Assignment #6

Rights and Obligations of the Vendee (Articles 1582-1593, New Civil Code)    RULING:
Republic Act No. 6552 As gleaned from the agreement, 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
Cases: 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
1. ARRA REALTY CORPORATION VS. SPOUSE ARGUELLES, 20 SEPTEMBER soon as the second floor was constructed within five (5) months, respondent Peñaloza would
2004 take possession of the property, and title thereto would be transferred to her name.

FACTS: The parties had agreed on the three elements of subject matter, price, and terms of payment.
Arra Realty Corporation (ARC) was the owner of a parcel of land, located in Alvarado Street, Hence, the contract of sale was perfected, it being consensual in nature, perfected by mere
Legaspi Village, Makati City, covered by Transfer Certificate of Title. Through its president, consent, which, in turn, was manifested the moment there was a meeting of the minds as to the
the ARC decided to construct a five-story building on its property and engaged the services of offer and the acceptance thereof. The perfection of the sale is not negated by the fact that the
Engineer Erlinda Peñaloza as project and structural engineer. In the process, Peñaloza and the property subject of the sale was not yet in existence. This is so because the ownership by the
ARC, through Carlos Arguelles, agreed that Peñaloza would share the purchase price of one seller of the thing sold at the time of the perfection of the contract of sale is not an element of
floor of the building, consisting of 552 square meters payable within sixty (60) days from its perfection. A perfected contract of sale cannot be challenged on the ground of non-
November 20, 1982, and the balance payable in twenty (20) equal quarterly installments. ownership on the part of the seller at the time of its perfection. What the law requires is that
the seller has the right to transfer ownership at the time the thing is delivered. Perfection per se
The parties further agreed that the payments of Peñaloza would be credited to her account in does not transfer ownership which occurs upon the actual or constructive delivery of the thing
partial payment of her stock subscription in the ARC’s capital stock. Sometime in May 1983, sold.
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 In a contract of sale, until and unless the contract is resolved or rescinded in accordance with
of Technology. Unknown to her, ARC had executed a real estate mortgage over the lot and the law, the vendor cannot recover the thing sold even if the vendee failed to pay in full the initial
entire building in favor of the CHINA BANKING CORPORATION as security for a loan on payment for the property. The failure of the buyer to pay the purchase price within the
May 12, 1983. The deed was annotated. Peñaloza paid for the portion of the second floor of stipulated period does not by itself bar the transfer of ownership or possession of the property
the building she had purchased from the ARC. She learned that the property had been sold, nor ipso facto rescind the contract.37 Such failure will merely give the vendor the option
mortgaged to the CHINA BANKING CORPORATION sometime.. Thereafter, she stopped to rescind the contract of sale judicially or by notarial demand as provided for by Article 1592
paying the installments due on the purchase price of the property. of the New Civil Code:

Peñaloza wrote the CHINA BANKING CORPORATION on August 1, 1984 informing the Art. 1592. In the sale of immovable property, even though it may have been stipulated that
bank that the ARC had conveyed a portion of the second floor of the building to her. She also upon failure to pay the price at the time agreed upon the rescission of the contract shall of right
proposed for the bank to assist her in requesting the ARC to execute a deed of absolute sale take place, the vendee may pay, even after the expiration of the period, as long as no demand
over the portion of the second floor she had purchased and the issuance of the title in her name for rescission of the contract has been made upon him either judicially or by a notarial act.
upon the payment of the purchase price. However, the bank rejected her proposal. After the demand, the court may not grant him a new term.

When the ARC failed to pay its loan to CHINA BANKING CORPORATION, the subject 2. LAFORTEZA VS. MACHUCA, 333 SCRA 643
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 FACTS:
lot for P22, 000,000, part of which was to be used to redeem the property from CHINA In the exercise of the authority of Special Power Of Attorney, on January 20, 1989, the heirs
BANKING CORPORATION With the money advanced by the GDCIA, the property was of the late Francisco Q. Laforteza represented by Roberto Z. Laforteza and Gonzalo Z.
redeemed on May 4, 1987. On May 14, 1987, the petitioner executed a deed of absolute sale Laforteza, Jr. entered into a Memorandum of Agreement (Contract to Sell) with the plaintiff
over the lot and building in favor of the GDCIA for P22, 000,000. over the subject property for the sum of SIX HUNDRED THIRTY THOUSAND PESOS
(P630,000.00) payable as follows: (a) P30,000.00 as earnest money, to be forfeited in favor of
the defendants if the sale is not effected due to the fault of the plaintiff; (b) P600,000.00 upon
ISSUE: issuance of the new certificate of title in the name of the late Francisco Q. Laforteza and upon
Whether or not Guarantee Development Corporation is not an innocent purchaser for value execution of an extra-judicial settlement of the decedent's estate with sale in favor of the
and that automatic rescission is present. plaintiff (Par. 2, Exh. "E", record, pp. 335-336). Significantly, the fourth paragraph of the
Memorandum of Agreement (Contract to Sell) dated January 20, 1989 (Exh. "E", supra.)
contained a provision as follows: . . . . Upon issuance by the proper Court of the new title, the
BUYER-LESSEE shall be notified in writing and said BUYER-LESSEE shall have thirty (30)
days to produce the balance of P600,000.00 which shall be paid to the SELLER-LESSORS 3. VDA. DE MISTICA VS. NAGUIAT, 418 SCRA 73
upon the execution of the Extrajudicial Settlement with sale. On January 20, 1989, plaintiff
paid the earnest money of THIRTY THOUSAND PESOS (P30,000.00), plus rentals for the
subject property . On September 18, 1998 3, defendant heirs, through their counsel wrote a FACTS:
letter to the plaintiff furnishing the latter a copy of the reconstituted title to the subject Eulalio Mistica, predecessor-in-interest of herein petitioner, is the owner of a parcel of land, a
property, advising him that he had thirty (3) days to produce the balance of P600,000.00 under portion thereof was leased to respondent Bernardino Naguiat. The two thereafter entered into a
the Memorandum of Agreement which plaintiff received on the same date. On October 18, contract to sell over the subject property. Pursuant to said agreement, respondent gave a
1989, plaintiff sent the defendant heirs a letter requesting for an extension of the THIRTY (30) downpayment and made another partial payment, however, he failed to make any payments
DAYS deadline up to November 15, 1989 within which to produce the balance of thereafter. Eulalio Mistica died and was survived by his wife, the petitioner who then filed a
P600,000.00. Defendant Roberto Z. Laforteza, assisted by his counsel Atty. Romeo L. complaint for rescission alleging that that the failure and refusal of respondents to pay the
Gutierrez, signed his conformity to the plaintiff's letter request. The extension, however, does balance of the purchase price constitutes a violation of the contract which entitles her to
not appear to have been approved by Gonzalo Z. Laforteza, the second attorney-in-fact as his rescind the same; that respondents have been in possession of the subject portion and they
conformity does not appear to have been secured. On November 15, 1989, plaintiff informed should be ordered to vacate and surrender possession of the same to petitioner.
the defendant heirs, through defendant Roberto Z. Laforteza, that he already had the balance
of P600,000.00 covered by United Coconut Planters Bank Manager's Check dated November Respondents contended that the contract cannot be rescinded on the ground that it clearly
15, 1989 . However, the defendants, refused to accept the balance .Defendant Roberto Z. stipulates that in case of failure to pay the balance as stipulated, a yearly interest of 12% is to
Laforteza had told him that the subject property was no longer for sale . On November 20, be paid. Respondent Bernardino Naguiat likewise alleged that sometime during the wake of
defendants informed plaintiff that they were canceling the Memorandum of Agreement the late Eulalio Mistica, he offered to pay the remaining balance to petitioner but the latter
(Contract to Sell) in view of the plaintiff's failure to comply with his contractual obligations . refused and hence, there is no breach or violation committed by them and no damages could
yet be incurred by the late Eulalio Mistica, his heirs or assigns pursuant to the said document.
Thereafter, plaintiff reiterated his request to tender payment of the balance of P600,000.00.
Defendants, however, insisted on the rescission of the Memorandum of Agreement. The lower court disallowed the rescission which the CA affirmed. Hence, the petition.
Thereafter, plaintiff filed the instant action for specific performance. LOWER COURT: The Disallowing rescission, the CA held that respondents did not breach the Contract of Sale. It
lower court rendered judgment in favor of the Alonzo Machuca and against the defendant explained that the conclusion of the ten-year period was not a resolutory term, because the
heirs of the late Francisco Q. Laforteza,. Petitioners appealed to the Court of Appeals, CA: Contract had stipulated that payment — with interest of 12 percent — could still be made if
This affirmed with the decision of the lower court. Hence this petition wherein the petitioners respondents failed to pay within the period. According to the appellate court, petitioner did not
raise the issues: disprove the allegation of respondents that they had tendered payment of the balance of the
purchase price during her husband’s funeral, which was well within the ten-year period.
ISSUE:
Whether or not the MOA is an OPTION CONTRACT, CONTRACT TO SELL or a ISSUE:
CONTRACT OF SALE. Whether petitioner is entitled to rescind the contract.

RULING: RULING:
In the case at bench, there was a perfected agreement between the petitioners and the No, petitioner cannot rescind the contract. The transaction between Eulalio Mistica and
respondent whereby the petitioners obligated themselves to transfer the ownership of and respondents, as evidenced by the Kasulatan, was clearly a Contract of Sale. A deed of sale is
deliver the house and lot located at 7757 Sherwood St., Marcelo Green Village, Parañaque and considered absolute in nature when there is neither a stipulation in the deed that title to the
the respondent to pay the price amounting to six hundred thousand pesos (P600,000.00). All property sold is reserved to the seller until the full payment of the price; nor a stipulation
the elements of a contract of sale were thus present.The elements of a valid contract of sale giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to
under Article 1458 of the Civil Code are (1) consent or meeting of the minds; (2) determinate pay within a fixed period.
subject matter and (3) price certain money or its equivalent. Even assuming for the sake of
argument that the petitioners were ready to comply with their obligation (and Machuca
cannot), we find that rescission of the contract will still not prosper. The rescission of a sale of In a contract of sale, the remedy of an unpaid seller is either specific performance or
an immovable property is specifically governed by Article 1592 of the New Civil Code, which rescission. Under Article 1191 of the Civil Code, the right to rescind an obligation is
reads: In the sale of immovable property, even though it may have been stipulated that upon predicated on the violation of the reciprocity between parties, brought about by a breach of
failure to pay the price at the time agreed upon the rescission of the contract shall of right take faith by one of them. Rescission, however, is allowed only where the breach is substantial and
place, the vendee may pay, even after the expiration of the period, as long as no demand for fundamental to the fulfillment of the obligation.
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. It is not disputed that the petitioners did In the present case, the failure of respondents to pay the balance of the purchase price within
not make a judicial or notarial demand for rescission. ten years from the execution of the Deed did not amount to a substantial breach. In the
Kasulatan, it was stipulated that payment could be made even after ten years from the she has proved her ownership over the property, which was fraudulently transferred through
execution of the Contract, provided the vendee paid 12 percent interest. The stipulations of the Francisco's clever scheme.
contract constitute the law between the parties; thus, courts have no alternative but to enforce
them as agreed upon and written.13cräläwvirtualibräry. ISSUE:
Whether or not the property formerly covered by Transfer Certificate of Title No. T-188590
Moreover, it is undisputed that during the ten-year period, petitioner and her deceased husband was conjugal, and thus rendered its sale without the wife's consent void.
never made any demand for the balance of the purchase price. Petitioner even refused the
payment tendered by respondents during her husbands funeral, thus showing that she was not HELD:
exactly blameless for the lapse of the ten-year period. Had she accepted the tender, payment On one hand, the petitioner's claim rests on the Deed of Absolute Sale her husband Jose
would have been made well within the agreed period. executed with Rodriguez, as well as the Transfer Certificate of Title No. T-188590 issued
during their marriage. On the other hand, respondent Francisco maintained that he paid for the
4. MALABANAN VS. SPOUSES MONTANO, G.R. NO. 187225, MARCH 6, 2019 land and the house construction on the property. The Court of Appeals' finding that the
property was exclusively owned by Jose was premised on: (1) the Deed of Conditional Sale
FACTS: between Jose and Rodriguez, which do not appear on record; and (2) Jose's statement in the
Melinda Malabanan (Melinda) is the widow of Jose Malabanan (Jose) In a December 18, 1984 Special Power of Attorney. The circumstances here transpired prior to the effectivity of the
Deed of Absolute Sale, they acquired a 310-square meter lot, a portion of a 2,000-square meter Family Code on August 3, 1988. Thus, petitioner and Jose's marriage and property relations
land registered under Maria Cristina Rodriguez (Rodriguez). Subsequently, on February 21, are governed by the Civil Code. Under the Civil Code, property acquired during marriage is
1985, Transfer Certificate of Title No. T-188590 was issued to Jose, married to Melinda presumed to be conjugal. There is no need to prove that the money used to purchase a property
covering the disputed property. The spouses built a house on the lot which the family had came from the conjugal fund. What must be established is that the property was acquired
possessed since 1984. On October 13, 1984, Melinda left the Philippines to work in Libya. during marriage. Only through "clear, categorical, and convincing" proof to the contrary will it
Unfortunately, Jose was murdered on June 12, 1985, prompting her to return home on June 25, be considered the paraphernal property of one (1) of the spouses. Here, the pieces of evidence
1985. She then returned to Libya on August 19, 1985, and only came home on November 8, presented by respondents, who had the burden of proving that the property was not conjugal
1990. Later on, Melinda discovered that Transfer Certificate of Title No. T188590 had long were insufficient to overturn this presumption.
been canceled through a string of transactions, and that the property was registered under the
name of Spouses Dominador III and Guia Montano (the Montano Spouses). To recall, on September 20, 1984, Jose executed a Deed of Conditional Sale with Rodriguez,
where respondent Francisco's down payment was allegedly reflected. The following month, on
When Melinda's mother-in-law, Adelfina Mendoza (Adelfina) died, her family executed an October 13, 1984, Melinda left for Libya. On December 18, 1984, the Deed of Absolute Sale
Extrajudicial Settlement of her estate. The property, then covered by Transfer Certificate of between Jose and Rodriguez was executed The house underwent construction while Melinda
Title No. T-198039, was adjudicated to Ramon Malabanan (Ramon), who was Jose's brother. was in Libya, and before Jose's death on June 12, 1985. These events refute Francisco's claim
June 1, 1994, Melinda filed before the Regional Trial Court a Complaint about Annulment of that the petitioner and Jose had no means to purchase the lot as they were jobless. The
Title with Damages against Spouses Ramon and Prescila Malabanan (the Malabanan Spouses) petitioner was then working in Libya, presumably earning income when the Deed of Absolute
and Francisco Malabanan (Francisco). On June 17, 1994, Ramon sold the property to the Sale was executed and the house was constructed. These circumstances sufficiently show that
Montano Spouses, with whom Transfer Certificate of Title No. T467540 was issued. Melinda the property was, indeed, conjugal. While respondent Francisco did not waiver in his claim
later filed an Amended Complaint to implement the Montano Spouses. She argued that the that he and Adelfina bought the lot for the petitioner and Jose, we sustain the trial court in
Special Power of Attorney was void as her signature in it was forged, and that she and Jose deeming this as self-serving. It does not escape this Court that respondent Francisco's
remained the real owners of the property. Further, she averred that she spent her earnings as an characterization of the property changed throughout the trial and on appeal. A certificate of
overseas worker in Libya to remodel their family home, all of which Francisco and the title accumulates in one document a precise and correct statement of the exact status of the fee
Malabanan Spouses had fully known. held by its owner. The certificate, in the absence of fraud, is the evidence of title and shows
exactly the real interest of its owner.
She prayed for the nullification of the documents, which she claimed to have been illegally
executed to dispossess her of her property. Francisco and the Malabanan Spouses, in their The title once registered, with very few exceptions, should not thereafter be impugned, altered,
Amended Answer with Counterclaim, countered that Francisco and Adelfina bought the changed, modified, enlarged, or diminished, except in some direct proceeding permitted by
property for their son, Jose, and Melinda as an advance on Jose's legitime.Francisco, they law. Otherwise, all security in registered titles would be lost. The certificate of title is the best
added, paid for the construction of the house on the property. They contended that Melinda evidence of ownership of a property. Respondents neither alleged fraud nor assailed the
consented when Francisco reacquired the property upon his son's death. He sold the property issuance of the title in Jose's favor. This certificate of title, when taken with the Deed of
to his brother-in-law, Benjamin Lopez (Lopez) because he was short on cash; he later bought Absolute Sale between Jose and Rodriguez, as well as the tax declarations in petitioner's name,
it back with his hard-earned money. Francisco and the Malabanan Spouses further claimed weigh more heavily than the respondents' bare claims in establishing petitioner and Jose's
that the Extrajudicial Settlement of Adelfina's estate was legally executed. Melinda and her ownership of the property. Respondent Francisco, on the contrary, failed to present any
children, they argued, were excluded because they had already received their share of evidence to prove that he paid for the kind and the construction of the house on the property
inheritance from Adelfina. The Regional Trial Court ruled in favor of Melinda. It found that The Court ruled in a number of cases that the sale of conjugal property by a spouse without the
other's consent is void. All subsequent transferees of the conjugal property acquire no rights FACTS:
whatsoever from the conjugal property's unauthorized sale. A contract conveying conjugal On 6 February 2003, Petitioner Lily Villamil filed a Complaint for recovery of possession and
properties entered into by the husband without the wife's consent may be annulled entirely. damages against respondent-spouses Juanito and Mila Erguiza before the MTCC of Dagupan
Here, Jose had no right to either unilaterally dispose of the conjugal property or grant City. The Agreement, which petitioner and respondent-spouses entered into in the sale and
respondent Francisco this authority through the supposed Special Power of Attorney. In his purchase of the subject property.
attempt to disavow knowledge of or participation in the petitioner's forged signature in the
Special Power of Attorney, respondent Francisco claimed that Jose handed him the document On 26 May 2003, respondent-spouses filed their Answer, which effectively denied the
with the petitioner's signature affixed in it. However, he was resolute in his account that the material allegations in petitioner’s complaint and by way of special and affirmative defenses.
petitioner was in Libya when the house was being constructed.In the absence of a satisfactory On 14 October 2004, the MTCC dismissed the complaint on the ground that the cause of
explanation, one found in possession of and who used a forged document is the forger of said action thereof was one for the interpretation of the agreement and the determination of the
document. If a person had in his possession a falsified document and he made use of it, taking parties’ respective rights. It reasoned that such action was incapable of pecuniary estimation
advantage of it and profiting thereby, the clear presumption is that he is the material author of and, therefore, jurisdiction lies with the RTC.
the falsification. Here, it was through the Special Power of Attorney, where the petitioner's
signature was forged, that respondent Fernando was able to sell the property to his brother-in-
law. A presumption that he was the author of the falsification arose. Without contrary On appeal, the RTC reversed the decision of the MTCC on the ground that the cause of action
evidence, which he did not even attempt to adduce, the presumption stands. was one for recovery of possession of real property. Considering that the assessed value of the
subject property is P2,290.00, the MTCC has original and exclusive jurisdiction over the case.
Thus, the case was remanded to the MTCC.
This Court cannot allow respondent Fernando, the presumed perpetrator of the forgery in the
Special Power of Attorney, to benefit from his nefarious acts. Finally, we agree with the trial
court's finding that the Montano Spouses were not buyers in good faith. A person is a buyer in The MTCC ruled in favor of petitioner. Aggrieved, respondent-spouses elevated an appeal to
good faith or an "innocent purchaser for value, when he or she purchases and pays the fair the RTC which, however, affirmed the ruling of the MTCC. Unconvinced, respondent-spouses
price for a property, absent any notice that another has a right over it. If the property is moved for reconsideration which was likewise denied for lack of notice of hearing. However,
covered by a certificate of title, the buyer may rely on it and is not obliged to go beyond its the CA reversed and set aside the decision of the RTC. The appellate court declared that the
four (4) corners. Sigaya v. Mayuga, however, provides for situations where this rule does not agreement between the parties was a contract to sell involving the subject property because the
apply: This rule shall not apply when the party has actual knowledge of facts and vendors reserved ownership and it was subject to a suspensive condition, i.e., submission of
circumstances that would impel a reasonably cautious man to make such inquiry or when the the sellers of lacking documents or court approval of the sale of the shares of the minor
purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to owners. It concluded that respondent-spouses had more right to possess the subject property
induce a reasonably prudent man to inquire into the status of the title of the property in pending consummation of the agreement or any outcome thereof. The petitioner moved for
litigation. To justify good faith in merely relying on the certificate of title, the following must reconsideration, but the CA denied the same. Hence, this petition.
be present: First, the seller is the registered owner of the land; second, the latter is in
possession thereof; and third, at the time of the sale, the buyer was not aware of any claim or ISSUE:
interest of some other person in the property, or of any defect or restriction in the title of the Whether the parties entered into a contract to sell.
seller or in his capacity to convey title to the property. Here, the land has always been
possessed by the petitioner, and not respondent Ramon Malabanan who sold it. Respondent RULING:
Dominador should have inquired about this before he purchased the property. Verifying the A contract to sell is defined as a bilateral contract whereby the prospective seller, while
status of the property would not have been difficult for a seasoned businessman like him, who expressly reserving the ownership of the subject property despite delivery thereof to the
incidentally lives in the same neighborhood where the property is located. The Petition for prospective buyer, binds himself to sell the said property exclusively to the latter upon his
Review for Certiorari was granted. fulfillment of the conditions agreed upon, i.e., the full payment of the purchase price and/or
compliance with the other obligations stated in the contract to sell. Given its contingent nature,
5. PABLO UY VS. HEIRS OF JULITA UY, G.R. NO. 227460, DECEMBER 5, 2019 the failure of the prospective buyer to make full payment and/or abide by his commitments
6. VILLAMIL VS. SPOUSES ERGUIZA, G. R. NO. 195999, JUNE 20, 2018 stated in the contract to sell prevents the obligation of the prospective seller to execute the
corresponding deed of sale to effect the transfer of ownership to the buyer from arising. A
DOCTRINE: contract to sell is akin to a conditional sale where the efficacy or obligatory force of the
A contract to sell is defined as a bilateral contract whereby the prospective seller, while vendor’s obligation to transfer title is subordinated to the happening of a future and uncertain
expressly reserving the ownership of the subject property despite delivery thereof to the event, so that if the suspensive condition does not take place, the parties would stand as if the
prospective buyer, binds himself to sell the said property exclusively to the latter upon his conditional obligation had never existed. In a contract to sell, the fulfillment of the suspensive
fulfillment of the conditions agreed upon, i.e., the full payment of the purchase price and/or condition will not automatically transfer ownership to the buyer although the property may
compliance with the other obligations stated in the contract to sell. Given its contingent nature, have been previously delivered to him. The prospective seller still has to convey title to the
the failure of the prospective buyer to make full payment and/or abide by his commitments prospective buyer by entering into a contract of absolute sale. On the other hand, in a
stated in the contract to sell prevents the obligation of the prospective seller to execute the conditional contract of sale, the fulfillment of the suspensive condition renders the sale
corresponding deed of sale to effect the transfer of ownership to the buyer from arising.
absolute and the previous delivery of the property has the effect of automatically transferring “even in residential properties the Act” recognizes and reaffirms the vendor’s right to cancel
the seller’s ownership or title to the property to the buyer. the contract to sell upon breach and nonpayment of the stipulated installments. …”

The law provides inter alia that “in all transactions or contracts involving the sale or financing
of real estate on installment payments, including residential condominium apartments, …,
In this case, an examination of the agreement would reveal that the parties entered into a where the buyer has paid at least two years of installments, the buyer is entitled to the
contract to sell the subject property. First, petitioner and her siblings who were then co-owners following rights in case he defaults in the payment of succeeding installments:
merely promised to sell the subject property, thus, signifying their intention to reserve
ownership. Second, the execution of a deed of absolute sale was made dependent upon the [Grace Period]
proper court’s approval of the sale of the shares of the minor owners. Third, the agreement (a) To pay, without additional interest, the unpaid installments due within the total grace
between the parties was not embodied in a deed of sale. The absence of a formal deed of period earned by him which is hereby fixed at the rate of one month grace period for every
conveyance is a strong indication that the parties did not intend immediate transfer of year of installment payments made: Provided, That this right shall be exercised by the buyer
ownership. Fourth, petitioner retained possession of the certificate of title of the lot. This is an only once in every five years of the life of the contract and its extensions, if any;
additional indication that the agreement did not transfer to private respondents, either by actual
or constructive delivery, ownership of the property. Finally, respondent Juanito admitted [Refund of “Cash Surrender Value”]
during trial that they have not finalized the sale in 1972 because there were minor owners such (b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of
that when they constructed their house thereon, they sought the permission of petitioner. the payments on the property equivalent to fifty percent of the total payments made and, after
five years of installments, an additional five per cent every year but not to exceed ninety per
Hence, inasmuch as the sellers allowed them to have the subject property in their possession cent of the total payments made; Provided, That the actual cancellation of the contract shall
pending the execution of a deed of sale, respondent-spouses are entitled to possession pending take place after thirty days from receipt by the buyer of the notice of cancellation or the
the outcome of the contract to sell. demand for rescission of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer.
7. LAYUG VS. IAC, 167 SCRA 627
In the case at bar, Layug had paid two (2) annual installments of P40,000.00 each. He is
FACTS: deemed therefore, in the words of the law, to have “paid at least two years of installments.” He
Involved in the appellate proceedings at bar is a contract for the purchase on installments by therefore had a grace period of “one month .. for every year of installment payments made,” or
Antonio Layug of twelve (12) lots owned by Rodrigo Gabuya, situated at Barrio Bara-as, two (2) months (corresponding to the two years of installments paid) from October 5, 1980
Iligan City. The contract, entered into on October 4, 1978, set the price for the lots at within which to pay the final installment.
P120,000.00 payable in three (3) yearly installments. The contract also provided for the
automatic cancellation of the contract and forfeiture of all installments thus far paid, which That he made no payment within this grace period is plain from the evidence. He has thus
would be considered as rentals for the use of the lots should the vendee fail to pay any of the been left only with the right to a refund of the “cash surrender value of the payments on the
yearly installments when due or otherwise fail to comply with any of the terms and conditions. property equivalent to fifty percent of the total payments made,” or P40,000.00 (i.e., ½ of the
total payments of P80,000.00). Such refund will be the operative act to make effective the
Layug paid the first two annual installments, totalling P80,000.00. But he failed to pay the last cancellation of the contract by Gabuya, conformably with the terms of the law.
installment of P40,000.00. Gabuya made several informal demands for payment; and when all
these proved unavailing, he made a formal written demand therefor. When this, too, went 8. ODYSSEY PARK INC. VS. CA, G.R. NO. 107992, OCTOBER 8, 1997
unheeded, Gabuya finally brought suit in the Court of First Instance of Lanao del Norte for the
annulment of his contract with Layug and for the recovery of damages. FACTS:
Bancom Development Corporation and Odyssey Park, Inc., entered into a Contract to Sell,
ISSUE: whereby the former agreed to sell to the latter the parcel of land with an area of 8,499 square
Whether Gabuya had the right to rescind the contact and should this happen, whether Layug is meters situated in Baguio City and the structure constructed thereon identified as the Europa
entitled to recover the entire amount he already paid. Clubhouse. Subsequently, in a document entitled “Separate Deed of Conveyance”, Bancom
confirmed and acknowledged that it has ceded, transferred and conveyed in favor of Union
RULING: Bank all the rights, title and interest it has over the property.
Gabuya can rescind the contract. Layug cannot recover the entire amount he already paid.R.A.
6552 governs sales of real estate on installments. It recognizes the vendor’s right to cancel The purchase price of P3,500,000.00 was, per Section 2 of the Contract to Sell, with the
such contracts upon failure of the vendee to comply with the terms of the sale, but imposes, agreement that Sec. 5:
chiefly for the latter’s protection, certain conditions thereon. We have had occasion to rule that
In the event Odyssey fails to pay any portion of the purchase price of the Property or the RULING:
interest and service charge thereon as and when it falls due, or otherwise fails to comply with Contract properly rescinded, RA 6552 does not apply. Unfortunately for petitioner, the
or violate any of the provisions of this Contract, Bancom may at its absolute discretion cancel invocation of Republic Act No. 6552 is misplaced. This law, which normally applies to the
and rescind this Contract and declare the same as null, void and no further force and effect by sale or financing of real estate on installment payments, excludes “industrial lots, commercial
serving on Odyssey a written notice of cancellation and rescission thirty (30) days in advance. buildings, and sales to tenants under R.A. No. 3844.” The appellate court has thus aptly said:

In the event this Contract is cancelled and rescinded as provided in this Section, all the “While the law applies to all transactions or contracts involving the sale or financing of real
amounts which the Odyssey may have paid to Bancom pursuant to and in accordance with this estate on installment payments, including residential condominium apartments, excluded are
Contract shall be forfeited in favor of Bancom as rentals for the use and occupancy of the industrial lots, commercial buildings and sales to tenants under R.A. 3844 as amended. The
Property and as penalty for the breach and violation of this Contract. property subject of the contract to sell is not a residential condominium apartment. Even on
the basis of the letter of Mr. Vicente A. Araneta, Exhibit E, the building is merely `part of
Furthermore, all the improvements which Odyssey may have introduced on the Property shall common areas and amenities under the Condominium concept of selling to the public’. The
form part thereof and belong to Bancom without right of reimbursements to Odyssey; property subject of the contract to sell is more of a commercial building.”
Provided, that Bancom may at its absolute discretion instead require Odyssey to remove such
improvements from the Property at expense of Odyssey. So, too, must Article 1592 of the Civil Code be held inapplicable. This law states:

Mr. Vicente A. Araneta, President of Europa Condominium Villas, Inc., wrote Union Bank, a “Art. 1592. In the sale of immovable property, even though it may have been stipulated that
letter stating that the Europa Center was reported to prospective buyers as well as government upon failure to pay the price at the time agreed upon the rescission of the contract shall of right
authorities as part of common areas and amenities under the condominium concept of selling take place, the vendee may pay; even after the expiration of the period, as long as no demand
to the public and for that reason wants to make it of record that Europa Condominium Villas, for rescission of the contract has been made upon him either judicially or by a notarial act.
Inc., questions the propriety of the contract to sell. After the demand, the court may not grant him a new term.”

Odyssey, through its Chairman of the Board, Mr. Carmelito A. Montano, wrote Bancom a It is clear that the above provisions contemplate neither a conditional sale nor a contract to sell
letter stating that it acknowledges receipt of a copy of the letter-protest from the Europa but an absolute sale.
Condominium Villas, Inc., and that in the meantime that there is a question on the propriety of
the sale, it is stopping/withholding payments of the amortization. On the same date Bancom, 9. MOLDEX REALTY VS. SABERON, G.R. NO. 176289, APRIL 8, 2013
through its Senior Vice-President, wrote Europa Condominium Villas, Inc. a letter explaining
that the Europa Center and the parcel of land on which it is built are not part of the Europa
Condominium Villas, Inc.Union Bank wrote Odyssey Park a letter demanding payment of the FACTS:
overdue account of inclusive of interest and service charges, otherwise the contract to sell Respondent Flora asked Moldex, to reserve the lot for her as shown by a Reservation
would be cancelled and rescinded. Odyssey wrote Union Bank a letter proposing a manner of Application. Flora opted to pay on installment and began making a periodical payments
settlement which Union Bank answered asking for more details of the proposal. Moldex sent Flora notices reminding her to update her account. Upon inquiry, however, Flora
was shocked to find out that as of July 1996, 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
The series of communications led to the drafting of a Memorandum of Agreement which was buyer and a written request for refund so that she can get half of all payments she made.
not, however, signed by the parties. Union Bank, through counsel, wrote Odyssey Park a letter
formally rescinding and/or cancelling the contract to sell and demanding that Odyssey vacate
and peaceably surrender possession of the premises.For failure of Odyssey to vacate, Union However, Flora never made a written request for refund. Moldex, then sent Flora a Notarized
Bank filed a case for illegal detainer and damages. Odyssey, on the other hand, filed this case Notice of Cancellation of Reservation Application and/or Contract to Sell. Flora, on the other
for “Declaration of the Nullity of the Rescission of the Contract to Sell With Damages” The hand, filed before the Housing and Land Use Regulatory Board (HLURB) Regional Field
lower court rendered that the Contract to Sell have been properly rescinded and dismissed the Office IV a Complaint for the annulment of the contract to sell, recovery of all her payments
complaint for being frivolous and unfounded which the CA affirmed. 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.
ISSUE:
Whether or not the rescission of the contract to sell by private respondent accords with the According to Flora, Moldex violated Section 5 of Presidential Decree (PD) No. 957 when it
requirements of Republic Act (“R.A.”) No. 6552, also known as “An Act to Protect Buyers of sold the subject lot to her on April 11, 1992 or before it was issued a license to sell on
Real Estate on Installment Payments” which, petitioner insists, requires a cancellation or September 8, 1992. Flora likewise claimed that Moldex violated Section 17 of the same law
rescission of the contract by means of a notarial act. because it failed to register the contract to sell in the Registry of Deeds. In its defense, Moldex
exercised its right under Republic Act (RA) No. 6552, or the Maceda Law, by cancelling the Deeds, in violation of Section 17 of PD 957. However, just like in Section 5 which did not
reservation Agreement/Contract to Sell and forfeiting all payments made. penalize the lack of a license to sell with the nullification of the contract, Section 17 similarly
did not mention that the developer’s or Moldex’s failure to register the contract to sell or deed
Finally, Moldex alleged that since Flora was at fault, the latter cannot be heard to make an of conveyance with the Register of Deeds resulted to the nullification or invalidity of the said
issue out of Moldex’s ; the HLURB Arbiter declared as void the Contract to Sell entered into contract or deed. Thus, non-registration of an instrument of conveyance will not affect the
by the parties because Moldex lacked the required license to sell at the time of the contract’s validity of a contract to sell. It will remain valid and effective between the parties thereto as
perfection, in violation of Section 5 of PD 957. Hence, Moldex was ordered to refund under PD 1529 or The Property Registration Decree, registration merely serves as a
everything Flora had paid, plus legal interest, and to pay attorney’s fees. Moreover, Moldex constructive notice to the whole world to bind third parties.
was ordered to pay a fine for its violation of the above provision of PD 957.
Under the Maceda Law, the defaulting buyer who has paid at least two years of installments
In its Petition for Review before the HLURB Board of Commissioners (HLURB Board), has the right of either to avail of the grace period to pay or, the cash surrender value of the
Moldex argued that the absence of license at the time of the contract’s perfection does not payments made.
render it void the HLURB Board, in a Decision dated July 29, 1999, dismissed the petition and
affirmed in toto the Arbiter’s Decision. It held that the law is clear on the prerequisite of a It is on record that Flora had already paid more than two years of installments (from March 11,
license to sell before a developer can sell lots. 1992 to July 19, 1996) in the aggregate amount of ₱375,295.49. Her last payment was made
on July 19, 1996. It is also shown that Flora has defaulted in her succeeding payments.
Since Moldex did not have a license to sell at the time it contracted to sell the subject lot to Thereafter, Moldex sent notices to Flora to update her account but to no avail. She could thus
Flora, the Board agreed with the Arbiter in declaring the contract invalid and in ordering the no longer avail of the option provided in Section 3(a) of the Maceda Law which is to pay her
refund of Flora’s payments. Moldex then appealed to the Office of the President (OP). The OP unpaid installments within the grace period. Besides, Moldex already sent Flora a Notarized
affirmed the finding that the contract to sell was a nullity. Moldex thus sought relief with the Notice of Cancellation of Reservation Application and/or Contract to Sell. Hence, the only
CA via a Petition for Review. the CA agreed with the findings of the tribunals. option available is Section 3(b) 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, or ₱187,647.75.33
It ratiocinated that Moldex’s non-observance of the mandatory provision of Section 5 of PD
957 rendered the contract to sell void, notwithstanding Flora’s payments and her knowledge
that Moldex did not at that time have the requisite license to sell. It also held that the WHEREFORE, the Petition is GRANTED. The contract to sell between petitioner Moldex
subsequent issuance by the HLURB of a license to sell in Moldex’s favor did not cure the Realty, Inc. and respondent Flora A. Saberon is declared CANCELLED and petitioner Moldex
defect or result to the ratification of the contract. Realty, Inc. is ordered to REFUND to respondent Flora A. Saberon the cash surrender value of
the amortizations she made equivalent to Pl87,647.75 pursuant to Section 3(b) of Republic Act
No. 6552 within 15 days from date of finality of this Decision.
ISSUE:
Moldex only raises the matter of the validity of the contract to sell it entered with Flora
contending that the same remains valid and binding. 10. FEDMAN DEVELOPMENT CORPORATION VS. AGCAOILI, G. R. NO.
165025; AUGUST 31, 2011
RULING:
A review of the relevant provisions of P.D. 957 reveals that while the law penalizes the selling FACTS:
of subdivision lots and condominium units without prior issuance of a Certificate of Petitioner was the owner and developer of a condominium project known as Fedman Suites
Registration and License to Sell by the HLURB, it does not provide that the absence thereof Building (FSB). Interchem Laboratories Incorporated (Interchem) purchased FSB’s Unit 411
will automatically render a contract, otherwise validly entered. With regard to P.D. 957, under a contract to sell. Thereafter, FDC executed a Master Deed with Declaration of
nothing therein provides for the nullification of a contract to sell in the event that the seller, at Restrictions, and formed the Fedman Suite Condominium Corporation (FSCC) to manage FSB
the time the contract was entered into, did not possess a certificate of registration and license and hold title over its common areas.
to sell. Absent any specific sanction pertaining to the violation of the questioned provisions
(Secs. 4 and 5), the general penalties provided in the law shall be applied. The general On October 10, 1980, Interchem, with FDC’s consent, transferred all its rights in Unit 411 to
penalties for the violation of any provisions in P.D. 957 are provided for in Sections 38 and respondent Federico Agcaoili, a practicing attorney who was then also a member of the
39. As it can clearly be seen in the aforequoted provisions, the same do not include the Provincial Board of Quezon Province. Not getting any immediate response, when the
nullification of contracts that are otherwise validly entered. Thus, the contract to sell entered centralized air-conditioning unit of FSB’s fourth floor broke down, respondent sent follow-up
into between Flora and Moldex remains valid despite the lack of license to sell on the part of letters to FSCC reiterating the demand, but the letters went unheeded. He then informed FDC
the latter at the time the contract was entered into. and FSCC that he was suspending the payment of his condominium dues and monthly
amortizations. FDC cancelled the contract to sell involving Unit 411 and cut off the electric
Moreover, Flora claims that the contract she entered into with Moldex is void because of the supply to the unit. Respondent was thus prompted to sue FDC and FSCC but the parties later
latter’s failure to register the contract to sell/document of conveyance with the Register of executed a compromise agreement.
Few months later, petitioner again disconnected the electric supply of Unit 411. Respondent 1. Obligations of a vendee
lodged a complaint for damages against FDC and FSCC. He alleged that the disconnection of 2. 3 instances where vendee is supposed to pay interest
the electric supply of Unit 411 on April 22, 1986 had unjustly deprived him of the use and 3. What is extrajudicial demand
enjoyment of the unit; that the disconnection had seriously affected his law practice and had 4. What is judicial demand
caused him sufferings, inconvenience and embarrassment; that petitioner and FSCC violated 5. In obligation to pay, can the buyer suspend the payment of the price
the compromise agreement; that he was entitled to actual damages as well as to moral and 6. Is right to examine subject to waiver
exemplary damages, and attorney’s fees as might be proven during the trial; that the payment 7. Delivery by installment has an agreement of fixed price, what happens if there is a
of interest sought by petitioner and FSCC under the contract to sell was illegal; and that breach
petitioner and FSCC were one and the same corporation. 8. Maceda law
9. Layug Case
On the other hand, petitioner contended that it had a personality separate from that of FSCC; 10. 1590
that it had no obligation or liability in favor of respondent and the latter failed to comply with 11. Arra Case
the terms of the contract to sell; that despite demands, respondent did not pay the 12. Laforteza Case
amortizations and the surcharges; that due to the non-payment, petitioner cancelled the 13. Vda mistica v naguiat
contract to sell and forfeited the amount paid by respondent, applying the amount to the 14.
payment of liquidated damages, agent’s commission, and interest; that it demanded that
respondent vacate Unit 411, but its demand was not heeded. The RTC rendered judgment in
favor of respondent which the CA affirmed. Hence, the petition.

ISSUE:
Whether the petitioner was justified when it rescinded the contract to sell.

RULING:
No. In the instant case, petitioner failed to show by evidence that it incurred loans and /or
other financial accommodations to pay interest for its loans in developing the property.

Thus, the increased interest rates it imposed on respondent was not justified, and to allow the
same is tantamount to unilaterally altering the terms of the contract which the law proscribes.
The contract must bind both contracting parties; its validity or compliance cannot be left to the
will of one of them.

For this reason, the Court sees no valid reason for petitioner to cancel the contract to sell on
ground of default or non-payment of monthly amortizations. It was also grave error on the part
of the petitioner to cancel the contract to sell for non-payment of the monthly amortizations
without taking into consideration Republic Act 6552, otherwise known as the Maceda Law.

The policy of 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.”

Thus, in order for petitioner to have validly cancelled the existing contract to sell, it must have
first complied with Section 3 (b) of RA 6552. Petitioner should have refund respondent the
cash surrender value of the payments on the property equivalent to fifty percent of the total
payments made.

QUESTIONS: