a time of need, this is not
the separate consideration contemplated by law. This Court also notes that in the present
case both the Regional Trial Court and the Court of Appeals agree that the option was not
founded upon a separate and distinct consideration and that, hence, respondents Villanueva’s
cannot be compelled to sell their property to petitioner Baptist Church. Having found that the
option to buy granted to the petitioner Baptist Church was not founded upon a separate
consideration, and hence, not enforceable against respondents, this Court finds no need to
discuss whether a price certain had been fixed as the purchase price.
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Facts: The court of Judge Fernando A. Cruz issued a Judgment in favor of Enrique de Leon
the amount 35,000 pesos worth of damages against Eusebio Bernabe and that a writ of
execution was issued for the two parcels of land of Eusebio Bernabe, sold at an execution sale
which was bought by Aurora De Leon for 30,194 pesos being the highest bidder which was
held on February 14 1967, the property being then subject to an existing mortgage lien in the
amount of 120,000. The sheriff executed the corresponding certificate of sale in her favor
which was registered on February 21 1967.
February 7 1968 two weeks before the expiration of the one-year period to redeem
the properties sold in execution, Bernabe filed a separate civil action against his judgment
creditor Enrique de Leon, Aurora P. De Leon and the sheriff for the purpose of setting aside
the execution sale for being anomalous and irregular before the Judge Serafin Salvador who
issued on February 19 1968 a writ of preliminary injunction enjoining the defendants,
particularly the sheriff to desist from taking further proceeding of the properties of defendant
and from issuing a sheriffs deed of sale at the expiration of the period of redemption on
February 21 1968 in favor defendant Aurora P. de Leon. Judge Salvador then issued on May
20 1969 an order granting two ex-parte motion of Bernabe and ordering the sheriff to allow
bernabe to redeem the two properties sold at public auction under the writ of execution issued
by Judge Cruz court in the first case. Thus an action for certiorari was filed by Aurora and
Bernabe also filed an action for certiorari impleading the sheriff for the annulment and
revocation of the questioned orders of Judge Cruz.
Issue: which court, Branch XII presided by Judge Cruz or Branch XIV presided by Judge
Salvador has exclusive jurisdiction to set aside for alleged irregularities the execution sale
held on February 14, 1967 by virtue of the writ for the execution of the final judgment in the
first case (No. C-189) issued by Judge Cruz’ court and to order a new auction sale — which
was the relief sought by the judgment debtor in the second case (No. C-1217) in Judge
Salvador’s court?
Ruling:
As early as 1922, in Cabigao v. del Rosario, this Court laid down the doctrine that "no
court has power to interfere by injunction with the judgments or decrees of a court of
concurrent or coordinate jurisdiction having power to grant the relief sought by injunction. In
the case of Hubahib vs Insular Drug. So The various branches of a Court of First Instance of
a province or city, having as they have the same or equal authority and exercising as they do
concurrent and coordinate jurisdiction, should not, cannot, and are not permitted to interfere
with their respective cases, much less with their orders or judgments, by means of injunction."
La In National Power Corporation v. De Veyra, the Court, through former Chief Justice
Bengzon, thus explained that the garnishment or levy of property on execution brings the
property into custodia legis of the court issuing the writ of execution, beyond the interference
of all other co-ordinate courts, thereby avoiding conflicts of power between such courts The
execution sale having been carried out upon order of Judge Cruz court, any and all questions
concerning the validity and regularity of the sale necessarily had to be addressed to his court
which had exclusive jurisdiction over the properties and were beyond interference by Judge
Salvador s court.Any and all questions involving the execution sale concerned the proceedings
in Judge Cruz’ court and had to be raised and determined in that court, subject to review by
the higher courts. They could not be improperly passed upon by another co-ordinate court —
behind the back, as it were — of Judge Cruz’ court
Judge Salvador’s order of May 20, 1969 granting two ex-parte motions of the judgment debtor
Bernabe and directing the sheriff to allow the redemption of the properties notwithstanding
that the one-year redemption period had already lapsed more than one year ago on February
21, 1968
As to the alleged gross inadequacy of the price of P30, 194.00 paid by Aurora when according
to Bernabe the properties could have been easily sold for a total price of P385, 000.00,
Bernabe has admitted that there was an existing mortgage lien on the properties in the
amount of P120, 000,00 which necessarily affected their value. the applicable rule on forced
sales where the law gives the owner the right of redemption was thus stated by the Court in
Velasquez v. Coronel: "However, while in ordinary sales for reasons of equity a transaction
may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks
one’s conscience as to justify the courts to interfere, such does not follow when the law gives
to the owner the right to redeem, as when a sale is made at public auction, upon the theory
that the lesser the price the easier it is for the owner to effect the redemption. And so it was
aptly said: ‘When there is the right to redeem, inadequacy of price should not be material,
because the judgment debtor may reacquire the property or also sell his right to redeem and
thus recover the loss he claims to have suffered by reason of the price obtained at the auction
sale
ART 1475-1488- Promise to Sell
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FACTS: The Spouses Apeles leased a property to Arturo Eulogio (Arturo). When Arturo died,
his son Enrico succeeded as lessor of the subject property. He entered into a contract of lease
with an option to purchase with the spouses. It is stipulated in the contract that the LESSOR
(Enrico) has an option to buy the subject house and lot within three years and that the
monthly rentals paid by him during the 3-year lease period will just be deducted from the
purchase price agreed upon by them. There is also a stipulation that if Enrico gives an oral
or written notice to the spouses before the expiration of the 3year lessee period, then the
latter shall proceed with the execution of the contract by selling, transferring and conveying
the said property to Enrico. Before the 3-year lease period expires.
Enrico decided to exercise his option to purchase the subject property by giving oral and
written notice to the respondents. Unfortunately, spouses Apeles ignored his manifestations.
Enrico Eulogio then instituted a Complaint for Specific Performance with Damages against the
spouses Apeles. His cause of action is based on par. 5 of their Contract of Lease with Option
to Purchase vesting him the right to acquire ownership of the subject property after paying
the agreed amount of consideration. Enrico contended that Luz Apeles voluntarily signed their
contract of lease and therefore the property should be transferred to him. On the other hand,
Luz Apeles denied that she signed the contract. According to Luz Apeles, it was impossible for
her to sign the contract because she was in the United States of America that time and that
her signature thereon was just forged.
The RTC ruled in favor of Enrico and ordered them to comply with the provisions of the
Contract.
The Court of Appeals noted that the Notary Public did not observe utmost care in certifying
the due execution of the Contract of Lease with Option to Purchase. The Court of Appeals
chose not to accord the disputed Contract full faith and credence.
ISSUE: Whether or not Enrico can compel the spouses Apeles to execute the Deed of Sale
over the subject property in his favor.
HELD: No. The Supreme Court held that Enrico Eulogio can not compel the spouses Apeles
to execute the Deed of Sale in his favor. While it is true that a notarized document carries
the evidentiary weight conferred upon it with respect to its due execution, and has in its favor
the presumption of regularity, this presumption, however, is not absolute. It may be rebutted
by clear and convincing evidence to the contrary.
In civil cases, the party having the burden of proof must establish his case by a
preponderance of evidence. Preponderance of evidence is the weight, credit, and value of the
aggregate evidence on either side and is usually considered to be synonymous with the term
"greater weight of the evidence" or "greater weight of the credible evidence." Preponderance
of evidence is a phrase which, in the last analysis, means probability of the truth. It is evidence
which is more convincing to the court as worthier of belief than that which is offered in
opposition thereto.
In the case at bar, the spouses Apeles were able to prove beyond preponderant evidence the
invalidity of the Contract of Lease with Option to Purchase. While Enrico just relied on his own
selfserving testimonies, without asserting any proof of collaborating testimony or
circumstantial evidence to support his claim. This is considered as an option contract. It is a
contract by which the owner of the property agrees with another person that the latter shall
have the right to buy the former’s property at a fixed price within a certain time. It is not a
sale of property but a sale of right to purchase. In order for an option contract to be valid,
there must be a separate and distinct consideration that supports it. In the present case, it is
definite that Enrico gave no consideration to the spouses for the option contract. The absence
of monetary or any material consideration keeps this court from enforcing the rights of the
parties under said option contract.
An option is a contract by which the owner of the property agrees with another person that
the latter shall have the right to buy the former’s property at a fixed price within a certain
time. It is a condition offered 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 certain time, 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
An option is not of itself a purchase, but merely secures the privilege to buy. It is not a sale
of property but a sale of the right to purchase. It is simply a contract by which the owner of
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the 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, i.e., the right or privilege to buy at the election or option of the
other party. Its distinguishing characteristic is that it imposes no binding obligation on the
person holding the option, aside from the consideration for the offer.
Right of first Refusal
Ponente: VITUG, J.:

Topic: Law on Sales: Right of First Refusal
Principle: "Right of First Refusal" is an innovative juridical relation. Needless to point out, it
cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code.
Facts: A second amended Complaint for Specific Performance was filed by Ang Yu Asuncion
and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the
Regional Trial Court –Manila alleging that plaintiffs are tenants or lessees of residential and
commercial spaces owned by defendants; 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, 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
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 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.
RTC Ruling:
RTC rendered judgment in favor of the defendants and against the plaintiffs summarily
dismissing the complaint subject to the aforementioned condition that if the defendants
subsequently decide to offer their property for sale for a purchase price of Eleven Million Pesos
or lower, then the plaintiffs has the option to purchase the property or of first refusal,
otherwise, defendants need not offer the property to the plaintiffs if the purchase price is
higher than Eleven Million Pesos.
CA Ruling:
CA affirmed with modification of the lower court's judgment holding that there was no meeting
of the minds between the parties concerning the sale of the property. Absent such
requirement, the claim for specific performance will not lie. Appellants' demand for actual,
moral and exemplary damages will likewise fail as there exists no justifiable ground for its
award. Summary judgment for defendants was properly granted. Courts may render
summary judgment when there is no genuine issue as to any material fact and the moving
party is entitled to a judgment as a matter of law. All requisites obtaining, the decision of the
court a quo is legally justifiable. The court a quo in the aforestated decision gave the plaintiffs-
appellants the right of first refusal only if the property is sold for a purchase price of Eleven
Million pesos or lower; however, considering the mercurial and uncertain forces in our market
economy today. We find no reason not to grant the same right of first refusal to herein
appellants in the event that the subject property is sold for a price in excess of Eleven Million
pesos.
Issue: Whether or not the “Right of First Refusal” is deemed a perfected contract of sale.
SC Ruling: In the law on sales, the so-called "right of first refusal" is an innovative juridical
relation. Needless to point out, 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 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
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best be so described as merely belonging to a class of preparatory juridical relations governed

not by contracts but by, among other laws of general application, the pertinent scattered
provisions of the Civil Code on human conduct.
Even on the premise that such right of first refusal has been decreed under a final judgment,
like here, its breach 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. It is not to say, however, that the right of first refusal would be
inconsequential for, such as already intimated above, an unjustified disregard thereof, given,
for instance, the circumstances expressed in Article 19 of the Civil Code, can warrant a
recovery for damages.
The final judgment, it must be stressed, has merely accorded a "right of first refusal" in favor
of petitioners. The consequence of such a declaration entails no more than what has
heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by
the failure of private respondents to honor the right of first refusal, 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.
Cause; Inadequacy of Price
Ponente: CONCEPCION, C.J.:
Principle: Bad faith and inadequacy of the monetary consideration do not render a
conveyance inexistent, for the assignor's liberality may be sufficient cause for a valid contract .
Facts: Lot No. 2488 used to belong to Enrique P. Montinola and was covered by TCT No. T-
15687 of the Register of Deeds in his name. Alleging that his owner's duplicate copy of said
certificate had been lost, Montinola succeeded in securing order for the issuance of a second
owner's duplicate, with which he managed to sell the lot to Pio Reyes. Upon registration of
the deed of sale to the latter, said TCT No. T15687 was cancelled and, in lieu thereof, TCT No.
21036, in the name of Reyes. Sps Abella purchased the land from Reyes, whereupon the deed
of conveyance, executed by Reyes, was registered and the Abellas got TCT No. 21037 in their
name, upon cancellation of said TCT No. 21036. About seven (7) months later, the Abellas
sold the land, for P7,000, — of which P4,500 was then paid — to the Deseos, who immediately
took possession of the property. It appears, however, that the first owner's duplicate of TCT
No. T-15687 was either never lost or subsequently found by Montinola, who, making use of
it, mortgaged the lot in question to the Philippine National Bank, for P700. Then, Montinola
sold the property to Morales, for P2,000, from which the sum due to the Bank was deducted.
Upon presentation of the deed of sale in favor of Morales, the latter was advised by the office
of the Register of Deeds of Quezon that said TCT No. T-15687 had already been cancelled and
the property sold, first, to Pio Reyes, and, then, to the Abellas. Thereupon, Morales filed a
petition for the annulment and cancellation of the second owner's copy of TCT No. T-15687.
After due notice to Reyes and the Abellas, but not to the Deseos
Having been unable to register the deed of conveyance executed by the Abellas, the Deseos
commenced, in the court aforementioned, the present action against Morales, for the
annulment of the subsequent sale thereto by Montinola, and the registration of said deed of
conveyance in their (Deseos) favor, alleging that the same enjoys preference over the sale to
Morales, the Deseos having, prior thereto, bought lot No. 2488 in good faith and for value,
and having been first in possession of said lot, likewise, in good faith.
Upon the other hand, Morales claimed to have a better right upon the ground that it had
bought the property in good faith and for value, relying upon the first owner's duplicate copy
of TCT No. T-15687, unlike the Deseos, whose predecessor in interest, Pio Reyes, had relied
upon the second owner's duplicate, which — Morales alleged had been secured fraudulently,
and that the sale to Reyes and that made by the latter to the Abellas are null and void,
because both sales took place under suspicious circumstances, so Morales concluded that they
were not purchasers in good faith and for value.
RTC Ruling: The court of first instance sustained the contention of Morales and rendered
judgment in its favor.
CA Ruling: Judgment appealed from is hereby reversed and another one entered in favor of
the plaintiffs (Deseos) and against the defendant (Morales) declaring said plaintiffs to be the
lawful and absolute owners of Lot No. 2489 of the Cadastral Survey of Catanauan, Quezon,
covered by Transfer Certificate of Title No. T-21037 of the Office of the Register of Deeds of
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Quezon; declaring the deed of sale executed by Enrique P. Montinola in favor of defendant
covering the same property as null and void; ordering the Register of Deeds of Quezon to
register the deed of sale executed by the spouses Lupo Abella and Felisa Aguilar in favor of
the plaintiffs dated June 16, 1955, marked Exhibit A, without cost, not having prayed for in
the brief for the appellants.
Issues:
1. Whether or not inadequacy of price as consideration renders the sale rescissible or
voidable.
2. Whether or not petitioner has better title over the property in question against the
private respondents.
SC Ruling: For Issue No. 1:

The major premise thereof is based upon the fact that the consideration stated in the deeds
of sale in favor of Reyes and the Abellas is P1.00. It is not unusual, however, in deeds of
conveyance adhering to the Anglo-Saxon practice of stating that the consideration given is
the sum of P1.00, although the actual consideration may have been much more. Moreover,
assuming that said consideration of P1.00 is suspicious, this circumstance, alone, does not
necessarily justify the inference that Reyes and the Abellas were not purchasers in good faith
and for value. Neither does this inference warrant the conclusion that the sales were null and
void ab initio. Indeed, bad faith and inadequacy of the monetary consideration do not render
a conveyance inexistent, for the assignor's liberality may be sufficient cause for a valid
contract
For Issue No. 2:

Deseos had bought the land in question for value and in good faith, relying upon the transfer
certificate of title in the name of their assignors, the Abellas. The sale by the latter to the
former preceded the purchase made by Morales, by about eight (8) months, and the Deseos
took immediate possession of the land, which was actually held by them at the time of its
conveyance to Morales by Montinola, and is in the possession of the Deseos, up to the present.
Then, again TCT No. T-15687, in the name of Montinola, had been cancelled over a year
before he sold the property to Morales, who, in turn, was informed of this fact, what it sought
to register the deed of conveyance in its favor. It should be noted, also, that TCT No. 21037,
in the name of the Abellas, on which the Deseos had relied in buying the lot in dispute, has
not been ordered cancelled.
Since the object of this litigation is a registered land and the two (2) buyers thereof
have so far been unable to register the deeds of conveyance in their respective favor, it follows
that "the ownership" of said lot pertains to the Deseos, as the only party who took possession
thereof in good faith.
Ponente: Padilla, J.
Principle: In a right of first refusal, the holder of the property or asset has a contractual right
to have the option to enter into a business transaction with the owner of the asset, according
to specified terms before the owner can enter into such business transaction with another.
Facts: To secure a loan of ₱ 5,000, Catabona executed in respondent’s favor a mortgage with
conditional sale on a piece of land with a clause providing that he reserved the right to redeem
the property after 5 years after the date of execution and that on his failure to do so, title
thereto shall pass to and become vested in the private respondent. The mortgage was
registered.Catabona sold ½ of the same land to Guerrero after Yñigo said the latter (Yñigo)
cannot afford the price set by Catabona, and after he said to Guerrero that he will not resent
it if Guerrero bought the land provided that the obligation towards him would be paid.
In an action by Guerrero, the Court of First Instance adjudged him owner of ½ of the land.
However, the Court of Appeals reverted this judgment and declared that, as the parcel of land
was sold with pacto de retro and the deed of sale was executed and registered prior to
Guerrero’s purchase, Yñigo had a better right.
Issue: Whether or not Yñigo had a right of first refusal.
Ruling: YES. The right of first refusal is a contractual right that gives its holder the option to
enter a business transaction with the owner of something, according to specified terms, before
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the owner is entitled to enter into that transaction with a third party. This right can cover
almost any sort of asset, including real estate. The owner can only offer the property to other
properties when the holder turns it down.
Yñigo has a right of first refusal over the land because their contract with Catabona stated
that he shall sell the land to no other except to the Yñigo spouses, and that should he sell it
to others, the Yñigos may sue him for damages plus reasonable Attorney’s fees. Hence, SC
reversed the judgment of the Court of Appeals and declared Guerrero as the lawful owner of
one-half of the parcel of land (the western part) described in transfer certificate of title No.
19251, subject to a mortgage to secure the payment of P1,847.22 in favor of the spouses
Serapion D. Yñigo and Francisca D. Batañgan payable within such period of time as may be
fixed by the Court upon petition.
Principle: The holder’s right of first refusal is not breached when the owner offers the subject
property to other buyers after the holder refuses the owner’s offer.
registered.
Catabona sold ½ of the same land to Guerrero after Yñigo said the latter (Yñigo) cannot afford
the price set by Catabona, and after he said to Guerrero that he will not resent it if Guerrero
bought the land provided that the obligation towards him would be paid. In an action by
Guerrero, the Court of First Instance adjudged him owner of ½ of the land. However, the
Court of Appeals reverted this judgment and declared that, as the parcel of land was sold with
pacto de retro and the deed of sale was executed and registered prior to Guerrero’s purchase,
Yñigo had a better right.
Issue: Whether or not Yñigo’s right had been breached.
Ruling: NO. In the Right of First Refusal, the owner of the property can already offer the
property to other prospective buyers once the holder refuses to buy it. In the case at bar,
Catabona offered to sell the land to Yñigo, but the latter said they could not afford the price
of the land. Before buying the property, Guerrero even offered to see Yñigo and the latter if
he would not resent it if he bought the land. Yñigo answered that he would not resent it
provided that the obligation towards him was paid. This means that Yñigo had already turned
down Catabona’s offer to buy the land.
Hence, SC reversed the judgment of the Court of Appeals and declared Guerrero as the lawful
owner of one-half of the parcel of land (the western part) described in transfer certificate of
title No. 19251, subject to a mortgage to secure the payment of P1,847.22 in favor of the
spouses Serapion D. Yñigo and Francisca D. Batañgan payable within such period of time as
may be fixed by the Court upon petition.
Ponente: Padilla, J.
Principle: An agreement which states that title to the property given as security shall pass
to the creditor upon debtor’s failure to redeem it by paying the amount of the loan is a mortage,
not a sale con Pacto de Retro
registered.
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Catabona sold ½ of the same land to Guerrero after Yñigo said the latter (Yñigo) cannot afford
the price set by Catabona, and after he said to Guerrero that he will not resent it if Guerrero
bought the land provided that the obligation towards him would be paid. In an action by
Guerrero, the Court of First Instance adjudged him owner of ½ of the land. However, the
Court of Appeals reverted this judgment and declared that, as the parcel of land was sold with
pacto de retro and the deed of sale was executed and registered prior to Guerrero’s purchase,
Yñigo had a better right.
Issue: Whether or not there was a Pacto de Retro sale.
Ruling: NO. Pacto de Retro sale refers to the sale wherein the seller has the right to
repurchase the subject matter or the property being sold. The essence of a pacto de retro
sale is that the title and ownership of the property sold transfers immediately to the vendee
a retro. However it is still subject to the resolutory condition of repurchase of the subject
property by a vendor a retro within the period agreed upon by them, or, in the absence
thereof, as provided by law or else it would vests upon the vendee a retro absolute title and
ownership over the property sold by operation of law.
In the third mortgage, the words the words "mortgage with conditional sale" were used and
the following was stipulated:
That the Party of the First Part, by these presents, reserves for himself and his heirs
the right to redeem the said property after the period of five years from the date hereof
by paying back and returning the above-mentioned amount and the right of possession
and use within the said period; and that on failure of the Party of the First Part to
exercise the said right to redeem the said property according to the terms hereof, title
thereto shall pass to and become vested, absolutely, in the Party of the Second Part.
This is conclusive proof conclusive proof that it is a mortgage and not a sale with pacto de
retro because if it were the latter title to the parcel of land would pass unto the vendee upon
the execution of the sale and not later as stipulated that "title thereto shall pass to and become
vested, absolutely, in the Party of the Second Part" "on failure of the Party of the First Part to
exercise the said right to redeem the said property according to the terms hereof." Therefore,
no sale of the parcel of land with the right to repurchase was made by Amando Catabona to
the spouses of Serapion D. Yñigo and Francisca D. Batañgan.
The registration of the three instruments created a real right in favor of the mortgagees. But
the fact that in the instruments the mortgagor undertook, bound and promised to sell the
parcel of land to the mortgagees, such undertaking, obligation or promise to sell the parcel
of land to the mortgagees does not bind the land. It is just a personal obligation of the
mortgagor. Hence, SC reversed the judgment of the Court of Appeals and declared Guerrero
as the lawful owner of one-half of the parcel of land (the western part) described in transfer
certificate of title No. 19251, subject to a mortgage to secure the payment of P1,847.22 in
favor of the spouses Serapion D. Yñigo and Francisca D. Batañgan payable within such period
of time as may be fixed by the Court upon petition.
Division: En Banc
One-liner / Principle: The seller and the buyer need to have a definite agreement on the
manner of payment of the purchase price in order for the contract of sale to be binding.
Facts: The petitioner and Magdalena Estate, Inc. had entered into a contract of sale by virtue
of which the defendant offered to sell the petitioner and the petitioner in turn agreed to buy
2,059 square meters of Lot 15, Block 7, Psd-6129, located in New Manila for the total purchase
price of P100,000.00. The agreement was that the petitioner was to give a down payment of
P10,000.00 to be followed by P20,000.00 and the balance of P70,000.00 would be paid in
installments, the equal monthly amortization of which was to be determined as soon as the
P30,000.00 down payment had been completed. It is further alleged that the petitioner paid
down payment of P10,000.00 on November 29, 1962, and that when on January 8, 1964 he
tendered to Magdalena Estate, Inc. the payment of the additional P20,000.00 to complete the
P30,000.00, which Magdalena Estate, Inc. refused to accept and that eventually it likewise
refused to execute a formal deed of sale obviously agreed upon.
Magdalena Estate, Inc. denies that it has had any direct dealings or contractual relations with
the petitioner regarding the property in question. In addition, a portion of the property in
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question was being leased by Socorro Velasco who indicated her desire to purchase the lot;
that Magdalena Estate, Inc. indicated its willingness to sell the property to her at the price of
P100,000.00. Socorro Velasco offered to pay P10,000.00 as initial payment instead of the
agreed P20,000.00 but because the amount was short of the alleged P20,000.00 the same
was accepted merely as deposited and upon request of Socorro Velasco the receipt was made
in the name of her brother-in-law the petitioner herein; that Socorro Velasco failed to
complete the down payment of P30,000.00 and neither has she paid any installments on the
balance of P70,000.00 up to the present time; that it was only on January 8, 1964 that
Socorro Velasco tendered payment of P20,000.00, which offer Magdalena Estate, Inc. refused
to accept because it had considered the offer to sell rescinded on account of her failure to
complete the down payment on or before December 31, 1962.
Lorenzo Velasco testified that Socorro Velasco is his sister-in-law and that he had he had
authorized her to negotiate with Magdalena Estate, Inc. with regards to the purchase of the
property in question since he was not fluent in English.
Issue: Whether or not the talks between the Magdalena Estate, Inc. and Lorenzo Velasco
either directly or through Socorro Velasco ripened into a contract of sale.
Ruling: NO. The minds of the parties did not meet in regard to the manner of payment. A
definite agreement on the manner of payment of the purchase price is an essential element
in the formation of a binding contract of sale. The time within the full down-payment of the ₱
30,000 was to be completed was not specified by the parties. The fact that the petitioners
delivered to Magdalena Estates, Inc. the sum of ₱ 10,000 as part of the down-payment that
they had to pay cannot be considered as sufficient evidence of the perfection of any purchase
and sale agreement between the parties as the petitioners admit in their affidavit that certain
essential matters, such as the terms of payment, still had to be mutually agreed. Hence, SC
denied the petition.
Right of First Refusal
Ponente: Cruz, J.:
Facts: Africa Valdez de Reynoso, is the administratrix of a parcel of land around 600sqm.
Belonging to Intestate Estate of Jose L. Reynoso.This property was leased to Raoul S.
Bonnevie and Christopher Bonnevie for a period of one year with the stipulation;
20. — In case the LESSOR desire or decides to sell the lease property, the
LESSEES shall be given a first priority to purchase the same, all things and
considerations being equal.
On November 3, 1976 according to Reynoso, she notified the private respondents by

registered mail that she was selling the leased premises for P600.000.00 less a mortgage loan
of P100,000.00, and was giving them 30 days from receipt of the letter within which to
exercise their right of first priority to purchase the subject property. She said that in the event
that they did not exercise the said right, she would expect them to vacate the property not
later then March, 1977.
On March 7, 1977, the leased premises were formally sold to petitioner Guzman, Bocaling &
Co. On April 12, 1977, Reynoso wrote a letter to the private respondents demanding that they
vacate the premises within 15 days for their failure to pay the rentals for four months. On
April 29, 1980, while the ejectment case was pending in the City Court, the private
respondents filed an action for annulment of the sale between Reynoso and herein petitioner
Guzman, Bocaling & Co. and cancellation of the transfer certificate of title in the name of the
latter. They also asked that Reynoso be required to sell the property to them under the same
terms and conditions agreed upon in the Contract of Sale in favor of the petitioner.
City Court Decision for ejectment case:

In favor of Reynoso
CFI Decision:
1. Ejectment case was affirmed but modified.
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2. Case filed by respondent to annul the sale between Reynoso & Bocaling, cancellation
of corresponding TCT and requiring Reynoso to sell the property to them was awarded
in favour of the respondent.
CA Decision: Affirmed the decision of CFI in the case filed by the respondent.
Issue: Whether or not CA erred in ruling that the grant of first priority to purchase the subject
properties needed no judicial authority by the administratrix from the probate court?
Held: No, Reynoso claimed to have sent the November 3, 1976 letter by registered mail, but
the registry return card was not offered in evidence. A copy of the other side of the card
showing the signature of the person who received the letter and the data of the receipt was
not submitted. There is thus no satisfactory proof that the letter was received by the
Bonnevies.
The Court agrees with the respondent court that it was not necessary to secure the approval
by the probate court of the Contract of Lease because it did not involve an alienation of real
property of the estate nor did the term of the lease exceed one year so as to make it fall
under Article 1878(8) of the Civil Code. Only if Paragraph 20 of the Contract of Lease was
activated and the said property was intended to be sold would it be required of the
administratrix to secure the approval of the probate court pursuant to Rule 89 of the Rules of
Court.
Even if the order of the probate court was valid, the private respondents still had a right to
rescind the Contract of Sale because of the failure of Reynoso to comply with her duty to give
them the first opportunity to purchase the subject property as expressed in the following
stipulation; In case the LESSOR desire or decides to sell the lease property, the LESSEES shall
be given a first priority to purchase the same, all things and considerations being equal.
Petition is denied. The challenged decision is affirmed.
PRINCIPLE: The Principle that the persons dealing with registered land need not go behind
the register to determine the condition of the property. (Article 1505)
FACTS: The spouses Romeo Martinez and Leonor Suarez are the registered owners of two
(2) parcels of land located in Lubao, Pampanga. The disputed property was originally owned
by one Paulino Montemayor, who secured a "titulo real" over it way back in 1883. After the
death of Paulino Montemayor the said property passed to his successors-in-interest, Maria
Montemayor and Donata Montemayor, who in turn, sold it, as well as the first parcel, to a
certain Potenciano Garcia. Because Potenciano Garcia was prevented by the then municipal
president of Lubao, Pedro Beltran, from restoring the dikes constructed on the contested
property, Garcia filed a civil case with the Court of First Instance against Beltran to restrain
the latter in his official capacity from molesting him in the possession of said second parcel,
and on even date, applied for a writ of preliminary injunction, which was issued against said
municipal president. The Court declared permanent the preliminary injunction. On April 17,
1925. Potenciano Garcia applied for the registration of both parcels of land in his name, and
the Court of First Instance of Pampanga, sitting as land registration court, granted the
registration.
Thereafter, the ownership of these properties changed hands until eventually they were
acquired by the spouses. To avoid any untoward incident, the disputants agreed to refer the
matter to the Committee on Rivers and Streams, which, after conducting an ocular inspection,
reported that the parcel was not a public river but a private fishpond owned by the herein
spouses. The Secretary of Public Works and Communications, ordered another investigation
of the said parcel of land, directing the spouses to remove the dikes they had constructed,
threatening that the dikes would be demolished should the spouses fail to comply therewith
within 30 days.
RULING: No, they are not. There is no weight in the spouses' argument that, being a
purchaser for value and in good faith of Lot No. 2, the nullification of its registration would be
contrary to the law and to the applicable decisions of the Supreme Court as it would destroy
the stability of the title which is the core of the system of registration. Appellants cannot be
deemed purchasers for value and in good faith as in the deed of absolute conveyance executed
in their favor.
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Before purchasing a parcel of land, it cannot be contended that the spouses did not know
exactly the condition of the land that they were buying and the obstacles or restrictions
thereon that may be put up by the government in connection with their project of converting
Lot No. 2 in question into a fishpond. Nevertheless, they willfully and voluntarily assumed the
risks attendant to the sale of said lot. One who buys something with knowledge of defect or
lack of title in his vendor cannot claim that he acquired it in good faith.
The ruling that a purchaser of a registered property cannot go beyond the record to make
inquiries as to the legality of the title of the registered owner, but may rely on the registry to
determine if there is no lien or encumbrances over the same, cannot be availed of as against
the law and the accepted principle that rivers are parts of the public domain for public use
and not capable of private appropriation or acquisition by prescription.
FACTS: Petitioners spouses Dino, doing business under the trade name "Candy Claire Fashion
Garment" are engaged in the business of manufacturing and selling shirts. Respondent Sio is
part owner and general manager of a manufacturing corporation doing business under the
trade name "Universal Toy Master Manufacturing." Petitioners and respondent Sio entered
into a contract whereby the latter would manufacture for the petitioners 20,000 pieces of
vinyl frogs and 20,000 pieces of vinyl moose heads at P7.00 per piece in accordance with the
sample approved by the petitioners. These frogs and moose heads were to be attached to the
shirts petitioners would manufacture and sell.
Respondent Sio delivered in several instalments the 40,000 pieces of frogs and
mooseheads.The last delivery was made on September 28, 1988. Petitioner fully paid the
agreed price. Subsequently, petitioners returned to respondent 29,772 pieces of frogs and
moose heads for failing to comply with the approved sample. The return was made on different
dates: the initial one on December 12, 1988 consisting of 1,720 pieces, the second on January
11, 1989, and the last on January 17, 1989.Petitioners then demanded from the respondent
a refund of the purchase price of the returned goods in the amount of P208, 404.00. As
respondent Sio refused to pay, petitioners filed on July 24, 1989 an action for collection of a
sum of money in the Regional Trial Court of Manila, Branch 38 where it ruled in favor of the
petitioners.
Respondent Sio sought recourse in the Court of Appeals. In its April 30, 1993 decision, the
appellate court affirmed the trial court decision. Respondent then filed a Motion for
Reconsideration and a Supplemental Motion for Reconsideration alleging therein that the
petitioners' action for collection of sum of money based on a breach of warranty had already
prescribed. On January 24, 1994, the respondent court reversed its decision and dismissed
petitioners' Complaint for having been filed beyond the prescriptive period.
ISSUES:
1. Whether or not the contract executed by and between the petitioners and the
respondent was a contract for a piece of work?
2. Whether or not there is a breach of warranty committed by respondent Sio?
RULING: We uphold the respondent's contention. The following provisions of the New Civil
Code are apropos: "Art. 1467. A contract for the delivery at a certain price of an article which
the vendor in the ordinary course of his business manufactures or procures for the general
market, whether the same is on hand at the time or not, is a contract of sale, but if the goods
are to be manufactured specially for the customer and upon his special order, and not for the
general market, it is a contract for a piece of work."
"Art. 1713. By the contract for a piece of work the contractor binds himself to execute
a piece of work for the employer, in consideration of a certain price or compensation. The
contractor may either employ only his labor or skill, or also furnish the material."
As this Court ruled in Engineering & Machinery Corporation v. Court of Appeals, et

al.,"a contract for a piece of work, labor and materials may be distinguished from a contract
of sale by the inquiry as to whether the thing transferred is one not in existence and which
would never have existed but for the order of the person desiring it. In such case, the contract
is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract
would have existed and been the subject of a sale to some other person even if the order had
not been given then the contract is one of sale. The contract between the petitioners and
respondent stipulated that respondent would manufacture upon order of the petitioners
20,000 pieces of vinyl frogs and 20,000 pieces of vinyl moose heads according to the samples
specified and approved by the petitioners.
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Respondent Sio did not ordinarily manufacture these products, but only upon order of the
petitioners and at the price agreed upon. Clearly, the contract executed by and between the
petitioners and the respondent was a contract for a piece of work. At any rate, whether the
agreement between the parties was one of a contract of sale or a piece of work, the provisions
on warranty of title against hidden defects in a contract of sale apply to the case at bar, viz:
"Art. 1714. If the contractor agrees to produce the work from material furnished by
him, he shall deliver the thing produced to the employer and transfer dominion over the thing.
This contract shall be governed by the following articles as well as by the pertinent provisions
on warranty of title and against hidden defects and the payment of price in a contract of sale."
"Art. 1561. The vendor shall be responsible for warranty against the hidden defects
which the thing sold may have , should they render it unfit for the use for which it is intended,
or should they diminish its fitness for such use to such an extent that, had the vendee been
aware thereof, he would not have acquired it or would have given a lower price for it; but
said vendor shall not be answerable for patent defects or those which may be visible, or for
those which are not visible if the vendee is an expert who, by reason of his trade or profession,
should have known them."
"Art. 1571. Actions arising from the provisions of the preceding ten articles shall be
barred after six months from the delivery of the thing sold."
There is no dispute that respondent made the last delivery of the vinyl products to
petitioners on September 28, 1988. It is also settled that the action to recover the purchase
price of the goods petitioners returned to the respondent was filed on July 24, 1989, more
than nine months from the date of last delivery. Petitioners having filed the action three
months after the six-month period for filing actions for breach of warranty against hidden
defects stated in Art. 1571, the appellate court dismissed the action.
Void and Voidable Contracts
FACTS: Sofia Martinez was the registered owner of 2 parcels of land who leased the lots to
Yu Siong, father of the president and stockholders of petitioner Sen Po Ek for a period of 10
years. When the lease expired it was later renewed several times, the last renewal being on
March 1982 which is to expire on Jan. 1987. In the meantime, Sofia sold the lots and the
building to her daughter, respondent Teodora Martinez. After the lease contract expired in
Jan. 1987, it was no longer renewed by the parties. Sen Po Ek, however, continued to possess
and occupy the leased properties, and regularly paid the monthly rentals to Sofia until her
death, and then to her heirs through Teodora. On November 11, 1989, Teodora sent a letter
to petitioner Sen Po Ek informing it of her intention to sell the leased premises and authorizing
a broker to negotiate the sale "with any and all interested parties." Sen Po Ek offered to
purchase the poperty. Another buyer, Tiu Uyping, was also interested. Sen Po Ek then filed
a complaint for the annulment of the sale executed by Sofia in favor of Teodora. Days later,
the property was sold to Tiu Uyping. Sen Po Ek amended its complaint, praying for the nullity
of the second sale transaction.
ISSUE: Were the two disputed sale transactions valid?
HELD: The first sale is void. The second sale, however, is valid and binding. The first sale
between Sofia and Teodora was void for being fictitious. Under Art. 1409 (2), NCC, one type
of contract which can be declared void and inexistent is that which is absolutely simulated or
fictitious, and this was established by several badges of simulation proving that the sale
between Sofia and Teodora was not intended to have any legal effect between them. The
combination of all of these events leads one to the inescapable conclusion that the first sale
transaction was absolutely simulated, hence void. Nonetheless, the sale between Teodora and
the Tiu Uyping, is valid. Teodora, as only one of the co-heirs of Sofia, had no authority to sell
the entire lot to the Tiu Uyping. She can only sell her undivided portion of the property. Thus,
when she sold the leased premises to Tiu Uyping, the sale is unenforceable having been
entered into by Teodora in behalf of her co-heirs who, however, gave no authority or legal
representation. However, such a contract is susceptible of ratification. In this case, the
ratification came in the form of "Confirmation of Sale of Land and Improvements” executed
by the other heirs of Sofia. Since the sale by Teodora of the leased premises to Tiu Uyping
was ratified by her co-heirs, then the sale is considered valid and binding.
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FACTS: Perfecto A. Tabora(buyer) bought from the Lawyers Cooperative Publishing

Company(seller) 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 P300.00, leaving a balance of
P1,382.40. The books were duly delivered and receipted for by Tabora on May 15, 1955 in
his law office in Naga City.
However, a big fire broke out in that locality which destroyed and burned all the
buildings standing on one whole block including at the law office and library of Tabora. As a
result, the books bought from the company as above stated, together with Tabora's important
documents and papers, were burned during the conflagration.
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 CFI of Manila for the recovery of the balance of the obligation.
Defendant, in his answer, pleaded force majeure as a defense. He alleged that the books
bought from the plaintiff were burned during the fire that broke out in Naga City on May 15,
1955, and since the loss was due to force majeure he cannot be held responsible for the loss.
CFI rendered judgment for the plaintiff. It ordered Tabora 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. Tabora appealed to the CA,
but the case was forwarded to the SC by virtue of a certification issued by the CA that the
case involves only questions of law.
ISSUE:Whether or not respondent Tabora should bear the loss and pay the unpaid purchase
price?
HELD: YES. 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."
General 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. BUT, this rule does not apply in this case because the parties clearly agreed
to the abovementioned contrary stipulation.
Although the seller agreed that the ownership of the books shall remain with it until the
purchase price shall have been fully paid, 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, which in part provides:
 (1) Where delivery of the goods has been made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the ownership in the goods has been retained
by the seller merely to secure performance by the buyer of his obligations under the
contract, the goods are at the buyer's risk from the time of such delivery
Force majeure will not exempt Tabora from his liability. This is because this 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. Here these qualifications
are not present. The obligation does not refer to a determinate thing, but is pecuniary in
nature (money), and the obligor bound himself to assume the loss after the delivery
of the goods to him. Obligor (Tabora) agreed to assume any risk concerning the
goods from the time of their delivery.
WHEREFORE, the decision appealed from is modified by eliminating that portion which refers
to liquidated damages. No costs.
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FACTS: Catalina L. Santos owns 8 parcels of land which she leased to Frederick Chua who
then later assigned all his rights and interest and participation in the leased property to Lee
Ching Bing with the conformity of Santos. Lee Ching Bing also assigned all his rights and
interest in the leased property to Paranaque Kings Enterprises, Inc. On September 21, 1988,
Santos sold the property to defendant David Raymundo which was opposed by Paranaque
King since the said sale is in contravention of the lease contract, for the first option or priority
to buy was not offered to them. Subsequently, Santos reconveyed the property for the same
consideration of 5M and then Santos offered it to Paranaque King for 15M which was way
higher than the 5M selling price with Raymundo. She gave them a period to make a good
offer but before they could replied to the offer to purchase, Santos, in a second deed of sale,
finally sold the property to Raymundo for 9M. Thus, petitioner filed a complaint to annulled
the Deed of Sale between Santos and Raymundo and the leased properties be sold to them.
Instead of filing their respective answers, respondents filed motions to dismiss the complaint
by the petitioner which the trial court had granted.
ISSUE: Whether or not the complaint alleging breach of the contractual right of first option
to buy states a valid cause of action?
HELD: Yes, SC held that in order to have full compliance with the contractual right granting
petitioner the first option to purchase, the sale of the properties for the amount of P9 million,
the price for which they were finally sold to respondent Raymundo, should have likewise been
first offered to petitioner.
Under paragraph 9 of the contract of lease between respondent Santos and petitioner, the
latter was granted the first option or priority to purchase the leased properties in case Santos
decided to sell. If Santos never decided to sell at all, there can never be a breach, much less
an enforcement of such right. But on September 21, 1988, Santos sold said properties to
Respondent Raymundo without first offering these to petitioner. Santos indeed realized her
error, since she repurchased the properties after petitioner complained. Thereafter, she
offered to sell the properties to petitioner for P15 million, which petitioner, however, rejected
because of the ridiculous price. But Santos again appeared to have violated the same
provision of the lease contract when she finally resold the properties to respondent Raymundo
for only P9 million without first offering them to petitioner at such price.
The basis of the right of the first refusal must be the current offer to sell of the seller or offer
to purchase of any prospective buyer. Only after the grantee fails to exercise its right of first
priority under the same terms and within the period contemplated, could the owner validly
offer to sell the property to a third person, again, under the same terms as offered to the
grantee.
WHEREFORE, the petition is GRANTED. The assailed decisions of the trial court and Court
of Appeals are hereby REVERSED and SET ASIDE. The case is REMANDED to the Regional
Trial Court of Makati for further proceedings.
FACTS: Spouses Cruz are occupants of the front portion of a property located in Bulacan. On
October 21, 1994, spouses Fernando filed before the RTC a complaint for accion publiciana
against petitioners, demanding the latter to vacate the premises and to pay the amount of
P500.00 as monthly rental. Respondents alleged among others that they are the owners of
the said lot per a Deed of Sale executed on March 9, 1987 and that the offer to sell the rear
portion of the property by Clodualdo and Teresita Glorioso (Gloriosos) embodied in a
“Kasunduan” in favor of the spouses Cruz did not materialize.
Petitioners, on the other hand, contended that the Kasunduan is a perfected contract of sale,
that the agreement has already been partially consummated as they already relocated their
house from the rear portion of the lot to the front portion that was sold to them and that the
respondents are buyers in bad faith having bought that portion of the lot occupied by them
with full knowledge of the prior sale to them by the Gloriosos.
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The RTC ruled in favor of respondents which was later affirmed by the Court of Appeals. Hence,
this instant petition.
ISSUE: Whether or not the Kasunduan is a mere contract to sell and not a perfected contract
of sale?
RULING: The Kasunduan is a contract to sell. Under Article 1458 of the Civil Code, a contract
of sale is a contract by which one of the contracting parties obligates himself to transfer the
ownership and to deliver a determinate thing, and the other to pay therefor a price certain in
money or its equivalent. In a contract of sale, the title to the property passes to the vendee
upon the delivery of the thing sold, as distinguished from a contract to sell where ownership
is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment
of the purchase price.
The Kasunduan provides the following terms and conditions: (a) that the Gloriosos agreed to
sell to petitioners a portion of the property with an area of 213 meters at the price of P40.00
per square meter; (b) that in the title that will be caused to be issued, the aggregate area is
223 square meters with 10 meters thereof serving as right of way; (c) that the right of way
shall have a width of 1.75 meters from Lopez Jaena road going towards the back of the lot
where petitioners will build their house on the portion of the lot that they will buy; (d) that
the expenses for the survey and for the issuance of the title will be divided between the parties
with each party giving an amount of no less than P400.00; and (e) that petitioners will
definitely relocate their house to the portion they bought or will buy by January 31, 1984.
For one, the Kasunduan lacks the definite manner of payment (formal deed of conveyance)
which is an essential element before a valid and binding contract of sale can exist. Second,
there existed another suspensive condition that petitioners will relocate their house to the
rear portion which they will buy and which they failed to comply with. Thus, no obligation on
the part of the Gloriosos, the original owner to consider it as having been sold because of the
petitioner’s non-fulfillment of the suspensive condition.
Moreover, petitioners admit that they have not paid a single centavo due to the fact that there
is yet to be a survey made. However, a survey was indeed made six days after the execution
of the Kasunduan. Lastly, there is no need for judicial rescission for the obligation is non-
existent for the simple reason that the obligation of the Gloriosos to transfer the property to
petitioners has not yet arisen. Hence, petitioners have no superior right of ownership over
the property. In fact, they were just able to live and build their house on the lot through the
permission and kindness of the previous owner who was their relative. A person who occupies
the land of another at the latter's forbearance or permission without any contract between
them is necessarily bound by an implied promise that he will vacate upon demand.
WHEREFORE, petition is denied.
Ponente: Castro, J.
One-liner / Principle: The seller and the buyer need to have a definite agreement on the
manner of payment of the purchase price in order for the contract of sale to be binding.
Facts: The petitioner and Magdalena Estate, Inc. had entered into a contract of sale by virtue
of which the defendant offered to sell the petitioner and the petitioner in turn agreed to buy
2,059 square meters of Lot 15, Block 7, Psd-6129, located in New Manila for the total purchase
price of P100,000.00.
The agreement was that the petitioner was to give a down payment of P10,000.00 to be
followed by P20,000.00 and the balance of P70,000.00 would be paid in installments, the
equal monthly amortization of which was to be determined as soon as the P30,000.00 down
payment had been completed. It is further alleged that the petitioner paid down payment of
P10,000.00 on November 29, 1962, and that when on January 8, 1964 he tendered to
Magdalena Estate, Inc. the payment of the additional P20,000.00 to complete the P30,000.00,
which Magdalena Estate, Inc. refused to accept and that eventually it likewise refused to
execute a formal deed of sale obviously agreed upon.
Magdalena Estate, Inc. denies that it has had any direct dealings or contractual relations with
the petitioner regarding the property in question. In addition, a portion of the property in
question was being leased by Socorro Velasco who indicated her desire to purchase the lot;
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that Magdalena Estate, Inc. indicated its willingness to sell the property to her at the price of
P100,000.00. Socorro Velasco offered to pay P10,000.00 as initial payment instead of the
agreed P20,000.00 but because the amount was short of the alleged P20,000.00 the same
was accepted merely as deposited and upon request of Socorro Velasco the receipt was made
in the name of her brother-in-law the petitioner herein; that Socorro Velasco failed to
complete the down payment of P30,000.00 and neither has she paid any installments on the
balance of P70,000.00 up to the present time; that it was only on January 8, 1964 that
Socorro Velasco tendered payment of P20,000.00, which offer Magdalena Estate, Inc. refused
to accept because it had considered the offer to sell rescinded on account of her failure to
complete the down payment on or before December 31, 1962.
Lorenzo Velasco testified that Socorro Velasco is his sister-in-law and that he had he had
authorized her to negotiate with Magdalena Estate, Inc. with regards to the purchase of the
property in question since he was not fluent in English.
Issue: Whether or not the talks between the Magdalena Estate, Inc. and Lorenzo Velasco
either directly or through Socorro Velasco ripened into a contract of sale.
Ruling: NO. The minds of the parties did not meet in regard to the manner of payment. A
definite agreement on the manner of payment of the purchase price is an essential element
in the formation of a binding contract of sale. The time within the full down-payment of the ₱
30,000 was to be completed was not specified by the parties.
The fact that the petitioners delivered to Magdalena Estates, Inc. the sum of ₱ 10,000 as part
of the down-payment that they had to pay cannot be considered as sufficient evidence of the
perfection of any purchase and sale agreement between the parties as the petitioners admit
in their affidavit that certain essential matters, such as the terms of payment, still had to be
mutually agreed. Hence, SC denied the petition.
Facts: This case is a petitions seeking to reverse the Decision and Resolution of the Court of
Appeals which affirmed the Decision of the Regional Trial Court of Makati City. Petitioner
National Development Company is a government-owned and controlled corporation created
under Commonwealth Act. Petitioner Polytechnic University of the Philippines is a public, non-
sectarian, non-profit educational institution created by Presidential Decree.
In the early sixties, NDC entered and had its disposal a ten hectare property located along
Pureza St. Sta. Mesa Manila. Covered by Transfer Certificate of Title.On September 7, 1977,
NDC entered into a Contract of Lease with Golden Horizon Realty Corporation over a portion
of the property with an area of 2, 407 square meters for a period of ten years, renewable for
another ten years. On May 4, 1978, a second contract of Lease was executed between NDC
and GHRC covering 3, 222.80 square meters, also renewable upon mutual consent after the
expiration of the ten years lease period. GHRC as lease was granted the option to purchase
the area leased, the price to be negotiated and determined at the time the option to purchase
is exercise.
Under the leased agreements, GHRC was obliged to construct at its own expense buildings of
strong material at no less than the stipulated cost, and other improvements which shall
automatically belong to the NDC as lessor upon the expiration of the lease period. GHRC
introduced permanent improvements and structures as required by the terms of the contract.
After the completion of the industrial complex project for which GHRC spent 5 million pesos.
On June 13, 1988, before the expiration of the ten year period under the second lease contract,
GHRC wrote a letter to NDC indicating its exercise of the option to renew the lease for another
ten years. Sometime after September 1988, GHRC discovered that NDC had decided to
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secretly dispose the property to a third party. On October 21, 1988, GHRC filed in the RTC a
complaint.
Issue: Whether or not the right of first refusal under the lease contract was violated by the
sale of the property to PUP without NDC having first offered to sell the same to GHRC?
Ruling: No, the right of first refusal was not violated. Because the respondent did not offer
any amount to petitioner NDC and neither disputed the 1, 500.00 pesos per square meter
actual value of NDC’s property. Therefore, the petitions in this case are denied. The Decision
dated November 25, 2004 of the Regional Trial Court of Makati City, Branch 144 as affirmed
by the Court of Appeals in its Decision is Affirmed with Modification.
FACTS: Roque Naranja was the registered owner of a parcel of land, denominated as Lot No.
4 in Consolidation- Subdivision Plan (LRC) Pcs-886, Bacolod Cadastre, with an area of 136
square meters and covered by Transfer Certificate of Title (TCT) No. T-18764. Roque was also
a co-owner of an adjacent lot, Lot No. 2, of the same subdivision plan, which he co-owned
with his brothers, Gabino and Placido Naranja. When Placido died, his one- third share was
inherited by his children, Nenita, Nazareto, Nilda, Naida and Neolanda, all surnamed Naranja,
herein petitioners. Lot No. 2 is covered by TCT No. T-18762 in the names of Roque, Gabino
and the said children of Placido. TCT No. T-18762 remained even after Gabino died. The other
petitioners — Serafin Naranja, Raul Naranja, and Amelia Naranja-Rubinos — are the children
of Gabino. Roque had no other source of income except for the P200.00 monthly rental of
his two properties. To show his gratitude to Belardo, Roque sold Lot No. 4 and his one-third
share in Lot No. 2 to Belardo on August 21, 1981, through a Deed of Sale of Real Property
which was duly notarized by Atty. Eugenio Sanicas. The Deed of Sale reads:
I, ROQUE NARANJA, of legal age, single, Filipino and a resident of Bacolod City, do hereby
declare that I am the registered owner of Lot No. 4 of the Cadastral Survey of the City of
Bacolod, consisting of 136 square meters, more or less, covered by Transfer Certificate of
Title No. T-18764 and a co-owner of Lot No. 2, situated at the City of Bacolod, consisting of
151 square meters, more or less, covered by Transfer Certificate of Title No. T- 18762 and
my share in the aforesaid Lot No. 2 is one-third share.
ISSUE: W/N the sale was valid.
HELD: To be valid, a contract of sale need not contain a technical description of the subject
property. Contracts of sale of real property have no prescribed form for their validity; they
follow the general rule on contracts that they may be entered into in whatever form, provided
all the essential requisites for their validity are present. The failure of the parties to specify
with absolute clarity the object of a contract by including its technical description is of no
moment. What is important is that there is, in fact, an object that is determinate or at least
determinable, as subject of the contract of sale.
The deed of sale clearly identifies the subject properties by indicating their respective lot
numbers, lot areas, and the certificate of title covering them. One who alleges any defect, or
the lack of consent to a contract by reason of fraud or undue influence, must establish by full,
clear and convincing evidence, such specific acts that vitiated the party’s consent. Petitioners
adduced no proof that Roque had lost control of his mental faculties at the time of the sale.
Undue influence is not to be inferred from age, sickness, or debility of body, if sufficient
intelligence remains. The Deed of Sale which states “receipt of which in full I hereby
acknowledge to my entire satisfaction” is an acknowledgment receipt in itself. Moreover, the
presumption that a contract has sufficient consideration cannot be overthrown by a mere
assertion that it has no consideration. Heirs are bound by contracts entered into by their
predecessors-in-interest. Having been sold already to Belardo, the two properties no longer
formed part of Roque’s estate which petitioners could have inherited.
Rules on Ordinary Sale: Statute of Frauds
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Facts: Cirilo Paredes had filed action to compel defendant- appellee Jose L. Espino to execute
a deed of sale and to pay damages. The complaint alleged that the defendant "had entered
into the sale" to plaintiff of Lot No. 67 of the Puerto Princesa Cadastre at P4.00 a square meter.
The deal had been "closed by letter and telegram" but the actual execution of the deed of sale
and payment of the price were deferred to the arrival of defendant at Puerto Princesa. The
defendant upon arrival had refused to execute the deed of sale although plaintiff was able and
willing to pay the price, and continued to refuse despite written demands of plaintiff. As a
result, plaintiff had lost expected profits from a resale of the property, and caused plaintiff
mental anguish and suffering, for which reason the complaint prayed for specific performance
and damages.
Defendant filed a motion to dismiss upon the ground that the complaint stated no cause of
action, and that the plaintiff’s claim upon which the action was founded was unenforceable
under the Statute of Frauds. Plaintiff opposed in writing the motion to dismiss and annexed
to his opposition a copy of a letter purportedly signed by defendant.
Issue: Whether or not the enforcement of the contract pleaded in the complaint is barred by
the Statute of Frauds.
Ruling: No, the contract is not barred by the Statute of Frauds. The Statute of Frauds,
embodied in Article 1403 of the Civil Code of the Philippines, does not require that the contract
itself be in writing. The plain text of Article 1403, paragraph (2) is clear that a written note or
memorandum, embodying the essentials of the contract and signed by the party charged, or
his agent, suffices to make the verbal agreement enforceable. In the case at bar, the
complaint in its paragraph 3 pleads that "the deal had been closed by letter and telegram".
This letter, constitute an adequate memorandum of the transaction. The Court also ruled in
Berg v. Magdalena Estate Inc., that a sufficient memorandum may be contained in two or
more documents. All of the essential terms of the contract are present, and they satisfy the
requirements of the Statute of Frauds.
Under, Art. 1483. Subject to the provisions of the Statute of Frauds and of any other applicable
statute, a contract of sale may be made in writing, or by word of mouth, or partly in writing
and partly by word of mouth, or may be inferred from the conduct of the parties. As a general
rule, a contract may be entered into in any form provided all the essential requisites for its
validity are present.
FACTS: On March 29, 1963, in pursuant of a previous verbal understanding plaintiff paid
Adriana Maloto P10,000.00 as purchase price for the disputed house and lot of 453 square
meters, located in Iloilo City. The deed of sale was to be executed later on.
Margarita Inigo did not press Adriana Maloto for a receipt for the money paid considering the
"almost filial relationship" between the two (plaintiff is a niece of Adriana's deceased
husband), and because plaintiff was told by Adriana that the matter of the preparation of the
said receipt and the deed of sale was to be referred to the latter's lawyer. Meanwhile, plaintiff
"began to exercise ownership and dominion over the said property by improving the same
and constructing a retail store in front thereof." On two occasions, in September and in
October, 1963, on Adriana's instructions, plaintiff went to see Atty. Palma for the preparation
of a deed of sale. She was without success because Palma then was on the campaign trail as
a candidate for councilor of Iloilo City. On October 20, 1963, Adriana died. Thereafter, the
Torrens title to the property was transferred in the name of the present defendants, nephews
and niece of Adriana Maloto, after settlement of the latter's estate. Formal demand for the
execution of a deed of sale by said defendants was rejected by them.
ISSUE: WON the contract of sale is unenforceable?
RULING: YES. Under the civil code, a verbal agreement of sale is unenforceable unless
ratified. However, this rule is only applicable to fully executory contracts not to contracts
which are totally or practically performed. In this case, Inigo paid the purchase price and
performed acts of ownership over the property (house and lot). These shows that the contract
was already consummated. Therefore, the contract of sale is not within the ambit of statute
of frauds and it does not matter whether the receipt or the sale was in writing.
Facts: Roberto Laperal was the owner of a residential lot and building which was situated at
No. 1570 Arlegui St. San Miguel, Manila. He sold the said lot to the Republic of the Philippines
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which was controlled by the Japanese Military for the sum of P500,000.00 in Japanese Military
war notes. Pursuant to Executive Order No. 9818 of the President of the United States, the
said property was transferred to the Philippine Alien Property Administrator to be held, used,
administered, liquidated, sold or otherwise dealt with. On April 27, 1947, Roberto Laperal filed
a claim for the property and his allegations were that in executing the deed of sale he was
under duress and the representative of the Japanese Administration had threatened him. The
consideration of P 500,000.00 was also grossly inadequate for the property. However, the
Philippine Alien Property Administrator denied, for lack of knowledge and information
regarding the allegation of the plaintiff. The Register of Deeds of Manila was declared in
default due to his failure to answer the complaint within the given period.
Issue: Whether or not the contract of sale was valid
Ruling: During the Second World War, the Japanese Army have occupied private properties
in the City of Manila and elsewhere in the country without the authority of their owners. In
this case, the property was acquired under duress and that the consideration was considered
as grossly inadequate. It was recognized by the trial court that there was a reasonable and
well-grounded fear for suffering a possible injury if the plaintiff had not sold his lot to the
Japanese Military. It would be a ground that there was no consent and the consent of the
plaintiff was vitiated. Also in Article 1470 of the Civil Code it states that gross inadequacy of
price does not affect a contract of sale, expect as it may indicate a defect in the consent, or
that the parties really intended a donation or some other act or contract. This would mean
that the contract may be annulled on the grounds that there is vitiated consent and that if
the price is so inadequate as to shock the conscience of the Court, it will set aside. In the
case, what was paid was just below half of what is the real value of the property. Thus, the
price is considered as grossly inadequate. Wherefore, the decision appealed if affirmed.
Facts: On May 28, 1973, Sabejase sued Dailon to recover ownership of a land, which was
based on a document of absolute sale which was dated July 1, 1965. Dalion however denied
the fact of sale and contends that the document was fictitious, his signature was forged and
that the said land was a conjugal property which he and his wife acquired in 1960 from
Saturnina Sabejase. Dailon denied claims of Sabejase after executing a deed of sale over the
land and that they had pleaded Sabejase to be allowed to administer the land because Dailon
did not have any means of livelihood. They have also admitted of administering lands in Sogod,
Leyte, which belonged to the grandfather of Sabejase. They claim that they have never
received the 10% to 15% commission from the sale of copra and abaca and that Sabejase
was just suing them to forestall the threat of Dailon to sue over the unpaid commission.
Issue: Whether of not there was a valid contract of sale for the parcel of land
Ruling: A contract of sale is a consensual contract. This means that it is perfected by mere
consent and there is no particular form that is required for its validity. Upon perfection, the
parties may reciprocally demand performance. Article 1475 of the Civil Code, gives the parties
to a perfected contract of sale the right to reciprocally demand the performance. In Sabejase’s
complaint it was sufficient to allege a cause of action in order to compel Dailon to execute a
formal deed of sale and the suit for recovery of ownership which was premised on the effect
and validity of the parties in the contract of sale which merely seeks consummation of the
contract. Accordingly, the petition was denied.
Facts: Two lots were owned by Domingo Melad. The lots are claimed by both Felix Daguilan
and Apolonia Melad (and her husband Jose Tagacay). On 29 January 1962, Apolonia Melad
filed a complaint against Daguilan in the then CFI Cagayan for recovery of a farm lot and a
residential lot which she claimed she had purchased from Domingo Melad in 1943 and were
now being unlawfully withheld by Daguilan. In his answer, Daguilan denied the allegation and
averred that he was the owner of the said lots of which he had been in open, continuous and
adverse possession, having acquired them from Domingo Melad in 1941 and 1943. The case
was dismissed for failure to prosecute but was refiled in 1967. At the trial, Melad presented a
deed of sale dated 4 December 1943, purportedly signed by Domingo Melad and duly
notarized, which conveyed the said properties to her for the sum of P80.00. She said the
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amount was earned by her mother as a worker at the Tabacalera factory. She claimed to be
the illegitimate daughter of Domingo Melad, with whom she and her mother were living when
he died in 1945. She moved out of the farm only when in 1946 Felix Danguilan approached
her and asked permission to cultivate the land and to stay therein. She had agreed on
condition that he would deliver part of the harvest from the farm to her, which he did from
that year to 1958. The deliveries having stopped, she then consulted the municipal judge who
advised her to file the complaint against Danguilan. Melad’s mother, her only other witness,
corroborated this testimony. Daguilan testified that he was the husband of Isidra Melad,
Domingo’s niece, whom Domingo Melad and his wife Juana Malupang had taken into their
home as their ward as they had no children of their own. He and his wife lived with the couple
in their house on the residential lot and helped Domingo with the cultivation of the farm.
Domingo Melad signed in 1941 a private instrument in which he gave Daguilan the farm and
in 1943 another private instrument in which he also gave him the residential lot, on the
understanding that the latter would take care of the grantor and would bury him upon his
death. Danguilan presented three other witnesses to corroborate his statements and to prove
that he had been living in the land since his marriage to Isidra and had remained in possession
thereof after Domingo Melad’s death in 1945. Two of said witnesses declared that neither the
plaintiff nor her mother lived in the land with Domingo Melad. The trial court believed Daguilan
and rendered a decision based mainly on the issue of possession. On appeal, however, the
appellate court upheld Melad as the true and lawful owner of the disputed property, holding
that the private instruments where Domingo Melad had conveyed the land to Daguilan were
null and void for reason that donation of real property should be effected through a public
instrument. Hence, the petition to the Supreme Court.
The Supreme Court set aside the decision of the appellate court and reinstated that of the
trial court, with costs against Apolonia Melad.
ISSUE:
1. Whether or not there is transfer of ownership by mere stipulation?
2. Whether or not the execution of a public document constitute sufficient delivery
where the property involved is in actual and adverse possession of third person?
RULING: No on both questions. As held in Garchitorena v. Almeda, it is a fundamental and

elementary principle that ownership does not pass by mere stipulation but only by delivery
and the execution of a public document does not constitute sufficient delivery where property
involved is in actual and adverse possession of third person.
The Code imposes upon the vendor the obligation to deliver the thing sold. 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 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.
In the present case, Daguilan and not Melad is in actual possession of the litigated properties.
Thus, being in actual possession, Danguilan , is the rightful owner since both claims of the
plaintiff and defendant are weak, the judgment therefor must be for the defendant, for the
latter being in possession is presumed to be the owner and cannot be obliged to show or
prove a better right.
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FACTS: Petitioners own a property in Tacloban City which they intend to sell for 6.5M. They
gave the respondents the right to purchase the property nut only until July 31, 1978.
Respondents replied that they agree to buy the property and they will negotiate for details.
Petitioner sent another telegram informing respondents that their proposal is accepted and a
contract will be prepared.
Lawyer of defendant, Atty. Gamboa sent a letter to Yao King Ong stating the willingness to
sell the land to latter. It brought a contact with an altered mode of payment which says that
the balance payment should be paid withing 30 days instead of the former 90 days. (Otiginal
terms: 2M payment upon execution. 4.5M after 90 days) Yao King Ong replied by telegram
with the following words “we agree to buy proceed to Tacloban to negotiate details”. Yao King
Ong filed a suit for specific performance against the petitioners. Petitioners contended that
the contract of sale is unenforceable under the Statute of Frauds and there was no absolute
acceptance made by the respondents. Hence, there was no perfected contract of sale.
ISSUE: WON there was a perfected contract of sale?
HELD: The court ruled that the acceptance was not absolute under Article 1319 of the Civil
Code. There was no perfected contract of sale yet because both parties are still under
negotiation and hence, no meeting of the minds. Mr.Gamboa even went to the respondents
to negotiate for the sale. Even though there was an agreement on the terms of payment,
there was no absolute acceptance because respondents still insisted on further details.
With regard to the alleged violation of terms of payment, there was no written document to
prove that the respondents agreed to pay not in cash but in installment. In sale of real
property, payment of installment must be in requisite of a note under the statute of frauds
Facts: At the core of the controversy is a 4,608 square-meter parcel of land in the District of
Toril, Davao City. On August 6, 1970, Reynaldo Manalili, predecessor-in-interest of
respondent Ronald C. Manalili, filed with the Bureau of Land an application to purchase the
subject property, attaching therewith his Occupants Affidavit. The application was favorably
acted upon and on March 27, 1972, the BOL required Manalili to pay the downpayment of
10% of the purchase price or P1,865.28. Thereafter, Manalili declared the land for taxation
purposes. On March 25, 1981, after the lapse of nine (9) years and even as the BOL had
already issued a Certification of Full Payment endorsing the approval of the sale of the land
in question to applicant Reynaldo Manalili, herein petitioner Rodolfo Santos wrote an undated
letter to the BOL protesting Manalilis application.
On December 16, 1981, following Manalilis compliance with other requirements, the BOL
issued to him the corresponding Deed of Absolute Sale which was duly approved by the Office
of the President on December 21, 1981. On April 26, 1982, petitioner filed the aforementioned
complaint for Reconveyance, Damages, Attorneys Fees and/or Annulment of Title against the
BOL and the Manalilis.
Issue: Whether or not Manalili has the better right of possession over the lot in question?
Held: The Court answered in the affirmative. It affirmed the BOLs finding that the Manalilis
had a better right of possession thereto. Preponderant evidence of respondent have
sufficiently established that as early as 1970, Reynaldo Manalili, respondents predecessor-in-
interest, had already filed an Affidavit of Occupancy with the BOL, the government agency
tasked to administer it; that the Manalilis administered the land before they left for Manila in
1972; that after they moved to Manila they appointed an administrator to oversee the land
and the improvements and crops they have planted thereon, such as bananas and coconut
trees; and that the Manalilis have been paying the real estate taxes for the subject land even
before the sale thereof to them. The circumstance that after the sale, the Manalilis resided in
Manila and Pangasinan is of no moment. As it is, possession may be exercised in ones own
name or in that of another. It is not necessary that the owner or holder of the thing exercise
personally the rights of possession. Rights of possession may be exercised through agents.
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FACTS: Petitioner Asset Privatization Trust was a government entity created for the purpose
to conserve, to provisionally manage and to dispose assets of government institutions.
Petitioner had acquired from the Development Bank of the Philippines (DBP) assets consisting
of machinery and refrigeration equipment which were then stored at Golden City compound,
Pasay City, which was leased and occupied by Creative Lines, Inc., (Creative Lines).
On 7 November 1990, petitioner and respondent entered into an absolute deed of sale
over certain machinery and refrigeration equipment identified as Lots Nos. 2, 3 and 5.
Respondent paid the full amount of P84,000.00 as evidenced by petitioner's Receipt No.
12844. Respondent was able to pull out from the compound the properties designated as Lots
Nos. 3 and 5. However, during the hauling of Lot No. 2 consisting of sixteen (16) items,
only nine (9) items were pulled out by respondent because Creative Lines' employees
prevented respondent from hauling the remaining machinery and equipment.
Respondent filed a complaint for specific performance and damages against petitioner and
Creative Lines. During the pendency of the case, respondent was able to pull out the
remaining machinery and equipment. However, upon inspection it was discovered that
the machinery and equipment were damaged and had missing parts. Petitioner argued that
upon the execution of the deed of sale it had complied with its obligation to deliver
the object of the sale since there was no stipulation to the contrary. It further argued that
being a sale on an as-is-where-is basis, it was the duty of respondent to take
possession of the property. Petitioner claimed that there was already a constructive
delivery of the machinery and equipment.
The RTC ruled that the execution of the deed of absolute sale did not result in constructive
delivery of the machinery and equipment. It found that at the time of the sale, petitioner did
not have control over the machinery and equipment and, thus, could not have transferred
ownership by constructive delivery. The RTC ruled that petitioner is liable for breach of
contract and should pay for the actual damages suffered by respondent. On petitioner's appeal,
the Court of Appeals affirmed in toto the decision of the RTC. Hence this petition.
ISSUE: Whether or not there was a constructive delivery of the machinery and equipment
upon the execution of the deed of absolute sale between petitioner and respondent.
RULING: NO. In this case, there was no constructive delivery of the machinery and
equipment upon the execution of the deed of absolute sale or upon the issuance of the
gate pass since it was not petitioner but Creative Lines which had actual possession of the
property. The presumption of constructive delivery is not applicable as it has to yield to the
reality that the purchaser was not placed in possession and control of the property.
The ownership of a thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof. The thing sold shall be understood as delivered when it is placed
in the control and possession of the vendee.
As a general rule, when the sale is made through a public instrument, the execution thereof
shall be equivalent to the delivery of the thing which is the object of the contract, if from the
deed the contrary does not appear or cannot clearly be inferred. And with regard to movable
property, its delivery may also be made by the delivery of the keys of the place or depository
where it is stored or kept. In order for the execution of a public instrument to effect tradition,
the purchaser must be placed in control of the thing sold.
However, the execution of a public instrument only gives rise to a prima facie
presumption of delivery. Such presumption is destroyed when the delivery is not
effected because of a legal impediment. It is necessary that the vendor shall have
control over the thing sold that, at the moment of sale, its material delivery could
have been made. A person who does not have actual possession of the thing sold
cannot transfer constructive possession by the execution and delivery of a public
instrument.
Reference:
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FACTS: The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979, Wilfredo
Dy purchased a truck and a farm tractor through financing extended by Libra Finance and
Investment Corporation (Libra). Both truck and tractor were mortgaged to Libra as security
for the loan. The petitioner wanted to buy the tractor from his brother so on August 20, 1979,
he wrote a letter to Libra requesting that he be allowed to purchase from Wilfredo Dy the said
tractor and assume the mortgage debt of the latter.
In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares approved the
petitioner's request. Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute
sale in favor of the petitioner over the tractor in question. At this time, the subject tractor
was in the possession of Libra Finance due to Wilfredo Dy's failure to pay the amortizations.
Despite the offer of full payment by the petitioner to Libra for the tractor, the immediate
release could not be effected because Wilfredo Dy had obtained financing not only for said
tractor but also for a truck and Libra insisted on full payment for both.
The petitioner was able to convince his sister, Carol Dy-Seno, to purchase the truck so that
full payment could be made for both. A PNB check was issued in the amount of P22k in favor
of Libra, thus settling in full the indebtedness of Wilfredo with the financing firm. Payment
having been effected through an out-of-town check, Libra insisted that it be cleared first
before Libra could release the chattels in question.
The tractor was subsequently sold at public auction where Gelac Trading was the lone bidder.
Later, Gelac sold the tractor to one of its stockholders, Antonio Gonzales. It was only when
the check was cleared on January 17, 1980 that the petitioner learned about GELAC having
already taken custody of the subject tractor. Consequently, the petitioner filed an action to
recover the subject tractor against GELAC Trading with the Regional Trial Court of Cebu City
ISSUE: Whether at the time of the execution of the deed of sale, constructive delivery was
effected since the consummation of the sale depended upon the clearance and encashment
of the check which was issued in payment of the subject tractor.
HELD/RATIO: YES. There was constructive delivery. The rule is settled that the chattel
mortgagor continues to be the owner of the property, and therefore, has the power to alienate
the same; however, he is obliged under pain of penal liability, to secure the written consent
of the mortgagee. Thus, the instruments of mortgage are binding, while they subsist, not only
upon the parties executing them but also upon those who later, by purchase or otherwise,
acquire the properties referred to therein. The absence of the written consent of the
mortgagee to the sale of the mortgaged property in favor of a third person, therefore, affects
not the validity of the sale but only the penal liability of the mortgagor under the RPC and the
binding effect of such sale on the mortgagee under the Deed of Chattel Mortgage.
ISSUE: Whether or not the sale between the brothers valid and binding and whether there
is constructive delivery upon the same object.
RULING:
Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor can not sell the subject
tractor. There is no dispute that the consent of Libra Finance was obtained in the instant case.
In a letter dated August 27, 1979, Libra allowed the petitioner to purchase the tractor and
assume the mortgage debt of his brother. The sale between the brothers was therefore valid
and binding as between them and to the mortgagee, as well.
Article 1496 of the Civil Code states that the 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 or in any other manner signing an agreement that the possession is transferred from
the vendor to the vendee. We agree with the petitioner that Articles 1498 and 1499 are
applicable in the case at bar.
Article 1498 states:
Art. 1498. When the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the object of
the contract, if from the deed the contrary does not appear or cannot clearly
be inferred.
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Article 1499 provides:
Article 1499. The delivery of movable property may likewise be made by the
mere consent or agreement of the contracting parties, if the thing sold cannot
be transferred to the possession of the vendee at the time of the sale, or if the
latter already had it in his possession for any other reason. (1463a)
In the instant case, actual delivery of the subject tractor could not be made. However, there
was constructive delivery already upon the execution of the public instrument pursuant to
Article 1498 and upon the consent or agreement of the parties when the thing sold cannot be
immediately transferred to the possession of the vendee. (Art. 1499)
While it is true that Wilfredo Dy was not in actual possession and control of the subject tractor,
his right of ownership was not divested from him upon his default. Neither could it be said
that Libra was the owner of the subject tractor because the mortgagee can not become the
owner of or convert and appropriate to himself the property mortgaged. (Article 2088, Civil
Code) Said
Where a third person purchases the mortgaged property, he automatically steps into the
shoes of the original mortgagor. (See Industrial Finance Corp. v. Apostol, 177 SCRA 521
[1989]). His right of ownership shall be subject to the mortgage of the thing sold to him. In
the case at bar, the petitioner was fully aware of the existing mortgage of the subject tractor
to Libra. In fact, when he was obtaining Libra's consent to the sale, he volunteered to assume
the remaining balance of the mortgage debt of Wilfredo Dy which Libra undeniably agreed to.
CASE FACTS: Miguel Tan is doing business under the name and style of Manila Mandarin
Marketing which is engaged in the business of selling electrical materials. From August 19 to
November 26, 1997, Manila Mining Corporation (MMC) ordered and received various electrical
materials from Tan valued at ₱2,347,880. MMC agreed to pay the purchase price within 30
days from delivery, or be charged interest of 18% per annum, and in case of suit to collect
the same, to pay attorney’s fees equal to 25% of the claim.
MMC made partial payments in the amount of ₱464,636. But despite repeated demands, it
failed to give the remaining balance of ₱1,883,244, which was covered by nine invoices.On
September 3, 2001, Tan filed a collection suit against MMC at the Manila RTC
After Tan completed presenting evidence, MMC filed a Demurrer to Evidence, which the RTC
denied. RTC further directed MMC to present evidence. MMC offered as sole witness Rainier
Ibarrola, its accountant from year 2000 to 2002. Ibarrola confirmed that it was standard office
procedure for a supplier to present the original sales invoice and purchase order when claiming
to be paid. He testified that the absence of stamp marks on the invoices and purchase orders
negated receipt of said documents by MMC’s representatives. In Tan's argument he presented
Wally de los Santos, his sales representative in charge of MMC’s account. De los Santos
testified that he delivered the originals of the invoices and purchase orders to MMC’s
accounting department.
The RTC ruled for Tan and ordered defendant to pay the principal amount with interest and
liquidated damages. MMC filed a motion for reconsideration, but its motion was denied by the
RTC. On appeal, the Court of Appeals affirmed the RTC’s decision. Therefore MMC filed a
petition for review on certiorari.
ISSUE: Whether MMC should pay for the electrical materials despite its allegation that Tan
failed to comply with certain requisites for payment, there being no proof that respondent
had actually done so.
RULING: YES, Article 1475 of the Civil Code provides the manner by which a contract of sale
is perfected: ART. 1475. The contract of sale is perfected at the moment there is a meeting
of 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.
In this case, the purchase orders constituted accepted offers when Tan supplied the electrical
materials to MMC. Hence, petitioner cannot evade its obligation to pay by claiming lack of
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consent to the perfected contracts of sale. The invoices furnished the details of the
transactions.
Laches is the neglect to assert a right or claim which, taken together with lapse of time and
other circumstances causing prejudice to adverse party, operates as bar in a court of equity.
Here, Tan had no reason to go to court while MMC was paying its obligation, even if partially,
under the contracts of sale.
FACTS: The complaint alleges, for a first cause of action, that on January 11, 1934, the
defendant executed and delivered to the plaintiff a promissory note with interest thereon,
payable in installments and in case of default, an additional sum equal to 20 per cent of the
total amount due was to be paid as attorney's fees; to guarantee the payment of this note
the defendant executed a duly registered chattel mortgage on a Willis 77, Sedan, automobile;
one of the conditions of said mortgage is that if the mortgaged property be lost, destroyed or
damages, for any cause whatsoever, the mortgage would immediately have the right to
foreclose and declare the whole amount of the principal and interest, secured by said
mortgage, due and payable; that on January 21, 1934, the mortgaged automobile, while in
possession and control of the defendant, met with an accident resulting in its total wreck and
loss; by reason of the failure of the defendant to replace or to restore the automobile to its
former condition or to pay the value thereof plaintiff foreclosed its mortgage and what
remained of the wrecked automobile was sold at public auction for the sum of P50; after
applying this amount to the account of defendant there was an unpaid balance of P980.39
plus interest at 12 per cent per annum from March 24, 1934, until paid, and 20 per cent of
the amount due as attorney's fees, which defendant refused to pay in spite of demand therefor.
As a second and alternative cause of action, the plaintiff reproduces the allegations contained
in the first cause of action and alleges that another condition of the above-mentioned chattel
mortgage is that the defendant agreed to use extraordinary care and diligence in the
preservation and maintenance of the mortgaged property and further engaged to pay any
and all damages for deterioration, reasonable wear and tear excepted, resulting directly or
indirectly from carelessness or neglect of any kind on the part of the mortgagor and alleges
further that through the carelessness, neglect or reckless imprudence of the defendant and
or her agents while the automobile was in her possession or under her control the same was
totally wrecked by reason of which the plaintiff was damaged in the sums mentioned in the
first cause of action and therefore the plaintiff prays that defendant be sentenced to pay the
plaintiff and above-mentioned sum of P980.39 with interest at the rate of 12 per cent per
annum for March 24, 1934, until paid, and 20 per cent of said sum as attorney's fees and the
costs of this case.
ISSUE: Whether or not there was a contract for the sale of personal property payable in
installments and that there has been a failure to pay two or more installments.
HELD: YES. ARTICLE 1454- A of the Civil Code states: ART. 1454-A. In a contract for the sale
of personal property payable in installments, failure to pay two or more installments shall
confer upon the vendor the right to cancel the sale or foreclose the mortgage if one has been
given on the property, without reimbursement to the purchaser of the installments already
paid, if there be an agreement to this effect.
However, if the vendor has chosen to foreclose the mortgage, he shall have no further action
against the purchaser for the recovery of any unpaid balance owing by the same, and any
agreement to the contrary shall be null and void.
In this case, defendant made a promissory note, indicating that if he fails to pay the
installments, an additional interest will be paid. And also, it was guaranteed to be in a chattel
mortgage and putting in a condition that if the mortgage property be loss, or damage it will
immediately foreclose and the proceeds will be paid the principal amount and interest.
Sales at Auction
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Principle: The owner of property offered for sale either at public or private auction has the
right to prescribe the manner, conditions and terms of such sale.
Facts: Tiburcio Leoquinco alleged that he was the highest bidder at a public auction held by
the defendants on March 31, 1924, for the sale of a piece or parcel of land belonging to the
Bank, offering P27,000 for said property. Under a rule in Resolution No. 31 of the board of
directors of the Bank, authorizing the sale of said property at public auction, as well as in the
public notice announcing said sale, the board of directors have expressly reserved to
themselves the right to reject any and all bids. He wrote a letter to the defendants on May 9,
1924, advising that he was ready to tender payment for the land as soon as the deed of sale
of the same in his favor is executed and delivered by the defendants. However, the Bank
refused to issue a Deed of Sale.
Leoquinco instituted an action and prayed that said defendants be ordered to execute and
deliver the deed of sale of said land in his favor, and to pay him damages amounting to
P25,000, and the costs. As a defense, the bank alleged that in Resolution No. 31 of the board
of directors of the Postal Savings Bank, the bank expressly reserved to themselves the right
to reject any and all bids, and that they never accepted the bid or offer of the Leoquinco.
Honorable C.A. Imperial, judge, rendered a judgment holding that the plaintiff had not
established his case, and dismissed the complaint without costs. Hence, this petition.
Issue: Whether or not Postal Savings bank may be compelled to execute and deliver a deed
of sale in favor of Tiburcio Leoquinco.
Ruling: No, the bank may not be compelled to execute a deed of sale. The Supreme Court
applied foreign jurisprudence and ruled that the owner of property offered for sale at auction
has the right to prescribe the manner, conditions and terms of sale, and where these are
reasonable and are made known to the buyer, they are binding upon him, and he cannot
acquire a title in opposition to them, and against the consent of the owner. In the present
case, the Postal Savings Bank had expressly reserved to themselves the right to reject any
and all bids under a rule in Resolution No. 31 of the board of directors of the Bank. By taking
part in the auction and offering his bid, Leoquinco voluntarily submitted to the terms and
conditions of the auction sale, announced in the notice, and clearly acknowledged the right
so reserved to the bank. The bank, making use of that right, rejected his offer. Therefore,
Postal Savings bank may not be compelled to execute a deed of sale because their right to
reject the offer of Leoquinco is binding.
Sales by sample and/or Description
Doctrine: The written agreement of the parties prevail. The plaintiff delivered the machine
as described in the sales contract and the fact that the defendant could not use it satisfactorily
in the three cold stores division cannot be attributed to plaintiff's fault.
Facts: On September 14, 1927, the Pacific Commercial Co., the plaintiff herein, sold to the
Ermita Market & Cold Stores, Inc., the defendant, an automatic refrigerating machine. The
parties signed the usual printed sales-contract form of the plaintiff company, the purchase
price, payable by installments as stated in the sales contract. By mutual agreement, the said
machine was installed by the plaintiff, to be paid by the defendant, in favor of the plaintiff.
Complying with the terms of the sales contract, the defendant paid the plaintiff an initial
amount of the purchase price of the machine, leaving a balance. A few days after installation,
the defendant advised the plaintiff that the machine was not serving the purpose for which it
was sold and that it was lacking ammonia receiver and oil separator, and further alleges that
the temperature in the refrigerating rooms did not reach, and had never reached, owing to
the negligence of the plaintiff in not repairing or putting in good working condition the said
refrigerating machine, the defendant had been forced to close its establishment and for which
reason the defendant claimed damages against the plaintiff.
The plaintiff denied generally and specifically each and every and every allegation in the said
cross-complaint and by way of special defense, alleged that whatever defects or deficiency
there might have been in the temperature in the refrigerating rooms of defendant's
establishment, or in the functioning of the machine, these were due to the defects and
imperfections of the coils which were supplied and installed by the defendant itself, as well as
to the incompetency and inefficiency of the defendant's personnel to operate the machine.
CFI ordered defendant to pay.
Issue: Whether or not the installed refrigeration machine was the same machine agreed upon
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Held: Yes, the plaintiff delivered the machine as described in the sales contract, and the fact
that the defendant could not use it satisfactorily in the three cold stores division cannot be
attributed to plaintiff's fault because what was delivered The machine was strictly in
accordance with the written contract between the parties, and the defendant can hardly
honestly say that there was any deception by the plaintiff.
It is clear that the defendant company did not fully understand the use of the motor. It
complains that the machine would not properly refrigerate the refrigerating rooms, but it is
evident that the machine could not operate automatically when the defendant had three
refrigerating rooms which it expected to maintain at three different temperatures.
The defendant also complained that the machine was not equipped with a thermostat and
that the lack of its obstructed the work of the refrigerating. In the first place, the thermostat
was not included in the sales contract and in the second place it would not have been of any
service to defendant because it could not possibly operate automatically at three different
temperatures with the defendant's insufficient equipment. The defendant's complaint that the
machine did not contain an oil separator is not true; the oil separator is combined with the
receiver and condenser in a single combined piece in the machine. Ermita wanted to use it
for the purpose he wants and not how the refrigeration machine was made. Thus, they can
compel Ermita to pay for the balance of the purchase price because the thing was the machine
agreed upon.
Sale of Personal Property
Principle: Recto Law or now Article 1484 of the New Civil Code of the Philippines
Topic: Alternative remedies in case of non-payment
FACTS: On 22 September 1982, the spouses Romulo de la Cruz and Delia de la Cruz, and
one Daniel Fajardo, petitioners herein, purchased on installment basis one (1) unit Hino truck
from Benter Motor Sales Corporation (BENTER for brevity). To secure payment, they executed
in favor of BENTER a chattel mortgage over the vehicle and a promissory note for P282,
360.00 payable in thirty (30) monthly installments of P9, 412.00. On the same date, BENTER
assigned its rights and interest over the vehicle in favor of private respondent Asian Consumer
and Industrial Finance Corporation (ASIAN for brevity). Although petitioners initially paid
some installments they subsequently defaulted on more than two (2) installments. Thereafter,
notwithstanding the demand letter of ASIAN, petitioners failed to settle their obligation.
On 26 September 1984, by virtue of a petition for extrajudicial foreclosure of chattel mortgage,
the sheriff attempted to repossess the vehicle but was unsuccessful because of the refusal of
the son of petitioner, Rolando de la Cruz to surrender the same. Hence, the return of the
sheriff that the service was not satisfied.
On 27 November 1984, ASIAN filed an ordinary action with the court a quo for collection of
the balance of P196, 152.99 of the purchase price, plus liquidated damages and attorney’s
fees.
ISSUE: Whether or not the petitioners can take exception from the alternative remedies
under Article 1484.
RULING: No. It is not disputed that the instant case is covered by the so-called "Recto Law",
now Art. 1484 of the New 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.”
In this jurisdiction, the three (3) remedies provided for in the "Recto Law" are alternative and
not cumulative; the exercise of one would preclude the other remedies. Consequently, should
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the vendee-mortgagor default in the payment of two or more of the agreed installments, the
vendormortgagee has the option to avail of any of these three (3) remedies: either to exact
fulfillment of the obligation, to cancel the sale, or to foreclose the mortgage on the purchased
chattel, if one was constituted. In the case before us, it is clear that while ASIAN eventually
succeeded in taking possession of the mortgaged vehicle, it did not pursue the foreclosure of
the mortgage as shown by the fact that no auction sale of the vehicle was ever conducted.
There being no actual foreclosure of the mortgaged property, ASIAN is correct in resorting to
an ordinary action for collection of the unpaid balance of the purchase price.
WHEREFORE, the assailed decision is AFFIRMED, with the MODIFICATION that the subject
vehicle be returned to petitioners or, at their option, they be allowed to deduct P60, 000.00
from their adjudged liability. No costs.
SO ORDERED.
Rule in Special Sales

Sale of Personal Property payable by installments (Recto Law)
Alternative remedies in case of non-payment (Art. 1484)
Principle: The remedies provided under Article 1484 are alternative and are not to be
exercised cumulatively or successively and the election of one is a waiver of the right to
resort to the others.
Facts: Respondent-Colarina bought on installment, from plaintiff-Magna, one (1) unit of

Suzuki Multicab. After making a down payment, Colarina executed a promissory note for his
balance in thirty-six (36) equal monthly installments. To secure payment thereof, Colarina
executed an integrated promissory note and deed of chattel mortgage over the motor vehicle.
Colarina failed to pay the monthly amortization accumulating an unpaid balance. Magna
Financial Services Group, Inc. filed a Complaint for Foreclosure of Chattel Mortgage with
Replevin before the Municipal Trial Court. Writ of Replevin was issued also on Colarina; who
voluntarily surrendered physical possession of the vehicle. The motor vehicle was turned over
by the sheriff to Magna Financial Services Group, Inc.vColarina was declared in default for
having filed his answer after more than six (6) months from the service of summons upon
him. MTCC decided in favor of plaintiff-Magna. During this time, Colarina died and was
substituted in the case by his heirs. RTC affirmed MTCC decision. However, the CA reversed
the decision in favor of respondent-Colarina ruling that it is beyond cavil that the complaint
seeks the judicial foreclosure of the chattel mortgage. The fact that the respondent had
unconscionably sought the payment of the unpaid balance regardless of its complaint for the
foreclosure of the said mortgage is glaring proof that it intentionally devised the same to
deprive the defendant of his rights. A judgment in its favor will in effect allow it to retain the
possession and ownership of the subject vehicle and at the same time claim against the
defendant for the unpaid balance of its purchase price. It however ordered the foreclosure
pursuant to Article 1484 without the sought payment of unpaid balance.
Petitioner assails the decision of the Court of Appeals and asserts that a mortgage is only an
accessory obligation, the principal one being the undertaking to pay the amounts scheduled
in the promissory note. To secure the payment of the note, a chattel mortgage is constituted
on the thing sold. It argues that an action for foreclosure of mortgage is actually in the nature
of an action for sum of money instituted to enforce the payment of the promissory note, with
execution of the security. In case of an extrajudicial foreclosure of chattel mortgage, the
petition must state the amount due on the obligation and the sheriff, after the sale, shall
apply the proceeds to the unpaid debt. This, according to petitioner, is the true nature of a
foreclosure proceeding as provided under Rule 68, Section 2 of the Rules of Court.
On the other hand, respondent countered that the Court of Appeals correctly set aside the
trial court’s decision due to the inconsistency of the remedies or reliefs sought by the
petitioner in its Complaint where it prayed for the custody of the chattel mortgage and at the
same time asked for the payment of the unpaid balance on the motor vehicle.
Issue: WHETHER OR NOT THE CONTRACT FALLS UNDER THE EXERCISE OF THE 3rd OPTION
UNDER ARTICLE 1484, PARAGRAPH 3 OF THE CIVIL CODE
Ruling: YES. Petitioner resolutely declared that it has opted for the remedy provided under
Article 1484(3) of the Civil Code,that is, to foreclose the chattel mortgage. It is,
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unmistakable from the Complaint that petitioner preferred to avail itself of the first and third
remedies under Article 1484, at the same time suing for replevin. For this reason, the Court
of Appeals justifiably set aside the decision of the RTC.
Perusing the Complaint, the petitioner, under its prayer number 1, sought for the payment of
the unpaid amortizations which is a remedy that is provided under Article 1484(1) of the
Civil Code, allowing an unpaid vendee to exact fulfillment of the obligation. At the same time,
petitioner prayed that Colarina be ordered to surrender possession of the vehicle so that it
may ultimately be sold at public auction, which remedy is contained under Article 1484(3).
Such a scheme is not only irregular but is a flagrant circumvention of the prohibition of the
law. By praying for the foreclosure of the chattel, Magna Financial Services Group, Inc.
renounced whatever claim it may have under the promissory note.
Article 1484, paragraph 3, provides that if the vendor has availed himself of the right to
foreclose the chattel mortgage, "he shall have no further action against the purchaser to
recover any unpaid balance of the purchase price. Any agreement to the contrary shall be
void." In other words, in all proceedings for the foreclosure of chattel mortgages executed on
chattels which have been sold on the installment plan, the mortgagee is limited to the property
included in the mortgage.
Since the petitioner has undeniably elected a remedy of foreclosure under Article 1484(3) of
the Civil Code, it is bound by its election and thus may not be allowed to change what it has
opted for nor to ask for more. On this point, the Court of Appeals correctly set aside the trial
court’s decision and instead rendered a judgment of foreclosure as prayed for by the petitioner.
These remedies are alternative and are not to be exercised cumulatively or successively and
the election of one is a waiver of the right to resort to the others. Be that as it may, although
no actual foreclosure as contemplated under the law has taken place in this case, since the
vehicle is already in the possession of Magna Financial Services Group, Inc. and it has
persistently and consistently avowed that it elects the remedy of foreclosure, the Court of
Appeals, thus, ruled correctly in directing the foreclosure of the said vehicle without more.
Distinction of Sale from Lease with option to purchase
FACTS: The petitioner, Employer of the Private Respondents, is filing this petition for review
against a CA decision which affirmed an RTC decision. Private Respondents are Sps. Lantan,
owners of a 1979 model 2-door Colt Lancer car (Car), acquired under a car plan for top
employees of the Elizalde group of companies. Rolando Lantan (Employee) is head of the cash
department at Elisco Tool Manufacturing (Employer). He entered into an agreement with his
Employer which provides:
• Employer is the owner of Car with Serial No. 3403 under LTC Registration Certificate No.
0526558.
• The Car, for a monthly rental of P1, 010.65, is leased for five (5) years to the Employee.
All expenses necessary to maintain the vehicle in top condition shall be borne by
Employee. • The monthly rental payment is through salary deduction for a period of five
years. • The Employee can purchase the vehicle from the Employer upon:
o the 60th monthly rental or the end of said 5-year period, where all monthly
rentals are applied to the full purchase price of the Car; or
o within the 5-year period, by paying the remaining balance on the 5-year rental
unto the Employer.
• Failure of Employee to pay three (3) consecutive monthly rentals entitles the Employer
full right to lease the vehicle to another employee.
After signing a promissory note, payments began on January 9, 1980, Employee took
possession of the car and installed accessories therein worth P15, 000. In 1981, a year later,
Employer ceased operations, as a result Employee was laid off. Nonetheless, Employee
continued and completed payments for the car as of December 4, 1984.
However, on June 6, 1986, Employer filed a complaint entitled "replevin plus sum of
money" against Employee, et. al. Alleging that Employee failed to pay monthly rentals
amounting to Php 39,054.86 (as of May 1986), despite demands, thereby entitling Employer
to the possession of the Car. Employer prayed for (a) Payment of Php 39,054.86 (b)
Repossession of the Car, otherwise its sum in the amount of Php 60,000 (c) Payment of costs
and other reliefs the Court deem just & equitable.
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On the other hand, Employee argued the agreement was to "buy & sell and not Lease
with option to buy" the Car as evidenced by the maintenance costs shouldered by Employee.
Additionally, Employer did not require the return of the Car despite the resignation of
Employee, and continued to accept payments in various amounts and on different dates,
notwithstanding the failure of the Employee in paying three monthly "rentals".
Consequently, the Employer maintained that the agreement is one of "lease with option to
purchase" and that the promissory note was merely a "nominal security" for the agreement.
After trial, the RTC, in favoring the Employee, held that the agreement in question was on of
sale and Employer needs to return the overpayment made by Employee in the sum of Php
431.94, plus other costs & damages. Employer appealed, however, the Court of Appeals
affirmed RTC; hence, this petition for review on certiorari.
ISSUE: Whether the agreement was one of a "Contract of Sale on installment" or a "lease”?
HELD: The agreement is one of a "Contract of Sale". The Supreme Court has long been
aware of the practice of vendors of personal property of calling a "contract of sale on
installment" as one of "lease" to prevent the ownership of the object of the sale from passing
to the vendee until and unless the price has been fully paid. As noted in Vda. De Jose v.
Barrueco:
Sellers desirous of making conditional sales of their goods, but who do not wish
openly to make a bargain in that form, for one reason or another, have frequently
resorted to the device of making contracts in the form of leases either with options
to the buyer to purchase for a small consideration at the end of term, provided
the so
called rent has been duly paid, or with stipulations that if the rent throughout the
term is paid, title shall thereupon vest in the lessee. It is obvious that such
transactions are leases only in name. The so-called rent must necessarily be
regarded as payment of the price in installments since the due payment of the
agreed amount results, by the terms of the bargain, in the transfer of title to the
lessee.
In the present case, although the agreement provides for "monthly rentals", the contract
provides an option to purchase the Car at the end of the 5th year or upon payment of 60th
rental wherein all monthly rentals are to be applied to the payment of the "full purchase
price" of the Car. Clearly, the transaction in this case is a lease in name only. These so-called
"monthly rentals" are in fact monthly amortizations (installments) on the price of the car.
One-Liner: A demand made by a lessor which fashioned its claim in alternative, such as
“Payment of the remaining amount, OR Surrender the financed assets” was interpreted to
reveal that the lessee had an option to purchase the property leased..
FACTS: Petitioner PCI LEASING and respondent GIRAFFE entered into a Lease Agreement for
two equipment with accessories. In connection with this agreement, the parties subsequently
signed two (2) separate documents, each denominated as Lease Schedule, forming parts of
the basic lease agreement were two (2) separate documents denominated Disclosure
Statements of Loan/Credit Transaction which was acknowledged and it must pay monthly for
36 months. GIRAFFE undertook to remit the amount of ₱3,120,000.00 by way of "guaranty
deposit," a sort of performance and compliance bond for the two equipment.
A year into the life of the Lease Agreement, GIRAFFE defaulted in its monthly rental-payment
obligations. And following a three-month default, PCI LEASING, through one Atty. Florecita
R. Gonzales, addressed a formal pay-or-surrender-equipment type of demand letter dated
February 24, 1998 to GIRAFFE stated below:
“Demand is hereby made upon you to pay in full your outstanding balance
in the amount of P8,248,657.47 on or before March 04, 1998 OR to
surrender to us the one (1) set Silicon High Impact Graphics and one (1)
unit O berry Cinescan 6400-10”
Such demand was left unheeded, PCI LEASING instituted the instant case against GIRAFFE,
which was favored by the RTC, declaring the petitioner the entitled to the possession of the
subject properties, as well as payment of rental balances for P8+ Million, plus litigation costs.
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Subsequently, a motion to dismiss was filed by GIRAFFE, and argues that pursuant to Art.
1484 of the Civil Code, PCI is barred from pursuing any claim, adding that in reality the lease
agreement was a lease in of movables with an option to buy based on Art. 1485 as
supplemented by the schedule documents. Of course PCI maintains its stand that it is just a
straight lease agreement and rejects the applicability of the said provision.
The motion to dismiss filed by GIRRAFE was considered by trial court for having relinquished
any claim to the personal properties which is in PCI’s possession already. Subsequently, PCI’s
motion for reconsideration was denied.
Hence, PCI has directly petitioned for review raising the sole issue below.
ISSUE: Whether or not the underlying Lease Agreement, Lease Schedules and the Disclosure
Statements that embody the financial leasing arrangement between the parties are covered
by and subject to the consequences of Articles 1484 and 1485 of the New Civil Code
RULING:
YES. 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: (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 contrary shall be void.
Art. 1485. The preceding article shall be applied to contract purporting to be leases of personal
property with the option to buy, when the leasor deprived the lessee of the possession or
enjoyment of the thing. On the whole, then, we rule, as did the trial court, that the PCI
LEASING- GIRAFFE lease agreement is in reality a lease with an option to purchase the
equipment. This has been made manifest by the actions of the petitioner itself,
foremost of which is the declarations made in its demand letter to the respondent.
There could be no other explanation than that if the respondent paid the balance, then it could
keep the equipment for its own; if not, then it should return them. This is clearly an option to
purchase given to the respondent. Being so, Article 1485 of the Civil Code should apply.
One-Liner: The vendee’s insolvency that will excuse the vendor from his obligation to deliver
referred to by the law may be before or after the sale, provided it is discovered after the
perfection of the contract, such as a judicially declared insolvency, or one inferred from such
acts as petitioning for suspension of payments, or as a result of all his properties having been
attached in a civil or criminal proceeding.
FACTS: Defendants-appellants, Flores(dba Rizal Investment Corporation) and Abeto (dba Phil.
Investment Co Ltd) entered a contract to bound themselves to deliver on Nov. 18, 1946, to
Visayan Distributor (Plaintiff Appellee) at the port of Romblon , 2,000 tons of copra @ P103.50
per ton FOB appellee’s vessel at Romblon. With due notice to Defendants, the SS Panaman
was sent by the Appellee and arrived at the port of Romblon on November 17, 1946 and
advised the defendants that the steamer (SS Panaman) would be ready to load the copra on
November 18, 1946. Unfortunately, the defendants were unable to deliver any amount of
copra on said steamer and left Romblon without cargo. The Appellee instituted in the CFI of
Manila on December 14, 1946, an action for breach of contract and sought to recover damages,
the trial court of first instance favored the Appellee Appealed, Defendants Abeto and Flores,
contend that they were excused from delivering copra on November 18, 1946, because
Visayan (plaintiff-appellee) was insolvent.
ISSUE: Whether or not delivery is affected by the insolvency of the buyer.
RULING: NO, the contention is untenable. Abeto and Flores should have still delivered the
goods because, there was no conclusive proof that would suggest that Visayan was already
insolvent. There is no showing that in definite terms the former (Abeto and Flores) had warned
the appellee that they would not delivery the copra called for until they were sure paid in
accordance with said contract. Moreover, even assuming that the Visayan, still owed Abeto
and Flores, on the copras delivered before November 18, 1946 is not a positive evidence of
insolvency. The insolvency that will excuse the vendor from his obligation to deliver the thing
by law may be before or after the sale, provided it is discovered after the perfection of the
contract such as, (1) Judicially declared insolvency; or (2) One inferred from such acts as
petitioning for suspension of payments; or (3) As a result of all his properties having been
attached in a civil or criminal proceeding. (see footnotes of the full case). Wherefore, the
appealed judgement is affirmed.
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Facts: Patricio Pagtalunan, petitioner’s stepfather, entered into a Contract to Sell with private
respondent over a house and lot for P17, 000 to be paid in the following manner: P1, 500 as
downpayment upon execution of the Contract and the balance to be paid in equal monthly
installments of P150 on or before the last day of each month until fully paid. The contract
provides that while respondent could immediately occupy the house and lot, in case of default
in the payment of any of the installments for 90 days after its due date, the contract would
be automatically rescinded without need of judicial declaration; all payments made and all
improvements done on the premises by respondent would be considered as rentals for the
use and occupation of the property or payment for damages suffered; and that respondent
should peacefully vacate the premises and deliver the possession thereof back to the vendor.
Petitioner alleged that Manzano stopped paying after December 1979 without any justification
or explanation and that the latter paid only P12, 950. Pagtalunan asserted that when
respondent ceased paying her installments, her status of buyer was automatically
transformed to that of a lessee. Petitioner issued a letter for respondent to vacate the
premises, but was ignored. Petitioner filed a case after.
Issue: Whether or not the contract has been automatically rescinded pursuant to the
agreement when Manzano defaulted in the payment of her installments?
Ruling: No, While the Court agrees with petitioner that the cancellation of the Contract to
Sell may be done outside the court particularly when the buyer agrees to such cancellation,
the cancellation of the contract by the seller must be in accordance with Sec. 3 (b) of the
Maceda Law, which requires: (1) a notarial act of rescission and (2) the refund to the buyer
of the full payment of the cash surrender value of the payments on the property. Actual
cancellation of the contract takes place after 30 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. While the Court agrees with petitioner that
the cancellation of the Contract to Sell may be done outside the court particularly when the
buyer agrees to such cancellation, the cancellation of the contract by the seller must be in
accordance with Sec. 3 (b) of the Maceda Law, which requires: (1) a notarial act of rescission
and (2) the refund to the buyer of the full payment of the cash surrender value of the
payments on the property. Actual cancellation of the contract takes place after 30 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.
Facts: Juliana Melliza owns 3 parcels of land, she donated Lot 1214 of her land to the
Municipality of Iloilo but was revoked for inadequate requirements. The said land was then
subdivided into portions 1214-A and 1214-B, which was futherer subdivided into Lots 1214-
B-1, Lot 1214-B-2 and Lot 1214-B-3. Juliana Melliza sold her remaining interest in Lot 1214
to Remedios Sian Villanueva. Remedios in turn transferred her rights to said portion of land
to petitioner. the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city
hall site together with the building thereon, to the University of the Philippines (Iloilo branch).
The site donated consisted of Lots Nos. 1214-B, 1214-C and 1214-D. Petitioner thereupon
made representations, thru his lawyer, with the city authorities for payment of the value of
the lot (Lot 1214-B). No recovery was obtained, because as alleged by plaintiff, the City did
not have funds. Petitioner then sued against Iloilo City and the University of the Philippines
for recovery of Lot 1214-B or of its value. Respondents answered, contending that Lot 1214-
B was included in the public instrument executed by Juliana Melliza in favor of Iloilo
municipality. Juliana Melliza not only sold Lots 1214-C and 1214-D but also such other
portions or lots as were necessary for the municipal hall site, such as Lot 1214-B.
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Issue: Whether or not the Lot-1214-B is included in the conveyance of the property to the
municipality of Iloilo
Ruling: Yes, the requirement of the law that a sale must have for its object a determinate
thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is
capable of being made determinate without the necessity of a new or further agreement
between the parties. The specific mention of some of the lots plus the statement that the lots
object of the sale are the ones needed for city hall site, avenues and parks, according to the
Arellano plan, sufficiently provides a basis, as of the time of the execution of the contract, for
rendering determinate said lots without the need of a new and further agreement of the
parties. Petitioner claims that although said plan existed, its metes and bounds were not fixed
until 1935, and thus it could not be a basis for determining the lots sold on November 15,
1932. Appellant however fails to consider that the area needed under that plan for city hall
site was then already known; that the specific mention of some of the lots covered by the
sale in effect fixed the corresponding location of the city hall site under the plan; that,
therefore, considering the said lots specifically mentioned in the public instrument Exhibit "D",
and the projected city hall site, with its area, as then shown in the Arellano plan (Exhibit 2),
it could be determined which, and how much of the portions of land contiguous to those
specifically named, were needed for the construction of the city hall site.
Principle: Article 1391 of the New Civil Code:The action for annulment shall be brought within
four years.This period shall begin:In cases of intimidation, violence or undue influence, from
the time the defect of the consent ceases.
Facts: This is an action for annulment of deeds of sale thereat instituted by petitioner against
respondents.Petitioner, a domestic corporation engaged in the publication of Philippine Free
Press Magazine, one of the widely circulated political magazines in the Philippines. In 1963,
petitioner purchased a parcel of land situated at No. 2249, Pasong Tamo Street, Makati which
had an area of 5,000 square meters as evidenced by . . . (TCT) No. 109767 issued by the
Register of Deeds of Makati.Sometime during the middle of 1973, Locsin, Sr. was contacted
by Brig. Gen. Hans Menzi, the former aide-de-camp of then President Marcos concerning the
sale of the [petitioner]. Locsin, Sr. requested that the meeting be held inside the [petitioner]
Building and this was arranged by Menzi. On October 23, 1973, the parties [petitioner, as
vendor and private respondent, represented by B/Gen. Menzi, as vendee] met . . . and
executed two (2) notarized Deeds of Sale covering the land, building and the machineries of
the [petitioner]. Menzi paid the balance of the purchase price in the amount of . . . (P4,
750,000.00) Pesos.
Petitioner contends, however, that the 4-year prescriptive period could not have commenced
to run on October 23, 1973, martial law being then in full swing. Plodding on, petitioner avers
that the continuing threats on the life of Mr. Teodoro Locsin, Sr. and his family and other
menacing effects of martial law - which should be considered as force majeure - ceased only
after the February 25, 1986 People Power uprising.
On February 26, 1987, [petitioner] filed a complaint for Annulment of Sale against
[respondent] Liwayway and the PCGG before the Regional Trail Court of Makati, Branch 146
on the grounds of vitiated consent and gross inadequacy of purchase price.
Issue: Whether or not, petitioner's Cause of Action had already prescribed.
Held: YES. Petitioner's Cause of Action already prescribed. The Supreme Court cannot accept
the petitioners' contention that the period during which authoritarian rule was in force had
interrupted prescription and that the same began to run only on February 25, 1986, when the
Aquino government took power. The prevailing rule, therefore, is that on a case-to-case basis,
the Martial Law regime may be treated as force majeure that suspends the running of the
applicable prescriptive period provided that it is established that the party invoking the
imposition of Martial Law as a force majeure are true oppositionists during the Martial Law
regime and that said party was so circumstanced that is was impossible for said party to
commence, continue or to even resist an action during the dictatorial regime. To say that the
Judiciary was not able to render justice to the persons who sought redress before it during
the Martial Law years is a sweeping and unwarranted generalization as well as an unfounded
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indictment. The Judiciary, did not lack in gallant jurists and magistrates who refused to be
cowed into silence by the Marcos administration.
Facts: On 13 March 1989, respondent [Arturo] Marquez entered into a Contract to Sell with
Transamerican Sales and Exposition (‘TSE’), through the latter’s Owner/General Manager
Engr. Jesus Garcia, involving a 52.5 sq. m. lot in Diliman, Quezon City with a three-storey
townhouse unit denominated as Unit No. 10 to be constructed thereon for a total
consideration of ₱800,000.00. The parcel of land in question is a portion of that property
covered by TCT No. 156254. On 22 May 1989, TSE obtained a loan from petitioner FEBTC
in the amount of ₱7,650,000.00 and mortgaged the property.
For failure of TSE to pay its obligation, petitioner FEBTC extrajudicially foreclosed the real
estate mortgage and became the highest bidder (₱15.7 million) in the auction sale
conducted for the purpose. Respondent had already paid a total of ₱600,000.00 when he
stopped payment because the construction of his townhouse unit slackened. He discovered
later on that this was due to the foreclosure.
Consequently, [respondent] instituted a case with the Office of Appeals, Adjudication and
Legal Affairs (‘OAALA’) of the Housing and Land Use Regulatory Board (‘HLURB’) to compel
TSE to complete the construction of the townhouse and to prevent the enforceability of the
extra-judicial foreclosure made by petitioner FEBTC and to have the mortgage between TSE
and petitioner FEBTC declared invalid, said mortgage having been entered into by the
parties in violation of section 18 of P.D. 957.
Issue: Whether or not the mortgage contract violated Section 18 of P.D. 957, hence, void
insofar as third persons are concerned.
Ruling: The Petition is partly meritorious. As a general rule, where there is nothing on the
certificate of title to indicate any cloud or vice in the ownership of the property, or any
encumbrance thereon, the purchaser is not required to explore further than what the
Torrens Title upon its face indicates in quest for any hidden defect or inchoate right that
may subsequently defeat his right thereto. This rule, however, admits of an exception as
where the purchaser or mortgagee has knowledge of a defect or lack of title in the vendor,
or that he was aware of sufficient facts to induce a reasonably prudent man to inquire into
the status of the property in litigation."14
Petitioner bank should have considered that it was dealing with a town house project that
was already in progress. A reasonable person should have been aware that, to finance the
project, sources of funds could have been used other than the loan, which was intended to
serve the purpose only partially. Hence, there was need to verify whether any part of the
property was already the subject of any other contract involving buyers or potential buyers.
In granting the loan, petitioner bank should not have been content merely with a clean title,
considering the presence of circumstances indicating the need for a thorough investigation
of the existence of buyers like respondent. Having been wanting in care and prudence, the
latter cannot be deemed to be an innocent mortgagee.
Petitioner cannot claim to be a mortgagee in good faith. Indeed it was negligent, as found
by the Office of the President and by the CA. Petitioner should not have relied only on the
representation of the mortgagor that the latter had secured all requisite permits and licenses
from the government agencies concerned. The former should have required the submission
of certified true copies of those documents and verified their authenticity through its own
independent effort.
Having been negligent in finding out what respondent’s rights were over the lot, petitioner
must be deemed to possess constructive knowledge of those rights.
FACTS: In case the developer of a subdivision or condominium fails in its obligation, it gives
the buyer the option to demand reimbursement of the total amount paid, or to wait for
further development of the subdivision, and when the buyer opts for the latter alternative,
he may suspend payment of installments until such time that the owner or developer had
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fulfilled its obligation to him. Respondents Huang Sui Sin, Josefino Huang, Miguel Huang
and Milagros Huang, entered into a contract of ―Indenture vwith EAP Development
Corporation (EAP) under which the EAP shall develop their lands into a first class subdivision.
Carlos R. Tamayo purchased a lot from Huang et al. under a contract to sell. In the said
agreement, Tamayo agreed to pay in 60 monthly installments a total purchase price of
P242, 080.00. Tamayo paid installments up to June 1982, but stopped paying thereafter
due to the non-development of the subdivision as agreed upon in the contract. Later on,
Huang et al. filed an action to rescind the contract of ―Indenture‖ against EAP for
abandoning the development of the subdivision. Such petition was granted by the Regional
Trial Court (RTC). More than 5 years after the execution of the contract to sell, Huang et al.
demanded Tamayo for the payment of lot. Tamayo issued a check representing the full
payment of the value of the lot, for which a receipt was issued. However, Huang et al.
returned the check to Tamayo. Tamayo thus filed an action for specific performance with
damages against Huang et al. before the Housing and Land Use Regulatory Board (HLURB).
Both the HLURB Arbiter and HLRUB Board of Commissioners dismissed Tamayo‘s complaint,
on the ground that there has been no valid consignation. However, HLURB removed the
awards of damages in favor of Huang et al. On appeal by Huang et al. to the Office of the
President (OP), they raised for the first time that the subject lot has been sold to certain
Nene Abijar. The OP affirmed the decision of the HLURB holding that Abijar‘s right as a
purchaser of the land in good faith prevails over the right of Tamayo, without prejudice to
Tamayo‘s right to reimburse what he has already paid.
ISSUE: Whether or not the contract to purchase the lot between Tamayo and Huang et al.
remains valid.
HELD: It is not disputed that EAP, acting as the Attorney-in-Fact and Manager of the Huang
et al. totally abandoned the development of the subdivision in 1983, thus prompting Huang
et al., to continue development thereof on May 22, 1985 and to even file a complaint to
rescind its contract of ―Indenture with EAP which the RTC Davao granted.
Facts: Petitioners bought on an installment basis subdivision lots from respondent CRS
Realty and had paid in full the agreed purchase prices; but notwithstanding the full payment
and despite demands, respondents failed and refused to deliver the corresponding
certificates of title to petitioners. They alleged that respondent Casal was the owner of a
parcel of land situated in General Mariano Alvarez, Cavite known as the CRS Farm Estate
while respondent Salvador was the president of respondent CRS Realty, the developer of
CRS Farm Estate. Petitioners averred that respondents failed to deliver the titles to their
respective properties. Casal averred that despite his willingness to deliver them, petitioners
refused to accept the certificates of title with notice of lis pendens covering the subdivision
lots. Respondent Salvador alleged that the failure by respondent Casal to comply with his
obligation under the first agreement to deliver to CRS or the buyers the certificates of title
was caused by the annotation of the notice of lis pendens on the certificate of title covering
the subdivision property.
HLURB Arbiter Ma. Perpetua Y. Aquino declared that the regular courts and not the HLURB
had jurisdiction over petitioners’ complaint, thus, the complaint for quieting of title could
not be given due course. The Heirs of Laudiza and Ligon were dropped as parties on the
ground of lack of cause of action. However, she found respondents CRS Realty, Casal and
Salvador liable on their obligation to deliver the certificates of title of the subdivision lots
to petitioners who had paid in full the purchase price of the properties. She also found as
fraudulent and consequently nullified the subsequent transfer of a portion of the
subdivision to respondents Ang and Cuason.
Issues:
Whether or not the absence of a license to sell has rendered the sales void;
Whether or not the subsequent sale to respondent Cuason and Ang constitutes double
sale;
Ruling:
1. The only requisite for a contract of sale or contract to sell to exist in law is the meeting
of minds upon the thing which is the object of the contract and the price, including the
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manner the price is to be paid by the vendee. The absence of the license to sell does not
affect the validity of the already perfected contract of sale between petitioners and
respondent CRS Realty.
2. The HLURB has exclusive jurisdiction over the complaint for specific performance to
compel respondents CRS Realty, Casal and Salvador as subdivision owners and developers
to deliver to petitioners the certificates of title after full payment of the subdivision lots. On
this score, the Court affirms the findings of HLURB Arbiter Aquino with respect to the
obligation of respondents Casal, Salvador and CRS Realty to deliver the certificates of title
of the subdivision to petitioners pursuant to their respective contracts to sell.
There is no question that respondents Casal, Salvador and CRS Realty breached their
obligations to petitioners under the contracts to sell. It is settled that a breach of contract
is a cause of action either for specific performance or rescission of
contracts.Respondents Casal, Salvador and CRS Realty have the obligation to deliver the
corresponding clean certificates of title of the subdivision lots, the purchase price of which
have been paid in full by petitioners. That the subject subdivision property is involved in a
pending litigation between respondent Casal and persons not parties to the instant case
must not prejudice petitioners.
Jurisdiction
PRINCIPLE the National Housing Authority shall have exclusive jurisdiction to hear and
decide Cases involving specific performance of contractual and statutory
obligations filed by buyers of subdivision lots or condominium units against
the owner, developer, dealer, broker or salesman.
FACTS:
1. Spouses Estela and Rodolfo Calderon filed a verified complaint against

petitioner for specific performance and for the issuance of cease and desist
order and damages.
2. Spouses Geronimo erected a building for his family and later became a
church. It has been used in gatherings and worship.
3. The respondents contended that the noise affected the respondent’s health
and caused inconvenience to respondent’s health and caused inconvenience
because they were forced to leave their house if they want peace and
tranquility.
4. Respondents sought assistance from the President of the homeowners'
association. SACC, through Atty. Alan Alambra promised that it will take
steps to avoid church activities beyond 10:00 p.m. However, the intolerable
noise still continued.
5. SACC, Joel Geronimo, Annie Geronimo, Susan Geronimo and Jonas
Geronimo denied the allegations with regard to the activities that allegedly
caused disturbance and stress to respondents. They averred that the HLURB
has no jurisdiction over the case which primarily involves... abatement of
nuisance, primarily lodged with the regular courts.
6. The HLURB Arbiter rendered a Decision on October 22, 2007 and ordered
petitioners not to use the property at #46 Silverlane Street for religious
purposes and as a location of a church. The case was appealed, the CA
dismissed.
ISSUE: Whether or not CA erred in ruling that the HLURB has jurisdiction over the present
controversy.
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RULING: No. CA didn’t erred in ruling that the HLURB has jurisdiction over the
present controversy. Presidential Decree (P.D.) No. 1344, "EMPOWERING THE
NATIONAL HOUSING AUTHORITY
TO ISSUE WRIT OF EXECUTION IN THE ENFORCEMENT OF ITS DECISION

UNDER PRESIDENTIAL DECREE NO. 957," clarifies and spells out the quasi-
judicial dimensions of the grant of jurisdiction to the HLURB in the following
specific terms:
SEC. 1. In the exercise of its functions to regulate the real estate trade and
business and in addition to its powers provided for in Presidential Decree
No. 957, the National Housing Authority shall have exclusive jurisdiction to
hear and decide... cases of the following nature:
1. Unsound real estate business practices;

2. Claims involving refund and any other claims filed by subdivision lot
or condominium unit buyer against the project owner, developer,
dealer, broker or salesman; and
3. Cases involving specific performance of contractual and statutory
obligations filed by buyers of subdivision lots or condominium units
against the owner, developer, dealer, broker or salesman.
Jurisdiction over the subject matter of a case is conferred by law and determined
by the allegations in the complaint which comprise a concise statement of facts.
The nature of an action, as well as which court or body has jurisdiction over it, is
determined based on the allegations contained in the complaint of the plaintiff,
irrespective of whether or not the plaintiff is entitled to recover upon all or some of
the claims asserted therein. The averments in the complaint and the character of
the relief sought are the ones to be consulted.
FACTS: On February 2, 2004, the late Emmanuel B. Moran, Jr. filed with the Consumer
Arbitration Office (CAO) a verified complaint against private respondent PGA Cars, Inc.
pursuant to the relevant provisions of Republic Act 7394 (RA 7394), otherwise known as
the Consumer Act of the Philippines. The complaint alleged that the private respondent
should be held liable for the product imperfections of a BMW car which it sold to complainant.
The CAO rendered a Decision in favor of complainant. Consequently, the private respondent
sought reconsideration of the Decision but the CAO denied the motion. Thus, the private
respondent appealed to the Secretary of the Department of Trade and Industry (DTI), the
quasi-judicial agency designated by Article 165 of RA 7394 to entertain appeals from the
adverse decisions and orders of the CAO. However, the DTI Secretary dismissed the appeal
of the private respondent who then filed an appeal with the herein public respondent, Office
of the President (OP).
The OP granted the appeal, reversed the DTI Secretary’s Resolution, and dismissed the
complaint on the ground that the DTI erred in holding the private respondent liable for
product defects. The complainant filed a motion for reconsideration with the OP but it was
denied. So, a petition for certiorari was filed with the Court of Appeals and alleged lack of
jurisdiction on the part of the OP for ruling cases involving a violation of RA 7394.
However, the CA dismissed the petition for certiorari on the ground that it was a wrong
mode of appeal. CA likewise denied the motion for reconsideration filed by the petitioner.
Since the original complainant Emmanuel Moran, Jr. passed away, his widow, Concordia
Moran filed the present petition for review on certiorari.
ISSUE: Whether or not there is an error of jurisdiction on the part of the Office of the
President?
RULING: Yes, there is an error of jurisdiction on the part of the Office of the President. The
procedure for appeals to the Office of the President is governed by Administrative Order No.
18, Series of 1987. Section 1 thereof provides:
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SECTION 1. Unless otherwise governed by special laws, an

appeal to the Office of the President shall be taken within thirty (30) days
from receipt by the aggrieved party of the decision/resolution/order
complained of or appealed from . . . (Emphasis supplied.)
Furthermore, in the case of Phillips Seafood (Philippines) Corporation vs. The Board of
Investments, the Court held that “a decision or order issued by a department or agency
need not be appealed to the Office of the President when there is a special law that provides
for a different mode of appeal.”
In this case, a special law, RA 7394 expressly provided for immediate judicial relief from
decisions of the DTI Secretary by filing a petition for certiorari with the proper court.
Arts. 1489 – 1492

A. Capacity in general (Art. 1489)
B. Special disqualification
C. Between spouses
Note: The Sale from Uy Siu Pin and Chua hue to his wife is null and void not only because
the former had nor right to dispose of the land in controversy in view of the existence of the
contract Exhibit A, but because such sales comes with in the prohibition of article 1458 of
the civil code.
Facts: Pedro Velegano and Casimira Cantollas owed 2,000 pesos to El Hogar Filipino which
was secured by a mortgage on a certain land covered by original certificate of tile No. 1017.
However the spouses were not able to pay and had a balance of 1,300 pesos, and that Pedro
died. Because of this Casimira and her son Blas entered into a contract with Uy Siu Pin on
April 2 1932, in which the contract stated that Casimira and Blas agreed to deliver said land
to Uy Siu Pin with full right on the part of the latter to possess and enjoy the same with its
improvement during the period of 15 year from April 2 1932, on condition that Uy Siu Pin
would be the one to pay the remaining balance and all other expenses including real
property tax. However the contract also provided that if after 5 years from April 2 1932
Casimira and Blas had the capacity to pay Uy Siu Pin they would redeem the said land for
the sum of 1,750. However Uy Siu Pin was not able to pay the whole amount hence the
property was foreclosed. Because of this the Land was bought by El Hogar for 1,062.66. On
December 26 7934, Uy Siu Pin bought the land from El Hogar (*maro na insik, iya gyud gi
tuyo og pa forclosed haron ingnon ni cease na daw ang contract ni Cantollas, para iya
mapalit ang yuta) two days later he sold it to his wife for 4,000 pesos. Because of this, it
prompted Casimira and son Blas to file a case in the court of first instance and prayed that
1. The sale in favor of Chua Hae wife of Uy Siu Pin and transfer to her name be cancelled
2. That the agreement Between Casimira and Uy Siu Pin be noted on the transfer of title
issued in favor of Uy Siu Pin 3. That the defendants be ordered to pay the plaintifss the sum
of 380 by way of damages and sum of 7,500 as the valued of land in question. The Court
of first instance and the Court of appeals ruled in favor of Cantollas hence the petition to
the Supreme Court The counsel for petitioners contended that the contract entered between
Uy Siu Pin and Cantollas was a contract not of trust but was one of antichresis.
Ruling: Supreme Court Ruled that whatever may be is denomination, the petitioner Uy Siu
Pin is bound to comply therewith it still being force and effect. Uy Siu Pin cannot contended
that he acquired the property in his own right when he bought it from El Hogar after the
latter forclosed the mortgage, because the failure to pay so to El Hogar was due to Uy Siu
Pin. Casimira cannot be blamed for the failure to pay since the relied on the contract with
Uy Siu Pin which the latter under the contract has to obligation to reconvey the same to
Casimira. The obligation of Uy Siu Pin under the contract can only be extinguished until the
return of the property to Casimira and Blas Velaganyo. Lastly that the sale of Uy Siu Pin to
his wife is void because art 1458 of the Civil code forbids it. Further it is not necessary to
dwell upon the sale from Chua Hue to the Intervenor Juan Mabagos as the latter has not
appealed therefrom the decision complained of by the petitioners.
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FACTS: Respondents Joseph Goyanko et al. filed with the Regional Trial Court of Cebu City
a complaint for recovery of property and damages against Maria Ching, praying for the
nullification of the deed of sale and of transfer certificate and the issuance of a new one.
Goyanko et al. aver that they are the real owners of the property involved. They further
contend that it was after their father‘s death that they found out that a contract of sale
involving the same property has been executed by their father and common-law wife Ching.
However, Ching claimed that she is the actual owner of the property as it was she who
provided its purchase price. The RTC dismissed the complaint against Ching, declaring that
there is no valid and sufficient ground to declare the sale as null and void, fictitious and
simulated.
On appeal, the Court of Appeals reversed the decision of the trial court and declared null
and void the questioned deed of sale and TCT No. 138405.
ISSUE: Whether or not the contract of sale was null and void for being contrary to morals
and public policy.
RULING: Yes, the Court ruled that the contract of sale was null and void for being contrary
to morals and public policy. The sale was made by a husband in favor of a concubine after
he had abandoned his family and left the conjugal home where his wife and children lived
and from whence they derived their support. The sale was subversive of the stability of the
family, a basic social institution which public policy cherishes and protects.
Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or
purposes is contrary to law, morals, good customs, public order, or public policy
are VOID and INEXISTENT from the very beginning.
In the case at bar, the subject property having been acquired during the existence of a valid
marriage between Joseph Sr. and Epifania dela Cruz-Goyanko, is presumed to belong to the
conjugal partnership. Moreover, while this presumption in favor of conjugality is rebuttable
with clear and convincing proof to the contrary, the court finds no evidence on record to
conclude otherwise. The record shows that while Joseph Sr. and his wife Epifania have been
estranged for years and that he and defendant-appellant Maria Ching, have in fact been
living together as common-law husband and wife, there has never been a judicial decree
declaring the dissolution of his marriage to Epifania nor their conjugal partnership. It is
therefore undeniable that the property located at Cebu City belongs to the conjugal
partnership. Assuming that the subject property was not conjugal, still the court cannot
sustain the validity of the sale of the property by Joseph, Sr. to defendant-appellant Maria
Ching, there being overwhelming evidence on records that they have been living together
as common-law husband and wife.
Additionally, the law emphatically prohibits the spouses from selling property to each other
subject to certain exceptions. Similarly, donations between spouses during marriage are
prohibited. And this is so because if transfers or conveyances between spouses were allowed
during marriage, that would destroy the system of conjugal partnership, a basic policy in
civil law. It was also designed to prevent the exercise of undue influence by one spouse
over the other, as well as to protect the institution of marriage, which is the cornerstone of
family law. The prohibitions apply to a couple living as husband and wife without benefit of
marriage, otherwise, the condition of those who incurred guilt would turn out to be better
than those in legal union. Those provisions are dictated by public interest and their criterion
must be imposed upon the will of the parties.
Facts: Mariano Bernardo, a minor, inherited 17 parcels of land from his deceased father.
Respondent, Mariano’s step-mother, was appointed his guardian. As guardian, she sold the
17 parcels to Dr. Ramos, her brother-in-law, for P14,700. After a week, Dr. Ramos sold the
lands to her for P15,000. Subsequently, she sold 4 out of 17 parcels to Emilio Cruz.
Petitioner replaced Roldan as guardian, and two months thereafter, this litigation sought to
declare as null and void the sale to Dr. Ramos, and the sale to Emilio Cruz.
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Issue: Whether the sale of the land by the guardian is null and void for being violative of
the prohibition for a guardian to purchase either in person or through the mediation of
another the property of her ward.
Held: Remembering the general doctrine that guardianship is a trust of the highest order,
and the trustee cannot be allowed to have any inducement to neglect his ward’s interest,
and in line with the court’s suspicion whenever the guardian acquires ward’s property we
have no hesitation to declare that in this case, in the eyes of the law, Socorro Roldan took
by purchase her ward’s parcels thru Dr. Ramos, and that Article 1459 of the Civil Code
applies.
Topic: Pacto de Retro
Principle: Article 1475 of the Civil Code, we find that "the contract of sale is perfected at
the moment there is a meeting of 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 law governing the form of contracts.
Facts: The GSIS was the registered owner of a parcel of land situated in the district of Paco
and covered by Transfer Certificate of Title No. 5986 of the Registry of Deeds of Manila.
GSIS entered into a conditional contract to sell the parcel of land to petitioner Maharlika
Publishing Corporation (Maharlika) together with the building thereon as well as the printing
machinery and equipment therein. Among the conditions of the sale are that the petitioner
shall pay to the GSIS monthly installments of P969.94 until the total purchase price shall
have been fully paid and that upon the failure of petitioner to pay any monthly installment
within ninety (90) days from due date, the contract shall be deemed automatically cancelled.
After Maharlika failed to pay the installments for several months, the GSIS notified Maharlika
in writing and warned Maharlika that the conditions of the contract would be enforced should
Maharlika fail to settle its account within fifteen (15) days from notice. Because of
Maharlika’s failure to settle the unpaid accounts, the GSIS notified Maharlika in writing that
the conditional contract of sale was annulled and cancelled and required Maharlika to sign
a lease contract. Maharlika refused to vacate the premises and to sign the lease contract.
GSIS published an invitation to bid several acquired properties, among which was the
property in question. Maharlika represented by its president Adolfo Calica addressed to GSIS
a letter-proposal to repurchase their foreclosed properties proposing that they be allowed
to pay P11,000.00 representing ten percent (10%) of their total account; that they be
allowed to pay P18,300.00 as balance to complete the twenty-five percent (25%) of their
total arrearages (P117,175.00) and the remaining seventy-five percent (75%) to be paid in
twenty four (24) months.
Public bidding of this particular property was held as scheduled prompting Adolfo Calica to
submit his bid to the Bidding Committee with a deposit of P11,000.00 represented by the
same two checks submitted to General Manager Cruz, Jr., together with his letter-proposal.
The bidding committee rejected Maharlika’s bid as an imperfect bid and recommended
acceptance of private respondent Luz Tagle’s bid. GSIS addressed a letter to Adolfo Calica
informing him of the non-acceptance of his bid and returning his two checks. After approval
and confirmation of the sale of the subject property to Luz Tagle, the GSIS executed a Deed
of Conditional Sale in favor of the Tagles.
Due to the refusal of petitioners to surrender the possession of the property in question,
respondent spouses Luz R. Tagle and Edilberto Tagle filed a case for Recovery of Possession
with Damages with the Court of First Instance of Manila.
RTC Ruling: Court hereby renders judgment:

XXX "(a) declaring the letter-proposal ineffective and without any binding effect, being
imperfect to create any contractual relation between GSIS and defendants Maharlika and
Adolfo Calica.
Intermediate Appellate Court Ruling:

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"The mere offer to repurchase of the subject property and the deposit of the amount of
P11,000.00 by the defendants does not have the effect of reviving the conditional deed of
sale executed by the GSIS and the defendants. To revive the said contract, and for the
defendants to be deemed to have repurchased the subject property, there should have been
payment in favor of the GSIS of all the installments due and interests thereon in the total
amount of P117,175.
Issues: Whether or not the auction sale in question is void for having been conducted
despite the directive of the GSIS General Manager to suspend the same in virtue of
petitioners offer to repurchase the subject property and their payment of P11,000.00 in
checks as earnest money which he accepted.
SC Ruling: In Article 1475 of the Civil Code, we find that "the contract of sale is perfected
at the moment there is a meeting of 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 law governing the form of contracts."
This Court in the case of Central Bank of the Philippines v. Court of Appeals (63 SCRA 431)
ruled on the perfection of government contracts in the following manner:
"We are not persuaded that petitioner’s posture conforms with law and equity. According to
Paragraph IB 114.1 of the Instructions to Bidders, Ablaza was ‘required to appear in the
office of the Owner (the Bank) in person, or, if a firm or corporation, a duly authorized
representative (thereof), and to execute the contract within five (5) days after notice that
the contract has been awarded to him. Failure or neglect to do so shall constitute a breach
of agreement effected by the acceptance of the Proposal.’ There can be no other meaning
of this provision than that the Bank’s acceptance of the bid of respondent Ablaza effected
an actionable agreement between them. We cannot read it in the unilateral sense suggested
by petitioner that it bound only the contractor, without any corresponding responsibility or
obligation at all on the part of the Bank. An agreement presupposes a meeting of minds and
when that point is reached in the negotiations between two parties intending to enter into
a contract, the purported contract is deemed perfected and none of them may thereafter
disengage himself therefrom without being liable to the other in an action for specific
performance."
It is undisputed that when the letter-proposal of petitioners was presented to GSIS General
Manager Roman Cruz, Jr., he wrote on the face of such letter the words "Hold Bidding.
Discuss with me." These instructions were addressed to one Mr. Ibañez who was in-charge
of public bidding. Thereafter, a deposit of P11,000.00 in checks was accepted by the
Secretary of Mr. Roman Cruz, Jr. In the light of these circumstances an inference may be
made that General Manager Cruz, Jr. had already accepted the petitioners’ offer of
repurchase or at the very least had led them to understand that he had arrived at a decision
to accept it.
We note that the petitioners are not complete strangers entering into a contract with
respondent GSIS for the first time. There was an earlier contract to sell the same properties
to the petitioners. That contract was perfected and there had been partial compliance with
its terms. The transaction now under question in this case merely referred to the curing of
certain defects which led to the cancellation of the earlier contract by GSIS. Under the
peculiar circumstances of this case, therefore, the acceptance of the petitioners’ letter-
proposal by Mr. Roman Cruz, Jr., the person with authority to do so, and his order to his
subordinates to stop the bidding so that they could first discuss the matter with him, created
an agreement of binding nature with the petitioners.
WHEREFORE, the decision and resolution of the Intermediate Appellate Court subject of the
instant petition for review on certiorari are hereby SET ASIDE. The conditional sale entered
into between public respondent GSIS and private respondents Luz and Edilberto Tagle is
declared NULL and VOID for being contrary to public policy. The prayer of petitioners for
the repurchase of the subject property in an amount equal to the amount offered by private
respondents and to retain ownership and possession of the disputed property is GRANTED.
“As long as the order of distribution has not been complied with, the probate proceedings
cannot be deemed terminated because a judicial partition is not final and conclusive and
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does not prevent the heir from bringing an action to obtain his share within the prescriptive
period”
FACTS:The case involves an annulment of title over a parcel of land located in San Juan,
Metro Manila, which was originally owned by Rosalina Gurrea, who transferred the
ownership of the same to Adelina Gurrea. The latter continued to be the owner of the lot
until her death. Thereafter Special Proceedings No.7815 was instituted to have the will
which she executed during her lifetime probated for the purpose of settling her estate.
Ricardo Gurrea, an heir of Adelian Gurrea filed an opposition to the probate of will and was
duly represented by his counsel Atty. Enrique Suplico. The consideration for such
representation involves a contingent fee of 20% of whatever maybe due the latter, be it
real or personal property. The heirs of Adelina Gurrea arrived at an amicable settlement,
thereafter Ricardo Gurrea withdrew his opposition and the heirs drew up a project of
partition, the result of which transferred the ownership of subject San Juan Lot to Riccardo
Gurrea along with several other properties.
As payment for his services , Atty. Suplico was offered the San Juan lot of which the latter
accepted, a deed of transfer of rights was duly executed, notarized and was registered with
the register of deeds of San Juan. Petitioners contend that no evidence was presented to
show that the probate court issued an order declaring Special Proceedings No. 7185 closed
and terminated. In addition, when the Transfer of Rights and Interest in favor of respondent
was notarized on August 20, 1975, the title over the subject lot was still in the name of
Adelina Gurrea and that said title was transferred only in the name of Ricardo on October
7, 1980. On these bases, petitioners conclude that at the time the Transfer of Rights and
Interest was notarized, there is no dispute that the subject property still formed part of the
estate of Adelina Gurrea and was, therefore, still the subject of litigation. Hence, the
transfer of rights and interest over the subject property in favor of Atty. Suplico
(respondent) is null and void.
ISSUE:Whether or not the probate proceedings have already been closed and terminated
when the subject lot was transferred to Atty. Suplicio ?
What will be the status of the transfer or rights and interest in case the probate proceedings
have not yet been closed?
HELD: The rule is that as long as the order for the distribution of the estate has not been
complied with, the probate proceedings cannot be deemed closed and terminated. The
probate court loses jurisdiction of an estate under administration only after the payment of
all the debts and the remaining estate delivered to the heirs entitled to receive the same.In
the present case, while the subject lot was assigned as Ricardo’s share in the project of
partition executed by the heirs of Adelina Gurrea, the title over the subject lot was still in
the name of the latter and was not yet conveyed to Ricardo when the Transfer of Rights and
Interest was executed. As correctly cited by petitioners, the Court held in Lucero v. Bañaga
that:
[t]he term “delivery” or tradition has two aspects: (1) the de jure delivery or the execution
of deeds of
conveyance and (2) the delivery of the material possession (The usual practice is that, if
the land to be delivered is in the name of the decedent, the administrator executes a deed,
conveying the land to the distributee. That deed, together with the project of partition, the
order approving it, the letters of administration and the certification as to the payment of
the estate, inheritance and realty taxes, is registered in the corresponding Registry of
Deeds. Title would then be issued to the distributee. Thereafter, the administrator or
executor places him in material possession of the land if the same is in the custody of the
former. It follows that, since at the time of execution of the deed of Transfer of Rights and
Interest, the subject property still formed part of the estate of Adelina, and there being no
evidence to show that material possession of the property was given to Ricardo, the probate
proceedings concerning Adelina’s estate cannot be deemed to have been closed and
terminated and the subject property still the object of litigation. Having been established
that the subject property was still the object of litigation at the time the subject deed of
Transfer of Rights and Interest was executed, the assignment of rights and interest over
the subject property in favor of respondent is null and void for being violative of the
provisions of Article 1491 of the Civil Code which expressly prohibits lawyers from acquiring
property or rights which may be the object of any litigation in which they may take part by
virtue of their profession.
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Incapacity to sell
One Liner : The law requires that the subject matter must be licit or lawful, that is, it should
not be contrary to law, morals, good customs, public order, or public, and should not be
impossible.
Facts: The controversy involves Lot No. 2204 located at Panghulo, Obando, Bulacan. The
property had been originally in the possession of Jose Alvarez, Eduardo’s grandfather. The
lot is adjacent to a fishpond owned by Ricardo Cruz, predecessor-in-interest of respondents
Consuelo Cruz and Rosalina Cruz-Bautista. Before the lot was titled, Eduardo sold a portion
with an area of 553 sqm to Ricardo. The sale is evidenced by a deed of sale which was
signed by Eduardo himself as vendor and his wife Engracia Aniceto with Santiago Enriquez
signing as witness. Another deed of sale covering 50sqm of the lot was executed by Eduardo
in favor of Ricardo. Later, Leon Banaag, Jr, as attorney-in-fact of his father-in-law Eduardo,
executed a mortgage with the Rural Bank of San Pascual, Obando Branch (RBSP), for
P100,000 with the subject lot as collateral. The Cruzes, were not immediately aware of the
consummated sale between Eduardo and Ricardo. Eduardo himself died and was survived
by his heirs. Neither did the heirs of Eduardo inform the Cruzes of the prior sale in favor of
Ricardo. Yet subsequently, the Cruzes came to learn about the sale and the issuance of the
OCT in the name of Eduardo. Upon learning the sale, the Cruzes tried to confront petitioners
on the mortgage and obtain the surrender of the OCT. Petitioners, however, were unwilling
to surrender the OCT. Having failed to physically obtain the title from petitioners, the Cruzes
instead went to RBSP which had custody of the owner’s duplicate certificate of the OCT,
earlier surrendered as a consequence of the mortgage. The Cruzes sought to borrow the
owner’s duplicate certificate for the purpose of photocopying the same and thereafter
showing a copy thereof to the Register of Deeds. Salazar allowed the Cruzes to bring the
owner’s duplicate certificate outside the bank premises when the latter showed the
Kasulatan. They then brought the copy of the OCT to Register of Deeds. After the Cruzes
presented the owner’s duplicate certificate, along with the deeds of sale and the subdivision
plan, the Register of Deeds cancelled the OCT and issued in lieu thereof covering the
remaining 455 square meters in the name of Eduardo. The Cruzes went back to the bank
and surrendered to Salazar in the name of Eduardo and retrieved the title they had earlier
given as substitute collateral. After securing the new separate titles, the Cruzes furnished
petitioners with a copy of TCT No. 9327-P(M) through the barangay captain and paid the
real property tax for 1989. Banaag went to RBSP, intending to tender full payment of the
mortgage obligation. It was only then that he learned of the dealings of the Cruzes with the
bank which eventually led to the subdivision of the subject lot and the issuance of two
separate titles thereon. In exchange for the full payment of the loan, RBSP tried to persuade
petitioners to accept TCT in the name of Eduardo. After trial of the consolidated cases, the
RTC of Malolos rendered a decision in favor of the heirs of Eduardo. The trial court found
that petitioners were entitled to the reliefs of reconveyance and damages. It found that
petitioners were complacent and unperturbed, believing that the title to their property, while
serving as security for a loan, was safely vaulted in the impermeable confines of RBSP. To
their surprise and prejudice, said title was subdivided into two portions, leaving them a
portion of 455 square meters from the original total area of 1,058 square meters, all because
of the fraudulent and negligent acts of respondents and RBSP. It ruled that although the act
of the Cruzes could be deemed fraudulent, still it would not constitute intrinsic fraud. Neither
the bank nor its manager had business entrusting to strangers titles mortgaged to it by
other persons for whatever reason. It was a clear violation of the mortgage and banking
laws, the trial court concluded.
Issue: Whether or not the first sale was valid
Held: No. It is not valid. Eduardo was issued a title in 1976 on the basis of his free patent
application. Such application implies the recognition of the public dominion character of the
land and, hence, the five (5)-year prohibition imposed by the Public Land Act against
alienation or encumbrance of the land covered by a free patent or homestead should have
been considered. The deed of sale covering the fifty (50)-square meter right of way
executed by Eduardo on 18 March 1981 is obviously covered by the proscription, the free
patent having been issued on 8 October 1976. However, petitioners may recover the portion
sold since the prohibition was imposed in favor of the free patent holder. While the law bars
recovery in a case where the object of the contract is contrary to law and one or both parties
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acted in bad faith, we cannot here apply the doctrine of in pari delicto which admits of an
exception. The sale of the 553 square meter portion is a different story. It was executed in
1954, twenty-two (22) years before the issuance of the patent in 1976. Apparently, Eduardo
disposed of the portion even before he thought of applying for a free patent. Where the sale
or transfer took place before the filing of the free patent application, whether by the vendor
or the vendee, the prohibition should not be applied. In such situation, neither the
prohibition nor the rationale therefor which is to keep in the family of the patentee that
portion of the public land which the government has gratuitously given him, by shielding
him from the temptation to dispose of his landholding, could be relevant. Precisely, he had
disposed of his rights to the lot even before the government could give the title to him. The
mortgage executed in favor of RBSP is also beyond the pale of the prohibition, as it was
forged in December 1981 a few months past the period of prohibition.
PRINCIPLE: Sale of homestead within the prohibited period is void. SUBJECT: Incapacity
to sell – Homestead.
FACTS: Victoriano Manzano, now deceased, was granted a homestead patent on June 25,
1934, and the land was registered in his name on July 25, 1934 under Original Certificate
of Title No. 4590. On January 4, 1938, he and respondent Rufino Ocampo agreed on the
sale of said homestead for the amount of P1,900.00, P1,100.00 of which was paid by
Ocampo to Manzano on the same day, and for the balance, he executed a promissory note
which promises to pay the balance of P800.00. Knowing, however, that any sale of the
homestead at that time was prohibited and void, the parties likewise agreed that the deed
of sale was to be made only after the lapse of five years from the date of Manzano's patent.
And to protect the buyer Ocampo's rights in the agreed sale, Manzano executed in his favor
a "Mortgage of Improvements" over the homestead to secure the amount of P1,100.00
already received as down payment on the price. Three months later, Manzano informed
Ocampo that someone was offering to buy his homestead for P3,000.00, and Ocampo
agreed to pay that same price therefor after Manzano's title would have ripened into
absolute ownership. On October 17, 1939, the Undersecretary of Agriculture and Natural
Resources approved the proposed sale of Manzano's homestead to Ocampo. Accordingly,
the parties executed the formal deed of Sale on October 19, 1939 for the price of P3,000.00,
of which Ocampo paid only P1,900.00, because the amount of P1,100.00 had already been
delivered to Manzano on January 4, 1938. On the same day, the mortgage Exhibit "1" was
released and a transfer certificate of title over the homestead issued in Ocampo's name.
But the latter informed him that the same was misplaced or lost. Two years later, in 1940,
the tax declaration over the homestead in question was transferred to Ocampo's name. On
June 22, 1954, Manzano commenced this action in the Court of First Instance of Nueva Ecija
for the annulment of the sale of his homestead to Ocampo, on the theory that the same
was executed on the same date as the promissory note Exhibit "A" and, therefore, within
the prohibitory period of five years from the issuance of his patent. During the pendency of
the case, Manzano died and was substituted by his heirs.
ISSUE: Whether or not the sale of the homestead to Ocampo within the prohibited period
is valid?
HELD: The law prohibiting any transfer or alienation of homestead land within five years,
from the issuance of the patent does not distinguish between executory and consummated
sales; and it would hardly be in keeping with the primordial aim of this prohibition to
preserve and keep in the family of the homesteader the piece of land that the state had
gratuitously given to them,1 to hold valid a homestead sale actually perfected during the
period of prohibition but with the execution of the formal deed of conveyance and the
delivery of possession of the land sold to the buyer deferred until after the expiration of the
prohibitory period, purposely to circumvent the very law that prohibits and declares invalid
such transaction to protect the homesteader and his family. To hold valid such arrangements
would be to throw the door wide open to all possible fraudulent subterfuges and schemes
that persons interested in land given to homesteaders may devise to circumvent and defeat
the legal provision prohibiting their alienation within five years from the issuance of the
homestead's patent. We therefore, hold that the sale in question is illegal and void for having
been made within five years from the date of Manzano's patent, in violation of section 118
of the Public Land Law. Being void from its inception, the approval thereof by the
Undersecretary of Agriculture and Natural Resources after the lapse of five years from
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Manzano's patent did not legalize the sale1 . The result is that the homestead in question
must be returned to Manzano's heirs, petitioners herein, who are, in turn, bound to 1
(Santander v. Villanueva, G.R. No. L-6184, Feb. 28, 1958; Cadiz v. Nicolas, G.R. No. L-
9198, Feb. 13, 1958). restore to appellee Ocampo the, sum of P3,000.00 received by
Manzano as the price thereof. 2The fruits of the land should equitably compensate the
interest on the price. 2 (Medel v. Eliazo, G. R. No. L-12617, Aug. 27, 1959; Santander v.
Villanueva, supra; Fences v. Iriola, G.R. No. L11269, Feb. 28, 1958).
D. When incompetent buys

E. Effect of forbidden sales
Arts. 1493 – 1494

A. Effect of loss of the thing sold
a. At the time of perfection

i. Total loss (Art 1493)
ii. Partial loss (Art. 1494)
iii. Deterioration (Art 1494)
Facts: Perfecto A. Tabora(buyer) bought from the Lawyers Cooperative Publishing

Company(seller) 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 P300.00, leaving a balance
of P1,382.40. The books were duly delivered and receipted for by Tabora on May 15, 1955
in his law office in Naga City.However, a big fire broke out in that locality which destroyed
and burned all the buildings standing on one whole block including at the law office and
library of Tabora. As a result, the books bought from the company as above stated,
together with Tabora's important documents and papers, were burned during the
conflagration.
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 CFI of Manila for the recovery of the balance of the obligation. Defendant, in his
answer, pleaded force majeure as a defense. He alleged that the books bought from the
plaintiff were burned during the fire that broke out in Naga City on May 15, 1955, and since
the loss was due to force majeure he cannot be held responsible for the loss. CFI rendered
judgment for the plaintiff. It ordered Tabora 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. Tabora appealed to the CA, but the case
was forwarded to the SC by virtue of a certification issued by the CA that the case involves
only questions of law.
Issue:Whether or not respondent Tabora should bear the loss and pay the unpaid purchase
price.
Held: YES. 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."
 General 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
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from liability. BUT, this rule does not apply in this case because the parties clearly
agreed to the abovementioned contrary stipulation.
Although the seller agreed that the ownership of the books shall remain with it until the
purchase price shall have been fully paid, 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, which in part provides:
 (1) Where delivery of the goods has been made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the ownership in the goods has been retained
by the seller merely to secure performance by the buyer of his obligations under the
contract, the goods are at the buyer's risk from the time of such delivery
Force majeure will not exempt Tabora from his liability. This is because this 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. Here these
qualifications are not present. The obligation does not refer to a determinate thing, but is
pecuniary in nature (money), and the obligor bound himself to assume the loss
after the delivery of the goods to him. Obligor (Tabora) agreed to assume any risk
concerning the goods from the time of their delivery.
WHEREFORE, the decision appealed from is modified by eliminating that portion which refers
to liquidated damages. No costs.
Facts: This case happened on June 5, 1913, counsel for Carlos de Lizardi, administrator of
the property of the deceased Lim Jocsing, appointed in the proceedings for the settlement
of his estate filed a complaint in writing in the Court of First Instance of Cebu.
On October 13, 1912 said Lim Jocsing then living placed on board the steamer Bais lying at
Malitbog, Leyte a certain quantity of abaca valued at 15,000 pesos consigned to the
defendant F.M. Yaptico to be sold in Cebu, Lim Jocsing insuring said abaca for the sum of
15,000 pesos with an insurance company whose agent in Cebu was the defendant himself
and paying the premium on the insurance policy, that on or about October 15, 1912 by
reason of the wrecking of the said steamer Bais in its voyage to Cebu, Lim Jocsing perished
in the sea and at the same time all the abaca he had on board was lost that the defendant
Yaptico collected the insurance amounting to 15,000 and appropriated this sum to his own
use refusing to return it to the plaintiff.
In his answer the defendant F.M. Yaptico admitted as a fact that Lim Jocsing had delivered
for him and loaded on board the steamer Bais a certain quantity of abaca valued at 10,320
and under an express contract made between him and Lim Jocsing the abaca later delivered
on board the Bais became the property of Yaptico, he also admitted that said shipment of
abaca had been insured in his own name by the defendant who paid the corresponding
premium that this abaca was lost as a consequence of the wrecking of the said steamer.
Issue: Whether or not the judgment will be reserved as to its loss?
Held: Yes, the judgment appealed must be reversed and absolve the defendant Yaptico
from the complaint. As owner of the abaca the defendant Yaptico was interested in its
preservation and had the right to insure it against any risk or accident prejudicial to his
interests and since the loss of the abaca would have injured Yaptico as the owner of both
the fiber and the money with which it was acquired.
FACTS: Sun bros and Perez entered into a Conditional Sale Agreement of an Admiral air
conditioner, the price of which is 1,678php. The agreement contains the ff. stipulations:”2.
Title to said property shall vest in the Buyer only upon full payment of the entire account
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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 causes, 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;”
Pursuant to the contract, sun bros. delivered the item and was received by Perez. Perez
made a down payment of 274php and the item was installed by sun bro representatives.
The said air conditioner was burned where it was installed by the plaintiff (no details about
the fire in the case). The defendant claims that the destruction was due to force majeure.
Perez did not pay any of the monthly installments leaving a balance of 1,404php.
ISSUE: Who should bear the loss? – Buyer
CFI RULING: Ordered Perez to pay. As the buyer would be liable in case of loss for any
cause, such buyer assumed liability even in case of loss by fortuitous event.
HELD: 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,
nor to morals or public policy . Citing American decisions, the court held that the loss did
not relieve the buyer from his obligation to pay. Reason for the rule: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.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 good sand the right to acquire title upon making full payment of the price.Providing
an incentive to care properly for the goods, they being exclusively under the control and
dominion of the vendee.
FACTS: Roman and Grimalt, both parties, through one Fernando Agustin Pastor, verbally
agreed upon the sale of the said schooner. That Roman, had notied the defendant through
Agustin Pastor that he accepted the plan of payment suggested by him and that from that
date the vessel was at his disposal, and offered to deliver the same at once to defendant if
he so desired; that the contract having been closed and the vessel being ready for delivery
to the purchaser, it was sunk in the harbor of Manila and is a total loss, as a result of a
severe storm. Demand was made upon the defendant for the payment of the purchase price
of the vessel in the manner stipulated and defendant failed to pay. Plaintiff nally prayed that
judgment be rendered in accordance with the prayer of his previous complaint. Defendant
alleged that plaintiff personally proposed to the defendant the sale of the said vessel, the
plaintiff stating that the vessel belonged to him and that it was then in a sea worthy
condition. Defendant accepted the offer of sale on condition that the title papers were found
to be satisfactory, also that the vessel was in a seaworthy condition. The plaintiff promised
to perfect his title and called on defendant to close the sale. The defendant believing that
plaintiff had perfected his title, wrote to him and set for the execution of the contract, but,
upon being informed that plaintiff had done nothing to perfect his title, he insisted that he
would buy the vessel only when the title papers were perfected and the vessel duly
inspected.
ISSUE: Whether or not the sale has been perfected that the buyer should bear the loss.
RULING: NO, The court found that the parties had not arrived at a definite understanding.
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. A sale shall be
considered perfected and binding as between vendor and vendee when they have agreed
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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.) 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.)
b. After perfection and before delivery

i. By the fault of one party (Arts. 1480, 1538)
ii. By fortuitous event (Arts. 1480, 1504, 1538)
B. Art. 1504 [para. 1] applied
Facts: Petitioner is a customer and dealer of the products of IMC and LSPI. The latter being
the maker of Wrangler Blue Jeans and the local distributor of products owned by Levi Strauss
& Co, respectively. IMC and LSPI separately obtained from respondent fire insurance policies
with book debt endorsements. The insurance policies provide for coverage on "book debts
in connection with ready-made clothing materials which have been sold or delivered to
various customers and dealers of the Insured anywhere in the Philippines." The policies
defined book debts as the "unpaid account still appearing in the Book of Account of the
Insured 45 days after the time of the loss covered under this Policy. On February 25, 1991,
the Gaisano Superstore Complex in Cagayan de Oro City, owned by petitioner, was
consumed by fire. Included in the items lost or destroyed in the fire were stocks of ready-
made clothing materials sold and delivered by IMC and LSPI. Petitioner argues that IMC
bears the risk of loss because it expressly reserved ownership of the goods by stipulating in
the sales invoices that "[i]t is further agreed that merely for purpose of securing the
payment of the purchase price the above described merchandise remains the property of
the vendor until the purchase price thereof is fully paid."
Issue: Whether or not IMC bears the risk of loss because it expressly reserved ownership
of the goods.
Ruling: No. it is not IMC who bears the risk of loss. The present case clearly falls under
paragraph (1), Article 1504 of the Civil Code: ART. 1504. Unless otherwise agreed, the
goods remain at the seller's risk until the ownership therein is transferred to the buyer, but
when the ownership therein is transferred to the buyer the goods are at the buyer's risk
whether actual delivery has been made or not, except that: (1) Where delivery of the goods
has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and
the ownership in the goods has been retained by the seller merely to secure performance
by the buyer of his obligations under the contract, the goods are at the buyer's risk from
the time of such delivery; Thus, when the seller retains ownership only to insure that the
buyer will pay its debt, the risk of loss is borne by the buyer. Accordingly, petitioner bears
the risk of loss of the goods delivered. IMC and LSPI did not lose complete interest over the
goods. They have an insurable interest until full payment of the value of the delivered goods.
Unlike the civil law concept of res perit domino, where ownership is the basis for
consideration of who bears the risk of loss, in property insurance, one's interest is not
determined by concept of title, but whether insured has substantial economic interest in the
property.
Arts. 1495 – 1506

A. General Provisions
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FACTS: Petitioners-spouses Encarnacion L. Cuizon and Salvador Cuizon rely on Transfer

Certificate of Title (TCT) No. RT-3121 in the name of Encarnacion L. Cuizon, married to
Salvador Cuizon, issued by the Registry of Deeds of Agusan del Norte on March 15, 1984,
pursuant to a notarized Extra-Judicial Settlement with Sale dated August 3, 1983 (1983
Extra-Judicial Settlement with Sale) executed by the heirs of Placida Tabada-Lambo
(Placida), wherein they adjudicated unto themselves the one-fourth share of Placida, and,
at the same time, sold said portion to their co-heir, Encarnacion L. Cuizon.
On the other hand, respondents have in their favor a notarized Deed of Sale of Real Property
dated September 19, 1968, (1968 Deed of Sale) involving a portion of the same property
covered by TCT No. RT-183, measuring 4,300 square meters, executed by Placida in favor
of Angel Remoto (Angel), husband of respondent Mercedes C. Remoto, and father of the
other respondents, Leonida R. Meynard, Celerina R. Rosales and Remedios C. Remoto.
RTC rendered a decision in favour of respondents which was affirmed by the Court of
Appeals.
ISSUE: Whether or not the petitioners have the better right to the property in dispute.
RULING: No. As correctly ruled by both the trial court and the CA, the 1968 Deed of Sale
executed by Placida in favor of Angel should prevail over the 1983 Extra-Judicial Settlement
with Sale made by the heirs of Placida in favor of petitioners-spouses Cuizon
Prior tempore, potior jure. It simply means, "He who is first in time is preferred in right."
The only essential requisite of this rule is priority in time, and the only one who can invoke
this is the first vendee. Records bear the fact that when Placida sold her one-fourth portion
of the property covered by TCT No. RT-183 in 1968, the 1983 Extra-Judicial Settlement with
Sale was still inexistent, and more importantly, said portion was yet to be transferred by
succession to Placida's heirs. The records also show that after Placida sold her portion to
Angel, the latter immediately took possession of the same. Applying the principle of priority
in time, it is clear that Angel, and consequently his heirs, the respondents herein, have a
superior right to the property.
Petitioners rely heavily on TCT No. RT-3121 issued in their names. In the first place, the
issuance of the title was made pursuant to the 1983 Extra-Judicial Spettlement with Sale.
At the time this document was entered into by the heirs of Placida, the latter was no longer
the owner of the property, having earlier sold the same to Angel. No one can give what one
does not have — nemo dat quod non habet. Accordingly, one can sell only what one owns
or is authorized to sell, and the buyer can acquire no more than what the seller can transfer
legally. Such being the case, the heirs of Placida did not acquire any right to adjudicate the
property unto them and sell it to Encarnacion.
a. To preserve the thing

i. Deterioration, loss or improvement
b. To deliver the thing sold (Arts 1537)
Facts: The plaintiff alleges that it was the owner of the Oregon Saloon consisting of bar,
furniture, furnishings, and fixtures in which the Jose Desiderio, as sheriff, levied upon by
virtue of an execution issued upon a judgment secured by the defendant Macke & Chandler,
against Stanley & Krippendorf. Said plaintiff notified the sheriff that it was the owner of said
goods and forbade the sale thereof under said execution. The sheriff sold said goods under
said execution and the firm of Macke & Chandler was the purchaser of said goods. Bachrach,
Elser, and Gale, were the sureties upon the bond given to the sheriff by Macke & Chandler
before said goods were sold. The defendants in this case allege that the property described
by the plaintiff and sold at the execution sale referred to was not the property of the plaintiff
at the time of said levy and sale, but was the property of Stanley & Krippendorf, who were
in possession of the same at the time of such levy. They further allege that Stanley &
Krippendorf, being indebted in a considerable sum to the plaintiff in this case, attempted to
sell to the said plaintiff by an instrument in writing the property in question which was never
recorded and was a private document. The said property was not delivered to the plaintiff
but that property remained from the time of sale forward in the exclusive possession and
control of said Stanley & Krippendorf, and that they conducted the business.
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ISSUE: Whether or not there is an effect in the said instrument of sale in transferring the
property in question from Stanley & Krippendorf to the plaintiff.
HELD: No. 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 could have no effect against a person dealing with the property upon the
faith of appearances. It is evident that the bill of sale was in no sense a conditional sale of
property. Possession of the property in suit was not taken at any time by the plaintiff. 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.
Facts: On June 11, 1914, plaintiff sold to Marciana Felix with the consent of her husband,
four parcels of land through a public instrument. Defendant have paid the sum of P3,000
for the on account of the purchase price and have remainder to be paid in installments. It
was stated in the contract that the purchasers may rescind the contract within one year
after the title is issued. The petitioner then asked for the survey and the delivery of the land
and that the defendant only delivered 2 parcels of land. It was also found out that 2/3 of
the land in possession was owned by Juan Villafuerte. The plaintiff then asked for the
installment but the defendants contented that there was no delivery and that they are
entitled to get the sum of P3,000 for the purchase price they have given upon the execution
of the contract.
Issue: Whether or not there was valid delivery of the thing
Ruling: It was ruled that there was no delivery in the case. In the 2 parcels of land it was
found out that 2/3 of the land was owned by a third person The thing is considered to be
delivered when it is placed "in the hands and possession of the vendee." It is 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. Symbolic delivery is sufficient when there are no impediments in passing the thing
sold to the vendor. The thing sold must be placed in his control. In the case, the 2 parcels
of land were owned by Juan Villafuerte which would serve as an impediment in the delivery
of the thing. Symbolic delivery is no sufficient because it is owned by another person and it
is not considered as a valid delivery.
Facts: Two lots were owned by Domingo Melad. The lots are claimed by both Felix Daguilan
and Apolonia Melad (and her husband Jose Tagacay). On 29 January 1962, Apolonia Melad
filed a complaint against Daguilan in the then CFI Cagayan for recovery of a farm lot and a
residential lot which she claimed she had purchased from Domingo Melad in 1943 and were
now being unlawfully withheld by Daguilan. In his answer, Daguilan denied the allegation
and averred that he was the owner of the said lots of which he had been in open, continuous
and adverse possession, having acquired them from Domingo Melad in 1941 and 1943. The
case was dismissed for failure to prosecute but was refiled in 1967. At the trial, Melad
presented a deed of sale dated 4 December 1943, purportedly signed by Domingo Melad
and duly notarized, which conveyed the said properties to her for the sum of P80.00. She
said the amount was earned by her mother as a worker at the Tabacalera factory. She
claimed to be the illegitimate daughter of Domingo Melad, with whom she and her mother
were living when he died in 1945. She moved out of the farm only when in 1946 Felix
Danguilan approached her and asked permission to cultivate the land and to stay therein.
She had agreed on condition that he would deliver part of the harvest from the farm to her,
which he did from that year to 1958. The deliveries having stopped, she then consulted the
municipal judge who advised her to file the complaint against Danguilan. Melad’s mother,
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her only other witness, corroborated this testimony. Daguilan testified that he was the
husband of Isidra Melad, Domingo’s niece, whom Domingo Melad and his wife Juana
Malupang had taken into their home as their ward as they had no children of their own. He
and his wife lived with the couple in their house on the residential lot and helped Domingo
with the cultivation of the farm. Domingo Melad signed in 1941 a private instrument in which
he gave Daguilan the farm and in 1943 another private instrument in which he also gave
him the residential lot, on the understanding that the latter would take care of the grantor
and would bury him upon his death. Danguilan presented three other witnesses to
corroborate his statements and to prove that he had been living in the land since his
marriage to Isidra and had remained in possession thereof after Domingo Melad’s death in
1945. Two of said witnesses declared that neither the plaintiff nor her mother lived in the
land with Domingo Melad. The trial court believed Daguilan and rendered a decision based
mainly on the issue of possession. On appeal, however, the appellate court upheld Melad as
the true and lawful owner of the disputed property, holding that the private instruments
where Domingo Melad had conveyed the land to Daguilan were null and void for reason that
donation of real property should be effected through a public instrument. Hence, the petition
to the Supreme Court.
The Supreme Court set aside the decision of the appellate court and reinstated that of the
trial court, with costs against Apolonia Melad.
ISSUE:
1. Whether or not there is transfer of ownership by mere stipulation?

2. Whether or not the execution of a public document constitute sufficient
delivery where the property involved is in actual and adverse possession
of third person?
RULING: No on both questions. As held in Garchitorena v. Almeda, it is a fundamental and

elementary principle that ownership does not pass by mere stipulation but only by delivery
and the execution of a public document does not constitute sufficient delivery where
property involved is in actual and adverse possession of third person.
considered to be delivered when it is placed in the hands and possession of the vendee.
(Civil Code, art. 1462). It is true that the same article declares that the execution of a public
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. In the present case, Daguilan and not
Melad is in actual possession of the litigated properties. Thus, being in actual possession,
Danguilan , is the rightful owner since both claims of the plaintiff and defendant are weak,
the judgment therefor must be for the defendant, for the latter being in possession is
presumed to be the owner and cannot be obliged to show or prove a better right.
FACTS: Plaintiffs Calixto Pasagui and Fausta Mosar bought a property in Leyte from
Estaquia and Catalina Bocar and that corresponding document of sale was executed,
notarized and recorded in the Registry of Deeds. Before they could take possession of the
property, defendant spouses Ester T. Villablanca and Zosimo Villablanca illegally and without
any right, took possession of the property harvesting coconuts from the coconut plantation
thus depriving plaintiffs of its possession.
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Despite Plaintiffs demanded to surrender the property and its possession, the latter failed
or refused to return said parcel of land.
ISSUE: Whether or not the rule of the execution of public instrument is equivalent to
delivery absolute.
RULING: Yes. It is true that the execution of the deed of absolute sale in a public instrument
is equivalent to delivery of the land subject of the sale. This presumptive delivery only holds
true when there is no impediment that may prevent the passing of the property from the
hands of the vendor into those of the vendee. It can be negated by the reality that the
vendees actually failed to obtain material possession of the land subject of the sale. It
appears from the records of the case at bar that plaintiffs-appellants had not acquired
physical possession of the land since its purchase.
Facts: Petitioner Power Commercial & Industrial Development Corporation, an industrial

asbestos manufacturer, bought the property of spouses Reynaldo and Angelita Quiambao
located in Makati City. Since there are lessees occupying the subject land, part of the deed
of sale is a warranty of respondents that will defend its title and peaceful possession in favor
of the petitioners. The property is mortgage to PNP and as such, petitioners filed a request
to assume responsibility of the mortgage. Because of petitioner's failure to produce the
required papers, their petition was denied. Petitioners allege that the contract should be
rescinded because of failure of delivery due to the fact that there were still lessees in the
subject lot.
Issue: Whether or not there is a delivery in the case at bar?
Held: The Court answered in the affirmative. There is no breach of contract in this case
since there is no provision in the contract that imposes the obligation to the respondents to
eject the people occupying the property. There was also a constructive delivery because the
deed of sale was made in a public document. The contention of the petitioners that there
could be no constructive delivery because the respondents is not in possession of the
property is of no merit. What matters in a constructive delivery is control and not
possession. Control was placed in the hands of the petitioners that is why they were able to
file an ejectment case. Prior physical delivery or possession is not legally required and the
execution of the deed of sale is deemed equivalent to delivery.
Facts: Eustaquio P. Foz executed in Manila a contract, ratified before a notary, obligating
himself to deliver his house and lot for a consideration of P6,000 to Jose Florendo. The latter
already paid P2,000 of the purchase prize. In the contract, plaintiff fixed the period of the
payment of the prize wherein plaintiff has to pay the remainder of the prize when he goes
to Vigan or if not to pay to the Church wherein he has a debt and to obtain the title of the
subject matter of the sale. Defendant went to Vigan, plaintiff tendered payment of the
remainder of the prize, however, the former refused, saying that the true prize of the sale
recorded in the other instrument was P10,000. As defendant refused payment, plaintiff filed
a suit to comply with the contract of absolute purchase and sale, by delivering to the plaintiff
the property sold.
Issue: Whether or not the plaintiff can compel the defendant to deliver his property
pursuant to the notarized contract.
Held: Yes. The 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. Pursuant to the
contract, it can’t be found that the payment of the prize is a precondition for the delivery of
the thing. There was no need, therefore, of assent on the part of the plaintiff to pay the
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P4,000, the remainder of the price, in order to oblige the defendant unconditionally to
deliver the property sold. With still more reason should the defendant be compelled to effect
the material delivery of the property, since, after the lapse of the period for the delivery of
the price, the plaintiff hastened to pay it and, on account of the defendant’s refusal to
receive it, duly deposited it, in order to avoid the consequences that might issue from
delinquency in the payment of a sum entrusted to him for a fixed period.
It is the material delivery of the property sold which the defendant must make in compliance
with the contract, inasmuch as the formal delivery de jure was made, according to the
provisions of article 1462, 2nd paragraph, of the same code
FACTS: The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979,
Wilfredo Dy purchased a truck and a farm tractor through financing extended by Libra
Finance and Investment Corporation (Libra). Both truck and tractor were mortgaged to Libra
as security for the loan. The petitioner wanted to buy the tractor from his brother so on
August 20, 1979, he wrote a letter to Libra requesting that he be allowed to purchase from
Wilfredo Dy the said tractor and assume the mortgage debt of the latter.
In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares approved the
petitioner's request. Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute
sale in favor of the petitioner over the tractor in question. At this time, the subject tractor
was in the possession of Libra Finance due to Wilfredo Dy's failure to pay the amortizations.
Despite the offer of full payment by the petitioner to Libra for the tractor, the immediate
release could not be effected because Wilfredo Dy had obtained financing not only for said
tractor but also for a truck and Libra insisted on full payment for both.
The petitioner was able to convince his sister, Carol Dy-Seno, to purchase the truck so that
full payment could be made for both. A PNB check was issued in the amount of P22k in
favor of Libra, thus settling in full the indebtedness of Wilfredo with the financing firm.
Payment having been effected through an out-of-town check, Libra insisted that it be cleared
first before Libra could release the chattels in question.
The tractor was subsequently sold at public auction where Gelac Trading was the lone
bidder. Later, Gelac sold the tractor to one of its stockholders, Antonio Gonzales. It was
only when the check was cleared on January 17, 1980 that the petitioner learned about
GELAC having already taken custody of the subject tractor. Consequently, the petitioner
filed an action to recover the subject tractor against GELAC Trading with the Regional Trial
Court of Cebu City
ISSUE: Whether at the time of the execution of the deed of sale, constructive delivery was
effected since the consummation of the sale depended upon the clearance and encashment
of the check which was issued in payment of the subject tractor.
HELD/RATIO: YES. There was constructive delivery. The rule is settled that the chattel
mortgagor continues to be the owner of the property, and therefore, has the power to
alienate the same; however, he is obliged under pain of penal liability, to secure the written
consent of the mortgagee. Thus, the instruments of mortgage are binding, while they
subsist, not only upon the parties executing them but also upon those who later, by
purchase or otherwise, acquire the properties referred to therein. The absence of the written
consent of the mortgagee to the sale of the mortgaged property in favor of a third person,
therefore, affects not the validity of the sale but only the penal liability of the mortgagor
under the RPC and the binding effect of such sale on the mortgagee under the Deed of
Chattel Mortgage.
ISSUE: Whether or not the sale between the brothers valid and binding and whether there
is constructive delivery upon the same object.
RULING: Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor can not sell
the subject tractor. There is no dispute that the consent of Libra Finance was obtained in
the instant case. In a letter dated August 27, 1979, Libra allowed the petitioner to purchase
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the tractor and assume the mortgage debt of his brother. The sale between the brothers
was therefore valid and binding as between them and to the mortgagee, as well.
Article 1496 of the Civil Code states that the 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 or in any other manner signing an agreement that the possession is transferred
from the vendor to the vendee. We agree with the petitioner that Articles 1498 and 1499
are applicable in the case at bar.
Article 1498 states:
Art. 1498. When the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the object of
the contract, if from the deed the contrary does not appear or cannot clearly
be inferred.
Article 1499 provides:
Article 1499. The delivery of movable property may likewise be made by the
mere consent or agreement of the contracting parties, if the thing sold cannot
be transferred to the possession of the vendee at the time of the sale, or if
the latter already had it in his possession for any other reason. (1463a)
Article 1498 and upon the consent or agreement of the parties when the thing sold cannot
be immediately transferred to the possession of the vendee. (Art. 1499)
While it is true that Wilfredo Dy was not in actual possession and control of the subject
tractor, his right of ownership was not divested from him upon his default. Neither could it
be said that Libra was the owner of the subject tractor because the mortgagee can not
become the owner of or convert and appropriate to himself the property mortgaged. (Article
2088, Civil Code) Said
Where a third person purchases the mortgaged property, he automatically steps into the
shoes of the original mortgagor. (See Industrial Finance Corp. v. Apostol, 177 SCRA 521
[1989]). His right of ownership shall be subject to the mortgage of the thing sold to him. In
the case at bar, the petitioner was fully aware of the existing mortgage of the subject tractor
to Libra. In fact, when he was obtaining Libra's consent to the sale, he volunteered to
assume the remaining balance of the mortgage debt of Wilfredo Dy which Libra undeniably
agreed to.
FACTS: The Philippine Suburban Development Corporation (PSDC) appealed by certiorari

against the Auditor General because its request for refund of real estate tax on the Sapang
Palay estate for the year 1961 was disallowed.
Said estate was purchased by the People’s Homesite and Housing Corporation (PHHC), as
authorized by the President, from the petitioner for the purpose of relocating
squatters. Prior to the signing of the deed, the PHHC acquired the possession of the
property with the consent of the petitioner. The deed of sale was signed in 1960. The
Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of P30,099.79
from the purchase price to be paid by it to the Philippine Suburban Development
Corporation. Said amount represented the realty tax due on the property involved for the
calendar year 1961.
Petitioner, through the PHHC, paid under protest and requested by letter the Secretary of
Finance to order a refund of the amount so paid. Moreover, it claimed that it ceased to be
the owner of the land in question upon the execution of the deed of sale.
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However, upon the recommendation of the Provincial Treasurer of Bulacan the request was
denied by the Secretary of Justice. PSDC argued that in the execution of the deed of sale,
it ceased to be the owner of the property involved, under Article 1498 of the New Civil Code:
“when the sale is made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract, if from the deed
the contrary does not appear or cannot clearly be inferred”.
Also, in Article 1496 of the same Code which states that:
“the ownership of the thing sold is acquired by the vendee from the moment it is delivered
to him in any ways specified in Articles 1497 to 1501, or in any other manner signifying an
agreement that the possession is transferred from the vendor to the vendee.”
On the other hand, the Provincial Treasurer contends that, as under the Land Registration
Act (Act No. 496) the Philippine Suburban Development Corporation is still the owner of the
property until the deed of sale covering the same has been actually registered, the vendor
is still liable to the payment of real property tax for the calendar year 1961.
ISSUE: Whether or not by the transmission of ownership to the vendee (PHHC), the
petitioner ceased to be the owner of the property, therefore is under no obligation to pay
the real property tax?
RULING: Yes. 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 be inferred.
In the case at bar, the vendor 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
goods is not a condition precedent to the transfer of title to the buyer, but the title passes
by the delivery of the goods.
Ponente: Reyes, J.B.L. J.
Principle: Art. 1499 - The delivery of movable property may likewise be made by the mere
consent or agreement of the contracting parties, if the thing sold cannot be transferred to
the possession of the vendee at the time of the sale.
Facts: Melecio Malabanan entered into an agreement with the Board for the salvage of
surplus properties sunk in territorial waters off the provinces of Mindoro, La Union, and
Batangas. Malabanan was to commence operations within 30 days from execution of said
contract, which was to be effective for a period of one year from the start of operations,
extendible for a total period of not more than six months. Four months previously,
Malabanan had entered into an agreement with Exequiel Floro. It was agreed that Floro
would advance to Malabanan certain sums of money, not to exceed P25,000.00, thereof
being secured by quantities of steel mattings which Malabanan would consign to Floro; that
said advances were to paid within a certain period, and upon default at the expiration, Floro
was, authorized to sell whatever steel mattings were in his possession under said contract,
in amount sufficient to satisfy the advances. Pursuant thereto, Floro claims to have made
total advances to the sum of P24,224.50.
Malabanan was not able to repay Floro's advances. Malabanan filed in the Court of First
Instance of Manila a petition for voluntary insolvency. Attached in the petition was an
Inventory of Properties, listing certain items of personal property allegedly aggregating
P33,707.00 in value. In this list were included 11,167 pieces of steel mattings with an
alleged estimated value of P33,501.00.
The Board, claiming to be the owner of the listed steel matting, filed a petition to exclude
them from the inventory; and to make the insolvent account for a further 1,940 pieces of
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steel matting. Exequiel Floro opposed the Board's petition and claimed that the steel matting
listed had become the property of Eulalio Legaspi by virtue of a deed of sale in his favor,
executed by Floro.
The lower court denied the Board's petition, declaring that Malabanan had acquired
ownership over the steel mattings under his contract with the Board
Issue: Whether or not there is delivery of the object of contract.
Ruling: Yes, there is delivery in the present case.
Art. 1499 of the New Civil Code provides that the delivery of movable property may likewise
be made by the mere consent or agreement of the contracting parties, if the thing sold
cannot be transferred to the possession of the vendee at the time of the sale.
In the case, even if there is no physical delivery of the object, there is still delivery by means
of tradition longa manu. In the public instrument they executed, there is nothing in the
terms of such instrument which an intent to withhold delivery or transfer of title.
Hence, there is delivery in the case by agreement of the parties.
i. Form / manner of delivery

1. Physical or real (Art 1497)
2. Constructive
3. De Constituto (constitutom possesorium)
ii. Kinds of Delivery
Doctrine: Ownership is not acquired by the mere execution of the receipt of partial
payment for the property. Agreement should be embodied in a public instrument to affirm
a constructive delivery of the land.
Facts:
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent
Pablo Babasanta. The latter made a down payment of fifty thousand pesos (P50,000.00) as
evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other
payments totaling two hundred thousand pesos (P200,000.00) were made by Babasanta.
He demanded the execution of a Final Deed of Sale in his favor so that he may effect full
payment of the purchase price; however, the spouses declined to push through with the
sale. They claimed that when he requested for a discount and they refused, he rescinded
the agreement. Thus, Babasanta filed a case for Specific Performance.
On the other hand, San Lorenzo Development Corporation (SLDC) alleged that on 3 May
1989, the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it
in a Deed of Absolute Sale with Mortgage.
It alleged that it was a buyer in good faith and for value and therefore it had a better right
over the property in litigation.
Issue: Whether or not there was a contract of sale
Held: The agreement between Babasanta and the Spouses Lu is a contract to sell and not
a contract of sale.
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand
pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot.
While there is no stipulation that the seller reserves the ownership of the property until full
payment of the price which is a distinguishing feature of a contract to sell, the subsequent
acts of the parties convince us that the Spouses Lu never intended to transfer ownership to
Babasanta except upon full payment of the purchase price.
Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite his
repeated requests for the execution of the final deed of sale in his favor so that he could
effect full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta
himself recognized that ownership of the property would not be transferred to him until such
time as he shall have effected full payment of the price. Doubtlessly, the receipt signed by
Pacita Lu should legally be considered as a perfected contract to sell.
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The law provides that ownership of the thing sold is acquired by the vendee from the
moment it is delivered to him.
There was no delivery to Babasanta, whether actual or constructive, which is essential to

transfer ownership of the property. Babasanta did not acquire ownership by the mere
execution of the receipt by Pacita Lu acknowledging receipt of partial payment for the
property. For one, the agreement between Babasanta and the Spouses Lu, though valid,
was not embodied in a public instrument. Hence, no constructive delivery of the lands could
have been effected. For another, Babasanta had not taken possession of the property at
any time after the perfection of the sale in his favor or exercised acts of dominion over it
despite his assertions that he was the rightful owner of the lands. Simply stated, there was
no delivery to Babasanta, whether actual or constructive, which is essential to transfer
ownership of the property.
There was no double sale in this case because the contract in favor of Babasanta was a
mere contract to sell; hence, Art. 1544 is not applicable. There was neither actual nor
constructive delivery as his title is based on a mere receipt. Based on this alone, the right
of SLDC must be preferred.
FACTS: Petitioner Asset Privatization Trust (petitioner) was a government entity created for
the purpose to conserve, to provisionally manage and to dispose assets of government
institutions. Petitioner had acquired from the Development Bank of the Philippines (DBP)
assets consisting of machinery and refrigeration equipment which were then stored at
Golden City compound, Pasay City. The compound was then leased to and in the physical
possession of Creative Lines, Inc., (Creative Lines). These assets were being sold on an as-
is-where-is basis.
On 7 November 1990, petitioner and respondent entered into an absolute deed of sale over
certain machinery and refrigeration equipment identified as Lots Nos. 2, 3 and 5.
Respondent paid the full amount of ₱84,000.00 as evidenced by petitioner’s Receipt No.
12844. After two (2) days, respondent demanded the delivery of the machinery it had
purchased. Sometime in March 1991, petitioner issued Gate Pass No. 4955. Respondent
was able to pull out from the compound the properties designated as Lots Nos. 3 and 5.
However, during the hauling of Lot No. 2 consisting of sixteen (16) items, only nine (9)
items were pulled out by respondent. Creative Lines’ employees prevented respondent from
hauling the remaining machinery and equipment.
Respondent filed a complaint for specific performance and damages against petitioner and
Creative Lines. During the pendency of the case, respondent was able to pull out the
remaining machinery and equipment. However, upon inspection it was discovered that the
machinery and equipment were damaged and had missing parts.
Petitioner argued that upon the execution of the deed of sale it had complied with its
obligation to deliver the object of the sale since there was no stipulation to the contrary. It
further argued that being a sale on an as-is-where-is basis, it was the duty of respondent
to take possession of the property. Petitioner claimed that there was already a constructive
delivery of the machinery and equipment.
The RTC ruled that the execution of the deed of absolute sale did not result in constructive
delivery of the machinery and equipment. It found that at the time of the sale, petitioner
did not have control over the machinery and equipment and, thus, could not have
transferred ownership by constructive delivery. The RTC ruled that petitioner is liable for
breach of contract and should pay for the actual damages suffered by respondent.
On petitioner’s appeal, the Court of Appeals affirmed in toto the decision of the RTC.
ISSUES:
 Whether or not there was a constructive delivery of the machinery and equipment
upon the execution of the deed of absolute sale between petitioner and respondent.
 Whether or not the sale being in an as-is-where-is basis.
 Whether or not the presence of the disclaimer of warranty in the deed of absolute
sale absolves it from all warranties, implied or otherwise.
 Whether or not its failure to make actual delivery was beyond its control.
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RULINGS:
1. The ownership of a thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof. The thing sold shall be understood as delivered when
it is placed in the control and possession of the vendee.
As a general rule, when the sale is made through a public instrument, the execution thereof
shall be equivalent to the delivery of the thing which is the object of the contract, if from
the deed the contrary does not appear or cannot clearly be inferred. And with regard to
movable property, its delivery may also be made by the delivery of the keys of the place or
depository where it is stored or kept. In order for the execution of a public instrument to
effect tradition, the purchaser must be placed in control of the thing sold.
In this case, there was no constructive delivery of the machinery and equipment upon the
execution of the deed of absolute sale or upon the issuance of the gate pass since it was
not petitioner but Creative Lines which had actual possession of the property. The
presumption of constructive delivery is not applicable as it has to yield to the reality that
the purchaser was not placed in possession and control of the property.
2. Respondent agreed to take possession of the things sold in the condition where they
are found and from the place where they are located. The phrase as-is where-is basis
pertains solely to the physical condition of the thing sold, not to its legal situation. It is
merely descriptive of the state of the thing sold. Thus, the as-is where-is basis merely
describes the actual state and location of the machinery and equipment sold by petitioner
to respondent. The depiction does not alter petitioner’s responsibility to deliver the property
to respondent.
3. No. The vendor is bound to transfer the ownership of and deliver, as well as warrant
the thing which is the object of the sale. Ownership of the thing sold is acquired by the
vendee from the moment it its delivered to him in any of the ways specified in articles 1497
to 1501, or in any other manner signifying an agreement that the possession is transferred
from the vendor to the vendee. A perusal of the deed of absolute sale shows that both the
vendor and the vendee represented and warranted to each other that each had all the
requisite power and authority to enter into the deed of absolute sale and that they shall
perform each of their respective obligations under the deed of absolute in accordance with
the terms thereof. As previously shown, there was no actual or constructive delivery of the
things sold. Thus, petitioner has not performed its obligation to transfer ownership and
possession of the things sold to respondent.
4. The refusal of Creative Lines to allow the hauling of the machinery and equipment
was unforeseen and constituted a fortuitous event. A fortuitous event may either be an act
of God, or natural occurrences such as floods or typhoons, or an act of man such as riots,
strikes or wars. However, when the loss is found to be partly the result of a person’s
participation–whether by active intervention, neglect or failure to act—the whole occurrence
is humanized and removed from the rules applicable to a fortuitous event.
We find that Creative Lines’ refusal to surrender the property to the vendee does not
constitute force majeure which exculpates APT from the payment of damages. This event
cannot be considered unavoidable or unforeseen. APT knew for a fact that the properties to
be sold were housed in the premises leased by Creative Lines.
Moreover, Art. 1504 of the Civil Code provides that where actual delivery has been delayed
through the fault of either the buyer or seller the goods are at the risk of the party in fault.
The risk of loss or deterioration of the goods sold does not pass to the buyer until there is
actual or constructive delivery thereof. As previously discussed, there was no actual or
constructive delivery of the machinery and equipment. Thus, the risk of loss or deterioration
of property is borne by petitioner. Thus, it should be liable for the damages that may arise
from the delay.1avvphi1
This Court agrees with the appellate court’s findings on the matter of damages.
Facts: Gertrudis Wuthrich and her six other siblings were the co-owners of a parcel of land
Over time, Gertrudis and two other co-owners sold each of their one-seventh (1/7) shares,
or a total area of 741 square meters, to Jesus Mascuñana. The latter then sold a portion of
his 140-square-meter undivided share of the property... to Diosdado Sumilhig. Mascuñana
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later sold an additional 160-square-meter portion to Sumilhig. However, the parties agreed
to revoke the said deed of sale and, in lieu thereof, executed a Deed of Absolute Sale. In
the said deed,... Mascuñana, as vendor, sold an undivided 469- square-meter portion of the
property. Mascuñana and Jose G. Estabillo executed a Deed of Exchange and Absolute Sale
of Real Estate, in which Estabillo deeded to Mascuñana a portion of his property abutting
that of Sumilhig on the southeast. Meanwhile, Mascuñana died intestate... and was survived
by his heirs, Eva M. Ellisin. Sumilhig executed a Deed of Sale of Real Property on a portion
of Lot No. 124-B with an area of 469 square meters and the improvements thereon, in favor
of Corazon LayumasThe spouses Layumas then had the property subdivided into two lots
Lot No. 124-B-2... and Lot No. 124-B-1 The spouses Layumas took possession of the
property and caused the cutting of tall grasses thereon. Upon the plea of a religious
organization, they allowed a chapel to be constructed on a portion of the property. the
spouses Layumas allowed Aquilino Barte to stay on a portion of the property to ward off
squatters. Barte and his kin, Rostom Barte, then had their houses constructed on the
property.On October 1, 1985, the spouses Layumas received a Letter from the counsel of
Renee Tedrew, offering to buy their share of the property For her part, Corazon Layumas
wrote Pepito Mascuñana, offering to pay the amount of P1,000.00,... the balance of the
purchase price of the property under the deed of absolute sale executed by Mascuñana and
Sumilhig... the heirs of Mascuñana filed a Complaint for recovery of possession of Lot No.
124-B... alleging that they owned the subject lot by virtue of successional rights from their
deceased... father. They averred that Barte surreptitiously entered the premises, fenced the
area and constructed a house thereon without their consent. Attached... to the complaint
were TCT... and a certification from the Office of the City Treasurer, Land Tax Division,
vouching that the property in question was owned by the petitioners and that they had paid
the taxes thereon In his answer to the complaint, Barte admitted having occupied a portion
of Lot No. 124-B, but claimed that he secured the permission of Rodolfo Layumas, the owner
of the subject property. Barte raised the following special defenses: (a) the petitioners were
estopped from asserting ownership over the lot in question because they did not object
when he occupied the said portion of the lot; (b) neither... did the petitioners protest when
a church was built on the property, or when residential houses were constructed thereon;
(c) the petitioners still asked Barte and the other occupants whether they had notified
Rodolfo Layumas of the constructions on the property; and (d) the... heirs of Mascuñana,
through the lawyer of Mrs. Renee M. Tedrew, even wrote a letter[17] to Rodolfo Layumas
on October 1, 1985, expressing her willingness to buy the subject property... the spouses
Layumas filed a Motion for Leave to Intervene,[18] alleging therein that they had a legal
interest in Lot No. 124-B-1 as its buyers from Sumilhig, who in turn purchased the same
from Mascuñana. In their answer in... intervention,[19] the spouses Layumas alleged that
they were the true owners of the subject property and that they had wanted to pay the
taxes thereon, but the Land Tax clerk refused to receive their payments on account that the
petitioners had already made... such payment. the trial court rendered judgment in favor
of Barte and the spouses Layumas. the CA affirmed the decision of the trial court. It ruled
that the contract between the petitioners' father and Sumilhig was one of sale. The
petitioners reiterated their pose that the deed of absolute sale over the property executed
by their father, Jesus Mascuñana, as vendor, and Diosdado Sumilhig as vendee, was a
contract to sell and not a contract of sale. They assert that on its face, the contract...
appears to be a contract to sell, because the payment of the P1,000.00 balance of the
purchase price was subject to a suspensive condition The petitioners assert that Sumilhig
never paid the aforesaid amount to the vendor; hence, the obligation of the latter and his
predecessors-in-interest (herein... petitioners) to execute a final deed of sale never arose.
As such, they aver, title to the property remained reserved in the vendor and his heirs even
after his death. The petitioners insist that Sumilhig never acquired title over the property;
he could not have transferred any title to the respondents.
Issues:
WAS THE SALE OF LOT NO. 124-B MADE BY JESUS M. MASCUÑANA IN FAVOR OF DIOSDADO
SUMILHIG A CONTRACT TO SELL OR CONTRACT OF SALE?
Ruling:
The petition is denied for lack of merit. We have reviewed the records and find no
justification for a reversal or even a modification of the assailed decision of the CA. The
deed of absolute sale executed by Jesus Mascuñana and Sumilhig, provides, thus: That the
VENDOR is the true and absolute owner of a parcel of land That for and in consideration of
the sum... to be paid by the VENDEE... he VENDOR does hereby sell, transfer, cede and
convey, a portion of the above-described property The evidence on record shows that during
the lifetime of vendor Jesus Mascuñana, and even after his death, his heirs, the petitioners
herein, unequivocably declared that Diosdado Sumilhig was the owner of the property
subject of this case, and that the respondents acquired title... over the property, having
purchased the same via a deed of absolute sale from Diosdado Sumilhig. Thus, Jesus
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Mascuñana and Jose Estabillo executed a Deed of Exchange and Absolute Sale of Real Estate
long after the death of Jesus Mascuñana, one of his heirs, petitioner Renee Tedrew, through
counsel, wrote respondent Rodolfo Layumas offering to buy the property occupied by his
overseer Aquilino Barte It was only after the respondents rejected the proposal of petitioner
Renee Tedrew that the petitioners secured title over the property. While it is true that Jesus
Mascuñana executed the deed of absolute sale over the property on August 12, 1961 in
favor of Diosdado Sumilhig for P4,690.00, and that it was only on July 6, 1962 that TCT No.
967 was issued in his name as one of the co-owners of Lot No. 124, Diosdado Sumilhig and
the respondents nevertheless acquired ownership over the property. The deed of sale
executed by Jesus Mascuñana in favor of Diosdado Sumilhig was a perfected contract of
sale over the property. a perfected... contract of sale cannot be challenged on the ground
of the nontransfer of ownership of the property sold at that time of the perfection of the
contract, since it is consummated upon delivery of the property to the vendee. As provided
in Article 1458 of the New Civil Code, when the sale is made through a public instrument,
the execution thereof is equivalent to the delivery of the thing which is the object of the
contract, unless the contrary appears... or can be inferred. As between the seller and the
buyer, the transfer of ownership takes... effect upon the execution of a public instrument
covering the real property. Long before the petitioners secured a Torrens title over the
property, the respondents had been in actual possession of the property and had designated
Barte as their... overseer.
Article 1458 of the New Civil Code provides: 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. Thus, there are three essential elements of sale, to wit: a)
Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the
price; b) Determinate subject matter; and c) Price certain in money or its equivalent. In this
case, there was a meeting of the minds between the vendor and the vendee, when the
vendor undertook to deliver and transfer ownership over the property covered by the deed
of absolute sale to the vendee There was no stipulation in... the deed that the title to the
property remained with the vendor, or that the right to unilaterally resolve the contract
upon the buyer's failure to pay within a fixed period was given to such vendor. Patently, the
contract executed by the parties is a deed of sale and not... a contract to sell. The condition
in the deed... merely provides the manner by which the total purchase price of the property
is to be paid. The condition did not prevent the contract from being... in full force and effect
In a contract to sell, ownership is retained by a seller and is not to be transferred to the
vendee until full payment of the price. Such payment is a positive suspensive condition, the
failure of which is not a breach of contract but simply an event that prevented the...
obligation from acquiring binding force. in a contract of sale, the nonpayment of the price
is a resolutory condition which extinguishes the transaction that, for a time, existed and
discharges the obligation created under the transaction.A seller cannot unilaterally... and
extrajudicially rescind a contract of sale unless there is an express stipulation authorizing
it. In such case, the vendor may file an action for specific performance or judicial rescission.
Transfer of ownership to the buyer

General rule
Principle: When the sale is made through a public instrument, the execution thereof shall
be equivalent to the delivery of the thing which is the object of the contract.
Ponente: Tinga,J:
Facts: Subject of this case is a parcel of land situated in Sta. Cruz, Manila and covered by
Transfer Certificate of Title No. 48529 (TCT No. 48529) in the name of the deceased
Simplicio Ilao (Ilao). In the course of the judicial settlement of Ilao’s estate, his heirs found
out that the title of the subject property had an annotation of adverse claim filed by a certain
Juanito Ibarra (Ibarra). Respondent herein, Atty. Rodolfo Mapile (respondent), filed a
motion to exclude the property from the inventory on the ground that the same no longer
formed part of Ilao’s estate having been disposed of during the latter’s lifetime in favor of
Ibarra. Acting upon respondent’s allegation, the heirs of Ilao, through petitioners herein,
promptly filed on December 8, 1976 a civil case for Quieting of Title and Damages, docketed
as Civil Case No. 105865 of the Regional Trial Court (RTC) of Manila, Branch 37. On October
3, 1983, respondent filed Civil Case No. 83-20520 for Specific Performance and Declaration
of Nullity of Contract, claiming that the subject property had been sold by Ilao to Ibarra
pursuant to a Deed of Absolute Sale (deed of sale) dated February 7, 1972, and that Ibarra,
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in turn, sold the property to him. Civil Case No. 105865 and Civil Case No. 83-20520 were
consolidated. After trial, the court rendered judgment in favor of respondent, finding that
the deed of sale was genuine and ordering, among others, that petitioners herein surrender
the owner’s duplicate copy of TCT No. 48529 and all documents appurtenant thereto in their
possession. The decision was primarily anchored on the trial court’s finding that the
conflicting testimonies of the handwriting experts presented by both parties left it no choice
but to favor the notarized deed of sale and to rule that the same is genuine. Petitioners filed
a motion for reconsideration, which respondent countered with an omnibus motion to strike
out the motion for reconsideration for being pro forma and to seek the issuance of a writ of
execution. The trial court denied petitioners’ motion for reconsideration, granted
respondent’s omnibus motion, and ordered the issuance of a writ of execution. The decision
was appealed to the Court of Appeals and was denied because the trial court had already
ordered the elevation of the records of the case to the appellate court, and in view of
respondent’s manifestation that he would not move for execution pending appeal. Hence
this action.
ISSUE: Whether or not Ibara exercise ownership over the subject property as neither the
property nor the certificate of title covering it were delivered to Ibarra.
RULING: It has been held that ownership of the thing sold is acquired only from the delivery
thereof, either actual or constructive. Article 1498 of the Civil Code provides that 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 clearly be inferred. The execution of the public
instrument, even without actual delivery of the thing, transfers the ownership from the
vendor to the vendee, who may thereafter exercise the rights of an owner over the same.
In this case, a public instrument was executed through which constructive delivery of the
subject property was made transferring ownership thereof to Ibarra. As the new owner,
Ibarra acted perfectly within his rights when he sold the property to respondent. IN VIEW
OF THE FOREGOING, the petition is hereby DENIED. Costs against petitioners. SO
ORDERED.
Exception:
Facts: The petitioner seeks a reversal of the CA decision that affirmed the Trial Court’s
judgment of her estafa.
Rosalinda Cruz (Private offended party) and Victoria Vallarta (accused) are long time friends
and business acquaintances. On November 20, 1968, Cruz entrusted to Vallarta seven
pieces of jewelry. In December 1968, Vallarta decided to buy some items, exchanged one
item with another and issued a post-dated checks in a amount of P5,000. Cruz then
deposited the said checks to the bank however, upon presentment, the check was
dishonored and Cruz was informed that Vallarta’s account had been closed. Cruz apprised
Vallarta of the dishonor and promised to give another check. Later, Vallarta pleaded for
more time. Still later, she started avoiding Cruz. Hence this criminal action was instituted
Issue: Whether or not the transaction between Vallarta and Crus was a “sale or return”.
Ruling: The court ruled that the transaction entered into Cruz and Vallarta was not a “sale
or return” but rather a “sale on approval (also called “sale on acceptance,” “sale on trial,”
or “sale on satisfaction). In a “sale or return”, the ownership passes to the buyer on delivery.
Delivery, or tradition, as a mode of acquiring ownership must be in consequence of a
contract.
If there was no meeting of the minds on November 20, 1968, then, as of that date, there
was yet no contract of sale which could be the basis of delivery or tradition. Thus, the
delivery made on November 20, 1968 was not a delivery for purposes of transferring
ownership the prestation incumbent on the vendor. If ownership over the jewelry was not
transmitted on that date, then it could have been transmitted only in December 1968, the
date when the check was issued. In which case, it was a "sale on approval" since ownership
passed to the buyer, Vallarta, only when she signified her approval or acceptance to the
seller, Cruz, and the price was agreed upon.
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There can be no doubt that the "postdating or issuing of a check in payment of an obligation
when the offender had no funds in the bank, or his funds deposited therein were not
sufficient to cover the amount of the check," is a false pretense or a fraudulent act. It is so
characterized by Art. 315 (2) (d), Revised Penal Code. Republic Act No. 4885 does nothing
more than limit the period within which the drawer/issuer must pay the creditor.
Facts: Petitioner herein insists that findings of the Court considering as determinative of
the place of transfer of ownership of the logs sold, for purposes of taxation, are not in
themselves evidentiary indications to show that the parties intended the title of the logs to
pass to the Japanese buyers in Japan. Thus, it points out that the "FOB" feature of the sales
contract was made only to (1) fix its price and not to fix the place of delivery; (2) that the
requirement of certification of quality, quantity and measurement specifications of the logs
by local authorities was done to comply with local laws, rules, and regulations and was not
a part of the sales arrangement; (3) that the payment of freight by the Japanese buyers is
not an uncommon feature of "FOB" shipments; and that the payment of prices by means of
irrevocable letters of credit is but a common established business practice to secure
payment of the price to the seller. It also insists that even assuming that the "FOB" feature
of the disputed sales determines the situs of transfer of ownership, the same is merely a
prima facie presumption which yields to contrary proof such as that the logs were made
deliverable to the order of the shipper" and the logs were shipped at the risk of the shipper,
which would negate the above implications.
Issue: Whether or not there is transfer of ownership
Ruling: The above contentions of petitioner were devoid of merit In a decided case with
practically identical set of facts obtaining in the case at bar, this Court declared: ". . . it is
admitted that the agreed price was 'F.O.B. Agusan', thus indicating, although prima facie,
that the parties intended the title to pass to the buyer upon delivery of the log in Agusan,
on board the vessels that took the goods to Japan. Moreover, said prima facie proof was
bolstered up by the following circumstances, namely: ---x x x--- 5. The petitioner collected
the purchase price of every shipment of logs by surrendering the covering letter of credit,
bill of lading, which was endorsed in blank, tally sheet, invoice and export entry, to the
corresponding bank in Manila of the Japanese agent bank with whom the Japanese buyers
opened letters of credit. ---x x x--- That the specification in the bill of lading to the effect
that the goods are deliverable to the order of the seller or his agent does not necessarily
negate the passing of title to the goods upon delivery to the carrier is clear from the second
part of paragraph 2 of Article 1503 of the Civil Code of the Philippines: "Where goods are
shipped, and by the bill of lading the goods are deliverable to the seller or his agent, or to
the order of the seller or of his agent the seller thereby reserves the ownership in the
goods.” But, if except for the form of the bill of lading, the ownership would have passed to
the buyer on shipment of the goods, the sellers' property in the goods shall be deemed to
be only for the purpose of securing performance by the buyer of his obligation under the
contract.
Arts. 1521 – 1524
Time and Place of delivery-Time
Topic: Distinction of Sale from Agency to Sell (Art. 1466)
FACTS: On August 1918, plaintiff corporation and defendant entered into contracts. The
former obligated to sell and the latter to purchase the following: • Two (2) "Steel Tanks" (P
21,000 each) from New York to Manila, "To be delivered within 3 or 4 months" • Two (2)
"Expellers" (P 25,000 each) from San Francisco in the month of September 1918
"Approximate delivery within ninety days". • Two (2) "Electric Motors" (P 2,000 each)
Furthermore, all the contracts have the following final clause: "The sellers are not
responsible for delays caused by fires, riots on land or on the sea, strikes or other cause
known as ‘Force Majeure’ entirely beyond the control of the sellers or their representatives."
Consequently, plaintiff corporation successfully delivered the obligations on the following
dates: • Tanks (April 27, 1919) • Expellers (October 26, 1918) • Motors (February 27, 1919)
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Plaintiff corporation notified the defendant. However, the Defendant refused to receive and
pay for any of them, alleging that it arrived incomplete and long after the stipulated date.
ISSUE: Whether the plaintiff has fulfilled its obligation to bring the goods in question to
Manila in due time.
HELD: Yes. Considering these contracts in the light of the civil law, we cannot but conclude
that the term which the parties attempted to fix is so uncertain that one cannot tell just
whether, as a matter of fact, those articles could be brought to Manila or not. If that is the
case, as we think it is, the obligations must be regarded as conditional. The export of the
machinery in question was, as stated in the contract, contingent upon the sellers obtaining
certificate of priority and permission of the United States Government, subject to the rules
and regulations, as well as to railroad embargoes, then the delivery was subject to a
condition the fulfillment of which depended not only upon the effort of the herein plaintiff,
but upon the will of third persons who could in no way be compelled to fulfill the condition.
In cases like this, which are not expressly provided for, but impliedly covered, by the Civil
Code, 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.
"In such cases, the decisions prior to the Civil Code have held that the obligee having done
all that was in his power, was entitled to enforce performance of the obligation. This
performance, which is fictitious — not real — is not expressly authorized by the Code, which
limits itself only to declare valid those conditions and the obligation thereby affected; but it
is neither disallowed, and the Code being thus silent, the old view can be maintained as a
doctrine." (Manresa’s commentaries on the Civil Code [1907], vol. 8, page 132.) Whether
or not the delivery of the machinery in litigation was offered to the defendant within a
reasonable time, is a question to be determined by the court. It is sufficiently proven in the
record that the plaintiff has made all the efforts it could possibly by expected to make under
the circumstances, to bring the goods in question to Manila, as soon as possible. And, as a
matter of fact, through such efforts, it succeeded in importing them and placing them at the
disposal of the defendant, Mr. Sotelo, in April, 1919. Under the doctrine just cited, which,
as we have seen is of the same juridical origin as our Civil Code, it is obvious that the
plaintiff has complied with its obligation. Therefore, the plaintiff has not been guilty of any
delay in the fulfillment of its obligation, and, consequently, it could not have incurred any
of the liabilities mentioned by the intervenor in its counterclaim or set-off. Mr. Vicente Sotelo
Matti is sentenced to accept and receive from the plaintiff the tanks, the expellers and the
motors, and pay for the same.
Facts: Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in

coastwise shipping. It used to own the cargo vessel M/V Dadiangas Express. Upon the other
hand, respondent BJ Marthel International, Inc. is a business entity engaged in trading,
marketing, and selling of various industrial commodities. It is also an importer and
distributor of different brands of engines and spare parts. From 1987 onwards, respondent
supplied petitioner with spare parts for the latter's marine engines. Sometime in 1989,
petitioner asked respondent for a quotation for various machine parts. Acceding to this
request, respondent furnished petitioner with a formal quotation. It was stipulated in the
contract that DELIVERY is within 2 months after receipt of firm order. The TERMS is 25%
upon delivery, balance payable in 5 bi-monthly equal and Installment[s] not to exceed 90
days. Petitioner thereafter issued to respondent Purchase Order. For the procurement of
one set of cylinder liner, valued at P477,000, to be used for M/V Dadiangas Express. Instead
of paying the 25% down payment for the first cylinder liner, petitioner issued in favor of
respondent ten postdated checks to be drawn against the former's account with Allied
Banking Corporation. The checks were supposed to represent the full payment of the
aforementioned cylinder liner. Subsequently, petitioner issued Purchase Order dated 15
January 1990, for yet another unit of cylinder liner. This purchase order stated the term of
payment to be "25% upon delivery, balance payable in 5 bimonthly equal installment[s].
On 26 January 1990, respondent deposited petitioner's check that was postdated 18 January
1990, however, the same was dishonored by the drawee bank due to insufficiency of funds.
The remaining nine postdated checks were eventually returned by respondent to petitioner.
However, the parties presented disparate accounts of what happened to the check which
was previously dishonored. Petitioner claimed that it replaced said check with a good one,
the proceeds of which were applied to its other obligation to respondent. For its part,
respondent insisted that it returned said postdated check to petitioner. On 20 April 1990,
Pajarillo delivered the two cylinder liners at petitioner's warehouse in North Harbor, Manila.
The sales invoices evidencing the delivery of the cylinder liners both contain the notation
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"subject to verification" under which the signature of Eric Go, petitioner's warehouseman,
appeared. Due to the failure of the parties to settle the matter, respondent filed an action
for sum of money and damages before the Regional Trial Court (RTC) of Makati City. In its
complaint, respondent (plaintiff below) alleged that despite its repeated oral and written
demands, petitioner obstinately refused to settle its obligations. Respondent prayed that
petitioner be ordered to pay for the value of the cylinder liners plus accrued interest of
P111,300 as of May 1991 and additional interest of 14% per annum to be reckoned from
June 1991 until the full payment of the principal; attorney's fees; costs of suits; exemplary
damages; actual damages; and compensatory damages. In an Order dated 25 July 1991,
the court a quo granted respondent's prayer for the issuance of a preliminary attachment.
On 09 August 1991, petitioner filed an Urgent Ex-Parte Motion to Discharge Writ of
Attachment attaching thereto a counter-bond as required by the Rules of Court. On even
date, the trial court issued an Order lifting the levy on petitioner's properties and the
garnishment of its bank accounts. Petitioner afterwards filed its Answer alleging therein that
time was of the essence in the delivery of the cylinder liners and that the delivery on 20
April 1990 of said items was late as respondent committed to deliver said items "within two
(2) months after receipt of firm order" from petitioner. Petitioner likewise sought
counterclaims for moral damages, exemplary damages, attorney's fees plus appearance
fees, and expenses of litigation. Subsequently, respondent filed a Second Amended
Complaint with Preliminary Attachment dated 25 October 1991. The amendment introduced
dealt solely with the number of postdated checks issued by petitioner as full payment for
the first cylinder liner it ordered from respondent. Whereas in the first amended complaint,
only nine postdated checks were involved.
Issue: W/N significant the period of time which lapsed in the contract causing the delay in
the delivery of the cylinder liners is essential in the decision of the case at bar?
Held: After trial, the court a quo dismissed the action, the decretal portion of the Decision
stating: WHEREFORE, the complaint is hereby dismissed, with costs against the plaintiff,
which is ordered to pay P50,000.00 to the defendant as and by way of attorney's fees. The
trial court held respondent bound to the quotation it submitted to petitioner particularly with
respect to the terms of payment and delivery of the cylinder liners. It also declared that
respondent had agreed to the cancellation of the contract of sale when it returned the
postdated checks issued by petitioner. Respondent's counterclaims for moral, exemplary,
and compensatory damages were dismissed for insufficiency of evidence. Respondent
moved for the reconsideration of the trial court's Decision but the motion was denied for
lack of merit. The respondent filed an appeal with the Court of Appeals which reversed and
set aside the Decision of the court. The appellate court brushed aside petitioner's claim that
time was of the essence in the contract of sale between the parties herein considering the
fact that a significant period of time had lapsed between respondent's offer and the issuance
by petitioner of its purchase orders. The dispositive portion of the Decision of the appellate
court states: WHEREFORE, the decision of the lower court is REVERSED and SET ASIDE.
The appellee is hereby ORDERED to pay the appellant the amount of P954,000.00, and
accrued interest computed at 14% per annum reckoned from May, 1991. The Court of
Appeals also held that respondent could not have incurred delay in the delivery of cylinder
liners as no demand, judicial or extrajudicial, was made by respondent upon petitioner in
contravention of the express provision of Article 1169 of the Civil Code which provides:
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. On 22 May 2000,
petitioner filed a motion for reconsideration of the Decision of the Court of Appeals but this
was denied through the resolution of 06 October 2000. WHEREFORE, premises considered,
the instant Petition for Review on Certiorari is DENIED. The Decision of the Court of Appeals,
dated 28 April 2000, and its Resolution, dated 06 October 2000, are hereby AFFIRMED. No
costs. SO ORDERED.
One-Liner: The vendee’s insolvency that will excuse the vendor from his obligation to
deliver referred to by the law may be before or after the sale, provided it is discovered after
the perfection of the contract, such as a judicially declared insolvency, or one inferred from
such acts as petitioning for suspension of payments, or as a result of all his properties
having been attached in a civil or criminal proceeding.
FACTS: Defendants-appellants, Flores(dba Rizal Investment Corporation) and Abeto (dba

Phil. Investment Co Ltd) entered a contract to bound themselves to deliver on Nov. 18,
1946, to Visayan Distributor (Plaintiff Appellee) at the port of Romblon , 2,000 tons of copra
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@ P103.50 per ton FOB appellee’s vessel at Romblon. With due notice to Defendants, the
SS Panaman was sent by the Appellee and arrived at the port of Romblon on November 17,
1946 and advised the defendants that the steamer (SS Panaman) would be ready to load
the copra on November 18, 1946. Unfortunately, the defendants were unable to deliver any
amount of copra on said steamer and left Romblon without cargo. The Appellee instituted
in the CFI of Manila on December 14, 1946, an action for breach of contract and sought to
recover damages, the trial court of first instance favored the Appellee Appealed, Defendants
Abeto and Flores, contend that they were excused from delivering copra on November 18,
1946, because Visayan (plaintiff-appellee) was insolvent.
ISSUE: Whether or not delivery is affected by the insolvency of the buyer.
insolvent. There is no showing that in definite terms the former (Abeto and Flores) had
warned the appellee that they would not delivery the copra called for until they were sure
paid in accordance with said contract. Moreover, even assuming that the Visayan, still owed
Abeto and Flores, on the copras delivered before November 18, 1946 is not a positive
evidence of insolvency. The insolvency that will excuse the vendor from his obligation to
deliver the thing by law may be before or after the sale, provided it is discovered after the
perfection of the contract such as, (1) Judicially declared insolvency; or (2) One inferred
from such acts as petitioning for suspension of payments; or (3) As a result of all his
properties having been attached in a civil or criminal proceeding. (see footnotes of the full
case) Wherefore, the appealed judgement is affirmed.
Facts: Two contracts contained “Important conditions” re: delivery in par2: The stipulated
delivery period shall not be exceeded. However, should there be delay in delivery,
Purchasing Agent may grant a reasonable time for extension. Deliveries made within the
extended period, shall not be subjected to any of the following penalties.
The two contracts also contained in par.4: In case of Contractor’s (Litton) failure to deliver,
will authorize Purchasing Agent (Republic), in his discretion, to impose: Penalty, deduct
from each day of delay in delivery, a liquidated damage 1/10 of 1% per day of total value
of contract OR To make open market purchases, and charge the contractor the excess in
price. Either case, Republic reserves the right to rescind the contract.
Re: Contract 1-Padlocks.
Litton failed to deliver on said date. It however delivered on April8 34,200 padlocks. These
were fully paid. Republic was compelled to make open market purchases, incurring loss of
P176,243.13 Re: Contract 2- (Office Supplies)
Litton also failed to deliver. After elections they however delivered 2K boxes of clips costing
P180. Republic was compelled to make open market purchases, incurring loss of P20,164.17
Republic is now claiming a total of P259,366.41 as losses from open market purchases.
Litton’s DEFENSE: The contracts did not express the true contract. The real agreement was
that Litton would deliver provided the Rep. should obtain shipping priority and the necessary
export license from the US. Rep failed to secure them. Hence delay of delivery was due to
Rep. fault and to circumstances beyond Litton’s control. Open market purchases were made
at exorbitant prices.
Counterclaim: Litton delivered after elections, an additional 9K padlocks. Republic has

refused to pay these despite demands. RTC: Granted claims of government BUT also
granted the counterclaim of Litton allowing a deduction of 25K. Litton was still the one with
the sole obligation to obtain the necessary export license and shipping space. Acts done by
the republic to ease the shipping of good were merely in the nature of a friendly assistance.
Issue: WON Litton unconditionally bound himself to deliver the supplies.
Ruling: YES. Litton undertook to deliver NOT LATER than March 1, 1946. This was
UNCONDITIONAL. Hence delay due to the non-acquisition of the licenses was not due to
Republic’s acts, and CAN be subject to penalties in par.4
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It was expressly stated that the supplies were for election purposes, and the bidder was
therefore required to state the shortest time of delivery. It would be preposterous to
suppose that delivery after the elections would ever be contemplated or accepted.
Litton in his letter to the purchasing agent said that, “it is understood that your Office
(Republic) will give us a letter certifying that the padlocks are urgently needed. So that the
export license can be secured without delay…” The foregoing shows that Litton merely
expected Rep. to give a certification.
The execution of the sureties negates the contention that the delivery was subject to any
contingency. Moreover, Litton also sent another letter, foreseeing his inability to deliver on
time, asked for an extension. True the Gov’t exerted efforts, and that the licenses were
issued in the name of the Rep., but these do not prove that it was Rep.’s obligation to secure
the same. They were merely done in furtherance of the letter asking for certification.
RE: Delay in delivery.
The vessels carrying the supplies arrived in Manila on or before April 1,1946 At the time
Rep purchased supplies in the open market, the vessels carrying the shipment of supplies
were already inside the breakwater waiting for unloading. However due to lack of berthing
space, their cargo was unloaded and delivered only after the elections. On purely equitable
reasons the SC reduced the damages awarded by 90K, the difference between the stated
contract price and open market price for the padlocks delivered after the elections. At any
rate Litton failed to protect itself or minimize damages by buying in the open market himself
at lower prices than that acquired by the government (allegedly at black market prices).
Place
FACTS:
 A contract for sale of 80 drums of caustic soda was agreed between Behn, Meyer &
Co. and Teodoro Yanco, the merchandise was shipped from New York to Manila.
 The steamship was detained by the British authorities in Penang, causing seventy-
one of the eighty drums of caustic soda to be removed. Yanco refused to accept what
was left and also refused to accept the offer of Behn Meyer to have the products
substituted with other merchandise which were different from what was ordered.
 The contract provided for “c.i.f. Manila, pagadero against delivery of documents.”
 Yanco filed an action seeking for damages for alleged breach of contract.
ISSUE: Whether petitioner should bear the burden of the loss of the merchandise
RULING: Yes. The rule as to delivery of goods by a vendor via a common carrier is that if
the contract is silent, delivery of seller to common carrier transfer ownership to buyer. If
the contract be 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.
If freight is paid by the buyer, he acquires ownership at the point of shipment but if payment
of freight is made by the seller, the title of property does not pass until the goods have
reached their destination.
The letters "c.i.f." found in British contracts stand for cost, 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.
In this case, in addition to the letters "c.i.f.," has the word following, "Manila." In mercantile
contracts of American origin the letters "F.O.B." standing for the words "Free on Board," are
frequently used. The meaning is that the seller shall bear all expenses until the goods are
delivered where they are to be "F.O.B." According as to whether the goods are to be
delivered "F.O.B." at the point of shipment or at the point of destination determines the
time when property passes.
Delivery was to be made in Manila. The word Manila in conjunction with the letters "c.i.f."
must mean that the contract price, covering costs, insurance, and freight, signifies that
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delivery was to made at Manila. If petitioner Behn Meyer has seriously thought that the
place of delivery was New York and Not Manila, it would not have gone to the trouble of
making fruitless attempts to substitute goods for the merchandise named in the contract,
but would have permitted the entire loss of the shipment to fall upon the defendant.
Behn Meyer failed to prove that it performed its part in the contract. In this case, the place
of delivery was Manila and Behn Meyer has not legally excused default in delivery of the
specified merchandise at that place. In resume, we find that the plaintiff has not proved the
performance on its part of the conditions precedent in the contract.
ARTICLES 1495 - 1506

General Provision-One cannot give what one does not have (nemo dat quod non habet)

Salvador Cuizon, issued by the Registry of Deeds of Agusan del Norte on March 15,
1984, pursuant to a notarized Extra-Judicial Settlement with Sale dated August 3, 1983 (1983
Extra-Judicial Settlement with Sale) executed by the heirs of Placida Tabada-Lambo (Placida),
wherein they adjudicated unto themselves the one-fourth share of Placida, and, at the same
time, sold said portion to their co-heir, Encarnacion L. Cuizon.
covered by TCT No. RT-183, measuring 4,300 square meters, executed by Placida in favor of
Angel Remoto (Angel), husband of respondent Mercedes C. Remoto, and father of the other
respondents, Leonida R. Meynard, Celerina R. Rosales and Remedios C. Remoto. RTC
rendered a decision in favor of respondents which was affirmed by the Court of Appeals.
ISSUE: WON there was transfer of ownership to the respondents.
YES. Petitioners rely heavily on TCT No. RT-3121 issued in their names. In the first place, the
issuance of the title was made pursuant to the 1983 Extra-Judicial Settlement with Sale. At
the time this document was entered into by the heirs of Placida, the latter was no
longer the owner of the property, having earlier sold the same to Angel. No one can give
what one does not have — nemo dat quod non habet. Accordingly, one can sell only what one
owns or is authorized to sell, and the buyer can acquire no more than what the seller can
transfer legally. Such being the case, the heirs of Placida did not acquire any right to
adjudicate the property unto them and sell it to Encarnacion.
ONE-LINER: A bill of sale of personal property, executed as a private document and

unrecorded, the property described in said instrument not having been delivered but
remaining exclusively in possession of the vendor, can have no effect against a person dealing
with the property upon the faith of appearances.
FACTS: An action brought by the plaintiff to recover the sum of P 1,000 pesos, the value of
certain personal property, constituting a saloon bar, furniture, furnishing and fixtures. On or
about the month of January 1907, the sheriff Jose Desiderio levied upon the property of the
plaintiff by virtue of an execution issued upon a judgment secured by Macke & Chandler
against Stanley & Krippendorf. The plaintiff notified the sheriff that it was the owner of
the goods and forbade the sale of such under said execution. However,
notwithstanding such claim, the sheriff proceeded with the sale of goods under
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execution. Macke & Chandler was the purchaser of said good and the same were delivered
to it.
The defendants allege that the property described by the plaintiff and sold at the
execution sale referred to was not the property of the plaintiff at the time of said levy and
sale, but was the property of Stanley &Krippendorf, who were in possession of the same at
the time of such levy. The defendants also alleged that Stanley & Krippendorf, being indebted
in a considerable sum to the plaintiff in this case, attempted to sell by an instrument in writing
the property in question and said instrument was private and was never recorded, nor
delivered, and that it remained from the time of sale in the possession and control of Stanley
& Krippendorf.
ISSUE: Whether or not there is an effect in the said instrument of sale in transferring the
property in question from Stanley & Krippendorf to the plaintiff.
HELD: No. The ownership of personal property cannot 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 could have no effect against a person dealing with the property upon the faith
of appearances. A bill of sale of personal property, executed as a private document and
unrecorded, the property described in said instrument not having been delivered but
remaining exclusively in possession of the vendor, can 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.
Symbolic Delivery through execution of Public Instrument
PRINCIPLE: It is the duty of the vendor to deliver the thing sold. Symbolic delivery by the
execution of a public instrument is equivalent to actual delivery only when the things sold is
subject to the control of the vendor at the moment of sale, its material delivery could have
been made 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. 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
FACTS: By a public instrument, the plaintiff sold to the defendant four parcels of land,
described in the instrument. The defendant Felix paid, at the time of the execution of the
deed, the sum of P3,000 on account of the purchase price, and bound herself to pay the
remainder in installments, the first of P2,000 and the second of P5,000 thirty days after the
issuance to her of a certificate of title under the Land Registration Act, and further, within ten
years from the date of such title P10, for each coconut tree in bearing and P5 for each such
tree not in bearing, that might be growing on said four parcels of land on the date of the
issuance of title to her, with the condition that the total price should not exceed P85,000.
It was further stipulated that the purchaser was to deliver to the vendor 25 per centum of the
value of the products that she might obtain from the four parcels “from the moment she takes
possession of them until the Torrens certificate of title be issued in her favor.” It was also
covenanted that “within one year from the date of the certificate of title in favor of Marciana
Felix, this latter may rescind the present contract of purchase and sale…”The vendor filed suit
to compel Felix to make payment of the first installment of P2,000, demandable in accordance
with the terms of the contract of sale aforementioned, and of the interest in arrears, at the
stipulated rate of 8 per cent per annum. The defendant answered the complaint and
alleged by way of special defense that the plaintiff had absolutely failed to deliver
to the defendant the lands that were the subject matter of the sale, notwithstanding
the demands made upon him for this purpose. She therefore asked that she be absolved from
the complaint, and that, after a declaration of the rescission of the contract of the purchase
and sale of said lands, the plaintiff be ordered to refund the P3,000 that had been paid to him
on account, together with the interest agreed upon, and to pay an indemnity for the losses
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and damages which the defendant alleged she had suffered through the plaintiff’s non-
fulfillment of the contract.
ISSUE: Whether or not there has been delivery of the disputed property.
RULING: No. The record shows that the plaintiff did not deliver the thing sold. The
thing is considered to be delivered when it is placed "in the hands and possession of the
vendee." It is 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.
SPECIAL CONTRACT; SALES; OWNERSHIP DOES NOT PASS BY MERE STIPULATION

BUT ONLY BY DELIVERY; EXECUTION OF PUBLIC DOCUMENT DOES NOT
CONSTITUTE SUFFICIENT DELIVERY WHERE PROPERTY INVOLVED IS IN ACTUAL
AND ADVERSES POSSESSION OF THIRD POSSESSION:
As was held in Garchitorena v. Almeda; It is fundamental and elementary principle that
ownership does not pass by mere stipulation but only by delivery, and the execution of a
public document does not constitute sufficient delivery where the property involved is in actual
and adverse possession of third persons of third person (Addison v. Felix, 38 Phil. 404), it
becomes incontestable that even if included in the contract, the ownership of the property in
dispute did not pass thereby to petitioner.
WHEN THING CONSIDERED DELIVERED:

considered to be delivered when it is placed 'in the hands and possession of the vendee.' (Civil
Code, art. 1462). It is true that the same article declares that the execution of a public
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
FACTS: A residential and farm lot in Cagayan owned by Dominggo Melad were being claimed
by petitioner Felix Danguilan and respondent Apolonia Melad. Apolonia contends that she
acquired the property when Dominggo Melad sold it to her when she was just three years old
in which her mother paid the consideration. She contends that she just moved out of the farm
only when in 1946 Felix Danguilan approached her and asked permission to cultivate the land
and to stay therein.
Danguilan presented for his part 2 documents to prove his claim that the properties were
given to him by Dominggo Melad through an onerous donation. The onerous part of
the donation includes the taking care of the farm and the arrangement of the burial
of Dominggo.
Trial court favored the defendant (the petitioner in this case) over the plaintiff (respondent in
this case), the Court of appeals reversed the decision because the Donations were null and
void for not being in public instrument.
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ISSUEs:
1. W.O.N. Danguilan should be declared as lawful owner of the lands.
2. W.O.N the purported deed of sale made constituted delivery.
HELD:
1.) The ruling should be in favor of Danguilan. The contention of Apolonia that the
deed of donation is void because it was not made through a public document is of no merit.
The deed was an onerous one and hence, it was not covered by the rule in Article
749 requiring donations of real properties to be effected through a public
instrument. An onerous donation is effective and valid if it embraces the conditions that the
law requires. Since it has been proven that Danguilan did the conditions in the onerous
donation particularly the arrangement of Dominggo’s burial, the deed is deemed valid.
2,. No, she failed to show that she consummated the contract of sale by actual
delivery of the properties to her and her actual possession thereof in concept of
purchaser-owner. Ownership does not pass by mere stipulation but only by delivery.
On the other hand, the deed of sale made in favor of Apolonia is suspicious, as it was
executed when she was only 3 years old. One may well wonder why the transfer was not
made to the mother herself, who was after all the one paying for the lands. The averment
was also made that the contract was simulated and prepared after Domingo Melad's death in
1945.
Even assuming the validity of the deed of sale, the record shows that the private
respondent did not take possession of the disputed properties and indeed waited until 1962
to file this action for recovery of the lands from the petitioner. If she did have possession, she
transferred the same to the petitioner in 1946, by her own sworn admission, and moved out
to another lot belonging to her step-brother.
As was held in Garchitorena v. Almeda: 21

"Since in this jurisdiction it is a fundamental and elementary principle that ownership does
not pass by mere stipulation but only by delivery (Civil Code, Art. 1095; Fidelity and Surety
Co. v. Wilson, 8 Phil. 51), and the execution of a public document does not constitute sufficient
delivery where the property involved is in the actual and adverse possession of third persons
(Addison vs. Felix, 38 Phil. 404; Masallo vs. Cesar, 39 Phil. 134), it becomes incontestable
that even if included in the contract, the ownership of the property in dispute did not pass
thereby to Mariano Garchitorena. Not having become the owner for lack of delivery, Mariano
Garchitorena cannot presume to recover the property from its present possessors.
As for the argument that symbolic delivery was effected through the deed of
sale, which was a public instrument, the Court has held:
The Code imposes upon the vendor the obligation to deliver the thing sold. 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 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."
Execution of deed of sale in a public instrument constitute presumptive delivery –

this presumptive delivery only holds true when there is no impediment that may prevent
the passing of the property from the hands of the vendor into those of the vendee.
It can be negated by the reality that the vendees actually failed to obtain material possession
of the land subject of sale.
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FACTS: Plaintiffs Calixto Pasagui and Fausta Mosar bought a property in Leyte from Estaquia
and Catalina Bocar and that corresponding document of sale was executed, notarized and
recorded in the Registry of Deeds. Before they could take possession of the property,
defendant spouses Ester T. Villablanca and Zosimo Villablanca illegally and without any right,
took possession of the property harvesting coconuts from the coconut plantation thus
depriving plaintiffs of its possession. Despite Plaintiffs demanded to surrender the property
and its possession, the latter failed or refused to return said parcel of land.
ISSUE: Whether or not the execution of public instrument is equivalent to delivery absolute.
RULING: No. It is true that the execution of the deed of absolute sale in a public instrument
is equivalent to delivery of the land subject of the sale. This presumptive delivery only holds
true when there is no impediment that may prevent the passing of the property from
the hands of the vendor into those of the vendee. It can be negated by the reality that
the vendees actually failed to obtain material possession of the land subject of the sale.
It appears from the records of the case at bar that plaintiffs-appellants had not
acquired physical possession of the land since its purchase.
Delivery of property vests ownership to the vendee – Art. 1496 of the Civil Code states
that the 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 1497-1501 or in any other manner signifying
an agreement that the possession in transferred form the vendor to the vendee
Rule on Constructive Delivery – in the instant case, actual delivery of the subject tractor
could not be made. However, there was constructive delivery already upon the execution
of the public instrument pursuant to Article 1498 and upon the consent or
agreement of the parties when the thing sold cannot be immediately transferred to
the possession of the vendee (Art. 1499)
FACTS: Wilfredo Dy purchased a truck and a farm tractor through LIBRA which was also
mortgaged with the latter, as a security to the loan. Petitioner, expresses his desire to
purchased his brother’s tractor in a letter to LIBRA which also includes his intention
to shoulder its mortgaged. LIBRA approved the request. At the time that Wilfredo
Dy executed a deed of absolute sale in favor of petitioner, the tractor and truck were
in the possession of LIBRA for his failure to pay the amortization.
When petitioner finally fulfilled its obligation to pay the tractor, LIBRA would only release the
same only if he would also pay for the truck. In order to fulfill LIBRA’s condition, petitioner
convinced his sister to pay for the remaining truck, to which she released a check amounting
to P22,000. LIBRA however, insisted that the check must be first cleared before it delivers
the truck and tractor.
Meanwhile, another case penned “Gelac Trading Inc vs. Wilfredo Dy” was pending in Cebu as
a case to recover for a sum of money (P12,269.80). By a writ of execution the court in Cebu
ordered to seize and levy the tractor which was in the premise of LIBRA, it was sold in a public
auction to which it was purchased by GELAC. The latter then sold the tractor to Antonio
Gonzales. RTC rendered in favor of petitioner. On appeal CA reversed the case, alleging that
it still belongs to Wilfredo Dy.The respondents claim that at the time of execution of the deed
of sale no constructive delivery was effected since the consummation of the sale depended
upon the clearance and encashment of the check which was issued in payment of the subject
tractor
ISSUE: Whether or not the sale between mortgagor (Wilfredo Dy) and the petitioner was
valid and was the delivery effected.
HELD: YES. The mortgagor who gave the property as security under a chattel mortgage did
not part with the ownership over the same. He had the right to sell it although he was under
the obligation to secure the written consent of the mortgagee (which the mortgagee allowed).
And even if no consent was obtained from the mortgagee, the validity of the sale would still
not be affected. Thus, we see no reason why Wilfredo Dy, can not sell the subject tractor as
there is no dispute that the consent was obtained in the instant case. The sale therefore
between the mortgagor and the petitioner was valid.
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As to the contention that the consummation of the sale is depended upon encashment was
untenable. Article 1496 of the Civil Code states that the 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 or in any other manner signing an agreement that the possession is transferred
from the vendor to the vendee.
Article 1498 and upon the consent or agreement of the parties when the thing sold cannot be
immediately transferred to the possession of the vendee.
The payment of the check was actually intended to extinguish the mortgage obligation so that
the tractor could be released to the petitioner. It was never intended nor could it be considered
as payment of the purchase price because the relationship between Libra and the petitioner
is not one of sale but still a mortgage. The clearing or encashment of the check which produced
the effect of payment determined the full payment of the money obligation and the release
of the chattel mortgage. It was not determinative of the consummation of the sale.
The transaction between the brothers is distinct and apart from the transaction
between Libra and the petitioner.
CIVIL LAW; CONTRACT; SALE; TYPES OF DELIVERY, CONSTRUED: The Civil Code
provides that delivery can either be (1) actual (Article 1497) or (2) constructive (Articles
1498-1501). Symbolic delivery (Article 1498), as a species of constructive delivery, effects
the transfer of ownership through the execution of a public document. Its efficacy can,
however, be prevented if the vendor does not possess control over the thing sold, in which
case this legal fiction must yield to reality. The Court has consistently held that: [Addison vs.
Felix, 38 Phil. 404,408 (1918); Vda de Sarmiento vs Lesaca, 108 Phil. 900, 902-903 (1960);
and Danguilan vs Intermediate Appellate Court, 168 SCRA 22, 32, November 28, 1988.) ". .
. (I)n 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 . . .
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
action yields to reality — the delivery has not been effected."
FACTS: January 31, 1979- Power Commercial and Industrial Development Corporation
(Petitioner) entered into a contract of sale with spouses Reynaldo and Angelita R.
Quiambao(Respondents). The contract involved a 612-sq. m. parcel of land located at San
Antonio Village, Makati.
The parties agreed that petitioner would pay respondents P108,000.00 as down payment and
the balance of P295,000.00 upon execution of the deed of transfer of the title over the
property. Also, petitioner assumed, as part of the purchase price, the existing mortgage on
the land, in which he paid P79,145.77 to PNB as full satisfaction thereof.
June 1, 1979-Respondent spouses mortgaged again said land to PNB to guarantee a loan of
P145,000.00, P80,000.00 of which was paid to respondent spouses.
June 26, 1979-The parties executed a Deed of Absolute Sale with Assumption of
Mortgage. On the same date, Mrs. C.D. Constantino, then General Manager of petitioner-
corporation, submitted to PNB said deed with a formal application for assumption of mortgage.
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February 15-1980-PNB informed respondent spouses that, for petitioner’s failure to submit
the papers necessary for approval pursuant to the former’s letter date January 15, 1980, the
application for assumption of mortgage was considered withdrawn; that the outstanding
balance of P145,000.00 was deemed fully due and demandable; and that said loan was to be
paid in full within fifteen (15) days from notice.
On June 24, 1980 Petitioner paid PNB P41, 889.45 and P20, 283 on December 23, 1980.
Subsequently, demanded PNB thru a letter to transfer the title and mortgaged be transferred
to their name. In response, PNB sent a letter dated February 19, 1982, that the loan was
renewed and requested the petitioner to remit all the necessary payments.
On March 17, 1982, a case was filed against the respondent spouses for rescission and
damages before the RTC, and while the case was pending the property was foreclosed and
subsequently bought by PNB thru public auction.
Trial Court ruled in favor of the petitioner. On appeal, CA reversed the trial courts decision, it
held it that deed of sale did not obligated the respondent to eject the lesses form the land in
question as a condition of sale, nor the occupation thereof by said lessens a violation of
warranty, hence no substantial breach to justify rescission of said contract. Moved to SC for
petition for review on certiorari.
Petitioner alleges among else that the respondent failed to deliver the lot sold. Also, petitioner
assert that the legal fiction of symbolic delivery yielded to the truth that, at the execution of
the deed of sale, transfer of possession of said lot was impossible due to the presence of
occupants on the lot sold.
ISSUE: W.O.N. possession of a property is necessary in order that symbolic delivery may
produce effect of tradition, which would eventually transfer the ownership.
RULING: NO. The Court Disagree with the petitioner’s allegations. Delivery remains an
indispensable requisite as our law does not admit the doctrine of transfer of property by mere
consent. The Civil Code provides that delivery can either be (1) Actual (Art. 1497) or
Constructive (Art. 1498-1501). Symbolic delivery, as species of constructive delivery,
effects the transfer of ownership through execution of public document. Its efficacy
however, be prevented if the vendor does not possess control over thing sold, in
which case this legal fiction must yield to reality(delivery is not effected).
The key word is CONTROL not possession of the land as the petitioner would insist.
The court has consistently held that: “ 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 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 – DELIVERY HAS NOT BEEN EFFECTED.
Considering that the deed of sale between the parties did not stipulate or infer otherwise,
delivery was effected through the execution of said deed. The lot sold had been placed under
the control of petitioner; thus, the filing of the ejectment suit was subsequently done. It
signified that its new owner intended to obtain for itself and to terminate said
occupants' actual possession thereof. Prior physical delivery or possession is not
legally required and the execution of the deed of sale is deemed equivalent to
delivery. This deed operates as a formal or symbolic delivery of the property sold and
authorizes the buyer to use the document as proof of ownership. Nothing more is required.
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Obligation to convey Property Sold – the vendor’s obligation to convey the thing sold
arises from the validity and force of contract. According to Art. 1466(NCC1524) of the CC, the
vendor is not obliged to convey the thing sold unless the vendee has paid the price or has
fixed a time in the contract for such payment. If time of such payment has been fixed in the
contract, the vendor must convey the thing sold
EXCEPTION: the exception is that the thing must be conveyed even though the price be not
first paid, if a time for such payment has been fixed in the contract, in which case of exception
conveyance of the thing sold doe not depend upon the payment of the price.
Public Document – sale is made by means of public instrument, the execution thereof is
tantamount to conveyance of the subject matter, unless the contrary clearly follow or be
deduced from such instrument itself, and in the absence of this condition such execution by
the vendor is per se a formal symbolical conveyance of the property sold, that is the vendor
in the instrument itself authorizes the purchaser to use the title of ownership as proof that
the latter is thenceforth the owner of the property.
FACTS: On May 11, 1909, Eustaquio P. Foz executed in Manila a contract, ratified before
a notary, obligating himself to deliver his house and lot for a consideration of P6,000 to Jose
Florendo. The latter already paid P2,000 of the purchase prize. In the contract, plaintiff
fixed the period of the payment of the prize wherein plaintiff has to pay the
remainder of the prize when he goes to Vigan or if not to pay to the Church wherein
he has a debt and to obtain the title of the subject matter of the sale.
Defendant ( Foz ) went to Vigan on June 23 of the same year, plaintiff (Florendo) tendered
payment of the remainder of the prize, however, the former refused, saying that the true
prize of the sale recorded in the other instrument was P10,000. As defendant refused payment,
plaintiff filed a suit to comply with the contract of absolute purchase and sale, by delivering
to the plaintiff the property sold. The defendant, alleged that it was false that he had sold his
property for the price of P 6,000, that if he signed the deed of sale, he was deceived in doing
so as he had heard, or believed that it was previously read to him was P 10,000 and asked
that the deed of sale be declared as false, null and void.
RTC, rendered in conformity with plaintiffs petition. On appeal,
ISSUE: Whether or not the plaintiff can compel the defendant to deliver his property pursuant
to the notarized contract.
HELD: Yes. The 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. Pursuant to the
contract, it can’t be found that the payment of the prize is a precondition for the delivery of
the thing.
There was no need, therefore, of assent on the part of the plaintiff to pay the P4,000, the
remainder of the price, in order to oblige the defendant unconditionally to deliver the property
sold. With still more reason should the defendant be compelled to effect the material delivery
of the property, since, after the lapse of the period for the delivery of the price, the plaintiff
hastened to pay it and, on account of the defendant’s refusal to receive it, duly deposited it,
in order to avoid the consequences that might issue from delinquency in the payment of a
sum entrusted to him for a fixed period.
It is the material delivery of the property sold which the defendant must make in compliance
with the contract, inasmuch as the formal delivery de jure was made, according to the
provisions of article 1462, 2nd paragraph, of the same code.
Transfer of Ownership: Execution of Public Instrument equivalent to Delivery –

Under the civil law, delivery(tradition) as a mode of transmission of ownership may be actual
or constructive. When the sale of real property is made in public instrument, the execution
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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 the case at bar, where the vendor had actually placed the vendee in possession and control
over the thing sold even before the date of sale, the non-payment of the purchase price of
the goods did not preclude the transmission of the title upon execution of the deed of sale,
since payment of the purchase price is not a condition precedent to the transfer of title to the
buyer.
REGISTRATION NOT NECESSARY TO EFFECT TRANSFER OWNERSHIP: the registration

is intended to protect the buyer against claims of third person arising from subsequent
alienations by the vendor.
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, 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 and of another area either in Las Piñas or Parañaque, Rizal, or Bacoor, Cavite for
those who desire to settle south of Manila. On June 10, 1960, the Board of Directors of the
PHHC passed Resolution No. 700 (Annex "C") authorizing the purchase of the unoccupied
portion of the Sapang Palay Estate at P0.45 per square meter "subject to the following
conditions precedent:
3. That the President of the Philippines shall first provide the PHHC with the necessary
funds to effect the purchase and development of this property from the proposed P4.5
million bond issue to be absorbed by the GSIS.
4. That the contract of sale shall first be approved by the Auditor General pursuant to
Executive Order dated February 3, 1959.
On July 13, 1960, the President authorized the floating of bonds under Republic Act
Nos. 1000 and 1322 in the amount of P7,500,000.00 to be absorbed by the GSIS, in order to
finance the acquisition by the PHHC of the entire Sapang Palay Estate at a price not to exceed
P0.45 per sq. meter.
On December 29,1960, Petitioner Philippine Suburban Development Corporation, as

owner of the unoccupied portion of the Sapang Palay Estate and the People's Homesite and
Housing Corporation, entered into a contract embodied in a public instrument entitled "Deed
of Absolute Sale" whereby the former conveyed unto the latter the two parcels of land
abovementioned. This was not registered in the Office of the Register of Deeds until March
14, 1961, due to the fact, petitioner claims, that the PHHC could not at once advance the
money needed for registration expenses.
In the meantime, the Auditor General, to whom a copy of the contract had been submitted
for approval in conformity with Executive Order No. 290, expressed objections thereto and
requested a re-examination of the contract, in view of the fact that from 1948 to December
20, 1960, the entire hacienda was assessed at P131,590.00, and reassessed beginning
December 21, 1960 in the greatly increased amount of P4,898,110.00.
It appears that as early as the first week of June, 1960, prior to the signing of the deed by
the parties, the PHHC acquired possession of the property, with the consent of petitioner, to
enable the said PHHC to proceed immediately with the construction of roads in the new
settlement and to resettle the squatters and flood victims in Manila who were rendered
homeless by the floods or ejected from the lots which they were then occupying.
On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold the
amount of P30,099.79 from the purchase price to be paid by it to the Philippine Suburban
Development Corporation. Said amount represented the realty tax due on the property
involved for the calendar year 1961. Petitioner, through the PHHC, paid under protest the
abovementioned amount to the Provincial Treasurer of Bulacan and thereafter, or on June 13,
1961, by letter, requested then Secretary of Finance Dominador Aytona to order a refund of
the amount so paid. Upon recommendation of the Provincial Treasurer of Bulacan, said
request was denied by the Secretary of Finance in a letter-decision dated August 22, 1961.
Petitioner claimed that it ceased to be the owner of the land in question upon the execution
of the Deed of Absolute Sale on December 29, 1960. It is now claimed in this appeal that the
Auditor General erred in disallowing the refund of the real estate tax in the amount of
P30,460.90 because aside from the presumptive delivery of the property by the execution of
the deed of sale on December 29, 1960, the possession of the property was actually delivered
to the vendee prior to the sale, and, therefore, by the transmission of ownership to the vendee,
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petitioner has ceased to be the owner of the property involved, and, consequently, under no
obligation to pay the real property tax for the year 1961.
Respondent, however, argues that the presumptive delivery of the property under Article
1498 of the Civil Code does not apply because of the requirement in the contract that the sale
shall first be approved by the Auditor General, pursuant to the Executive Order.
ISSUE: WON there was already a valid transfer of ownership between the parties.
HELD: YES. Under the civil law, delivery (tradition) as a mode of transmission of ownership
maybe actual (real tradition) or constructive (constructive tradition). 2 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. 3
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.
WHEREFORE, the 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. Without any
pronouncement as to costs.
Rights of Salvor – becomes the owner of Goods Salvaged upon possession, and NOT
PAYMENT: The fact that the salvor was required under the contract of salvage to post a
bond to guarantee compliance with its terms; that the operations for salvage were entirely at
the salvor's expense and risks; that gold, silver, copper, coins, currency, Jewelry, precious
stones, etc. were excepted from the contract; and that expense for storage, including guard
service, were for the salvor’s account, it is clear that ownership of the goods passed to the
salvor-contractor as soon as they were recovered or salvaged, and not after payment of the
stipulated price.
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), the contract in question does not show reservation of title or
withholding of delivery.
FACTS: On June 14, 1952 Melencio Malabanan entered into an agreement with the Board of
Liquidators for the salvage of surplus properties sunk in territorial waters of the provinces of
Mindoro, La Union, and Batangas. They agreed that Malabanan was assigned the right, title
and interest in and to all the surplus properties salvaged, and shall therefore pay the
Government for such which shall be made monthly.
Four months earlier, Malabanan had entered into an agreement with Exequiel Floro, dated
March 31, 1964, in which, among other things, it was agreed that Floro would advance to
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Malabanan a sum of money not more than P25,000, repayment secured by quantities of steel
mattings consign to Floro, and in case of default, was authorized to sell the steel mattings in
his possession in amount sufficient to satisfy the advance.
Subsequently, on August 21, 1964, Malabanan filed in the CFI a petition for voluntary
insolvency which listed the Board and Exequiel Floro as creditors for P10, 874.46 and
P24,220.50 respectively. Also attached was a list of properties aggregating P33,707 in value,
included the 11,1167 pieces of steel mattings obtained from the waters with an alleged value
of P33,501. The Board claimed that they are the owners of the steel mattings. Floro opposed
this and contended that such steel mattings are owned by Eulalio Legaspi by virtue
of a deed of sale executed in his favor, executed by Floro pursuant to a previous
contract between Malabanan and Floro.
The CFI declared Malabanan as the owner of the steel mattings under his contract with the
board, thus, Floro was properly authorized to dispose of the mattings (sale to Legaspi). The
Board contends that Malabanan did not acquire ownership over the steel mattings for failure
to comply with certain terms of the contract, allegedly constituting conditions precedent for
the transfer of title. CA certified this case to SC on the ground of questions of law are involved.
ISSUE: WON , based on the contract between Malabanan and the Board, delivery of the
surplus properties salvaged (steel mattings)were never intended to be delivered to
Malabanan.
HELD: Yes. There is nothing in the terms of the public instrument in question from which an
intent to withhold delivery or transfer of title may be inferred that delivery was not intended.
While there can be reservation of title in the seller until full payment of the price (Article 1478,
N.C.C.), or, until fulfillment of a condition (Article 1505, N.C.C.); 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 (Article 1498, supra), 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.
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 Article 1499 of the Civil
Code.
Art. 1499 — The delivery of movable property may likewise be made by the mere consent or
agreement of the contracting parties, if the thing sold cannot be transferred to the possession
of the vendee at the time of the sale… .
Kinds of delivery
KINDS OF DELIVERY: Explicitly, the law provides that the 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 Article 1497 to 1501.30 The word "delivered" should not be taken restrictively to mean
transfer of actual physical possession of the property. The law recognizes two principal modes
of delivery, to wit: (1) actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the vendee.
Legal or constructive delivery, on the other hand, may be had through any of the following
ways: (1)the execution of a public instrument evidencing the sale; (2)symbolical
tradition such as the delivery of the keys of the place where the movable sold is being kept;
(3)traditio longa manu or by mere consent or agreement if the movable sold cannot yet
be transferred to the possession of the buyer at the time of the sale; (4) traditio brevi
manu if the buyer already had possession of the object even before the sale; and (5)traditio
constitutum possessorium, where the seller remains in possession of the property in a
different capacity.
FACTS:On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to
respondent Pablo Babasanta.
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The latter made a down payment of fifty thousand pesos (P50,000.00) as evidenced by a
memorandum receipt issued by Pacita Lu of the same date. Several other payments
totaling two hundred thousand pesos (P200,000.00) were made by Babasanta. He demanded
the execution of a Final Deed of Sale in his favor so that he may effect full payment of the
purchase price; however, the spouses declined to push through with the sale. They claimed
that when he requested for a discount and they refused, he rescinded the agreement. Thus,
Babasanta filed a case for Specific Performance.
On the other hand, San Lorenzo Development Corporation (SLDC) alleged that on 3 May 1989,
the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it in a
Deed of Absolute Sale with Mortgage.
It alleged that it was a buyer in good faith and for value and therefore it had a better right
over the property in litigation. ]
Respondent Babasanta argued that SLDC could not have acquired ownership because it failed
with the requirement of registration of the sale in good faith, emphasizing that at the time of
registration of sale on June 30, 1990, there was already a notice of lis pendent annotated on
the titles made as early as Jun 2, 1989. Babasanta also asserted the petitioner’s bad faith in
the acquisition evident from the fact that it failed to make necessary inquiry regarding the
purpose of the issuance of P200,000 manager’s check in his favor.
ISSUE: WON the agreement entered into is contract of sale, and is the issued receipt
constituted a delivery
RULING: NO. The agreement between Babasanta and the Spouses Lu is a contract to sell
and not a contract of sale. The receipt signed by Pacita Lu merely states that she accepted
the sum of fifty thousand pesos (P50,000.00) from Babasanta as partial payment of 3.6
hectares of farm lot.
While there is no stipulation that the seller reserves the ownership of the property until full
payment of the price which is a distinguishing feature of a contract to sell, the subsequent
acts of the parties convince us that the Spouses Lu never intended to transfer
ownership to Babasanta except upon full payment of the purchase price.
Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite his
repeated requests for the execution of the final deed of sale in his favor so that he could effect
full payment of the price, Pacita Lu allegedly refused to do so.
In effect, Babasanta himself recognized that ownership of the property would not be
transferred to him until such time as he shall have effected full payment of the price.
Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a perfected
contract to sell.
The law provides that ownership of the thing sold is acquired by the vendee from the moment
it is delivered to him.
There was no delivery to Babasanta, whether actual or constructive, which is

essential to transfer ownership of the property.
Babasanta did not acquire ownership by the mere execution of the receipt by Pacita Lu
acknowledging receipt of partial payment for the property. For one, the agreement
between Babasanta and the Spouses Lu, though valid, was not embodied in a public
instrument. Hence, no constructive delivery of the lands could have been effected.
For another, Babasanta had not taken possession of the property at any time after
the perfection of the sale in his favor or exercised acts of dominion over it despite
his assertions that he was the rightful owner of the lands. Simply stated, there was no
delivery to Babasanta, whether actual or constructive, which is essential to transfer ownership
of the property.
There was no double sale in this case because the contract in favor of Babasanta was a mere
contract to sell; hence, Art. 1544 is not applicable. There was neither actual nor constructive
delivery as his title is based on a mere receipt. Based on this alone, the right of SLDC must
be preferred
When execution of public document not equivalent to delivery
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FACTS: Petitioner Asset Privatization Trust (APT) was a government entity created for the
purpose to conserve, to provisionally manage and to dispose assets of government
institutions. APT had acquired from the Development Bank of the Philippines (DBP) assets
consisting of machinery and refrigeration equipment which were then stored at Golden City
compound, Pasay City. The compound was then leased to and in the physical possession of
Creative Lines, Inc. These assets were being sold on an as-is-where-is basis.
APT and TJ entered into an absolute sale over certain machinery and refrigeration equipment.
TJ paid the full amount and demanded the delivery of the machinery it had purchased. APT in
turn issued a gate pass.
TJ was able to pull out from the compound the properties. During the hauling of Lot No.2
consisting of 16 items, only 9 items were pulled out by TJ. This prompted the it to file a
complaint for specific performance and damages against petitioner and Creative Lines.
During the pendency of the case, TJ was able to pull out the remaining machinery and
equipment. However, upon inspection it was discovered that the machinery and equipment
were damaged and had missing parts. APT argued that there has already been constructive
delivery by virtue of the deed of sale executed and being a sale of as-is-where-is basis, it was
the duty of TJ Enterprises to take care of the property.
ISSUE: W.O.N The execution of the deed of sale and delivery of keys constituted constructive
delivery.
RULING: NO. As a general rule, when the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which is the object of the
contract, if from the deed the contrary does not appear or cannot clearly be inferred.
With regard to movable property, its delivery may also be made by the delivery of the keys
of the place or depository where it is stored or kept. In order for the execution of a public
instrument to effect tradition, the purchaser must be placed in control of the thing
sold. However, the execution of a public instrument only gives rise to a prima facie
presumption of delivery. Such presumption is destroyed when the delivery is not effected
because of a legal impediment.
It is necessary that the vendor shall have control material delivery could have been made.
Thus, a person who does not have actual possession of the thing sold cannot transfer
constructive possession by the execution and delivery of a public instrument. In this case,
there was no constructive delivery of the machinery and equipment upon the execution of the
deed of absolute sale or upon the issuance of the gate pass since it was not petitioner but
Creative Lines which had actual possession of the property.
Rule in sale of registered land
Effect of REGISTRATION: The record of the sale with the Register of Deeds and the issuance
of the certificate of title in the name of the buyer over the property merely bind third parties
to the sale. As between the seller and the buyer, the transfer of ownership takes effect upon
the execution of a public instrument covering the real property.
FACTS: Gertrudis Wuthrich and her 6 siblings were the co-owners of a parcel of land as Lot
No. 124 with an area of 1,729 sq meters, and Gertrudis and two other co-owners sold each
of their one-seventh (1/7) shares to Jesus Mascuñana totaling 741 square meters. Jesus
Mascuñana then sold 140 square meter of his undivided share and an additional 160 square
meter on April 7, 1961, However, the parties agreed to revoke the said deed of sale and, in
lieu, executed a Deed of Absolute Sale on August 12, 1961 stating among else that, he sold
469-square-meter portion of a property for P4,690.00, with P3,690.00 as downpayment.
That the balance P1,000.00 shall be paid as soon as they are surveyed in the name of the
VENDEE and all papers pertinent and necessary to the issuance of a separate Certificate of
Title in the name of the VENDEE shall have been prepared.
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One December 31, 1961 Mascuñana and Estabillo executed a Deed of Exchange and
Absolute Sale of Real Estate, which is abutting (next to Sumilhig). The subdivision of
the lot was approved on August 2, 1962 and the property of Sumilhig was identified as Lot
No. 124-B. Mascuñana died intestate on April 20, 1965. One April 21, 1968, Sumilhig executed
a Deed of Sale of Real Property in favor of Corazon Layumas, lot No. 124-B with Ana read of
469 sq.mtr. The spouses Layumas then had the property subdivided into two (124-B-2 & 124-
B-1, with 71 and 469 sq.mtr, respectively) and took possession of the property and allowed
a chapel to be constructed.
Spouses Layumas allowed Aquilino Barte to stay on a portion of the property to ward off
squatters. Unknown to the spouses Layumas, a title was issued in the name of Jesus
Mascuñana.
On November 17, 1986, the heirs of Mascuñana filed a Complaint for recovery of possession
of Lot No. 124-B and damages with a writ of preliminary injunction, alleging that they owned
the subject lot by virtue of successional rights from their deceased father.
Barte raised the following special defenses: (a) the petitioners were estopped from asserting
ownership over the lot in question because they did not object when he occupied the said
portion of the lot; (b) neither did the petitioners protest when a church was built on the
property, or when residential houses were constructed thereon; (c) the petitioners still asked
Barte and the other occupants whether they had notified Rodolfo Layumas of the constructions
on the property; and (d) the heirs of Mascuñana, through the lawyer of Mrs. Renee M. Tedrew,
even wrote a letter expressing her willingness to buy the subject property. The trial court and
the CA rendered judgment in favor of Barte and the spouses Layumas. Petitioners filed the
instant petition for review on certiorari with this Court.
ISSUE:
RULING:While it is true that Jesus Mascuñana executed the deed of absolute sale over the
property on August 12, 1961 in favor of Diosdado Sumilhig for P4,690.00, and that it was
only on July 6, 1962 that TCT No. 967 was issued in his name as one of the co-owners of Lot
No. 124, Diosdado Sumilhig and the respondents nevertheless acquired ownership over the
property.
The deed of sale executed by Jesus Mascuñana in favor of Diosdado Sumilhig on

August 12, 1961 was a perfected contract of sale over the property. A perfected
contract of sale cannot be challenged on the ground of the non-transfer of
ownership of the property sold at that time of the perfection of the contract, since
it is consummated upon delivery of the property to the vendee.
It is through tradition or delivery that the buyer acquires ownership of the property sold. As
provided in Article 1458 of the New Civil Code, when the sale is made through a public
instrument, the execution thereof is equivalent to the delivery of the thing which is the object
of the contract, unless the contrary appears or can be inferred.
The record of the sale with the Register of Deeds and the issuance of the certificate
of title in the name of the buyer over the property merely bind third parties to the
sale. As between the seller and the buyer, the transfer of ownership takes effect
upon the execution of a public instrument covering the real property.
To transfer ownership to the buyer
PRINCIPLES: As regards petitioners’ contention that at no time did Ibarra exercise ownership
over the subject property as neither the property nor the certificate of title covering it were
delivered to Ibarra, these circumstances do not necessarily warrant a conclusion that the
property was not validly transferred to Ibarra.
It has been held that ownership of the thing sold is acquired only from the delivery thereof,
either actual or constructive. Article 1498 of the Civil Code provides that 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
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does not appear or cannot clearly be inferred. The execution of the public instrument,
even without actual delivery of the thing, transfers the ownership from the vendor
to the vendee, who may thereafter exercise the rights of an owner over the same.
FACTS: Subject of this case is a parcel of land situated in Sta. Cruz, Manila and covered by
Transfer Certificate of Title in the name of the deceased Simplicio Ilao. In the course of the
judicial settlement of Ilao’s estate, his heirs found out that the title of the subject
property had an annotation of adverse claim filed by a certain Juanito Ibarra.
Respondent herein, Atty. Rodolfo Mapile, filed a motion to exclude the property from the
inventory on the ground that the same no longer formed part of Ilao’s estate having been
disposed of during the latter’s lifetime in favor of Ibarra.
Acting upon respondent’s allegation, the heirs of Ilao promptly filed a civil case for Quieting
of Title and Damages.
The Court of First Instance of Manila denied respondent’s motion and authorized the
sale of the subject property to Virgilio Sevilla subject to the outcome of aforementioned civil
case. Relevantly, it appears that in 1974, Ibarra filed a petition for the issuance of a new
owner’s duplicate copy of the title of the subject property, claiming that he was in possession
of said owner’s duplicate but that he lost the same in a fire that took place in Sta. Ignacia,
Camiling, Tarlac on April 26, 1974. This allegation was, however, uncovered by the trial court
to be false when, upon the court’s subpoena, Ilao’s heirs appeared and presented the
certificate of title Ibarra claimed to have been lost.
Subsequently, respondent filed a civil case for Specific Performance and Declaration of Nullity
of Contract, claiming that the subject property had been sold by Ilao to Ibarra pursuant to a
Deed of Absolute Sale dated February 7, 1972, and that Ibarra, in turn, sold the property to
him. The two civil cases were consolidated. After trial, the court rendered judgment
in favor of respondent, finding that the deed of sale was genuine and ordering that
petitioners surrender the owner’s duplicate copy of the transfer certificate of title
and all documents appurtenant thereto. The decision was primarily anchored on the trial
court’s finding that the conflicting testimonies of the handwriting experts presented by both
parties left it no choice but to favor the notarized deed of sale and to rule that the same is
genuine.
Petitioners argue that the appellate court erred in disregarding the testimonies of the expert
witnesses allegedly to the effect that Ilao’s signature on the deed of sale was forged. It also
alleged that it erred in certain matters crucial to the case, such as the fact, among others,
that Ibarra neither took possession of the subject property nor of the certificate of title
covering it.
ISSUE:
WON the property subject of this case rightfully belongs to respondent herein.
HELD: YES. The petitioners’ contention is not entirely accurate. The trial court and the Court
of Appeals did take into account the entirety of the testimonies of the handwriting experts
and reckoned that neither should be accorded probative value because the expert witnesses
have conflicting opinions on the genuineness of the signatures used as standards against
which the alleged forged signature on the deed of sale would be measured.
Experts are presented to enlighted – not confuse – the courts and for this reason, the Court
do not fault the lower court for disregarding, in its exasperation, their testimony on record,
no doubt, relying on the leeway extended to all courts that they "are not bound to submit
their findings necessarily to such testimony.”
The validity of the deed of sale should, therefore, be recognized, the only opposition thereto
being the alleged forgery of Ilao’s signature which was not satisfactorily demonstrated. There
is no doubt that the deed of sale was duly acknowledged before a notary public. As a notarized
document, it has in its favor the presumption of regularity and it carries the evidentiary weight
conferred upon it with respect to its due execution.
As regards petitioners’ contention that at no time did Ibarra exercise ownership over the
subject property as neither the property nor the certificate of title covering it were delivered
to Ibarra, these circumstances do not necessarily warrant a conclusion that the property was
not validly transferred to Ibarra.
It has been held that ownership of the thing sold is acquired only from the delivery thereof,
either actual or constructive. Article 1498 of the Civil Code provides that 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
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does not appear or cannot clearly be inferred. The execution of the public instrument, even
without actual delivery of the thing, transfers the ownership from the vendor to the vendee,
who may thereafter exercise the rights of an owner over the same.
In this case, a public instrument was executed through which constructive delivery of the
subject property was made transferring ownership thereof to Ibarra. As the new owner, Ibarra
acted perfectly within his rights when he sold the property to respondent
EXCEPTIONS:
It was held that the initial delivery date of articles in a form of a jewelry did not indicate that
there was a meeting of minds, thus no contract and no basis of delivery, but rather on the
subsequent date when the buyer signified her approval or acceptance to the seller and price
was agreed upon, thus the issuance of the check was simultaneous with the transfer of
ownership over the jewelry.
FACTS: Respondent Rosalinda Cruz entrusted to petitioner Victoria Vallarta seven pieces of
jewelry on November 1968. On December of the same year, Vallarta exchanges one jewelry
to another and issued a post-dated check in favor of Cruz. Cruz deposited the check but it
was dishonored for lack of funds.
An estafa case was filed against Vallarta but she argued that she can only be civilly liable
because even though the check bounced, she only gave it for a pre-existing obligation. She
contends a person cannot be imprisoned for non-payment of debt.
ISSUE: WON the transaction is a “sale or return”
HELD: The transaction is not a sale or return but a sale on approval or sale on acceptance.
When Cruz gave the jewelry to Vallarta on November, the clear intention is to make the latter
choose which item she wanted to buy. There was no meeting of the minds yet at this point
and hence, it cannot be considered as delivery.
If ownership over the jewelry was not transmitted on that date, then it could have been
transmitted only in December 1968, the date when the check was issued. In which case, it
was a "sale on approval" since ownership passed to the buyer when , Vallarta, only signified
her approval or acceptance to the seller, Cruz, and the price was agreed upon.
Thus, the issuance of the check was simultaneously with the transfer of ownership over the
jewelry.
One Liner: An FOB feature of a sale indicates that parties intended the title to pass to the
buyer upon delivery of the logs in Agusan, on board the vessels that took the goods to Japan.
Further bolstered by the fact that, freight charges and insurance were paid by the buyer, and
an irrevocable letters of credit were opened in favor of the seller
Doctrine: The specification in the bill of lading that the goods are deliverable to the order of
the SELLER or his agent does not necessary negate the passing of the tile to the goods upon
delivery. But, if except for the form of the bill of lading, the ownership would have passed to
the buyer on the shipment, the seller’s property in the goods shall be deemed to be only for
purpose of securing performance by the buyer of his obligation under the contract.
One Liner: Shipping documents** issued in the name of the seller, as exporter, and that logs
were consigned to the seller or its order and all bills of lading made covering the shipments
of logs to Japan were drafts are attached which represents the selling price do not necessarily
prove that the title to the logs passed into the buyers in Japan and are mere schemes to
ensure the performance by the buyer of their obligations under their contract.
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**Export sales invoices, export entry and license, exchange control license,
certificate of inspection by the Bureau of Forestry, and certificate of origin, together
with bill of lading
FACTS: During the period of January 31, 1951 to June 8, 1953, Butuan Sawmill Inc. sold logs
to Japanese firms at prices FOB Vessel Magallanes, Agusan. The FOB prices included costs
of loading, wharfage stevedoring and other costs in the Philippines.
The freight was paid by the Japanese buyers and the payments of the logs were
effected by means of letters of credit in favor of petitioner and payable through the
Philippine National Bank or any other bank named by it.
Upon investigation by the Bureau of Internal Revenue, it was ascertained that no sales tax
was filed by petitioner and neither did it pay the corresponding tax on sales. Petitioner
contends that the disputed sales were consummated in Japan, and, therefore, not subject to
the taxing jurisdiction of our Government. The lower court upheld the legality and correctness
of the amended assessment of the sales tax and surcharge, ruling that the sales in question
were domestic or “local” sales, and therefore subject to sales tax under the provisions of the
Tax Code.
ISSUE: W.O.N. the sale consummated in the Philippines and ownership was transferred
thereto.
RULING:
The export sales have been consummated in the Philippines and were, accordingly,
subject to sales tax therein. The logs sold to Japanese firms at price FOB Agusan and such
FOB feature of sales, based on decided and authoritative cases (Bislig Bay Lumber Co Inc v.
CIR and Misamis Lumber Co, Inc vs. CIR) indicated that the parties intended the title to pass
to the buyer upon delivery of the logs in Agusan on Board the vessels bound to Japan.
That the specification in the bill of lading to the effect that goods are deliverable to the order
of the seller or his agent does not necessarily negate the passing of title to the goods upon
delivery to the carrier is clear from the 2nd paragraph of Article 1503 of the Civil Code.
ARTICLES 1521-1524
Timelines of Delivery in light of Stipulations in the Contract:
CONTRACTS; PURCHASE AND SALE OF MERCHANDISE; UNCERTAINTY OF TIME OF

FULFILLMENT OF OBLIGATION. — As no definite date was fixed for the delivery of the goods,
which the plaintiff undertook to deliver, the term which the parties attempted to establish
being so uncertain that one cannot tell whether, as a matter of fact, the aforesaid goods
could, or could not, be imported into Manila, the obligation must be regarded as conditional
and not one with a term.
WHEN TIME NOT ESSENTIAL. — Where no date is fixed in the contract for the delivery of
the thing sold, time is considered unessential, and delivery must be made within a reasonable
time to be determined by the courts in accordance with the circumstances of the case
FACTS:
On August 1918, Smith Bell and Mr. Vicente Sotelo Matti entered into contracts
whereby the former obligated itself to sell, and the latter to purchase from it the following:
• Two steel tanks for P21,000 coming from New York and delivered within 3
months;
• Two expellers for P25,000 coming from San Francisco to be delivered on
September 1918 or as soon a possible;
• Two electric motors for P2,000, as to delivery of the stipulation was worded
as: “Approximate deliver within ninety days. – This is not guaranteed.”
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The tanks arrived at Manila on the 27th of April, 1919; the expellers on the
26th of October, 1918; and the motors on the 27th of February, 1919. Smith Bell
notified Matti (defendant) of the arrival of the goods, but Mr. Matti (defendant) refused
to receive them and pay the price. Smith Bell filed a suit against Matti based on
four separate causes of action.
In his answer, Matti and the intervenor, Manila Oil Refining, denied the
allegations and claimed that the goods never arrived at Manila. Likewise, since the
goods will be used by defendants in manufacturing coconut oil, the intervenor suffered
damages for the delay in the delivery of tanks and the expellers.
The lower court absolved defendants as to the complaint of tanks and electric
motors, but not for the expellers. Both parties appealed to the SC.
ISSUE: Whether or not, under the contracts entered into, the plaintiff has
fulfilled, in due time, its obligation to bring the goods in question to Manila
within reasonable time.
HELD: Yes, the plaintiff has not been guilty of any delay in the fulfillment of its
obligation, and, consequently, it could not have incurred any of the liabilities mentioned
by the intervenor in its counterclaim or set-off. Under these stipulations, it cannot be
said that any definite date was fixed for the delivery of the goods:
• As to the tanks, the agreement was that the delivery was to be made "within
3 or 4 months," but that period was subject to the contingencies referred to in
a subsequent clause.
• As to expellers, the contract says "within the month of September, 1918," but
to this is added "or as soon as possible."
• As to the motors, the contract contains this expressions, "Approximate delivery
within ninety days," but right after this, it is noted that "this is not guaranteed."
The terms above, which the parties attempted to fix is so uncertain that one cannot
tell just whether, as a matter of fact, those articles could be brought to Manila or
not. If that is the case, the obligation must be regarded as conditional. The rule in North
America is that when the time of delivery is not fixed in the contract, time is regarded
unessential. The law implies, however, that if no time is fixed, delivery shall be made within
reasonable time, in the absence of anything to show that an immediate delivery is intended.
When the contract provided for delivery as soon as possible, the seller is entitled to a
reasonable time, in view of all circumstances, such as the necessities of manufacture, or
putting the goods in condition for delivery. The term, does not mean immediately or that the
seller must stop all his other work and devote himself to a particular order. But the seller
must nevertheless act with all reasonable diligence or without unreasonable delay.
The record shows, that the plaintiff did all within its power to have the machinery arrive at
Manila as soon as possible, and immediately upon its arrival notified the purchaser of the fact
and offered to deliver it to him. Taking these circumstances into account, we hold that the
said machinery was brought to Manila within a reasonable time. Thus, plaintiff has not been
guilty of any delay.
PRINCIPLE: In determining whether time is of the essence in a contract, the ultimate

criterion is the actual or apparent intention of the parties and before time may be so regarded
by a court, there must be a sufficient manifestation, either in the contract itself or the
surrounding circumstances of that intention.
THUS, when the time of delivery is not fixed or is stated in general and indefinite terms, time
is not of the essence of the contract. . . . In such cases, the delivery must be made within a
reasonable time. The law implies, however, that if no time is fixed, delivery shall be made
within a reasonable time, in the absence of anything to show that an immediate delivery
intended. . . . (Smith, Bell & Co., Ltd. v. Matti)
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FACTS: Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in

coastwise shipping. It used to own the cargo vessel M/V Dadiangas Express. On the other
hand, respondent BJ Marthel International, Inc. is a business entity engaged in trading,
marketing, and selling of various industrial commodities. It is also an importer and distributor
of different brands of engines and spare parts.
Sometime in 1989, petitioner asked respondent for a quotation for various machine parts.
Acceding to this request, respondent furnished petitioner with a formal quotation, offering
delivery within 2 months after receipt of firm order. Petitioner thereafter issued to respondent
Purchase Order No. 13839, dated 02 November 1989, for the procurement of one set of
cylinder liner, and Purchase Order No. 14011, dated 15 January 1990, for yet another unit of
cylinder liner. These purchase orders stated the term of payment to be “25% upon
delivery, balance payable in 5 bi-monthly equal installments.”, WITHOUT stating date of
delivery.
Petitioner issued postdated checked as payment. Respondent deposited petitioner’s check

that was postdated 18 January 1990, however, the same was dishonored by the drawee bank
due to insufficiency of funds, and remaining nine postdated checks were eventually returned
by respondent. Thereafter placed the order for the two cylinder liners with its principal in
Japan, Daiei Sangyo Co. Ltd., by opening a letter of credit on 23 February 1990 under its own
name with the First Interstate Bank of Tokyo.
On 20 April 1990, Henry Pajarillo, respondents’ sales manager, delivered the two cylinder
liners at petitioner’s warehouse in North Harbor, Manila and demanded for full payment the
two cylinder liners by sending a Statement of Account and a demand letter to petitioner.
In reply, petitioner sent respondent a letter offering to pay only P150,000 for the cylinder
liners, claiming that as the cylinder liners were delivered late and due to the scrapping of the
M/V Dadiangas Express, it (petitioner) would have to sell the cylinder liners in Singapore and
pay the balance from the proceeds of said sale. Another demand letter furnished petitioner
by respondent’s counsel requiring the former to settle its obligation to respondent together
with accrued interest and attorney’s fees.
Due to the failure of the parties to settle the matter, respondent filed an action for sum of
money and damages before the Regional Trial Court (RTC) of Makati City, alleging that despite
its repeated oral and written demands, petitioner obstinately refused to settle its obligations.
Petitioner afterwards filed its Answer alleging therein that time was of the essence in the
delivery of the cylinder liners and that the delivery on 20 April 1990 of said items was late as
respondent committed to deliver said items “within two (2) months after receipt of firm order”
from petitioner.
Trial court favored the petitioner and the motion for reconsideration of the respondent was
denied.Aggrieved by the findings of the trial court, respondent filed an appeal with the Court
of Appeals which reversed and set aside the decision of the trial court and further denied the
motion for reconsideration of the petitioner. Hence, this petition for review.
ISSUE: Whether or not the respondent, BJ Marthel International, Inc., incurred delay in
performing its obligation as time was of the essence of the contract of sale.
HELD: No. Respondent could not have incurred delay in the delivery of cylinder liners as no
demand, judicial or extrajudicial, was made by respondent upon petitioner in
contravention of the express provision of Article 1169 of the Civil Code which provides
that 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. There was
also no evidence of the alleged cancellation of orders by petitioner and that the delivery of
the cylinder liners on 20 April 1990 was reasonable under the circumstances.
In determining whether time is of the essence in a contract, the ultimate criterion

is the actual or apparent intention of the parties and before time may be so regarded
by a court, there must be a sufficient manifestation, either in the contract itself or
the surrounding circumstances of that intention.
Petitioner insists that although its purchase orders did not specify the dates when the
cylinder liners were supposed to be delivered, nevertheless, respondent should
abide by the term of delivery appearing on the quotation it submitted to petitioner.
In the present case, the documents, by themselves, embody the terms of the sale of the
cylinder liners. While the quotation provided by respondent evidently stated that the cylinder
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liners were supposed to be delivered within two months from receipt of the firm order of
petitioner and that the 25% down payment was due upon the cylinder liners delivery, the
purchase orders prepared by petitioner clearly omitted these significant items and
made no mention at all of the due dates of delivery of the two cylinder liners
The formal quotation provided by respondent represented the negotiation phase of the
subject contract of sale between the parties. As of that time, the parties had not yet reached
an agreement as regards the terms and conditions of the contract of sale of the cylinder liners.
Notably, petitioner was the one who caused the preparation of the said Purchase Orders yet
it utterly failed to adduce any justification as to why said documents contained terms which
are at variance with those stated in the quotation provided by respondent. The only plausible
reason for such failure on the part of petitioner is that the parties had, in fact, renegotiated
the proposed terms of the contract of sale.
Relative to the above discussion, when the time of delivery is not fixed or is
stated in general and indefinite terms, time is not of the essence of the contract. . .
. In such cases, the delivery must be made within a reasonable time. The law
implies, however, that if no time is fixed, delivery shall be made within a reasonable
time, in the absence of anything to show that an immediate delivery intended. . . .
(Smith, Bell & Co., Ltd. v. Matti)
The fact that while petitioner alleges that the cylinder liners were to be used for dry
dock repair and maintenance of its M/V Dadiangas Express between the later part of
December 1989 to early January 1990, the record is bereft of any indication that respondent
was aware of such fact. The failure of petitioner to notify respondent of said date is fatal to
its claim that time was of the essence in the subject contracts of sale. In fact, the petitioner
should have cancelled the first purchase order when the cylinder
linerwasnotdeliveredonthedateitnowsayswasnecessary.Insteaditissuedanotherpurchaseorder
for the second set of cylinder liner. This fact negates petitioner’s claim that time was indeed
of the essence in the consummation of the contract of sale between the parties.
Finally, the ten postdated checks issued in November 1989 by petitioner and received
by the respondent as full payment of the purchase price of the first cylinder liner supposed to
be delivered on 02 January 1990 fail to impress. It is not an indication of failure to honor a
commitment on the part of the respondent. Also, by accepting the cylinder liners when these
were delivered to its warehouse, petitioner indisputably waived the claimed delay in the
delivery of said items.
We, therefore, hold that in the subject contracts, time was not of the essence. The delivery
of the cylinder liners on 20 April 1990 was made within a reasonable period of time considering
that respondent had to place the order for the cylinder liners with its principal in Japan and
that the latter was, at that time, beset by heavy volume of work.
One-Liner: The vendee’s insolvency that will excuse the vendor from his obligation to deliver
referred to by the law may be before or after the sale, provided it is discovered after the
perfection of the contract, such as a judicially declared insolvency, or one inferred from such
acts as petitioning for suspension of payments, or as a result of all his properties having been
attached in a civil or criminal proceeding.
FACTS: Defendants-appellants, Flores(dba Rizal Investment Corporation) and Abeto (dba

Phil. Investment Co Ltd) entered a contract to bound themselves to deliver on Nov. 18, 1946,
to Visayan Distributor (Plaintiff Appellee) at the port of Romblon , 2,000 tons of copra @
P103.50 per ton FOB appellee’s vessel at Romblon.
With due notice to Defendants, the SS Panaman was sent by the Appellee and arrived at the
port of Romblon on November 17, 1946 and advised the defendants that the steamer (SS
Panaman) would be ready to load the copra on November 18, 1946. Unfortunately, the
defendants were unable to deliver any amount of copra on said steamer and left Romblon
without cargo. The Appellee instituted in the CFI of Manila on December 14, 1946, an action
for breach of contract and sought to recover damages, the trial court of first instance favored
the Appellee Appealed, Defendants Abeto and Flores, contend that they were excused from
delivering copra on November 18, 1946, because Visayan (plaintiff-appellee) was insolvent.
ISSUE: Whether or not time of delivery is affected by the insolvency of the buyer.
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insolvent. There is no showing that in definite terms the former (Abeto and Flores) had warned
the appellee that they would not delivery the copra called for until they were sure paid in
accordance with said contract.
Moreover, even assuming that the Visayan, still owed Abeto and Flores, on the copras
delivered before November 18, 1946 is not a positive evidence of insolvency. The insolvency
that will excuse the vendor from his obligation to deliver the thing by law may be before or
after the sale, provided it is discovered after the perfection of the contract such as, (1)
Judicially declared insolvency; or (2) One inferred from such acts as petitioning for suspension
of payments; or (3) As a result of all his properties having been attached in a civil or criminal
proceeding. (see footnotes of the full case).Wherefore, the appealed judgement is affirmed.
FACTS:Two contracts contained “Important conditions” re: delivery in par2: The

stipulated delivery period shall not be exceeded. However, should there be delay in
delivery, Purchasing Agent may grant a reasonable time for extension. Deliveries made
within the extended period, shall not be subjected to any of the following penalties.
The two contracts also contained in par.4: In case of Contractor’s (Litton) failure to
deliver, will authorize Purchasing Agent (Republic), in his discretion, to impose: Penalty,
deduct from each day of delay in delivery, a liquidated damage 1/10 of 1% per day
of total value of contract OR To make open market purchases, and charge the
contractor the excess in price. Either case, Republic reserves the right to rescind the
contract.
Re: Contract 1-Padlocks: Litton failed to deliver on said date. It however

delivered on April 8 34,200 padlocks. These were fully paid. Republic was compelled
to make open market purchases, incurring loss of P176,243.13
Re: Contract 2- (Office Supplies): Litton also failed to deliver. After elections
they however delivered 2K boxes of clips costing P180. Republic was compelled
to make open market purchases, incurring loss of P20,164.17 Republic is now
claiming a total of P259,366.41 as losses from open market purchases.
Litton’s DEFENSE:
The contracts did not express the true contract. The real agreement was that
Litton would deliver provided the Republic should obtain shipping priority and the
necessary export license from the US and failed to secure them. Hence delay of
delivery was due to Republic fault and to circumstances beyond Litton’s control. Open
market purchases were made at exorbitant prices.
Counterclaim: Litton delivered after elections, an additional 9K padlocks. Republic has

refused to pay these despite demands. RTC: Granted claims of government BUT also
granted the counterclaim of Litton allowing a deduction of 25K. Litton was still the
one with the sole obligation to obtain the necessary export license and shipping space.
Acts done by the republic to ease the shipping of good were merely in the nature
of a friendly assistance.
ISSUE: WON Litton unconditionally bound himself to deliver the supplies.
RULING: YES. Litton undertook to deliver NOT LATER than March 1, 1946. This was
UNCONDITIONAL. Hence delay due to the non-acquisition of the licenses was not due
to Republic’s acts, and CAN be subject to penalties in par.4
It was expressly stated that the supplies were for election purposes, and the
bidder was therefore required to state the shortest time of delivery. It would be
preposterous to suppose that delivery after the elections would ever be contemplated
or accepted. Litton in his letter to the purchasing agent said that, “it is understood
that your Office (Republic) will give us a letter certifying that the padlocks are urgently
needed. So that the export license can be secured without delay…” The foregoing
shows that Litton merely expected Republic to give a certification.
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The execution of the sureties negates the contention that the delivery was
subject to any contingency (because this surety was intended to insure performance of
Litton). Moreover, Litton also sent another letter, foreseeing his inability to deliver on
time, asked for an extension. True the Gov’t exerted efforts, and that the licenses
were issued in the name of the Republic, but these do not prove that it was Republic’s
obligation to secure the same. They were merely done in furtherance of the letter
asking for certification.
RE: Delay in delivery. The vessels carrying the supplies arrived in Manila on or
before April 1,1946 At the time Rep purchased supplies in the open market, the
vessels carrying the shipment of supplies were already inside the breakwater waiting
for unloading. However due to lack of berthing space, their cargo was unloaded and
delivered only after the elections. On purely equitable reasons the SC reduced the
damages awarded by 90K, the difference between the stated contract price and open
market price for the padlocks delivered after the elections. At any rate Litton failed
to protect itself or minimize damages by buying in the open market himself at lower
prices than that acquired by the government (allegedly at black market prices).
PLACE
GEN. RULE: Delivery to carrier is delivery to buyer, if it is the duty of the seller to
send the goods to the buyer
PRINCIPLE: Determination of the place of delivery resolves itself into a question of fact. If
the contract be 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. A specification in a contact relative to the payment of freight can
be taken to indicate the intention of the parties in regard to the place of delivery. Thus, if a
the word “Manila” in conjunction with the letters "c.i.f." must mean that the contract price,
covering costs, insurance, and freight, signifies that delivery was to be made at Manila.
Consequently, if the goods are not delivered in Manila, Seller should be held liable
FACTS: A memorandum of agreement was executed between Yangco and Behn, Meyer & Co.
The contract provided that the vendor (Behn M & Co) will deliver to Yangco “80 drums of
Caustic Soda 76 percent “Carabao” brand al precious de Dollar Gold Nine and 75/100 per
100-lbs”. The contract provided for "c.i.f. Manila, pagadero against delivery of documents."
The contract provided for: "Embrace: March 1916." The merchandise was in fact shipped from
New York on the Steamship Chinese Prince on April 12, 1916.
The steamship was detained by the British authorities at Penang, and part of the cargo,
including seventy-one drums of caustic soda, was removed. Yangco refused to accept delivery
of the remaining nine drums of soda on the ground that the goods were in bad order. Yangco
also refused the optional offer of the Behn, Meyer & Co, of waiting for the remainder of the
shipment until its arrival, or of accepting the substitution of seventy-one drums of caustic
soda of similar grade from plaintiff's stock.
The plaintiff thereupon sold, for the account of the defendant, eighty 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, we have the amount claimed as damages for alleged breach of the
contract.
ISSUE: Whether or not the place of delivery is in Manila and is the Plaintiff excused in default
in delivery of the specified merchandise at that place
RULING: Yes, the place of delivery is Manila.
Determination of the place of delivery resolves itself into a question of fact. If the contract be
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. A specification in a contact relative to the payment of freight can be taken to indicate
the intention of the parties in regard to the place of delivery. If the buyer is to pay the freight,
it is reasonable to suppose that he does so because the goods become his at the point of
shipment. On the other hand, if the seller is to pay the freight, the inference is equally so
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strong that the duty of the seller is to have the goods transported to their ultimate destination
and that title to property does not pass until the goods have reached their destination.
The Court believes that the word Manila in conjunction with the letters "c.i.f." must mean that
the contract price, covering costs, insurance, and freight, signifies that delivery was to be
made at Manila. If the plaintiff company has seriously thought that the place of delivery was
New York and Not Manila, it would not have gone to the trouble of making fruitless attempts
to substitute goods for the merchandise named in the contract, but would have permitted the
entire loss of the shipment to fall upon the defendant.
This view is corroborated with the facts that that goods were not shipped nor consigned from
New York as the bill of lading being the document evidencing the said shipment and
symbolizing the property were sent by Neus Hesslein & Co to the Bank of the Philippine
Islands (BPI) with draft(bank draft) upon Behn, Meyer & Co. and with instruction to deliver
the same.Therefore the place of delivery was Manila and plaintiff has not legally excused
default in delivery of the specified merchandise at that place.
Discussion of words CIF and FOB:
The letters "c.i.f." found in British contracts stand for cost, 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 contract, in addition to the letters "c.i.f.," has the
word following, "Manila." Under such a contract, an Australian case is authority for the
proposition that no inference is permissible that a seller was bound to deliver at the point of
destination. In mercantile contracts of American origin the letters "F.O.B." standing for the
words "Free on Board," are frequently used. The meaning is that the seller shall bear all
expenses until the goods are delivered where they are to be "F.O.B." According as to whether
the goods are to be delivered "F.O.B." at the point of shipment or at the point of destination
determines the time when property passes.
Under plaintiffs hypothesis, the defendant would have been the absolute
owner of the specific soda confiscated at Penang and would have been indebted for
the contract price.
No, Yangco is not liable. The specific merchandise was never tendered. The
soda which the plaintiff offered to defendant was not of the "Carabao" brand, and the offer of
drums of soda of another kind was not made within the time that a March shipment, according
to another provision the contract, would normally have been available.
The plaintiff has not proved the performance on its part of the conditions precedent in
the contract. The warranty — the material promise — of the seller to the buyer has not been
complied with. The buyer may therefore rescind the contract of sale because of a breach in
substantial particulars going to the essence of the contract. As contemplated by article 1451
of the Civil Code, the vendee can demand fulfillment of the contract, and this being shown to
be impossible, is relieved of his obligation. There thus being sufficient ground for rescission,
the defendant is not liable.
One Liner: Shipping documents** issued in the name of the seller, as exporter, and that logs
were consigned to the seller or its order and all bills of lading made covering the shipments
of logs to Japan were drafts are attached which represents the selling price do not necessarily
prove that the title to the logs passed into the buyers in Japan and are mere schemes to
ensure the performance by the buyer of their obligations under their contract.
**Export sales invoices, export entry and license, exchange control license,
certificate of inspection by the Bureau of Forestry, and certificate of origin, together
with bill of lading
FACTS: On September 27, 1954 Bislig Bay Lumber was assessed by the Collector of
Internal Revenue for deficiency tax amounting to ₱175, 683.30 as deficiency sales tax
and surcharge for shipment of logs to buyers in Japan from June 14, 1951 to June
20, 1953.
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Petitioner ask respondent to reconsider contending that title to the logs passed from
the petitioner to the buyer outside the Philippines hence such sale of logs is not
subject to tax. The respondent denied the request thus the petitioner filed a petition
for review at the Court of Tax Appeals.
The findings of the Court of Tax Appeals are” It appears that the contracts of sale
were negotiated by petitioner's agent in Japan; that the contracts of sale were
confirmed by said agent by means of purchase notes sent to the sellers and seller's
notes to the buyers; that the logs were shipped either under terms F.O.B. Bislig,
Surigao, or C & I., Bislig, Surigao; that by the terms of the bills of lading the logs
were "consigned to the order of the seller (notify respective buyers)"; that all freight
charges were paid by the buyers; that in shipments under terms F.O.B. Bislig, the
logs were insured by the buyers; that in shipments under terms C. & I., Bislig, the
logs were insured by the seller, petitioner herein; and that the bills of lading, insurance
policies taken in the name of the seller, and other commercial and shipping documents
were indorsed in blank and presented to the bank in Manila for collection through
whom the foreign buyers opened letters of credit.”
ISSUE: Whether or not title to the logs passed within the Philippines or in Japan.
RULING: Title of the sold logs passed to the buyer in the Philippines. The fact that,
as pointed out by the petitioner, it has a legal representative in Japan whereas the
buyers have none in the Philippines to whom the logs could be delivered; that all
the shipping documents such as export sales invoices, export entry, export license,
exchange control license, certificate of inspection by the Bureau of Forestry, and
certificate of origin together with the bills of lading, were all issued in the name of
the petitioner as exporter and not of the Japanese buyers; that the logs were
consigned to the petitioner or its order; and that in all the bills of lading made by
the petitioner covering shipments of logs to Japan there were drafts attached to the
bills of lading and the amounts in the drafts represent the selling price of the logs
shipped to Japan, do not necessarily prove that title to the logs passed into the
buyers in Japan and not in the Philippines, thereby exempting it from the payment
of sales tax. They are mere schemes to ensure the performance by the buyers of
their obligations under their contracts (pursuant to Art. 1503). Ownership in the logs
passed in the Philippines from the seller to the foreign buyers because the freight
charges and insurance were paid by the buyers.
ARTICLES 1536-1543
Where it is sold per unit or number.
FACTS: Respondent bought two (2) condominium units and four (4) parking slots from
petitioner while petitioner’s condominium was still under construction. The area per unit was
155 square meters which costs Php 22,378.95 per square meter. Possession of the property
was turned over to Hua on October 10, 1996.
After the purchase price was fully paid on January 31, 1997, petitioner sent Hua the Deeds of
Sale. The latter was distressed to find that the floor area is only 127 square meters, contrary
to what was indicated in the price list. Hua caused a verification survey and discovered the
area to be only 110 square metes. Hua demanded a refund but petitioner refused. Petitioner
further contended that the action has prescribed when it filed on August 7, 1998 after
possession was delivered to respondent on October 10, 1996.
ISSUE: Whether or not the sale was one made with a statement of its area or at the rate of
a certain price for a unit of measure and not on a lump sum.
HELD: The Court held that the sale was for a unit price. Accordingly, respondent is entitled
to relief under Article 1539 and not under Article 1542 of the New Civil Code. Ong is entitled
either a proportional reduction of the price or rescission of a contract, at his option.
Respondent however, chose the former remedy when he prayed in his complaint a reduction
of the price of Php 2 million paid by him. Likewise, the action has not yet prescribed since
there was no delivery yet on October 10, 1996. It appears that petitioner was already placed
in possession of the subject properties. However, it is only upon payment of the last
installment when the absolute deed of sale was to be executed. This shows that the ownership
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was still withheld by petitioner. Consequently, there is no delivery yet to speak of. What was
merely transferred was possession and not ownership of the properties.
Where it is sold for a lump sum or a single price (Art. 1542)
FACTS: Buriol previously owned a parcel of unregistered land in Palawan. In 1986, he entered
into a lease agreement with Flaviano and Tiziana Turatello and Sani(Italians) involving a
hectare of his property. This agreement was for a period of 25 years, renewable for another
25 years. After the payment of P10,000 as downpayment, Turatello and Sani took possession
of the land. However, this agreement was only reduced into writing in 1987.
After 11 months, Buriol sold the same parcel of land (5Hec) to Rodulf lietz Inc for 30,000.
Later on, Rudolf Lietz Inc discovered that Buriol owned only 4 hectares with one hectare
covered by the lease; thus, only 3 hectares were delivered to the former. Rudolf Lietz Inc
instituted a complaint for the annulment of the lease against Buriol, Sani and the Turatellos
before the RTC. RTC & CA ruled in favor of Buriol, Sani and Turatellos.
ISSUE: Whether or not the sale between Buriol and Rudolf Lietz Inc is a lump sum or unit
price sale.
HELD: Lump Sum Sale. The Deed of Absolute Sale shows that the parties agreed on the
purchase price on a predetermined area of 5 hec. within the specified boundaries and not
based on a particular rate per area. In accordance with Art. 1542, there shall be no reduction
in the purchase price even if the area delivered to Rudolf Lietz Inc is less than that stated in
the contract. In the instant case, the area within the boundaries as stated in the contract shall
control over the area agreed upon in the contact.
FACTS: Spouses Arbasa purchased from Fidela Roble a unregistered parcel of land. According
to the deed of sale, the land had a total of 240 sqm. However, due to persistent efforts in
reclaiming a portion of the sea, the land increased to 884 sqm. Since then the spouses were
in continuous possession of the entire parcel of land, Adelaida Arbasa tolerated her sister’s
Fidela Roble stay in the house, while Veronica and Lilibeth Roble, nieces stay with Fidela.
Shortly after Fidela’s death, Veronica and Lilibeth Roble claimed a portion of the land with an
area of 644sqm. According to the Roble’s the two lots located at the southern portion of the
lot were owned by Fidela and Gualberto Roble what was only conveyed to spouses Arbasa
was the 240 sqm.
ISSUE: Who has the better right in claiming ownership of the lot?
RULING: The plaintiff-appellant Adelaida Roble Arbasa is the one who has the better right in
claiming entire ownership over the lot as based on the rulling of the case which stated that
entitled to the possession of the entire parcel of land containing an area of 844 square meters
which is covered by Tax Declaration No. 67 in the name of Adelaida Roble Arbasa.
It was repeatedly ruled that where land is sold for lump sum and not so much per unit of
measure or number, the boundaries of the land stated in the contract determine the effects
and scope of the sale, not the area thereof. The vendors are obligated to deliver all the land
included within the boundaries, regardless of whether the real area should be greater or
smaller than that recited in the deed. This is particularly true where the area is described as
’‘humigit kumulang” that is more or less.
Prescription of the action (Art. 1543)
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FACTS: Respondent bought two (2) condominium units and four (4) parking slots from
petitioner while petitioner’s condominium was still under construction. The area per unit was
155 square meters which costs Php 22,378.95 per square meter. Possession of the property
was turned over to Hua on October 10, 1996.
After the purchase price was fully paid on January 31, 1997, petitioner sent Hua the Deeds of
Sale. The latter was distressed to find that the floor area is only 127 square meters, contrary
to what was indicated in the price list. Hua caused a verification survey and discovered the
area to be only 110 square metes. Hua demanded a refund but petitioner refused. Petitioner
further contended that the action has prescribed when it filed on August 7, 1998 after
possession was delivered to respondent on October 10, 1996.
ISSUE: WON respondents action has prescribed pursuant to Article 1543, in relation to Article
1539 and 1542 of the Civil Code
RULING: NO. Under the Civil Code, the vendor is bound to transfer the ownership of and
deliver the thing which is the object of the sale. Under the Civil Code, ownership does not
pass by mere stipulation but only by delivery.
If the vendee is placed in actual possession of the property, but by agreement of the parties
ownership of the same is retained by the vendor until the vendee has fully paid the price, the
mere transfer of the possession of the property subject of the sale is not the delivery
contemplated in the Law on Sales or as used in Article 1543 of the Civil Code
From the foregoing, the Court held that the transfer of possession of the subject properties
on October 10, 1996 to respondent cannot be considered as delivery within the purview of
Article 1543 of the Civil Code. It follows that since there has been no transfer of
ownership of the subject properties since the deeds of absolute sale have not yet
been executed by the parties, the action filed by respondent has not prescribed.
Movables (Art. 1522)

Movables (Article 1522) Where there is deficiency in the quantity or quality
FACTS: Buriol previously owned a parcel of unregistered land in Palawan. In 1986, he entered
into a lease agreement with Flaviano and Tiziana Turatello and Sani(Italians) involving a
hectare of his property. This agreement was for a period of 25 years, renewable for another
25 years. After the payment of P10,000 as downpayment, Turatello and Sani took possession
of the land. However, this agreement was only reduced into writing in 1987.
After 11 months, Buriol sold the same parcel of land (5Hec) to Rodulf lietz Inc for
30,000. Later on, Rudolf Lietz Inc discovered that Buriol owned only 4 hectares with one
hectare covered by the lease; thus, only 3 hectares were delivered to the former. Rudolf Lietz
Inc instituted a complaint for the annulment of the lease against Buriol, Sani and the
Turatellos before the RTC. RTC & CA ruled in favor of Buriol, Sani and Turatellos.
ISSUE: Whether or not the sale between Buriol and Rudolf Lietz Inc is a lump sum or unit
price sale.
HELD: Lump Sum Sale. The Deed of Absolute Sale shows that the parties agreed on the
purchase price on a predetermined area of 5 hec. within the specified boundaries and not
based on a particular rate per area. In accordance with Art. 1542, there shall be no reduction
in the purchase price even if the area delivered to Rudolf Lietz Inc is less than that stated in
the contract. In the instant case, the area within the boundaries as stated in the contract shall
control over the area agreed upon in the contact.
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FACTS: Spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo sold a land in Bulacan to
respondent Rosa Hernandez for P11,000. The boundaries of the land were stated in the deed
of sale and its approximate land area.
After the sale (there were two other previous sales to different vendees of other portions of
the land), the petitioners-spouses caused the preparation of a subdivision plan. Rosa
Hernandez, however, unlike the previous vendees, did not conform to the plan and refused
to execute an agreement of subdivision and partition for registration and refused to vacate
the areas that she had occupied. Instead, she caused the preparation of a different
subdivision plan, which was approved by the Director of Lands.
On 28 February 1955, herein petitioners-spouses filed suit against respondent Rosa

Hernandez in CFI-Bulacao, claiming that said defendant was occupying an excess of 17,000
sq. meters in area of what she had bought from them. Defendant Rosa Hernandez, on the
other hand, claimed that the alleged excess, was part of the areas that she bought.
Argument of Rosa Hernandez: plaintiffs had sold two portions without clear boundaries but
with exact areas (12,500 sq. m. and 26,000 sq. m) at the rate of P .29 per sq. or, as
defendant Rosa Hernandez claimed, two portions, the areas of which were not definite but
which were defined on the land and with definite boundaries and sold for the lump sum of
P11,000.
Argument of Sta. Ana Spouses: Despite the incontestable fact the the dead of sale in favor
of Rosa Hernandez, recites a price in lump sum (11,000.) for both lots, appellants insist that
the recited area, of 12,500 sq. m. and 26,000 sq. m. at the rate of P. 29 per sq. meter,
where the boundary properties was mentioned should be taken as controlling.
ISSUE: Whether or not the recital of the land area’s boundary properties is controlling in a
contract of sale of lump sum real property.
HELD: The answer is in the affirmative. The sale involves 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.
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 sale in this
case only involves the definite boundaries but only approximate land areas. As such, Art
1542 concerning the sale for lump sum must be considered.
Applying to the case Article 1542 of the new civil code:
In the sale of real estate, made for 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 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.
Principle: The principle is that if land shall be sold within boundaries with an expression of
the area and if the area is grossly deficient, the vendee has an option, either to have the
price reduced proportionately or to ask for the rescission of the contract. The rule of the civil
law is more favorable to the purchaser than is the common law.
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FACTS: Luis Asiain, the plaintiff-appellant in this case, Benjamin Jalandoni is the defendant-
appellee. The parties prepared and signed a memorandum-agreement regarding the purchase
of land of Mr. Luis Asiain and his wife Maria Cadenas, by B. Jalandoni, containing 25 hectares
more or less of land bounded by property of the purchaser, with its corresponding crop,
estimated at 2,000 piculs, the total value of which is P55,000.00. The price is to be paid by
paying P30, 000.00 at the signing of the document, and P25, 000.00 within one year with
interest at the rate of 10%.”
Apparently there was always a difference of opinion between Asiain and Jalandoni as to the
area of the tract and as to the crop of sugar cane; that the agreement between them mentions
land containing 25 hectares more or less, giving the boundaries, and a crop estimated and
in one sense warranted at 2,000 piculs, and that in reality the land contained only a little
more than 18 hectares and produced a crop of only about 800 piculs. Jalandoni had paid P30,
000 leaving an unpaid balance of P25, 000 of the purchase price of P55, 000 stipulated in
the contract. Asiain sued to recover the balance from Jalandoni.
Judge of First Instance, declared null the document of purchase and its related memorandum;
absolved the defendant from the payment of P25, 000 and ordered the parties to return what
they had received under the contract. Because of the said judgement the plaintiff filed an
appeal.
ISSUE: Whether or not the seller and buyer misrepresented each other and committed mutual
mistake?
HELD:
If the difference between the real and the represented quantity is very great, both parties act
obviously under a mistake which it is the duty of a court of equity to correct.
Mutual mistake of the contracting parties to sale in regard to the subject-matter of the sale
which is so material as to go to the essence of the contract, is a ground for relief and
rescission. The mistake with reference to the subject-matter of the contract is such that, at
the option of the purchaser, it is rescindable. Without such mistake the agreement would not
have been made and since this is true, the agreement is inoperative and void. Specific
performance of the contract can therefore not be allowed at the instance of the vendor.
The ultimate result is to put the parties back in exactly their respective positions before they
became involved in the negotiations and before accomplishment of the agreement. The
judgment was affirmed on the ground that both parties had acted by a mutual mistake.
FACTS: By a public document, the plaintiff sold two parcels of lands to the defendant for the
lump sum of P47,000, payable in installments with the conditions of payment P5,000 at the
time of signing of the contract, P20,000 upon delivery of the Torrens title to the first parcel
described in the Deed of Sale, P10,000 upon the delivery of the Torrens title to the second
parcel, and the sum of P12,000 one year after the deliver of the Torrens title to the second
parcel.
Vendee complied with the first two payment conditions but failed to pay the remaining
P10,000 during the delivery of the second parcel and the P12,000 hence the filing of the
complaint by the plaintiff for the collection money with legal interest from the month of April
1921 and 1922 until full payment of the amounts claimed.
Defendants admit the aforementioned circumstance but alleges that the plaintiff
misrepresented the second parcel of land to have 98 hectares when in fact it only had 60
hectare, that the defendant, other than the above-mentioned sums, also paid the amount of
P4,000 and the defendants never refused to pay the reduced price but was instead refused
to be received by the plaintiff.
The trial court ruled in favor of the plaintiff finding no importance given by the parties to the
area of land but only agreed as to the lump sum of P47,000 as purchase price for the subject
parcels of land. Having denied their motion for a new trial, the case was brought before the
Supreme Court.
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ISSUE: WON trial court erred in failing to order the reduction of the price due on the second
parcel of land.
RULING: Article 1471 provides that 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.
The same rule shall apply when two or more estates are sold for a single price; but, if in
addition to a statement of the boundaries, which is indispensable in every conveyance of real
estate, the area of the estate should be designated in the contract, the vendor shall be obliged
to delivery all that is included with such boundaries, even should it exceed the area specified
in the contract; and should he not be able to do so, he shall suffer a reduction of the price in
proportion to what is lacking of the area, unless the contract be annulled by reason of the
price in proportion to what is lacking of the area, unless the contract be annulled by reason
of the vendee’s refusal to accept anything other than that which was stipulated.
Where everything was included within the boundaries is delivered there can be no increase or
decrease in price, no matter whether the area be more or less than that given in the contract.
From this a very important consequence follows, to wit; That if the vendor is bound to deliver
a determinate object, he is bound to deliver all of it, that is, everything within its boundaries,
in the contract, and that from the moment he fails to do so, either because he cannot or
because, ignoring the meaning of the contract, he alleges that it contains a greater area than
than stipulated, the contract is partially unfulfilled and tha is is but just the certain actions be
available to the vendee for the protection of his right.
In this case, the rule formulated for the second paragraph or article 1471 is inapplicable in
the instant case inasmuch as all the land included within the boundaries of the two parcels
sold has been delivered in its entirety to the vendee. There is no division of the land enclosed
within the boundaries of the properties sold; the determinate object which is the subject
matter of the contract has been delivered by the vendor in its entirety as he obligates himself
to do.
Therefore, there is no right to complain either on the part of the vendor, even if there be a
greater area than that stated in the deed, or on the part of the vendee, though the area of
the second parcel be really much smaller.
ARTICLE 1544
N. Sales of two different persons (Art. 1544)

Salvador Cuizon, issued by the Registry of Deeds of Agusan del Norte on March 15, 1984,
pursuant to a notarized Extra-Judicial Settlement with Sale dated August 3, 1983 (1983 Extra-
Judicial Settlement with Sale) executed by the heirs of Placida Tabada-Lambo (Placida),
wherein they adjudicated unto themselves the one-fourth share of Placida, and, at the same
time, sold said portion to their co-heir, Encarnacion L. Cuizon.
covered by TCT No. RT-183, measuring 4,300 square meters, executed by Placida in favor of
Angel Remoto (Angel), husband of respondent Mercedes C. Remoto, and father of the other
respondents, Leonida R. Meynard, Celerina R. Rosales and Remedios C. Remoto.
RTC rendered a decision in favour of respondents which was affirmed by the Court of Appeals.
ISSUE: Whether or not the petitioners have the better right to the property in dispute.
RULING: No. As correctly ruled by both the trial court and the CA, the 1968 Deed of Sale
executed by Placida in favor of Angel should prevail over the 1983 Extra-Judicial Settlement
with Sale made by the heirs of Placida in favor of petitioners-spouses Cuizon
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Priore tempore, priore jure. It simply means, "He who is first in time is preferred in right."
The only essential requisite of this rule is priority in time, and the only one who can invoke
this is the first vendee. Records bear the fact that when Placida sold her one-fourth portion
of the property covered by TCT No. RT-183 in 1968, the 1983 Extra-Judicial Settlement with
Sale was still inexistent, and more importantly, said portion was yet to be transferred by
succession to Placida's heirs. The records also show that after Placida sold her portion to
Angel, the latter immediately took possession of the same. Applying the principle of priority
in time, it is clear that Angel, and consequently his heirs, the respondents herein, have a
superior right to the property.
Petitioners rely heavily on TCT No. RT-3121 issued in their names. In the first place, the
issuance of the title was made pursuant to the 1983 Extra-Judicial Spettlement with Sale. At
the time this document was entered into by the heirs of Placida, the latter was no longer the
owner of the property, having earlier sold the same to Angel. No one can give what one does
not have — nemo dat quod non habet. Accordingly, one can sell only what one owns or is
authorized to sell, and the buyer can acquire no more than what the seller can transfer legally.
Such being the case, the heirs of Placida did not acquire any right to adjudicate the property
unto them and sell it to Encarnacion.
Sigaya vs. Mayuga, G.R. No. 143254, 18 Aug 2005
FACTS: A parcel of land owned by Dionisia Alorsabes was sold to Juanito Fuentes while the
remainder was inherited by her children. Each of the heirs sold their share of portions to the
the respondents. However, a document entitled Extra-Judicial Partition with Deed of Sale was
uncovered wherein the heirs of Dionisia purportedly sold their shares in favor of Teodulfo
Sigaya through a Deed of Sale.
Later on, the petitioners filed a case for recovery of possession against the respondents
arguing that they have the right of ownership and possession over the property. The
respondents answered that the Deed of Sale in favor of Teodulfo was null and void as it is
based on a fictitious extra-judicial settlement considering that two of the heirs were illiterate.
Hence, they were fraudulently made to sign as vendees. The Regional Trial Court ruled in
favor of the respondents believing that the evidence of actual occupation and possession of
the respondents had been satisfactorily proven. The Court of Appeals affirmed the decision of
RTC.
In appealing to the Supreme Court, the petitioners aver that Teodulfo purchased the property
from Francisco, one of the heirs, who was in possession of an OCT of the property named
after Dionisia. Relying on the instrument and after inspecting the land and seeing nobody
occupied the same, Teodulfo bought the land and had the title subsequently issued in his
name. In this manner, Teodulfo was an innocent purchaser in good faith and also a victim of
misrepresentation.
ISSUE: WON petitioners are entitled to be awarded ownership based on rule on double sale
of real property
HELD: No. Apart from the fact that Teodulfo is not a purchaser in good faith, the law on
double sales as provided in Art. 1544 of the Civil Code contemplates a situation where a single
vendor sold one and the same immovable property to two or more buyers. For the rule to
apply, 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 it.
The rule cannot be invoked where the two different contracts of sale are made by two different
persons, one of them not being the owner of the property sold In this case, respondents
derive their right over their respective portions either through inheritance or sale from Dionisia
while petitioners invoke their right from the sale of the land from Francisco. Clearly, the law
on double sales does not apply here.
FACTS: Principal petitioners SAMUEL ULEP, now deceased and substituted by his heirs, and
VALENTINA ULEP are brother-and-sister. Together with their siblings, namely, AtinedoroUlep
and Rosita Ulep, they are children of the late Valentin Ulep. During his lifetime, the father
Valentin Ulep owned a parcel of land, identified as Lot 840 with an area of 3,270 square
meters, located at Asingan, Pangasinan. Sometime in 1950, the older Ulep sold the one-half
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(1/2) eastern portion of Lot 840, comprising an area of 1,635 square meters, to respondent
Maxima Rodico, while the remaining one-half (1/2) western portion with the same area, to
his son Atinedoro Ulep married to Beatriz Ulep, and to his other daughter Valentina Ulep. On
June 5, 1952, all the transferees of Lot 840, namely, Maxima Rodico (for the eastern portion)
and Atinedoro Ulep and Valentina Ulep (for the western portion), were jointly issued in their
names Transfer Certificate of Title No. 12525. On June 18, 1971, Atinedoro Ulep, his wife
Beatriz and sister Valentina Ulep sold the one-half (1/2) portion of the area sold to them by
their father to their brother Samuel Ulep and the latter’s wife, Susana Repogia-Ulep. The
portion sold to Samuel and Susana has an area of 817.5 square meters. The document of
sale was registered with the Office of the Registry of Deeds of Pangasinan on February 20,
1973. Later, an area of 507.5 square meters of the western portion of Lot 840 was sold by
the spouses Atinedoro Ulep and Beatriz Ulep to respondent Warlito Paringit and the latter’s
spouse Encarnacion Gante, who were then issued TCT No. 12688 on September 23, 1975.
Evidently, all the foregoing transactions were done and effected without an actual ground
partition or formal subdivision of Lot 840.
In June 1977, respondent Iglesiani Cristo (INC) begun constructing its chapel on Lot 840. In
the process, INC encroached portions thereof allegedly pertaining to petitioners and blocked
their pathways. This prompted Samuel Ulep and sister Rosita Ulep to make inquiries with the
Office of the Register of Deeds of Pangasinan.
ISSUE: W/N the respondent has the rights of ownership based on the rule of double sale of
real property
HELD: Yes. Article 1544 of the Civil Code provides the statutory solution. Per records, the
sale of the disputed 620 square-meter portion of Lot 840 to respondent INC was made on
December 21, 1954 and registered with the Registry of Deeds of Pangasinan on January 5,
1955. In fact, INC was issued a title over the same portion on September 23, 1975. On the
other hand, the conveyance to the spouses Samuel Ulep and Susana Repogia-Ulep happened
on January 18, 1971 and the spouses registered their document of conveyance only on
February 22, 1973.
Clearly, not only was respondent INC the first buyer of the disputed area. It was also the first
to register the sale in its favor long before petitioners Samuel’s and Susana’s intrusion as
second buyers. Although Samuel and Susana thereafter registered the sale made to them,
they did so only after 18 years from the time INC caused the registration of its own document
of sale.
Petitioners allegation of forgery relative to the deed of sale executed on December 21, 1954
by the spouses Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep over the 620 square-
meter portion of Lot 840 cannot be sustained. As a rule, forgery cannot be presumed and
must be proved by clear, positive and convincing evidence, the burden for which lies on the
party alleging it.
Principle:
VENDOR AND PURCHASER; SALE OF REALTY TO DIFFERENT PERSONS; REFERENCE.
— In a case where a real property has been sold two or three times to different persons and
the corresponding deeds of sale do not appear to have been entered in the registry of
property, the question as to who is the lawful owner of such property, in accordance with the
provisions of Article 1473 of the Civil Code, should be resolved in favor of the purchaser who
first took possession of the property, pursuant to the provisions of Article 1462 of the same
Code.
RIGHT OF SECOND PURCHASER. — From what has been said, 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.
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FACTS:
On September 4, 1912, the defendant Francisco Sioson and his wife Lorenza de la Cruz, sold
to the plaintiff Rosalio Bautista the camarin in question, through a notarial instrument, under
the right of repurchase. It was stipulated that if within two years from the date of the contract
the vendors, or their successors in interest should not repurchase said properties for the sum
of P400, the price of the sale, such sale should become absolute and thenceforth the
ownership in the properties sold should be consolidated, the execution of another instrument
being unnecessary.
On the same date, Rosalio Bautista, through a notarial instrument, leased the properties sold
to him to the vendors Francisco Sioson and Lorenza de la Cruz, for the price of P100 per
annum, for the period of two years counted from the date of the instrument.
August 5, 1914, Francisco Sioson executed before a notary, a document by which he sold
under right of repurchase to the defendant Raymundo de la Cruz, the camarin in question.
It was stipulated in this instrument that if within six months, counted from August 1, 1914,
the vendor Francisco Sioson should return to the purchase Raymundo de la Cruz the sum of
P422, the price of the purchase, then the purchaser Raymundo de la Cruz would be obliged
to execute in favor of said vendor Francisco Sioson an instrument of resale, but that if within
the period mentioned he should not make the redemption stipulated, said sale should become
absolute, the execution of another instrument being unnecessary.
Plaintiff prayed for the court to hold that his ownership in said buildings was consolidated, to
order the defendants to deliver him the buildings, and to order Francisco Sioson to pay to him
the price of the lease. Defendants alleged that the camarin described in the complaint, was
of the exclusive ownership of the defendant Raymundo de la Cruz.
ISSUE: Which of the two purchasers, the plaintiff Bautista and the defendant Cruz, is the
lawful owner of the camarin?
RULING: Bautista is the rightful owner of the camarin. The deed of sale between Bautista
and Sioson was not entered in the registry of property. Upon the execution of the second
sale of the same camarin by the said Sioson, which sale was made after the death of his wife
Lorenza by virtue of an instrument made in favor of Cruz, it may be presumed, in the absence
of proof to the contrary, that the second purchaser Raymundo de la Cruz acted in good faith.
However, actual and material possession of the camarin by Cruz does not constitute a
sufficient legal reason for holding the he has a better right to the building than the first
purchaser Rosalio Bautista, although the latter was not in actual, physical, and material of
the camarin that he had purchased. This conclusion is derived from a strict application of the
provisions of said article 1473 of the Civil Code.
FACTS: On July 26, 1882, by a public instrument, Macario Berenguer sold to Cristino Singian
with right of repurchase for an indefinite time.
On October 7, 1889, by means of another public instrument, Macario Berenguer sold the
same land to Cornelia Lauchangco with right of repurchase for the term of two years. It was
stipulated that Macario Berenguer would take the land under a lease, paying an annual rent
therefor, either in cash or in sugar at the option of Cornelia Lauchangco. It was also stipulated
that all fruits of the land would be stored in Cornelia Lauchangco's enfarderia (sugar packing
house) in this city and the proceeds thereof would be applied to the payment of the price of
the repurchase. This sale was registered in 1907.
It appears that on September 2, 1890, Macario Berenguer, by virtue of a public instrument,

sold again the land in question with pacto de retro to Cristino Singian at a higher price but
the amount paid on account of the sale of 1882 was considered as a part of the price. In the
document wherein appears this contract, it is said that Cristino Singian accepts the purchase
in the name and representation of Anselmo Singian of whom he was the tutor.
From what has been said, it appears that the land in question had been twice sold by Macario
Berenguer: the first sale was made in 1882 in favor of Cristino Singian and the second, in
1889, in favor of Cornelia Lauchangco, predecessor in interest of the plaintiffs.
ISSUE: Whether or not the sale of the land executed by Macario Berenguer in favor of Cornelia
Lauchangco be declared absolute
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RULING: No. Considering the facts in connection with the time prior to 1907, it follows that
the preference should be in favor of the purchaser who took possession of the land, inasmuch
as this possession, according to the law in force prior to the promulgation of the Civil Code,
constituted the consummation of the contract, and also inasmuch as the Civil Code (Article
1478) expressly provides that possession in such cases transfers the ownership of the thing
sold.
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 provisions of Article
1473 of the Civil Code, notwithstanding the material and personal possession by the second
vendee.
FACTS:The entire lot involved in this suit was originally in the name of Anselmo Lacatan.
After the death, his two sons as his heirs executed a deed of sale in favor of spouses Romeo
Paylago which cover the entire property. After few years, Florentino Lacatan, one of the heirs
died and his heirs executed a deed of sale in favor of the same vendees over only a portion
of the said property. The two deed of sale was registered, anew TCT was issued in favor of
the Paylago spouses. A subsequent subdivision survey, however, disclosed that a portion of
the total areapurchased and indicated in the sketch was being occupied by Jarabe. They then
filed an action to recover possession and ownership of thesaid portion of the land.
ISSUE: Whether or not right in a case of double sale, the better right would be given to the
registered buyer.
Ruling: The court held that the general rule 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.
Stated in Article 1544 of the New Civil Code 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. In the case, even if spouses Paylago
has a registered title, it cannot be denied that their acquisition of the property was tainted
with bad faith. Being a buyer of the property they must have exercised due diligence on the
possible defects of the property. TheCourt finds that the appealed decision should be affirmed.
FACTS: The estate belonging to the deceased Dionisio Quimson was first transferred in favor
of his daughter Tomasa Quimson through a deed of conveyance, but continued in his
possession and enjoyment. He sold it to Francisco Rosete, with a repurchase agreement for
the term of five years granting to this effect the writing of sale. Since then Rosete is the one
in his possession and enjoyment, in peaceful and quiet manner, even after the death of
Dionisio Quimson, which occurred in June 6, 1939 until January 1943. Tomasa Quimson
petitioned that the property should be givem to her as she is the rue owner and possessor of
the property.
ISSUE: Who was prior in possession?
RULING: The Court held that the execution of a public instrument is equivalent to the delivery
of the realty sold and its possession by the vendee. Under these conditions the sale is
considered consummate and completely transfers to the vendee all of the vendor’s rights of
ownership including his real rights over the thing. 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 sales, take material
possession of the thing, he does it as a mere detainer, and it would be unjust to protect this
detention against the rights to the thing lawfully acquired by the first vendee. The finding 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.
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Hence, the Court ruled that Tomasa Quimson is the rightful owner of the property
Rules as to immovable
FACTS: On October 25, 1975 spouses Mabanta mortgaged 2 parcels of land with the DBP as
collateral for a P14,000 loan. In 1980, they sold the lots to Susana Soriano with the right to
repurchase the property within 2 years. They failed to do repurchase. In 1984, they convinced
petitioner Alejandro Gabriel to purchase the lot from Soriano as a result, DBP had to
restructure the loan making Gabriel as the mortgagor. In 1982 however, one lot was sold to
Zenaida Tan-Reyes by the spouses Mabanta who in turn filed an intervention to the case after
not being a party in the instant case. As a result, the petitioners filed for damages, and specific
performance which the trial court ruled in their favor holding that the sale between the
spouses Mabanta and Tan-Reyes null and void. On appeal, the CA modified the trial court’s
decision holding that the second sale was indeed valid.
ISSUE: Whether or not the second sale in 1982 to Tan-Reyes is valid?
HELD: Article 1544 of the Civil Code provides that should immovable property be sold to
different vendees, the ownership shall belong to the first person in good faith to record it in
the registry of property. Unfortunately, the registration made by Zenaida Tan-Reyes of her
deed of sale was not in good faith, and for this reason in accordance with the same Article
1544, the land shall pertain to the person who in good faith was first in possession. There is
no question that it is the Gabriels who are in possession of the land.
FACTS: On October 20, 1962, Lazardo Tañedo executed a notarized deed of absolute sale in
favor of his eldest brother, Ricardo Tañedo, and the latter's wife, Teresita Barera a property
which is said to be a property of "future inheritance" from his parents. Upon the death of his
father Matias, Lazaro executed an "Affidavit of Conformity" to re-affirm, acknowledge and
validate the sale. On January 13, 1981, Lazaro executed another notarized deed of sale in
favor of private respondents covering his "undivided ONE TWELVE (1/12) of a parcel of land.
He acknowledged therein his receipt of P 10,000.00 as consideration therefor. In February
1981, Ricardo learned that Lazaro sold the same property to his children. On June 7, 1982,
private respondents recorded the Deed of Sale in their favor in the Registry of Deeds and the
corresponding entry was made in Transfer Certificate of Title No. 166451
Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds of
sale executed by Lazaro in favor of private respondents covering the property inherited by
Lazaro from his father. The trial court decided in favor of private respondents, holding that
petitioners failed "to adduce a preponderance of evidence to support (their) claim." On appeal,
the Court of Appeals affirmed the decision of the trial court, ruling that the Deed of Sale dated
January 13, 1981 (Exh. 9) was valid and that its registration in good faith vested title in said
respondents.
ISSUE:
1. Whether or not the sale of a future inheritance valid?
2. Whether or not the subsequent execution on January 13, 1981 (and registration with
the Registry of Property) of a deed of sale covering the same property to the same
buyers valid?
RULING:
1. NO, sale of future inheritance is not valid. The sale made in 1962 involving future
inheritance is not really at issue here. In context, the assailed Decision conceded "it may be
legally correct that a contract of sale of anticipated future inheritance is null and void."
But to remove all doubts, we hereby categorically rule that, pursuant to Article 1347 of the
Civil Code, "(n)o contract may be entered into upon a future inheritance except in cases
expressly authorized by law."
Consequently, said contract made in 1962 is not valid and cannot be the source of any right
nor the creator of any obligation between the parties.
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Hence, the "affidavit of conformity" dated February 28, 1980, insofar as it sought to validate
or ratify the 1962 sale, is also useless and, in the words of the respondent Court, "suffers
from the same infirmity." Even private respondents in their memorandum4 concede this.
2. As earlier pointed out, what is on review in these proceedings by this Court is the
Court of Appeals' decision — which correctly identified the subject matter of the January 13,
1981 sale to be the entire undivided 1/12 share of Lazaro in Lot No. 191 and which is the
same property disposed of on December 29, 1980 in favor of petitioners.
Critical in determining which of these two deeds should be given effect is the registration of
the sale in favor of private respondents with the register of deeds on June 7, 1982.
Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple
sales, as follows:
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.
The property in question is land, an immovable, and following the above-quoted law,
ownership shall belong to the buyer who in good faith registers it first in the registry of
property. Thus, although the deed of sale in favor of private respondents was later than the
one in favor of petitioners, ownership would vest in the former because of the undisputed fact
of registration. On the other hand, petitioners have not registered the sale to them at all.
FACTS: This is an action for the recovery of a piece of land described in the second paragraph
of the complaint. This land is in the defendant's possession and formerly belonged to Ciriaco
Fernandez. On July 1, 1910, Ciriaco Fernandez sold it to the spouses Marcelino Gomez and
Narcisa Sanchez under pacto de retro for the period of one year. This also was executed in a
public instrument. Marcelino Gomez and Narcisa Sanchez never took material possession of
the land. The period for repurchase elapsed without the vendor making use of it. On July 3,
1912, Ciriaco Fernandez again sold the same land, by means of a private document, to Roque
Ramos who immediately took material possession thereof. By applying article 1473 of the
Civil Code, the trial court declared preferable the sale executed to the defendant and absolved
him from the complaint.
ISSUE: Who is the declared owner of the land in question?
RULING: The plaintiff is declared owner of the land in question; and the defendant is ordered
to deliver the possession of the land to the plaintiff.
ART. 1473. 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. (NEW CC ART. 1544)
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 presents the oldest title,
provided there is good faith.
Possession is acquired by the material occupancy of the thing or right possessed, or by the
fact that the latter is subjected to the action of our will, or by the appropriate acts and legal
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formalities established for acquiring possession (art. 438, Civil Code.). By a simple reasoning,
it appears that, because the law does not mention to which of these kinds of possession the
article refers, it must be understood that it refers to all of these kinds. The proposition that
this article, according to its letter, refers to the material possession and excludes the symbolic
does not seem to be founded upon a solid ground. It is said that the law, in the gradation of
the causes of preference between several sales, fixes, first, possession and then the date of
the title and, as a public instrument is a title, it is claimed that the inference is that the law
has deliberately intended to place the symbolic possession, which the execution of the public
document implies after the material possession. This argument, however, would only be
forceful if the title, mentioned by this article, includes public instruments, and this would only
be true if public instruments are not included in the idea of possession spoken of in said
article. In other words, the strength of the argument rests in that this possession is precisely
the material and does not include the symbolic. Consequently, the argument is deficient for
it is begging the same question, because if this possession includes the symbolic, which is
acquired by the execution of a public instrument, it should be understood that the title,
mentioned by the law as the next cause of preference, does not include public instruments.
Furthermore, our interpretation of this article 1473 is more in consonance with the principles
of justice. The execution of a public instrument is equivalent to the delivery of the realty sold
(art. 1462, Civil Code) and its possession by the vendee (art. 438). Under these conditions
the sale is considered consummated and completely transfers to the vendee all of the vendor's
rights of ownership including his real right over the thing. The vendee by virtue of this sale
has acquired everything and nothing, absolutely nothing, is left to the vendor. From this
moment the vendor is a stranger to the thing sold like any other who has never been its
owner. As the thing is considered delivered, the vendor has no longer the obligation of even
delivering it. If he continues taking material possession of it, it is simply on account of
vendee's tolerance and, in this sense, his possession is vendor's possession. And if the latter
should have to ask him for the delivery of this material possession; it would not be by virtue
of the sale, because this has been already consummated and has produced all its effects, but
by virtue of the vendee's ownership, in the same way as said vendee could require of another
person although same were not the vendor. This means that after the sale of a realty by
means of a public instrument, the vendor, who resells it to another, does not transmit
anything to the second vendee and if the latter, by virtue of this second sale, takes material
possession of the thing, he does it as mere detainer, and it would be unjust to protect this
detention against the rights to the thing lawfully acquired by the first vendee.
The possession mentioned in article 1473 includes not only the material but also the symbolic
possession, which is acquired by the execution of a public instrument. From the foregoing it
follows that the plaintiff was the first to take possession of the land, and consequently the
sale executed to him is preferable.
FACTS: Petitioner spouses Juanito and Francisca Mahusay purchased several lots in Aurora
Subdivision, Malabon, Metro Manila, owned by respondent B.E. San Diego, Inc. The
transactions were covered by two contracts to sell, payable in monthly instalLments. Due to
petitioners non-payment of the monthly amortizations, respondent was constrained to file a
case for cancellation of contracts. It was dismissed by the trial court for lack of jurisdiction. A
Compromise Agreement was entered into by the parties, whereby petitioners agreed to pay
respondent the remaining balance of the purchase price of all the lots in the manner and
under the terms agreed upon by the parties. Petitioners failed to comply with the terms
embodied in the Compromise Agreement; thus, respondent filed a Complaint for Specific
Performance with the Regional Trial Court of Malabon.
The RTC ruled in favor of respondent. Upon appeal, the CA upheld the decision of the RTC.
ISSUE: Whether or not rescission is the proper remedy for B.E. San Diego, Inc.
RULING: No, rescission is not the proper remedy. The Supreme Court ruled that petitioners
are in actual or physical possession of the properties and enjoying the beneficial use thereof,
despite the payment of only ₱133,872.76. It would be grossly unfair for respondent to be
deprived of the amount it would have received from the sale of their properties, while
petitioners benefited from the use and continued possession of the properties even if no
payments were made by them since October 1978. It is a basic rule in law that no one shall
unjustly enrich oneself at the expense of another.
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Since rescission is no longer an option considering that petitioners have been in

possession of the properties for a considerable period of time, substantial justice dictates that
respondent be entitled to receive the unpaid balance of the purchase price, plus legal interest.
DOCTRINE: In case of double sale the person who will be considered as the owner of the
property will be based on the order of priority: the first person to register the sale in good
faith; the first possessor in good faith; the buyer who in good faith presents the oldest title.
FACTS: Two (2) documents, an "Agreement to Sell Real Property" and a "Contract to Sell,"
covering the same parcel of land were executed by a seller in favor of two (2) different buyers.
Both buyers now assert against each other a better title to the property.
Tolosa sold his land to Ocampo with a stipulation that the balance shall be paid within 6
months after signing the deed. Ocampo failed to pay some instalments within the 6-month
period but Talosa accepted a late payment though there’s still a deficiency. Ocampo caused
the annotation of her adverse claim in Tolosa’s certificate of title.
After a year, Tolosa executed a Contract to Sell in favor of Villaruz covering the same lot.
Consequently, Tolosa filed an action for “Breach of Contract, Damages and Quieting of Title”
against Ocampo.
ISSUE: Who should be considered the preferred buyer between Ocampo and Villacruz
HELD: While the contract dated 3 June 1977 in favor of Villaruz is also a contract of sale, that
of Ocampo dated 21 April 1975 should prevail pursuant to Art. 1544 of the Civil Code on
double sales. While Villaruz may have registered his contract or came into possession ahead
of Ocampo, Villaruz was never in good faith. Since Ocampo had her adverse claim annotated
on Tolosa's OCT on 6 June 1976, Villaruz could not profess innocence thereof when she signed
her contract on 3 June 1977; in fact, her full payment of the purchase price was made
dependent, among others, on the cancelation of this claim. Moreover, Villaruz admitted having
been informed by Tolosa of the Crst sale to Ocampo while still negotiating to buy the land.
Knowledge of the foregoing should have impelled Villaruz to investigate the circumstances of
the annotation since this is equivalent to registration of Ocampo's contract of sale as against
Villaruz. In sum, Ocampo having the older title in good faith and considering that personal
knowledge thereof by Villaruz constitutes registration as against the latter, Ocampo should
be considered the preferred buyer.
FACTS: On September 7, 1954, petitioner J.M. Tuason & Co., Inc. entered a contract to sell
with respondent Ligaya Javier a parcel of land known as Lot No. 28, Block No. 356, PSD
30328, of the Sta. Mesa Heights Subdivision for the sum of Php3,691.20 with 10% interest
per annum; Php396.12 will be payable upon execution of the contract, and an installment of
Php43.92 monthly for a period of ten (10) years. It was further stipulated in the contract,
particularly the sixth paragraph, that upon failure of respondent to pay the monthly
installment, she is given a one month grace period to pay such installment together with the
monthly installment falling on the said grace period. Furthermore, failure to pay both monthly
installments, respondent will pay an additional 10% interest. And after 90 days from the end
of the grace period, petitioner can rescind the contract, the payments made by respondent
will be considered as rentals. Upon the execution of the contract, respondent religiously paid
the monthly installment until January 5, 1962.
Respondent, however, was unable to the pay the monthly installments within the grace period
which petitioner, subsequently, sent a letter to respondent on May 22, 1964 that the contract
has been rescinded and asked the respondent to vacate the said land. So, upon failure of
respondent to vacate the said land, petitioner filed an action to the Court of First Instance of
Rizal for the rescission of the contract. The CFI rendered a decision in favor of respondent in
applying Article 1592 of the New Civil Code. Hence, petitioner made an appeal to the Supreme
Court alleging that since Article 1592 of the New Civil applies only to contracts of sale and not
in contracts to sell.
ISSUE: Did the CFI erroneously apply Article 1592 of the New Civil Code?
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RULING: Yes. Regardless, however, of the propriety of applying Article 1592, petitioner has
not been denied substantial justice under Article 1234 of the New Civil Code. In this
connection, respondent religiously satisfied the monthly installments for almost eight (8)
years or up to January 5, 1962. It has been shown that respondent had already paid
Php4,134.08 as of January 5, 1962 which is beyond the stipulated amount of Php3,691.20.
Also, respondent has offered to pay all installments overdue including the stipulated interest,
attorney’s fees and the costs which the CFI accordingly sentenced respondent to pay such
installment, interest, fees and costs.
Thus, petitioner will be able recover everything that was due thereto. Under these
circumstances, the SC feel that, in the interest of justice and equity, the decision appealed
from may be upheld upon the authority of Article 1234 of the New Civil Code.
FACTS: Respondent contracted with petitioner to pay in installment the 2 parcels of lot for
Php 1,500 each a total of Php 3,000.00 payable in 10 years with 10% interest per annum of
PhP 19.83 a month but respondent paid only up to 8 years then nothing follows, thereby
owing petitioner the sum of Php 1,317.72 as balance when complaint was filed. Respondent
wrote petitioner stating that “his desire to build a house on the lots was prevented by the
latter’s failure to introduce improvements on said subdivision as there still no roads on these
lots. Petitioner replied that pursuant to provision of contract all the amounts paid and
improvement shall be considered as rent in payment for damages suffered from respondents
default in payment.
ISSUE: Whether Hermanos action to rescind the contract due to Saldana’s default in payment
is valid
HELD: No, Supreme Court ruled that even though it was stipulated that failure to complete
the payment would result to the cancellation of the contract, it was still not valid. As clearly
shown in the statement of account, Saldaña was able to pay one of the two said lots. Under
Article 1234 of the New Civil Code, “if the obligation has been substantially performed in good
faith, the obligor may recover as though there had been a strict and complete fulfillment, less
damages suffered by the obligee”.
Hence, under the authority of Article 1234 of the New Civil Code, Saladaña is entitled to one
of the two lots of his choice and the interest paid shall be forfeited in favor of the petitioners.
Thus, Saldana’s substantial compliance of the obligation entitles him to the transfer of
ownership of one lot.
Good faith in the buyer
FACTS: The "Compañia Agricola Filipina" bought a considerable quantity of rice-cleaning

machinery from the defendant machinery company, and executed a chattel mortgage thereon
to secure payment of the purchase price. It included in the mortgage deed the building of
strong materials in which the machinery was installed, without any reference to the land on
which it stood. The indebtedness secured by this instrument not having been paid when it fell
due, the mortgaged property was sold by the sheriff, in pursuance of the terms of the
mortgage instrument, and was bought in by the machinery company.
A few weeks thereafter, The “Compañia Agricola Filipina” executed a deed of sale of the land
upon which the building stood to the machinery company, but this deed of sale, although
executed in a public instrument was not registered. This deed makes no reference to the
building erected on the land and would appear to have been executed for the purpose of
curing any defects which might be found to exist in the machinery company’s title to the
building under the sheriff’s certificate of sale.
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The "Compañia Agricola Filipina" executed another mortgage to the plaintiff upon the
building, separate and apart from the land on which it stood, to secure payment of the balance
of its indebtedness to the plaintiff under a contract for the construction of the building. Upon
the failure of the mortgagor to pay the amount of the indebtedness secured by the mortgage,
the plaintiff secured judgment for that amount, levied execution upon the building, bought it
in at the sheriff's sale.
At the time when the execution was levied upon the building, the defendant machinery
company, which was in possession, filed with the sheriff a sworn statement setting up its
claim of title and demanding the release of the property from the levy. Thereafter, upon
demand of the sheriff, the plaintiff executed an indemnity bond in favor of the sheriff in the
sum of P12,000, in reliance upon which the sheriff sold the property at public auction to the
plaintiff, who was the highest bidder at the sheriff's sale.
ISSUE: Whether or not Leung Yee is a buyer in good faith.
RULING: The SC ruled that Strong Machinery has a better right to the contested property.
Yee cannot be regarded as a buyer in good faith as he was already aware of the fact that
there was a prior sale of the same property to Strong Machinery.
Article 1473 of the Civil Code is as follows:

"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 person
acquiring it who first recorded it in the registry.
"Should there be no entry, the property shall belong to the person who first took
possession of it in good faith, and, in the absence thereof, to the person who presents
the oldest title, provided there is good faith."
It has been suggested that since the provisions of article 1473 of the Civil Code require "good
faith," in express terms, in relation to "possession" and "title," but contain no express
requirement as to "good faith" in relation to the "inscription" of the property on the registry,
it must be presumed that good faith is not an essential requisite of registration in order that
it may have the effect contemplated in this article. We cannot agree with this contention. It
could not have been the intention of the legislator to base the preferential right secured under
this article of the code upon an inscription of title in bad faith. Such an interpretation placed
upon the language of this section would open wide the door to fraud and collusion. The public
records cannot be converted into instruments of fraud and oppression by one who secures an
inscription therein in bad faith. The force and effect given by law to an inscription in a public
record presupposes the good faith of him who enters such inscription; and rights created by
statute, which are predicated upon an inscription in a public registry, do not and cannot accrue
under an inscription "in bad faith," to the benefit of the person who thus makes the inscription.
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 in the title of his vendor. A purchaser cannot close his eyes to
facts which should put a reasonable man upon his guard, and then claim that he acted in good
faith under the belief that there was no defect in the title of the vendor. His mere refusal to
believe that such defect exists, or his willful closing of his eyes to the possibility of the
existence of a defect in his vendor's title, will not make him an innocent purchaser for value,
if afterwards develops that the title was in fact defective, and it appears that he had such
notice of the defects as would have led to its discovery had he acted with that measure of
precaution which may reasonably be acquired of a prudent man in a like situation.
But it appearing that he had full knowledge of the machinery company's claim of ownership
when he executed the indemnity bond and bought in the property at the sheriff's sale, and it
appearing further that the machinery company's claim of ownership was well founded, he
cannot be said to have been an innocent purchaser for value. He took the risk and must stand
by the consequences; and it is in this sense that we find that he was not a purchaser in good
faith.
When rules do not apply
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The rules on double sales as provided under Art. 1544 does not apply when the sales were
executed by two different persons, one not being the owner of the property. For instance, one
sale by the owner, and another by the latter’s agent.
Five Madrid brothers co-owned a parcel of lot. One of them, Rizal, sold his share to Gamiao
and Dayag with the consent of the four co-owners; this sale was not registered. Subsequenty,
Gamiao and Dayag sold the same property to Dela Cruz and Hernandez; the latter took
possession thereof. The respondents were heirs of Dela Cruz.
Meanwhile, the four-co-owners also conveyed their rights and interest over the subject
property to one Marquez; the latter registered the sale. He then mortgaged portion of subject
property to Consolidated Rural Bank (CRB; petitioner), which was later foreclosed. The
respondents thus filed a complaint for the reconveyance of the subject property.
As defense, Marquez argued that he had better right over the subject land being the first
registrant in good faith and for value; and the that sale to Gamiao and Dayag was not binding
upon him, the same being unregistered.The RTC dismissed the complaint, holding that
Marquez had better right for being the first to register in good faith. The CA reversed, finding
Marquez in bad faith; the mortgage constituted on the subject property were likewise nullified.
The SC affirmed.
ISSUE: WON the respondents have a better right being the first vendees.
HELD: YES DELA CRUZ HEIRS (RESPONDENTS), THE FIRST VENDEES.
The rule on double sales was not applicable in the case at bar. The said rule contemplates a
case of double or multiple sales by a single vendor. It cannot be invoked where the two
different contracts of sale are made by two different persons, one of them not being the owner
of the property sold. In this case, the vendors of the first sale were Gamiao and Dayag; of
the second, the four Madrid borthers 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 (they consented
to Rizal’s sale). Thus, the Court held that the sale to Gamiao and Dayag were consummated
already at the time that a subsequent sale to Marquez was effected.
The Court said that the applicable rule was prior tempore, potior jure or simply “he who is
first in time is preferred in right.” It also found Gamiao and Dayag to be purchasers in good
faith. Furthermore, nothing was transferred to Marquez for at the time of sale, the Madrid
brothers had already disposed of their rights under the subject property. Nemo dat quod non
habet.
Finally, the SC said that assuming arguedo that Art. 1544 was applicable, Marquez still cannot
claim better right since the registration was not made in good faith. Marquez then know that
the property was being claimed or “taken” by the Heirs (respondents). For CRB’s failure to
observe due diligence in making further inquiry, it was likewise held not a mortgagee in good
faith.
FACTS: On April 12, 1956, (First Sale) Amado Canuto (Canuto) & Nemesia Ibasco (Ibasco)
sold a 359.09 sqm., more or less, land by virtue of a "Deed of Sale of Unregistered Land" to
Amado Carumba (Carumba) & Benita Canuto. The deed was never registered in the RD of
Camarines Sur, nor was the "notary" then, an authorized notary public in the place.
On January 21, 1957, a complaint for a sum of money filed by Santigao Balbuena (SB) against
Canuto & Ibasco. On April 15, 1967 a decision in favor of SB. A year later (October 1, 1958),
Ex-officio Sheriff, Justo V. Imperial issued "Definite Deed of Sale" for SB; immediately 2 days
later, October 3, 1958, the deed was registered in the RD in the name of SB.
The issue on ownership was raised in the RTC, where it was found that Carumba, after
execution of the document, had taken possession of the land and executed acts of ownership
thereon (planting bananas, coffee, and other vegetables). Thus, RTC declared him the owner
of the property under a consummated sale; voided the execution levy made by the sheriff;
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and nullified the sale in favor of SB. SB appealed, where the CA declared a "double sale" of
the land, and that SB has the superior/better title than Carumba, since the same has been
properly registered in good faith, whereas the sale of Carumba was not recorded. Carumba
claims otherwise, hence the instant petition.
ISSUE: Whether Santiago Balbuena has the better title over the land.
HELD:
No. While under the invoked Article 1544 registration in good faith prevails over possession
in the event of a "doubt sale" by 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.
This is specifically provided by section 35 of Rule 39 of the Revised Rules of Court, the second
paragraph of said section specifically providing that:
"Upon the execution and delivery of said (final) deed the purchaser, redemptioner, or
his assignee 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, except as against the
judgment debtor in possession, in which case the substitution shall be effective as of
the time of the deed.."
The "time of the levy" is controlling, which is the time the subject property was levied
by the sheriff's execution sale after the decision in favor of Balbuena.
In the instance case, the deed of sale in favor of Carumba was executed two (2) years
before the levy was made by the Sheriff. While it is true that the said deed of sale was only
embodied in a private document, the same, coupled with the fact that the petitioner-buyer
Carumba had taken possession of the unregistered land sold, is enough to vest ownership
on the petitioner-buyer Carumba. Such that when levy was made by the Sheriff, 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.
Hence, Santiago Balbuena must yield the land to petitioner Carumba. The Supreme
Court reversed the ruling of CA, affirmed the RTC.
ONE-LINER: The better right referred to in Act No. 3344 is more than a mere prior deed,
which involves facts and circumstances which combined, would make it clear that the first
buyer has a better right than the second purchaser.
FACTS:
Appellant 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 and a decision on a complaint which
was filed on June 16, 1948 against the same vendors, according to his own averments, took
possession of the said property, which was decided favoring him as the owner on September
12, 1958.
On the other hand, appellee 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
The case was submitted for decision without any testimonial evidence, and both relying
exclusively on their documentary evidence, and was favored Pilapil mainly upon Second
paragraph of 1544 of the New C.C.
Appelant on his appeal argues among else, that the registration of Pilapil’s notarized deed of
sale in 1948 under Act no. 3344 “shall be understood to be without prejudiced to a third party
with a better right. He contents that since at the time the Siapos sold the land in question,
the former are no longer the owners as they had already sold the same to appellants since
1938, the first sale to him is a better right which cannot be prejudiced by the registration of
the second sale.
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The CA, moved and certified to the SC for proper adjudication, the issue involved being
exclusively of law.
ISSUE: Whether or not the registration of the second deed of sale in favor of Pilapil (Appellee)
affects his (Hanopol’s) right as the first vendee?
RULING:
Yes. 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, but also other facts and circumstances
exist, in addition to his deed of sale, the first bender can be said to have better right than the
second purchaser.
In the case at bar, there appears to be no clear evidence of Hanopol’s possession of the land
in controversy. In fact, in 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 appellee 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”.
How the SC resolve the argument/contention of the appellant in relation to the

issue:
As to appellant’s argument, we do not think the quoted proviso in Act. No. 3344 justifies his
contention. If his theory is correct, then the second paragraph of Art. 1544 would have no
application at all except to lands or real estate registered under the Spanish Mortgage Law or
the Land registration act, and such would limit the scope of such codal provision. But even if
we adopt his view, Art. 1544 only applies to registered land, still we cannot agree with him
that 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.
FACTS: A parcel of land in CDO owned by late Pantaleon Jomoc was fictitiously sold to third
persons in which the last transferee are the spouses Mariano and Maria So. Maria Vda de
Jomoc filed suit to recover the property and won.
While pending appeal, Vda de Jomoc executed executed a Deed of Extrajudicial Settlement
and Sale of Land with private respondent for P300,000.00. The document was not yet signed
by all the parties nor notarized but in the meantime, Maura So had made partial payments
amounting to P49,000.00. So demanded from the heirs of Jomoc for the execution of final
deed of conveyance but the latter did no comply. As such, So filed a civil case and a notice
of lis pendens were placed in the title of the land.
On the same date, the heirs of Jomoc executed another extra-judicial settlement with absolute
sale in favor of intervenors Lim Leong Kang and Lim Pue claiming that they believe that So
already backed-out from the agreement.
ISSUE: WON the sale is enforceable.
HELD: Since petitioners admit the existence of the extra-judicial settlement, the court finds
that there was meeting of the minds between the parties and hence, there is a valid contract
that has been partly executed. The contract of sale of real property even if not complete in
form, so long as the essential requisites of consent of the contracting parties, object, and
cause of the obligation concur and they were clearly established to be present, is valid and
effective as between the parties. Public document is only needed to bind third persons.
The payment made by So is a clear proof of her intention to acquire the property and the
petitioners cannot claim about the respondent backing out. The sale to the intervenors Lim
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cannot be recognized because when they bought the property, there was already a notice of
lis pendens and the sale cannot be said to be in good faith.
Section 3 – Conditions and Warranties

Art 1545-1547
Kinds
PRINCIPLE A PURCHASER OF MERCHANDISE HAVING FULLY EXAMINED THE SAME TO HIS

SATISFACTION BEFORE THE CONSUMMATION OF THE SALE, CANNOT MAINTAIN AN ACTION
FOR BREACH OF AN IMPLIED WARRANTY.
TOPIC IMPLIED CONDITIONS AND WARRANTIES

PONENTE OSTRAND, J.
FACTS:
1. October 25, 1922, the plaintiff and the defendant entered into a contract. The
oil purchased by the petitioners was stored in the tanks. Before delivery of
the oil, it was tested by the defendant’s chemist for analysis. Upon checking
and finding no anomaly with the quality of the oil, it was delivered to the
petitioner.
2. The Petitioner, Philippine Manufacturing now sold its oil to its client Portsmouth
however the said oil was found out to contain some impurities containing
cotton seed oil/ kapok oil. The Petitioner now files a case of damages due
to occurrence of such impurities.
3. The contention of the defendant was, they have no liability with the impurities
because the oils were tested before the delivery to the petitioner. Meanwhile,
the petitioners alleged that they defendants are liable due to the delivered oil
contains impurities.
4. ISSUE:
5. Whether or not the Defendant, Go Jocco, is liable to the impurities of the oil
delivered to the petitioner?
RULING: No. The defendant, Go Jocco, is not liable to the impurities of the oil
delivered to the petitioner. The Code of Commerce law provides that:
Art. 336: 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.
In the case at bar, the plaintiff examined the oil to his satisfaction, it is evident that
he cannot now rely on this article for his cause of action. There being no express
warranty for the impurities and the plaintiff having lost its right of action on the
implied warranties as to the quality of the merchandise, the petitioner cannot raise
an action of damages. Fallo: The judgment appealed from is affirmed with the costs
against the appellant.
FACTS: In the present case Schmid & Oberly, Inc. (SCHMID) seeks reversal of the decision
and the resolution of the Court of Appeals to refund the purchase price paid by RJL Martinez
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Fishing Corporations (RJL) to D. Nagata Co., Ltd. of Japan (NAGATA) for twelve (12) defective
“Nagata”-brand generators, plus consequential damages and attorney’s fees.
RJL MARTINEZ is engaged in deep-sea fishing. As RJL needed electric generators for some of
its boats, SCHMID sold electric generators with the brand of “Nagata”, a Japanese product.
NAGATA was SCHMID’s supplier.
SCHMID advertised the 12 Nagata generators for sale and RJL purchased the brand new
generators. Through an irrevocable line of credit, NAGATA shipped to SCHMID the generators
and RJL paid the amount of the purchase price. The first sale was for 3 generators; The
second sale was for 12 generators.
However, the generators were found to be factory defective. RJL informed SCHMID that it
shall return the 12 generators as in fact 3 of the 12 were actually returned. SCHMID replaced
the 3 generators subject of the first sale with generators of a different brand. As to the second
sale, 3 were shipped to Japan and the remaining 9 were neither repaired nor replaced.
NAGATA wrote SCHMID suggesting that the latter check the generators, request for spare
parts for the replacement free of charge and send to NAGATA, SCHMID’s warranty claim
including the labor cost for repairs. However, SCHMID did not agreed to these terms.
As not all generators were replaced or repaired, RJL formally demanded that it be refunded
the cost of the generators and paid damages. SCMID in its reply maintained that it was not
the seller of the 12 generators and thus refused to refund the purcase price thereof. Hence,
RJL brought suit against SCHMID on the theory that the latter was the vendor of the 12
generators and was liable under its warranty against hidden defects.
ISSUE: Whether or not SCHMID is liable for the seller’s implied warranty against hidden
defects?
RULING: No, Schmid is not liable for the seller’s warranty against hidden defects.
Although paragraph (2) Article 1547 in the Civil Code provides that “there is an implied
warranty that the thing shall be free from any hidden faults or defects, or any charge or
encumbrance not declared or known to the buyer”, Schmid cannot be held liable for the seller’s
warranty as it is merely acting as an indentor.
The Rules and Regulations to Implement Presidential Decree No. 1789 (the Omnibus
Investments Code) lumps “indentors”together with “commercial brokers” and “commission
merchants”. Therefore, an indentor is a middleman in the same class as commercial brokers
and commission merchants.
Hence, the Court ruled that SCHMID was acting as an indentor in the purchase and sale of
the 12 generators subject of the second transaction. Not being the vendor, SCHMID cannot
be held liable for the implied warranty for hidden defects under the Civil Code.
Principle: There is no cause of action against the vendor of real property to make him
responsible for warranty in case of eviction unless said vendor is given notice of the suit for
eviction. Although our local jurisdiction is silent on the subject, we think that counsel is right.
Laws Mentioned:
At 1475: eviction exists when by final judgment based upon a right prior to the sale, the
vendee is deprived of the whole or any part of the thing purchased. The vendors shall be
liable for the eviction even though the contract is silent on the subject.
Art 1481: The vendor shall be bound to make good the warranty whenever it is proved that
he was given notice, at the instance of the vendee, of the suit for eviction. In the absence of
such notice the vendor shall not be bound to the warranty
Art 1482: The defendant vendee, within the time fixed by the Law of Civil Procedure for
answering the complaint, shall cause notice thereof to be served upon the vendor or vendors
within the shortest period possible. This notification shall be made in the manner established
in said law for the summoning of defendants.
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The time to answer granted to the vendee shall be extended until the expiration of that
granted the vendor or vendors to appear and answer the complaint, which periods shall be
the same as those granted all defendants by the Law of Civil Procedure, counted from the
notification prescribed by the first paragraph of this article.
Should the persons summoned to defend against the eviction fail to appear at the proper time
and in the proper manner, the period in which to answer the complaint shall continue with
regard to the vendee.
FACTS: On November 6 1911 Dionisia Solmirano, Lucio Solmirano, and Macario Solminrano
soldt to Enrique Jovellano a paracel of land for P150 ;located in Nagcarlan, Laguna. In the
deed of sale a covenant was made stating that: “That we Dionisia Lucio and Macario
Solmirano, agree, to answer in case of eviction and to warranty the property hereby sold’.
On March 4 1913 a person name Maxima Dorado instituted an action against Jovellano for
the recovery of the possession of the Land in which the justice of the peace granted the action.
Jovellano did not appeal and instead instituted another action against Maxima Dorado to
determine ownership in which the court ruled in favor of Maxima Dorado and was defeated
on Appeal by the Supreme Court.
Frustrated, Jovellano filed an action against the Solmiranos to recover from the defendants
the price paid for the land, together with all the expenses incurred in improving it and in
maintain the suits. The Solmiranos contended that they were not notified hence the action
should not prosper however the trial court ruled in favor of Jovellano, they appealed to the
Court of Appeals. Take note that in none of the above cited vases were the solmiranos cited
to appear or made parties.
ISSUE: Whether or not the purchaser should give notice to the Vendor?
RULING: With all the silent facts and legal provisions before us, it is well to recall a few
controlling points. The purchaser has been forced to surrender possession of the land to a
third person having a paramount title. The purchaser now relies upon his covenant of
warranty. The purchaser has given the vendor no formal notice of the suits for eviction.
Nevertheless, the purchaser expects to recover from the seller of the land the purchase price
and an additional amount sufficient to cover his losses. Our researches disclose that the
Spanish law on the subject of notice to the vendor in the case of covenants of warranty is
much more rigorous than the French and Roman law. By the Code Napoleon, as adapted in
the State of Louisiana, the warranty is lost in the absence of notification to the vendor,
provided that the vendor can prove that he had good grounds of defense which he had lost
in consequence of the vendee's failure to call him. Not so by the Spanish law. That law speaks
both affirmatively and negatively. The buyer who fails to cite his vendor in warranty loses all
recourse against him.
The commentator Manresa says:
No discussion, therefore, should be made here as to whether or not the vendor had means of
defense. All of this counts very little. There is only one condition to be complied with by the
vendee, and that is to give notice of the complaint. Once this is proven, his right to the
warranty is perfect, and the vendor cannot set up anything against it. This is the preparation
for the exercise of the action for eviction spoken of by us the commentary on the preceding
article; the warranty, according to article 1480, cannot be enforced until a final judgment is
rendered, but the action for eviction is prepared, before that judgment, by causing a notice
of the complaint to be given to the vendor.
The only doubtful point relates to that part of article 1482 of the Civil Code which refers to
the Law of Civil Procedure. But as the Spanish Ley de Enjuiciamiento Civil has disappeared,
the article must be considered as referring to the present Code of Civil Procedure. (Willard's
Notes to the Spanish Civil Code, p. 85.) Section 114 of the Code of Civil Procedure could
easily be taken advantage of to join the vendor as codefendant. The purchaser threatened
with eviction, who wishes to preserve his right of warranty against his vendor, should call in
the vendor to defend the action which has been instituted against the purchaser.
We hold articles 1481 and 1482 of the Civil Code as in full force and effect, said articles to be
supplemented by such pertinent sections of Code of Civil Procedure as should be invoked in
particular cases.
In accordance with the prayer of the appellant, the judgment is reversed and the complaint
dismissed without special pronouncement as to costs in either instance. So ordered.
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FACTS: On March 7, 1958, the spouses, Africa V. Reynoso and Jose L. Reynoso sold to
petitioners several others, a parcel of land situated in Antipolo Rizal with an area of 239,479
square meters.
On April 21, 1961, the Register of Deeds of Rizal and A. Doronilla Resources Development,
Inc. filed Case No. 4252 before the Court of First Instance of Rizal for the cancellation of OCT
No. 1526 issued in the name of Angelina C. Reynoso (predecessor-in-interest of private...
respondents-vendors) on February 26, 1958 under Decree No. 62373, LRC Record No. N-
13783, on the ground that the property covered by said title is already previously registered
under Transfer Certificate of Title No. 42999 issued in the name of A. Doronilla Development,...
Inc. Petitioners as vendees filed their opposition to the said petition.
On August 31, 1965, herein petitioners, spouses Maria de Leon Escaler and Ernesto Escaler
and spouses Cecilia J. Roxas and Pedro Roxas, filed Civil Case No. 9014 before the Court of
First Instance of Rizal against their vendors, herein private respondents spouses Jose L.
Reynoso... and Africa Reynoso for the recovery of the value of the property sold to them, plus
damages on the ground that the latter have violated the vendors' "warranty against eviction."
ISSUE: That the Court of Appeals erred in applying strictly to the instant case the provisions
of Articles 1558 and 1559 of the New Civil Code;
RULING: No. Art. 1558. The vendor shall not be obliged to make good the proper warranty,
unless he is summoned in the suit for eviction at the instance of the vendee.
In order that a vendor's liability for eviction may be enforced, the following requisites must
concur a) there must be a final judgment; b) the purchaser has been deprived of the whole
or part of the thing sold; c) said deprivation was by virtue of a right prior to the sale made..
by the vendor; and d) the vendor has been summoned and made co-defendant in the suit for
eviction at the instance of the vendee.
In the case at bar, the fourth requisite - that of being summoned in the suit for eviction (Case
No. 4252) at the instance of the vendee is not present. All that the petitioners did, part of
their very admission, was to furnish respondents, by registered mail, with a copy of the
opposition they (petitioners) filed in the eviction suit.
Decidedly, this is not the kind of notice prescribed by the afore-quoted Articles 1558 and 1559
of the New Civil Code.
The term "unless he is summoned in the suit for eviction at the instance of the... vendee"
means that the respondents as vendor/s should be made parties to the suit at the instance
of petitioners-vendees, either by way of asking that the former be made a co-defendant or
by the filing of a third-party complaint against said vendors.
Nothing of that sort… appeared to have been done by the petitioners in the instant case.
FACTS: On January 31, 1952, petitioner J.M. Tuason & Co., Inc. executed, in favor of
Ricardo de Leon, a contract to sell Lot No. 15, Block 460 of the Sta. Mesa Heights
Subdivision containing an area of 1,703.6 square meters with the agreed price of P24.60
per square meter or a total of P41,908.56. At the execution of the contract, Ricardo de
Leon paid the down-payment of P4,190.86 and agreed to pay the balance in the monthly
installment of P498.63 including the agreed annual interest of 10% . At the time of the
execution of the contract to sell, the contracting parties knew that a portion of the lot
in question was actually occupied by Ramon Rivera. However, it was their understanding
that the latter will be ejected by the petitioner from the premises
Meanwhile, on April 10, 1953, petitioner signed a compromise agreement with the Deudors
(in another Civil Case No. Q-135, captioned Florencio Deudor, et al. vs. J.M. Tuason, et al.).
The said lot was transferred by Ricardo de Leon to his parents Alfonso and Rosario de Leon
who paid the outstanding balance and was then issued a deed of sale which was then
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registered at the registry of deeds and was issued a corresponding Transfer Certificate of
Title.
In an action of ejectment filed by JM Tuason against Ramon Rivera the courts decides in favor
of Ramon Rivera ordering JM Tuason to enter into agreement with Ramon Rivera to purchase
the land in question at the prevailing rate of ₱60.00 per square meters. When the decision
becomes final and executory on September 1971 the De Leons were evicted from the
questioned property.
ISSUE: Whether or not the De Leons could make J.M. Tuason liable for warranty against
eviction? DECISION:
The court decides that J.M. Tuason and Co. was in good faith as shown by the
following circumstances.
1. The compromise agreement entered by J.M. Tuason was not his making as this was
sanctioned by the court after the Deudors filed an action against J.M. Tuason. The prior
right of Ramon Rivera to purchase the lot in litigation was based more on his prior
occupancy to the same since 1949, about which fact respondents De Leon were informed
by petitioner at the time of the execution of the contract to sell. The execution of the
compromise agreement merely recognized this prior right, under the condition as
stipulated in said agreement, that it was possible to do so.
2. The continued collection of monthly payments after the execution of the Compromise
Agreement only showed that J.M. Tuason honestly believes that it found no barrier against
the enforceability of the contract to sell
3. The issuance of the deed of sale after payment of the price also showed the honesty and
good faith of J. M. Tuason in dealing with their private respondents.
4. It initiated an ejectment case against Ramon Rivera in compliance with its assurance to
the respondents. However, the decision of the lower court dismissing the complaint of
ejectment was affirmed by the appellate court in CA-G.R. No. 38212-R, which decision, of
the latter upon its finality in September, 1971 resulted in the eviction of herein
respondents from the lot. In its decision, the Court of Appeals branded Ricardo de Leon
as a buyer in bad faith.
The Court declared that private respondents were lacking in good faith for knowing
beforehand, at the time of the sale, the presence of an obstacle to their taking over the
possession of the land, which, in effect, would amount to eviction from said land, and still
they bought the land without first removing that obstacle. Without being shown to be vendees
in good faith, respondents are not entitled to the warranty against eviction nor are they On
titled to recover damages (Article 1555 of the Civil Code).
FACTS: Private respondent Raymundo Gatpayat sold the land subject matter of this case to
petitioner Investment and Development, Inc. (IDI). Transfer Certificate of Title was issued in
Investment and Development, Inc.’s name.
Subject land is agricultural with an area of three-and-a-half hectares, more or less, located
in Talon, Las Piñas, Rizal. Originally, the land was owned by one Francisca Tolentino. It had
Sotero Domingo Ramirez as tenant. When old age ensued, Sotero asked for his replacement
in the person of his son, Jose Ramirez.
Respondent Gatpayat bought the land from the original owner on the condition that the annual
rental of ten cavans of palay given by tenant Ramirez would pertain to Gatpayat only after
full payment of the purchase price. Subsequently, respondent Gatpayat completed his
payments for the land and entered into an agreement with tenant Ramirez that the latter
shall sell the ten cavans of palay and give the proceeds to him. Petitioner sold the land to
respondent Agencia de Empenos de A. Aguirre, Inc. As a result thereof, Transfer Certificate
of Title was issued in the vendee’s name.
Tenant Ramirez was forced to stop cultivating the land in question because of the bulldozing
caused by respondent A. Aguirre, Inc. In a complaint filed by tenant Ramirez against the
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petitioner and the private, payment for disturbance compensation was prayed for as a
consequence of the bulldozing of the land
ISSUE: Whether or not respondent Gatpayat as seller of the land in question violated his
warranty to the petitioner which bought the land "free from all liens and encumbrances."
RULING: We find no merit in the petitioner’s position.
The reimbursement of the payment for disturbance compensation by the petitioner to

respondent Agencia de Empenos de Aguirre is clearly based on an express warranty as can
be gleaned from the specific wordings of the contract between them. The petitioner cannot
claim reimbursement from its seller, respondent Gatpayat, on the basis of an implied warranty
against hidden faults or defects under Article 1547, subparagraph (2) inasmuch as the term
"hidden faults or defects" pertains only to those that make the object of the sale unfit for the
use for which it was intended at the time of the sale. In the case at bar, since the object of
the sale by Gatpayat to the petitioner is an agricultural land, the existing tenancy relationship
with respect to the land cannot be a "hidden fault or defect." It is not a lien or encumbrance
that the vendor warranted did not exist at the time of the sale. It is a relationship which any
buyer of agricultural land should reasonably expect to be present and which it is its duty to
specifically look into and provide for. Agencia saw to it that the warranty was specific when
it, in turn, purchased the land.
On April 5, 1993, the Spouses Efren and Maura Evangelista, the respondents herein, started
to directly procure various kinds of animal feeds from petitioner Nutrimix Feeds Corporation.
The petitioner gave the respondents a credit period of thirty to forty-five days to postdate
checks to be issued in payment for the delivery of the feeds. The various animal feeds were
paid and covered by checks with due dates from July 1993 to September 1993. In some
instances, however, they failed to issue checks despite the deliveries of animal feeds which
were appropriately covered by sales invoices and incurred an aggregate unsettled account in
the amount of P766,151.00.
The petitioner made several demands for the respondents to settle their unpaid obligation,
but the latter failed and refused to pay their remaining balance with the petitioner. On
December 15, 1993, the petitioner filed with the Regional Trial Court of Malolos, Bulacan, a
complaint, docketed as Civil Case No. 1026-M-93, against the respondents for sum of money
and damages with a prayer for issuance of writ of preliminary attachment.
In their answer with counterclaim, the respondents admitted their unpaid obligation but
impugned their liability to the petitioner. They asserted that the nine checks issued by
respondent Maura Evangelista were made to guarantee the payment of the purchases, which
was previously determined to be procured from the expected proceeds in the sale of their
broilers and hogs. They contended that inasmuch as the sudden and massive death of their
animals was caused by the contaminated products of the petitioner, the nonpayment of their
obligation was based on a just and legal ground.
On January 19, 1994, the respondents also lodged a complaint for damages against the
petitioner, docketed as Civil Case No. 49-M-94, for the untimely and unforeseen death of their
animals supposedly effected by the adulterated animal feeds the petitioner sold to them.
It appears that in the morning of July 26, 1993, three various kinds of animal feeds,
numbering 130 bags, were delivered to the residence of the respondents in Sta. Rosa, Marilao,
Bulacan. The deliveries came at about 10:00 a.m. and were fed to the animals at
approximately 1:30 p.m. at the respondents' farm in Balasing, Sta. Maria, Bulacan. At about
8:30 p.m., respondent Maura Evangelista received a radio message from a worker in her farm,
warning her that the chickens were dying at rapid intervals. When the respondents arrived at
their farm, they witnessed the death of 18,000 broilers, averaging 1.7 kilos in weight,
approximately forty-one to forty-five days old. The broilers then had a prevailing market price
of P46.00 per kilo.
On July 27, 1993, the respondents received another delivery of 160 bags of animal feeds from
the petitioner, some of which were distributed to the contract growers of the respondents. At
that time, respondent Maura Evangelista requested the representative of the petitioner to
notify Mr. Bartolome of the fact that their broilers died after having been fed with the animal
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feeds delivered by the petitioner the previous day. She, likewise, asked that a technician or
veterinarian be sent to oversee the untoward occurrence. Nevertheless, the various feeds
delivered on that day were still fed to the animals. On July 27, 1993, the witness recounted
that all of the chickens and hogs died. On August 2, 1993, another set of animal feeds were
delivered to the respondents, but the same were not returned as the latter were not yet
cognizant of the fact that the cause of the death of their animals was the polluted feeds of
the petitioner.
Dr. Juliana G. Garcia, a doctor of veterinary medicine and the Supervising Agriculturist of the
Bureau of Animal Industry, testified that on October 20, 1993, sample feeds for chickens
contained in a pail were presented to her for examination by respondent Efren Evangelista
and a certain veterinarian. The Clinical Laboratory Report revealed that the feeds were
negative of salmonella and that the very high aflatoxin leve found therein would not cause
instantaneous death if taken orally by birds.
Dr. Florencio Isagani S. Medina III, Chief Scientist Research Specialist of the Philippine
Nuclear Research Institute, informed the trial court that respondent Maura Evangelista and
Dr. Garcia brought sample feeds and four live and healthy chickens to him for laboratory
examination. In his Cytogenetic Analysis, Dr. Medina reported that at noon of the same day,
one of the chickens which had been fed with the Nutrimix feeds died, and a second chicken
died at 5:45 p.m. of the same day. Samples of blood and bone marrow were taken for
chromosome analysis, which showed pulverized chromosomes both from bone marrow and
blood chromosomes.
Aida Viloria Magsipoc, Forensic Chemist III of the Forensic Chemist Division of the National
Bureau of Investigation, affirmed that she performed a chemical analysis of the animal feeds,
submitted to her by respondent Maura Evangelista and Dr. Garcia in a sealed plastic bag, to
determine the presence of poison in the said specimen. The witness verified that the sample
feeds yielded positive results to the tests for COUMATETRALYL Compound, the active
component of RACUMIN, a brand name for a commercially known rat poison.
Paz Austria, the Chief of the Pesticide Analytical Section of the Bureau of Plants Industry,
conducted a laboratory examination to determine the presence of pesticide residue in the
animal feeds submitted by respondent Maura Evangelista and Dr. Garcia. The tests disclosed
that no pesticide residue was detected in the samples received but it was discovered that the
animal feeds were positive for Warfarin, a rodenticide (anticoagulant), which is the chemical
family of Coumarin.
RTC Decision:
After due consideration of the evidence presented, the trial court ruled in favor of the
petitioner.
Issue: The threshold issue is whether or not there is sufficient evidence to hold the petitioner
guilty of breach of warranty due to hidden defects.
Held. NoThe provisions on warranty against hidden defects are found in Articles 1561
and 1566 of the New Civil Code of the Philippines, which read as follows: Art. 1561.
The vendor shall be responsible for warranty against hidden defects which the thing
sold may have, should they render it unfit for the use for which it is intended, or should
they diminish its fitness for such use to such an extent that, had the vendee been
aware thereof, he would not have acquired it or would have given a lower price for it;
but said vendor shall not be answerable for patent defects or those which may be
visible, or for those which are not visible if the vendee is an expert who, by reason of
his trade or profession, should have known them.
Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in
the thing sold, even though he was not aware thereof.
This provision shall not apply if the contrary has been stipulated, and the vendor was
not aware of the hidden faults or defects in the thing sold.
A hidden defect is one which is unknown or could not have been known to the vendee. Under
the law, the requisites to recover on account of hidden defects are as follows:
(a) the defect must be hidden;

(b) the defect must exist at the time the sale was made;
(c) the defect must ordinarily have been excluded from the contract;
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(d) the defect, must be important (renders thing UNFIT or considerably decreases FITNESS);
(e) the action must be instituted within the statute of limitations.
In the sale of animal feeds, there is an implied warranty that it is reasonably fit and suitable
to be used for the purpose which both parties contemplated. To be able to prove liability
on the basis of breach of implied warranty, three things must be established by the
respondents. The first is that they sustained injury because of the product;
the second is that the injury occurred because the product was defective or
unreasonably unsafe; and finally, the defect existed when the product left the hands
of the petitioner. A manufacturer or seller of a product cannot be held liable for any damage
allegedly caused by the product in the absence of any proof that the product in question was
defective. The defect must be present upon the delivery or manufacture of the product; or
when the product left the seller's or manufacturer's control; or when the product was sold to
the purchaser; or the product must have reached the user or consumer without substantial
change in the condition it was sold. Tracing the defect to the petitioner requires some
evidence that there was no tampering with, or changing of the animal feeds. The
nature of the animal feeds makes it necessarily difficult for the respondents to prove
that the defect was existing when the product left the premises of the petitioner.
We find it difficult to believe that the feeds delivered on July 26 and 27, 1993 and fed to the
broilers and hogs contained poison at the time they reached the respondents. A difference of
approximately three months enfeebles the respondents' theory that the petitioner is guilty of
breach of warranty by virtue of hidden defects. In a span of three months, the feeds could
have already been contaminated by outside factors and subjected to many conditions
unquestionably beyond the control of the petitioner. In fact, Dr. Garcia, one of the witnesses
for the respondents, testified that the animal feeds submitted to her for laboratory
examination contained very high level of aflatoxin, possibly caused by mold (aspergillus
flavus). We agree with the contention of the petitioner that there is no evidence on record to
prove that the animal feeds taken to the various governmental agencies for laboratory
examination were the same animal feeds given to the respondents' broilers and hogs for their
consumption. Moreover, Dr. Diaz even admitted that the feeds that were submitted for
analysis came from a sealed bag.
In essence, we hold that the respondents failed to prove that the petitioner is guilty of breach
of warranty due to hidden defects. It is, likewise, rudimentary that common law places upon
the buyer of the product the burden of proving that the seller of the product breached its
warranty. The bevy of expert evidence adduced by the respondents is too shaky and utterly
insufficient to prove that the Nutrimix feeds caused the death of their animals. For these
reasons, the expert testimonies lack probative weight. The respondents' case of breach of
implied warranty was fundamentally based upon the circumstantial evidence that the chickens
and hogs sickened, stunted, and died after eating Nutrimix feeds; but this was not enough to
raise a reasonable supposition that the unwholesome feeds were the proximate cause of the
death with that degree of certainty and probability required. The rule is well-settled that if
there be no evidence, or if evidence be so slight as not reasonably to warrant inference of the
fact in issue or furnish more than materials for a mere conjecture, the court will not hesitate
to strike down the evidence and rule in favor of the other party. This rule is both fair and
sound. Any other interpretation of the law would unloose the courts to meander aimlessly in
the arena of speculation.
WHEREFORE, in light of all the foregoing, the petition is GRANTED. The assailed Decision
of the Court of Appeals, dated February 12, 2002, is REVERSED and SET ASIDE. The
Decision of the Regional Trial Court of Malolos, Bulacan, Branch 9, dated January 12, 1998,
is REINSTATED. No costs.
Key Concepts:
1. CONTRACTS; INTERPRETATION; A CONTRACT IS WHAT THE LAW DEFINES IT AND

THE PARTIES INTEND IT TO BE, NOT WHAT IF IS CALLED BY THE PARTIES. —
The real intention of the parties should prevail. The nomenclature of the
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agreement cannot change its true essence, i.e., a sale on installments.
2. SPECIAL CONTRACTS; SALES; REMEDIES OF SELLER OF MOVABLES PAYABLE IN

INSTALLMENTS WHERE BUYER FAILS TO PAY TWO OR MORE INSTALLMENTS;
REMEDIES ARE ALTERNATIVE NOT CUMULATIVE. — Under Article 1484 of the New
Civil Code.
3. CONTRACT OF LEASE WITH OPTION TO BUY, RESORTED TO AS A MEANS OF

CIRCUMVENT ARTICLE 1484 OF NEW CIVIL CODE. — Indubitably, the device —
contract of lease with option to buy — is at times resorted to as a means to
circumvent Article 1484, particularly paragraph (3) thereof.
4. SPECIAL CONTRACTS; SALES; WARRANTY; EXPRESS WAIVER OF WARRANTIES

ABSOLVED SELLER FROM ANY LIABILITY ARISING FROM ANY DEFECT OR
DEFICIENCY OF MACHINERY; CASE AT BAR - At any rate, even if the private
respondents could not be adjudged as negligent, they still are precluded from
imputing any liability on the petitioner. One of the stipulations in the contract they
entered into with the petitioner is an express waiver of warranties in favor of the
latter. By so signing the agreement, the private respondents absolved the petitioner
from any liability arising from any defect or deficiency of the machinery they bought.
FACTS: Spouses Sy Bang were engaged in the sale of gravel produced from crushed rocks
and used for construction purposes. In order to increase their production, they looked for a
rock crusher which Rizal Consolidated Corporation then had for sale. A brother of Sy Bang,
went to inspect the
machine at the Rizal Consolidated plant site. Apparently satisfied with the machine, the
private respondents signified their intent to purchase the same.
Since he does not have the financing capability, Sy Bang applied for financial assistance
from Filinvest Credit Corporation. Filinvest agreed to extend financial aid on the following
conditions: (1) that the machinery be purchased in the petitioner’s name; (2) that it be
leased with option to purchase upon the termination of the lease period; and (3) that Sy
Bang execute a real estate mortgage as security for the amount advanced by Filinvest. A
contract of lease of machinery (with option to purchase) was entered into by the parties
whereby they to lease from the petitioner the rock crusher for two years. The contract
likewise stipulated that at the end of the two-year period, the machine would be owned
by Sy Bang. 3 months from the date of delivery, Sy Bang claiming that they had only
tested the machine that month, sent a letter-complaint to the petitioner, alleging that
contrary to the 20 to 40 tons per hour capacity of the machine as stated in the lease
contract, the machine could only process 5 tons of rocks and stones per hour. They then
demanded that the petitioner make good the stipulation in the lease contract. Sy Bang
stopped payment on the remaining checks they had issued to the petitioner. As a
consequence of the non-payment, Filinvest extrajudicially foreclosed the real estate
mortgage.
ISSUE: Whether or not, the real transaction was lease or sale?
RULING: Sale on installments.
The real intention of the parties should prevail. The nomenclature of the agreement cannot
change its true essence, i.e., a sale on installments. It is basic that a contract is what the
law defines it and the parties intend it to be, not what it is called by the parties. It is apparent
here that the intent of the parties to the subject contract is for the so-called rentals to be
the installment payments. Upon the completion of the payments, then the rock crusher,
subject matter of the contract, would become the property of the private respondents. This
form of agreement has been criticized as a lease only in name.
Sellers desirous of making conditional sales of their goods, but who do not wish openly to
make a bargain in that form, for one reason or another,
have frequently resorted to the device of making contracts in the form of leases either with
options to the buyer to purchase for a small consideration at the end of term, provided the
so-called rent has been duly paid, or with stipulations that if the rent throughout the term is
paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases
only in name. The so-called rent must necessarily be regarded as payment of the price in
installments since the due payment of the agreed amount results, by the terms of bargain,
in the transfer of title to the lessee.
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Indubitably, the device contract of lease with option to buy is at times resorted to as a means
to circumvent Article 1484, particularly paragraph (3) thereof. Through the set-up, the
vendor, by retaining ownership over the property in the guise of being the lessor, retains,
likewise, the right to repossess the same, without going through the process of foreclosure,
in the event the vendee-lessee defaults in the payment of the installments. There arises
therefore no need to constitute a chattel mortgage over the movable sold. More important,
the vendor, after repossessing the property and, in effect, canceling the contract of sale,
gets to keep all the installments-cum rentals already paid.
Even if there was a contract of sale, Filinvest is still not liable because Sy Bang is presumed
to be more knowledgeable, if not experts, on the machinery subject of the contract, they
should not therefore be heard now to complain of any alleged deficiency of the said
machinery. It was Sy Bang who was negligent, not Filinvest. Further, Sy Bang is precluded
to complain because he signed a Waiver of Warranty.
FACTS:
 Mendoza ordered three sets of furniture from David worth P185,650 and paid an initial
deposit of P40,650. -Mendoza and David agreed on the specifications of the dining set,
sofa set and tea set including the material and quality. Mendoza cancelled some of the
furniture she ordered and David agreed to the cancellation.
 On 12 April 1997, Mendoza paid an additional deposit of P40,000. When David
delivered the dining set to Mendoza on 17 April 1997, Mendoza rejected the set
because of inferior material and poor quality. Mendoza likewise rejected the sala set
and the tea set for the same reason.
 When Mendoza requested a refund of her total deposit ofP80,650, David refused.
Mendoza then sent David a letter dated 27 May 1997 demanding the refund of her
deposit but David ignored the demand letter.4
 The parties failed to arrive at an amicable settlement. Thus, Mendoza filed a complaint
for collection of money with damages.5
 DAVID’S Defense: She and Mendoza agreed on the material and quality of the furniture
Mendoza ordered since that was the normal practice for "made to order" furniture. She
delivered some of the furniture which was received by Mendoza’s father. However,
Mendoza could not pay the balance of the price and requested payment on installment
which David rejected. As a result of Mendoza’s non-payment, David reclaimed the
furniture already delivered and informed Mendoza she could get the furniture upon
payment of the balance of P105,000. When David received Mendoza’s demand letter,
she refused to comply with Mendoza’s request for a refund of the deposit since all the
three sets of furnituree Mendoza ordered were already finished and delivered on the
agreed date.
 MTC: dismissed Mendoza’s complaint; there was already a perfected contract which
imposes reciprocal obligations; no proof that the furniture was not in accordance with
agreed specifications
 RTC: affirmed MTC’s decision; Mendoza should pay for the furniture; upon payment,
David should deliver the furniture
 CA: affirmed lower courts’ decision; no proof that the furniture sets did not meet the
specifications.
ISSUE: Whether or not it was a made to order sale or a sale by description or sample?
RULING: It was a made to order sale.
RATIO:
-David alleges that the three sets of furniture were "made to order" in accordance with the
usual practice of furniture stores. On the other hand, Mendoza insists that the transaction was
a sale by sample or description which can be rescinded as provided under Article 1481 20 of
the Civil Code.
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- Sale by sample: a small quantity is exhibited by the seller as a fair specimen of the bulk,
which is not present and there is no opportunity to inspect or examine the same. ; the parties
treated the sample as the standard of quality and that they contracted with reference to the
sample with the understanding that the product to be delivered would correspond with the
sample. There is an implied warranty that the goods shall be free from any defect which is
not apparent on reasonable examination of the sample and which would render the goods
unmerchantable.
- Sale of goods by description: where the buyer has not seen the article sold and relies on
the description given to him by the seller, or has seen the goods, but the want of identity is
not apparent on inspection." The description creates a warranty that the goods will conform
to that description and that the goods are of merchantable quality.26
-there is a finding that that the transaction in this case was a "made to order" agreement.
Other than Mendoza’s bare allegations that the transaction was a sale by sample or description,
Mendoza failed to produce evidence to substantiate her claim.
-The sale of furniture in this case is not a sale by sample. The term sale by sample does not
include an agreement to manufacture goods to correspond with the pattern. In this case, the
three sets of furniture were manufactured according to the specifications provided
by the buyer. Mendoza did not order the exact replica of the furniture displayed in
David’s shop but made her own specifications on the measurement, material and
quality of the furniture she ordered.
-Neither is the transaction a sale by description. Mendoza did not rely on any description
made by David when she ordered the furniture. Mendoza inspected the furniture
displayed in David’s furniture shop and made her own specifications on the three
sets of furniture she ordered.
Statement of sellers Option
FACTS: Sometime in June of 1987 Harrison Motors Corporation through its president, Renato
Claros, sold two Isuzu Elf trucks to private respondent Rachel Navarro, owner of RN Freight
Lines, a franchise holder operating and maintaining a fleet of cargo trucks all over Luzon.
Petitioner, a known importer, assembler and manufacturer, assembled the two (2) trucks
using the components parts. Prior to the sale, all the BIR Taxes and customs duties for the
parts used on the two trucks had been paid for. Subsequently, the Bureau of Internal Revenue
(BIR), the Land Transportation Office entered a Memorandum of Agreement which provided
that for purposes of registering vehicles, a Certificate of Payment should first be obtained
from the BIR.
On June 16, 1988 the BIR, BOC and LTO entered into a tripartite MOA that prior to the
registration in the LTO of any locally assembled motor vehicle using imported component
parts, a Certificate of Payment should first be obtained from the BIR and BOC to prove that
all existing taxes and customs duties have been paid. Government agents seized and detained
the two trucks of Navarro after discovering that there were still unpaid taxes. Navarro ask for
the receipts evidencing payment of BIR taxes and customs duties, however, Claros refused
to comply. Wanting to secure the immediate release of the trucks, Navarro paid the assessed
BIR taxes and customs duties and ask for reimbursement but Claros again refused.
ISSUE: Whether the two (2) Memorandum of Agreement impairs the contract of sale between
petitioner and private respondent.
RULING: The Memorandum of Agreement does not impose any additional taxes which would
unduly impair the contract of sale between the petitioner and private respondent. Instead,
these administrative orders were passed to enforce payment of existing BIR taxes and
customs duties at the time of importation. Clearly, petitioner’s contention is unmeritorious.
What Sec 10 Art III of the Constitution prohibits is the passage of a law which enlarges,
abridges or in any manner changes the intention of the contracting parties.
Court of Appeals ordered Petitioner Harrison Motors Corporation to reimburse respondent

Rachel Navarro.
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FACTS: The plaintiff had agreed with Wm. H. Anderson Y Co., for the purchase of certain
machinery. On November 16, 1918, the plaintiff sold the defendant all his rights and interest
in the aforesaid contract of sale, another document was executed to that end.
Of the parts of the machinery covered by these contracts, only the "filler press," the "cooker"
and the "chains" were in Manila on November 16, 1918, the date of Exhibit B, but the most
important parts, such as the "oil expellers" and the "grinding mills" were not then yet in this
city.
The "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 the defendant under protest, on account of the
fact that they were not delivered within the periods stipulated in the contract.
On April 25, 1919, the defendant's attorney-in-fact, wrote the plaintiff a letter, advising him
that the contract above referred to was rescinded, it appearing that the parts of the
machinery, which the plaintiff 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. In this letter the parts
received were placed at the plaintiff's disposal upon the repayment of the sums advanced by
the defendant to Messrs. Anderson & Co.
On the 14th of October, 1919, the plaintiff commenced a complaint against the defendant.
The defendant answered, denying generally and specifically the allegations of the complaint
and setting up a special defense and counterclaim. The defendant answered, denying
generally and specifically the allegations of the complaint and setting up a special defense
and counterclaim.
In his special defense, he alleges that he had accepted and signed the contract Exhibit B 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 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; that otherwise he would not have signed
the contract.
ISSUE: Whether or not time is essential in the contract.
RULING: Yes, time is essential in the contract. The Court held that in the case at bar the
arrival of the machinery within a reasonable time was an essential time of the contract, such
time to be determined by taking account the fact that it was then on the way to Manila.
The acts of the defendant disclose the fact that he intended the arrival of the machinery to
be an essential element of the contract. The defendant had no reason to doubt the veracity
of the plaintiff's assertion that said machinery was then on the way. The plaintiff himself
testified that he had showed the letters, copies of which are Exhibits X, Y, and Z, in the last
of which Messrs. Anderson & Co. stated that according to the information received, the
expellers had already been sent out by manufacturers.
Arts. 1548-1559- Effect of Warranty
Principle: Statement of seller’s option

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Art. 1546. Any affirmation of fact or any promise by the seller relating to the thing is
an express warranty if the natural tendency of such affirmation or promise is to induce
the buyer to purchase the same, and if the buyer purchase the thing relying thereon.
No affirmation of the value of the thing, nor any statement purporting to be a
statement of the seller's opinion only, shall be construed as a warranty, unless the
seller made such affirmation or statement as an expert and it was relied upon by the
buyer.
TOPIC: Effect of warranty; Loss of important part
PRINCIPLE:
• A mortgage creditor who purchases real properties at an extrajudicial foreclosure sale

thereof by virtue of a chattel mortgage constituted in his favor, which mortgage has
been declared null and void with respect to said real properties, acquires no right
thereto by virtue of said purchase.
• Neither does the subsequent purchaser of said properties acquire any right to the real
properties which were excluded from the chattel mortgage, and upon being evicted
therefrom by virtue of a judgment declaring that the vendor had no right to the
properties which had been excluded from the chattel mortgage constituted in the
latter's favor and which said vendor purchased in the foreclosure sale thereof, said
subsequent purchaser is entitled to be indemnified for the value thereof at the time
of the eviction.
FACTS: On October 26, 1928, the Panabutan Lumber & Plantation Co., Inc., executed an
instrument whereby it constituted a chattel mortgage on certain personal and real properties
in favor of the Philippine National Bank to secure payment of the sum of P120,000
On November 20, 1930, the first writ of execution of said judgment was issued. By virtue of
said writ, the then provincial sheriff of Zamboanga, Luis de la Vera, attached certain
properties of the Panabutan Lumber & Plantation Co., Inc. and which were not included in
the mortgage in favor of the Philippine National Bank. Inasmuch as the plaintiffs in whose
favor the execution was to be made could not deposit the estimated amount of the expenses
and costs and execution, the sale of the attached properties could not be made and said
sheriff had to return to Zamboanga. The attached properties, together with those bought by
the Philippine National Bank at the foreclosure sale of the chattel mortgage constituted in its
favor by the Panabutan Lumber & Plantation Co., Inc., were delivered under receipt to E. A.
Robertson.
The Philippine National Bank and Luis Panaguiton ordered said provincial sheriff to foreclose
said mortgage and sell all the mortgaged properties at public auction, which said sheriff did
on December 24, 1930, with said Philippine National Bank as the highest bidder. When on
February 19, 1931, judgment was rendered in said civil case No. 1683 declaring said chattel
mortgage null and void with respect to the real properties included therein, all the properties
covered thereby had already been sold to the Philippine National Bank.
Inasmuch as the properties, the inclusion of which in the chattel mortgage was declared null
and void, were not specified. This gave rise to Ah Kee's appeal from said order. The appeal,
however, was not continued because the attorney for the Philippine National Bank had agreed
to exclude all the houses and buildings of whatever kind or description from the mortgage
constituted in favor of said bank
Seran de la Riva, Antonio de la Riva's attorney in fact, was notified by deputy sheriff Jose G.
Fernando of the second writ of execution issued in favor of Ah Kee and was required to
surrender all the properties of the Panabutan Lumber & Plantation Co. in his possession which
were not covered by the mortgage and which had been attached by the sheriff by virtue of
the first writ of execution
ISSUE: Whether or not PNB is bound to indemnify Antonio de la Riva for the said value of
the properties in question.
RULING: YES. The vendor is bound to deliver and warrant the thing which is the subject
matter of the sale (article 1461, Civil Code); and shall be responsible to the vendee for the
legal and peaceful possession of the thing sold and for any hidden faults or defects therein
(article 1474, Civil Code) in case the vendee, by a final judgment based upon a right prior to
the sale, is deprived of the whole or of any part of the thing purchased (article 1475, Civil
Code), the warranty consisting in the restitution of the value which the thing sold had at the
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time of the eviction, whether it be greater or less than the price for which it was sold (article
1478, Civil Code). The declaration of nullity of the chattel mortgage in question, with respect
to the real properties included therein, is equivalent to a final judgment that the vendor
thereof, Philippine National Bank, had no right to sell them and the purchaser, Antonio de la
Riva, acquired no right to the ownership by virtue of the sale and can, therefore, be
dispossessed thereof, which is equivalent to eviction. Consequently, the vendor, Philippine
National Bank,is bound to warrant to real properties sold by restoring to the purchaser Antonio
de la Riva the value thereof at the time of the eviction.
Waiver of warranty against eviction by the buyer/vendee
FACTS: On June 13, 1934, Isidro Fenis sold a land to Eustaquia Llanes, with a right to
repurchase with a period of 5 years. After the periodalready expired, Isidro sold the land to
Maria Viloria. Fewmonths afterthe sale sold the land Melencio Manansala with a right to
repurchasewithin a period of 1 year. Upon reaching the one year period, defendant registered
in the Registry of Deeds an affidavit consolidating his titleonthe said property. After a year,
Viloria sold the property to Casino, Valdez and to the spouses Andaya. Then, Llanes filed a
civil caseforquieting of title and recover possession of the land fromCasino. Subsequently,
Manansala have sold the land to Valdez andCasino. Llanes then included Manansala, Valdez,
Cabrito and Andayaasco-defendants. A writ of execution was issued and the property
wassoldat a public auction. Andaya and Cabrito then instituted a case against Manansala for
recovery of damages because it was alleged that therewas a breach in the warranty of title
against eviction. Manansalaontheother hand said that his co-purchasers pleaded himto sell
the propertyat low price after the case instituted by Llanes.
ISSUE: Whether or not the eviction was valid?
RULING: Article 1544 of the New Civil Code states that "When the vendeehaswaived the right
to warranty in case of eviction, and eviction shall occur, the vendor shall only pay the price
which the thing sold had at thetimeof the eviction, unless the vendee has made the waiver
with knowledgeof the danger of eviction and assumed its consequences." The appelleesin the
case already knew the danger of eviction at the time theyhadpurchased the land. The
appellant is not obliged to restore to themtheprice of the land and the time of eviction, it is
considered as exempt from liability. Therefore, the warranty against eviction in a contract of
sale is waivable and may be renounced by the vendee.
FACTS: On July 14, 1920, the plaintiff executed a deed of sale to the defendant conveying a
parcel of land consisting of some 659 hectares in area situated in the municipality of Paniqui,
Tarlac and five carabaos, for P13,500.00, of which defendant paid P5,500.00 and promised
to pay the balance of P8,000.00 on or before the month of March 1921.
By that deed of sale, which is Exhibit 3, the defendant waived his right to warranty in case of
eviction, in the following terms:
"It is hereby also covenanted and agreed by both parties that the vendee waives
warranty in case of eviction from the property sold, to which he has a right by virtue of this
sale, against the vendor Leocadia Angelo."
In 1924, the defendant asked the plaintiff to sign another deed eliminating the prohibition of
the defendant to freely disposed of the land. On the same date, the defendant executed the
promissory note for P8,000.00 payable in three years from the date thereof and secured the
payment with a real estate mortgage.
But the land which the plaintiff sold to the defendant was at that time subject of litigation
which happened before the sale and with the defendant’s knowledge. Later on, the proper
decree was issued in the name of the plaintiff, however, a motion for review was filed by the
Director of Lands and by two large groups of private opponents.
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At that time, defendant Cipriano Pacheco already appeared as the owner of the property, with
the certificate of title. The court then set aside and the decree was issued to Leocadia Angelo
and Transfer Certificate of title in the name of the defendant.
From that decision an appeal was taken both by the latter and by Lucia F. de Valle Cruz to
whom the property had been sold by Cipriano Pacheco, the Supreme Court on December 31,
1926, affirmed the order setting aside the decree and the transfer certificate of title but
"declaring that the appellant Lucia F. de Valle Cruz, or her successors in interest, shall have
a lien upon the land”. Later on Lucia F. de Valle Cruz brought an action against Cipriano
Pacheco.
ISSUE: Does the warranty obligation still bind the plaintiff as the vendor of that land?
RULING: No because there was a formal and express waiver of warranty in case of eviction
made by the defendant. Based on Article 1548 of the Civil Code.
Article 1558 states that “The vendor shall not be obliged to make good the proper warranty,
unless he is summoned in the suit for eviction at the instance of the vendee.
Moreover, Article 1553 states that “Any stipulation exempting the vendor from the obligation
to answer for eviction shall be void, if he acted in bad faith. However, it shall bear some
relation to some fact from which eviction arises. In the case at bar, although the statement
that the land thereby conveyed had already been registered under the Torrens system and
the petitions for review were pending hearing and indeed inaccurate, such error has not
affected the case because of the defendant;s complete and absolute waiver of warranty of
eviction and upon failure of evidence to show that the plaintiff acted in bad faith in conveying
the realty.
Therefore, waiving warranty against eviction, the defendant did not notify or have the vendor
summoned for the revision of the decree of registration issued to the latter and the transfer
certificate made out in the vendee's name, or which occasion the defendant lost the title to
the realty. For this lack of notification, the plaintiff vendor is not bound to warranty.
Arts 1561-1571- Warranty against redhibitory vices of movables
FACTS: Jerry Moles (petitioner) bought from Mariano Diolosa owner of Diolosa Publishing
House a linotype printing machine (secondhand machine). Moles promised Diolosa that he
will pay the full amount after the loan from DBP worth P50,000.00 will be released. Private
respondent on return issued a certification wherein he warranted that the machine was in A-
1 condition, together with other express warranties. After the release of the money from DBP,
Petitioner required the Respondent to accomplish some of the requirements. On which the
dependant complied the requirements on the same day.
On November 29, 1977, petitioner wrote private respondent that the machine was not
functioning properly. The petitioner found out that the said machine was not in good condition
as experts advised and it was worth lesser than the purchase price. After several telephone
calls regarding the defects in the machine, private respondent sent two technicians to make
necessary repairs but they failed to put the machine in running condition and since then the
petitioner wan unable to use the machine anymore.
ISSUE:
1. Whether or not there is an implied warranty of its quality or fitness?

2. Whether the hidden defects in the machine is sufficient to warrant a
rescission of the contract between the parties?
RULING:
1. It is generally held that in the sale of a designated and specific article sold as secondhand,
there is no implied warranty as to its quality or fitness for the purpose intended, at least
where it is subject to inspection at the time of the sale. On the other hand, there is also
authority to the effect that in a sale of secondhand articles there may be, under some
circumstances, an implied warranty of fitness for the ordinary purpose of the article sold or
for the particular purpose of the buyer.
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Said general rule, however, is not without exceptions. Article 1562 of our Civil Code, which
was taken from the Uniform Sales Act, provides:
“Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or
fitness of the goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to the seller the particular
purpose for which the goods are acquired, and it appears that the buyer relies on the seller’s
skill or judgment (whether he be the grower or manufacturer or not), there is an implied
warranty that the goods shall be reasonably fit for such purpose;”
2. We have to consider the rule on redhibitory defects contemplated in Article 1561 of the
Civil Code. A redhibitory defect must be an imperfection or defect of such nature as to
engender a certain degree of importance. An imperfection or defect of little consequence does
not come within the category of being redhibitory.
As already narrated, an expert witness for the petitioner categorically established that the
machine required major repairs before it could be used. This, plus the fact that petitioner
never made appropriate use of the machine from the time of purchase until an action was
filed, attest to the major defects in said machine, by reason of which the rescission of the
contract of sale is sought. The factual finding, therefore, of the trial court that the machine is
not reasonably fit for the particular purpose for which it was intended must be upheld, there
being ample evidence to sustain the same.
At a belated stage of this appeal, private respondent came up for the first time with the
contention that the action for rescission is barred by prescription. While it is true that Article
1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action
a cursory reading of the ten preceding articles to which it refers will reveal that said rule may
be applied only in case of implied warranties. The present case involves one with and express
warranty. Consequently, the general rule on rescission of contract, which is four years shall
apply. Considering that the original case for rescission was filed only one year after the
delivery of the subject machine, the same is well within the prescriptive period. This is aside
from the doctrinal rule that the defense of prescription is waived and cannot be considered
on appeal if not raised in the trial court, and this case does not have the features for an
exception to said rule.
Effect of warranty against defect or vices
FACTS: Filemon Flores, respondent, purchased from Supercars Management and

Development Corporation, petitioner, an Isuzu Carter Crew Cab. Upon delivery of the vehicle
on December 27, 1988, respondent paid petitioner the 30% down payment, plus premium
for the vehicle‘s comprehensive insurance policy amounting to P7,374.80. The RCBC financed
the balance of the purchase price. Its payment was secured by a chattel mortgage of the
same vehicle. A day after the vehicle was delivered, respondent used it for his family‘s trip
to Bauang, La Union. While traversing the national highway in Tarlac, Tarlac, the fan belt of
the vehicle snapped. Then its brakes hardened after several stops and did not function
properly; the heater plug did not also function; the engine could not start; and the fuel
consumption increased. Upon their return to Manila in the first week of January 1989,
respondent complained to petitioner about the defects of the vehicle. Marquez then had the
vehicle repaired and returned it to respondent that same day, assuring the latter that it was
already in good condition. But after driving the vehicle for a few days, the same defects
resurfaced, prompting respondent to send petitioner a letter dated January 30, 1989
rescinding the contract of sale and returning the vehicle due to breach of warranty against
hidden defects. A copy of the letter was furnished to RCBC.
ISSUE: Whether or not respondent has the right to rescind the contract of sale and to claim
damages as a result thereof.
RULING: YES! We rule for respondent.

Respondent's complaint filed with the RTC seeks to recover from petitioner the money he paid
for the vehicle due to the latter's breach of his warranty against hidden defects under Articles
1547,13 1561,14 and 156615 of the Civil Code.
The vehicle, after it was delivered to respondent, malfunctioned despite repeated repairs by
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petitioner. Obviously, the vehicle has hidden defects. A hidden defect is one which is unknown
or could not have been known to the vendee. It is well within respondent's right to recover
damages from petitioner who committed a breach of warranty against hidden defects. Article
1599 of the Civil Code partly provides:
"Article 1599. Where there is a breach of warranty by the seller, the buyer may,
at his election:
x x x (4) Rescind the contract of sale and refuse to receive the goods, or if the
goods have already been received, return them or offer to return them to the
seller and recover the price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in anyone of these
ways, no other remedy can thereafter be granted, without prejudice to the
provisions of the second paragraph of Article 1191. x x x."
Petitioner's contention that under Article 1191 of the Civil Code, rescission can no longer be
availed of as the vehicle was already in the hands of an innocent purchaser for value lacks
merit. Rescission is proper if one of the parties to a contract commits a substantial breach of
its provisions. It creates an obligation to return the object of the contract. It can be carried
out only when the one who demands rescission can return whatever he may be obliged to
restore. Rescission abrogates the contract from its inception and requires a mutual restitution
of the benefits received.18 Petitioner is thus mandated by law to give back to respondent the
purchase price upon his return of the vehicle.
Period to bring action for breach of warranty
FACTS: On November 27, 1997, petitioner purchased from respondent a brand-new white
Toyota Hi-Lux 2.4 SS double cab motor vehicle, 1996 model, in the amount of P508,000.
Petitioner made a down payment of P152,400, leaving a balance of P355,600 which was
payable in 36 months with 54% interest.
The vehicle was delivered to petitioner two days later. On October 18, 1998 (approximately
20 days after), petitioner demanded the replacement of the engine of the vehicle because it
developed a crack after traversing Marcos Highway during a heavy rain.
Last 18 October 1998, after only 12,000 kilometers of use, the vehicle's engine cracked.
Although it was previously driven through a heavy rain, it didn't pass through flooded streets
high enough to stop sturdy and resistant vehicles. Besides, vehicles of this class are advertised
as being capable of being driven on flooded areas or rugged terrain.
Petitioner asserted that respondent should replace the engine with a new one based on an
implied warranty. Respondent countered that the alleged damage on the engine was not
covered by a warranty. On April 20, 1999 (19 months from delivery), petitioner filed a
complaint for damages.
ISSUE: Whether the action has prescribed
RULING: Yes. Under Article 1599 of the Civil Code, once an express warranty is breached,
the buyer can accept or keep the goods and maintain an action against the seller for damages.
In the absence of an existing express warranty on the part of the respondent, as in this case,
the allegations in petitioner's complaint for damages were clearly anchored on the
enforcement of an implied warranty against hidden defects, i.e., that the engine of the vehicle
which respondent had sold to him was not defective. By filing this case, petitioner wants to
hold respondent responsible for breach of implied warranty for having sold a vehicle with
defective engine. Such being the case, petitioner should have exercised this right within six
months from the delivery of the thing sold. 7 Since petitioner filed the complaint on April 20,
1999, or more than nineteen months counted from November 29, 1997 (the date of the
delivery of the motor vehicle), his cause of action had become time-barred.
Consequently, even if the complaint is made to fall under the Republic Act No. 7394, the same
should still be dismissed since the prescriptive period for implied warranty thereunder, which
is one year, had likewise lapsed.
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A. Requirement of previous examination by the buyer
Principle: Art. 1584 of the New Civil Code states that where goods are delivered to the buyer,
which he has not previously examined, he is not deemed to have accepted them unless and
until he has had a reasonable opportunity of examining them for the purpose of ascertaining
whether they are in conformity with the contract if there is no stipulation to the contrary.
FACTS:
GR E G OR IO FU L E , A BAN K ER A ND A J E W E LL E R, O FF ER E D T O S E L L H IS P AR C EL
OF LA N D T O D R. CR UZ IN E XC H AN G E F OR P4 0, 000 A ND A D IA M ON D E A RR IN G
O WN E D BY T H E LA T T ER . A D E E D OF A B SO LU T E SA L E WAS P RE PAR E D BY A TT Y.
BE L ARM IN O , AN D O N TH E SA M E DA Y FU L E W EN T T O T H E B A NK W IT H D I C H O S O
AN D M E N D OZA , AN D DR . CRU Z A RR IV ED SH OR T L Y T H ER EAF T ER . DR . CR U Z G O T
T H E EARR IN G S F R O M H E R S AF E TY D E P O S IT BO X AN D HA ND E D IT T O F U L E W H O,
W H EN A SK ED IF T H OS E W ER E A LR IG H T , F UL E N OD D ED A ND TO OK T H E
EA RR IN GS . T W O H O URS AFT E R, FU L E C O MP LA IN E D T HA T T H E E ARR IN G S W ER E
FAK E. H E F IL ES A C O M P LA IN T T O D E C L AR E T H E SA L E NU LL A N D V O ID O N T H E
GR O UN D O F F RAU D AN D D EC E IT .
ISSUE: Whether Fule was given reasonable opportunity to examine the goods under Art.
1584.
RULING: Yes, he was given reasonable opportunity.
The Supreme Court ruled that petitioner was afforded the reasonable opportunity required in
Article 1584 of the Civil Code within which to examine the jewelry as he in fact accepted them
when asked by Dr. Cruz if he was satisfied with the same.
By taking the jewelry outside the bank, petitioner executed an act which was more consistent
with his exercise of ownership over it. That after two hours he later claimed that the jewelry
was not the one he intended in exchange for his Tanay property, could not sever the juridical
tie that now bound him and Dr. Cruz. The nature and value of the thing he had taken preclude
its return after that supervening period within which anything could have happened, not
excluding the alteration of the jewelry or its being switched with an inferior kind.
Hence, Fule was given reasonable opportunity to examine the goods under Art. 1584.
Exception
EFFECTS OF WARRANTY (BUYER’S OPTIONS) PRESCRIPTION OF ACTION CHAPTER 5 –

OBLIGATIONS OF THE VENDEE/BUYER TO ACCEPT DELIVERY REQUIREMENT OF PREVIOUS
EXAMINATION BY THE BUYER LAW ON SALES
Doctrine: A buyer is deemed to have accepted the goods when he does an act
inconsistent with the ownership of the seller, or when after the lapse of a reasonable
time, he retains the goods without intimating to the seller that he has rejected them
(Art. 1585).
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FACTS: De Guzman purchased large quantities of steel bars form Triangle Ace Corp.What he
ordered was 9mm but what was delivered was 8mm. De Guzman used this in his business;
Triangle Ace sued de Guzman for recovery of the unpaid price of P124,277.00.
it was only when he was sued for payment of the items when he raised the defense of
breach of contract that what was delivered to him was different from what was stated
and he claimed damages as part of his counterclaim. De Guzman answered that his
liability was only P79,510.00; and by way of counterclaim, he said that he suffered
damages as a result of the cancellation of his contract with another corporation because
the steel bars delivered to him measured only 8mm x 20ft instead of 9mm by 20ft as
agreed.
ISSUE: Whether De Guzman can assert breach of contract
RULING: Art. 1595 provides that if ownership of the goods has passed to the buyer and he
wrongfully refuses to pay for such, the seller may maintain an action for the price of the goods.
A buyer is deemed to have accepted the goods when he does an act inconsistent with the
ownership of the seller, or when after the lapse of a reasonable time, he retains the goods
without intimating to the seller that he has rejected them (Art. 1585).
In the case at bar, there is no dispute that the steel bars purchased by petitioner
were received by him. It is also not disputed that petitioner made partial payments
for the goods and that some of the steel bars were in fact used by him to
manufacture reinforced concrete pipes although they were allegedly rejected on the
ground that the steel bars were undersized. The retention and use of the steel bars by
the petitioner clearly show that he accepted the goods and for this reason he should pay
the price of the same.
B Suspension of payment by the buyer after delivery
Topic: Suspension of Payment by the Buyer after Delivery
Principle: Art. 1590. Should the vendee be 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, unless the latter gives security
for the return of the price in a proper case, or it has been stipulated that, notwithstanding
any such contingency, the vendee shall be bound to make the payment. A mere act of trespass
shall not authorize the suspension of the payment of the price.
FACTS: Arra Realty Corporation (ARC) was the owner of a parcel of land, located in Alvarado
Street, Legaspi Village, Makati City, covered by Transfer Certificate of Title (TCT) No. 112269
issued by the Register of Deeds.
The petitioner ARC, as vendor, and respondent Peñaloza, as vendee, entered into a contract
of sale over a portion of the second floor of the building yet to be constructed for the price of
₱3,105,838 payable in installments, the first installment of ₱901,738 to be paid within sixty
(60) days from November 20, 1982 or on or before January 20, 1983, and the balance payable
in twenty (20) equal quarterly payments of ₱110,205. As soon as the second floor was
constructed within five (5) months, respondent Peñaloza would take possession of the
property, and title thereto would be transferred to her name.
The parties further agreed that the payments of Peñaloza would be credited to her account in
partial payment of her stock subscription in the ARC’s capital stock. Sometime in May 1983,
Peñaloza took possession of the one-half portion of the second floor, with an area of 552
square meters where she put up her office and operated the St. Michael International Institute
of Technology. Unknown to her, ARC had executed a real estate mortgage over the lot and
the entire building in favor of the CHINA BANKING CORPORATION as security for a loan on
May 12, 1983. The deed was annotated. Peñaloza paid for the portion of the second floor of
the building she had purchased from the ARC. She then learned that the property had been
mortgaged to the CHINA BANKING CORPORATION sometime. Peñaloza wrote the CHINA
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BANKING CORPORATION on August 1, 1984 informing the bank that the ARC had conveyed
a portion of the second floor of the building to her. She also proposed for the bank to assist
her in requesting the ARC to execute a deed of absolute sale over the portion of the second
floor she had purchased and the issuance of the title in her name upon the payment of the
purchase price. However, the bank rejected her proposal.
Thereafter, the plaintiff wrote the defendants ARRA and Arguelles on August 31, 1984
proposing to defendants ARRA and Arguelles the execution of a deed of sale with assumption
of mortgage in her favor of the portion of the loan corresponding to the second floor of the
said edifice and informing them of her resolve to hold further payments on the purchase price
of the second floor until her rights and interest over the same shall have been adequately and
properly secured.
When the ARC failed to pay its loan to CHINA BANKING CORPORATION, the subject property
was foreclosed extrajudicially, and, thereafter, sold at public auction to CHINA BANKING
CORPORATION. ARC and the Guarantee Development Corporation and Insurance Agency
(GDCIA) executed a deed of conditional sale covering the building and the lot for P22, 000,000,
part of which was to be used to redeem the property from CHINA BANKING CORPORATION
With the money advanced by the GDCIA, the property was redeemed on May 4, 1987. On
May 14, 1987, the petitioner executed a deed of absolute sale over the lot and building in
favor of the GDCIA for P22,000,000.
On May 28, 1987, Peñaloza filed a complaint against the ARC, the GDCIA, and the Spouses
Arguelles, with the Regional Trial Court of Makati, Branch 61, for "specific performance or
damages" with a prayer for a writ of preliminary injunction.
ISSUE: Whether or not Engr. Peñaloza may suspend the payment of the purchase price of
the property sold.
RULING: Yes. The respondent cannot be blamed for suspending further remittances of
payment to the petitioner ARC because when she pushed for the issuance of her title to the
property after taking possession thereof, the ARC failed to comply. She was aghast when she
discovered that in July 1984, even before she took possession of the property, the petitioner
ARC had already mortgaged the lot and the building to the China Banking Corporation; when
she offered to pay the balance of the purchase price of the property to enable her to secure
her title thereon, the petitioner ARC ignored her offer. Under Article 1590 of the New Civil
Code, a vendee may suspend the payment of the price of the property sold:
Art. 1590. Should the vendee be 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, unless the latter gives security for the return
of the price in a proper case, or it has been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the payment. A mere act of trespass shall
not authorize the suspension of the payment of the price.
Admittedly, respondent Peñaloza failed to pay the downpayment on time. But then, the
petitioner ARC accepted, without any objections, the delayed payments of the respondent;
hence, as provided in Article 1235 of the New Civil Code, the obligation of the respondent is
deemed complied with:
Art. 1235. When the obligee accepts the performance, knowing its incompleteness or
irregularity, and without expressing any protest or objection, the obligation is deemed fully
complied with.
In a contract of sale, until and unless the contract is resolved or rescinded in accordance with
law, the vendor cannot recover the thing sold even if the vendee failed to pay in full the initial
payment for the property. The failure of the buyer to pay the purchase price within the
stipulated period does not by itself bar the transfer of ownership or possession of the property
sold, nor ipso facto rescind the contract. Such failure will merely give the vendor the option
to rescind the contract of sale judicially or by notarial demand as provided for by Article 1592
of the New Civil Code:
Art. 1592. In the sale of immovable property, even though it may have been stipulated that
upon 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.
In this case, respondent Peñaloza suspended the payment of the balance of the purchase
price of the property because she had the right to do so. While she failed to pay the purchase
price on time, the petitioner ARC nevertheless accepted such delayed payments. The
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respondent even proposed to assume the loan account of the petitioner ARC with the China
Banking Corporation in an amount equivalent to the balance of the purchase price of the
subject property, which the petitioner ARC rejected. In fine, respondent Peñaloza acted in
accord with law and in utmost good faith. Hence, she is not liable for damages to the
petitioners under Article 19 of the New Civil Code.
The law is that men, singly or in combination, may use any lawful means to accomplish a
lawful purpose, although the means adopted may cause injury to another.42 When a person
is doing a lawful thing in a lawful way, his conduct is not actionable though it may result in
damages to another; for, though the damage caused is undoubted, no legal right of another
is invaded; hence, it is said to be damnum absque injuria.43
The elements of abuse of rights are the following: (a) the existence of a legal right or duty,
(b) which is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another.
Malice or bad faith is at the core of said provision.44 Good faith is presumed and he who
alleges bad faith has the duty to prove the same.45 Good faith refers to the state of the mind
which is manifested by the acts of the individual concerned. It consists of the intention to
abstain from taking an unconscionable and unscrupulous advantage of another. 46 Bad faith,
on the other hand, does not simply connote bad judgment to simple negligence. It imports a
dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of known
duty due to some motive or interest or ill-will that partakes of the nature of fraud. 47Malice
connotes ill-will or spite and speaks not in response to duty. It implies an intention to do
ulterior and unjustifiable harm. The petitioners failed to adduce evidence of bad faith or malice
on the part of respondent Peñaloza. This cannot be said of the petitioner ARC. It mortgaged
the property to China Banking Corporation even after having sold the same to respondent
Peñaloza, and, thereafter, sold the same anew to GDCIA; respondent Peñaloza was, thus, left
holding the proverbial bag.
Payment of interest on the price
FACTS: Crismina Garments engaged in the export of girl’s denim pants, contracted the
services of Norma Siapno, the owner of D’Wilmar Garments, for the sewing of 20 762 pieces
of assorted girl’s denim for P76,410. The pants were delivered in good condition but Crismina
Garments told Siapno that some were defective. She offered to take them back but Crismina
Garments said that the pants were already good. She was told to just return for her check
P76, 410. However , Crismina Garments failed to pay her the foresaid amount. Siapno then
hired the services of counsel who wrote a letter to Crismina Garments demanding payment
within 10 days from receipt thereof.
Cristina Garment’s vice-president comptroller wrote to Siapno’s counsel, averring that 6, 164
pairs were defective and that she was liable for P49, 925.51 and demanded its refund. The
trial court and CA decided in favor of Siapno, ordering Crismina Garments to pay the former
P76, 140 with interest of 12% per annum, to be counted from the filing of the complaint until
fully paid. Because the case is an “action for the enforcement of an obligation for payment of
money arising from a contract for a piece of work” Crismina Garments submits that the
interest rate should be 6% pursuant to Article 2209 of the New Civil Code. Siapno maintains
that the interest rate should be 12% per annum in accordance with Central Bank Circular No.
416. Hence this petition.
ISSUE:Whether or not it is proper to impose an interest of 12% per annum for an obligation
that does not involve a loan or forbearance of money in the absence of stipulation of the
parties.
RULING: The Court ruled that it is to be a legal interest of 6% per annum that which should
be applied because the amount due in this case arose from a contract for a piece of work and
not from a loan or forbearance of money.
The court observed that a “forbearance” in the context of usury law is a “Contractual
obligation of lender or creditor to refrain, during a given period of time, from requiring the
borrower of debtor to repay a loan or debt then due and payable”. Using this standard, the
obligation in this case was obviously not a forbearance of money, goods or credit. The rate of
interest shall be 6% per annum, to be computed from the time of filing of the complaint in
the trial court until the finality of judgment. If the adjudge principle and the interest remain
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unpaid
thereafter, the interest rate shall be 12% per annum computed from the judgment becomes
final and executor until it is fully satisfied.
Arts. 1594- 1599- Buyers action for breach of warranty
Doctrine: If the purchaser fails to take delivery and pay the purchase price of the
subject matter of the contract, the vendor, without the need of first rescinding the
contract judicially, is entitled to resell the same, and if he is obliged to sell it for less
than the contract price, the buyer is liable for the difference.
FACTS: This case arose from an agreed purchase and sale of a Double Drum Carco Tractor
Winch. Artemio Katigbak upon reading an advertisement for the sale of the winch placed by
V. K. Lundberg, owner and operator of the International Tractor and Equipment Co., Ltd.,
went to see Lundberg and inspected the equipment. The price quoted was P12,000.00.
Desiring a reduction of the price, Katigbak was referred to Daniel Evangelista, the owner.
After the meeting, it was agreed that Katigbak was to purchase the winch for P12,000.00,
payable at P5,000.00 upon delivery and the balance of P7,000.00 within 60 days. The
condition of the sale was that the winch would be delivered in good condition. Katigbak was
apprised that the winch needed some repairs, which could be done in the shop of Lundberg.
It was then stipulated that the amount necessary for the repairs will be advanced by Katigbak
but deductible from the initial payment of P5,000.00. The repairs were undertaken and the
total of P2,029.85 for spare parts was advanced by Katigbak for the purpose. For one reason
or another, the sale was not consummated and Katigbak sued Evangelista,
Lundberg and the latter's company, for the refund of such amount.
Lundberg alleged non-liability since the obligation for refund was purely a personal account
between defendant Evangelista and plaintiff Katigbak. Evangelista, on his part, claimed that
while there was an agreement between him and Katigbak for the purchase and sale of the
winch and that Katigbak advanced the payment for the spare parts, he (Katigbak) refused to
comply with his contract to purchase the same; that as a result of such refusal he
(Evangelista) was forced to sell the same to a third person for only P10,000.00, thus incurring
a loss of P2,000.00.
ISSUE: Whether or not the doctrine in the cited case of Hanlon that if the purchaser fails
to take delivery and pay the purchase price of the subject matter of the contract,
the vendor, without the need of first rescinding the contract judicially, is entitled to
resell the same, and if he is obliged to sell it for less than the contract price, the buyer is
liable for the difference, is applicable herein.
RULING: We quote from the Hanlon case:
.... In the present case the contract between Hanlon and the mining company was executory
as to both parties, and the obligation of the company to deliver the shares could not
arise until Hanlon should pay or tender payment of the money. The situation is similar
to that which arises every day in business transactions in which the purchaser of goods upon
an executory contract fails to take delivery and pay the purchase price. The vendor in such
case is entitled to resell the goods. If he is obliged to sell for less than the contract
price, he holds the buyer for the difference; if he sells for as much as or more than
the contract price, the breach of contract by the original buyer is damnum absque
injuria (*loss or damage without injury). But it has never been held that there is any need
for an action of rescission to authorize the vendor, who is still in possession, to dispose of the
property where the buyer fails to pay the price and take delivery... (40 Phil. 815) .
The facts of the case under consideration are identical to those of the Hanlon case. 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
We are bound to accept under existing jurisprudence. The right to resell the equipment,
therefore, cannot be disputed. It was also found by the Court of Appeals that in the
subsequent sale of the winch to a third party, the vendor thereof lost P2,000.00, the sale
having been only for P10,000.00, instead of P12,000.00 as agreed upon, said difference to
be borne by the supposed vendee who failed to take delivery and/or to pay the price.
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Principle: The general rule is that rescission is only permitted for breaches so substantial
and fundamental as to defeat the object of the parties in making the agreement.
FACTS: Hawaiian is a sugar milling company, and trades molasses as one of its business.
Song & Hawaiian entered on a sale of molasses, where the agreement is shown through the
exchange of letters by both parties' administrators. The letter from Hawaiian stipulated that
payments are to be paid at the end of each month for molasses delivered. On the other hand,
the letter from Song agreed to set the price at 2 cents per gallon delivered, while silent on
the date of payments.
Hawaiian delivered molasses to Song, however the latter allegedly defaulted in the payment
for 20 days in the first delivery. All the rest of the molasses was paid for either on time or
ahead of time. As a result, Hawaiian was compelled to cancel and rescind the said contract.
ISSUE: Whether Hawaiian had the right to rescind the contract of sale made with Song?
RULING: No. The general rule is that rescission is only permitted for breaches so substantial
and fundamental as to defeat the object of the parties in making the agreement. Otherwise,
for a slight or casual breach of the contract rescission is not allowed.
A reasonable deduction is that Song was to pay Hawaiian upon presentation of accounts at
the end of each month. The terms of payment stipulated by the parties are controlling. The
time of payment stipulated for in the contract should be treated as the essence of the contract.
Hawaiian would have had the right to rescind the contract because of the breach of Song,
but there is no outstanding fact which would legally sanction the rescission of the contract
by the Hawaiian.
Only the first payment was delayed for twenty (20) days, while all the rest of the molasses
was paid for either on time or ahead of time. A delay in payment for a small quantity of
molasses for some twenty days is not such a violation of an essential condition of the contract
as warrants rescission for non-performance. Lastly, Hawaiian impliedly waived the condition
for the first overdue payment by its acceptance of the overdue account and continuance with
the contract.
ONE LINER: The notice in writing which Article 1623 requires to be made to the other co
owners and from receipt of which the 30-day period to redeem should be counted is a notice
not only of a perfected sale but of the actual execution and delivery of the deed of sale.
PURCHASE AND SALE; LEGAL REDEMPTION; NOTICE IN WRITING SHOULD BE

NOTICE OF ACTUAL EXECUTION AND DELIVERY OF DEED OF SALE. — For purposes of
the co-owner's right to redemption granted by Article 1620 of the Civil Code, the notice in
writing which Article 1623 requires to be made to the other co- owners and from receipt of
which the 30-day period to redeem should be counted is a notice not only of a perfected sale
but of the actual execution and delivery of the deed of sale. This is implied from the latter
portion of Article 1623 which requires that before a register of deeds can record a sale by a
co-owner, there must be presented to him an affidavit to the effect that the notice of sale
had been sent in writing to the other co- owners. A sale may not be presented to the registrar
of deeds for registration unless it be in the form of a duly executed public instrument.
Moreover, the law prefers that all the terms and conditions of the sale should be definite and
in writing.
FACTS: A parcel of land in Iloilo were co-owned by 7 siblings ( Antonio, Luis, Soledad, Fe,
Rosita, Carlos, and Esperanza) all surnamed Horilleno. As the co-owners are scattered in
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various parts of the country, Carlos, Mary, Soledad, Fe and Rosita gave a SPA to their niece
Mary Jimenez, who succeeded her father as a co-owner, for the sale of the land to father
and son Doromal. One of the co-owner, herein petitioner, Filomena Javellana however did
not gave her consent to the sale even though her siblings executed a SPA for her signature.
The co-owners went on with the sale of 6/7 part of the land and a new title for the Doromals
were issued. Respondent offered to repurchase the land for 30K as stated in the deed of sale
but petitioners declined invoking lapse in time for the right of repurchase. Petitioner also
contend that the 30K price was only placed in the deed of sale to minimize payment of fees
and taxes and as such, respondent should pay the real price paid which was P115, 250.
The RTC ruled in favor of the petitioner that among else, the respondent was informed of the
intended sale of the 6/7 share belonging to the. Horillenos. The CA reversed the decision and
held although respondent was informed of her co-owners proposal to sell the land in question
she was never notified...least of all in writing of the actual execution and registration of the
deed of sale, hence the right to redeem had not yet expired at the time of offer and further
held that redemption price should be P30,000 as stated price notwithstanding that evidence
suggests and proved the actual price was P115, 250.
Petitioner brought the case to the SC assigning the alleged errors that: "IT IS ERROR FOR
THE COURT OF APPEALS TO HOLD THAT THE NOTICE IN WRITING OF THE SALE
CONTEMPLATED IN ARTICLE 1623 OF THE CIVIL CODE REFERS TO A NOTICE IN WRITING
AFTER THE EXECUTION AND REGISTRATION OF THE INSTRUMENT OF SALE, HENCE, OF THE
DOCUMENT OF SALE.
ASSUMING, THAT PRIVATE RESPONDENT HAS THE RIGHT TO REDEEM, THE COURT OF
APPEALS ERRED IN HOLDING THAT THE REDEMPTION PRICE SHOULD BE THAT STATED IN
THE DEED OF SALE."
ISSUE:
1. Whether or not the period to repurchase of petitioner has already lapsed?

2. Whether or not the price for redemption is the the stated price in the deed of sale?
RULING:
NO. We are of the considered opinion and so hold that for purposes of the co-owner's right
of redemption granted by Article 1620 of the Civil Code, the notice in writing which Article
1623 requires to be made to the other co-owners and from receipt of which the 30-
day period to redeem should be counted is a notice not only of a perfected sale but
of the actual execution and delivery of the deed of sale. This is implied from the latter
portion of Article 1623 which requires that before a register of deeds can record a sale
by a co- owner, there must be presented to him, an affidavit to the effect that the
notice of the sale had been sent in writing to the other co-owners.
YES. As stated in the decision under review, the trial court found that "the consideration of
P30,000 only was placed in the deed of sale to minimize the payment of the registration fees,
stamps and sales tax." With this undisputed fact in mind, it is impossible for the Supreme
Court to sanction petitioners' pragmatic but immoral posture. Being patently violative of public
policy and injurious to public interest, the seemingly wide practice of understating
considerations of transactions for the purpose of evading taxes and fees due to the
government must be condemned and all parties guilty thereof must be made to suffer the
consequences of their ill-advised agreement to defraud the state.
Of course, the Court of Appeals was also eminently correct in its considerations
supporting the conclusion that the redemption in controversy should be only for the
price stipulated in the deed, regardless of what might have been actually paid by
petitioners...xx The P30,000 be possible enrichment on the part of the respondent
(Filomena), it was not unjust but just enrichment because permitted by the law, what she
is seeking to enforce is not an abuse but a mere exercise of a right, it only binds the
parties to make good their solemn representation to possible redemptioners on the
price of the sale, to what they had solemnly averred in a public document required
by law to be the only basis for that exercise of redemption.
WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against
petitioners.
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Art 1600- Causes of extinguishent
FACTS: The parties in this case are brothers, except Alejandro Sangalang, herein intervenor-
respondent. Senen and Virgilio purchased a house and lot located in Parañaque City, Metro
Manila for the benefit of their father, Maximiano Aguilar (now deceased). The brothers wanted
their father to enjoy his retirement in a quiet neighbourhood.
On February 23, 1970, they executed a written agreement stipulating that their shares in the
house and lot would be equal; and that Senen would live with their father on condition that
he would pay the Social Security System (SSS) the remaining loan obligation of the former
owners.
In 1974, their father died. Virgilio then demanded that Senen vacate the house and that the
property be sold, the proceeds to be divided between them. Senen refused to comply with
Virgilios demand. On March 27, 1995, Senen filed with the Regional Trial Court, Branch 260,
Parañaque City, an action for legal redemption against Virgilio and another brother, Angel.
Senen alleged that while he knows that Virgilio sold his share of the property to Angel in
January 1989, however, he (Senen) was not furnished any written notice of the sale.
Consequently, as a co-owner, he has the right to redeem the property.
ISSUE: Whether or not petitioner can exercise Legal Redemption?
RULING: No, Legal redemption (retracto legal de comuneros) is a privilege created by law,
partly by reason of public policy and partly for the benefit of the redemptioner to afford him
a way out of a disagreeable or inconvenient association into which he has been thrust.4
With respect to redemption by co-owners, in case the share of a co-owner is sold to a third
person, the governing law is Article 1620 of the Civil Code which provides:
"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 rate.
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." The
purpose behind Article 1620 is to provide a method for terminating the co-ownership and
consolidating the dominion in one sole owner.5
Article 1623 of the same Code also provides:
"ART. 1623. The right of legal pre-emption or redemption shall not be exercised except
within thirty days from the notice in writing by the prospective vendee, 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 vendee that he has given written
notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners."
From the above provisions, the following are the requisites for the exercise of legal
redemption: (1) There must be a co-ownership; (2) one of the co-owners sold his right to a
stranger; (3) the sale was made before the partition of the co-owned property; (4) the right
of redemption must be exercised by one or more co-owners within a period of thirty days to
be counted from the time that he or they were notified in writing by the vendee or by the co-
owner vendor; and (5) the vendee must be reimbursed for the price of the sale.
In this case, the sale took place in January 1989. Petitioner admits that he has actual
knowledge of the sale. However, he only asserted his right to redeem the property in March
1995 by filing the instant complaint. Both the trial court and the Appellate Court ruled that
this was seven (7) years late.
Petitioner, however, now contends that there being no written notice to him of the sale by
the vendee or vendor, the thirty-day redemption period has not prescribed.
Petitioner’s contention lacks merit. The old rule is that a written notice of the sale by the
vendor to his co-owners is indispensable for the latter to exercise their retracto legal de
comuneros.6 More recently, however, we have relaxed the written notice requirement. Thus,
in Si v. Court of Appeals,7 we ruled that a co-owner with actual notice of the sale is not
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entitled to a written notice for such would be superfluous. The law does not demand what is
unnecessary.
A SALE WITH PACTO DE RETRO TRANSFERS THE LEGAL TITLE TO THE VENDEE-
FACTS:
1. Virgilio Cadungog executed a deed of sale with the right to repurchase on August
17, 1979. Cadungog sold to his cousin Franklin Ong six parcels of land which
indicates in the same contract that Cadungog has the right to repurchase within
10 years. He failed to redeem the property.
2. Virgilio Cadungog executed another deed of sale containing three parcels of land
in favor of Jocelyn Yap with the amount of P 5,000.
3. Virgilio filed a complaint alleging that the deed of sale with Yap was fictitious as
merely executed to afford Yap claim for the reduction of her tax liabilities in Canada.
4. The trial court held that Cadungog was able to repurchase the six parcels of land
on May 25-26, 1997, which was after the lapse of 18 years, upon payment to Ong
of the amount of P50k. Moreover, the court held that the 10-year redemption
period was to be regarded as extended because of the failure of Ong to consolidate
his title over the property.
ISSUE:
Whether or not there was impairment of the title over the property of the vendee a retro
because of his failure to consolidate the sale.
RULING:
No. There was no impairment of the title over the property of the vendee a retro because of
his failure to consolidate the sale. Article 1607 of the Civil Code did not impair such title and
ownership because the methods and procedure prescribed was merely for the purpose of
registering and consolidating the titles to the property. In the case at bar, Franklin Ong is the
lawful owner of the said lots under the deed of sale with Yap. Thus, the There was no
impairment of the title over the property of the vendee a retro because of his failure to
consolidate the sale.
A sale with pacto de retro transfers the legal title to the vendee a retro. The essence of a
pacto de retro sale is that the title and ownership of the property sold are immediately vested
in the vendee a retro, subject to the resolutory condition of repurchase by a vendor a retro
to repurchase the property within the period agreed upon by them, or, in the absence thereof,
as provided by law, vests upon the vendee a retro absolute title and ownership over the
property sold by operation of law. The failure of the vendee a retro to consolidate his title
under Article 1607 of the New Civil Code does not impair such title and ownership because
the method prescribed thereunder is merely for the purpose of registering and consolidating
titles to the property.
FACTS: The Spouses Natalio Salonga and Felicidad Salonga (Spouses Salonga) were the
owners of (8) prime parcels of land located in Dagupan City. They had a commercial building
with four floors which stood on their property along A.B. Fernandez Avenue, Dagupan City.
The spouses leased the building to traders and merchants, and lived in a house along Arellano
Street. The house stood on a lot they also owned.
The spouses loaned from several banks and mortgaged several of their properties in order to
finance their business. Due to an earthquake that damaged their building, they were unable
to pay their loans and some of their properties were foreclosed. They asked help from
respondents, Spouses Manuel and Nenita Concepcion (Spouses Concepcion), who were in the
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business of lending. The Spouses Concepcion agreed to Spouses Salonga’s plea for loan in to
enable them to settle their obligations to several banks. Thus, they were able to redeem their
properties.
However, the Spouses Salonga failed to pay the loans, interest and commission despite the
lapse of several months. Moreover, they were not able to sell their property to any interested
buyer. Worse, the Spouses Concepcion pressed them to pay their loan accounts, plus interest
thereon. Due to this agreement a deed of absolute sale was made in favor of the respondents
with the condition that it will not be registered. The loan was not repaid and the building was
subsequently transferred in the name of the respondents.
ISSUE: Whether or not the contract is one of equitable mortgage or absolute sale?
RULING: The Supreme Court ruled that the contract was one of equitable mortgage.
Article 1602 of the New Civil Code of the Philippines provides that a contract shall be
presumed to be an equitable mortgage, in any of the following cases:
 When the price of a sale with right to repurchase is unusually inadequate;
 When the vendor remains in possession as lessee or otherwise;
 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;
 When the purchaser retains for himself a part of the purchase price;
 When the vendor binds himself to pay the taxes on the thing sold;
In any other case where it may fairly inferred that the real intention of the parties
is that the transaction shall secure the payment of a debt or the performance of any
other obligation.
In any of the foregoing case, any money, fruits, or other benefit to be received by the vendee
as rent or otherwise shall be considered as interest which shall be subject to the usury laws.
For the presumption in Article 1602 of the New Civil Code to arise, two requirements must
concur: (a) that the parties entered into a contract denominated as a contract of sale; and
(b) that their intention was to secure
an existing debt by way of a mortgage. The existence of any of the circumstances defined in
Article 1602 of the New Civil Code, not the concurrence nor an overwhelming number of such
circumstances is sufficient for a contract of sale to be presumed an equitable mortgage.
One liner: The present Contract, which purports to be an absolute deed of sale, should be
deemed an equitable mortgage for the following reasons: (1) the consideration has been
proven to be unusually inadequate; (2) the supposed vendor has remained in possession of
the property even after the execution of the instrument; and (3) the alleged seller has
continued to pay the real estate taxes on the property
Facts: In this case Eliodoro Bacaron conveyed his 15 hectare property to Benny Go for 20,000
pesos, a year later he wanted to take back his property but Benny Go refused and contended
that it was a sale. Hence Bacaraon went to the trial court of Davao City to reform the contracts.
Respondent Bacaron was place in this situation because he had financial trouble during 1993
thus he went to Benny Go to borrow money for 20,000 pesos, Benny Go on the other hand
suggested that both of them would make a “Transfer of Rights” but this was only for formality
purpose, since he was desperate enough for the money he agreed with Benny Go. The
following year upon returning the 20,000 to Benny Go, Benny Go wouldn’t accept the 20,000
of Bacaron and contended that such was a sale hence, Bacaron could not recover the property.
Bacaron on the other had contended that it was impossible for him to sell the property to Go
for 20,000 pesos since it was very inadequate, when in fact the value of the property where
it is located cost at around 100,000 pesos per month.
Petitioner Benny Go in his defense denied the claim of Bacaron that such was an equitable
mortgage and not a transfer of title, furthermore Go added that Bacaron was in serious
financial debt and that base on their transactions and accounts, Bacaron owed him 985,423.70
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and that in order for him not to resort in the filing of cases against Bacaron the would resort
to Dacion En Pago which the subject was the property he further added that considering the
land was untitled and Bacaron purchased it from a Meliton Bacarro for only 50,000 pesos, he
cannot be expected to accept the land in exchange for 1 million. Lastly Petitioner Go by way
of Affirmative Defense contended that the respondent has no cause of action against him
since the respondent failed to comply with the essential requisites for the Reformation of
Instrument and added that respondent is in estoppel because he signed the document
knowing that it did not express the true intention of the Parties.
The ruling of the trial court
The trial court ruled in favor of petitioner citing that Article 1350 (should be 1359) of the New
Civil Code, found that [respondent] failed to establish the existence of all the requisites for
an action for reformation by clear, convincing and competent evidence. Considering
[respondent's] own testimony that he read the document and fully understood the same,
signing it without making any complaints to his lawyer, the trial court held that the evidence
on record shows that the subject instrument had been freely and voluntarily entered into by
the parties and that the same expresses the true intention of the parties. "The trial court
likewise observed that, contrary to [respondent's] claim that the transaction was a mere
mortgage of the property, the terms of the instrument are clear and unequivocable that the
property subject of the document was 'sold, transferred, ceded and conveyed' to the
[petitioner] 'by way of absolute sale,' and hence, no extrinsic aids are necessary to ascertain
the intention of the parties as the same is determinable from the document itself.
Ruling of the Court of Appeals
The C.A ruled in favor of respondent contending Granting respondent's appeal, the appellate
court ruled that the Contract entered into by the parties should be deemed an equitable
mortgage, because the consideration for the sale was grossly inadequate. By continuing to
harvest the crops and supervise his workers, respondent remained in control of the property.
Issues:
(1) Whether the agreement entered into by the parties was one for equitable mortgage or for
absolute sale; and
(2) Whether the grant of the relief of contract reformation was proper.
RULING OF THE SUPREME COURT
Equitable Mortgage
An equitable mortgage has been defined "as one which although lacking in some formality,
or form or words, or other requisites demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as security for a debt, and contains nothing
impossible or contrary to law."10
The instances in which a contract of sale is presumed to be an equitable mortgage are

enumerated in Article 1602 of the Civil Code as follows:
"Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending
the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is
that the transaction shall secure the payment of a debt or the performance of any other
obligation.
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In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee
as rent or otherwise shall be considered as interest which shall be subject to the usury laws."
Furthermore, Article 1604 of the Civil Code provides that "[t]he provisions of Article 1602
shall also apply to a contract purporting to be an absolute sale." In the present case, three of
the instances enumerated in Article 1602 - - grossly inadequate consideration, possession of
the property, and payment of realty taxes - - attended the assailed transaction and thus
showed that it was indeed an equitable mortgage.
Inadequate Consideration
The parties' respective arguments show that the sum of P20,000, by itself, is inadequate to
justify the purported absolute Transfer of Rights.
Petitioner, however, acknowledges (1) that respondent paid some of the obligations through
the coprax delivered to petitioner's father; and (2) that petitioner owed and subsequently
paid respondent P214,000
That claim, however, confirms the inadequacy of the P20,000 paid in consideration of the
Transfer of Rights; hence, the Contract does not reflect the true intention of the parties. As
to what their true intention was - - whether dacion en pago or equitable mortgage - - will
have to be determined by some other means.
Possession
According to Article 1602(2) of the New Civil Code, one of the instances showing
that a purported contract of sale is presumed to be an equitable mortgage is when
the supposed vendor remains in possession of the property even after the
conclusion of the transaction. In the present case, the witnesses of respondent
swore that they had seen him gather fruits and coconuts on the property. Based on
the cited cases, the witness’s testimonies sufficientyly establish that even after the execution
of the assailed contract respondent has remained in possession of the property. The
testimonies proffered by petitioner's witnesses merely indicated that they were tenants of the
property. Petitioner only informed them that he was the new owner of the property. This
attempt at a factual presentation hardly signifies that he exercised possession over the
property. As held by the appellate court, petitioner's other witness was unconvincing, because
he could not even say whether he resided within the premises. The factual findings of the trial
court and the CA are conflicting and, hence, may be reviewed by this Court.26 Normally, the
findings of the trial court on the credibility of witnesses should be respected. Here, however,
their demeanor while testifying is not at issue. What is disputed is the substance of their
testimonies the facts to which they testified. Assuming that the witnesses of petitioner were
indeed credible, their testimonies were insufficient to establish that he enjoyed possession
over the property
Payment of Realty Taxes
Finally, petitioner asserts that the trial court's finding that he paid the realty taxes should also
be given corresponding weight. Respondent counters with the CA's findings that it was he
who paid realty taxes on the property. The appellate court concluded that he had paid taxes
for the years 1995, 1996 and 1997 within each of those years; hence, before the filing of the
present controversy. In contrast, petitioner paid only the remaining taxes due on October 17,
1997, or after the case had been instituted. This fact allegedly proves that respondent has
remained in possession of the property and continued to be its owner. He argues that if he
had really transferred ownership, he would have been foolish to continue paying for those
taxes
Reformation of Instrument
Ultimately, it is the intention of the parties that determines whether a contract is one of sale
or of mortgage. In the present case, one of the parties to the contract raises as an issue the
fact that their true intention or agreement is not reflected in the instrument. Under this
circumstance, parol evidence becomes admissible and competent evidence to prove the true
nature of the instrument.Hence, unavailing is the assertion of petitioner that the interpretation
of the terms of the Contract is unnecessary, and that the parties clearly agreed to execute an
absolute deed of sale. His assertion does not hold, especially in the light of the provisions of
Article 1604 of the Civil Code, under which even contracts purporting to be absolute sales are
subject to the provisions of Article 1602. Moreover, under Article 1605 of the New Civil Code,
the supposed vendor may ask for the reformation of the instrument, should the case be
among those mentioned in Articles 1602 and 1604. Because respondent has more than
sufficiently established that the assailed Contract is in fact an equitable mortgage rather than
an absolute sale, he is allowed to avail himself of the remedy of reformation of contracts.
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WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and Resolution
AFFIRMED.
FACTS: On July 12, 1966, Jovito Gloria, instituted against Rosario Artuz Civil Case No. M-79
in the Court of First Instance of Capiz for consolidation of ownership of a parcel of land.The
complaint stated that on October 10, 1964 Rosario Artuz executed in favor of Jovito Gloria a
deed of sale with right to repurchase within a period of one (1) year of a parcel of residential
land located in Poblacion, Tapaz, Capiz; that the defendant allegedly failed to exercise her
right to repurchase within the stipulated period; that the plaintiff had been in possession of
the property immediately after the execution of the document; and that said plaintiff had
been paying the taxes thereon.In her answer the defendant Rosario Artuz admitted the
existence of the deed of sale with right to repurchase but denied the legality and genuineness
thereof and alleged as affirmative defenses that the document in question was an equitable
mortgage, the real intention of the parties being merely to secure the payment of a loan in
the amount of P2.025.00; that the defendant, who was then deaf. totally blind and senile, did
not understand English and was made to affix her thumbmark on the alleged deed of sale
with right to repurchase upon representation of the plaintiff that the same was a mere
equitable mortgage; that the defendant had remained in possession of the property in
question and had been paying the taxes thereon that a tender of payment was made by
defendant to the plaintiff on or before October 10, 1965 to repurchase the property but
plaintiff refused to accept the amount of P2,025.00 because he was asking for a much bigger
amount of P6,000.00; that by reason of such refusal, the defendant consigned the amount of
P2,025.00 with the court; and that the actual amount of the loan received by the defendant
from the plaintiff was only P1,525.00 inasmuch as the amount of P500.00 was retained by
plaintiff as interest on the transaction.The original defendant Rosario Artuz died. Hence the
complaint was amended to substitute the deceased defendant with her surviving heirs.
ISSUE: Whether or not the defendants appeal on repurchase the consolidated land after a
month from the judgment of the court is meritorious.
HELD: The court ruled that the appeal has merit.

The nature of the document in question was squarely placed in issue. The defendants contend
that the document was only an equitable mortgage The third paragraph of Article 1606 of the
Civil Code of the Philippines provides that “the vendor may still exercise the right to
repurchase within thirty days from the time final judgment was rendered in a civil action on
the basis that the contract was a true sale with right to repurchase.” Hence even if after a
new trial it is found that the document in question is a true sale with right of repurchase, the
defendants may still exercise the right to repurchase the land in question within thirty days
from the time final judgment is rendered.
G.R. No. L-31586 February 28, 1972
FACTS: Francisco Yturralde and Margarita de los Reyes, owned a parcel of agricultural land
located in Guilinan, Tungawan, Zamboanga del Sur, containing an area of 14.1079 hectares,
more or less, and registered in their names under Original Certificate of Title No. 2356.
Sometime in the year 1944, Francisco Yturralde died intestate, survived by his wife, Margarita
de los Reyes, and their children who are the petitioners herein, Ernesto, Fortunata, Montano,
Zosimo, Ramon, Guadalupe, Luis, Josefina and Rosalia, all surnamed Yturralde. In 1950,
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Margarita de los Reyes contracted a second marriage with her brother-in-law and uncle of
the petitioners herein, Damaso Yturralde.
On May 30, 1952, Damaso Yturralde and Margarita de los Reyes executed a deed of sale with
right of repurchase in favor of the respondent Isabelo Rebollos, covering the above-
mentioned property in consideration of the sum of P1,715.00. The vendors failed to exercise
the right to repurchase on the property within the three-year period agreed upon, which
expired on May 30, 1955. In 1961, Margarita de los Reyes died.
On May 3, 1965, the respondent, Isabelo Rebollos, filed a petition for consolidation of
ownership, naming as respondents in the case the petitioners herein and Damaso Yturralde.
Summons was then issued, and received on June 17, 1965 by the respondents therein,
Damaso, Ernesto, Fortunata, Montano, Guadalupe, Luis and Rosalia, all surnamed Yturralde.
However, summons could not be served on three of the respondents therein, Josefina,
Zosima and Ramon Yturralde, as they were no longer residing at their last known addresses.
Rebollos then filed a motion to declare the respondents in the case in default, the Court
issued an order dated November 13, 1965, declaring all the respondents therein in default.
November 20, 1965, the Court rendered a decision consolidating the ownership of the subject
property in favor of Rebollos, and ordering the Register of Deeds of Zamboanga del Sur to
cancel Original Certificate of Title No. 2356 covering said property and, in lieu thereof, to
issue a transfer certificate of title in the name of Rebollos.
ISSUE: Whether or not the consolidation of ownership and the ordering of the Registry of
Deeds by the Trial Court to cancel original certificate of title and to issue a new certificate of
title in the new of respondent Rebollos is in accordance with Article 1607 of the new Civil
Code?
DECISION: Unlike the old Civil Code, Article 1607 of the new Civil Code of 1950 provides
that consolidation of ownership in the vendee of real property by virtue of the failure of the
vendor to comply with the provisions of Article 1616 shall not be recorded in the Registry of
Property without a judicial order, after the vendor has been duly heard." In the case of
Teodoro vs. Arcenas, the Court, through Mr. Justice Jose B. L. Reyes, ruled that under the
aforesaid Article 1607 of the new Civil Code, such consolidation shall be effected through an
ordinary civil action, not by a mere motion, and that the vendor should be made a party
defendant, who should be served with summons in accordance with Rule 14 of the Revised
Rules of Court; and that the failure on the part of the court to cause the service of summons
as prescribed in Rule 14, is sufficient cause for attacking the validity of the judgment and
subsequent orders on jurisdictional grounds.
The jurisdiction over the persons of herein petitioners Josefina, Zosima and Ramon all
surnamed Yturralde, was not properly acquired by the court because they were not properly
served with summons in the manner directed by Rule 14 of the Revised Rules of Court. The
said three petitioners cannot therefore be legally declared in default. The action for
consolidation should be brought against all the indispensable parties, without whom no final
determination can be had of the action; and such indispensable parties who are joined as
party defendants must be properly summoned pursuant to Rule 14 of the Revised Rules of
Court. If anyone of the party defendants, who are all indispensable parties is not properly
summoned, the court acquires no jurisdiction over the entire case and its decision and orders
therein are null and void.
FACTS:On December 4, 1928, the spouses Laureano Marquez and Eugenia Capiral leased to
defendant Vicente Valencia the herein mentioned fishpond for a period of ten years, expiring
December 31, 1938. The stipulated yearly rental was P1, 000, payable every month of
January. Valencia held the fishpond and paid the rents for the years 1929, 1930 and 1931.
According to plaintiffs, Valencia could make a net profit of P2, 000 every year. Before July,
1931, Laureano Marquez had a litigation with Fortunato Santiago, and to settle it, he got that
month seven thousand pesos (P7,000) from Vicente Valencia who did not want to give it
“unless Laureano Marquez signed the document Exhibit E.” Although Marquez actually
received the amount of P7,000 only, the document Exhibit B listed the, sum of P11,290 as
purchase and repurchase price. The distress for money under which he then was, places him
in the same condition as other borrowers, in numerous cases reported in the books, who have
submitted to the dictation of the lender under the pressure of their wants. Necessitous men
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are not, truly speaking, free men; but, to answer a present emergency, will submit to any
terms that the crafty may impose upon them.” (Villa vs. Santiago, 38 Phil., 157, 164.)
Now, it is easy to understand (a) why the petitioners were required to pay the land taxes; (b)
why they were charged compound interest at the rate of ten per cent; (c) why they received
only P7,000, when the alleged purchase and repurchase price was P11,290; (d) why the
amount actually received by the petitioners coincided with the total rental for the unexpired
term of the lease, Exhibit A; (e) why the respondent Vicente Valencia spoke of “the amount
of P7,000, the capital;” and (f) why the sum actually received by the petitioners, or even the
alleged-purchase and repurchase price of P11,290, was much below the assessed value.
ISSUE:WON the payment of the Vicente Valencia will close the existence of a Pacto de retro
sale.
RULING: No, the Supreme Court reversed the ruling of the Court of appeals because, neither
the payment by the vendor of the land tax, interest, or other additional charge, nor the fact
that the amount actually received by the vendor is different from the purchase or repurchase
price and such below the assessed value, nor the circumstances that the vendee spoke of the
purchase price as the capital, taken singly, will preclude the existence of a pacto de retro sale,
and stipulations essentially not germane to a sale may be legally or morally acceptable, the
collective weight of such consideration reveals, as in this case, the intention of the parties to
enter into a loan agreement with security, or equitable mortgage.
1. CONTRACTS; INTERPRETATION AND CONSTRUCTION; PRICE OF LAND GROSSLY

INADEQUATE; VENDOR REMAINED IN POSSESSION OF LAND AND ENJOYED FRUITS;
EQUITABLE MORTGAGE. — Although the contract upon its face is one of absolute sale,
nevertheless the price being grossly inadequate and the vendor having remained in
possession of the land and enjoyed the fruits thereof, we hold that the real nature of the
transaction is one of equitable mortgage.
2. EQUITABLE MORTGAGE; MORTGAGE NOT FORECLOSED; ACTION TO RECOVER

MORTGAGED PROPERTY; DOES NOT PRESCRIBE. — As the property in question was merely
mortgaged, and there having been no foreclosure proceedings in the proper court, said
property remained subject to the mortgage. Consequently, the action of plaintiff-mortgagor
has not prescribed.
Facts:
Filomena Salas commenced this action in the Court of First Instance of Iloilo to compel Flora
Quinga, in her capacity as Administratrix of the Intestate Estate of Ceferino Datoon, to resell
to her lot No. 7741 of the Cadastral Survey of Pototan, Iloilo, and to recover damages. She
claimed that prior to September, 1934, she owed Ceferino Datoon the sum of P200.00; that
when she could not meet the demands for payment made on her, she offered to mortgage or
sell under pacto de retro to her creditor the property in question; that, instead of a deed of
mortgage or a pacto de retro sale, Datoon caused the preparation of a deed of absolute sale
on September 18,1934, which plaintiff signed on condition that she would remain in
possession of the land and could repurchase the same; that Datoon registered the deed of
sale and secured the cancellation of Original Certificate of Title No. 40792 and issuance in his
name of Transfer Certificate of Title No. 14841 on October 30, 1935; that an accounting made
on or about October 10, 1940 showed that the unpaid portion of her indebtedness was only
P100.00, and on the same day, complying with a previous promise, Datoon executed a private
document — now in the record as Exhibit A — allowing her to repurchase the property within
ten years; that upon Datoon’s death in 1943, Flora Quinga was appointed judicial
administratrix of his estate; that because the latter had refused to allow her to repurchase
the property, she was forced to file suit and to deposit the sum of P100.00 in the Court of
First Instance of Iloilo as consideration for the repurchase.
RTC Decision: The Court of First Instance of Iloilo found that the transaction between Datoon
and plaintiff was an absolute sale and that the private instrument Exhibit A was a forgery.
Consequently, it rendered judgment dismissing the complaint and ordering the plaintiff
(and/or the receiver appointed in the case) to deliver possession of the property in question
to the defendant and to pay her damages.
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CA Decision: On the question of whether the transaction between Filomena Salas and
Ceferino Datoon was one of sale or otherwise, the Court of Appeals found "that the real
contract which had been entered into was an equitable mortgage.
Issue: Whether or not the transaction entered into was one of absolute deed of sale or
equitable mortgage.
Held: Equitable mortgage. The first assignment of error submitted in petitioner’s brief refers
to the ruling of the Court of Appeals regarding the true nature of the transaction between the
now deceased Ceferino Datoon and Filomena Salas — that it was not one of sale but a mere
equitable mortgage. Considering the reasons supporting the findings of the Court of Appeals
in this matter, we are constrained to say that petitioner’s contention is without merits. Even
disregarding the inadequacy of the price of P200.00 for the more than two hectares of riceland
alleged to have been sold by Salas to Datoon, there remains the important circumstance that,
in spite of the alleged sale, Salas remained in possession of the property and the vendee
started receiving his share in the fruits of the land only in 1944, that is, more than nine years
after the alleged sale. If the real transaction was one of sale, Datoon would have asserted his
right to receive from the alleged tenant his share in the fruits of the property right after the
sale, specially considering the fact that he had registered the deed of sale and secured the
issuance of a transfer certificate of title in his name.
LEGAL PRINCIPLE: Conventional Redemption (Pacto de Retro Sale)
Conventional redemption shall take place when the vendor reserves the right to repurchase
the thing sold with the obligation to comply with the provisions of Art. 1616 and other
stipulations as agreed upon. (Art. 1601)
Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases: 1. When the price of a sale with right to repurchase is unusually inadequate;
2. When the vendor remains in possession as lessee or otherwise; 3. When upon or after
the expiration of the right to repurchase another instrument extending the period of
redemption or granting a new period is executed; 4. When the purchaser retains for himself
a part of the purchase price; 5. When the vendor binds himself to pay the taxes on the
thing sold; 6. In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the performance of any
other obligation.
One liner: “to increase the redemption price than to erase the nomenclature of the
transaction from a deed of sale with conventional redemption, — into the revelation that it
was truly and in reality, a simple loan”
FACTS: On May 8, 1972, petitioners-spouses Prudencia Gloria- Diaz and Eugenio Diaz as
plaintiffs filed their complaint in the Pangasinan court of first instance praying that
respondents-spouses Felix B. Magalong and Isidra G. Magalong as defendants be compelled
to accept the tender of payment of
P4,500.00 deposited in the court by way of redemption of their 40,000- square meter
riceland in Bayambang, Pangasinan, subject of several contracts entitled "Deed of Sale with
Conventional Redemption" executed by them with respondents as vendees and to execute
the necessary deed reconveying the said property to them.
The trial court in its decision, dismissed the complaint on the ground of lapse of the 10-year
repurchase period and ruling that if “[respondents]had set certain conditions for the
reconveyance of the property to [petitioners] other than those agreed upon, [respondents]
were well within their right to do so."
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Eugenia executed Exh. A being a deed entitled one of sale with conventional redemption
over 2 parcels of land in Barrio Buayaan, town of Bayambang, Pangasinan, in favor of
Isidra Gloria, wife of Magalong for the
sum of P3,600.00, redeemable with 10 years then 2 years later, on 21 August 1961, a new
deed of same tenor was signed by spouses Diaz increasing the original consideration of
P3.600.00 by P 200.00, Exh. B; again, on 1 October, 1964, a new deed once more of the
same tenor executed by spouses Diaz increasing the sum received by P400, so that the total
became P4,200.00, Exh. C; finally, on 26 June 1965, another sum was added of P30.00, and
a new deed once again of the same tenor was signed by Prudencia, Exh. D, so that the total
became P4,500.00 now— remember that the period of redemption not having been changed
either in Exh. B, C or D, — was to expired by 27 January 1968.
Because according to plaintiffs, spouses Magalong answered in letter of 19 February, 1968

indicating willingness, — Exh. F, which is in handwriting, instructing that new document of
same tenor be drafted by Notary Public, Mr. Numeriano de Castro, Magalong's friend, — this
despite the fact that 10- year redemption period had already expired.
And the misunderstanding began with that, — plaintiffs, on the position that they were
complying with Exh. F, caused preparation of new deed, Exh. E, on 21 June, 1968, with
consideration being only for P4,500.00, and had it ratified before the above-mentioned
notary public, Mr. Numeriano G. de Castro, but in turn, defendants refused to accept claiming
they were not bound thereby.
ISSUE: Was the contract executed by Eugenia Diaz a true pacto-de-retro sale?
HELD: The appellate court found that "(I)n the mind of this Court, (the) foregoing facts,
admitted on both sides, cannot have any other interpretation than that there could have
been no legal purposes for the additions of P200.00, P400.00, and P500.00 to increase the
redemption price than to erase the nomenclature of the transaction from a deed of
sale with conventional redemption, — into the revelation that it was truly and in
reality, a simple loan, — surely, if Exh. A was a true deed of sale with pacto de retro, the
price was P3,600.00, nothing not even a centavo more, the only right of vendor-a-retro
would have been to redeem at that price; if vendee-a- retro himself gave afterwards several
additional amounts, and himself consented that they be aggregated to the price
of redemption, that was absolutely inconsistent with the designation of the agreement, Exh.
A, as a true sale with pacto de retro, a sale with pacto de retro is a true, a good sale, it
transfers title to vendee, only subject to a resolutory condition, — the addition of further
sums accepted by vendee-a-retro, becomes incomprehensible, — in other words, the
net conclusion must have to that consistent with their own conduct, especially that of
'vendee-a-retro', the Courts should understand the agreement to have been really only
loan with equitable mortgage, for the parties neither have any legal night to change
the juridical qualification that the law attaches to their conduct, it is the law, not
their written contract, that does that for them.
The petition at bar, which the Court finds to be well taken for the following principal
considerations.
1. The conclusion in the appellate court's countermanding Resolution of February 3, 1978

that the true transaction a pacto de retro sale is contrary to the very admission of
respondent Felix B. Magalong in his letter of March 28, 1972 to petitioner Eugenie Diaz
wherein said respondent expressly referred to petitioners' proposal "to redeem the land
which has been mortgaged to us."
2. The appellate court's countermanding Resolution of February 3, 1978, supra,

recognized that the undisputed fact that on three occasions the original "purchase price"
of P3,600.00 was increased with the "additional payments" of P200.00, P400.00 and
P300.00, which added up to a total increased "purchased price" of P4,500.00 indicated
that only a simple loan
was intended by the contracting parties." Yet, it rejected this correct indication and
conclusion on three manifestly mistaken inferences as follows:
1st that "this is not one of the circumstances listed in Article 1602 of the Civil Code",
completely disregarding the 6th circumstance or badge of equitable mortgage
fisted in the article, to wit, "(6) In any other case where it may be fairly inferred
that the real intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation";
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2nd, "The additional amounts did not result in any extension of the redemption period."
Precisely, as stressed in the original decision of November 3, 1977, if the transaction
were a true pacto de retro, the purchase price had been fixed at P3,600.00 not a
centavo more and respondents' giving of additional amounts on three
different occasions to be aggregated to the redemption price "was
absolutely inconsistent" with the concept of "a true sale with pacto de retro";
3. The appellate court's countermanding Resolution of February 3, 1978 furthermore
completely disregarded the applicable provisions of Article 1603, Civil Code that "In case
of doubt, a contract purporting to be a sale with right to repurchase shall be
construed as an equitable mortgage" and of Article 1606, Civil Code, 3rd paragraph
that "the vendor may still exercise the right to repurchase within thirty days from
the time final judgment was rendered in a civil action on the basis that the contract
was a true sale with right to repurchase", which latter provision was aptly applied in the
original decision although it did not expressly cite the Codal article.
Arts. 1601-1618-Equitable mortgage
Facts: Petitioner Erlinda San Pedro initiated this suit against the spouses Ruben Lee and Lilian
Sison on November 23, 1994, praying for: (1) a declaration that the document entitled
Kasulatan ng Ganap na Bilihan ng Lupa is an equitable mortgage and not a sale; (2) the
reconveyance of the property subject of the Kasulatan ng Ganap na Bilihan ng Lupa; and (3)
damages. San Pedros version of events paints a portrait of an unscrupulous couple, usuriously
taking advantage of her financial straits to enrich themselves. Petitioner claims that she
desperately needed money to support her children’s college education, and approached one
Philip dela Torre, who introduced her to respondent Ruben Lee. From Lee and his wife Lilian
Sison, San Pedro was able to secure a loan in the amount of P105,000.00, with interest of
P45,000.00, or a total indebtedness of P150,000.00. As security for this loan, she agreed to
mortgage a 17,235-square meter parcel of agricultural land located at San Juan, Balagtas,
Bulacan, covered by Transfer Certificate of Title (TCT) No. T-290387. This transaction took
place in the office of Atty. Venustiano Roxas, where she met Lee for the first time.
San Pedro claims that Atty. Roxas and Lee coerced her to sign the Kasulatan ng Ganap na
Bilihan ng Lupa and that the document was executed merely as written evidence of the loan
and mortgage. She alleges that Atty. Venustiano Roxas and Ruben Lee told her that the
document was just a formality, with the assurance from Atty. Roxas and Lee that respondents
would never enforce the contract against her.
She readily agreed because she believed in good faith that the spouses were tunay na tao.
She further claims that she continued in possession of the parcel of land through her tenant,
Federico Santos, and continued to receive her landowners’ share of the harvest from 1985
until 1995. In 1986, petitioner attempted to pay the real property tax on the subject
agricultural land.To her surprise, she learned that the property had already been transferred
to the names of respondents. She also learned that TCT No. T-290387 had been cancelled
and TCT No. RT-41717 (T-305595) had been issued in the name of Ruben Lee.
After saving enough money to pay her indebtedness, San Pedro attempted to redeem her
mortgage. She approached Ruben Lee’s brother, Carlito, offering to pay her debt, but she was
continually rebuffed. Nine years after the contract was executed, she initiated this suit to
recover title to the subject property.
Respondents, on the other hand, present an entirely different version of events. They claim
that the sale of the property in question was brokered by their mutual acquaintance and
broker, Philip dela Torre. Spouses Lee and Sison are engaged in the real estate business, and
believed that San Pedros agricultural property would be a good investment.
It was disclosed to them that the property had no existing right of way, that it was not
tenanted, and that it was low-lying real estate which was prone to flooding during the rainy
season. They thus negotiated for the purchase of the property, which had an initial asking
price of P200,000.00, and offered to pay P150,000.00 therefor. San Pedro accepted their offer
and agreed to sell the land.
Respondents requested that petitioner execute an affidavit of non-tenancy and a written
power of attorney authorizing respondents to pay the capital gains taxes and expenses on the
registration of the property in their name.
Issue: Whether the Kasulatan ng Ganap na Bilihan ng Lupa is an equitable mortgage?
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Held: In this case, it was incumbent upon San Pedro to adduce sufficient evidence to support
her claim of an equitable mortgage. Petitioner relies on paragraphs 1, 2, 5 and 6 of Article
1602. Upon an examination of the evidence, we find insufficient basis to conclude the
existence of any of the grounds she relied upon.
Anent alleged inadequacy of the purchase price, petitioner presented two witnesses who
testified as to the market values of real estate in the subject locale. Neither of these witnesses,
however, was able to conclusively demonstrate that the purchase price of the property was
grossly inadequate.
The second witness, BIR Revenue Supervisor Juanito Angeles, testified as to the market value
of properties in the subject locale as of the effectivity of Department Order No. 83-94, on
September 25, 1994. However, it must be noted that Angeles did not testify as to the market
value of the locale as of May 23, 1985, the date of the contract in question. Neither did
petitioner present any other evidence of the real estate market values as of that date.
Absent any evidence of the market value of the locale as of the date of the contract, it cannot
be concluded that the price at which the property was sold, or about P8.70 per square meter,
was grossly inadequate. Mere inadequacy of price would not be sufficient. The price must be
grossly inadequate, or purely shocking to the conscience. Since the property in question could
have been worth as little as P20.00 per square meter in 1994, the price of P8.70 per square
meter nine years earlier, in 1985, does not seem to be grossly inadequate. Indeed,
respondents Declaration of Real Property No. 10786, for the year 1987, shows the market
value of the property to be only P34,470.00 for that year.
As regards the alleged continuous possession of the property in question, San Pedro presented
Federico Santos, who testified that he is a farmer by occupation, currently tilling a farmholding
of less than two hectares located at San Juan, Balagtas, Bulacan,[76] owned by Erlinda San
Pedro, to whom he has been paying lease rentals of 18 cavans a year.
The testimony of the witness was offered to prove that he was the agricultural leasehold
tenant of the petitioner on the parcel of land which was described in the complaint. However,
while the witness may have established that he was, indeed, the agricultural tenant of the
petitioner, the identity of the parcel of land which he tills and the parcel of land described in
the complaint was not established. The Kasunduan sa Buwisan entered into between Federico
J. Santos and Lourdes Manalo Vda. De San Pedro dated May 14, 1975 reiterates the tenancy
relation between witness Santos and the San Pedro family. The parcel of land described
therein has an area of 1.5 hectares,while the property subject of the contract in question has
an area of 17,235 square meters, or 1.72 hectares.
There is therefore no clear indicator that the parcel of land being tilled by Santos is,
indeed, the parcel of land subject of the contract between San Pedro and Lee. Although a
landowner-tenant relation has been established between San Pedro and Santos, we cannot
conclude therefrom that San Pedro was in possession of the property subject of the Kasulatan
ng Ganap na Bilihan ng Lupa through her tenant Federico Santos.
As a third ground for the establishment of the purported equitable mortgage, petitioner argues
that paragraph 5 of Article 1602 is present.Again, petitioner presented no proof that she, as
vendor of property, bound herself to pay taxes on the thing sold.
Finally, petitioner relies on Article 1602, paragraph 6, which applies to any other case where
it may be fairly inferred that the real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of any other obligation.
In contrast, respondents’ witnesses all testified as to the existence of a contract of sale
between her and respondent Ruben Lee. Pertinently, Philip dela Torre, who brokered the sale,
and Atty. Venustiano Roxas, who prepared the contract in question, were both unequivocal
as to the nature of the contract. These two witnesses, whose impartiality was not impugned,
both affirmed the sale of the subject property.
Respondents presented documentary evidence which shows that the contract was indeed a
sale: (1) a receipt for P150,000.00 dated May 23, 1985, issued by Erlinda San Pedro, attesting
full receipt of the amount in question; (2) an authority to pay capital gains tax, executed by
Erlinda San Pedro in favor of Ruben Lee; and (3) an affidavit of non-tenancy executed by
Erlinda San Pedro.
The Kasulatan ng Ganap na Bilihan ng Lupa unequivocally states the absolute sale of
the property covered by Transfer Certificate of Title No. T-290387. Being a notarized
document, it carries the evidentiary weight conferred upon duly executed instruments
provided by law, and is entitled to full faith and credit upon its face.
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It is the intention of the parties and not the terminology used in the contract that determines
whether a deed of absolute sale in form is an equitable mortgage
FACTS: Nelson Banga, as mortgagor, with the consent of his wife Socorro, executed a Deed
of Real Estate Mortgage in favor of Jose V. Bello over their real property as security for a loan
extended by Jose to Nelson. The said mortgage was amended twice increasing the amount of
the loan. It appears that a Deed on Absolute Sale was subsequently executed involving the
same property. Socorro filed a complaint for the declaration of nullity of the sale for making
it appear that she consented to the absolute sale. Also, Socorro questions the unconscionably
low consideration for the sale of the property.
Bello contends that the sale was personally and voluntarily executed by Spouses Banga before
the notary public and that the consideration of the sale is fair and reasonable because it is
also based on the real estate mortgage and its amendments. Nelson, on the other hand,
claims that the executed Deed was actually a third amendment to the mortgage and that he
had already paid in full their principal indebtedness.
ISSUE: Whether or not the parties intended the deed of absolute sale to be merely an
equitable mortgage
HELD: Article 1602 of the Civil Code enumerates instances when a contract shall be presumed
to be an equitable mortgage. Some of these cases are: (1) When the price of a sale with right
to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee
or otherwise; (3) In any other cases where it may be fairly inferred that the real intention of
the parties is that the transaction shall ensure the payment of a debt or the performance of
an obligation. Also, Article 1604 of the Civil Code provides that the provisions of Article 1602
shall also apply to a contract purporting to be an absolute sale.
It has been observed by the Trial Court that the Deed of Absolute Sale was prepared in 1987,
the same year that the original deed of real estate mortgage was executed. Such is because
the residence certificate numbers issued to the parties in 1987 appearing in the real estate
mortgage of 1987 are the same as those appearing in the Deed of Absolute Sale purportedly
executed in 1989. In fact, in the acknowledgement portion of the 1989 Deed of Absolute Sale
whereon the phrase ―Series of 1987‖ appears, the number ―9‖ was superimposed on the
number ―7‖, which this Court takes as a clear design to make it appear that it was notarized
in 1989.
In determining whether a deed absolute in form is a mortgage, the court is not limited to the
written memorials of the transaction. 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, such as the relative situation of the parties at that time,
the attitude, acts, conduct, declarations of the parties, the negotiations between them leading
to the deed, and generally, all pertinent facts having a tendency to fix and determine the real
nature of their design and understanding.
Revealing the true intention of the parties is the undisputed relationship of Nelson and the
Bello spouses as debtor and creditors respectively, which, together with the circumstances
mentioned above, draws the Supreme Court to affirm the trial court’s ruling that the deed of
absolute sale was executed to serve as additional security for the loan extended to Nelson.
FACTS: In 1996, Hamilton Salak rented a car from Benjamin Bautista who failed to return
the car after three (3) days prompting the latter to file a complaint against him demanding
the sum of P232,372.00 as payment for car rental fees, fees incurred in locating the car,
attorney's fees and other incidental expenses. Salak and his common-law wife, Shirley
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Unangst, expressed willingness to pay but since they were then short on cash, they sold to
Bautista a house and lot with right to repurchase, specifying, among others, that:
(1) Unangst, as vendor, shall pay capital gains tax, current real estate taxes
and utility bills pertaining to the property;
(2) if Unangst fails to repurchase the property within 30 days from the date of
the deed, she and her assigns shall immediately vacate the premises and deliver
its possession to petitioner without need of a judicial order; and
(3) Unangst refusal to do so will entitle petitioner to take immediate possession
of the property.
Unangst failed to repurchase the property within the stipulated period. As a result,
Bautista filed a complaint for specific performance or recovery of possession, for sum of
money, for consolidation of ownership and damages against Unangst.
Unangst argued that her consent to the deed of sale with right to repurchase was
procured under duress and that even assuming that her consent was freely given, the
contract partakes of the nature of an equitable mortgage.
Bautista alleged thatt the deed should not be construed as an equitable mortgage as it does
not fall under any of the instances mentioned in Article 1602 of the Civil Code where the
agreement can be construed as an equitable mortgage. He added that the "language and
terms of the Deed of Sale with Right to Repurchase executed by Unangst in favor of him
are clear and unequivocal. Said contract must be construed with its literal sense."
ISSUE: Should the deed of sale with right to repurchase executed by the parties be construed
as an equitable mortgage?
RULING: The Deed of Sale with Right of Repurchase executed by the parties was an
equitable mortgage.
First, before executing the deed, respondent and Salak were under police custody due
to the complaint lodged against them by petitioner. They were sorely pressed for money,
as they would not be released from custody unless they paid petitioner. It was at this
point that respondent was constrained to execute a deed of sale with right to repurchase.
It is established that respondent signed the deed only because of the urgent necessity
of obtaining funds.
Second, petitioner allowed respondent and Salak to retain the possession of the
property despite the execution of the deed. In fact, respondent and Salak were not bound
to deliver the possession of the property to petitioner if they would pay him the amount
he demanded. In a contract of sale with pacto de retro, the legal title to the property is
immediately transferred to the vendee, subject to the vendor's right to redeem. Retention,
therefore, by the vendor of the possession of the property is inconsistent with the vendee's
acquisition of the right of ownership under a true sale. Third, the purchase price stated in
the deed was the amount of the indebtedness of both respondent and Salak to petitioner.
The above-mentioned circumstances show that the true intention of the parties is to
secure the payment of said debts. The decisive factor in determining the true nature of
the transaction between the parties is the intent of the parties, as shown not necessarily by
the terminology used in the contract but by all the surrounding circumstances having
a tendency to fix and determine the real nature of their design and understanding.Verily,
an equitable mortgage under paragraphs 2 and 6 of Article 1602 exists here. The
presumption enunciated by Article 1602, the existence of one circumstance is enough to
construe a contract of sale to be one of equitable mortgage.
Facts: On September 4, 1991, petitioners filed a civil action for Declaration of Nullity
of Document and Reconveyance before the RTC of Malolos, Bulacan, against respondents.
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In their Complaint, docketed as Civil Case No. 552-M-91, petitioners alleged that they are
the owners and possessors of three parcels of land, with areas of 1,000, 1,000 and 1,363
square meters, more or less; all in the name of petitioner.
Said parcels became the subject of two Deeds of Absolute Sale, one dated July 21, 1979,
priced at P50,000 and the other dated October 23, 1981 priced at P240,000. Both deeds
were executed by petitioner in favor of respondents. But petitioners claimed that the
transactions entered between petitioners and respondents were not actually sales, but
merely loans in the amount of P260,000. According to petitioners, they used this amount to
redeem some mortgaged properties from the Rural Bank of Pandi, Bulacan. To secure the
loan, however, respondents required petitioners to furnish them with ten TCTs. Three of
these certificates covered the petitioners' properties subject of the present case, while the
other seven belonged to their relatives. Petitioners admitted that their debts to respondent
spouses remained unpaid due to business reverses.
According to petitioners, respondents thereafter registered the disputed properties in their

own names through the use of fraud, misrepresentation and falsification, using the fictitious
contracts of sale. Petitioners alleged that they came to know of said acts of respondents only
when they were served with a notice dated May 22, 1991, from respondents' counsel to
vacate said lots. Thus, petitioners sought the reconveyance of the three parcels from
respondents.
Respondents insisted in their Answer that on October 1981, petitioner Leonisa Hilario sold to
them the three lots in question. Respondent Veronica Gonzales agreed to buy the same out
of pity for petitioners, whose several properties had earlier been foreclosed by the bank. The
transaction was embodied in a Deed of Absolute Sale.
Issue: Whether the transaction in this case involves an absolute sale or equitable mortgage
of real property.
Ruling: The transaction involves a contract of absolute sale, not an equitable mortgage.
Articles 1602 and 1604 of the Civil Code as to an equitable mortgage. Petitioners point out
that the requirements of an equitable mortgage have been satisfied by the
following circumstances, to wit: (1) inadequacy of the selling price; (2) possession in
the premises, and (3) payment of realty taxes. However, such presumption of
equitable mortgage is not conclusive. It may be rebutted by competent and satisfactory proof
to the contrary. Petitioners failed to present any proof whatsoever that the fair
market values of the real property in the area at the time of the transaction were much
higher than the selling price of the parcels in question.
Apparently, petitioners were aware all along that what they had entered into
with respondents is a contract of sale. Petitioners cannot feign ignorance and illiteracy as
to its contents. Said letter is written not in English but in Filipino in which petitioners
are conversant.
Principle: Presumption of equitable mortgage as stated in Article 1602 and 1604 of the Civil
Code which states, respectively:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:
(1) When the price of a sale with right to re-purchase is unusually inadequate;
(2) When the vendor remains in the possession as the lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or granting a new
period is executed;
(4) When the purchaser retains for himself a part of the purchase price
In any other case where it may be fairly inferred that the real intention of
the parties is that the transaction shall secure the payment of a debt or
the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by
the vendee as rent or otherwise shall be considered as interest which shall be subject
to the usury laws.
Art.1604. The provisions of article 1602 shall also apply to a contract purporting to be an
absolute sale.
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FACTS: Petitioner Adoracion Redondo, with her siblings, Vicente, Celerina, and Efren
Redondo, were the registered co-owners of a 282 square-meter residential lot with Transfer
Certificate of Title No. T 5820 situated in Mabolo, Bacoor, Cavite.
Adoracion’s interest in the lot consisting of a one-fourth pro indiviso share, or about 70
square meters, appears in the title. This had been sold and conveyed to herein respondent
Angelina Jimenez, the widow of Efren Redondo. The sale was evidenced by a notarized Deed
of Absolute Sale of a Portion of Land 5 dated February 17, 1981, showing a consideration of
₱3,000. The Register of Deeds inscribed the said sale in the title on July 5, 1988 as entry
number 4796.
On November 27, 1992, Adoracion filed with the RTC a Complaint for annulment of sale
and recovery of ownership with damages. She claimed that she was deceived into signing
the deed of sale when all she wanted was to borrow money from Angelina.
ISSUE: Whether or not the transaction between Adoracion and Angelina an equitable
mortgage.
RULING: NO. Article 1602 of the Civil Code states:
ART. 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:
(1) When the price of a sale with right to repurchase is unusually

inadequate; (2) When the vendor remains in possession as lessee or
otherwise;
(3) When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period is executed;
(6) In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the performance
of any other obligation.
In this case, none of the instances enumerated above attended the assailed transaction
between Adoracion and Angelina.
We are unable to sustain Adoracion’s claim that the consideration of ₱3,000 for the absolute
sale of a 70-square meter residential lot in suburban Mabolo, Bacoor, Cavite was grossly
inadequate. Records show that the market value in 1981 of the entire property, consisting of
282 square meters, was only ₱22,560. Thus, her one-fourth share in the said property would
have roughly amounted to a market value of about ₱5,640, not exactly grossly
disproportionate to the selling price of ₱3,000. The sale should be viewed in light of
Adoracion’s own admission that she was in dire financial straits at the time of the transaction.
This explains why the selling price was below the actual market value of the property.
Adoracion also claims that she paid the real estate taxes on the property. It is true that
payment of realty taxes is a usual burden attached to ownership of real property. Coupled
with continuous possession of the property, it constitutes evidence of great weight that a
person under whose name the realty taxes were declared has a valid and rightful claim over
the land. However, the Tax Receipts on record clearly indicate that it was Angelina who had
been paying the realty taxes on the property from the time of the sale until the filing by
Adoracion of the Complaint for its annulment. Adoracion, on the other hand, failed to present
any evidence to support her claim that she was the one who paid the said taxes.
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Neither are we prepared to indulge Adoracion’s bare allegation of continuous possession of

the disputed property. Note in this particular case that Adoracion is a sister-in-law of
Angelina. At the time of the controversy, Adoracion was already advanced in age and ailing,
with no husband or children to look after her. Angelina, on the other hand, already had a
comfortable place to live in and was faring better than Adoracion. At the time of the sale,
Angelina had just received a hefty sum of money following the death of her husband. A subtle
interplay of complex family issues explains why Angelina opted not to assert her superior
right to possession of the said property. Such mere tolerated possession is not enough to
prove that the transaction between the parties was an equitable mortgage.
In sum, we are convinced the transaction entered into by Adoracion and Angelina in 1981
was indeed a sale, not an equitable mortgage.
Facts: Simeon Villa seeks to recover nine parcels of land situated inBacoor, from Jose
Santiago who is also the administrator of the estateof awoman named Monice Cuenca. The
basis of the plaintiff is onthe termsof an instrument purporting to be a deed of sale of the
said landstohimself for the sum of P2,000.00 which was executed the owner MonicaCuenca
before her death. The plaintiff also contends that sincethewidow did not exercise her right to
repurchase before her deathandalso her heirs have not exercised their right, he would
becometheabsolute owner of the property and is entitled to recover possessionof the said
property.
Issue: Whether or not the transaction is to be considered as a mortgageora sale
Ruling: It is then ruled that the transaction is to be considered as a sale. 'Inrespect to the
written memorandum, it was clearly intended to manifest a conditional sale. There is indeed
no question that any absence of anystatutory prohibition, as to the validity of an agreement
wherebythelender of the loan has taken a deed of land, absolute on its face or inform of a
deed which provides a right to repurchase by the vendor, would give an obligation that he
would hold such deed as a wayorsecurity of the repayment of the debt and not as evidence
of the sale. Unless the rights of innocent third persons have intervened, the lenderof the
money may be compelled to comply specifically with the termsof such an agreement, whether
it be oral or written; and further, that hewill not be permitted, in violation of its terms, to set
up title inhimself orto assert a claim of absolute ownership. It is ruled that concludethat the
judgment entered in the court below should be reversed, without costs in this instance, and
the record returned to the court belowwherejudgment will be entered granting the relief to
which the plaintiff appears to be entitled upon the pleadings and the proof, that is tosay,
ajudgment for the amount of the indebtedness evidencedbytheinstrument, and providing for
the sale of the property mentionedtherein and the application of the proceeds to the payment
of theamount of the judgment, unless that amount is paid bytheadministrator from other
available funds in his hands as suchadministrator, and providing further for the conveyance
of the landsdescribed in the complaint from the plaintiff to the person or personsentitled
thereto as a result of their sale by order of the court, or thepayment of the indebtedness by
the administrator.
Facts: petitioner filed a complaint with the Court of First Instance of Cavite, docketed as Civil
Case No. N-1595 for reconveyance to enforce his right to repurchase two parcels of land, Lots
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Nos. 3962 and 3963 of the Imus Estate covered by TCT Nos. T-4388 and T-4389, respectively,
which he sold to the defendant, now private respondent, pursuant to a sale with pacto de
retro as evidenced by a Deed of Sale with the Right to Repurchase he complaint alleged,
among others, that Bernardo B. Legaspi is the registered owner of the aforementioned two
parcels of land which he sold to his son-in-law, Leonardo B. Salcedo, on October 15, 1965 for
the sum of P25,000.00 with the right to repurchase the same within five years from the
execution of the deed of sale; that before the expiry date of the repurchase period which was
on October 15, 1970, Legaspi offered and tendered to Salcedo the sum of P25,000.00 for the
repurchase of the two parcels of land; that the tender of payment was refused by Salcedo
without justifiable or legal cause; that Salcedo refused to convey the properties to Legaspi as
requested by the latter; that on October 15, 1970, Legaspi deposited in the Office of the Clerk
of Court of First Instance of Cavite City the amount of P25,125.00 as evidenced by Official
Receipt No. 2698797-k marked as Exhibit "B"; that despite earnest efforts towards a
compromise after consignation of the repurchase money had been made, Salcedo refused to
reconvey the properties in question.
In his answer with compulsory counterclaim, Salcedo alleged, among others, that he denies
that Legaspi ever offered and tendered to him the sum of P25,000.00 or requested the
execution of the corresponding deed of reconveyance; that what actually transpired on
October 15, 1970 was that Legaspi asked for an extension of one year within which to
repurchase the two parcels of land bringing with him a document entitled "Extension Period
to Repurchase" marked as Exhibit "1" which Salcedo declined to sign; and that Salcedo also
denies that earnest efforts towards a compromise were pursued by Legaspi for the latter
merely proposed for an extension of one year of the right to repurchase. By way of special
defense, Salcedo claimed that Legaspi was no longer entitled to repurchase the properties in
question for failure to exercise his right within the stipulated period in accordance with Article
1250 of the Civil Code under which Salcedo maintained he was entitled to the payment of
P42,250.00 instead of only P25,000.00
Issue: WON petition validly exercised his right to repurchase
Ruling: Yes, Tender of payment is the manifestation made by the debtor to the creditor of
his desire to comply with his obligation, with the offer of immediate performance. (Tolentino,
Civil Code of the Phil....ippines, Vol. IV [1985]). Generally, it is an act preparatory to
consignation as an attempt to make a private settlement before proceeding to the solemnities
of consignation. (8 Manresa 325). Consignation is the act of depositing the thing due with the
court or judicial authorities whenever the creditor cannot accept or refuses to accept payment
and it generally requires a prior tender of payment. (Limkako v. Teodoro, 74 Phil..... 313). In
instances where no debt is due and owing, consignation is not proper. (Asturias Sugar Central
vs. Pure Cane Molasses Co., 60 Phil..... 255) We have early held that:
Consignation is not required to preserve the right of repurchase as a mere tender of

payment is enough if made on time as a basis for an action to compel the vendee a
retro to resell the property. (Villegas vs. Capistrano, 9 Phil..... 416; Resales vs. Reyes,
et al. 25 Phil..... 495; Paez, et al., vs. Magno, 46 O.G. p. 5425).
Since the case at bar involves the exercise of the right to repurchase, a showing that petitioner
made a valid tender of payment is sufficient. It is enough that a sincere or genuine tender of
payment and not a mock or deceptive one was made. The fact that he deposited the amount
of the repurchase money with the Clerk of Court was simply an additional security for the
petitioner. It was not an essential act that had to be performed after tender of payment was
refused by the private respondent although it may serve to indicate the veracity of the desire
to comply with the obligation.
FACTS: On January 31, 1987, Lina Jardines (respondent) executed in her favor a Deed of
Sale with Pacto de Retro over a parcel of land with improvements, the consideration for which
amounted to P165,000.00.
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It was stipulated in the deed that the period for redemption would expire in six months or on
July 29, 1987. Such period expired but neither respondent nor any of her legal representatives
were able to redeem or repurchase the subject property.
As a consequence, absolute ownership over the property has been consolidated in favor of
petitioner, Diño.
Respondent contends that:
 the Deed of Sale with Pacto de Retro did not embody the real intention of the
parties; the transaction actually entered into by the parties was one of simple
loan and the Deed of Sale with Pacto de Retro was executed just as a security
for the loan,
 the amount borrowed by respondent during the first week of January 1987 was
only P50,000.00 with a monthly interest of 9% to be paid within a period of six
months, but since the said amount was insufficient to buy construction
materials for the house she was then building, she again borrowed an additional
amount of P30,000.00. It was never the intention of respondent to sell her
property to petitioner,
 the value of respondent’s residential house alone is over a million pesos and if
the value of the lot is added, it would be around one and a half million pesos;
it is unthinkable that respondent would sell her property worth one and a half
million pesos for only P165,000.00,
 respondent has even paid a total of P55,000.00 out of the amount borrowed
and she is willing to settle the unpaid amount, but petitioner insisted on
appropriating the property of respondent which she put up as collateral for the
loan, and
 respondent has been the one paying for the realty taxes on the subject
property.
 RTC ruled in favor by the petitioner but CA reversed the decision.
ISSUE: Whether or not the true nature of the contract entered into by the parties as one
equitable mortgage and not a pacto de retro sale.
RULING: Yes. CA correctly ruled that the true nature of the contract entered into by herein
parties was one of equitable mortgage.
Article 1602 of the Civil Code enumerates the instances when a purported pacto de
retro sale may be considered an equitable mortgage, to wit:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:
(3) When upon or after the expiration of the right to repurchase, another instrument
In Legaspi vs. Ong, the Court further explained that:
The presence of even one of the above-mentioned circumstances as enumerated in Article

1602 is sufficient basis to declare a contract of sale with right to repurchase as one of equitable
mortgage. As stated by the Code Commission which drafted the new Civil Code, in practically
all of the so-called contracts of sale with right of repurchase, the real intention of the parties
is that the pretended purchase price is money loaned and in order to secure the payment of
the loan, a contract purporting to be a sale with pacto de retro is drawn up.
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In the same case, the Court cited Article 1603 of the Civil Code, which provides that in case
of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an
equitable mortgage.
In the instant case, the presence of the circumstances provided for under paragraphs (2) and
(5) of Article 1602 of the Civil Code, and the fact that petitioner herself demands payment of
interests on the purported purchase price of the subject property, clearly show that the
intention of the parties was merely for the property to stand as security for a loan. The
transaction between herein parties was then correctly construed by the CA as an equitable
mortgage.
FACTS: Respondent spouses Francisco and Rita Ong were owners of a parcel of land located
at 375 Matienza Street, San Miguel, Manila with an area of 1,010 square meters and a two-
storey house. They mortgaged the subject property with the Permanent Savings and Loan
Bank (PSLB) to secure their loan. For their failure to pay their loan, PSLB foreclosed the
mortgage on the subject property and thereafter sold it in a public auction where the bank
emerged as the highest bidder. Respondent spouses failed to redeem the property within the
redemption period, thus, the title was consolidated in the name of PSLB under Transfer
Certificate of Title (TCT) No. 182956 on November 10, 1988 but respondent spouses
continued to occupy the premises. When PSLB was subsequently ordered liquidated by the
Monetary Board of the Central Bank, PSLB's acquired assets were required to be disposed of
to pay its debts, thus respondent spouses, being the original owners of the subject property,
were given first priority by the Central Bank Liquidator to buy back their property in the
amount of P2,655,000.00 on or before June 13, 1989. Since respondent spouses had no
money then, they approached petitioner's father, Stephen Hong, a classmate and friend of
respondent Francisco, and sought his help to pay and redeem the subject property. Petitioner
and her father were shown the title of the subject property in respondent Rita's name. After
some deliberations, the parties’ agreement was reduced into writing denominated as a DEED
OF Sale with Right to Repurchase drafted by the petitioner’s counsel which respondent and
the petitioner signed.
A deed of absolute sale was executed and the title to the subject property was given to the
petitioner. On 1989, petitioner wrote to the respondents reminding them that the four-month
period to repurchase the subject property will expire and failure to pay on its due date will
force her to take the corresponding action to consolidate title on the property in her name.
The petitioner was granted an extension, however, they failed to redeem. The petitioner then
filed a petition for consolidation of ownership
Respondent spouses alleged that the Deed of Sale with Right to Repurchase did not reflect
the true intention of the parties because the document was actually an equitable mortgage
with illegal provision, i.e.,pactum commissorium.
ISSUE: Whether or not the transaction between the petitioner and respondent was an
equitable mortgage?
Ruling: Yes, the transaction between the parties is an equitable mortgage. Art. 1602 of the
Civil Code enumerates the instances when a contract, regardless of its nomenclature, may be
presumed to be an equitable mortgage.
They are as follows:
(a) when the price of a sale with right to repurchase is unusually inadequate;
(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
(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; and,
(f) in any other case where it may be fairly inferred that the real intention of the
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parties are that the transaction shall secure the payment of a debt or the performance
Art. 1603 provides that in case of doubt, a contract purporting to be a sale with right to
repurchase shall be construed as an equitable mortgage. The presence of even one of the
above-mentioned circumstances as enumerated in Article 1602 is sufficient basis to declare a
contract of sale with right to repurchase as one of equitable mortgage.
In the case at bar, the court found he presence of four circumstances in the transaction on
which bases it ruled that the transaction was an equitable mortgage, to wit: (a) respondents
remained in possession of the subject property even after the execution of the contract; (b)
there was gross inadequacy of price of P2,655,000.00 as contract price since the property
commands the price of P16 million; (c) extensions of the original period of redemption; and
(d) stipulation of interest.
Transactions presumed to be equitable mortgages
Facts: Petitioners are the children and heirs of Sergio Caballero and Elisea Hechanova. In
their lifetime, the couple owned two parcels of land located in Calatrava, Negros Occidental.
The lots with a total area of 110,010 square meters, were covered by Transfer Certificate of
Title Nos. 24402 and 24403, respectively. On March 17, 1972, Sergio Caballero, with the
marital consent of his wife, Elisea Hechanova, sold the two lots to respondent Ong Tiao Bok
for P60,000.00 under a contract denominated as "Deed of Sale with Right to Repurchase."
The contract provided that of the amount of P60,000.00, P23,000.00 should be paid to the
Philippine National Bank, P30,000.00 to a certain Rogelio Cruz, while the remaining amount
of P7,000.00 should be paid to Caballero; that the vendor may repurchase the property within
a period of five years from the date of the execution of the contract with a grace period of
three years from the expiration of the original period of five years; and that an area of 400
square meters in Lot No. 3, a beach resort with coconut and nipa palm trees, would be
reserved for the exclusive use of the vendor until the expiration of the period of redemption,
although it appears that respondent took possession of the lots. The deed of sale was duly
registered.
On January 29, 1996, after Sergio Caballero and Elisea Hechanova had died and 16 years
after the expiration of the stipulated period of redemption, petitioners filed an action in the
Regional Trial Court, Branch 58, San Carlos City, Negros Occidental, for the cancellation of
the annotations of the sale on the titles to the lots. They contended that the contract between
their predecessor-in-interest and respondent was in fact a contract of equitable mortgage
and, since the ten (10) year prescriptive period for the foreclosure of the mortgage had
lapsed, the annotation on the titles to the lots constituted a cloud thereon which should be
removed.
Issue: Whether or not the contract is an equitable mortgage?
Held: In order to determine whether a contract is one of sale or mortgage, the intention of
the parties must be ascertained. In this case, the parties stipulated that "for and in
consideration of the sum of P60,000.00, which the Party of the Second Part [respondent] shall
pay the Party of the First Part [Caballero], the latter hereby sells, cedes, and conveys unto
the Party of the Second Part all his rights, interest and participation in the abovementioned
lots" and that "after the expiration of five years from the signing of the contract the Party of
the First Part has the right to repurchase the two lots for the same consideration as stated in
the Deed of Sale with pacto de retro and that the said Party of the First Part shall have a
grace period of three years from the expiration of the five years." These stipulations clearly
express the intention of the parties to enter into a contract of sale with a right of repurchase.
Their contract needs no interpretation and should be enforced as written.
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FACTS: Spouses Jonas Ramos and Myrna Ramos executed a contract over their conjugal
house and lot in favor of Susana S. Sarao for and in consideration Entitled "DEED OF SALE
UNDER PACTO DE RETRO," the contract, granted the Ramos spouses the option to repurchase
the property within six months with interest. It was further agreed that should the spouses
fail to pay the monthly interest or to exercise the right to repurchase within the stipulated
period, the conveyance would be deemed an absolute sale.
Myrna Ramos tendered to Sarao the amount in the form of two manager's checks, which the
latter refused to accept for being allegedly insufficient. Myrna filed a Complaint for the
redemption of the property and moral damages plus attorney's fees.
RTC DECISION: After trial, the RTC dismissed the Complaint and granted the prayer of Sarao
to consolidate the title of the property in her favor. Aggrieved, Myrna elevated the case to the
CA.
COURT OF APPEALS DECSION: The appellate court sustained the RTC's finding that the
disputed contract was a bonafide pacto de retro sale, not a mortgage to secure a loan. It ruled
that Myrna Ramos had failed to exercise the right of repurchase, as the consignation of the
two manager's checks was deemed invalid. She allegedly failed (1) to deposit the correct
repurchase price and (2) to comply with the required notice of consignation.
ISSUE: (1) Whether or not the Deed of Sale under Pacto de Retro was an equitable
mortgage?
(2) Whether or not the there was no valid tender of payment of the redemption price neither
a valid consignation in the instant case.
RULING: (1) YES. In the present factual milieu, the vendor retained possession of the
property allegedly sold. Petitioner and her children continued to use it as their residence, even
after Jonas Ramos had abandoned them. In fact, it remained as her address for the service
of court orders and copies of Respondent Sarao's pleadings.
The presumption of equitable mortgage imposes a burden on Sarao to present clear evidence
to rebut it. Corollary to this principle, the favored party need not introduce proof to establish
such presumption; the party challenging it must overthrow it, lest it persist. To overturn
that prima facie fact that operated against her, Sarao needed to adduce substantial and
credible evidence to prove that the contract was a bona fide pacto de retro. This evidentiary
burden she miserably failed to discharge.
In a pacto de retro, ownership of the property sold is immediately transferred to the vendee
a retro, subject only to the repurchase by the vendor a retro within the stipulated period. The
vendor a retro's failure to exercise the right of repurchase within the agreed time vests upon
the vendee a retro, by operation of law, absolute title to the property. Such title is not
impaired even if the vendee a retro fails to consolidate title under Article 1607 of the Civil
Code.
On the other hand, an equitable mortgage is a contract that - - although lacking the formality,
the form or words, or other requisites demanded by a statute - - nevertheless reveals the
intention of the parties to burden a piece or pieces of real property as security for a debt. The
essential requisites of such a contract are as follows: (1) the parties enter into what appears
to be a contract of sale, but (2) their intention is to secure an existing debt by way of a
mortgage. The nonpayment of the debt when due gives the mortgagee the right to foreclose
the mortgage, sell the property, and apply the proceeds of the sale to the satisfaction of the
loan obligation.
There is no single conclusive test to determine whether a deed absolute on its face is really a
simple loan accommodation secured by a mortgage. However, the law enumerates several
instances that show when a contract is presumed to be an equitable mortgage, as follows:
Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:
(3) When upon or after the expiration of the right to repurchase another instrument extending
the period of redemption or granting a new period is executed;
(6) In any other case where it may be fairly inferred that the real intention of the parties is
that the transaction shall secure the payment of a debt or the performance of any other
obligation.
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Furthermore, a contract purporting to be a pacto de retro is construed as an equitable

mortgage when the terms of the document and the surrounding circumstances so require.
The law discourages the use of a pacto de retro, because this scheme is frequently used to
circumvent a contract known as a pactum commissorium. The Court has frequently noted that
a pacto de retro is used to conceal a contract of loan secured by a mortgage. Such
construction is consistent with the doctrine that the law favors the least transmission of
rights.
(2) There was valid Tender of Payment. Tender of payment is the manifestation by
debtors of their desire to comply with or to pay their obligation. If the creditor refuses the
tender of payment without just cause, the debtors are discharged from the obligation by the
consignation of the sum due. Consignation is made by depositing the proper amount to the
judicial authority, before whom the tender of payment and the announcement of the
consignation shall be proved. All interested parties are to be notified of the
consignation. Compliance with these requisites is mandatory.
The trial and the appellate courts is incorrect in deciding that there was no valid consignation,
because petitioner had failed to offer the correct amount and to provide ample consignation
notice to Sarao.
The facts show that the notice requirement was complied with. In her August 1, 1991 letter,
petitioner said that should the respondent fail to accept payment, the former would consign
the amount. This statement was an unequivocal announcement of consignation. Concededly,
sending to the creditor a tender of payment and notice of consignation - - which was precisely
what petitioner did - - may be done in the same act.
Principle: Under Article 1604 of the Civil Code, a contract purporting to be an absolute sale
shall be presumed to be an equitable mortgage should any of the conditions in Article 1602
be present. To stress, the existence of any one of the conditions under Article 1602, not a
concurrence, or an overwhelming number of such circumstances, suffices to give rise to the
presumption that the contract is an equitable mortgage.
Facts: In 1986, Spouses Romulo obtained from respondents a loan in the amount
of P50,000.00 with a monthly interest of 10%, which subsequently ballooned to P580,292.00.
To secure the payment of the loan, respondents allegedly duped petitioners into signing a
Contract of Lease and a Deed of Absolute Sale covering petitioners’ house and lot.
The Deed of Absolute Sale purportedly facilitated the cancellation of petitioners’ title on the
house and lot and the issuance of TCT No. 20489 in the name of respondents. Thus,
petitioners prayed for the nullification of the Deed of Absolute Sale, the contract of lease and
TCT No. 20489, and the award of moral and exemplary damages.
Respondents claim that the Deed of Absolute Sale was voluntarily executed by the parties for
the purpose of extinguishing petitioners’ indebtedness to respondents. As consideration of the
sale, respondents allegedly paid the amount of P200,000.00 in addition to the writing off of
petitioners’ obligation to them. That they allowed petitioners to occupy the house and lot as
lessees thereof was founded on the trust they reposed on petitioners, claimed respondents.
Prior to the filing of the civil action, Spouses Layug filed for ejectment, against petitioners to
compel the latter to vacate the house and lot allegedly sold by petitioners to Moises and
subsequently rented out by him to petitioners. Moises alleged that petitioners violated the
terms of the Contract of Lease when the latter failed to pay any rental or exercise their option
to repurchase the house and lot and refused to vacate the property despite demand.
Issue: Whether or not the parties in case intended an equitable mortgage.
Ruling: Yes, the parties intended equitable mortgage.
ARTICLE 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:
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Under Article 1604 of the Civil Code, a contract purporting to be an absolute sale shall be
presumed to be an equitable mortgage should any of the conditions in Article 1602 be present.
To stress, the existence of any one of the conditions under Article 1602, not a concurrence,
or an overwhelming number of such circumstances, suffices to give rise to the presumption
that the contract is an equitable mortgage.
In the case at bar, petitioners remained in possession of the house and lot even after the
execution of the Deed of Absolute Sale. Moreover, they remained in possession of the property
for more than a reasonable time that would suggest that petitioners were mere lessees
thereof.
Hence, the parties intended an equitable mortgage pursuant to the provisions of the Civil
Code.
DOCTRINE: Even if the deeds of sale do not reflect the true intention of the parties, their
real agreement must nonetheless be recognized and enforced. This being the case, the proper
remedy availed was to institute an action for the reformation of the deeds of sale in order to
reflect the true intention of the parties.
FACTS: Napoleon and Victoria Velo claimed that sometime in February of 1993, they had
experienced business reversals and financial difficulties and had sought assistance from
Alexander and Jean Jimeno Bacungan in securing a loan. They proposed that they would
obtain the loan provided that the former would secure the transfer of the titles to them that
would be used as security for the loan. Respondents agreed. However, after they obtained
the new titles, they never applied for a loan with the bank but had secretly negotiated for the
sale of the properties to third parties.
In their answer, the Velos asserted that respondents offered to sell to them 23 parcels
of land, 18 of which were used as collateral for the loan respondents had obtained from
Traders Royal Bank. They claimed to have bought 22 parcels of land and executed the
corresponding deeds of sale on 26 February 1993 and 10 March 1993. They also allegedly
paid in full respondents’ obligation with said bank but only 18 certificates of title released by
the bank were delivered to petitioners. Petitioners further maintained that they returned one
of the deeds of sale to respondents and considered the sale as cancelled. Petitioners averred
that the amounts they paid to respondents were more than enough as consideration of the
23 contracts.
ISSUE: Whether or not the deeds of absolute sale embody the agreements of the parties.
HELD: The Court finds that the deeds of absolute sale do not embody the real intention of
the parties. The records reveal that respondents executed several real estate mortgages over
the properties to secure the payment of the total amount of P350,000.00. Respondents
defaulted on the payments, prompting the bank to foreclose the properties. However, as
illustrated in the testimony of respondent Victoria Velo, respondents and petitioners devised
a plan in which they agreed that in exchange for the apparent transfer of ownership of the
parcels of land to petitioners, the latter would provide for the funds for the redemption of the
properties from the bank in addition to the loan that petitioners would obtain from the bank.
Thus, respondents were able to redeem the properties for the amount of P369,000.00 that
was advanced by way of mortgage to them by petitioners.
Thereafter, respondents executed several deeds of sale purporting to transfer the 18 parcels
of lands. The parties further agreed that upon the transfer of the properties in the name of
petitioners, the latter would obtain another loan from the bank using the properties as
collateral. Petitioners were supposed to remit the loan proceeds to respondents after
deducting the amount of P369,000.00 and, thereafter, allow respondents to buy back the
properties. However, because petitioners had failed to secure a loan from the bank after the
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transfer of the titles in their names, respondents instituted the present action to nullify the
deeds of sale on the ground that the sale was simulated.
This kind of arrangement, where the ownership of the land is supposedly transferred to the
buyer who provides for the funds to redeem the property from the bank but nonetheless
allows the seller to later on buy back the properties, is in the nature of an equitable mortgage
governed by Articles 1602 and 1604 of the Civil Code.
In the instant case, three telling circumstances indicating that an equitable mortgage exists
are present. First, as established by the CA, the price of each of the properties was grossly
inadequate. Second, petitioners retained part of the “purchase price” when they failed to turn
over to the respondents the loan that they were supposed to secure from the bank. Third,
petitioners insisted that part of the consideration of the sale consisted of amounts previously
borrowed by respondents from them, indicating that petitioners were using the properties as
“security” for the payment of respondents’ other loans from them.
The CA concluded that the sale was simulated because of the gross inadequacy of the prices
and the failure by respondents to receive the purchase price. Gross inadequacy of price by
itself will not result in a void contract. That respondents did not receive the purchase price is
not entirely correct. As discussed, the consideration for the transaction was to secure the
payment of respondents’ loan to petitioners.
Also, the CA’s conclusion that petitioner Alexander Bacungan admitted that the sale was
simulated is not supported by the records of the case. Petitioners merely admitted that
previous to the execution of the deeds of sale, respondents had borrowed other sums of
money from them.
All told, while the deeds of sale do not reflect the true intention of the parties, their real
agreement must nonetheless be recognized and enforced. This being the case, the proper
remedy availed was to institute an action for the reformation of the deeds of sale in order to
reflect the true intention of the parties. However, instead of dismissing the complaint
altogether, the just and expeditious manner is to settle once and for all the rights and
obligations of the parties under the equitable mortgage.
Period of repurchase
Principle: Paragraph 3 of Article 1606, “However, the vendor may still exercise the right to
repurchase within thirty days from the time final judgment was rendered in a civil action on
the basis that the contract was a true sale with right to repurchase.”
Facts: Petitioner spouses instituted against respondents an action for specific performance
for a recovery of sum of money and damages seeking the reimbursement of the expenses
they incurred in connection with the preparation and registration of two public instruments,
namely a Deed of Sale and an Option to Buy.
Carlos Gobonseng, Jr. and Theresita Ong (sellers) sold real estate to Ronaldo Abilla and
Geralda Dizon (buyers). They executed a “Deed of Sale” and “Option to Buy.” The buyers bore
the cost of said contracts. They asked for reimbursement but the sellers refused. Hence, they
filed a civil action against the vendor.
The RTC ruled in favor of the petitioners, finding the subject contract to be a pacto de
retro sale (they are entitled to reimbursement, it is generally the seller who bore the costs of
the executing the contract), but ruled that the seller’s right to redeem had already prescribed.
The CA affirmed. On motion for reconsideration, the sellers sought to exercise their right to
redeem citing third paragraph of Art. 1606 giving the seller-a-retro the right to repurchase
the property within 30 days from the final judgment declaring the contract to be a real pacto
de retro sale (this issue was not raised on the trial court). This was denied.
Issue: May the vendors in a sale judicially declared as a pacto de retro exercise the right of
repurchase under Article 1606, third paragraph, of the Civil Code, after they have taken the
position that the same was an equitable mortgage?
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Ruling: No. The application of the third paragraph of Article 1606 is predicated upon the bona
fides of the vendor a retro. It must appear that there was a belief on his part, founded on
facts attendant upon the execution of the sale with pacto de retro, honestly and sincerely
entertained, that the agreement was in reality a mortgage, one not intended to affect the title
to the property ostensibly sold, but merely to give it as security for a loan or other obligation.
In that event, if the matter of the real nature of the contract is submitted for judicial
resolution, the application of the rule is meet and proper; that the vendor a retro be allowed
to repurchase the property sold within 30 days from rendition of final judgment declaring the
contract to be a true sale with right to repurchase. Conversely, if it should appear that the
parties agreement was really one of sale transferring ownership to the vendee, but
accompanied by a reservation to the vendor of the right to repurchase the property and there
are no circumstances that may reasonably be accepted as generating some honest doubt as
to the parties' intention, the proviso is inapplicable. The reason is quite obvious. If the rule
were otherwise, it would be within the power of every vendor a retro to set at naught
a pacto de retro, or resurrect an expired right of repurchase, by simply instituting an action
to reform the contract known to him to be in truth a sale with pacto de retro into an equitable
mortgage. As postulated by the petitioner, to allow herein private respondents to repurchase
the property by applying said paragraph x x x to the case at bar despite the fact that the
stipulated redemption period had already long expired when they instituted the present
action, would in effect alter or modify the stipulation in the contract as to the definite and
specific limitation of the period for repurchase (2 years from date of sale or only until June
25, 1958) thereby not simply increasing but in reality resuscitating the expired right to
repurchase x x x and likewise the already terminated and extinguished obligation to resell by
herein petitioner. The rule would thus be made a tool to spawn, protect and even reward
fraud and bad faith, a situation surely never contemplated or intended by the law.
In the case at bar, both the trial court and the Court of Appeals were of the view that the
subject transaction was truly a pacto de retro sale; and that none of the circumstances under
Article 1602 of the Civil Code exists to warrant a conclusion that the transaction subject of
the Deed of Sale and Option to Buy was an equitable mortgage. The Court of Appeals correctly
noted that if respondents really believed that the transaction was indeed an equitable
mortgage, as a sign of good faith, they should have, at the very least, consigned with the trial
court the amount of P896,000.00, representing their alleged loan, on or before the expiration
of the right to repurchase on August 21, 1983.
Clearly, therefore, the declaration of the transaction as a pacto de retro sale will not, under
the circumstances, entitle respondents to the right of repurchase set forth under the third
paragraph of Article 1606 of the Civil Code.
Legal Redemption- Arts. 1619-1623
FACTS: On 1952 the Provincial Board of Cebu granted to Sudlon Agricultural High School
(SAHS), the usufruct of 41 parcels of land covering 104.5441 ha of the Banilad Friar Lands
Estate. Asuncion Sadaya-Misterio executed a Deed of Sale over a parcel of land (which was
also a part of the Banilad Friar Lands Estate) in favor of SAHS. The sale was subject to the
right of Misterio to repurchase the property 1) after the high school shall have ceased to exist,
OR 2) shall have transferred its site elsewhere. The Provincial Board of Cebu, through a
resolution, donated the aforementioned 41 lots to SAHS, subject to 2 conditions: (1) that if
SAHS ceases to operate, the ownership of the lands would automatically revert to the
province, and (2) that SAHS could not alienate, lease, or encumber the properties.
On June 10, 1983, B.P. 412 was enacted, which consolidated as one school system certain
vocational schools in the province of Cebu, including SAHS, and which became an extension
of the Cebu State College of Science and Technology (CSCST). Cebu decided to recover the
41 lots it had earlier donated on the ground that SAHS had no personality to accept the
donation. When the heirs of Asuncion Misterio, who had then died intestate, learned that the
province of Cebu was trying to recover its donated property, they informed the province on
August 19, 1998 of their intention to exercise their right to repurchase the property as
stipulated in the Deed of Sale.
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On March 19, 1990: The Misterio heirs then sent a letter to CSCST informing their intention
to exercise the option to repurchase, on the ground that SAHS had ceased to exist.
The Misterio heirs then filed a complaint before the RTC for “Nullity of Sale and/or
Redemption”, alleging: that SAHS had no juridical personality of its own at the time of the
sale, therefore the sale was null and void and that assuming the sale was valid, the enactment
of BP 412 abolished SAHS and converted it to become part of CSCST, therefore rendering the
operative condition granting the vendor and her heirs the right to redeem
Issue: Whether or not the action to redeem the property has prescribed.
Ruling: The Petition was denied by reason of the essence of a pacto de retro sale is that title
and ownership of the property sold is immediately vested in the vendee a retro, subject to
the restrictive condition of repurchase by the vendor a retro within the period provided in
Article 1606 of the New Civil Code. The failure of the vendor a retro to repurchase the property
vests upon the latter by operation of law the absolute title and ownership over the property
sold.
Under Art. 1606. The right referred to in Article 1601, in the absence of an express agreement,
shall last four years from the date of the contract. Should there be an agreement, the period
cannot exceed ten years. However, the vendor may still exercise the right to repurchase
within thirty days from the time final judgment was rendered in a civil action on the basis that
the contract was a true sale with right to repurchase
Misterio’s heirs contend that the issue of whether SAHS is yet to be resolved by court, hence
the applicable provision is Article 1606(3). The contention is misplaced as their right to
repurchase the property was not dependent upon the prior final interpretation of the said
phrase. There is no doubt that the Deed of Sale actually includes a right to repurchase. The
four-year period for the petitioners to repurchase the property was not suspended merely and
solely because there was a divergence as to the precise meaning of the phrase “after the
SAHS shall cease to exist.”
FACTS: Respondents Huang Sui Sin, Josefino Huang, Miguel Huang and Milagros Huang,
entered into a contract of ―Indenture‖ with EAP Development Corporation (EAP) under which
the EAP shall develop their lands into a first-class subdivision. Carlos R. Tamayo purchased
a lot from Huang et al. under a contract to sell. In the said agreement, Tamayo agreed to
pay in 60 monthly installments a total purchase price of P242, 080.00. Tamayo paid
installments up to June 1982, but stopped paying thereafter due to the non development of
the subdivision as agreed upon in the contract. Later on, Huang et al. filed an action to
rescind the contract of ―Indenture‖ against EAP for abandoning the development of the
subdivision. Such petition was granted by the Regional Trial Court (RTC).
More than 5 years after the execution of the contract to sell, Huang et al. demanded Tamayo
for the payment of lot. Tamayo issued a check representing the full payment of the value
of the lot, for which a receipt was issued. However, Huang et al. returned the check to
Tamayo. Tamayo thus filed an action for specific performance with damages against Huang
et al. before the Housing and Land Use Regulatory Board (HLURB). Both the HLURB Arbiter
and HLRUB Board of Commissioners dismissed Tamayo‘s complaint, on the ground that there
has been no valid consignation. However, HLURB removed the awards of damages in favor
of Huang et al.
On appeal by Huang et al. to the Office of the President (OP), they raised for the first time
that the subject lot has been sold to certain Nene Abijar. The OP affirmed the decision of the
HLURB holding that Abijar‘s right as a purchaser of
the land in good faith prevails over the right of Tamayo, without prejudice to Tamayo‘s right
to reimburse what he has already paid.
ISSUE: Whether or not the contract to purchase the lot between Tamayo and Huang et al.
remains valid
RULING: No. P.D. 957 is a law that seeks to regulate the sale of subdivision lots and
condominiums in view of the increasing number of incidents wherein “real eastate subdivision
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owners, developers, oerators, and/or sellers have reneged on their representations and
obligations to proved and maintain properly” the basic requirements and amenities, as well
as “reports of alarming magnitude of swindling and fraudulent manipulations perpetrated
by unscrupulous subdivision and condominium sellers and operators.” As such, PD 957
requires the registration not just of the developers, seller, brokers and /or owners of the
project but also of the project itself. Upon the registration of the project, license to sell must
be obtained prior to the sale of the subdivision lots or condominium units therein. The law
also provides for the suspension and revocation of the registration and license in certain
instances, as well as the procedure to be observed in the event thereof. Finally, the law
provides for administrative fines and other penalties in case of violation of or non-compliance
with its provisions.
Doctrine: Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of article 1616
and other stipulation which may have been agreed upon.
Facts: Spouses Angel Villarica and Nieves Palma Gil de Villarica sold to the spouses Gaudencio
Consunji and Juliana Monteverde a lot containing an area of 1,174 sq. meters. The instrument
of absolute sale , in the form of a deed poll, was acknowledged by a Notary Public. The public
instrument of absolute sale and the vendors' TCT No. 2786 were delivered to the vendees.
On the same day the spouses Consunji executed another public instrument, whereby they
granted the spouses Villarica an option to buy the same property within the period of one
year. In July, same year, the spouses Consunji registered the absolute deed of sale, Exh. "B",
in consequence of which TCT No. 2786 in the names of the spouses Villarica was cancelled
and a new TCT No. 3147 was issued in the names of the spouses Consunji. The spouses
Consunji sold the lot to Jovito S. Francisco for the price of P47,000 by means of a public
instrument of sale Exh. "4". This public instrument of sale was registered in view of which
TCT No. 3147 in the names of the spouse Consunji was cancelled and a new TCT in the name
of Jovito S. Francisco was issued.
Petitioners, Spouses Villarica contend that the Court of Appeals erred in finding that the public
instrument of absolute sale, Exh. "B", expressed the true intention of the parties, arguing that
under Article 1604 in relation to Articles 1602 and 1603 of the Civil Code, the instrument of
absolute sale, Exh. "B", should be presumed as an equitable mortgage on the grounds that
(3) the period of one year for repurchase granted in the instrument Exh. "D" was extended
for one month.
Issue Whether or not the right of repurchase was extended.
Ruling: NO. The contention is unmeritorious. (3) In Exh. "D" the Consunjis as new owners
of the lot granted the Villaricas an option to buy the property within the period of one year
from May 25, 1951 for the price of P37,750. Said option to buy is different and distinct from
the right of repurchase which must be reserved by the vendor, by stipulation to that effect,
in the contract of sale. This is clear from Article 1601 of the Civil Code, which provides:
Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of article
1616 and other stipulation which may have been agreed upon.
The right of repurchase is not a right granted the vendor by the vendee in a
subsequent instrument, but is a right reserved by the vendor in the same instrument
of sale as one of the stipulations of the contract. Once the instrument of absolute sale
is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter
granted by the vendor by the vendee in a separate instrument cannot be a right of repurchase
but some other right like the option to buy in the instant case. Hence, Exhibits "B" and "D"
cannot be considered as evidence of a contract of sale with pacto de retro. Since Exh. "D" did
not evidence a right to repurchase but an option to buy, the extension of the period of one
year for the exercise of the option by one month does not fall under No. 3, of Article 1602
of the Civil Code, which provides that:
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.
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Concept of Legal Redemption
FACTS: Petitioner Mactan Cebu International Airport Authority (MCIAA) seeks the reversal
of the CA decision which ruled in favor of the Private respondents (Melba Limbaco) for the
reconveyance of the disputed lot.
Sometime in 1949, National Airport Corporation informed the owners of the various
lots surrounding the Lahug Airport (now IT Park) that the government will purchase
their lands for the expansion of the airport. The landowners were convinced to sell
their properties, otherwise, the government will be forced to institute
expropriation proceedings in courts. Some landowners were hesitant to sell their land,
including the grandmother of Melba Limbaco (Inez), but agreed to sell since the government
promised that the land will be returned when it is no longer in use.
Other landowners were able to place a "rider" or certification which indicated that the land
will be returned if not used by the airport. On the other hand, the sale of Inez' property was
covered by a Deed of Sale signed by her and Mariano Reyes representing the NAC. The deed
indicates that the Lot 742 was sold for P2,596.40; and Lot 953 for P1,125.20. The deed does
not contain any provision regarding Inez' right to repurchase the properties. Nor does she
have any rider such as the one given to others.
The Lahug airport was then transferred to Mactan; lahug landowners were able to recover
their properties. Melba instituted the case of reconveyance and won in the RTC & CA; hence
the instant petition.
ISSUE: WHETHER INEZ OUANO AND HER SUCCESSORS ARE ALLOWED TO REPURCHASE
THE LOTS IN QUESTION ABSENT ANY "RIDER" IN THE DEED OF SALE SIMILAR TO THE SALES
OF ADJACENT LOTS WHICH CONTAINED RIDERS.
HELD: Yes. Inez ouano and her successors are allowed to repurchase the lots in
question absent any "rider" in the deed of sale similar to the sales of adjacent lots which
contained riders.
We see no reason, why Inez should be considered as not similarly situated as the owners of
these other lots. All these lots surround the Lahug Airport and were acquired by
the government for the proposed expansion of the airport. MCIAA has not presented any
evidence to show that Inez' lots were acquired for a different purpose or under
different conditions. Why then should the sale of such lots be singled out as not subject to
the right to repurchase when a good number of the lots around them were already
repurchased by their original owners?
In the instant case, the deed of sale and the verbal agreement allowing the right
of repurchase should be considered as an integral whole. The deed of sale relied
upon by petitioner is in itself the note or memorandum evidencing the contract. Likewise,
the defense of Statute of Frauds does not apply in the case at bar since the sale has
been consummated, MCIAA accepted some benefits thereunder, it cannot now deny
the existence of the agreement.
Ultimately, it is the agreement or representation made by the NAC that induced
Inez to execute the deed of sale; that the vendors and their heirs are given the right
of repurchase should the government no longer need the property. This led the
Supreme Court to accept the verbal agreement because where a "parol
contemporaneous agreement", the verbal agreement in this case, was the moving cause
of the written contract, or where the parol agreement forms part of the consideration of
the written contract, and it appears that the written contract was executed on the faith of
the parol contract or representation, such evidence is admissible.
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SALE WITH "PACTO DE RETRO;" RIGHT OF REDEMPTION. — The pendency of an

action brought in good faith and relating to the validity of a sale with pacto de retro, tolls
the term for the right of redemption.
Reformation of a deed will be granted where there is a mistake on one side and fraud or
unfair dealing on the other and the defrauded party comes into court with clean hands.
FACTS: Lots Nos. 136 and 137 and the house on lot No. 132 originally owned by Spouse
Henry E. Teck, and lot No. 135 was the property of Teck's wife, Magdalena Lim. Prior to June
20, 1923, the spouses sold the property in question to the plaintiff, Ong Chua, and on June
17, 1923, the latter executed a public document granting to Magdalena Lim and Henry E.
Teck the right to repurchase lot 135 for the sum of P6,500 within as well as lots Nos. 136,
137, and the house on lot 132 for the sum of P13,500 at any time within four years from
date. Neither one of the documents was placed on record with the register
Moore called Carr's attention to the lots above-mentioned and told him that he could buy the
lots for P20,000, the amount which Ong Chua paid for them to Henry E. Teck and Magdalena
Lim. Moore, among other things, informed Carr that Teck and his wife had the right to
repurchase the property in question from Ong Chua and that such rights would
expire in June, 1927.
The agreed purchase price of the property was P20,000, but Carr only had P13,500 on hand
and desired to obtain a loan of P6,500 from Zamboanga Mutual Building and Loan Association
of which Moore was the secretary. Thereupon instructed his clerk, C.E. Darlucio to prepare
and typewrite the deed of sale without including the condition of right to
repurchase of the Spouses Teck and Lim. The deed was signed by Ong Chua in the
presence of Darlucio and notarized duly by Moore. Ong Chua did not understand English and
was therefore ignorant of the arrangement and asked if the document contained a condition
in reference to right of repurchase., but was told that the document was sufficient.
Subsequently, the loan from the Building and Loan Association became unnecessary, but
instead of redrafting the deed, it was agreed that Moore would keep in custody
(escrow) the documents and would not delivery to any of them until the expiration
of the period of repurchase.
In September 1926, Moore was taken critically ill and while under treatment, Carr came to
him on various occasions and demanded the documents be delivered to him. The former
refused to make delivery of said documents as it is contrary to the agreement, but because
Carr continued to molest with his demands, Moore surrendered the deed and almost
immediately presented it to register of deeds for registration.
In July 1926, Teck offered to repurchase the property from Ong Chua, who thereupon
demanded to Carr of the reconveyance of the property to the spouses Teck and Lim, but
refused to do so, claiming he had absolute title to said property, that the deed did not contain
any reference to the right to repurchase. This is the first time Ong learned that the deed did
not contain any reference to the rights of repurchase.
On July 23, 1926 an action was brought, the plaintiff alleging in substance the principal
facts hereinbefore stated and demanding that the deed in question be reformed in accordance
therewith. The defendant answer the pleading setting up as special defenses that the deed
in question contained no stipulation as to rights of repurchase and that if there was any
agreement or promise on the part of the defendant to convey the property to Henry E. Teck
and Magdalena Lim or to the plaintiff.
The trial court ordered the reformation of the deed, Exhibit A, in accordance with the
plaintiff's demand. On appeal made an assignment of error, among else (2) that the facts
proven do not justify the reformation of the deed in question.
ISSUE(s): W.O.N. THE DEED CAN BE REFORMED TO CONTAIN THE RIGHTS OF THE
SPOUSES TO REPURCHASE and WILL THE PENDENCY OF THE CASE TOLL THE TERM FOR
THE RIGHT OF REDEMPTION.
RULING: YES. Reformation will be given where there is a mistake on one side and fraud or
unfair dealing on the other and the defrauded party comes into court with clean hands.
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The evidence is conclusive that the plaintiff had no clear conception of the contents of the
deed. He (Chua) was anxious to protect the rights of redemption held by the parties who
sold the land to him, is very obvious; indeed, if he had failed to do so, he would have laid
himself open to an action for damages. But the deed was written in the English language,
with which the plaintiff was unfamiliar, and he had to rely on the statements of Moore and
was told that the document was sufficient, being that he had previous business relations, it
was but natural for him to believe Moore's statement.
On the other hand, Carr knew the contents of the deed and fully agreed to Moore's plan to
place it in escrow until the expiration of the term for the repurchase or redemption of the
land, nevertheless, he violated his own agreement, harassed Moore, then a very sick man,
into giving him possession of the deed prematurely. He took immediate advantage of that
circumstance and hastened to have the document presented to the register of deeds for the
issuance of certificates of title. It is elementary that such conduct constitutes fraud and was
calculated to obtain an unfair advantage over the plaintiff.
It is an old and well stablished rule that the pendency of the action would toll the term for the
right of redemption. The sale of the property by the plaintiff to the defendant was subject to
Teck's and Lim's rights of redemption, and it was perfectly proper for the court below, in its
judgment, to define the extent of these rights and neither was it error on the part of the
court to hold that the pendency of the action tolled the term for the right of redemption.
The appealed judgment is affirmed with the costs against the appellant. So ordered.
Legal Redemption
FACTS: A valuable piece of land located at Meycauyan, Bulacan, with an area of 24,576 sq.
m. and covered by OCT No. 0-5290 is disputed by Lee Chuy Realty Corporation and Marc
Realty and Development Corp. Such land was originally co-owned by Ruben Jacinto(one-sixth),
Dominador, Arsenio, Liwayway all surnamed Bascara and Ernesto jacinto(collectively owned
the remaining five-sixths).
On Feb. 4, 1981, Ruben Jacinto sold his one-sixth pro-indiviso share to LEE CHUY REALTY
which was registered 30 April 1981. On 5 May 1989 the Bascaras and Ernesto Jacinto also
sold their share to MARC REALTY which was registered on 16 October 1989.
Lee Chuy Realty claims that it was never informed of the existence of the sale between Marc
Realty and the Bascaras/Jacinto. Marc Realty insists that Lee Chuy verbally notified of the
sale and was given a copy of the deed of sale.
On 13 November 1989 LEE CHUY REALTY filed a complaint for legal redemption against MARC
REALTY and consigned in court a manager's check for 614,400. MARC REALTY insisted that
the complaint be dismissed for failure to state a cause of action there being no allegation of
prior valid tender of payment or a prior valid notice of consignation.
On Dec 26, 1990, the trial court ruled in favour of Lee Chuy Realty which stated that there
was a valid tender of payment and consignation. It also stated that neither a separate offer
to redeem nor a formal notice of consignation is necessary for the reason that the filing of the
action itself, within the period of redemption, is equivalent to a formal offer to redeem.
On 1 February 1991 MARC REALTY filed a Petition for Certiorari, Prohibition with Temporary
Restraining Order and/or Writ of Preliminary Injunction which was referred to the Court of
Appeals. The CA reversed the decision of the lower court and ruled that "a prior tender or
offer of redemption is a prerequisite or precondition to the filing of an action for legal
redemption” and that "there must be tender of the redemption price within the required period
because the policy of the law is not to leave the purchaser's title in uncertainty beyond the
established 30-day period.
MARC REALTY contends that prior tender of payment is a condition precedent to the filing of
an action in court in order to validly exercise the right of legal redemption. LEE CHUY REALTY
however argues that the filing of the action itself is equivalent to a formal offer to redeem,
which is a condition precedent to the valid exercise of the right of legal redemption.
Lee Chuy filed a motion for reconsideration but was denied.
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ISSUE: WON a formal offer to redeem accompanied with tender of payment a condition
precedent to the filing of an action for the valid exercise of the right of legal redemption; is
the filing of the action with consignation equivalent to a formal offer to redeem.
HELD: The Court of Appeals erroneously concluded that a prior tender or offer of redemption
is a prerequisite or precondition to the filing of the action for legal redemption. To avail of the
right of redemption what is essential is to make an offer to redeem within the prescribed
period. There is no prescribed form for an offer to redeem to be properly effected. It can
either be the formal tender with consignation or the filing of a complaint in court. What is
paramount is the availment of the fixed and definite period within which to exercise the right
of legal redemption.
The filing of the action itself is equivalent to a formal offer to redeem. What constitutes a
condition precedent is either a formal offer to redeem or the filing of an action in court
together with the consignation of the redemption price within the reglementary period.
The decision of respondent Court of Appeals is REVERSED and SET ASIDE. The decision of the
Regional Trial Court of Malolos, Bulacan is REINSTATED.
FACTS:
1. Spouses Estela and Rodolfo Calderon filed a verified complaint against
petitioner for specific performance and for the issuance of cease and desist
order and damages.
2. Spouses Geronimo erected a building for his family and later became a church.
It has been used in gatherings and worship.
3. The respondents contended that the noise affected the respondent’s health
and caused inconvenience to respondent’s health and caused inconvenience
because they were forced to leave their house if they want peace and
tranquility.
4. Respondents sought assistance from the President of the homeowners'
association. SACC, through Atty. Alan Alambra promised that it will take steps
to avoid church activities beyond 10:00 p.m. However, the intolerable noise
still continued.
5. SACC, Joel Geronimo, Annie Geronimo, Susan Geronimo and Jonas Geronimo
denied the allegations with regard to the activities that allegedly caused
disturbance and stress to respondents. They averred that the HLURB has no
jurisdiction over the case which primarily involves... abatement of nuisance,
primarily lodged with the regular courts.
6. The HLURB Arbiter rendered a Decision on October 22, 2007 and ordered
petitioners not to use the property at #46 Silverlane Street for religious
purposes and as a location of a church. The case was appealed, the CA
dismissed.
ISSUE: Whether or not CA erred in ruling that the HLURB has jurisdiction over the present
controversy.
RULING: No. CA didn’t erred in ruling that the HLURB has jurisdiction over the present
controversy. Presidential Decree (P.D.) No. 1344, "EMPOWERING THE NATIONAL HOUSING
AUTHORITY
TO ISSUE WRIT OF EXECUTION IN THE ENFORCEMENT OF ITS DECISION UNDER
PRESIDENTIAL DECREE NO. 957," clarifies and spells out the quasi-judicial dimensions
of the grant of jurisdiction to the HLURB in the following specific terms:
SEC. 1. In the exercise of its functions to regulate the real estate trade and business
and in addition to its powers provided for in Presidential Decree No. 957, the National
Housing Authority shall have exclusive jurisdiction to hear and decide... cases of the
following nature:
1. Unsound real estate business practices;
2. Claims involving refund and any other claims filed by subdivision lot or
condominium unit buyer against the project owner, developer, dealer,
broker or salesman; and
3. Cases involving specific performance of contractual and statutory
obligations filed by buyers of subdivision lots or condominium units
against the owner, developer, dealer, broker or salesman.
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Jurisdiction over the subject matter of a case is conferred by law and determined by the
allegations in the complaint which comprise a concise statement of facts. The nature of an
action, as well as which court or body has jurisdiction over it, is determined based on the
allegations contained in the complaint of the plaintiff, irrespective of whether or not the
plaintiff is entitled to recover upon all or some of the claims asserted therein. The averments
in the complaint and the character of the relief sought are the ones to be consulted.
Redemption By Co-owners
FACTS: The parties in this case are brothers. Senen and Virgilio purchased a house and lot
for the benefit of their father, Maximiano Aguilar. They executed a written agreement
stipulating that their shares in the house and lot would be equal and that Senen would live
with their father on condition that he would pay the Social Security System (SSS) the
remaining loan obligation of the former owners. However, their father died. Virgilio then
demanded Senen to vacate the house so that the property will be sold and that the proceeds
will be divided between them. Consequently, Senen refused to comply with his brother’s
demand.
Virgilio filed a complaint in court for specific performance and prayed that Senen be compelled
to sell the property so that the proceeds could be divided between them.
The trial court rendered its decision, declaring that the brothers are co-owners of the house
and lot and are entitled to equal shares; and ordering that the property be sold and the
proceeds to be divided equally between them. Further, the court ordered Senen to vacate the
property and to pay Virgilio rentals with interests.
On appeal, the CA reversed the decision. Aggrieved, Virgilio filed a petition for review on
certiorari. The petition was granted and the CA decision was reversed and set aside. Moreover,
the Court ordered Senen to vacate the premises and to pay Virgilio a monthly rental.
This led to Senen to file with the Regional Trial Court an action for legal redemption against
Virgilio and another brother, Angel. In his complaint, Senen alleged that while he knows that
Virgilio sold his’ share of the property to Angel, he (Senen) was not furnished any written
notice of the sale. Consequently, as a co-owner, he has the right to redeem the property.
Meanwhile, pursuant to the Court’s decision (on the petition for review on certiorari filed by
Virgilio), the property was sold at public auction to Alejandro Sangalang. Virgilio then received
his share of the proceeds as well as the rental payments due from Senen.
By then, Virgilio moved to California, USA. Through the Philippine Consulate in San Francisco
he received a copy of Senen’s complaint. The trial court dismissed the case on the ground of
laches, holding that Senen occured a delay of (7) years before asserting his right to redeem
the property in question.
On appeal, the CA affirmed the order of the trial court. Hence, this instant petition.
First ISSUE:
Whether or not Senen still has the right for legal redemption?
RULING:
No, the right is no longer available to him.
Legal redemption (retracto legal de comuneros) is a privilege created by law, partly by reason
of public policy and partly for the benefit of the redemptioner to afford him a way out of a
disagreeable or inconvenient association in which he has been thrust. (Villasor vs. Medel, 81
Phil. 546, 550 [1948])
in this case, Senen has actual knowledge of the sale of Virgilio’s share to Angel in 1989. As
provided in Article 1623, he has thirty days from such actual knowledge within which to
exercise his right to redeem the property. However, he did not take action and waited (7)
years before filing his complaint.
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Definitely, such unexplained delay amounted to laches. In conclusion, to uphold his right
would unduly cause injury to Alejandro Sangalang, who was a purchaser in good faith and for
value.
Second ISSUE:
Whether or not there being no written notice to Senen of the sale by his brother, as his co-
owner, the thirty-day redemption period has not prescribed?
RULING:
Senen’s contention lacks merit.
With respect to redemption by co-owners, in case the share of a co-owner is sold to a third
person, the governing law is Article 1620 which provides:
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 rate.
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.
From the above provision, the following are the requisites for the exercise of legal redemption:
(1) There must be co-ownership;

(2) One of the co-owners sold his right to a stranger;
(3) The sale was made before the partition of the co-owned property;
(4) The right of redemption must be exercised by one or more co-owners within a period of
thirty days to be counted from the time that he or they were notified in writing by the vendee
or by the co-owner vendor; and
(5) The vendee must be reimbursed for the price of the sale.
“The old rule that a written notice of the sale by the vendor to his co-owners is indispensable
for the latter to exercise their retracto legal de comuneros. More recently, however, we have
relaxed the written notice requirement. Thus, in Si vs. Court of Appeals, we ruled that a co-
owner with actual notice of the sale is not entitled to a written notice for such would be
superflous. The law does not demand what is unnecessary.”
Facts: This involves a real property situated in Toledo City, Cebu with an area of 433 square-
motors Anunciacon Bahena vda de Meno upon her death, the property was transferred to her
5 children petitioners Narcisa Avila, Natividad Macapaz, Francisca Adlawan, Leon Nemeño and
Jose Bahena and built there respective houses on there lot. In 1964 Benjamin Barabat leased
a housed owned by Avila. Avila transferred to Cagayan however she returned to Toledo in
1979 she offered her house and share to her siblings but no body was interested in buying it
so she offered it to respondent Barabat which he agreed. Avila sold the house and lot for
8,000 pesos. However after such sale was made the siblings of Avila together with their
lawyers informed Barabat of the period that they were allowed to stay since, the siblings
bought it from Avila. Respondent Refused and demanded that Avila execute a public document
evidencing the sale, but she refused hence prompting respondent to file a quieting of title at
the RTC of Toledo, it was further amended to include an annulment of the deed of sale to the
spouses Adlawan, specific performance, partition and damages as additional causes of action.
The trial court ruled in favour to respondent and as well as the C.A. Hence this petition
Issues: WON such was a Equitable Mortgage or Sale?
Ruling: Petitioners contend that 1602 and 1604 must apply.
For Articles 1602 and 1604 to apply, two requisites must concur:
 the parties entered into a contract denominated as a contract of sale and

 their intention was to secure an existing debt by way of mortgage.
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Furthermore, contrary to petitioners’ claim, the trial court found that it was respondents who
took over the payment of real property taxes after the execution of Exhibit "A." There is no
reason to depart from these factual findings because, as a rule, factual findings of the trial
court, when adopted and confirmed by the Court of Appeals, are binding and conclusive on
the Court and generally will not be reviewed on appeal to us.5 There is no reason for us to
deviate from this rule.
Petitioners’ claim of gross inadequacy of selling price has no basis. They failed to introduce
evidence of the correct price at the time the land was sold to respondents in 1979. How can
we therefore conclude that the price was grossly inadequate? In the absence of evidence as
to the fair market value of a parcel of land at the time of its sale, we cannot reasonably
conclude that the price at which it was sold was inadequate
Petitioners’ rely on Article 1623 in relation to Article 1620 of the Civil Code to justify their
right of redemption. This is incorrect.
The right of redemption of co-owners excludes that of adjoining owners.
The regime of co-ownership exists when the ownership of an undivided thing or right belongs
to different persons.8 By the nature of co-ownership, a co-owner cannot point to any specific
portion of the property owned in common as his own because his share in it remains intangible
and ideal.
The purpose of partition is to separate, divide and assign a thing held in common among
those to whom it belongs.14 By their own admission, petitioners already segregated and took
possession of their respective shares in the lot. Their respective shares were therefore
physically determined, clearly identifiable and no longer ideal. Thus, the co-ownership had
been legally dissolved. With that, petitioners’ right to redeem any part of the property from
any of their former co-owners was already extinguished. As legal redemption is intended to
minimize co-ownership,15 once a property is subdivided and distributed among the co-owners,
the community ceases to exist and there is no more reason to sustain any right of legal
redemption.
Under the law, subject to certain conditions, owners of adjoining urban land have the pre-
emptive right to a lot before it is sold to third parties, or the redemptive right if it has already
been sold. In particular, Article 1622 of the Civil Code provides:
Art. 1622. Whenever a piece of urban land is so small and so situated in 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 rights of pre-emption or redemption, the owner whose intended use of the land
in question appears best justified shall be preferred.
However, this provision does not apply here. Aside from the fact that petitioners never raised
it as an issue, the conditions provided for its application were not met. While the property
may be considered as urban land, it was not shown or even alleged that its area and location
would render a major portion of no practical use within a reasonable time. Neither was there
any allegation to the effect that the disputed property was bought merely for speculation.
Facts: Sometime in 1964, Rurfino Cabales died leaving behind a parcel of land in Southern
Leyte to his wife, Saturnina and six children, namely, Bonifacio, Francisco, Alberto, Albino,
Lenora, and Rito. On 1971, the brothers and co-owners Bonifacio, Alberto and Albino sold the
property to Dr. Corrompido with a right to repurchase within eight (8) years. On 1972, prior
to the redemption of the property, Alberto died leaving behind his wife and son, Nelson, herein
petitioner.
Sometime later and within the redemption period, the said brothers and their mother, in lieu
of Alberto, tendered their payment to Dr. Corrompido. Subsequently, Saturnina, and her four
children, Bonifacio, Albino, Francisco and Leonora sold the said land to Spouses Feliano. It
was provided in the deed of sale that the shares of Nelson and Rito, being minor at the time
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of the sale, will be held in trust by the vendee and will paid upon them reaching the age of
21.
In 1986, Rito received the sum of 1,143 pesos from the Spouses Feliano representing his
share from the proceeds of the sale of the property. It was only in 1988, that Nelson learned
of the sale from his uncle, Rito. He signified his intention to redeem the property in 1993 but
it was only in 1995 that he filed a complaint for redemption against the Spouses Feliano. The
respondent Spouses averred that the petitioners are estopped from denying the sale since:
(1) Rito already received his share; and (2) Nelson, failed to tender the total amount of the
redemption price.
The Regional Trial Court ruled in favour of Spouses Feliano on the ground that Nelson was no
longer entitled to the property since, his right was subrogated by Saturnina upon the death
of his father, Alberto. It also alleged that Rito had no more right to redeem since Saturnina,
being his legal guardian at the time of the sale was properly vested with the right to alienate
the same.
The Court of Appeals modified the decision of the trial court stating that the sale made by
Saturnina in behalf of Rito and Nelson were unenforceable.
Issue: Whether or not the sale made by a legal guardian (Saturnina) in behalf of the minors
were binding upon them.
Held: With regard to the share of Rito, the contract of sale was valid. Under Section 1, Rule
96 “A guardian shall have the care and custody of the person of his ward, and the
management of his estate, or the management of the estate only. x x x” Indeed, the legal
guardian only has the plenary power of administration of the minor’s property. It does not
include the power of alienation which needs judicial authority. Thus, when Saturnina, as legal
guardian of petitioner Rito, sold the latter’s pro indiviso share in subject land, she did not
have the legal authority to do so. Accordingly, the contract as to the share of Rito was
unenforceable. However, when he received the proceeds of the sale, he effectively ratified it.
This act of ratification rendered the sale valid and binding as to him.
With respect to petitioner Nelson, the contract of sale was void. He was a minor at the time
of the sale. Saturnina or any and all the other co-owners were not his legal guardians; rather
it was his mother who if duly authorized by the courts, could validly sell his share in the
property. Consequently, petitioner Nelson retained ownership over their undivided share in
the said property. However, Nelson can no longer redeem the property since the thirty day
redemption period has expired and thus he remains as co-owner of the property with the
Spouses Feliano.
FACTS: Timotea F. Galvez died intestate on 28 April 1965. She left behind her children Ulpiano
and Paz Galvez. Ulpiano, who died on 24 July 1959, predeceased Timotea and was survived
by his son, Porfirio Galvez. Timotea left a parcel of land situated at Pagdaraoan, San Fernando,
La Union, covered by Tax Declaration No. 39645.
Porfirio Galvez was surprised to discover that on 4 May 1970, Paz Galvez executed an affidavit
of adjudication stating that she is the true and lawful owner of the said property. Tax
Declarations No. 15749 and No. 12342 were then issued in the name of Paz Galvez. On 22
June 1992, without the knowledge and consent of Porfirio Galvez, Paz Galvez sold the property
to Carlos Tam for a consideration of Ten Thousand Pesos (P10,000.00) by way of a Deed of
Absolute Sale. Carlos Tam thereafter filed an application for registration of said parcel of land
under Land Registration Case No. 2278 before the Regional Trial Court (RTC) of San Fernando,
La Union. On 21 January 1994, Original Certificate of Title No. 0-2602 of the Registry of Deeds
of San Fernando, La Union, was issued in the name of Carlos Tam. Subsequently, on 27
September 1994, Carlos Tam sold the property to Tycoon Properties, Inc. through a Deed of
Absolute Sale executed by the former in favor of the latter. As a result, the title of Carlos Tam
over the property was cancelled and a new one, Transfer Certificate of Title (TCT) No. T-
40390 was issued in favor of Tycoon Properties, Inc.
On 12 May 1994, Porfirio Galvez filed Civil Case No. 4895 before the RTC, Branch 26, of San
Fernando, La Union, for Legal Redemption with Damages and Cancellation of Documents
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against Paz Galvez and Carlos Tam. The Complaint was later amended to implead as additional
defendant, Tycoon Properties, Inc.
ISSUE: Whether or not the affidavit of adjudication made by Paz Galvez valid? And whether
or not the corresponding sale to Carlos Tam and from Carlos Tam to Tycoon Properties
valid for being buyers in good faith and for value?
DECISION: This case is governed by the rules on co-ownership since both Paz Galvez and
Porfirio Galvez are obviously co-owners of the disputed property having inherited the same
from a common ancestor. Article 494 of the Civil Code provides that "[a] prescription shall
not run in favor of a co-owner or coheir against his co-owners or co-heirs as long as he
expressly or impliedly recognizes the coownership." It is a fundamental principle that a co-
owner cannot acquire by prescription the share of the other co-owners, absent any clear
repudiation of the co-ownership.
There is clear repudiation of a trust when one who is an apparent administrator of property
causes the cancellation of the title thereto in the name of the apparent beneficiaries and gets
a new certificate of title in his own name. In this case, we find that Paz Galvez effected no
clear and evident repudiation of the co-ownership. The execution of the affidavit of self-
adjudication does not constitute such sufficient act of repudiation as contemplated under the
law as to effectively exclude Porfirio Galvez from the property. The court repeatedly expressed
its disapproval over the obvious bad faith of a co-heir feigning sole ownership of the property
to the exclusion of the other heirs essentially stating that one who acts in bad faith should
not be permitted to profit from it to the detriment of others.
A purchaser in good faith and for value is one who buys the property without notice that
some other person has a right to or interest in such property and pays its fair price before he
has notice of the adverse claims and interest of another person in the same property. So it is
that the "honesty of intention" which constitutes good faith implies a freedom from knowledge
of circumstances which ought to put a person on inquiry. Suffice it to state that both the trial
and appellate courts found that "Tam did not exert efforts to determine the previous
ownership of the property in question and relied only on the tax declarations in the name of
Paz Galvez. It must be noted that Carlos Tam received a copy of the summons and the
complaint on 22 September 1994. This notwithstanding, he sold the property to Tycoon
Properties, Inc. on 27 September 1994. Significantly, Carlos Tam is also an owner of Tycoon
Properties, Inc. to the extent of 45%.
Redemption By Adjoining Owners
Facts: Respondents reside on a lot east of the land in question and adjunct to it which is
owned in common. The land in question formerly belonged to Hugo Mararac who sold the
same to the spouses Leonardo Mararac and Monica Resuello on March 27, 1971. At that time,
the lot now owned by the respondents was owned by plaintiff Angel Mararac and Juanito
Mararac, who was the husband of plaintiff Carina Rafanan who died in 1976. Leonardo Mararac
and Monica Resuello sold to the petitioners the land in question on February 25, 1975. At that
time, the lot in eastern side of the land in question was owned by Angel Mararac and his
brother, Juanita Marara. On April 8, 1975,defendants declared the land for tax purposes. At
the time of sale of the land in question to the defendants in 1975 there was no offer to exercise
right of legal redemption. There was no legal redemption offered during the period between
the first and second sale. The southern boundary of the lot in question is a barrio road with
approximate area of 10 meters wide. The land in question in relation to plaintiffs’ lot is not
separated by ravine, by brook, trait road or other servitude for the benefit of others. A portion
of the land in question on the side farther from the road, is used as a fishwell. Plaintiffs offered
to redeem the land in the amount paid by the defendants as well as an amount for the return
of investment of the property and interest, and payments of attorney’s fees and are able and
willing to make the payment.
Issue: Whether or not the statement made by the respondents in the pleadings are
considered as an admission and thus binds them in relation to the character of the land to
entitle them for legal redemption.
Held: Yes. As provided under Section 2, Rule 129 of the Rules of Court, Admissions made by
the parties in the pleadings, or in the course of the trial or proceedings do not require proof
and cannot be contradicted unless previously shown to have been made through palpable
mistake.
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No such palpable mistake has been shown. Evidence militates against the respondents’
contention that the above description does not bind them. The description was merely copied
from the deed of sale between the property’s original owners and the petitioners when the
self-same document was presented by the respondents as their own evidence, marked as
Exhibit B, of the petitioner’s Declaration of Property for Tax Purposes which contains the
assessor’s official finding and classification that the land covered by the declaration is
residential.
The character of the locality, the streets, the neighboring and surrounding properties give a
clear picture of a residential area. Lots, including the disputed property, with residential
houses line the streets. There are concrete and semi-concrete houses, a chapel, an
elementary school, and a public artesian well. Evidence consisting of photographs of the
petitioners’ land show a one-storey nipa and bamboo house. Trees and plants abound on the
petitioner’s property, yet, the same do not, by their mere presence make the lot agricultural.
As correctly held by the lower court: “… the ordinary Philippine residence is traditionally
profuse with trees and plants for home sufficiency, esthetic appreciation, and ecological
balance.” In fact, the lots neighboring the land in question are likewise planted with trees and
plants and some even have fishwells. Truly a residential home lot is not converted into
agricultural land by the simple reservation of a plot for the cultivation of garden crops or the
planting of bananas and some fruit trees. Nor can an orchard or agricultural land be
considered residential simply because a portion thereof has been criss-crossed with asphalt
and cement roads with buildings here and there (Republic of the Philippines v. Lara, 50 O.G.
5778). We have to apply the rule of reason based on the specific facts of each case. The land,
subject matter of the petition, being primarily residential, cannot be considered as rural for
purposes of legal redemption under the law.
The stipulation of facts is deemed an admission by the respondents of the residential character
of their own land thus disqualifying them from rightfully redeeming the property in question.
ART. 1621. The owners of adjoining lands shall also have the right of redemption when a
piece of rural land, the area of which does not exceed one hectare, is alienated unless the
grantee does not own any rural land. This right is not applicable to adjacent lands which are
separated by brooks, drains, ravines, roads and other apparent servitudes for the benefit of
other estates.
If two or more adjoining owners desire to exercise the right of redemption at the same time,
the owner of the adjoining land of smaller area shall be preferred; and should both lands have
the same area, the one who first requested the redemption.ART. 1623. The right of legal pre-
emption or redemption shall not be exercised except within thirty days from the notice in
writing by the prospective vendor, or by the 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.
Facts: Petitioner is a private corporation based in Cebu City and the registered owner of Lot
4523 situated in Liloan, Cebu, with an area of 22,214 square meters. Adjacent to the lot of
petitioner are parcels of land, identified to be Lot 4527, Lot 4528, and Lot 4529 with a total
combined area of 3,751 square meters. The three lots, aforenumbered, have been sold by
Hermogenes Mendoza to respondent spouses sometime in December 1994. Petitioner learned
of the sale of the lots only in January, 1996, when Hermogenes Mendoza sold to petitioner
Lot No. 4820, a parcel also adjacent to Lot 4523 belonging to the latter. Forthwith, it sent a
letter to respondents, on 30 January 1996, signifying its intention to redeem the three lots.
On 30 May 1996, petitioner sent another letter to respondents tendering payment of the price
paid to Mendoza by respondents for the lots. Respondents, in response, informed petitioner
that they had no intention of selling the parcels. Thereupon, invoking the provisions of Articles
1621 and 1623, petitioner filed an action against respondents to compel the latter to allow
the legal redemption. Petitioner claimed that neither Mendoza, the previous owner, nor
respondents gave formal or even just a verbal notice of the sale of the lots as so required by
Article 1623 of the Civil Code.
RTC Decision: Regional Trial Court of Cebu dismissed petitioners complaint and respondents'
counterclaim; both parties appealed the decision of the trial court to the Court of Appeals.
CA Decision: The appellate court affirmed the assailed decision.
Issue: Whether or not the right of redemption exercised by the petitioner is valid.
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Held: Yes, The trial court found the lots involved to be rural lands. Unlike the case of Fabia
vs. Intermediate Appellate Court 3 (which ruled, on the issue of whether a piece of land was
rural or not, that the use of the property for agricultural purpose would be essential in order
that the land might be characterized as rural land for purposes of legal redemption),
respondents in the instant case, however, did not dispute before the Court of Appeals the
holding of the trial court that the lots in question are rural lands. In failing to assail this factual
finding on appeal, respondents would be hardput to now belatedly question such finding and
to ask the Court to still entertain that issue.
The Court of Appeals has equated the statement in the deed of sale to the effect that the
vendors have complied with the provisions of Article 1623 of the Civil Code, as being the
written affirmation under oath, as well as the evidence, that the required written notice to
petitioner under Article 1623 has been met. Respondents, like the appellate court, overlook
the fact that petitioner is not a party to the deed of sale between respondents and Mendoza
and has had no hand in the preparation and execution of the deed of sale. It could not thus
be considered a binding equivalent of the obligatory written notice prescribed by the Code.
The written notice of sale is mandatory. This Court has long established the rule that
notwithstanding actual knowledge of a co-owner, the latter is still entitled to a written notice
from the selling co-owner in order to remove all uncertainties about the sale, its terms and
conditions, as well as its efficacy and status.
WHEREFORE, the instant petition is GRANTED, and the assailed decision of the Court of
Appeals is reversed and set aside. Petitioner is hereby given a period of thirty days from
finality of this decision within which to exercise its right of legal redemption.
KEY LEGAL CONCEPTS: ARTICLE 1622. Whenever a piece of urban land which is so small
and so situated that a major portion thereof cannot be used for any practical purpose within
a reasonable time, having been bought merely for speculation, is about to be re-sold, the
owner of 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. (n)
Who may exercise the right: Adjoining owners (1622 p.1); if two or more adjoining owners
desire to exercise the right: Preference is given to the adjacent owner/s whose intended use
of the land in question appears best justified. (1622 p.3)
FACTS: Contreras is renting the first floor of the house owned by Alcantara, but the land on
which it stands is not owned by the latter. Alcantara rather owns the adjoining lot. The lot on
which the house stands is owned by Matawaran, and it was mortgaged to bank together with
the house which was foreclosed later. The bank then sold the lot together with the house to
Contreras. Alcantara then asserted his ownership of the house and wanted to exercise his
right of redemption to the adjoining lot.
The RTC ruled in favor of Alcantara; ordered the surrender of possession of the house to the
Alcantaras; declared the Deed of Absolute Sale as null and void. It further held that the
Alcantaras were entitled to exercise the right of preemption.
The Court of Appeals also held that since the ownership by the Alcantaras of the adjacent lot
was never controverted, the RTC had validly applied Articles 1621 and 1622 of the Civil Code,
which allow the adjoining owner to exercise the right of pre-emption.
ISSUE: Who has the better right of pre-emption?
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HELD: As it happens, that “measly sum” happens to be the exact amount for which CCDB
had sold the subject property to petitioner, as evidenced by the Deed of Absolute Sale which
petitioner herself had attached to her Answer before the RTC.
The precise relief granted by the RTC is drawn from the Alcantaras’ specific prayer in their
complaint that sought a judgment allowing the plaintiffs to exercise their right of pre-emption
and redemption under Article 1622 of the Civil Code of the Philippines. Clearly, it is
sufficiently alleged in the complaint that the Alcantaras are entitled to exercise their
right of pre-emption and redemption under Article 1622 of the Civil Code.
They specifically prayed that judgment be rendered entitling them to exercise such right,
which under Article 1622 entails the following: Art. 1622. Whenever a piece of urban land
which is so small and so situated that a major portion thereof cannot be used for any practical
purpose within a reasonable time, having been bought merely for speculation, is about to be
re-sold, the owner of the adjoining land 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.
The exercise of the right of redemption would entail the reconveyance to petitioner
of the subject land on which the house stands. This relief stands apart from the judicial
affirmation in the same RTC decision that the Alcantaras are also the owners of the house. In
the case at bar, the trial court found that the Alcantaras were entitled to exercise their rights
under Article 1622, but it would not have been sufficient nor correct for it to just make the
corresponding pronouncement in the decision and then stop. The relief assailed by petitioner
as unwarranted is nothing more but the affordance of the right of redemption to the Alcantaras
at the same reasonable price the bank had sold the property to petitioner. We see no error in
granting such relief.
FACTS: CFI declared Lots 9202 and 9203 public land in a cadastral proceeding because
nobody appeared as claimants thereof when they were called for hearing on that date.
Respondent PETRA HAW PIA filed in said cadastral proceedings two separate verified
petitions under the provisions of Republic Act No. 931, praying that the proceedings be
reopened to set aside the order and the subject land be declared as her exclusive property.
Petitioners, heirs of Francisco Parco, opposed the petitions claiming that said lots belonged to
the public domain and could not be the subject matter of private sales; that they and their
predecessors having been in possession thereof for a long period of time had a preferential
right to acquire them from the Government that said lots had been the subject of a Sales
Application filed by Zosima Parco, in her behalf and in that of her coheirs, which application
was opposed by respondent; that after the corresponding proceedings, the Department of
Agriculture and Natural Resources gave due course to Zosima's application; that because of
said administrative proceedings the Court had no jurisdiction to entertain or consider
respondent's petitions; that the conveyance of the two lots to the latter were not by way of
absolute sale but only by way of mortgage; and that respondent being an alien could not own
real properties in the Philippines. The court declared the cadastral proceedings reopened.
On appeal, CA affirmed the decision of the CFI. As found out by the lower courts, Lot
9202 originally belonged to Ignacio Reyes and Francisco Parco, while lot 9203 originally
belonged solely to Ignacio Reyes. Ignacio Reyes sold Lot to Leoncio Lim Kiam with right to
repurchase but without fixing the period within which such right could be exercised. Francisco
Parco, father herein petitioners, signed the deed to express his consent to its execution and
to acknowledge the fact that although Lot 9203 had been surveyed in his name its true owner
was his father Ignacio Reyes. On the other hand Lot 9202 was sold to respondent with the
right to repurchase three years from the date of execution of the deed. Leoncio Lim Kiam sold
Lot 9203 to respondent which took place more than 17 years after the pacto de retro sale
executed by Ignacio Reyes in favor of Lim Kiam. The pacto de retro sale did not fix the period
of repurchase, the Court of Appeals ruled that, pursuant to the provisions of Article 1606 of
the New Civil Code, said period should be four years from the date of execution of the deed
of sale. The Court of Appeals also found that upon the death of Francisco Parco, his heirs
unlawfully took possession of both lots.
ISSUE: Whether or not the THAT CONTRACTS OF PACTO DE RETROSALES EXECUTED BY THE
PETITIONERS' PREDECESSORS-IN-INTEREST IN FAVOR OF RESPONDENT are valid.
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HELD: The sale is valid. With respect to Lot 9203, respondent acquired it from Lim Kiam on
July 14, 1949. The Court of Appeals found that respondent was married to Sergio Tan See,
also a Chinese citizen, before 1941, but that on November 25 of that year the latter obtained
a certificate of naturalization as a Filipino citizen pursuant to a favorable decision of the Court
of First Instance of Manila in the corresponding naturalization proceeding.
Under our ruling in the case of Moy Ya Lim Lao vs. Commission of Immigration, Oct. 4, 1971,
41 SCRA 293, respondent was deemed a Filipino citizen as of the date of the naturalization of
her husband, pursuant to Section 15 of the Revised Naturalization Law. 1
The objection of petitioners to her acquisition of Lot 9203 in 1949 on the ground of alienage
is therefore without basis unless it be shown in an appropriate proceeding that she was
disqualified to be a citizen of the Philippines under Section 4 of the same law.
In the deed of pacto de retro sale executed by Ignacio Reyes in favor of Lim Kiam on May 30,
1932, covering Lot 9203, the period of repurchase was not fixed. The Court of Appeals
correctly held that in accordance with Article 1508 of the old Civil Code the right could be
exercised within four years from the date of execution of the conveyance in this case up to
May 30, 1936. The fact, however, that on this date the Constitution was already in force did
not affect the right acquired by Lim Kiam. We have held in a number of cases decided under
the provisions of the old Civil Code that the nature of a sale with the right of repurchase is
such that the ownership over the thing sold is transferred to the vendee upon execution of
the contract, subject only to the resolutory condition that the vendor exercise his right of
repurchase within the period agreed upon.
True, under the old law, upon expiration of the period of repurchase, the vendee a retro had
to file with the Register of Deeds a so-called Affidavit of Consolidation. (Under the provisions
of Article 1607 of the new Civil Code, after the expiration of said period, the vendee a retro has
to file an action in court for the consolidation of the title in his favor.) This requirement,
however, was only for the purpose of having the sale and the expiration of the period of
repurchase "recorded in the Registry of Property" and did not affect at all the legal effect of
the pacto de retro sale.
Procedure In redemption
Facts: Petitioner Adalia B. Francisco and three of her sisters were co-owners of four parcels
of registered lands on which the Ten Commandments Building at 689 Rizal Avenue Extension,
Caloocan City, was erected. On August 6, 1979, they sold 1/5 of their undivided share in the
subject parcels of land to their mother, Adela Blas, for P10,000.00. On August 8, 1986,
without the knowledge of the other co-owners, Adela Blas sold her 1/5 share for P10,000.00
to respondent Zenaida Boiser who is another sister of petitioner. On August 5, 1992, petitioner
received summons, with a copy of the complaint in Civil Case No. 15510 filed by respondent
demanding her share in the rentals being collected by petitioner from the tenants of the
building. Petitioner then informed respondent that she was exercising her right of redemption
as a co-owner of the subject property. On August 12, 1992, she deposited the amount of
P10,000.00 as redemption price. On September 14, 1995, petitioner instituted a civil case
alleging that the 30 day period for redemption under Art. 1623 of the Civil Code had not begun
to run against her since the vendor, Adela Blas, never informed her and the other owners
about the sale to respondent. She learned about the sale only on August 5, 1992, after she
received the summons in Civil Case No. 15510, together with the complaint. Respondent, on
the other hand, contended that petitioner knew about the sale as early as May 30, 1992, when
she wrote petitioner a letter informing the latter about the sale, with a demand that the rentals
corresponding to her 1/5 share be remitted to her. Said letter was sent with a copy of the
Deed of Sale between respondent and Adela Blas.
RTC dismissed petitioner CA affirmed RTC.
Issue: Whether or not the letter of May 30, 1992 sent by respondent to petitioner notifying
her of the sale on August 8, 1986 of Adela Blas' 1/5 share of the property to respondent,
containing a copy of the deed evidencing such sale, can be considered sufficient as compliance
with the notice requirement of Art. 1623 for the purpose of legal redemption.
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Held: No, Art. 1623 of the Civil Code is clear in requiring that the written notification should
come from the vendor or prospective vendor, not from any other person. In the case at bar,
the written notice came from the buyer or vendee and not from the vendor of the property
subject of legal redemption. The Court also ruled that the receipt by petitioner of summons
in Civil Case No. 15510 on August 5, 1992 amounted to actual knowledge of the sale from
which the 30-day period of redemption commenced to run. Petitioner then had until
September 4, 1992 within which to exercise her right of legal redemption, but in August 12,
1992 she deposited the P10,000.00 redemption price. As petitioner's exercise of said right
was timely, the same should be given effect.
Facts: Cleopas Ape was the registered owner of a parcel of land located at Escalante, Negros
Occidental. Upon Cleopas Ape's death sometime in 1950, the property passed on to his wife,
Maria Ondoy, and their eleven children.
On 15 March 1973, Generosa Cawit de Lumayno instituted a case for "Specific Performance
of a Deed of Sale with Damages" against Fortunato and his wife.It was alleged in the complaint
that on 11 April 1971, private respondent and Fortunato entered into a contract of sale of
land under which for a consideration of P5,000.00, Fortunato agreed to sell his share in the
subject lot to private respondent. The agreement was contained in a receipt prepared by
private respondent's son-in-law, Andres Flores, at her behest.
Fortunato and petitioner denied the material allegations of the complaint and claimed that
Fortunato never sold his share in Lot No. 2319 to private respondent and that his signature
appearing on the purported receipt was forged. Fortunato and petitioner also assailed private
respondent and her husband's continued possession of the rest of Lot No. 2319 alleging that
in the event they had acquired the shares of Fortunato's coowners by way of sale; he was
invoking his right to redeem the same.
In their reply, the private respondent and her husband alleged that they had purchased from
Fortunato's co-owners, as evidenced by various written instruments, their respective portions
of Lot No. 2319. By virtue of these sales, they insisted that Fortunato was no longer a co-
owner of Lot No. 2319 thus, his right of redemption no longer existed.
Issue: Whether or not there was still a right to redemption.
Ruling: The Court ruled that the redemption cannot anymore be invoked because the exercise
of this right "presupposes the existence of a co-ownership at the time the conveyance is made
by a co-owner and when it is demanded by the other co-owner or co-owners." The regime of
co-ownership exists when ownership of an undivided thing or right belongs to different
persons. By the nature of a co-ownership, a co-owner cannot point to specific portion of the
property owned in common as his own because his share therein remains intangible. As legal
redemption is intended to minimize co-ownership, once the property is subdivided and
distributed among the co-owners, the community ceases to exist and there is no more reason
to sustain any right of legal redemption.
The Court cited the case of Butte v. Manuel Uy & Sons, Inc. declaring that: In considering
whether or not the offer to redeem was timely, we think that the notice given by the vendee
(buyer) should not be taken into account. In this case, the records are bereft of any indication
that Fortunato was given any written notice of prospective or consummated sale of the
portions of Lot No. 2319 by the vendors or would-be vendors. The thirty (30)-day redemption
period under the law, therefore, has not commenced to run.
Principle: When to exercise the redemption; Article 1623 of the Civil Code provides:
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. 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.
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FACTS:On October 28, 1993, Senen and Virgilio purchased a house and lot located in
Parañaque City, Metro Manila for the benefit of their father, Maximiano Aguilar (now
deceased). The brothers wanted their father to enjoy his retirement in a quiet neighborhood.
On February 23, 1970, they executed a written agreement stipulating that their shares in the
house and lot would be equal; and that Senen would live with their father on condition that
he would pay the Social Security System (SSS) the remaining loan obligation of the former
owners.
In 1974, their father died. Virgilio then demanded that Senen vacate the house and that the
property be sold, the proceeds to be divided between them. Senen refused to comply with
Virgilio’s demand.
On January 12, 1979, Virgilio filed a complaint with the Court of First Instance (now Regional
Trial Court) of Rizal at Pasay City for specific performance. Virgilio prayed that Senen be
compelled to sell the property so that the proceeds could be divided between them.
However, during the pre-trial, neither Senen nor his counsel appeared. Thus, Senen was
declared as in default by the trial court and Virgilio was allowed to present his evidence ex-
parte.
On July 26, 1979, the trial court rendered its Decision, declaring the brothers co-owners of
the house and lot and are entitled to equal shares; and ordering that the property be sold,
the proceeds to be divided equally between them. The trial court also ordered Senen to vacate
the property and to pay Virgilio rentals with interests corresponding to the period from
January 1975 until he leaves the premises.
On March 27, 1995, Senen filed with the Regional Trial Court, Branch 260, Parañaque City,
an action for legal redemption against Virgilio and another brother, Angel. Senen alleged that
while he knows that Virgilio sold his ½ share of the property to Angel in January 1989,
however, he (Senen) was not furnished any written notice of the sale. Consequently, as a co-
owner, he has the right to redeem the property.
Meanwhile, on November 27, 1995, the property was sold at public auction to Alejandro C.
Sangalang, intervenor-respondent herein. Virgilio then received his share of the proceeds as
well as the rental payments due from Senen. By then, Virgilio had moved to California, USA.
It was only on January 25, 1997 that he was served, through the Philippine Consulate in San
Francisco, a copy of Senen’s complaint. On February 24, 1997, Virgilio filed a motion to
dismiss the complaint for lack of cause of action and forum shopping. In an Order dated June
27, 1997, the trial court dismissed Civil Case No. 05-039 on the ground of laches, holding
that Senen incurred a delay of seven (7) years before asserting his right to redeem the
property in question.
ISSUE: Whether or not Senen’s complaint for legal redemption is barred by laches.
RULING: YES. The old rule is that a written notice of the sale by the vendor to his co-owners
is indispensable for the latter to exercise their retracto legal de comuneros. More recently,
however, we have relaxed the written notice requirement. Thus, in Si v. Court of Appeals, we
ruled that a co-owner with actual notice of the sale is not entitled to a written notice for such
would be superfluous. The law does not demand what is unnecessary.
Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do
that which could or should have been done earlier through the exercise of due diligence.
Otherwise stated, laches is the negligence or omission to assert a right within a reasonable
time warranting a presumption that the party entitled to assert it has either abandoned or
declined to assert it. Its elements are: (1) conduct on the part of the defendant, or of one
under whom he claims, giving rise to the situation for which the complaint seeks a remedy;
(2) delay in asserting the complainant’s rights, the complainant having had knowledge or
notice of the defendant’s conduct as having been afforded an opportunity to institute a suit;
(3) lack of knowledge or notice on the part of the defendant that the complainant would assert
the right in which he bases his suit; and (4) injury or prejudice to the defendant in the event,
relief is accorded to the complainant, or the suit is not held barred.
In this case, the sale took place in January 1989. Petitioner admits that he has actual
knowledge of the sale. However, he only asserted his right to redeem the property in March
1995 by filing the instant complaint. Both the trial court and the Appellate Court ruled that
this was seven (7) years late.
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Petitioner has actual knowledge of the sale of Virgilio’s share to Angel in 1989. As provided
by Article 1623, he has thirty days from such actual knowledge within which to exercise his
right to redeem the property. Inexplicably, petitioner did not take any action. He waited for
seven (7) years before filing his complaint. Definitely, such an unexplained delay is
tantamount to laches. To be sure, to uphold his right would unduly cause injury to respondent-
intervenor, a purchaser in good faith and for value.
Moreover, by the time Senen filed Civil Case No. 95-039 for legal redemption, his right was
no longer available to him. We have held that after a property has been subdivided and
distributed among the co-owners, the community has terminated and there is no reason to
sustain any right of pre-emption or redemption
Facts: On July 4, 1966, Rufino Cabales died and left a parcel of land located in Southern Leyte
to his wife Saturnina and children Bonifacio, Albino, Francisco, Alberto and Rito the petitioner.
The brothers, Bonifacio, Albino and Alberto sold the property to Dr. Corrompido for P2,000.00
with a right to repurchase within 8 years. Within the 8 year redemption period, Bonifacio and
Albino tendered their payment but Dr. Corrompido only released the document of sale with
pacto de retro after Saturnina paid for the share of her deceased son, Alberto. Saturnina and
her four children then sold the parcel of land to respondents-spouses Jesus and Anunciacion
Feliano for P8,000.00. In July 24, 1986, petitioner Rito Cabales received the sum of P1,143.00
from respondents representing the share for the proceeds of the sale of the property. Upon
the death of Saturnina, petitioner Nelson, went back to his father’s hometown and learned
from his uncle regarding the sale of the property. Petitioner then filed before the Regional
Trial Court of Maasin, Souther Leyte a complaint for redemption of the subject land plus the
damages. In their response the respondents maintained that the petitioner were estopped
from claiming any right over the property because petitioner Rito had already received the
amount corresponding his share and that petitioner Nelson failed to consign to the court the
total amount of redemption price necessary for legal redemption.
Issue: Whther or not Nelson as a co-owner has the right to legal redemption
Ruling: Yes, as Nelson was one of the co-owners of the subject property. The sale insofar as
their share in property is unenforceable because it was entered into in the name of the other
and that they have not given authority of the sale. The sale of the land would only be binding
as to the petitioner Rito because he acknowledged the sale. In the case of Nelson, the contract
of sale would be void because he was a minor on the time of sale and that Saturnina and the
other co-owners were not his legal guardians with judicial authority to alienate the property.
His mother was considered as his legal guardian and did not also agree with the sale of the
property. Legal redemption may only be exercised by the co-owner who did not party with
his of their pro-indiviso share of the property.
Other cases of legal redemption
FACTS: The subject matter of this case is a parcel of land, known as Lot No. 895, Pls-209-D,
with an area of 128,409 square meters, situated in the City of General Santos in South
Cotabato. The aforesaid parcel was acquired by spouses Benjamin Tupas and Leonor
Baldonado under the homestead provisions of the Public Land Act.On November 30, 1951,
plaintiffs-spouses sold the said land for P3,000.00 to Juanita Bulaong, then still a minor being
only eleven (11) years old, but was represented by her father Eusebio Bulaong, now one of
the defendants-appellants.
Since the said Deed of Sale was executed within the prohibited five-year period from the
issuance of the Homestead Patent, another Deed of Sale for the same consideration of
P3,000.00 was executed on May 1, 1957 by plaintiffs-appellees in favor of Juanita Bulaong
and on the basis thereof, Transfer Certificate of Title No. T-5281 was issued in Juanita
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Bulaong's name on December 16, 1957. Since 1951 to the present, Juanita Bulaong and her
father, defendant-appellant Eusebio Bulaong, have been actually occupying the said parcel
and later caused the construction of a residential building thereon valued at P35,000.00, more
or less.Meanwhile, Benjamin Tupas had obtained a special crop loan from the Philippine
National Bank. For failure to pay the said loan, the Philippine National Bank, instituted Civil
Case for "Sum of Money" against Benjamin Tupas.
On April 4, 1959, the Provincial Sheriff of Cotabato sold the land in question at public auction
to the Philippine National Bank for P6,400.00 being the sole bidder. By reason of said
execution sale, the Provincial Sheriff executed in favor of the Philippine National Bank a
certificate of sale dated April 6, 1959 specifying therein that the one-year period of
redemption shall expire on April 4, 1960. The certificate of sale was registered in the Office
of the Register of Deeds of Cotabato on August 26, 1959. On June 10, 1965, spouses Benjamin
Tupas and Leonor Baldonado, filed against spouses Daniel Damasco and Juanita Bulaong
Damasco, Zacarias Antonio as Register of Deeds of Cotabato and the Philippine National Bank,
an action for the "Repurchase of Land Under Section 119 of Commonwealth Act 141”.
On July 28, 1965, plaintiffs-spouses filed an Amended Complaint and denominated the same
as "An Action to Declare a Document and Title a Nullity and Repurchase of Land Under Section
119 of Commonwealth Act 141, as amended and/or Recovery of Real Property" and filed a
Second Amended Complaint which was styled as "An Action to Declare a Levy and Execution
and Public Auction Sale and a Document as Patent Nullity and Recovery of a Parcel of Land".
ISSUE: Whether or not the five-year period granted under Sec. 119 of Commonwealth Act
141 should be counted from the date of the foreclosure sale or from the expiration of the
period of redemption of property foreclosed under Republic Act 720 as amended.Whether or
not the action to repurchase was filed on time.
RULING No, the action to repurchase was filed out of time. Jurisprudence dictates that the
right to repurchase a property under homestead agreement is within five years from the
conveyance or foreclosure sale.
Applying the aforesaid doctrine to the case at bar, appellees could only exercise the right to
repurchase his former homestead within five years from April 4, 1959, the date of the
execution sale or up to April 4, 1964. Since this action to repurchase was filed on June 10,
1965, the same was filed out of time. At any rate, even if we have to compute the five-year
period from the expiration of the right to redeem granted to a judgment debtor, still this case
was filed beyond five years, because the one-year period of redemption in this case expired
on April 4, 1960, and the five-year period from April 4, 1960 is April 4, 1965.
The other reason given by the lower court in allowing repurchase — that homestead law
should be interpreted in favor of the homesteader and that the underlying purpose of said
Section 119 is to give the homesteader every chance to preserve for himself and his family
the land that the State had gratuitously given him — no longer applies in the case at bar. As
held in the case of Vargas vs. Court of Appeals, the sale by appellees of their homestead even
before the expiration of the five-year prohibited period indicates lack of intent on the part of
the homesteader to preserve the homestead for himself and his family.
Facts: The subject matter of this case is a piece of land originally covered by Original
Certificate of Title No. 366, pursuant to Homestead Patent No. 45183 issued in the names of
Rufino Belisario and Felipa Lauga, located in Valencia, Bukidnon, and consisting of an area of
23.2210 hectares. On August 3, 1948, upon the death of Rufino Belisario, the ownership of
the land was extrajudicially settled among his children (petitioners herein), namely: Benjamin,
Pacita, Victoria, Silverio, Francisco, Anatolia, Felipe and Teresita, all surnamed Belisario and
his widow, Felipa Lauga, and in whose names Transfer Certificate of Title No. T-124 was issued.
Sometime in 1950, on the strength of a special power of attorney executed by some of the
petitioners in favor of petitioner, Benjamin Belisario, said land was mortgaged to the Philippine
National Bank (PNB) to secure a promissory note in the sum of P1,200.00. Petitioners-
mortgagors defaulted in the payment of the loan. Consequently, the mortgage was
extrajudicially foreclosed and on January 31, 1963 the land was sold at public auction for
P3,134.76 with respondent PNB as the highest bidder.
On April 21, 1971, petitioners wrote to respondent PNB making known their "desire to redeem
and/or repurchase the said property for and in the same price as the auction sale, P3,134.76,"
and enclosed therein a postal money order in the amount of P630.00 as partial payment, with
the balance to be paid in twelve equal monthly installments. At the time petitioners offered
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to redeem the subject property, the Sheriff's Certificate of Sale covering the sale at public
auction to the respondent PNB was not yet registered. Having been apprised of the non-
registration, the respondent PNB caused the registration of the Sheriff's Certificate of Sale
with the Register of Deeds of Bukidnon on July 22, 1971 and Transfer Certificate of Title No.
T-6834 was later issued in the name of respondent bank. On August 24, 1971, respondent
PNB sent a reply letter to petitioners, refusing the tender of P630.00 as partial payment of
the total obligations of P7,041.41 due from petitioners (which included the amount of
P2,027.02 allegedly paid by respondent Vicente Cabrera to respondent PNB) and stating
further that under existing regulations of the bank, payment by way of redemption must be
paid in full and not by installments. It cannot, however, be determined from the records of
the case why the amount of P2,027.02 was received from respondent Cabrera by respondent
PNB on December 12, 1967 and why the same was included in the statement of accounts
sent by respondent PNB to petitioners. On February 8, 1973, respondent PNB sold the land in
question to respondent Cabrera for P5,000.00 and the corresponding TCT No. 7264 was issued
in his name.
Issue: Whether or not there is a right of redemption?
Held: The general rule in redemption is that in making a repurchase, it is not sufficient that
a person offering to redeem makes manifestation of his desire to repurchase; this statement
of intention must be accompanied by an actual and simultaneous tender of payment, which
constitutes the legal use or exercise of the right to repurchase. Likewise, in several cases
decided by this Court where the right to repurchase was held to have been properly exercised,
there was a definite finding of tender of payment having been made by the vendor. The tender
of payment must be for the full amount of the repurchase price, otherwise the offer to redeem
will be held ineffectual. Bona fide redemption necessarily imports a reasonable and valid
tender of the entire repurchase price. There is no cogent reason for requiring the vendee to
accept payment by installments from the redemptioner, as it would ultimately result in an
indefinite extension of the redemption period. For purposes of determining whether
petitioners exercised their right to repurchase effectively, We have only to consider their filing
of the action for Repurchase of Homestead on January 9, 1975, against respondent PNB and
Cabrera, which was filed well within the five-year period to repurchase. The question of
timeliness of the tender of payment by petitioners on August 1 and 4, 1977 of the amount of
P5,000,00 had become insignificant in view of the filing of the action for Repurchase of
Homestead which has been held equivalent to an offer to redeem and has the effect by itself
of preserving their right of recovering the property.
Arts. 1624-1635
FACTS: Capitol Development Corporation filed a Complaint for the collection of a sum of
money against Edgar Ledonio. In its Complaint, respondent alleged that petitioner obtained
from a Ms. Patrocinio S. Picache two loans, with the aggregate principal amount of P60,000.00,
and covered by promissory notes duly signed by petitioner. In the first promissory note,
petitioner promised to pay to the order of Ms. Picache the principal amount of P30,000.00, in
monthly installments of P3,000.00, with the first monthly installment due on 9 January 1989.
In the second promissory note, petitioner again promised to pay to the order of Ms. Picache
the principal amount of P30,000.00, with 36% interest per annum, on 1 December 1988. In
case of default in payment, both promissory notes provide that (a) petitioner shall be liable
for a penalty equivalent to 20% of the total outstanding balance; (b) unpaid interest shall be
compounded or added to the balance of the principal amount and shall bear the same rate of
interest as the latter; and (c) in case the creditor, Ms. Picache, shall engage the services of
counsel to enforce her rights and powers under the promissory notes, petitioner shall pay as
attorney's fees and liquidated damages the sum equivalent to 20% of the total amount sought
to be recovered, but in no case shall the said sum be less that P10,000.00, exclusive of costs
of suit.
Since petitioner did not pay any of the loans covered by the promissory notes when they
became due, respondent - - through its Vice President Nina P. King and its counsel King,
Capuchino, Banico & Associates - - sent petitioner several demand letters. Despite receiving
the said demand letters, petitioner still failed and refused to settle his indebtednessPetitioner
sought the dismissal of the Complaint averring that respondent had no cause of action against
him. He denied obtaining any loan from Ms. Picache and questioned the genuineness and due
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execution of the promissory notes, for they were the result of intimidation and fraud; hence,
void. He asserted that there had been no transaction or privity of contract between him, on
one hand, and Ms. Picache and respondent, on the other. The assignment by Ms. Picache of
the promissory notes to respondent was a mere ploy and simulation to effect the unjust
enforcement of the invalid promissory notes and to insulate Ms. Picache from any direct
counterclaims, and he never consented or agreed to the said assignment.
ISSUE: Whether or not there was an assignment of credit and that there was no
novation/subrogation in the case at bar.
RULING: Yes. There was an assignment of Credit.

This Court cannot sustain petitioner's contention and hereby declares that the transaction
between Ms. Picache and respondent was an assignment of credit, not conventional
subrogation, and does not require petitioner's consent as debtor for its validity and
enforceability. An assignment of credit has been defined as an agreement by virtue of which
the owner of a credit (known as the assignor), by a legal cause - such as sale, DATION in
payment or exchange or donation - and without need of the debtor's consent, transfers that
credit and its accessory rights to another (known as the assignee), who acquires the power
to enforce it, to the same extent as the assignor could have enforced it against the debtor.
On the other hand, subrogation, by definition, is the transfer of all the rights of the creditor
to a third person, who substitutes him in all his rights. It may either be legal or conventional.
Legal subrogation is that which takes place without agreement but by operation of law
because of certain acts. Conventional subrogation is that which takes place by agreement of
parties.
Although it may be said that the effect of the assignment of credit is to subrogate the assignee
in the rights of the original creditor, this Court still cannot definitively rule that assignment of
credit and conventional subrogation are one and the same.
Conventional Subrogation and Assignment of Credits. - In the Argentine Civil Code,

there is essentially no difference between conventional subrogation and assignment of credit.
The subrogation is merely the effect of the assignment. In fact, it is expressly provided (article
769) that conventional redemption shall be governed by the provisions on assignment of
credit.
UNDER OUR CODE, HOWEVER, CONVENTIONAL SUBROGATION IS NOT IDENTICAL TO
ASSIGNMENT OF CREDIT. In the former, the debtor's consent is necessary; in the latter, it
is not required. Subrogation extinguishes an obligation and gives rise to a new one;
assignment refers to the same right which passes from one person to another. The nullity of
an old obligation may be cured by subrogation, such that the new obligation will be perfectly
valid; but the nullity of an obligation is not remedied by the assignment of the creditor's right
to another. (EMPHASIS SUPPLIED.)
Effects of Valid Assignment
FACTS: Sometime in 1975, respondent spouses Atty. Jesus and Elizabeth Ponce bought on
installment a Holden Torana vehicle from C.R. Tecson Enterprises. They executed a
promissory note and a chattel mortgage on the vehicle dated December 24, 1975 in favor of
the C.R. Tecson Enterprises to secure payment of the note. The mortgage was registered both
in the Registry of Deeds and the Land Transportation Office. On the same date, C.R. Tecson
Enterprises, in turn, executed a deed of assignment of said promissory note and chattel
mortgage in favor of Filinvest Credit Corporation with the conformity of respondent spouses.
The latter were aware of the endorsement of the note and the mortgage to Filinvest as they
in fact availed of its financing services to pay for the car. In 1976, respondent spouses
transferred and delivered the vehicle to Conrado R. Tecson by way of sale with assumption of
mortgage. Subsequently, in 1978, Filinvest assigned all its rights and interest over the same
promissory note and chattel mortgage to petitioner Servicewide Specialists Inc. without notice
to respondent spouses. Due to the failure of respondent spouses to pay the installments under
the promissory note from October 1977 to March 1978, and despite demands to pay the same
or to return the vehicle, petitioner was constrained to file before the Regional Trial Court of
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Manila on May 22, 1978 a complaint for replevin with damages against them, docketed as
Civil Case No. 115567. In their answer, respondent spouses denied any liability claiming they
had already returned the car to Conrado Tecson pursuant to the Deed of Sale with Assumption
of Mortgage. Thus, they filed a third party complaint against Conrado Tecson praying that in
case they are adjudged liable to petitioner, Conrado Tecson should reimburse them.
ISSUE/S:
1. Whether or not the assignment of a credit requires notice to the debtor in order to bind
him.
2. Whether or not respondent spouses needed to notify or secure the consent of petitioner's
predecessor to the alienation of the vehicle.
RULING:
1.Yes. Only notice to the debtor of the assignment of credit is required. His consent is not
required.
When the credit was assigned to petitioner, only notice to but not the consent of the debtor-
mortgagor was necessary to bind the latter. Applying Article 1627 of the Civil Code, the
assignment made to petitioner includes the accessory rights such as the mortgage. Article
2141, on the other hand, states that the provisions concerning a contract of pledge shall be
applicable to a chattel mortgage, such as the one at bar, insofar as there is no conflict with
Act No. 1508, the Chattel Mortgage Law. As provided in Article 2096 in relation to Article 2141
of the Civil Code, a thing pledged may be alienated by the pledgor or owner "with the consent
of the pledgee." This provision is in accordance with Act No. 1508 which provides that "a
mortgagor of personal property shall not sell or pledge such property, or any part thereof,
mortgaged by him without the consent of the mortgagee in writing on the back of the
mortgage and on the margin of the record thereof in the office where such mortgage is
recorded." Although this provision in the chattel mortgage has been expressly repealed by
Article 367 of the Revised Penal Code, yet under Article 319 (2) of the same Code, the sale
of the thing mortgaged may be made provided that the mortgagee gives his consent and that
the same is recorded. In any case, applying by analogy Article 2128 of the Civil Code to a
chattel mortgage, it appears that a mortgage credit may be alienated or assigned to a third
person. Since the assignee of the credit steps into the shoes of the creditor-mortgagee to
whom the chattel was mortgaged, it follows that the assignee's consent is necessary in order
to bind him of the alienation of the mortgaged thing by the debtor-mortgagor. This is
tantamount to a novation. As the new assignee, petitioner's consent is necessary before
respondent spouses' alienation of the vehicle can be considered as binding against third
persons. Petitioner is considered a third person with respect to the sale with mortgage
between respondent spouses and third-party defendant Conrado Tecson.
3. The sale with assumption of mortgage made by respondent spouses is tantamount to a

substitution of debtors. In such case, mere notice to the creditor is not enough, his
consent is always necessary as provided in Article 1293 of the Civil Code. Without such
consent by the creditor, the alienation made by respondent spouses is not binding on
the former. On the other hand, Articles 1625, 1626 and 1627 of the Civil Code on
assignment of credits do not require the debtor's consent for the validity thereof and so
as to render him liable to the assignee. The law speaks not of consent but of notice to
the debtor, the purpose of which is to inform the latter that from the date of assignment
he should make payment to the assignee and not to the original creditor. Notice is thus
for the protection of the assignee because before said date, payment to the original
creditor is valid.
Principle: Article 1628 of the Civil Code provides that “the vendor in good faith shall be
responsible for the existence and legality of the credit at the time of the sale, unless it should
have been sold as doubtful; but not for the solvency of the debtor, unless it has been so
expressly stipulated or unless the insolvency was prior to the sale and of common knowledge.”
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Facts: Respondent KJS ECO-FORMWORK System Phil., Inc. is a corporation engaged in the
sale of steel scaffoldings, while petitioner Sonny Lo is a building contractor. On 22 February
22 1990, petitioner ordered scaffolding equipments from respondent worth P540,425.80. He
paid P150,000.00 as downpayment, the balance of which was made payable in ten monthly
installments. Petitioner was only able to pay the first two monthly installments and was unable
to settle his obligation due to financial difficulties. On 11 October 11 1990, petitioner and
respondent executed a Deed of Assignment, the former assigning to the latter his receivables
in the amount of P335,462.14 from Jomero Realty Corporation. However, when respondent
tried to collect the said credit from Jomero, the latter refused to honor the Deed of Assignment
because it claimed that petitioner was also indebted to it. On 26 November 26 1990,
respondent sent a letter to petitioner demanding payment of his obligation. However,
petitioner refused to pay claiming that his obligation had been extinguished when they
executed the Deed of Assignment.
Issue: Whether or not the Deed of Assignment extinguished the obligation of Lo.
Ruling: No, it did not extinguished the obligation.

Article 1628 of the Civil Code provides that “the vendor in good faith shall be responsible for
the existence and legality of the credit at the time of the sale, unless it should have been sold
as doubtful; but not for the solvency of the debtor, unless it has been so expressly stipulated
or unless the insolvency was prior to the sale and of common knowledge.” Petitioner, as
vendor or assignor, is bound to warrant the existence and legality of the credit at the time of
the sale or assignment. When Jomero claimed that it was no longer indebted to petitioner
since the latter also had an unpaid obligation to it, it essentially meant that its obligation to
petitioner has been extinguished by compensation. In other words, respondent alleged the
non-existence of the credit and asserted its claim to petitioners warranty under the
assignment. Thus, it is proper on petitioner to make good its warranty and paid the obligation.
Hence, the Deed of Assignment did not extinguished the obligation of Lo.
Doctrine: Article 1484 of the Civil Code are alternative, not cumulative. The exercise of one
bars the exercise of the others. This limitation applies to contracts purporting to be leases of
personal property with option to buy by virtue of the same Article 1485.
Facts: Giraffe entered into an agreement with PCI leasing over 2 machines worth P8,000,000.
Giraffe agreed to pay P116,878.21 monthly and P181,362 for the other machine. It has also
remitted the amount of P3,120,000 as goodwill.
A year into the life of the lease agreement, respondent defaulted in paying the monthly rentals.
Following a three-month default, PCI LEASING, through one Atty. Florecita R. Gonzales,
addressed a formal pay-or-surrender-equipment type of demand letter dated February 24,
1998 to GIRAFFE stated below:
“Demand is hereby made upon you to pay in full your outstanding balance in the amount of
P8,248,657.47 on or before March 04, 1998 OR to surrender to us the one (1) set Silicon
HighImpact Graphics and one (1) unit Oxberry Cinescan 6400-10” Such demand was left
unheeded, PCI LEASING instituted the instant case against GIRAFFE, which was favored by
the RTC, declaring the petitioner the entitled to the possession of the subject properties, as
well as payment of rental balances for P8+ Million, plus litigation costs.
Subsequently, a motion to dismiss was filed by GIRAFFE, and argues that pursuant to Art.
1484 of the Civil Code, PCI is barred from pursuing any claim, adding that in reality the lease
agreement was a lease in of movables with an option to buy based on Art. 1485 as
supplemented by the schedule documents.
PCI maintains its stand that it is just a straight lease agreement and rejects the applicability
of the said provision.
ISSUE: Whether or not the underlying Lease Agreement, Lease Schedules and the Disclosure
Statements that embody the financial leasing arrangement between the parties are covered
by and subject to the consequences of Articles 1484 and 1485 of the New Civil Code
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HELD:The contract is in reality an option to purchase the equipment.

The Recto Law applies in this case. As such Art. 1484 states “ In a contract of sale of personal
property the price of which is payable in installments, the vendor may exercise any of the
following ….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.
Thus, he shall have no further action against the purchaser to recover any unpaid balance of
the price. Any agreement contrary shall be void.
Art. 1485. The preceding article shall be applied to contract purporting to be leases of personal
property with the option to buy, when the leasor deprived the lesee of the possession or
enjoyment of the thing. Therefore, Giraffe is not liable to pay for the remaining term since
the machineries has been foreclosed.
The present case reflects a situation where the financing company can withhold and conceal
- up to the last moment - its intention to sell the property subject of the finance lease, in
order that the provisions of the Recto Law may be circumvented. It may be, as petitioner
pointed out, that the basic “lease agreement” does not contain a “purchase option” clause.
The absence, however, does not necessarily argue against the idea that what the parties are
into is not a straight lease, but a lease with option to purchase. This Court has, to be sure,
long been aware of the practice of vendors of personal property of denominating a contract
of sale on installment as one of lease to prevent the ownership of the object of the sale from
passing to the vendee until and unless the price is fully paid.
In choosing, through replevin, to deprive the respondent of possession of the leased

equipment, the petitioner waived its right to bring an action to recover unpaid rentals on the
said leased items. Paragraph (3), Article 1484 in relation to Article 1485 of the Civil Code,
which we are hereunder re-reproducing, cannot be any clearer.
FACTS: On May 1, 1983, RJH Trading and Visayan Sawmill Company (VSC) entered into a
Purchase and Sale of Scrap Iron located at VSC’s stockyard at Negros Oriental, subject to the
condition that RJH will open a Letter of Credit (LOC) of P250,000 in favor of VSC on or before
May 15, 1983. On May 17, 1983, RJH through his men started to dig and gather and scrap
iron at the VSC's premises, proceeding until May 30 when VSC allegedly directed RJH's men
to desist from pursuing the work in view of an alleged case filed against RJH by Alberto
Pursuelo. VSC denies this, alleging that on May 23, 1983, they sent a telegram to RJH
canceling the contract of sale because of the failure of the latter to comply with the conditions
thereof. On May 24, 1983, RJH informed VSC that the LOC was opened May 12, 1983 at BPI
main office in Ayala, but the transmittal was delayed. On May 26, 1983, VSC received a letter
advice from BPI Dumaguete stating that an irrevocable domestic LOC P250,000 was opened
in favor of Ang Tay c/o VSC on account of Armaco-Armsteel Alloy Corporation.
On July 19, 1983, RJH Trading sent a series of telegrams stating that the case filed against
him by Pursuelo had been dismissed and demanding that VSC comply with the deed of sale,
otherwise a case will be filed against them. On July 20, 1983, VSC informed RJH that they
were unwilling to continue with the sale due to RJH's failure to comply with essential pre-
conditions of the contract. On July 29, 1983, RJH filed the complaint, praying for judgment
ordering VSC to comply with the contract by delivering to him the scrap iron subject thereof;
he further sought actual, moral and exemplary damages, attorney's fees and the costs of the
suit. VSC insisted that the cancellation of the contract was justified because of RJH’s
noncompliance with essential pre-conditions, among which is the opening of an irrevocable
and unconditional LOC not later than 15 May 1983.
RTC ruled in RJH’s favor, awarding the damages sought. CA affirmed, holding VSC argued
that under Articles 1593 and 1597 of the Civil Code, automatic rescission may take place by
a mere notice to the buyer if the latter committed a breach of the contract of sale. Even if
one were to grant that there was a breach of the contract by the buyer, automatic rescission
cannot take place because delivery had already been made. And, in cases where there has
already been delivery, the intervention of the court is necessary to annul the contract.
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Rescission in cases falling under Article 1191 of the Civil Code is always subject to review by
the courts and cannot be considered final. In this, the trial court ruled that rescission is
improper because the breach was very slight and the delay in opening the LOC was only 11
days. Hence, the appeal to SC by VSC.
Issue: Whether or not Visayan Sawmill Co. properly rescinded the contract.
Ruling: What obtains in this case is a mere contract to sell or promise to sell, and not a
contract of sale.
The RTC assumed that the transaction is a contract of sale and, influenced by its view that
there was an "implied delivery" of the object of the agreement, concluded that A1593, NCC
was inapplicable. It ruled that rescission under A1191, NCC could only be done judicially. It
further classified the breach committed by the private respondent as slight or casual,
foreclosing, thereby, VSC’s right to rescind the agreement.
 "ART. 1593. With respect to movable property, the rescission of the sale shall of
right take place in the interest of the vendor, if the vendee, upon the expiration
of the period fixed for the delivery of the thing, should not have appeared to
receive it, or, having appeared, he should not have tendered the price at the
same time, unless a longer period has been stipulated for its payment."
Sustaining RTC, CA cited A1497: “The thing sold shall be understood as delivered,
when it is placed in the control and possession of the vendee." VSC's obligation to sell is
unequivocally subject to a positive suspensive condition, i.e., RJH’s opening, making or
indorsing of an irrevocable and unconditional LOC. VSC agreed to deliver the scrap iron only
upon payment of the purchase price by means of an irrevocable and unconditional LOC.
Otherwise stated, the contract is not one of sale where the buyer acquired ownership over
the property subject to the resolutory condition that the purchase price would be paid after
delivery. Thus, there was to be no actual sale until the opening, making or indorsing of the
irrevocable and unconditional LOC. Since what obtains here is a mere promise to sell, RJH’s
failure to comply with the positive suspensive condition cannot even be considered a breach
casual or serious but simply an event that prevented the obligation of petitioner corporation
to convey title from acquiring binding force.
Not only did RJH fail to open, make or indorse an irrevocable and unconditional LOC on or
before 15 May 1983 despite his earlier representation in his 24 May 1983 telegram that he
had opened one on 12 May 1983, the letter of advice VSC received on 26 May 1983 from BPI
Dumaguete City branch explicitly makes reference to the opening on that date of a LOC in
favor of petitioner Ang Tay c/o Visayan Sawmill Co. Inc., drawn without recourse on
ARMACOMARSTEEL ALLOY CORPORATION and set to expire on 24 July 1983, which is
indisputably not in accordance with the stipulation in the contract signed by the parties on at
least three (3) counts: (1) it was not opened, made or indorsed by RJH, but by a corporation
which is not a party to the contract; (2) it was not opened with the bank agreed upon; and
(3) it is not irrevocable and unconditional, for it is without recourse, it is set to expire on a
specific date and it stipulates certain conditions with respect to shipment. In all probability,
RJH may have sold the subject scrap iron to ARMACOMARSTEEL, or otherwise assigned to it
the contract with VSC. RJH 's complaint fails to disclose the sudden entry into the picture of
this corporation.
Consequently, the obligation of VSC to sell did not arise; it therefore cannot be
compelled by specific performance to comply with its prestation. In short, A1191 does not
apply; on the contrary, pursuant to A1597, VSC may totally rescind, as it did in this case, the
contract.
 "ART. 1597. Where the goods have not been delivered to the buyer, and the buyer
has repudiated the contract of sale, or has manifested his inability to perform his
obligations, thereunder, or has committed a breach thereof, the seller may totally
rescind the contract of sale by giving notice of his election so to do to the buyer."
Summary
There has been no foreclosure of the chattel mortgage nor a foreclosure sale. Therefore the
prohibition against further collection does not apply.
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Facts: Amador Tajanlangit and his wife Angeles bought, from Southern Motors Inc. two
tractors and a thresher. As payment, they executed the promissory note whereby they
undertook to satisfy the total purchase price of P24,755.75 in several installments (with
interest) payable on stated dates.The note stipulated that if default be made in the payment
of interest or of any installment, then the total principal sum still unpaid with interest shall at
once become demandable etc. The spouses failed to meet any installment. So the seller
brought an action for collection of the P24k on the note for which the seller obtained a
favorable judgment. Carrying out the order of execution, the sheriff levied and sold at a public
auction the machineries and farm implements which had been bought by the spouses to the
highest bidder, Southern Motors for P10,000.
The Southern Motors subsequently asked and obtained an alias writ of execution; and
pursuant thereto, the provincial sheriff levied attachment on the Tajanlangits' rights and
interests in certain real properties — with a view to another sale on execution.
To prevent such sale, the Tajanlangits instituted this action in the Iloilo court of first instance
for the purpose among others, of annulling the alias writ of execution and all proceedings
subsequent thereto. Their two main theories: (1) They had returned the machineries and farm
implements to the Southern Motors Inc., the latter accepted them, and had thereby settled
their accounts; for that reason, said spouses did not contest the action in Civil Case No. 2942;
and (2) as the Southern Motors Inc. had repossessed the machines purchased on installment
(and mortgaged) the buyers were thereby relieved from further responsibility, in view of the
Recto Law, now article 1484 of the New Civil Code.
Issue Was the seller precluded from making further collection against the buyer in view of
the sale of the subject properties under Art. 1484(3) of the Civil Code?
Held: NO.Appellants would invoke the last paragraph. But there has been no foreclosure of
the chattel mortgage nor a foreclosure sale. Therefore the prohibition against further
collection does not apply. It is true that there was a chattel mortgage on the goods sold. But
the Southern Motors elected to sue on the note exclusively, i.e. to exact fulfillment of the
obligation to pay. It had a right to select among the three remedies established in Article
1484. In choosing to sue on the note, it was not limited to the proceeds of the sale, on
execution, of the mortgaged goods.
installments, the vendor may exercise of the following remedies:
(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.)
PRINCIPLE(S):
"Recto Law" - sale of personal property which is payable in installments.
The case is an exception to the rule that the creditor "shall have no further action
against the purchaser to recover any unpaid balance of the price."
Because in this case, the exercise of the 1st remedy, which is to "Exact
fulfillment of the obligation, should the vendee fail to pay;", via an Ordinary
Civil Action with a petition to attach the mortgaged chattel & sell the same in
a public auction, did not bar the Creditor from executing the favorable
judgment to recover the deficiency or unpaid balance of the price from the
defendant-purchaser.
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FACTS: Southern Motors, Inc. (SMI) sold a Chevrolet Truck (Truck) to Angel Moscoso
(Moscoso) wherein Moscoso paid a downpayment while the balance thereof on installment
basis. As a security, Moscoso executed a Promisory Note for the balance & Mortgaged the
Truck itself. Moscoso failed to pay three (3) installments, which prompted SMI to file an
Ordinary Civil Action with a Petition for a Writ of Attachment against the House & Lot, and the
Truck of Moscoso. By reason of the attachment, the Truck was brought to the compound of
SMI for safe keeping.
During the Pendency of the Ordinary Civil Action the Sheriff, on the motion of SMI, sold the
Truck at a public auction where the highest bidder is SMI. Months after the public auction sale,
the Trial court rendered judgment against Moscoso and the latter must pay the balance plus
interest. Moscoso appealed and was denied by the Court of Appeals, contending that:
"Since the attachment caused to be levied on the truck and its immediate sale at public auction,
was tantamount to the foreclosure of the chattel mortgage" SMI has no further action against
Moscoso to recover any unpaid balance.
ISSUE: WHETHER THE ATTACHMENT & SALE OF THE TRUCK IN A PUBLIC AUCTION AMOUNTS
TO FORECLOSURE WHICH BARS FURTHER ACTION.
HELD: No. The Court does not share the views of Moscoso on this matter. Manifestly, the
appellee had chosen the 1st remedy (specific performance). The complaint is an ordinary civil
action for recovery of the remaining unpaid balance due on the promissory note. We perceive
nothing unlawful or irregular in appellee's act of attaching the mortgaged truck itself.
Since SMI has chosen to exact the fulillment of Moscoso's obligation, it may enforce execution
of the favorable judgment rendered by the Trial court, on all personal and real properties of
the latter not exempt from execution sufficient to satisfy such judgment. It should be noted
that a house and lot was also attached. No one can successfully contest that the attachment
on the Truck was merely an incident to an ordinary civil action.
In sales on installments, where the action instituted is for specific performance (1st remedy)
and the mortgaged property is subsequently attached and sold, the sale thereof does not
amount to a foreclosure of the mortgaged property; hence, the seller-creditor (SMI) is entitled
to deficiency judgment.
PRINCIPLES:
1. 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 is sanctioned
by Article 1486 of the New Civil Code. Thus, the treatment of the installment payments as
rentals which corresponds to roughly one-third (1/3) of the purchase price is not considered
unconscionable.
2. The vendor in a sale of personal property payable in installments may exercise one of
three remedies, namely, (1) exact the fulfillment of the obligation, should the vendee fail to
pay; (2) cancel the sale upon the vendee's failure to pay two or more installments; (3)
foreclose the chattel mortgage, if one has been constituted on the property sold, upon the
vendee's failure to pay two or more installments. The third option or 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 (Art. 1484) The three (3) remedies are alternative and
NOT cumulative. If the creditor chooses one remedy, he cannot avail himself of the other two.
FACTS: On July 5, 1975, the defendants purchased from the plaintiff three (3) units of
'DAIKIN' airconditioner all valued at P19,350.00 as evidenced by the Deed of Conditional Sale,
Exhibit A; that the aforesaid deed of sale had the following terms and conditions, among else:
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
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shallautomatically 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: xxx xxx xxx
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 plaintiff's
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, the plaintiff tried to recover the said
properties extra-judicially but it failed to do so that the matter was later referred by the
plaintiff to its legal counsel for legal action.
In its verified complaint dated January 28, 1977, the plaintiff prayed for the issuance of a
writ of replevin, which the Court granted in its Order dated February 28, 1977, after the
plaintiff posted the requisite bond; that on April 11, 1977, the plaintiff, by virtue of the
aforesaid writ, succeeded in retrieving the properties in question.
October 3, 1977, the outstanding account of the defendants is only in the amount of
P6,188.29 as shown by the computation (Exhibit F), after deducting the interests in arrears,
cover charges, replevin bond premiums, the value of the units repossessed and the like; and,
that in view of the failure of the defendants to pay their obligations, the amount of P6,966.00
which had been paid by way of installments were treated as rentals for the units in question
for two (2) years pursuant to the provisions of paragraph 5 of the Deed of Conditional Sale,
Exhibit A.
The trial court ruled in favor of the plaintiff. The CA elevated this to the SC in its resolution
on pure question of law. The Defendants-appellants claim that for the use of the plaintiff-
appellee's three air- conditioners, from July 5, 1975 4 to April 11, 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 (1/3) of the entire price of said air-conditioners which was P19,350.00. They also
complain that for the said period the trial court is ordering them to pay P6,188.29 as the
balance due for the three air-conditioners repossessed. Defendants-appellants were likewise
ordered to pay P1,000.00 as attorney's fees when plaintiff-appellee never sought for
attorney's fees in its complaint.
ISSUES:
(1) W.O.N a stipulation in a contracts that the installments paid shall not be returned is
valid.
(2) W.O.N. the on the remedies of the vendor in a sale of PERSONAL PROPERTY PAYABLE
IN INSTALLMENTS are ALTERNATIVE.
RULING:
(1) YES. 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 is
sanctioned by Article 1486 of the New Civil Code.
Defendants-appellants cannot complain that their downpayment of P774.00 and installment

payments of P5,655.92 8 were treated as rentals — even though the total amount of
P6,429,92 which they had paid, approximates one-third (1/3) of the cost of the three (3) air-
conditioners. The monthly installment payable by defendants-appellants was P774.00. The
P5,655.92 installment payments correspond only to seven (7) monthly installments. Since
they admit having used the air-conditioners for twenty-two (22) months, this means that they
did not pay fifteen (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 three (3) remedies the vendor in a sale of personal property payable in
installments are alternative and NOT cumulative and may exercise one of three remedies. If
the creditor chooses one remedy, he cannot avail himself of the other two, namely, (1) exact
the fulfillment of the obligation, should the vendee fail to pay; (2) cancel the sale upon the
vendee's failure to pay two or more installments; (3) foreclose the chattel mortgage, if one
has been constituted on the property sold, upon the vendee's failure to pay two or more
installments. The third option or remedy, however, is subject to the limitation that the vendor
cannot recover any unpaid balance of the price and any
Clearly, plaintiff-appellee chose the second remedy in seeking enforcement of its contract.
This is shown from the fact that its Exhibit "F" which showed the computation of the
outstanding account of defendants-appellants as of October 3, 1977 took into account "the
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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 three air-conditioning units which it
had already repossessed. It cannot have its cake and eat it too.
WHEREFORE, the judgment of the trial court in Civil Case No. 25578 is hereby SET ASIDE
and the complaint filed by plaintiff-appellee Delta Motor Sales Corporation is hereby
DISMISSED. No costs.
Recto law (Act 4122)
FACTS: This is a petition for review by certiorari filed by Eutropio Zayas, Jr. to secure a
reversal of the the respondent court’s orders which remanded Civil Case No. 74381 for further
proceedings instead of affirming the City Court’s order of dismissal. The petitioner Eutropio
Zayas, Jr. purchased on installment basis a motor vehicle described as One (1) Unit Ford
Thames Freighter with PUJ Body, Engine No. 400E-127738 and Chassis No. 400E-127738
from Mr. Roque Escaño Enterprises in Cagayan de Oro City, dealer of respondent Luneta
Motor Company.
The motor vehicle was delivered to the petitioner who (1) paid the initial payment in the
amount of P1,006.82; and (2) executed a promissory note in the amount of P7,920.00, the
balance of the total selling price in favor of respondent Luneta Motor Company. The
promissory note stated the amounts and dates of payment of twenty-six installments
covering the P7, 920.00 debts. Simultaneously with the execution of the promissory note
and to secure its payment, the petitioner executed a chattel mortgage on the subject motor
vehicle in favor of the respondent. After paying a total amount of P3, 148.03, the petitioner
was unable to pay further monthly installments prompting the respondent Luneta Motor
Company to extra-judicially foreclose the chattel mortgage. The motor vehicle was sold at
public auction with the respondent Luneta Motor Company who was the highest bidder in the
amount of P5,000.00 realized from the foreclose of the chattel mortgage which could not
cover the total amount of the promissory note executed by the petitioner in favor of the
respondent, the latter filed Civil Case No. 165263 with the City Court of Manila for the
recovery of the balance of P1, 551.74 plus interest.
The City Court of Manila dismiss the case on the ground that the defendant is no longer liable
for the deficiency judgment in as much as the chattel mortgage has been foreclosed, with
the plaintiff as the highest bidder thereof, citing the case of Ruperto G. Crus vs. Filipinas
Investment, decided on May 27, 1968, G.R. No. L-24772 in connection with Article 1484 of
the Civil Code, and finding the same well taken. Luneta Motor Company filed an “Urgent
Motion for Reconsideration” reiterating its stand that Article 1484 of the New Civil Code on
sale of personal property by installment was not applicable and the contract involving the
parties was a mere case of an ordinary loan secured by a mortgage.
The court denied the motion of reconsideration for lack of merit, hence, Luneta Motor
Company appealed the case to the Court of First Instance of Manila, where the latter is of
the impression that the case at bar may not be decided merely as the City Court had done ,
on the question of law since the presentation of evidence is necessary to adjudicate the
questions involved.
ISSUE: Whether or not a deficiency amount after the motor vehicle, subject of the chattel
mortgage, has been sold at the public auction still be recovered by respondent company.
RULING: No. Article 1484 of the New Civil Code provides; Article 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:
(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.
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In the instant case, respondent Luneta Motor Company maintains that the contract between
the company and the petitioner was only an ordinary loan removed from the coverage of
Article 1484 of the New Civil Code on the ground that the role of Luneta Motor Company was
only to finance the purchase price of the motor vehicle and it has distinct and different
identity of the Escaño Enterprises, Cagayan de Oro from which the petitioner Eutoprio Zayas,
Jr. purchased the subject vehicle. The respondent’s arguments have no merit. Escaño
Enterprises, a dealer of respondent Luneta Motor Company, was merely a collecting-agent
as far as the purchase of the subject motor vehicle was concerned. The principal and agent
relationship is clear. The established rule is to the effect that the foreclosure and actual sale
of a mortgaged chattel bars further recovery by the vendor of any balance on the purchaser’s
outstanding obligation not so satisfied by the sale.
FACTS: Petitioners Daniel L. Borbon and Francisco Borbon signed a promissory note in favor
of Pangasinan Auto Mart, Inc. or order in the amount of One Hundred Twenty Two Thousand
Eight Hundred Fifty Six (P122,856.00) to be payable without need or notice or demand, in
installments of the amounts following and the dates hereinafter set forth, to wit: P10,238.00
monthly for (twelve) 12 months due and payable on the 7th day of each month starting
January, 1985, provided that at late payment charge of 3% per month shall be added on each
unpaid installment from due date until fully paid. It likewise agreed that upon such default,
attorney’s fees are availed of, an additional sum, equal to twenty five percent (25%) of the
total sum due thereon, which shall not be less than Five Hundred Pesos, shall be paid to the
holder hereof for attorney’s plus an additional sum equivalent to 25% of the total sum which
likewise shall not be less than Five Hundred Pesos for liquidated damages, aside from
expenses of collection and legal costs provided for in the rules of court. To secure the
promissory note, the defendant executed a chattel mortgage on “One (1) Brand New 1984
Isuzu, KCD 20 Crew Cab (Conv.) Serial No. KCD20DOF 207685k, Key No. 5509. The rights of
Pangasinan Auto Mart, Inc. was later assigned to Filinvest Credit Corporation on December
10, 1984, with notice to the defendants. On March 21, 1985, Filinvest Credit Corporation
assigned all its rights, interests and title over the Promissory Note and the Chattel Mortage
to the plaintiff.
The Promissory Note stipulates that the installment of P10, 238.00 monthly should be paid
on the 7th day of each month starting January 1985, but the defendants failed to comply with
their obligation. Because the defendants did not pay their monthly installments, Filinvest
demanded from the defendants the payment of their installments due in January 29, 1985 by
telegram. After the accounts were assigned to the plaintiff, the plaintiff attempted to collect
by sending a demand letter to the defendants for them to pay their entire obligations which
as of March 12, 1985, totaled P185, 257.80. The appellate court upheld the court a quo in the
award of liquidated damages and attorney’s fees in favor of private respondent, hence,
petitioners seek a modification of the decision of the appellate court invoking bthe provisions
of Article 1484 of the New Civil Code.
ISSUE:Whether liquidated damages and attorney’s fees apply in cases involving contract of
sale covered by Promissory Note and Chattel Mortgage.
RULING: The court modified the appealed decision by deleting therefrom the award for
liquidated damages; in all other respects, the judgment of the appellate court is upheld.
Article 1484 of the Civil Code provides:
Art. 1484. In a contract of sale of personal property the price of which is payable in
instalments, the vendor may exercise any of the following remedies:
1.) Exact fulfillment of the obligation, should the vendee failed to pay;
2.) Cancel the sale, should the vendee’s failure to pay covered two or more
instalments;
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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 instalments.
In this case, he shall have no further action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary shall be void. In Macondary & Co. vs.
Eustaquio, we have said that the phrase “any unpaid balance” can only mean the deficiency
judgment to which the mortgagee maybe entitled to when the proceeds from the auction sale
are insufficient to cover the “full amount of the secured obligations which… include the interest
on the principal, attorney’s fees, expenses of collection, and the costs”. In sum, we have
observed that the, legislative intent is not to merely limit the proscription of any further action
to the” unpaid balance of the principal” but, as so later ruled in Luneta Motor Co., vs. Salvador,
to all, other claims that may be likewise called in the accompanying Promissory Note against
the buyer, mortgagor or his guarantor, including costs and attorney’s fees. Private respondent
bewails the instant petition in that petitioners have failed to specifically raise the issue on
liquidated damages and attorney’s fees stipulated in the actionable documents. In several
cases, we have ruled that as long as the questioned items bear relevance and close relation
to those specifically raised, the interest of justice would dictate that they too, must be
considered.
FACTS: This case was an appeal from the decision of the Court of First Instance in action of
replevin.
The cause of action alleged in appellee’s complaint is to the effect that appellant-defendant
had bought a Mercedes-Benz Diesel truck from it on installments and defaulted in the payment
thereof, in consequence of which, it was entitled, by virtue of the mortgage contract in its
favor, to the possession of the said truck or, in case said truck could not be recovered, to the
paymemt of the amount of P37, 221.22 plus attorney’s fees in the amount of P9,305.30 and
the costs of the suit. The court a quo then issued a writ of replevin and eventually the
possession of the truck was delivered to the plaintiff-appellee by virtue of the said writ.
The defendant-appellant presented the issue that the lower court erred in further sentencing
him to pay for the attorney’s fees after the said court had already confirmed the possession
and title of the truck in favor of plaintiff-appellee, considering the provisions of Article 1484
in the Civil Code, in which these remedies are alternative and not cumulative.
Article 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:
(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.
In other words, if the vendor has elected to avail himself of any of the remedies, he is deemed
to have renounced the others. (Tolentino, Civil Code of the Philippines, Vol. V, 1959 ed., p.
27 citing the case of Pacific Commercial vs. de la Rama, O. G. August 9, 1941, p.
1224).Furthermore, the defendant-appellant submits that the present case is an election of
the third remedy provided in Article 1484 of the Civil Code.
ISSUE:Whether or not the judgement rendered by the trial court is a violation of the
provisions of Article 1484?
RULING: No, it is not a violation of the provisions of Article 1484. The Court held that the
mere fact that the appellee has secured possession of the truck in question does not
necessarily mean that it will foreclose its mortgage. Indeed, there is no showing at all that
the appellee is causing the sale thereof at public auction or even preparing to do so.
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FACTS: On December 4, 1970 Arnaldo Dizon sold to Consuelo Alcoba his 1966 model Chevrole
car for P13,157.89, payable in eighteen monthly installments, which were secured by a chattel
mortgage on the car. On that same date, Dizon assigned for ten thousand pesos to Industrial
Finance Corporation all his rights and interest in the chattel mortgage. Alcoba defaulted in the
payment of the first four installments, which were secured by a chattel mortgage on the car.
On that same date, Dizon assigned for ten thousand pesos to Industrial Finance Corporation
all his rights and interest in the chattel mortgage. Alcoba defaulted in the payment of the first
four installments. Because of that default and by virtue of the acceleration clause in the
promissory note forming part of the mortgage, the whole obligation became due and
demandable.
In its complaint Industrial Finance Corporation prayed for alternative reliefs. The main
objective of its complaint was recovery of the mortgaged car by means of a writ of replevin.
It submitted a redelivery bond. Undoubtedly, the mortgagee-assignee wanted to foreclose
extrajudicially the chattel mortgage but, before it could do so, the sheriff had to seize the car
by means of the provisional remedy of an order for the delivery of personal property. The
lower court issued the writ of replevin.
Consequently, there was no extrajudicial foreclosure of the mortgage since, for that purpose,
possession of the car by the sheriff is necessary (Bachrach Motor Co. vs. Summers, 42 Phil.
3). Consuelo Alcoba did not appeal. That judgment became final and executory. The sheriff
was able to levy upon the mortgaged car which was then in the possession of the Aco Motor
Service of Dagupan City. At the execution sale RULING on April 25, 1974 Industrial Finance
Corporation bought the mortgaged car for P4,000 (Exh. 3-A, p. 72, Expedients).
However, in order to take possession of the car, the corporation had to pay P4,250 to the Aco
Motor Service to satisfy its lien for the repair and storage of the car. The corporation
contended that, because of that payment, it sustained a loss of P250 in the execution sale. It
asked for a third alias writ of execution in order to satisfy the balance of Consuelo Alcoba’s
obligation which, together with the 12% interest, it computed at P11,300.92
ISSUE: Did Consuelo, mortgagor, have to pay the balance of her obligation?
RULING:Yes. The mortgagors should pay the deficiency. The corporation’s action was for
specific performance or fulfillment of the obligation and not for judicial foreclosure Consuelo
Alcoba’s payment of P2,000 on account of the money judgment against her signified that she
acquiesced in the action for specific performance. The Civil Code provides that it is only when
there has been a foreclosure that the mortgagor is not liable for any deficiency. In this case,
there was no foreclosure.
The mortgagee evidently chose the remedy of specific performance. It levied upon the car by
virtue of an execution and not as an incident of a foreclosure proceeding. The rule is that in
installment sales, if the action instituted is for specific performance and the mortgaged
property is subsequently attached and sold, the sale thereof does not amount to a foreclosure
of the mortgage. Hence, the seller creditor is entitled to a deficiency judgment.
1. NORTHERN MOTORS, INC. VS. SAPINOSO, G.R. NO. L-28074, 29 MAY 1970
DOCTRINE: 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.
FACTS: Sapinoso purchased form Northern Motors a car for P12,171, making a down payment
and the balance payable on installment. To secure the payment, Sapinoso executed chattle
mortgage on the car.
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The mortgage contract provided that upon default, the mortgagee may:
(a) sell the car;

(b) cancel the contract;
(c) foreclose the property extrajudicially;
(d) foreclose the property judicially;
(e) file an ordinary civil action for exact fulfillment
further, whichever is the elected remedy, the mortgagor waives his right to reimbursement
of any amounts paid by him. Sapinoso failed to pay several installment dues. His other
payments were applied almost all on the interest only. With this, Northern Motors filed this
present complaint.
In the complaint, Northern Motors stated that it was availing itself of the remedy of
extrajudicial foreclosure, with a prayer for the issuance of writ of replevin upon filing a bond.
Should the mortgagor failed to deliver the car, then it be ordered to pay the amount due plus
25% attorneys fees. Subsequent to the commencement of the action but before filing an
answer, Sapinoso paid P1,250.
A writ of replevin was issued and served to Sapinoso together with the summons. The next
day, the sheriff seized the car and delivered to Northern Motor. Sapinoso made an answer,
stating that he has already paid so much for the car; and that the value of the car is only
P5,000; and that the reason for not being able to pay the installment dues is because the car
is defective, and that Northern failed to have it fixed even though he had repeatedly called
its attention. He also avered that he gave P700 to Northern to have the car fixed, but instead,
Northern filed the instant suit. Sapinoso prayed that the car be returned to him, and that he
is willing to pay for it in a compromise agreement.
The trial court finds that Northern has the right to the possession of the car, and that the
delivery of the car to him is ratified. But Northern has to return the P1,250 to Sapinoso plus
interest.
Northern made an appeal claiming that the court erred in ordering it to return the P1,250.
Under Art 1484 of the Civil Code, it is the exercise and not the election of remedy of
foreclosure that bars the creditor from recovering the unpaid balance of the debt. Northern
states that Sapinoso, in paying him before he files his answer, and by not filing a counter-
claim, effectively renounced any right he has to recover.
ISSUE: Whether Northern has to return the P1,250 paid to him by Sapinoso after
commencement of the present case but before the filing of Sapinoso’s Answer.
RULING: No obligation to return. The trial court erred in concluding that the legal effects of
the filing of the action was to bar the plaintiff from accepting further payments on the
promissory note.
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.
In any event, what Article 1484(3) prohibits is "further action against the purchaser to recover
any unpaid balance of the price;" and although this Court has construed the word "action" in
said Article 1484 to mean "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
purchase price from the purchaser or his privy", there is no occasion at this stage to apply
the restrictive provision of the said article, because there has not yet been a foreclosure sale
resulting in a deficiency. The payment of the sum of P1,250.00 by defendant-appellee
Sapinoso was a voluntary act on his part and did not result from a "further action" instituted
by plaintiff-appellant.
FACTS: That on July 15, 1963, Ruperto G. Cruz purchased on installments, from the Far East
Motor Corporation, one (1) unit of Isuzu Diesel Bus, described in the complaint, for
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P44,616.24, Philippine Currency, payable in installments of P1,487.20 per month for thirty
(30) months, beginning October 22, 1963, with 12 % interest per annum, until fully paid. A
promissory note was made and to secure the payment of the sum a chattel mortgage over
the bus was made. Since there was no down payment additional security was required and
Cruz agreed to give, additional security for his obligation besides the chattel mortgage, that
said additional security was given by plaintiff Felicidad Vda. de Reyes in the form of SECOND
MORTGAGE on a parcel of land owned by her, together with the building. On July 15, 1963,
the Far East Motor Corporation for value received indorsed the promissory note and assigned
all its rights and interest in the Deeds of Chattel Mortgage and in the Deed of Real Estate
Mortgage to the defendant, Filipinas Investment & Finance Corporation, with due notice of
such assignment to the plaintiffs. Cruz defaulted on the loan and the assignee Filipinas
Investment and Finance Corp took steps to foreclose the chattel mortgage. During foreclosure
sale the bus was sold for P15,000.00 with the highest bidder being Cruz. Since the proceeds
of the sale did not cover the entire amount Filipinas Investment also move to foreclose the
additional security and requested the Sheriff to take possession of the land subject of the
real estate mortgage and sell it.
ISSUE: Whether or not Filipinas Investment can also foreclose the additional security when
it had already foreclose the chattel mortgage on the bus?
RULING: Since Cruz was not able to pay the installments and Filipinas Investment foreclosed
the chattel mortgage on the bus and was eventually bought by Cruz for P15,000.00 being
the highest bidder in a foreclosure sale then it can be said that the Filipinas availed of the
remedies as enumerated on Article 1484 which states
installments, the vendor may exercise any of the following remedies:
(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. These remedies have been
recognized as alternative, not cumulative, that the exercise of one would bar the
exercise of the others.
Defendant-appellant, however, sought to collect the supported deficiency by going against

the real estate mortgage which was admittedly constituted on the land of plaintiff Reyes as
additional security to guarantee the performance of Cruz' obligation, claiming that what is
being withRULING from the vendor, by the proviso of Article 1484 of the Civil Code, is only
the right to recover "against the purchaser", and not a recourse to the additional security put
up, not by the purchaser himself, but by a third person.
There is no merit in this contention. To sustain appellant's argument is to overlook the fact
that if the guarantor should be compelled to pay the balance of the purchase price, the
guarantor will in turn be entitled to recover what she has paid from the debtor vendee (Art.
2066, Civil Code) ; so that ultimately, it will be the vendee who will be made to bear the
payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage
given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and
public policy overturned.
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FACTS: On April 30, 1949, the defendant Myers Building Co. entered into a Deed of
Conditional Sale, in favor of Maritime Building Co. over 3 parcels of land with improvements
in Manila City for P1M. Maritime paid P50, 000.00 upon execution. The balance was to be paid
in monthly instalments of P10, 000.00 at 5% interest per annum (later lowered to P5, 000.00
at 5.5% interest per annum). The parties further agreed that: a. If Maritime defaults, the
contract would be annulled at Myers’ option; b. All payments already made shall be forfeited;
and c. Myers shall have the right to re-enter the property and take possession. Moreover, if
Maritime refuses to peacefully deliver the possession of the properties subject of this contract
to the Myers in case of rescission, a suit should be brought in court by the Myers to seek
judicial declaration of rescission.
Unfortunately, Maritime failed to pay the installment for March 1961, for which the Vice-
President, George Schedler,of the Maritime Building Co., Inc., wrote a letter to the President
of Myers, Mr. C. Parsons, requesting for a moratorium on the monthly payment of the
installments until the end of the year 1961, for the reason that the said company was
encountering difficulties in connection with the operation of the warehouse business.
Consequently, on May 1961, Myers made a demand upon Maritime for the unpaid
installments; also, Myers advised Maritime of the cancellation of the Deed of Conditional Sale
and demanded the return of the property, holding Maritime liable for rentals at P10, 000.00
monthly. Myers thereafter demanded from its lessee, Luzon Brokerage, to avoid paying to the
wrong party, filed an action for interpleader. After the filing of this action, the Myers Building
Co., Inc. in its answer filed a cross-claim against the Maritime Building Co., Inc. praying for
the confirmation of its right to cancel the said contract.
ISSUE: Whether or not Myers Company is entitled to extra-judicially rescind the Deed of
Conditional Sale.
RULING: YES. The Court RULING in Lopez v. Commissioner of Customs that a judicial action
for the rescission of a contract is not necessary where the contract provides that it may be
revoked and cancelled for violation of any of its terms.
As further explained in UP v. de los Angeles, the party who deems the contract violated may
consider it resolved or rescinded without previous court action, but it proceeds at its own risk.
For it is only the final judgment of the corresponding court that will conclusively and finally
settle whether the action taken was or was not correct in law. But the law definitely does not
require that the contracting party who believes itself injured must first file suit and wait for
a judgment before taking extrajudicial steps to protect its interest. Neither can Maritime
invoke Civil Code Art. 1592 (where vendee in default can continue to make payments as long
as no judicial/notarial demand for rescission has been made) because the cross-claim filed by
Myers constitutes a judicial demand for rescission that satisfies the said article.
FACTS: Sometime in 1994, respondent-spouses Arsenio and Angeles Nanol entered into a
Contract to Sell with petitioner Communities Cagayan, Inc., whereby the latter agreed to sell
to respondent-spouses a house and Lots 17 and 19 located at Block 16, Camella Homes
Subdivision, Cagayan de Oro City, for the price of P368,000.00. Respondent-spouses,
however, did not avail of petitioners inhouse financing due to its high interest rates. Instead,
they obtained a loan from Capitol Development Bank, a sister company of petitioner, using
the property as collateral. To facilitate the loan, a simulated sale over the property was
executed by petitioner in favor of respondent-spouses. Accordingly, titles were transferred in
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the names of respondent-spouses under Transfer Certificates of Title (TCT) Nos. 105202 and
105203, and submitted to Capitol Development Bank for loan processing. Unfortunately, the
bank collapsed and closed before it could release the loan.
On November 30, 1997, respondent-spouses entered into another Contract to Sell with
petitioner over the same property for the same price of P368,000.00. This time, respondent-
spouses availed of petitioners in-house financing thus, undertaking to pay the loan over four
years, from 1997 to 2001.
On September 10, 2003, petitioner sent respondent-spouses a notarized Notice of

Delinquency and Cancellation of Contract to Sell due to the latters failure to pay the monthly
amortizations.
Petitioner, on July 27, 2005, filed before Branch 18 of the RTC, Cagayan de Oro City, a
Complaint for Cancellation of Title, Recovery of Possession, Reconveyance and
Damages, docketed as Civil Case No. 2005-158, against respondent-spouses and all persons
claiming rights under them. Petitioner alleged that the transfer of the titles in the names of
respondent-spouses was made only in compliance with the requirements of Capitol
Development Bank and that respondent-spouses failed to pay their monthly amortizations
beginning January 2000. Thus, petitioner prayed that TCT Nos. T-105202 and T-105203 be
cancelled, and that respondent Angeles be ordered to vacate the subject property and to pay
petitioner reasonable monthly rentals from January 2000 plus damages.
Ruling of the Regional Trial Court: On December 29, 2006, the RTC rendered judgment
declaring the Deed of Absolute Sale invalid for lack of consideration. Transfer Certificates of
Title Nos. 105202 and 105203 in the names of the [respondents], Arsenio (deceased) and
Angeles Nanol, are ordered CANCELLED. The [respondents] and any person claiming rights
under them are directed to turn-over the possession of the house and lot to [petitioner],
Communities Cagayan, Inc., subject to the latters payment of their total monthly installments
and the value of the new house minus the cost of the original house.
ISSUES:
1) Whether petitioner is obliged to refund to respondent-spouses all the monthly installments

paid; and
2) Whether petitioner is obliged to reimburse respondent-spouses the value of the new house
minus the cost of the original house.
Whether or not the action of the RTC branch 18, in ordering the recovery of possession by
petitioner subject to the latters payment of their total monthly installments and the value of
the new house minus the cost of the original house is contrary to law and jurisprudence.
RULING:
1) Considering that this case stemmed from a Contract to Sell executed by the petitioner and
the respondent-spouses, we agree with petitioner that the Maceda Law, which governs sales
of real estate on installment, should be applied. Sections 3, 4, and 5 of the Maceda Law
provide for the rights of a defaulting buyer, to wit:
Section 3. In all transactions or contracts involving the sale or financing of real estate
on installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under Republic Act Numbered
Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three
hundred eighty-nine, where the buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults in the payment of succeeding
installments:
(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: 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 canceled, 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
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per cent every year but not to exceed ninety per cent of the total payments made:
Provided, That the actual cancellation of the contract shall take place after thirty days
from receipt by the buyer of the notice of cancellation or the demand for rescission of
the contract by a notarial act and upon full payment of the cash surrender value to the
buyer.
Down payments, deposits or options on the contract shall be included in the

computation of the total number of installment payments made. (Emphasis supplied.)
Section 4. In case where less than two years of installments were paid, the seller shall give
the buyer a grace period of not less than sixty days from the date the installment became
due.
If the buyer fails to pay the installments due at the expiration of the grace period, the seller
may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation
or the demand for rescission of the contract by a notarial act.
Section 5. Under Sections 3 and 4, the buyer shall have the right to sell his rights or assign
the same to another person or to reinstate the contract by updating the account during the
grace period and before actual cancellation of the contract. The deed of sale or assignment
shall be done by notarial act.
In this connection, we deem it necessary to point out that, under the Maceda Law, the actual
cancellation of a contract to sell takes place after 30 days from receipt by the buyer of the
notarized notice of cancellation, and upon full payment of the cash surrender value to the
buyer. In other words, before a contract to sell can be validly and effectively cancelled, the
seller has (1) to send a notarized notice of cancellation to the buyer and (2) to refund the
cash surrender value.
Until and unless the seller complies with these twin mandatory requirements, the contract to
sell between the parties remains valid and subsisting. Thus, the buyer has the right to
continue occupying the property subject of the contract to sell, and may "still reinstate the
contract by updating the account during the grace period and before the actual cancellation"
of the contract.
In this case, petitioner complied only with the first condition by sending a notarized notice of
cancellation to the respondent-spouses. It failed, however, to refund the cash surrender value
to the respondent-spouses. Thus, the Contract to Sell remains valid and subsisting and
supposedly, respondent-spouses have the right to continue occupying the subject property.
Unfortunately, we cannot reverse the Decision of the RTC directing respondent-spouses to
vacate and turnover possession of the subject property to petitioner because respondent-
spouses never appealed the order. The RTC Decision as to respondent-spouses is therefore
considered final.
In addition, in view of respondent-spouses failure to appeal, they can no longer reinstate the
contract by updating the account. Allowing them to do so would be unfair to the other party
and is offensive to the rules of fair play, justice, and due process. Thus, based on the factual
milieu of the instant case, the most that we can do is to order the return of the cash surrender
value. Since respondent-spouses paid at least two years of installment, they are entitled to
receive the cash surrender value of the payments they had made which, under Section 3(b)
of the Maceda Law, is equivalent to 50% of the total payments made.
Respondent-spouses are entitled to

reimbursement of the improvements
made on the property.
Petitioner posits that Article 448 of the Civil Code does not apply and that respondent-spouses
are not entitled to reimbursement of the value of the improvements made on the property
because they were builders in bad faith. At the outset, we emphasize that the issue of whether
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respondent-spouses are builders in good faith or bad faith is a factual question, which is
beyond the scope of a petition filed under Rule 45 of the Rules of Court.
In fact, petitioner is deemed to have waived all factual issues since it appealed the case
directly to this Court, instead of elevating the matter to the CA. It has likewise not escaped
our attention that after their failed preliminary conference, the parties agreed to submit the
case for resolution based on the pleadings and exhibits presented. No trial was conducted.
Thus, it is too late for petitioner to raise at this stage of the proceedings the factual issue of
whether respondent-spouses are builders in bad faith. Hence, in view of the special
circumstances obtaining in this case, we are constrained to rely on the presumption of good
faith on the part of the respondent-spouses which the petitioner failed to rebut. Thus,
respondent-spouses being presumed builders in good faith, we now rule on the applicability
of Article 448 of the Civil Code.
As a general rule, Article 448 on builders in good faith does not apply where there is a
contractual relation between the parties, such as in the instant case. We went over the records
of this case and we note that the parties failed to attach a copy of the Contract to Sell. As
such, we are constrained to apply Article 448 of the Civil Code, which provides viz:
ART. 448. The owner of the land on which anything has been built, sown or planted in good
faith, shall have the right to appropriate as his own the works, sowing or planting, after
payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built
or planted to pay the price of the land, and the one who sowed, the proper rent. However,
the builder or planter cannot be obliged to buy the land if its value is considerably more than
that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the
land does not choose to appropriate the building or trees after proper indemnity. The parties
shall agree upon the terms of the lease and in case of disagreement, the court shall fix the
terms thereof.
The Court likewise applied Article 448 in Spouses Macasaet v. Spouses Macasaet
notwithstanding the fact that the builders therein knew they were not the owners of the land.
In said case, the parents who owned the land allowed their son and his wife to build their
residence and business thereon. As found by this Court, their occupation was not by mere
tolerance but "upon the invitation of and with the complete approval of (their parents), who
desired that their children would occupy the premises. It arose from familial love and a desire
for family solidarity x x x." Soon after, conflict between the parties arose. The parents
demanded their son and his wife to vacate the premises. The Court thus ruled that as owners
of the property, the parents have the right to possession over it. However, they must
reimburse their son and his wife for the improvements they had introduced on the property
because they were considered builders in good faith even if they knew for a fact that they did
not own the property,
In fine, the Court applied Article 448 by construing good faith beyond its limited definition.
We find no reason not to apply the Courts ruling in Spouses Macasaet v. Spouses Macasaet
in this case. We thus hold that Article 448 is also applicable to the instant case. First, good
faith is presumed on the part of the respondent-spouses. Second, petitioner failed to rebut
this presumption. Third, no evidence was presented to show that petitioner opposed or
objected to the improvements introduced by the respondent-spouses. Consequently, we can
validly presume that petitioner consented to the improvements being constructed. This
presumption is bolstered by the fact that as the subdivision developer, petitioner must have
given the respondent-spouses permits to commence and undertake the construction. Under
Article 453 of the Civil Code, "it is understood that there is bad faith on the part of the
landowner whenever the act was done with his knowledge and without opposition on his part."
In view of the foregoing, we find no error on the part of the RTC in requiring petitioner to pay
respondent-spouses the value of the new house minus the cost of the old house based on
Article 448 of the Civil Code, subject to succeeding discussions.
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KEY LEGAL PROVISIONS: Article 1257. In order that the consignation of the thing due
may release the obligor, it must first be announced to the persons interested in the
fulfillment of the obligation. The consignation shall be ineffectual if it is not made strictly in
consonance with the provisions which regulate payment. (1177)
Article 1258. Consignation shall be made by depositing the things due at the disposal of
judicial authority, before whom the tender of payment shall be proved, in a proper case,
and the announcement of the consignation in other cases.
The consignation having been made; the interested parties shall also be notified thereof.
(1178)
CASE UNDER THE TOPIC OF: R.A. No. 6552 – The Realty Installment Buyer
Protection Act otherwise known as “MACEDA LAW”
FACTS: Petitioner and private respondent, Flores, entered into a contract of conditional sale
of real property. When the private responded failed to pay the balance on the date stipulated,
he filed a petition to rescind the contract. They entered into a Compromise Agreement.
Thereafter, the petitioner made a demand. In response, the Flores sent a letter to the former
signifying his willingness and intention to pay the balance. Flores alleged that he tendered
payment to petitioner but the petitioner refused to accept it. Petitioner filed a motion for writ
of execution, to rescind and liquidate damages, alleging that Flores had failed to pay the
installment due, as stipulated in their compromise agreement.
Flores filed a motion for reconsideration and tendered a certified manager’s check covering
the entire obligation, within seventeen days after it was due. The trial court dismissed the
motion for reconsideration. The CA
nullified and set aside the decision of the trial court. It contended that rescission will
not be permitted in cases of a slight or casual breach. The delay in payment of Flores
is merely a slight breach.
ISSUE: Whether or Not the tender of payment restored defendant’s right as vendee.
RULING: 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 in the amount of P7,000.00, or a total of P76,059.71.
But he is not released from the responsibility to pay the vendor. The vendee must first
consign the amount to the court. According to Article 1256 of the Civil Code of the Philippines,
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.
FACTS: Pacweld Steel Corporation (Pacweld) a now defunct domestic corporation executed
in favor of several purchasers a Contract to Sell pieces of lots payable in installment which
payments started to be made. Eventuallty, DBP acquired ownership of the property from
PACWELD thru foreclosure sale. Later on, the property was sold to Lagandaon spouses.
The above-mentioned defendant[s]-purchasers deferred/refused further payments on their

amortization to Pacweld because of [the] refusal of Lorenzo V. Lagandaon, then President of
Pacweld officials [sic] to undertake the development of the areas bought.
Defendants/Purchasers, together with other lot buyers filed an action for Specific Performance.
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ISSUE: Whether or not RA 6552 (MACEDA LAW) can be used by the Lagandaon spouses to
cancel the contracts to sell?
RULING: NO. The Maceda Law has no application to the present case. The policy of that law,
as embodied in its title, is "to provide protection to buyers of real estate on installment
payments." As clearly specified in Section 3, the declared public policy espoused by Republic
Act No. 6552 is "to protect buyers of real estate on installment payments against onerous and
oppressive conditions." In this case, petitioners did not buy the property on installment;
private respondents did. And thus, if the Maceda Law has any relevance at all, it is to protect
the said respondents, not the petitioners. Furthermore, Section 3(b) of the same law does
nor grant petitioners any legal ground to cancel the contracts to sell; rather, it prescribes the
responsibility of the seller in case the "contract[s are] cancelled." Clearly, Respondent Court
was correct in refusing to apply the Maceda Law and in not cancelling the contracts to sell.
FACTS: Respondent Fernando and petitioner entered into a contract to sell with respect to a
lot of Respondent in 1985.
The contract provided that in case the petitioner failed to pay the monthly installments beyond
the grace period, the respondent can rescind the contract and the prior payments made by
the petitioner shall be considered as rent. In 1989, the petitioner failed to pay her installments.
This prompted the respondent to file an ejectment suit in the MTC. The lower court ruled that
there was already a rescission of the contract as stipulated.
ISSUE: Whether or not there was a valid rescission of contract of sale pursuant to the Maceda
Law
RULING: No. The Maceda Law requires that there must be (1) notice of rescission through a
notarial act and (2) return of the cash surrender value.
The respondent complied with the first requisite as the decision in the ejectment case can be
considered as a valid notice of cancellation under the Maceda Law. However, the respondent
failed to comply with the second requirement of giving the cash surrender value. Thus, the
contract to sell is not properly canceled. However, since the petitioner incurred delay, she
shall pay additional penalties. Thus, the contract to sell exists where the petitioner shall pay
damages.
FACTS: ACTIVE REALTY & DEVELOPMENT CORPORATION entered into a Contract to Sell1
with respondent NECITA DAROYA whereby the latter agreed to buy a 515 sq. m. lot for
P224,025.00 in petitioner’s subdivision to be paid in amortization within 5 years, valued at
P346,367.00, a figure higher than that stated as the contract price. The buyer defaulted in
three (3) monthly amortizations. Petitioner sent respondent a notice of cancellation2 of their
contract to sell. When respondent offered to pay for the balance of the contract price,
petitioner refused as it has allegedly sold the lot to another buyer. The respondent has
already paid 4 years. already more than the contract price.
ISSUE: Whether or not the petitioner can be compelled to refund to the respondent the
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value of the lot or to deliver a substitute lot at respondent’s option?
RULING: Yes, According to Republic Act No. 6552 -- "The Realty Installment Buyer Protection
Act," or more popularly known as the Maceda Law. More specifically, Section 3 of R.A. No.
6552 provided 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." We hold
that the contract to sell between the parties remains valid and subsisting. Following Section
3(a) of R.A. No. 6552, respondent has the right to offer to pay for the balance of the purchase
price, without interest, which she did in this case. However since the lot has been sold to
another party it is only just and equitable that the petitioner be ordered to refund to
respondent the actual value of the lot resold, i.e., P875,000.00, with 12% interest per annum.
FACTS: Respondent Flora A. Saberon asked Moldex, the developer, to reserve the lot for her
as shown by a Reservation Application. Flora opted to pay on installment and began making
aperiodical payments from 1992 to 1996 in the total amount of P375,295.49. Respondent
sent notices, but she was shocjed to find out that she owed Moldex P247,969.10. Moldex
thus suggested to Flora to execute a written authorization for the sale of the subject lot to a
new buyer and a written request for refund so that she can get half of all payments she made.
However, Flora never made a written request for refund. Moldex, then sent Flora a Notarized
Notice of Cancellation of Reservation Application and/or Contract to Sell. Flora, on the other
hand, filed before the Housing and Land Use Regulatory Board (HLURB) a Complaint for the
annulment of the contract to sell, recovery of all her payments with interests, damages, and
the cancellation of Moldex’s license to sell. Flora alleged that the contract to sell between her
and Moldex is void from its inception.
Respondent contend that Moldex violated Section 5 of Presidential Decree (PD) No. 957 when
it sold the subject lot to her on April 11, 1992 or before it was ISSUEd a license to sell on
September 8, 1992. In its defense, Moldex exercised its right under Republic Act (RA) No.
6552, or the Maceda Law, by cancelling the reservation Agreement/Contract to Sell and
forfeiting all payments made.
ISSUE: Whether or not Moldex is correct in applying its right under R.A No. 6552.
RULING: Yes, Moldex is correct in applying the provisions of R.A No. 6552
because Flora had already paid more than two years of installments. Her last
payment was made on July 19, 1996. It is also shown that Flora has
defaulted in her succeeding payments.
Besides, Moldex already sent Flora a Notarized Notice of Cancellation of Reservation

Application and/or Contract to Sell. Hence, the only option available is Section 3 (b) of the
Maceda Law, whereby the seller, in this case, Moldex shall refund to the buyer, Flora, the
cash surrender value of the payments on the property equivalent to 50% of the total
payments made
Principle:
Under the Maceda Law, the defaulting buyer who has paid at least two years of installments
has the right of either to avail of the grace period to pay or, the cash surrender value of the
payments made:
Section 3 .In all transactions or contracts involving the sale or financing of real estate
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on installment payments, including residential condominium apartments but excluding

industrial lots, commercial buildings and sales to tenants under Republic Act
Numbered Thirty-eight Hundred Forty-four, as amended by Republic Act Numbered
Sixty-three Hundred Eighty-nine, where the buyer has paid at least two years of
installments, the buyer is entitled to the following rights in case he defaults in the
payment of succeeding installments:
(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: 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 canceled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty per cent
of the total payments made, and, after five years of installments, an additional
five per cent every year but not to exceed ninety per cent of the total payments
made: Provided, That the actual cancellation of the contract shall take place
after thirty days from receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act and upon full payment
of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the

computation of the total number of installment payments made.
RA 6552 The Realty Installment Buyer Protection Act, otherwise known as “Maceda Law”
FACTS: Evelyn Angeles (buyer) purchased a lot and house from Gatchalian Realty, Inc. (GRI;
buyer) for P450k and P750k, respectively. Both were payable in installments for 10 years.
The buyer eventually defaulted after making 35 and 48 monthly installments, respectively.
Despite the seller’s grant of 51 months grace period, and repeated demands, the buyer still
failed to make further payments. The seller then sent a notarial notice of cancellation to the
buyer, it also demanded payment of rentals from the latter of P 112,304.42. The latter
amounts is net of the 50% CSV on the installment payments by the buyer which the seller
deducted. The buyer then tried making installment payments via postal money order but the
seller refused; it also demanded that the buyers vacate the subject properties, the latter
refused.
The seller thus filed an unlawful detainer suit before the MeTC. The MeTC ruled in favor of
GRI, holding the rescission valid. The RTC affirmed with modifications; it ruled that the
requirements of Sec. 3 of R.A. No. 6552 of refund of the CSV of the installments made was
complied with by the seller’s deduction of such CSV from the rentals due from the buyer. The
CA reversed; it RULING that no valid rescission took place given the seller’s failure to pay
the CSV. The SC affirmed with modification. As it RULING that there was no valid rescission,
it gave the buyer the option to 1) pay the outstanding balance, or 2) accept the CSV.
ISSUE: Whether or not the cancellation of the contract of sale valid.
RULING: NO. A VALID AND EFFECTIVE CANCELLATION UNDER R.A. 6552 MUST COMPLY
WITH THE MANDATORY TWIN REQUIREMENTS OF A NOTARIZED NOTICE OF CANCELLATION
AND A REFUND OF THE CASH SURRENDER VALUE.
GRI gave the buyer sufficient grace period. The MeTC, RTC and CA all found that the buyer
was able to complete 35 months installment on the house, and 48 months installment of the
lot. Under Sec. 3 of R.A. No. 6552, the buyer is entitled to 1 month grace period for every
year of installment completed. Thus, the buyer was entitled to 2 months and 4 months grace
period respectively. And as the seller had granted him 51 months grace, the Court found the
seller in compliance, even beyond, the requirement of the law.
GRI duly notified the buyer of the rescission via registered mail. GRI presented the affidavit
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of its liaison officer Fortunato Gumahad, the registry receipt from the Greenhills Post Office,
and the registry return receipt. The latter is prima facie proof of the FACTS indicated therein,
and the buyer failed to adduce controverting proof.
GRI’s failed to actually refund the cash surrender value to the buyer. The cash surrender
value of the buyer’s payments on the lot and house amounted to P182,094.48 and
P392,053.92, respectively. Legal compensation was not applicable in this case, contrary to
MeTC’s RULING. GRI cannot off-set its obligation to pay the CSV of the buyer’s installments
with the rentals due from the latter. there was nothing in the contracts which provided for
the amount of rentals in case the buyer defaults in her installment payments; the rental
amounts weren’t liquidated. Furthermore, GRI merely imposed said rentals (and 10%
increase thereon) unilaterally. The RULING in Pilar, cited by GRI, is not applicable since in
the latter case, it was the MeTC (not the buyer) who determined the amount of rentals and
ordered its offsetting with the CSV due from the seller.
FACTS: Sps. Jovellanos entered into a Contract to Sell with PalmeraHomesfor the purchase
of a house and lot situated in Caloocan City. Sps. Jovellanos took possession of the property
upon a down payment withan undertaking to pay the remaining balance in equal
monthlyinstallments. On August 22, 2006 Palmera Homes assignedall therights, title and
intered in the Contract of Sell in favor of petitionerOptimum Development Bank. On April 10,
2006 OptimumISSUEdaNotice of Delinquency and Cancellation of the Contract to Sell
onthegrounds that the spouses have failed to pay their monthly installmentsdespite written
and verbal notices. Sps. Jovellanos was thenaskedtovacate and deliver possession of the
property but was unheededbytherespondent. Thus, petitioner filed a complaint for unlawful
detainer. The RULING of the MeTC is that spouses Jovellanos to vacatetheproperty and pay
compensation because the Contract to Sell wascancelled for non-payment of installment. The
RTC then affirmedthejudgment of the MeTC. The CA then reversed and set aside the RULINGof
the RTC for lack of jurisdiction. It found that the controversy doesnot involve the ISSUEd of
possession but also the validity of the cancellationof the Contract of Sell and the determination
of the rights of the parties.
ISSUE: Whether of not the non payment of monthly installment would be a ground for the
cancellation of the Contract to Sell
RULING: Under the Maceda Law, in conditional sales of all kinds of real estateprovides the
right of the seller to cancel the contract upon non-payment of an installment by the buyer,
which is simply an event that preventsthe obligation of the vendor to convey title from
acquiring binding force. In the case it was found out that the cancellation was valid
andeffectivebecause Optimum Development Bank has followed the three requisitesbefore the
seller may actually cancel the contract. The first beingthat the seller shall give a 60-day grace
period, second would be that theseller must give the buyer a notice of cancellation and lastly
is that theseller may actually cancel the contract after 30 days fromthe buyer’sreceipt of the
notice of cancellation. Optimum have followed the 60-daygrace period, have ISSUEd notices
for Cancellation of the Contract tosell and that they gave Sps. Jovellanos 30 days within which
to settle theirarrears and reinstate the contract which they have failedtodo. Wherefore, the
petition is granted.
FACTS: The petitioners are spouses who used to work for BPI Family. At the time material to
this case, Jaime was the Branch Manager of BPI Family's San Francisco del Monte Branch in
Quezon City and Evangeline was a bank teller at the Blumentritt Branch in Manila. On October
30, 1987, they availed themselves of a housing loan from BPI Family as one of the benefits
extended to its employees. Their loan amounted to P273,000.00, and was covered by a Loan
Agreement, whereby they agreed that the loan would be payable in 108 equal monthly
amortizations of P3,277.57 starting on January 10, 1988 until December 10, 1996; and that
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the monthly amortizations would be deducted from his monthly salary. To secure the payment
of the loan, they executed a real estate mortgage in favor of BPI Family over the property
situated in Bo. Ibayo, Marilao, Bulacan and covered by TCT No. T-30.827 (M) of the Register
of Deeds of Bulacan.
Apart from the loan agreement and the real estate mortgage, Jaime signed an undated letter-
memorandum addressed to BPI Family stating the automatic deduction from his salary or any
money due which is to be applied to the loan.
The petitioners' monthly loan amortizations were regularly deducted from Jaime's monthly
salary since January 10, 1988. On December 14, 1989, however, Jaime received a notice of
termination from BPI Family's Vice President, Severino P. Coronacion, informing him that he
had been terminated from employment due to loss of trust and confidence resulting from his
wilful non-observance of standard operating procedures and banking laws. Evangeline also
received a notice of termination dated February 23, 1990, telling her of the cessation of her
employment on the ground of abandonment. Both notices contained a demand for the full
payment of their outstanding loans from BPI Family.
ISSUES: Whether or not loan extended by the employer to its employee to finance the
purchase of house and lot is protected by Republic Act No. 6552 (Realty Installment Buyer
Protection Act)
RULING: No, the protection of RA No. 6552 does not cover a loan extended by the employer
to enable its employees to finance the purchase of a house and lot.
It would have been covered if the monthly amortizations being paid to BPI Family arose from
a sale or financing of real estate. In the case at bar, however, the monthly amortizations
represented the installment payments of a housing loan that BPI Family had extended to them
as an employee's benefit. The monthly amortizations they were liable for was derived from a
loan transaction, not a sale transaction, thereby giving rise to a lender-borrower relationship
between BPI Family and the petitioners. It bears emphasizing that Republic Act No. 6552
aimed to protect buyers of real estate on installment payments, not borrowers or mortgagors
who obtained a housing loan to pay the costs of their purchase of real estate and used the
real estate as security for their loan. The "financing of real estate in installment payments"
referred to in Section 3, supra, should be construed only as a mode of payment vis-à-vis the
seller of the real estate, and excluded the concept of bank financing that was a type of loan.
Accordingly, Sections 3, 4 and 5, supra, must be read as to grant certain rights only to
defaulting buyers of real estate on installment, which rights are properly demandable only
against the seller of real estate.
FACTS: On Dec. 29, 2004, Citihomes and Spouses Noynay executed a contract to sell
covering the sale of a house and lot. Under the terms of the contract, the price of the property
was fixed at P915,895, with a downpayment of P183,179, and the remaining balance to be
paid in 120 equal monthly installments with an annual interest rate of 21%. Subsequently,
Citihomes executed the Deed of Assignment of Claims and Accounts in favor of UCPB. Under
the said agreement, UCPB purchased from Citihomes various accounts, including the account
of Spouses Noynay, for a consideration of P100,000,000.00. In turn, Citihomes assigned its
rights, titles, interests, and participation in various contracts to sell with its buyers to UCPB.
In February 2007, Spouses Noynay allegedly started to default in their payments. Months
later, Citihomes decided to declare Spouses Noynay delinquent and to cancel the contract
considering that nine months of agreed amortizations were left unpaid. The notarized Notice
of Delinquency and Cancellation of the Contract to Sell was received by Spouses Noynay.
They were given 30 days within which to pay the arrears and failure to do so would authorize
Citihomes to consider the contract as cancelled. Citihomes sent its final demand letter asking
Spouses Noynay to vacate the premises due to their continued failure to pay the arrears.
Spouses Noynay insist that by virtue of the assignment of rights which Citihomes executed in
favor of UCPB, Citihomes did not have a cause of action against them because it no longer
had an interest over the subject property. The monthly installments amounting to three years
were already paid, by reason of which, Section 3(b) of the Maceda Law should apply. This
means that for the cancellation to be effective, the cash surrender value should have been
paid first to them by Citihomes. Citihomes counters that it has the right to ask for the eviction
of the petitioners in its capacity as the registered owner despite the assignment of rights it
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made to UCPB. It believes that because Spouses Noynay failed to pay at least 2 years of
installments, the cancellation became effective upon the expiration of the 30-day period
following the receipt of the notice of delinquency and cancellation notice and without the need
for the payment of the cash surrender value.
ISSUE:Whether or not the the cancellation of the contract to sell was valid?
RULING: No. The Contract to Sell dated December 29, 2004 is enlightening on the matter.
The amount of P183,179, representing full down payment shall be paid upon signing of the
contract. Citihomes claimed that the period of the payment of the amortizations started from
May 31, 2005. As can be gleaned from the contract to sell, however, it appears that the
payment of the down payment started from the signing thereof on December 29, 2004.
Moreover, based on the Statement of Account, dated March 18, 2009, Spouses Noynay
started defaulting from January 8, 2008. This shows that prior to that date, amortizations
covering the 3-year period, which started with the down payment, had been paid. This is
consistent with the admission of Citihomes during the preliminary conference. By its
admission that Spouses Noynay had been paying the amortizations for 3 years, there is no
reason to doubt Spouses Noynay's compliance with the minimum requirement of two years
payment of amortization, entitling them to the payment of the cash surrender value provided
for by law and by the contract to sell.
To reiterate, Section 3(b) of the Maceda Law requires that for an actual cancellation to
take place, the notice of cancellation by notarial act and the full payment of the cash surrender
value must be first received by the buyer. Clearly, no payment of the cash surrender value
was made to Spouses Noynay. Necessarily, no cancellation of the contract to selI could be
considered as validly effected.
BULK SALES LAW
FACTS: Imelda Ong, for and in consideration of One (P1.00) Peso and other valuable
considerations, executed in favor of private respondent Sandra Maruzzo, then a minor, a
Quitclaim Deed whereby she transferred, released, assigned and forever quitclaimed to
Sandra Maruzzo, her heirs and assigns, all her rights, title, interest and participation in the
ONE-HALF (1/2) undivided portion of the parcel of land.
Imelda Ong revoked the aforesaid Deed of Quitclaim and, thereafter, on January 20, 1982
donated the whole property described above to her son, Rex Ong Jimenez.
Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed with the Regional Trial Court
of Makati, Metro Manila an action against petitioners, for the recovery of
ownership/possession and nullification of the Deed of Donation over the portion belonging to
her and for Accounting.
Petitioners claimed that the Quitclaim Deed is null and void inasmuch as it is equivalent to a
Deed of Donation, acceptance of which by the donee is necessary to give it validity.The trial
court rendered judgment in favor of respondent Maruzzo and RULING that the Quitclaim Deed
is equivalent to a Deed of Sale and, hence, there was a valid conveyance in favor of the latter.
ISSUE: Whether or not the Quitclaim Deed is a conveyance of property with a valid cause or
consideration
RULING: YES. The execution of a deed purporting to convey ownership of a realty is in itself
prima facie evidence of the existence of a valuable consideration, the party alleging lack of
consideration has the burden of proving such allegation.
Moreover, even granting that the Quitclaim deed in question is a donation, Article 741 of the
Civil Code provides that the requirement of the acceptance of the donation in favor of minor
by parents of legal representatives applies only to onerous and conditional donations where
the donation may have to assume certain charges or burdens (Article 726, Civil Code). The
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acceptance by a legal guardian of a simple or pure donation does not seem to be necessary
(Perez v. Calingo, CA-40 O.G . 53).
Thus, Supreme Court ruled in Kapunan v. Casilan and Court of Appeals, 109 Phil. 889) that
the donation to an incapacitated donee does not need the acceptance by the lawful
representative if said donation does not contain any condition. In simple and pure donation,
the formal acceptance is not important for the donor requires no right to be protected and
the donee neither undertakes to v do anything nor assumes any obligation. The Quitclaim
now in question does not impose any condition.”
In Morales Development Co., Inc. v. CA, 27 SCRA 484, "the major premise thereof is based
upon the fact that the consideration stated in the deeds of sale in favor of Reyes and the
Abellas is P1.00. It is not unusual, however, in deeds of conveyance adhering to the Anglo-
Saxon practice of stating that the consideration given is the sum of P1.00, although the actual
consideration may have been much more. Moreover, assuming that said consideration of
P1.00 is suspicious, this circumstance, alone, does not necessarily justify the inference that
Reyes and the Abellas were not purchasers in good faith and for value. Neither does this
inference warrant the conclusion that the sales were null and void ab initio. Indeed, bad faith
and inadequacy of the monetary consideration do not render a conveyance inexistent, for the
assignor’s liberality may be sufficient cause for a valid contract (Article 1350, Civil Code),
whereas fraud or bad faith may render either rescissible or voidable, although valid until
annulled, a contract concerning an object certain entered into with a cause and with the
consent of the contracting parties, as in the case at bar."
RETAIL TRADE NATURALIZATION LAW
FACTS:On March 7, 2000 President Joseph E. Estrada signed into law Republic Act (R.A.)
8762, also known as the Retail Trade Liberalization Act of 2000. It expressly repealed R.A.
1180, which absolutely prohibited foreign nationals from engaging in the retail trade business.
R.A. 8762 also allows natural-born Filipino citizens, who had lost their citizenship and now
reside in the Philippines, to engage in the retail trade business with the same rights as Filipino
citizens. On October 11, 2000, all members of the House of Representatives, filed the petition,
assailing the constitutionality of R.A. 8762.
ISSUES:
1. Whether or not petitioner lawmakers have the legal standing to challenge

the constitutionality of R.A. 8762;
2. Whether or not R.A. 8762 is unconstitutional
RULING:
1. Legal standing or locus standi refers to the right of a party to come to a court of justice
and make such a challenge. More particularly, standing refers to his personal and substantial
interest in that he has suffered or will suffer direct injury as a result of the passage of that
law. To put it another way, he must show that he has been or is about to be denied some
right or privilege to which he is lawfully entitled or that he is about to be subjected to some
burdens or penalties by reason of the law he complains of.
Here, there is no clear showing that the implementation of the Retail Trade Liberalization Act
prejudices petitioners or inflicts damages on them, either as taxpayers or as legislators. Still
the Court will resolve the question they raise since the rule on standing can be relaxed for
nontraditional plaintiffs like ordinary citizens, taxpayers, and legislators when as in this case
the public interest so requires or the matter is of transcendental importance, of overaching
significance to society, or of paramount public interest.
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2. The Court explained in Tañada v. Angara, the provisions of Article II of the 1987
Constitution, the declarations of principles and state policies, are not self-executing.
Legislative failure to pursue such policies cannot give rise to a cause of action in the courts.
While Section 19, Article II of the 1987 Constitution requires the development of a self-reliant
and independent national economy effectively controlled by Filipino entrepreneurs, it does not
impose a policy of Filipino monopoly of the economic environment. The objective is simply to
prohibit foreign powers or interests from maneuvering our economic policies and ensure that
Filipinos are given preference in all areas of development.
The 1987 Constitution does not rule out the entry of foreign investments, goods, and services.
While it does not encourage their unlimited entry into the country, it does not prohibit them
either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only
on foreign competition that is unfair. The key, as in all economies in the world, is to strike a
balance between protecting local businesses and allowing the entry of foreign investments
and services.1avvphi1
Section 10, Article XII of the 1987 Constitution gives Congress the discretion to reserve to
Filipinos certain areas of investments upon the recommendation of the NEDA and when the
national interest requires. Thus, Congress can determine what policy to pass and when to
pass it depending on the economic exigencies. It can enact laws allowing the entry of
foreigners into certain industries not reserved by the Constitution to Filipino citizens. In this
case, Congress has decided to open certain areas of the retail trade business to foreign
investments instead of reserving them exclusively to Filipino citizens.
The NEDA has not opposed such policy.
The control and regulation of trade in the interest of the public welfare is of course an exercise
of the police power of the State. A person’s right to property, whether he is a Filipino citizen
or foreign national, cannot be taken from him without due process of law. In 1954, Congress
enacted the Retail Trade Nationalization Act or R.A. 1180 that restricts the retail business to
Filipino citizens. In denying the petition assailing the validity of such Act for violation of the
foreigner’s right to substantive due process of law, the Supreme Court RULING that the law
constituted a valid exercise of police power. 11 The State had an interest in preventing alien
control of the retail trade and R.A. 1180 was reasonably related to that purpose. That law is
not arbitrary.
Here, to the extent that R.A. 8762, the Retail Trade Liberalization Act, lessens the restraint
on the foreigners’ right to property or to engage in an ordinarily lawful business, it cannot be
said that the law amounts to a denial of the Filipinos’ right to property and to due process of
law.
Filipinos continue to have the right to engage in the kinds of retail business to which the law
in question has permitted the entry of foreign investors. Certainly, it is not within the province
of the Court to inquire into the wisdom of R.A. 8762 save when it blatantly violates the
Constitution. But as the Court has said, there is no showing that the law has contravened any
constitutional mandate. The Court is not convinced that the implementation of R.A. 8762
would eventually lead to alien control of the retail trade business.
Petitioners have not mustered any concrete and strong argument to support its thesis. The
law itself has provided strict safeguards on foreign participation in that business.
Thus –
First, aliens can only engage in retail trade business subject to the categories above-
enumerated; Second, only nationals from, or juridical entities formed or incorporated in
countries which allow the entry of Filipino retailers shall be allowed to engage in retail trade
business; and Third, qualified foreign retailers shall not be allowed to engage in certain
retailing activities outside their accredited stores through the use of mobile or rolling stores
or carts, the use of sales representatives, door-to-door selling, restaurants and sari-sari stores
and such other similar retailing activities.
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The Court DISMISSES the petition for lack of merit.
Principle: Section 4 of the amendatory Presidential Decree (P.D. 714) defines the term "retail
business" as occupation or calling of habitually selling direct to the general public merchandise,
commodities or goods for consumption. It excludes a manufacturer or processor selling to the
industrial and commercial users or consumers who use the products bought by them to render
service to the general public and/or produce or manufacture goods which are in turn sold to
them.
FACTS: The late Federico C. Alikpala declared that private respondent Union Carbide of the
Philippines is not engaged in the retail business does not pose any difficulty.
The amendatory Presidential Decree added two more paragraphs, the first of which was the
basis for the three previous decisions of this Court. The entire section 4 was reproduced. The
Section starts with an opening statement as to what the term "retail business" shall mean,
namely, "occupation or calling of habitually selling direct to the general public merchandise,
commodities or goods for consumption." It excludes, according to the amendment, "(c) a
manufacturer or processor selling to the industrial and commercial users or consumers who
use the products bought by them to render service to the general public and/or produce or
manufacture goods which are in turn sold to them.
Private respondent has two divisions, the Consumer Products Division and the Industrial
Products Division. As to the former, it effected its sales through retail outlets, dealers and
distributors. Thus there was no question as to the character of its business. It was not
embraced in the category of retail. As to the Industrial Products Division, its Agricultural
Chemicals Department sold its products through exclusive distributors. Again, it could be
concluded that such Department was not covered by the Act even before its amendment.
The products handled by the five other departments of the Industrial Products Division,
namely, the Metals and Carbide; Plastics; Industrial Chemicals; Linde, Haynes Stellite and
Carbon Products and Polyethylene Bags were generally sold to producers, processors,
fabricators and to industries. While these departments had a limited fixed clientele, still there
was no prohibition as to the general public malting similar purchases from them. What
removed these departments from the operation of the Retail Trade Act was pointed out in the
appealed decision in these words: "The goods handled by the five remaining departments of
petitioner's Industrial Products Division are generally raw materials used in the manufacture
of other goods, or if not, as one of the component raw materials, or at the least as elements
utilized in the process of production or manufacturing."
ISSUE: Whether or not Union Carbide Phils., Inc. is engaged in retail business.
RULING: No, it is not engaged in retail business.
Section 4 of the amendatory Presidential Decree (P.D. 714) defines the term "retail business"
as occupation or calling of habitually selling direct to the general public merchandise,
commodities or goods for consumption. It excludes a manufacturer or processor selling to the
industrial and commercial users or consumers who use the products bought by them to render
service to the general public and/or produce or manufacture goods which are in turn sold to
them.
The Court is persuaded to hold that the goods for consumption mentioned in Republic Act No.
1180 should be construed to refer to the final and end of a product which directly satisfy
human wants and desires and are needed for home and daily life. Accordingly, the goods
which Union Carbide Phils., Inc. Industrial Products Division handle (commonly referred to as
intermediate goods), do not fail and cannot be classified as consumption goods.
Hence, Union Carbide Phils., Inc. is considered not engaged in retail business.
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FACTS: This appeal by Goodyear Tire and Rubber Co. of the Philippines and intervenor
Firestone Tire and Rubber Co. of the Philippines answered whether that as to certain
customers, "proprietory planters, persons engaged in the exploitation of natural resources,"
and "employees and officers of the petitioner," are engaged in retail business.
ISSUE: Whether the legal question raised was set at rest by Presidential Decree No.
714 amending the Retail Trade Nationalization Law which took effect without presidential
approval.
RULING: Presidential Decree No. 714 (1975) amended the Retail Trade Nationalization
Law (RA No. 1180) which took effect without presidential approval. As originally worded, the
term "retail business" covers "any act, " or calling of habitually selling direct to the general
public merchandise, commodities or goods for consumption, but shall not include: (a) a
manufacturer, processor, laborer or worker selling to the general public the products
manufactured, processed or produced by him if his capital does not exceed five thousand
pesos, or (b) a farmer or agriculturist selling the production of his farm." (Sec. 4) Under the
aforesaid Presidential Decree, which took effect on May 28, 1975, two more paragraphs were
included. They are: "(c) a manufacturer or processor selling to the industrial and commercial
users or consumers, who use the products bought by them to reader service to the general
public and/or to produce or manufacture goods which are in turn sold to them; (d) a hotel-
owner or keeper operating a restaurant irrespective of the amount of capital, provided that
the restaurant is necessarily included in, or incidental to, the hotel business."
The court a quo RULING that petitioner and intervenor were not exempt from the provisions
of Republic Act No. 1180 since they are not included in the busninesses exempt under the
amendment.
C.A No. 108 Anti Dummy Law
Topic: Anti-Dummy Law, C.A. No. 108

Principle: The context of law is clear as to its extent and scope that the Retail Trade Law
advocates the complete nationalization of the retail trade by denying its ownership to any
alien, while the Anti-Dummy Law 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 prohibits a person not a Filipino from engaging in retail
trade directly or indirectly while it limits the management, operation, administration and
control to Filipino citizens.
FACTS: Macario King, a naturalized Filipino citizen, became the owner of the business
establishment known as "Import Meat and Produce", a grocery wholesale and retail business,
previously owned by the Philippine Cold Stores, Inc. In the business 15 persons were
employed 12 of whom are Filipinos and the other 3 Chinese. The three Chinese were old
employees of the previous owner, the Philippine Cold Stores, Inc., one having been employed
as purchaser and the other two as salesmen.
Three weeks after King had acquired the business as aforesaid, he sought permission from
the President of the Philippines to retain the services of the three Chinese employees pursuant
to Section 2-A of Commonwealth Act 108, coursing his letter thru the Secretary of Commerce
and Industry. This official recommended to the President the disapproval of King's request on
the ground that aliens may not be appointed to operate or administer a retail business under
Section 1 of Republic Act No. 1180 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
President approved the recommendation of the Secretary of Commerce and Industry since
the positions of purchaser and salesmen occupied by the three Chinese employees are not
technical positions within the meaning of Section 2-A of Commonwealth Act 108, as amended
by Republic Act No. 134.
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As a result of such adverse RULING, Macario King and his three Chinese employees filed a
petition for declaratory relief, injunction and mandamus on August 25, 1958 against the
Secretary of Commerce and Industry and the Executive Secretary alleging that said RULINGs
are illegal in view of the respective situations and positions of petitioners in the retail
establishment, the purpose and language of the laws abovementioned, and the constitutional
guarantee of the rights of an employer to employ and of an employee to work accorded to
citizens and aliens alike.
ISSUE: Whether or not aliens may be employed in a non-control position in a retail

establishment or trade prohibited by the Anti-Dummy Law?
RULING: No. The language of the Anti-Dummy Law bans aliens' employment in both control
and non-control positions. 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.
The purpose of the enactment of the Retail Trade Law, therefore, is clear. As expressed by
this Court, it 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.
Not only because the context of 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 Anti-Dummy 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 prohibits a person not a Filipino from engaging in retail trade
directly or indirectly while it limits the management, operation, administration and control to
Filipino citizens. These words may be technically synonymous in the sense that they all refer
to the exercise of a directing, restraining or governing influence over an affair or business to
which they relate, but it cannot be denied that by reading them in connection with the
positions therein enumerated one cannot draw any other conclusion than that they cover the
entire range of employment regardless of whether they involve control or non-control
activities. When the law says that you cannot employ an alien in any position pertaining to
management, operation, administration and control, "whether as an officer, employee, or
laborer therein", it only means one thing: the employment of a person who is not a Filipino
citizen even in a minor or clerical or non-control position is prohibited.
The reason is obvious: to plug any loophole or close any avenue that an unscrupulous alien
may resort to flout the law or defeat its purpose, for no one can deny that while one may be
employed in a non-control position who apparently is harmless he may later turn out to be a
mere tool to further the evil designs of the employer. It is imperative that the law be
interpreted in a manner that would stave off any attempt at circumvention of this legislative
purpose.
WHEREFORE, the decision appealed from is reversed. This preliminary injunction ISSUEd by
the trial court on December 6, 1958 is hereby lifted. The petition for mandamus is dismissed,
with costs against appellees.
FACTS: AIMI is a 100% Filipino-owned and controlled manufacturing and trading corporation,
engaged in the marketing of asbestos cement pressure pipes manufactured by Asbestos
Cement Products Philippines, Inc. (ACPPI) which is also a 100% Filipino-owned and controlled
manufacturing corporation organized under Phil. Laws and doing business in the Philippines.
Respondent Eternit Corporation is a domestic corporation with 90% of its capital stock, owned
and controlled by aliens.
Respondent Sanvar Development Corporation (Sanvar) is also a 100% Filipino-owned and

controlled corporation.Respondent Metropolitan Waterworks and Sewerage System (MWSS)
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is a GOCC. MWSS conducted a public bidding for its asbestos cement pipe requirements. AIMI
and Sanvar participated. In the bidding conducted last 18 May 1976, AIMI’s bid is 13.6%
higher than that of Sanvar’s. However, no award was made since “the pipes needed for the
projects will now come from the pipes to be supplied in the 27 September 1976 bidding.”
In 27 September bidding, AIMI’s bid is 22.84% higher than the bid of Sanvar. As a result,
the contract to supply the asbestos cement pressure pipes was awarded to Sanvar.
Whereupon, AIMI, claiming that Sanvar is but a mere dealer or distributor or marketing arm
of the alien-owned Eternit, filed a petition against the MWSS, Eternit, and Sanvar, to nullify
the award and to restrain the respondents from enforcing the same. AIMI invoked Retail
Trade Nationalization Act, the Flag Law, The Anti-Dummy Act, and RA. 5183 in support of its
petition.
Trial Court ISSUEd an order restraining the respondents from entering into contract covering
the public biddings, or making and accepting deliveries under any contract which may have
been entered into in the meantime, or from otherwise implementing the Board resolution of
the MWSS awarding the questioned bids in favor of defendants Sanvar and/or Eternit, until
further orders from the Court, and set the hearing on the issuance of a writ of prel. Injunction.
Respondents filed separate motions for dismissal, lifting of the restraining order ISSUE, and
denial of the prayer for the issuance of a writ of prel. Injunction. The trial court lifted the
restraining order and denied the motion for issuance of a writ of prel. Injunction.
AIMI filed a motion for reconsideration which the court denied and dismissed the complaint.
Hence this case. SC ISSUEd an TRO. Petitioner’s contention is that Sanvar is but an alter
ego of the marketing arm of Eternit so that it is prohibited by law from entering into a contract
with the MWSS for the supply of asbestos cement pressure pipes.
ISSUE: Whether or not Sanvar is an alter ego of Eternit, thereby disqualified from
participating in the bidding
RULING: Evidence presented by AIMI is not sufficient to support the conclusion that Sanvar
is an alter ego of Eternit. The evidence presented by AIMI shows that Sanvar is the exclusive
distributor of pipes manufactured by Eternit. It do not detract a whit from Sanvar’s position
vis a vis Eternit, as a buyer of the products of the latter, for a buyer engaged in the business
of selling what he buys from the manufacturer has to necessarily distribute what he buys,
without thereby becoming the seller’s agent, and an agreement that the buyer shall deal
exclusively with the products of the seller- a well-known practice in the business world- is not
inconsistent with the contract of sale, much less convert it into one of agency.
Since Sanvar is a not an alter ego of Eternit, it follows that the laws invoked by the petitioner
does not apply to this case.The petition is dismissed. The TRO is hereby lifted and set aside.
Summary: This is an action to recover the sum of P31,645, the value of 464 bales of hemp
deposited in certain bonded warehouses as evidenced by the quedans (warehouse receipts)
described in the complaint, said quedans having been delivered as pledge by one Otto Ranft
to the herein defendant, the Hongkong and Shanghai Banking Corporation, for the guarantee
of a preexisting debt of the former to the latter.
FACTS: The evidence shows that on June 25, 1926, Ranft called at the office of the herein
plaintiff to purchase hemp (abaca), and he was offered the bales of hemp as described in the
quedans above mentioned. The parties agreed to the price, and on the same date the quedans,
together with the covering invoice, were sent to Ranft by the plaintiff, without having been
paid for the hemp, but the plaintiff's understanding was that the payment would be made
against the same quedans, and it appears that in previous transaction of the same kind
between the bank and the plaintiff, quedans were paid one or two days after their delivery to
them.
In the evening of the day upon which the quedans in question were delivered to the herein
defendant, Ranft died. Plaintiff then immediately demanded the return of the quedans, or the
payment of the value, but was told that the quedans had been sent to the herein defendant
Page 275 of 290
DIGESTS COMPILATION
CIVIL CODE: SALES
as soon as they were received by Ranft.
Shortly thereafter the plaintiff filed a claim for the aforesaid sum of P31,645 in the intestate
proceedings of the estate of the deceased Otto Ranft. In the meantime, plaintiff demanded
from the defendant bank for the return of the quedans, or their value. The bank refused on
the ground that it was a holder of the quedans in due course. Plaintiff alleged that it has "sold"
the quedans in question to the deceased O. Ranft for cash, but that the said O. Ranft had not
fulfilled the conditions of the sale. Later on, plaintiff amended the complaint, wherein they
changed the word "sold" referred to in the first complaint to the words "attempted to sell".
RULING : The bank had a perfect right to act as it did, and its action is in accordance with
sections 47, 38, and 40 of the Warehouse Receipts Act (Act No. 2137), which read as
follows:
SEC. 47. When negotiation not impaired by fraud, mistake, or duress. — The
validity of the negotiation of a receipt is not impaired by the fact that such negotiation
was a breach of duty on the part of the person making the negotiation, or by the fact
that the owner of the receipt was induced by fraud, mistake, or duress to intrust the
possession or custody of the receipt was negotiated, or a person to whom the receipt
was subsequent negotiated, paid value therefor, without notice of the breach of duty,
or fraud, mistake, or duress.
SEC. 38. Negotiation of negotiable receipts by indorsement. — A negotiable

receipt may be negotiated by the indorsement of the person to whose order the goods
are, by the terms of the receipt, deliverable. Such indorsement may be in blank, to
bearer or to a specified person. . . . Subsequent negotiation may be made in like
manner.
SEC. 40. Who may negotiate a receipt. — A negotiable receipt may be negotiated:
(a) By the owner thereof, or
(b) By any person to whom the possession or custody of the receipt has been entrusted
by the owner, if, by the terms of the receipt, the warehouseman undertakes to deliver
the goods to the
order of the person to whom the possession or custody of the receipt has been
entrusted, or if at the time of such entrusting the receipt is in such form that it may
be negotiated by delivery.
The question as to the rights the defendant bank acquired over the aforesaid quedans
after indorsement and delivery to it by Ranft, we find in section 41 of the Warehouse
Receipts Act (Act No. 2137):
SEC. 41. Rights of person to whom a receipt has been negotiated. — A person
to whom a negotiable receipt has been duly negotiated acquires thereby:
(a) Such title to the goods as the person negotiating the receipt to him had or had
ability to convey to a purchaser in good faith for value, and also such title to the goods
as the depositor of person to whose order the goods were to be delivered by the terms
of the receipt had or had ability to convey to a purchaser in good faith
for value, and. . . .
In its second assignment of error, the defendant-appellant maintains that the plaintiff-
appellee is estopped to deny that the bank had a valid title to the quedans for the reason that
the plaintiff had voluntarily clothed Ranft with all the attributes of ownership and upon which
the defendant bank relied. In our opinion, the appellant's view is correct. The bank is not
responsible for the loss; the negotiable quedans were duly negotiated to the bank and as far
as the record shows, there has been no fraud on the part of the defendant.
List of Cases Stude nt

who digested
Art 1458
Nature and Characteristics
Page 276 of 290

DIGESTS COMPILATION
CIVIL CODE: SALES
Definition
Villonco Realty Co. vs. Bormaheco, Inc., G.R. No. L-26872, 25 Jul 1975 Pangilinan, Jude
Kenneth
Asuncion vs. Court of Appeals, G.R. No. 109125, 02 Dec 1994 Acebuche, Ma.
Larrydelle
Vda. De Ape vs. Court of Appeals, G.R. No. 133638, 15 Apr 2005 Agramon, Shienna
Mae
Sps. Torcuator vs. Sps. Bernabe, G.R. No. 134219, 08 Jun 2005 Aguirre, Dorothy
Lois
Essential Elements
Manila Metal Container Corp. vs. PNB, G.R. No. 166862, 20 Dec 2006 Armamento, Roque
Toyota Shaw, Inc. vs. Court of Appeals, G.R. No. 116650, 23 May 1995 Bacalso, Leah
Pauline
E. C. McCullough & Co. vs. Berger, G.R. No. L-19009, 26 Sep 1922 Batulan, Paulo
Sps. Portic vs. Cristobal, G.R. No. 156171, 22 Apr 2005 Bolano, Joanne
Heirs of Mascuñana vs. Court of Appeals, G.R. No. 158646, 23 Jun 2005 Cantingub, Lourdes
Angela
Ursal vs. Court of Appeals, G.R. No. 142411, 14 Oct 2005 Godinez, Theresa
Carrascos, Jr. vs. Court of Appeals, G.R. Nos. 123672 & 164489,
14 Dec 2005 Hadjirul,

Danica
Keppel Bank Philippines, Inc. vs. Adao, G.R. No. 158227, 19 Oct 2005 Jurado, Leilani
Sps. Edrada vs. Sps. Ramos, G.R. No. 154413, 31 Aug 2005 Ladub, Franchesca Bea
Subject Matter
Martinez vs. Court of Appeals, G.R. No. L-31271, 29 Apr 1974 Margallo, Frankel
Gerard
Pio Sian Melliza vs. City of Iloilo, G.R. No. L-24732, 30 Apr 1968 Montana, May Ann
Gaite vs. Fonacier, G.R. No. L-11827, 31 Jul 1961 Moran, Louise
Marie
Stages
Ainza vs. Spouses Padua, G.R. No. 165420, 30 Jun 2005 Plantar, Krizziane Katrina
Province of Cebu vs. Heirs of Morales, G.R. No. 170115, 19 Feb 2008 Ranrio, Charmaine
Hope
First Optima Realty Corp vs Securitron Security Services, Inc
G.R. No. 199648, 28 Jan 2015 Rances, Ranche Rick
Absolute Contract of Sale
Sps. Ramos vs. Sps. Heruela, G.R. No. 145330, 14 Oct 2005 Rizon, Louray
Contract of Sale vs Contract to Sell
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DIGESTS COMPILATION
CIVIL CODE: SALES
Ong vs. Court of Appeals, G.R. No. 97347, 16 Jul 1999 Rodriguez, Jeric
Tuazon vs. Del Rosario-Suarez, G.R. No. 168325, 13 Dec 2010 Rosas, Nilo
Heirs of San Andres vs. Rodriguez, G.R. No. 135634, 31 May 2000 Saumay Norjana
Akang vs. Municipality of Isulan, G.R. No. 186014, 26 Jun 2013 Soriano, Alyssa
Dignos vs. Court of Appeals, G.R. No. 59266, 29 Feb 1988 Torrefranca, Ian
Kharlo
Nabus vs. Pacson, G.R. No. 161318, 25 Nov 2009 Turla, Wegie
Ann
Arts. 1459-1465
A. Object
Lawful
Heirs of Eduardo Manlapat vs. Court of Appeals,
G.R. No. 125585, 08 Jun 2005 Vilbar, Jairus

Adrian
Vagilidad vs. Vagilidad, Jr., G.R. No. 161136, 16 Nov 2006 Villacastin, Franklin
National Grains Authority vs. Intermediate Appellate Court,
G.R. No. 68741, 28 Jan 1988 Villoga, Kyle

Stoudomire
Taredo vs. Court of Appeals, G.R. No. 104482, 22 Jan 1996 Camandona, Nina
Mae
Cavite Development Bank vs. Sps. Lim,
G.R. No. 131679, 01 Feb 2000 Cuizon, Francelle

Marie
Heirs of Salvador Hermosilla vs. Sps. Remoquillo,
G.R. No. 167320, 30 Jan 2007 Dumamba,

Anderson
Heirs of Arturo Reyes vs. Socco-Beltran,
G.R. No. 176474, 27 Nov 2008 Badal, Lea
Arts. 1466-1468
Agency to Sell
Quiroga vs. Parsons Hardware, Co., G.R. No. 11491, 23 Aug 1918 Suson, Kevin
Dino vs Court of Appeals Gr. No 113564 20 Jun 2001 Bacolod, James

Christian
Gonzalo Puyat& Sons Inc. vs Arco Amusement Co
Gr No 47538 20 Jun 1941 Aberjedo,

Melanie
Lease of Service or Contract for a piece of work
Commission of Internal Revenue vs. Engineering Equipment & Supply
Page 278 of 290

DIGESTS COMPILATION
CIVIL CODE: SALES
Co., G.R. No. L-27044, 30 Jun 1975" Amper, Kimberly

Lourdes Tina
Ker & Co., Ltd. vs. Lingad, G.R No. L-20871, 30 April 1971 Abastillas, Glenda
CIR vs Arnolds Carpentry Shop Inc. GR No 71122, 25 Mar 1988 Canoy, Rona Mae
PCI vs. Giraffe-X Creative Imaging, Inc. Gr. No. 142618, 12 Jul 2007 Salang, Donald
Elisco Tool Manufacturing Corp. vs. Court of Appeals,
G.R. No. 109966, 31 May 1999 Jadraque, Kimberly
Arts 1469-1474
Price
Boston Bank of the Philippines vs Manalo GR 158149, 09 Feb 2006 Quijano, Louella
Vanessa
Cruzado vs Bustos Gr No. L-10244, 29 Feb 1916 Diwag, Kyrie

Leonelyn
Doles vs Angeles Gr No 149353, 26June2006 Pepito, Arvie
Torres vs CA Gr No. 134559, 09Dec1999 Wahing, Rose

Christel
Bagnas vs CA GR No. L-38498, 10 Aug 1989 Gatchalian, Faro
Dantis vs Maghinang, Jr. Gr no 191696 1 April 2013 Urot, Dave Anthony
Balatbat vs CA GR no 109410, 28 Aug 1996 Bascug, Ryan
Velasco vs CA, supra Refil, Karen
San Miguel Properties Philippines, Inc., vs. Sps. Huang Penalosa, Belle Marie
Carabeo vs. Sps Dingco, GR No. 190823, 4 Apr. 2011 De Veyra Mark
Vda. de Maglana vs. Consolacion GR. No. 60506, 06 Aug 1992 Montinola, Trisha Jean
Barretto vs. Sta. Marina, G.R. No. L-8238, 02 Dec 1913 Herrero, Mary Grace
Bible Baptist Church vs. Court of Appeals,
G.R. No. 126454, 26 Nov 2004 Jumagdao, Jan

Julia
E.C. McCulough vs. R. Aenlle & Co. G.R. No. 1300, 03 Feb 1904 Pesiao, Joshua Steve
Robles vs. Hermanos, G.R. No. L-26173, 13 Jul 1927 Salvador, Pinky
Askay v. Cosalan G.R. No. 21943 15 Sep 1924 Saranillo, Isabel
Aguilar vs. Rubiato, G.R. No. L-14823, 09 Dec 1919 Pepito, Arvie
Bautista vs. Court of Appeals, G.R. No. 158015, 11 Aug 2004 Amistad, Alyssa Kristen
Sps Buenaventura vs Court of Appeals G.R No.126376 20 Nov 2003 Laurente, Christopher
Ian
Sps Serrano vs. Caguait G.R No. 139173, 28 Feb 2007 Miranda, Ilyana May
Escueta vs Lim, GR No 137162 Dacalan, Danilo
Villonco Realty Co. vs. Bormaheco, Inc., supra. Gepte, Joseph D
Page 279 of 290

DIGESTS COMPILATION
CIVIL CODE: SALES
Earnest Money
Sps Doromal vs C.A Abastillas, Glenda
PNB vs C.A Gr. 119580 Aberjedo, Melanie
Goldenrod,Inc vs CA Acebuche, Maria

Larrydelle
San Miguel Properties Phils Inc vs Sps Huang Amistad, Alyssa

Kristen
Earnest money vs option contract
San Miguel Properties Phils Inc vs Sps Huang Amper, Kimberly

Lourdes Tina
Tuazon vs Del Rosario-Suarez, Gr No 168325, dec 13 2010 Armamento, Roque
Sps Villamor vs Court of Appeals Gr, No 97332 Bacalso, Leah Pauline
Bible Baptist Church vs C.A Gr no. 126454 Bacolod, James

Christian
Arts. 1475-1488
Promise to sell
Eulogio vs Sps Apeles Gr. 167884 Bascug, Ryan
Diamente V.S Court of Appeals Gr. No 51824, Feb 7 1992 Cadenas, Armando
Asuncion vs Court of Appeals (Right of First Refusal) Canoy, Rona Mae
Guerrero vs Ynigo , Gr No L-5572 Oct 26 1654 Catingub, Lourdes

Angela
Guzman vs Bocaling&Co vs Bonnevie Gr. 86150 Daclan, Danilo
Equatorial Realty Development Inc vs Mayfair Theater
Inc Gr. No 133879 Diwag, Kyrie
Sen Po Ek Marketing Corp vs Martinez Gr.134117 Dumamba, Anderson
Paranaque Kings Enterprises Inc Vs Court of Appeals
G.R no 111538 Feb 26 1997 Herrero, Mary Grace
Polytechnic University of the Philippines vs
Golden horizon realty Corp G.R 183612 & 184260 Jonson, Christine
Sadwhani vs Court of Appeals G.R n.o 128119, Oct 17 1997 Laurente, Ian Kristofer
Rules on Ordinary Sales
Form
Sps Caoili vs Court of Appeals Gr. No 128325, Sep 14 1999 Miranda, Fevi
Naranja vs Court of Appeals GR, No 160132, April 17 2009 Miranda, Ilyana May
Paredes vs Espino GR no L-23351, March 13 1968 Montinola, Trisha Jean
Inigo vs Estate of Maloto Gr. no L 24384 Pepito, Arvies
Cuyugan vs Santos, Gr no 10265 Pepito, Aguste

Page 280 of 290
DIGESTS COMPILATION
CIVIL CODE: SALES
Sps. Dailon vs Court of Appeals, G.R no 78903 Pesiao, Joshua Steven
Yuvienco vs Dacuycuy Gr. L-55048 Plantar, Krizziane
Vda. de Jomoc vs Court of Appeals, Gr no 98217, 92860, Ranario, Charmaine

Hope
Santos vs Manalili Gr. no 157812 Rances, Ranche Rik
Perfection
Sps . Dalion Vs Court of Appeals Refil Karen
Coronel vs C.A Reyes, Janssen
Manila Mining Corp vs Tan GR, no 17102 Rizon, Louray
Rule in Special Sales
Dizon vs Dizon G.R no. 156539 Rodriguez, Jeric
Leoquinco vs Postal servic bank G,R no l-23630 Salang, Donald
Pacific Commercial Co vs Ermita Market & Cold Stores
Gr no. L-34727 Salvador, Pinky
Macondray & Co, Inc vs De Santos GR. No L-42416 Sagarino, Daphnee
Levy Hermanos, Inc vs Gervacio GR, no L-46306 Saranillo, Isabel
Sps, Dela Cruz vs Asian Consumer of Industraial Finance Corp
GR no 94828 Saumay, Norjana
Magna Financial Services Group, Inc vs Colarina GR No.158365 Soriano, Alyssa
Elisco Tool Manufacturing Corp vs Court of Appeals Suson, Kevin
PCI leasing and Finance Inc vs Giraffe-X Creative Imaging Inc Torrefranca, Ian Kahrlo
Pagtalunan vs De Manzano GR no 147695 Urot, Dave Anthony
Sps Ramos vs Sps Heruela Villacastin, Franklin
Active Realty& Development Corp vs Daroya GR no 141205 Wahing, Rosel Christel
Far Eastern Bank & Trust Co vs Marquez

GR no147964, Jan 20 2004 Abastillas, Glenda
Tamayo vs Huang Gr No 164136 Jan 2006 Aberjedo, Melanie
Cantemprate vs CRS Realty Development Corp
Gr no 171339 May 8 2009 Acebuce, Maria
Larrydelle
Geronimo vs Sps Calderon Gr. No 201781 Amper, Kimberly
Lourdes Tina
Moran Jr vs Office of the President of the Phil
Gr 192957 sep 29 2014 Bacalso, Leah
Pauline
Arts 1489-1492
Page 281 of 290
DIGESTS COMPILATION
CIVIL CODE: SALES
Special Disqualifications
Uy Siu Pin VS Cantiollas Gr No. L-46850 jun 20 1940 Bacolod, James Christian
Ching vs Goyangko Gr. no 165879 Nov 10 2006 Bascug, Ryan
Philippine Trust Co vs Roldan Gr. No L-8477 May 31 1956 Cadenas, Armando
Maharlika Publishi Corp vs Sps Tagle GR. No l-65594 Jul 9 1986 Canoy, Rona Mae
De Guerrea vs Suplico G.R No 144320 April 26 2006 Catingub, Lourdes Angela
Heris of Eduardo Manlapat vs Court of Appeals Daclan, Danilo
Incapacity to Sell
Manzano vs Ocampo G.R No-L14778 feb 28 1961 Dumamba, Anderson
Bislig Bay Lumber vs Collector of Internal Revenue Gr 13186 Gepte, Joseph
Art 1493-1494
Lawyers Cooperative Publishing Co vs Tabora
GR. No. L-21263, 30 april 1965 Herrero, Mary
Grace
Lizardi vs Yaptico Gr no 9954 Ma 22 1915 Jonson, Christine
Sun Brothers Appliances, Inc vs Perez
Gr. No. L-17527, April 30 1963 Laurente, Ian
Kristoffer
Cebu winland development Corp vs Ong Siao Hua
Gr No 173215 May 2009 Manubag, Celedino
Roman vs Grimalt Gr. 2412 Apr 30 1906 Miranda, Ilyana

May
Gaisano Cagayan, inc. vs Insurance Company of North America
Gr 147839 Jun 8 2006 Montinola, Trisha Jean
Arts. 1495-1506
Cuizon vs Remoto Gr. No 1430297 October 11 2005 Pepito, Arvie
Kuenzle& Streiff vs Macke & Chandler, Gr no 5295 Dec 16 1909 Abrejedo, Melanie
Addison vs Felix GR no 12342 Aug 3 1918 Pesiao, Joshua
Steven
Daguilan vs Intermedtiate Appelate Court
GR. no 69970 Nov 28 1988 Plantar, Krizziane
Pasagui vs Villablanca GR No L-21998 Nov 10 1975 Acebuche, Maria
Larrydele
Power Commercial and Industrial Corp vs Court of Appeals
GR no 119745 jun 20 1997 Rances, Ranche
Rik
Florendo vs Foz, GR No 6565 Oct 24 1911 Amper, Kimberly
Lourdes Tina
Dy, Jr vs Court of Appeals Gr no 92989 Jul 08 1991 Rizon, Louray

Philippine Suburban Development Corp vs Auditor General
Gr no L-19545 April 18 1975 Bacalso, Leah Pauline
Board of Liquidators vs Floro GR No. L- 15155 Dec 29 1960 Salang, Donald
San Lorenzo Development Corp vs Court of Appeals
G.R no 124242 Jan 21 2005 Salvador, Pinky
Asset Privatization Trusts vs T.J enterprises
G.R no 167195 May 2009 Sagarino, Daphnee
Heris of Macunana vs Court of Appeals Bacolod, James Christian
Ilao-Quianay vs Mapili GR. No 154087 Oct 25 2005 Saumay, Norjana
Vallarta vs Court of Appeals Gr. No L- 40195 May 29 1987 Seno, Reyar
Page 282 of 290

DIGESTS COMPILATION
CIVIL CODE: SALES
Butuan Sawmill, Inc vs Court of Tax Appeals

G.R No L-20601 feb 28 1966 Soriano, Alyssa
Arts.1521-1524
Time and Place of delivery
Smith Bell & Co Ltd vs Mati GR. No L-16570 Mar 09 1922 Suson, Kevin
Lorenzo Shipping Corp vs Bj Marthel International Inc
Gr No 145483 Nov 19 2004 Tria, Ninotchka
Visayan Distributors Inc vs Flores G.R No L-3751 Oct 25 1952 Torrefranca, Ian Kharlo
Republic vs Litton GR No L-5018 Nov 28 1953 Urot, Dave Anthony
Behn, Meyer &Co vs Yangco Gr. Bo. 13203 sept 19 1918 Bascug, Ryan
Bislig Bay Lumber vs Collector of internal revenue GR L- 13186 Cadenas, Amando
Art 1563-1543
Completeness of delivery
Cebu Winland Development vs Ong Siao Hua Canoy, Rona Mae
Rudolf Lietz vs Court of Appeals Gr. No 122463 Daclan, Danilo
Sta. Ana vs Hernandez G.R No 16394 Dumamba, Anderson
Asian vs Jalandoni Gr. 20435 Gabriola, Anton

Gregor,
Azarraga vs Gay G.R no 29449 Gepte, Joseph
Art 1544
Sales of two different persons
Sigaya vs Mayuga Gr Np 143254 Herrero, Mary Grace
Sps. Ulep vs C.A Gr No 125254 Manubag, Celedonio

Jr
Bautista vs De la Cruz Gr 13125 Miranda, Ilyana

May
Lichuaco vs Berenguer Gr. 11907 Pepito, Arvie
Paylago vs Jarabe Gr. No 20046 Pesiao, Joshua Steven
Quimson vs Rosete G.R no 2397 Plantar, Krizziane Katrina
Gabriel vs Sps Mabanta Gr. 142403 Rances, Ranche Rik
Taredo vs Court of Appeals Rizon, Louray Maria
Sanchez vs Ramos Gr. 13442 Sagarino, Dapnee
Spouses Mahusay vs B.E San Diego Gr 179675 Salang, Donald
Ocampos vs Court of Appeals G.R No. 97442 Salvador, Pinky
Hermanos vs Saldana Gr No. 26578 Saumay, Norjana
Yee vs Frank Strong Machinery Gr no 11658 Seno, Reyar
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DIGESTS COMPILATION
CIVIL CODE: SALES
Consolidated Rura Bank Inc vs Court of Appeals G.R no 132161` Soriano, Alyssa
Carumba vs CA, G.R. No. L-27587, Feb 18, 1970 Suson, Kevin
Hanopol vs Pilapil Gr. No. 19248 Torrefranca, Ian Kharlo
Vda de Jomoc vs Court of Appeals Tria, Ninotchka
Art 1545-1547
Conditions and Warranties
Guinhawa vs People Gr. 162822 Urot, Dave Anthony
Bautista vs. Lasam, G.R. No. 47501, 27 Jun 1941 Abrejedo, Melanie
Mendoza vs. Caparros, G.R. No. L-5937, 30 Jan 1954 Acebuche, Ma. Larrydelle
Philippine Manufacturing Co. vs. Go Jocco,
G.R. No. 24256, 21 Jan 1926 Amper, Kimberly
Schmid & Oberly, Inc. vs. RJL Martinez Fishing Corp.,
G.R. No. 75198, 18 Oct 1988 Bacalso, Leah Pauline
Jovellano vs. Solmirano, G.R. No. 22488, 02 Feb 1925 Bacolod, James Christian
Escaler vs. Court of Appeals, G.R. No. L-42636, 01 Aug 1985 Bascug, Ryan
J.M. Tuason & Co., Inc. vs. Court of Appeals,
G.R. No. L-41233, Nov 21 1979 Cadenas, Armando
Investment & Development, Inc. vs. Court of Appeals,
G.R. No. 51377 Jun 27 1988 Canoy, Rona Mae
Nutrimix Feeds Corp vs Court of Appeals
GR. No. 152219 Oct 25 2004 Daclan, Danilo
Filinvest Credit Copr vs Court of Appeals
GR.no 82508 Sep 29 1989 Dumamba, Anderson
Dino vs. Court of Appeals, supra. Gepte, Joseph
Mendoza vs. David, G.R. No. 147575, 22 Oct 2004 Herrero, Mary Grace
Harrison Motors Corp. vs. Navarro, G.R. No. 132269, 27 Apr 2000 Manubag, Celedonio
Jr.
Investment & Development, Inc. vs. Court of Appeals, supra. Miranda, Ilyana May
Soler vs. Chesley, G.R. No. L-17150, 20 Jun 1922 Montinola, Trisha Jean
Arts 1458-1459
Conditions
De La Riva vs. Ah Kee, G.R. No. L-40279, 14 Nov 1934 Pepito, Arvie
Andaya vs. Mananasala, G.R. No. L-14714, 30 Apr 1960 Pesiao, Joshua Steven
Angelo vs. Pacheco, G.R. No. 32984, 08 Sep 1931 Plantar, Krizziane
Arts 1561-1571
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DIGESTS COMPILATION
CIVIL CODE: SALES
Warranty against redhibitory
Moles vs. Intermediate Appellate Court,
G.R. No. 73913, 31 Jan 1989" Rances, Ranche Rick
Supercars Management & Development Corp. vs. Flores,
G.R. No. 148173, 10 Dec 2004 Rizon, Louray Maria
De Guzman vs. Toyota Cubao, Inc.,
G.R. No. 141480, 29 Nov 2006 Sagarino, Dapnee
Arts. 1582-1593
To accept delivery
Fule vs. Court of Appeals, G.R. No. 112212, 02 Mar 1998 Salang, Donald
De Guzman vs. Triangle Ace Group,
G.R. No. 149153, 12 Sep 2001 Salvador, Pinky
Arra Realty Corp. vs. Guarantee Development Corporation
and Insurance Agency, G.R. No. 142310, 20 Sep 2004 Saumay, Norjana
Crismina Garments, Inc. vs. Court of Appeals,
G.R. No. 128721, 09 Mar 1999 Seno, Reya
Arts. 1594-1599
Buyers action for breach
Katigbak vs. Court of Appeals, G.R. No. L-16480, 31 Jan 1962 Soriano, Alyssa
Song Fo & Co. vs. Hawaiian Philippine Co.,
G.R. No. 23769, 16 Sep 1925 Suson, Kevin
Art1600
Causes of Extinguishment
Sps. Doromal vs. Court of Appeals, supra. Torrefranca, Ian Kharlo
Sps. Almendrala vs. Sps. Ngo, G.R. No. 142408, 30 Sep 2005 Tria, Ninotchka
Aguilar vs. Aguilar, G.R. No. 141613, 16 Dec 2005 Urot Dave, Anthony
Villasor vs. Medel, G.R. No. CA-8677, 29 Sep 1948 Aberjedo, Melaine
Ortega vs. Orcine, G.R. No. L-28317, 31 Mar 1971 Acebuche, Ma. Larrydelle
Cadungog vs. Yap, G.R. No. 161223, 12 Sep 2005 Amper, Kimberly
Sps. Salonga vs. Sps. Concepcion, G.R. No. 151333, 20 Sep 2005 Bacalso, Leah Pauline
Go vs. Bacaron, G.R. No. 159048, 11 Oct 2005 Bacolod, James Christian
Gerardino, Sr. vs. Court of First Instance (Br. III), Capiz,
G.R. NoL-32670, 29 Dec 1977 Bascug Ryan
Yturralde vs. Court of Appeals, G.R. No. L-31586, 28 Feb 1972 Cadenas, Armando
Page 285 of 290

DIGESTS COMPILATION
CIVIL CODE: SALES
Marquez vs. Valencia, G.R. No. L-49240, 20 Dec 1946 Canoy, Rona Mae
Quinga vs. Court of Appeals, G.R. No. L-14961, 19 Sep 1961 Daclan, Danilo
Gloria-Diaz vs. Court of Appeals, G.R. No. L-48198, 31 Jul 1978 Dumamba, Anderson
Arts. 1601-1618
Equitable mortgage
Matanguihan vs. Court of Appeals, G.R. No. 115033, 11 Jul 1997 Gepte, Joseph
San Pedro vs. Lee, G.R. No. 156522, 28 May 2004 Herrero, Mary Grace T
Banga vs. Sps. Bello, G.R. No. 156705, 30 Sep 2005 Manubag, Celedonio
Bautista vs. Unangst, G.R. No. 173002, 04 Jul 2008 Miranda, Ilyana
Sps. Hilario vs. Sps. Gonzales, G.R. No. 147321, 21 Jan 2004 Montinola, Trisha
Redondo vs. Jimenez, G.R. No. 161479, 18 Oct 2007 Pepito, Arvie
Villa vs. Santiago, G.R. No. 11470, 04 Apr 1918 Pesiao, Joshua Steven
Legaspi vs. Sps. Ong, G.R. No. 141311, 26 May 2005 Plantar, Krizziane
Transactions presumed to be equitable mortgages
Caballero vs. Ong Tiao Bok, G. R. No. 147206, 02 Jul 2001 Rances, Ranche Rik A
Ramos vs. Sarao, G.R. No. 149756, 11 Feb 2005 Rizon, Louray
Dino vs. Jardines, G.R. No. 145871, 31 Jan 2006 Sagarino, Dapnee
Romulo vs. Layug, G.R. No. 151217, 08 Sep 2006 Salang, Donald
Bacungan vs. Court of Appeals, G.R. No. 170282, 18 Dec 2008 Salvador, Pinky
Abilla vs. Gobonseng, Jr., G.R. No. 146651, 17 Jan 2002 Saumay, Norjana
Arts. 1619-1623
Misterio vs. Cebu State College of Science and Technology,
G.R. No. 152199, 23 Jun 2005 Seno, Reyar
Villarica vs. Court of Appeals, G.R. No. L-19196, 29 Nov 1968 Soriano, Alyssa
Mactan Cebu International Airport Authority vs. Court of Appeals,
G.R. No. 121506 (Resolution), 30 Oct 1996 Suson, Kevin
Ong Chua vs. Carr, G.R. No. 29512, 17 Jan 1929 Torrefranca, Ian Kharlo
Sps. Narvaez vs. Sps. Alciso, G.R. No. 165907, 27 Jul 2009 Tria, Ninotchka
Legaspi vs. Court of Appeals, G.R. No. L-45510, 27 May 1986 Urot, Dave Anthony
Lee Chuy Realty Corp. vs. Court of Appeals,
G.R. No. 104114, 04 Dec 1995 Abrejedo, Melaine
Solid Homes, Inc. vs. Court of Appeals,
G.R. No. 117501, 08 Jul 1997 Acebuche, Maria Larrydelle
Sps. Cruz vs. Leis, G.R. No. 125233, 09 Mar 2000 Amper, Kimberly
Aguilar vs. Aguilar, G.R. No. 141613, 16 Dec 2005 Bacalso, Leah Pauline
Page 286 of 290

DIGESTS COMPILATION
CIVIL CODE: SALES
Avila vs. Sps. Barabat, G.R. No. 141993, 17 Mar 2006 Bacolod, James Christian
Cabales vs. Court of Appeals, G.R. No. 162421, 31 Aug 2007 Bascug, Ryan
Galvez vs. Court of Appeals, G.R. No. 157954, 24 Mar 2006 Cadenas, Armando
Sps. Fabia vs. Intermediate Appellate Court,
G.R. No. L-66101, 21 Nov 1984 Canoy, Rona Mae
Primary Structures Corp. vs. Sps. Valencia,
G.R. No. 150060, 19 Aug 2003 Daclan, Danilo
Contreras vs. Court of Appeals, G.R. No. 164819, 09 Mar2007 Dumamba, Anderson
National Development Company vs Madrigal Wan Hai Line Corp.,
GR.no 148332 Sep 30 2003 Gepte, Joseph
Heirs of Parco vs. Pia, G.R. No. L-22478, 30 May 1972 Herrero, Mary Grace
Verdad vs. Court of Appeals, G.R. No. 109972, 02 Apr 1996 Manubag, Celedonio Jr
Francisco vs. Boiser, G.R. No. 137677, 31 May 2000 Miranda, Ilyana
Vda. De Ape vs. Court of Appeals, supra. Montinola, Trisha
Aguilar vs. Aguilar, supra. Pepito, Arvie
Cabales vs. Court of Appeals, supra. Pesiao, Joshua Steven
Sps. Tupas vs. Sps. Bulaong, G.R. No. L-34654, 23 Oct 1984 Plantar, Krizziane
Belisario vs. Intermediate Appellate Court,
G.R. No. 73503, 30 Aug 1988 Rances, Ranche Rik
Arts.1624-1635
Ledonio vs. Capital Development Corp.,
G.R. No. 149040, 04 July 2007 Rizon, Louray
Servicewide Specialists, Inc. vs. Court of Appeals,
G.R. No. 116363, 10 Dec 1999 Sagarino, Dapnee
Lo vs. KJS Eco-Formwork System Phil., Inc.,
G.R. No. 149420, 08 Oct 2003 Salang, Donald
SPECIAL LAWS
Act No. 4122 Installment Sales Law
PCI Leasing and Finance, Inc. vs. Giraffe-X Creative Imaging, Inc Salvador, Pinky
Levy Hermanos, Inc. vs. Gervacio, supra. Saumay, Norjana
Visayan Sawmill Co., Inc. vs. Court of Appeals,
G.R. No. 83851, 03 Mar 1993 Seno, Reyar
Tajanlangit vs. Southern Motors, Inc.,
G.R. No. L-10789, 28 May 1957 Soriano, Alyss Chantelle
Southern Motors, Inc. vs. Moscoso,
Page 287 of 290

DIGESTS COMPILATION
CIVIL CODE: SALES
G.R. No. L-14475, 30 May 1961 Suson, Kevin
Delta Motor Sales Corp. vs. Niu Kim Duan,
G.R. No. 61043, 02 Sep 1992 Torrefranca, Ian
Nonato vs. Intermediate Appellate Court,
G.R. No. L-67181, 22 Nov 1985 Tria, Ninotchka
Adelfa Properties, Inc. vs. Court of Appeals,
G.R. No. 111238, 25 Jan 1995 Urot, Dave
WeeZayas, Jr. vs. Luneta Motor Co.,
G.R. No. L-30583, 23 Oct 1982 Aberjedo, Melaine
Pameca Wood Treatment Plant, Inc. vs. Court of Appeals,
G.R. No. 106435, 14 Jul 1999 Acebuche, Ma Larrydelle
Borbon II vs. Servicewide Specialists, Inc.,
G.R. No. 106418, 11 Jul 1996 Amper, Kimberly
Universal Motors Corp. vs. Dy Hian Tat,
G.R. No. L-23788, 16 May 1969 Bacalso, Leah Pauline
Industrial Finance Corp. vs. Ramirez,
G.R. No. L-43821, 26 May 1977 Bacolod, James Christian
Northern Motors, Inc. vs. Sapinoso,
G.R. No. L-28074, 29 May 1970 Bascug, Ryan
Cruz vs. Filipinas Investment & Finance Corp.,
G.R. No. L-24772, 27 May 1968 Cadenas, Armando
R.A No.6552 The Realty Installment Buyer Protection Act
Luzon Brokerage Co., Inc. vs. Maritime Building Co.,
G.R. No. L-25885 (Resolution), 16 Nov 1978 Canoy, Rona Mae
Communities Cagayan, Inc. vs. Sps. Nanol,
G.R. No. 176791, 14 Nov 2012 Daclan, Danilo
Mclaughlin vs. Court of Appeals,
G.R. No. L-57552, 10 Oct 1986 Dumamba, Anderson
Siska Development Corp. vs. Office of the President,
G.R. No. 93176, 22 Apr 1994 Gepte, Joseph
Sps. Lagandaon vs. Court of Appeals,
G.R. Nos. 102526-31, 21 May 1998 Herrero, Mary Grace
Leaño vs. Court of Appeals, G.R. No. 129018, 15 Nov 2001 Manubag, Celedonio
Active Realty & Development Corp. vs. Daroya, supra Miranda, Ilyana
Moldex Realty, Inc. vs. Saberon, G.R. No. 176289, 08 Apr 2013 Montinola Trisha
Gatchalian Realty, Inc. vs. Angeles, G.R. No. 202358, 27 Nov 2013 Pepito, Arvie
Optimum Development Bank vs. Sps. Jovellanos,
Page 288 of 290

DIGESTS COMPILATION
CIVIL CODE: SALES
G.R. No. 189145, 04 Dec 2013 Pesiao, Joshua Steven
Sps. Sebastian vs. BPI Family Bank, Inc.,
G.R. No. 160107, 22 Oct 2014 Plantar, Krizziane
Sps. Noynay vs. Citihomes Builder and Development, Inc.,
G.R. No. 204160, 22 Sep 2014 Rances, Ranche Rik
Act No.3952 Bulk Sales Law
Ong vs. Ong, G.R. No. L-67888, 08 Oct 1985 Rizon, Louray
R.A. No. 8762 Retail Trade Liberalization Act
Espina vs. Zamora, Jr., G.R. No. 143855, 21 Sep 2010 Sagarino, Dapnee
Balmaceda vs. Union Carbide Phils., Inc.,
G.R. No. L-30442, L-30409, 30 Sep 1983 Salang, Donald
Goodyear Tire and Rubber Co. vs. Reyes, Sr.,
G.R. No. L-30063, 2 Jul 1983 Salvador,Pinky
C.A No. 108 Anti-Dummy Law
King vs. Hernaez, G.R. No. L-14859, 31 Mar 1962 Saumay, Norjana
Asbestos Integrated Manufacturing, Inc. vs. Peralta,
G.R. No. L-45515, 29 Oct 1987 Seno, Reyar
R.A No. 247 Bonded Warehouse Act
Siy Cong Bieng & Co., Inc. vs. Hongkong & Shanghai Banking Corp Soriano, Alyssa
Page 289 of 290

DIGESTS COMPILATION
CIVIL CODE: SALES
List of Current Students Number of Cases Digested
Aberjedo, Melaine D 7
Acebuche, Ma Larrydelle L 1

Amper, Kimberly Lourdes 9

Tina U


Bacalso, Leah Pauline D 10

Bacolod, James Christian C 9 
Bascug, Ryan S 8
Cadenas, Armando O 6 
Canoy, Rona Mae 9
Daclan, Danilo G 7
Dumamba, Anderson S 9
Gepte, Joseph D 2
Herrero, Mary Grace T 9
Jonson, Christine T 7
Manubag, Celedonio Jr. S 6
Miranda, Ilyana 6
Montinola, Trisha Jean C 8
Pepito, Arvie D 9
Pesiao, Joshua Steven T 9
Plantar, Krizziane Katrina N 9
Rances, Ranche Rik A 8
Rizon, Louray Maria L 10
Sagarino, Dapnee C 7
Salang, Donald C 8
Salvador, Pinky P 7
Saumay, Norjana B 8
Seno, Reyar P 6
Soriano, Alyssa Chantelle 8

Deb P
Suson, Kevin, 8
Torrefranca, Ian Kharlo M. 8
Tria, Ninotchka II N 2
Urot, Dave Anthony 9
Page 290 of 290

Digest Compilation: Civil Code: Sales

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DIGESTS COMPILATION

Civil Code Sales- Atty. Maylon

Obligations and Contracts, Sources of an Obligation, LisPendens,

The registration of lispendens must be independently addressed in appropriate proceedings.

As legal redemption is intended to minimize co-ownership once the property is subdivided

Callejo, Sr., J.:

1. Consent of the contracting parties;

2. Objection certain which is the subject matter of the contract;

3. Cause of the obligation which is established.

The court ruled in Boston Bank of the Philippines vs Manalo:

“A definite agreement as to the price is an essential element of a binding agreement to sell

Meanwhile, Special Assets Management Department (SAMD) had prepared a statement of

PNB also rejected petitioners payment for the balance.

Lot was later transferred to its PNB President Bayani Gabriel

Petitioner filed a petition for certiorari

W/N there was a contract of sale - NO

W/N earnest money establishes a contract of sale – NO

Denied. Costs Against Petitioner.

(a) preparation, conception, or generation, which is the period of negotiation

(c) consummation or death, which is the fulfillment or performance of the terms

ISSUE: Whether or not there was a contract of sale in this case.

ISSUE: Whether or not the Contract to Sell vested ownership in Ursal.

Topic: Civil Law – Sales; Essential Elements

The CA reversed the RTC ruling.

Issue: Whether or not the contract of sale was valid?

Case Subject Matter/s:

In this case, respondents' predecessor had undoubtedly commenced performing her

Absolute Contract of Sale

1ST ISSUE: Whether or not the agreement is a contract of sale.

COURT RULING: Yes. It is a contract of sale on an installment basis. A contract of sale is

Contract of Sale vs Contract to Sell

It is essential to distinguish between a contract to sell and a conditional contract of sale

Issue: WHETHER OR NOT THE PETITIONER IS ENTITLED TO RECOVER OWNERSHIP AND

c. Price or Consideration - Lastly, the price or consideration is at Three Thousand Pesos

ONE LINER: A deed of sale is absolute in nature although dominated as a “Deed of

RULING: The contract between the parties is a contract of sale.

TOPIC: Rescission of Sale

ISSUE: Whether or not there was a valid rescission.

Contract to Sell vs Conditional Sale

Issue: Whether or not the first sale was valid

Existing or Future or Contingent

1. Is the sale of a future inheritance valid?

Art 1466-1468: AGENCY TO SELL

TOPIC: Agency to Sell

and Sale and not Agency.

Lease of Service or Contract for a Piece of Work

Topic: Contract of Sale vs Contract for a piece work

Petitioner Commissioner of Internal Revenue conducted an investigation of the business tax

Issue: Whether or not private respondent is a manufacturer or a contractor.

SC Ruling: The petition is without merit.

Lease with option to purchase

ARTICLE 1469-74: Price

General Principles in agreement as to price

ISSUE: WON there is a contract of sale or contract to sell

A definite agreement as to the price is an essential element of a binding agreement to sell

Effect if there is no consideration – null and void (non-existence of the contract)

ISSUE: Whether or not the sale of land was valid?

Issue: Whether or not the sale is void?