1. Santi vs.

Court of Appeals

227 SCRA 541

FACTS:

Esperanza Jose, a registered owner of a parcel of land, leased a portion of her property in Cavite to spouses
Eugenio Vitan and Beatriz Francisco for a period of 20 years automatically extended for another 20 years.
Spouses, in turn, sold all their rights and interest to Augusto Reyes where a new lease contract was entered
with Jose. In the interim, Jose sold all his rights to plaintiff Vicente Santi, with a rental of 20 years extendable
for another 20 years. After Reyes’ expiration of lease, plaintiff Santi wrote to Reyes’ heirs demanding recover
of possession. Defendants refused on the contention that there was automatic 20 years extension, and
tendered to plaintiff the payment which the latter refused to accept. Plaintiff filed a complaint against Reyes
which the trial court ruled in his favor. CA reversed the lower court’s decision.

ISSUE:

Whether the contract of lease contained automatic extension of lease

HELD:

NO. The phrase, “automatically extended” did not appear and was not used in the lease contract
subsequently entered by Jose and Reyes since the lessor did not want to be bound by the stipulation of
automatic extension as provided in the previous contract. It clearly shows that Jose did not intend to
automatically extend the lease contract but to ponder whether to do so. If the intention provided for an
automatic extension, they could have easily provided a 40 years contract instead to 20.

2. Rigor v. Consolidated Leasing G.R. No. 136423 August 20, 2002

PONENTE: Carpio, J.:

FACTS: Petitioners Efren and Zosima Rigor obtained a loan from private respondent Consolidated Orix
Leasing and Finance in the amount of P1, 630,320.00. Petitioners executed a promissory to pay the loan in
24 equal monthly installments of P67, 930.00 every fifth day of the month and failure to do so would render
the entire unpaid amount due and payable. To secure payment of the loan, petitioners executed in favor of
private respondent a deed of chattel mortgage over two dump trucks. When petitioners failed to pay several
installments despite demand from private respondent, the latter sought to foreclose the chattel mortgage
by filing a complaint for Replevin with Damages against petitioners. Petitioners moved to dismiss the
complaint on the ground of improper venue but denied by the trial court. CA affirmed the trial court’s
decision. Hence, this petition.

ISSUE: Whether or not the venue provision in the deed of chattel mortgage is a mere surplusage in the
principal contract.

HELD: NO. The chattel mortgage constituted over the two dump trucks is an accessory contract to the loan
obligation as embodied in the promissory note. The chattel mortgage cannot exist as an independent
contract since its consideration is the same as that of the principal contract. A principal obligation is an
indispensable condition for the existence of an accessory contract. Loans, sales or leases are classified as
principal contracts while pledges, mortgages and suretyships are classified as accessory contracts because
their existence is dependent upon the principal obligations they guarantee or secure. The promissory note
and the deed of chattel mortgage must be construed together. Private respondent explained that its older
standard promissory notes confined venue in Makati City where it had its main office. After it opened a
branch office in Dagupan City, private respondent made corrections in the deed of chattel mortgage, but
due to oversight, failed to make the corresponding corrections in the promissory notes. Petitioners affixed
their signatures in both contracts.

3. TOMAS K. CHUA vs. COURT OF APPEALS and ENCARNACION VALDES-CHOY

G.R. No. 119255
April 9, 2003

FACTS: Encarnacion Valdes-Choy advertised for sale her paraphernal house and lot in Makati. They agreed
on a purchase price of P10,800,000.00. Chua gave P100,000 to Valdes-Choy as earnest money They agreed
that the balance is payable on or before 15 July 1989. Failure to pay balance on or before the said date forfeits
the earnest money.
On July 13, 1989, Valdes-Choy as vendor and Chua as vendee signed two Deeds of Absolute Sale. The first
Deed of Sale covered the house and lot for the purchase price of P8,000,000.00. The second Deed of Sale
covered the furnishings, fixtures
andmovable properties contained in the house for the purchase price of P2,800,000.00. The parties also
computed the capital gains tax to amount to P485,000.00.
The next day, Valdes-Choy deposited the P485,000.00 manager's check to her account and check to the
counsel who undertook to pay the capitalgains tax. Chua showed to Valdes-
Choy a PBCom manager's check for P10,215,000.00 representing the balance of the purchase price. Chua,
however, did not give this PBCom manager's check to Valdes-Choy because the TCT was still
registered in the name of Valdes-Choy. Chua required that the Property be registered first in his name before
he would turn over the check to Valdes-Choy. This angered Valdes-Choy who tore up the Deeds of Sale,
claiming that what Chua required was not part of their agreement. Valdes-Choy demanded the payment of
the remaining purchase balance be first deposited in her account before she transfers the title of the
property to him.
Chua filed a complaint for specific performance against Valdes-Choy.
ISSUE: Can Chua (vendee) compel Valdes-Choy (vendor) to transfer the title of the property?
HELD:
NO. Chua’s condition that a new TCT should first be issued in his name, a found neither in the law nor in the
contract to sell as evidenced by the Receipt. Thus, at this point Chua was not ready, able and willing to pay
the full purchase price which is his obligation under the contract to sell. Chua was also not in a position to
assume the principal obligation of a vendee in a contract of sale, which is also to pay the full purchase price
at the agreed time. Article 1582 of the Civil Code provides that –
Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place
stipulated in the contract.
In this case, the contract to sell stipulated that Chua should pay the balance of the purchase price “on or
before 15 July 1989.” The signed Deeds of Sale also stipulated that the buyer shall pay the balance of the
purchase price upon signing of the deeds. However, on the agreed date, Chua refused to pay the balance of
the purchase price as required by the contract to sell, the signed Deeds of Sale, and Article 1582 of the Civil
Code. Chua was therefore in default and has only himself to blame for the rescission by Valdes-Choy of the
contract to sell.
Accordingly, since Chua refused to pay the consideration in full on the agreed date, which is a suspensive
condition, Chua cannot compel Valdes-Choy to consummate the sale of the Property. Chua acquired no
right to compel Valdes-Choy to transfer ownership of the Property to him.

4. RCBC vs. Court of Appeals

G.R. No. 133107, March 25, 1999
305 SCRA 449

FACTS:

Private respondent Atty. Felipe Lustre purchased a car from Toyota Shaw, Inc. for which he made a down
payment, the balance of which is to be paid in 24 equal monthly installments. He then issued 24 postdated checks in
the amount due for every month. To secure the balance, private respondent executed a promissory note and a
contract of Chattle Mortgage over the vehicle in favor of Toyota Shaw. The contract of Chattle Mortgage provided
for an acceleration clause stating that if there be default on the part of the mortgagor to pay any of the installments,
the whole amount remaining shall become due.

Toyota Shaw then assigned all its rights and interest in the Chattle Mortgage to petitioner Rizal Commercial
Banking Corporation (RCBC). The problem arose when one check was not signed by the private respondent. On the
theory that the respondent defaulted in his payments, petitioner demanded the payment of the debt including
liquidated damages. Atty. Lustre refused, prompting RCBC to file an action for replevin and damages before the
Regional Trial Court of Pasay City.

After trial, the RTC rendered a decision in favor of the private respondent, and held that he was not in default.
The Court of Appeals affirmed the decision of the lower court.

ISSUE:

Whether or not private respondent should be held in default.

HELD:

Article 1170 of the Civil Code states that “those who in the performance of their obligation are guilty
of delay are liable for damages.” The delay in the performance must be malicious or negligent. There was no
imputation, much less evidence, that private respondent acted with malice or negligence in failing to sign the check.
The Supreme Court agreed with the Court of Appeals that such omission was mere inadvertence on the part of private
respondent.
5. Gacos v. Court of Appeals
August 3, 1992
Medialdea, J.
Facts:
Eladio Gacos owned unregistered land measuring 6,548 m2. When he was ill during 1935 or 1936, he
verbally adjudicated to his three daughters (Petrona, Fortunata, Lucia) their respective inheritance shares
by dividing the property lines from east to west and assigned the northernmost to Fortunata, the middle to
Lucia, and the southernmost to Petrona. Petrona immediately took possession and occupied her share while
her sisters only did so after their father died in 1937.
In 1948, Petrona Gacos offered to sell to Marcial Olaybal (her nephew-in-law, Fortunata’s son-in-law)
part of her share. The transaction was consummated in a document Escritura Venta Absoluta describing
therein the land inherited by Petrona Gacos as containing an area of 2,720 m2. Marcial Olaybal immediately
took possession of the land and declared it in his name under Tax Declaration No. 5487, indicating therein
an area of 866 m2.
In 1949, Petrona Gacos died and was survived by her minor children Leonora, Solomon, Constantino,
and Benjamin, all surnamed Briones. Before her death, Petrona Gacos instructed her sister Lucia, who
administered her remaining property, to sell the small area on the east for funeral expenses and novena.
Lucia sold aforementioned area (84 m2) to Teodolfo Mendones, who took possession of the land and
declared the same in his name.
In May 1950, Lucia Gacos on her own behalf and in representation of Petrona Gacos, and Jose Cambal,
in behalf of his dead mother, Fortunata Gacos, executed an Agreement of Partition of Real Property,
formally confirming what was apportioned to them by their father as their respective shares in the 6,854 m 2
land.
On or about December 1950, Marcial Olaybal offered to sell to Encarnacion Gacos the parcel of land
he bought from Petrona Gacos. When the sale was consummated, the name Rosario Gacos (Encarnacion’s
sister) appeared as the vendee. The property sold was described as containing an area of 2,025 m 2. Rosario
Gacos took possession of the land and registered the deed of absolute sale and declared the same in her
name.
In 1967, Rosario Gacos executed a document captioned “Ratification of Ownership of Realty”
consolidating into one parcel of land for taxation purposes the four small adjoining parcels of land. In 1973,
Rosario Gacos sold the contiguous land to her nephew, Arnulfo Prieto (son of Encarnacion). Arnulfo Prieto
took possession of the land and declared the same in his name. In March 1975, Arnulfo Prieto entered into a
lease contract with his sister Vivencia Prieto, allowing her to use the land for her own purposes. Vivencia
Prieto then constructed a rice mill.
In August 1975, the children of Petrona Gacos (Leonora, Solomon, Constantino, Benjamin) executed
a Deed of Extra-Judicial Settlement adjudicating onto themselves the 1/3 undivided portion of the 2,242 m 2
of their mother’s share of inheritance after Leonora was informed in 1972 by Lucia Gacos that a portion of
the land had been sold to Encarnacion Gacos even though Rosario Gacos appeared in the deed of sale as the
vendee, and that a rice mill had been constructed.
Civil Case No. 1008
 The children of Petrona Gacos (all surnamed Briones) filed a complaint in the CFI of Sorsogon seeking
to recover the 1,352 m2 land from defendants Rosario Gacos and Arnulfo Prieto, alleged to be the remnant
of the 2,242 m2 land Petrona Gacos inherited from her father after she sold a portion to Marcial Olaybal. They
allege that Rosario Gacos had no lawful authority to sell the land to Arnulfo Prieto, who despite demands
made, refused to return the same to the Brioneses.
Defendants allege that what Petrona sold to Marcial Olaybal wasn’t a portion of her land, but the
entire thing. Thus, there is no remnant. They also contend that since plaintiffs are no longer owners of the
land in dispute since 1948, they have no legal right to intervene in the execution of the said Ratification of
Ownership by Rosario Gacos; that because of the continued possession for 27 years of the land by Arnulfo
Prieto and that of his predecessor-in-interest Rosario Gacos, whatever rights plaintiffs had have already been
barred by acquisitive prescription.
Civil Case No. 1049
Spouses Arnulfo Prieto and Renita Chua Prieto filed a complaint with the CFI of Sorsogon seeking to
recover from Teodolfo Mendones and Visitaction Borrega and spouses Jesus and Merced Gabitos the 84 m2
portion of the hereditary share of Petrona Gacos which, according to plaintiffs, such hereditary portion was
entirely sold to Marcial Olaybal. They claimed that the eastern portion was fraudulently and without
authority sold by Lucia Gacos to Teodolfo Mendones who sold it to spouses Gabitos who then constructed
a residential house that blocked from public view the Prieto Rice Mill and damaged their business.
Defendants counter that Marcial Olaybal couldn’t have sold the entirety of the hereditary estate
because what was sold was 866 m 2 of the total area of 2,242 m2; that the Mendoneses acquired that 84 m2
portion in good faith and for value; that the Mendoneses have the right to legally sell the same to the
Gabitos; that the Gabitos have the right to the exercise of their right of dominion over the lot by building a
house thereon.
CFI of Sorsogon rendered the decision in Civil Case No. 1008 that the Brioneses were the owners of
the 1,292 m2 portion of the land in dispute, and in Civil Case No. 1049 that the Gabitos were the owners and
entitled to the possession of the land in question. The Prietos appealed to the Court of Appeals, which
affirmed the CFI’s decision. The motion for reconsideration was denied, hence the instant petition.
Issue/s:
- Whether or not Petrona Gacos sold her entire property to Marcial Olaybal. (No)

Ruling/Ratio:
In disputing the findings of the Court of Appeals, petitioners argued that the Escritura Venta Absoluta
between Petrona Gacos and Marcial Olaybal clearly indicate that the property conveyed is the entire lot.
They contend that in delineating the boundaries of the property sold, the boundaries indicated in the deed
of sale as enclosing the land and indicating its limits put its identification beyond doubt and not the area
mentioned in its description.
The argument would have merit if the boundaries of the land claimed by petitioners to have been
sold to them in its entirety were certain and definite. This is not true in the instant case—the boundaries
given don’t coincide with the boundaries described in the Deed of Absolute Sale between Marcial Olaybal
and Rosario Gacos. They don’t even coincide with the boundaries of Petrona Gacos’ hereditary share.
 The boundaries described in the Escritura Venta Absoluta are vague. The variance in the boundaries
and the statement of the area (a difference of 1,159 m2) put to doubt the identity of the land sold by Petrona
Gacos to Marcial Olaybal. The rule thus enunciated in the cases cited by petitioners doesn’t apply. Neither
does the exception to the rule that area prevails when the boundaries relied upon don’t identify the land
beyond doubt apply in the instant case.
Recourse by the trial court therefore to other proofs was warranted under the rules on
interpretation of written agreements under Rule 130, Section 7, paragraph (a) in relation to Article 137 of
the Civil Code.
The Court of Appeals correctly relied on Tax Declaration No. 5487 which Marcial Olaybal himself
executed where he declared that the land in dispute had an area of 866 m 2 as well as the “sketch plan” and
the “field sheet” specifying the area of 866 m2 in both documents, submitted by Marcial Olaybal. The Court
of Appeals also relied on Marcial Olaybal’s testimony during the trial that he bought only 866 m2 from
Petrona Gacos (admission of a party to a relevant fact under Rule 130, Section 22 of the Rules of Court).

The boundaries stated in the Deed of Absolute Sale between Marcial Olaybal and Rosario Gacos
indicates that to the west of the area were the heirs of Petrona Gacos, which clearly indicates that Petrona
Gacos didn’t sell her entire share to Marcial Olaybal, neither did he sell the entire property to Rosario Gacos
for he can’t sell what he doesn’t own.
Petitioners also claimed that the sale of the disputed land is a sale for “lump sum,” not at the rate
per unit under Article 1542 of the Civil Code where the vendor “shall be bound to deliver all that is included
within said boundaries, even when it exceeds the area or number specified in the contract.”
The Supreme Court finds Articles 1372 and 1378 of the New Civil Code more applicable.
Art. 1372. However general the terms of a contract may be, they shall not be
understood to comprehend things that are distinct and cases that are different from
those upon which the parties intended to agree. (1283)
Art. 1378. When it is absolutely impossible to settle doubts by the rules established in
the preceding articles, and the doubts refer to incidental circumstances of a gratuitous
contract, the least transmission of rights and interests shall prevail. If the contract is
onerous, the doubt shall be settled in favor of the greatest reciprocity of interests.
If the doubts are cast upon the principal object of the contract in such a way that it
cannot be known what may have been the intention or will of the parties, the contract
shall be null and void. (1289)
The Escritura Venta Absoluta was consummated in favor of a close relative. Thus, in accordance
with Article 1378, said contract should be interpreted as “to effect the least possible transmission of rights
or interests.” Petrona couldn’t have sold her entire property since she and her children were staying on it
with her sister Lucia.
Petitioners argue that their continual possession in good faith and in the concept of an owner with a
just title for 27 years ripened into ownership by acquisitive prescription. Possession to constitute the
foundation of a prescriptive right must be possession under claim of title or it must be adverse. Acts of
possessory character performed by one who holds by mere tolerance of the owner are clearly not
possession under claim of title and don’t start the running of the period of prescription.
 Possession of petitioners’ predecessors-in-interest of the unsold portion can’t be characterized as
adverse possession in good faith. Rosario Gacos knew and recognized the sale by Lucia Gacos to Teodolfo
Mendones of the eastern portion. Petitioners never raised any objection on the exercise of Teodolfo of his
dominical rights over the said eastern portion.

6. Bentir v Leanda
GR 128991 April 12, 2000

Facts:

On May 15, 1992, respondent Leyte Gulf Traders, Inc. (herein referred to as respondent corporation) filed a complaint for
reformation of instrument, specific performance, annulment of conditional sale and damages with prayer for writ of injunction
against petitioners Yolanda Rosello-Bentir and the spouses Samuel and Charito Pormida. Respondent corporation alleged that it
entered into a contract of lease of a parcel of land with petitioner Bentir for a period of twenty (20) years starting May 5, 1968.
According to respondent corporation, the lease was extended for another four (4) years or until May 31, 1992. On May 5, 1989,
petitioner Bentir sold the leased premises to petitioner spouses Samuel Pormada and Charito Pormada.

Respondent corporation questioned the sale alleging that it had a right of first refusal. Rebuffed, it filed Civil Case No. 92-05-88
seeking the reformation of the expired contract of lease on the ground that its lawyer inadvertently omitted to incorporate in the
contract of lease executed in 1968, the verbal agreement or understanding between the parties that in the event petitioner Bentir
leases or sells the lot after the expiration of the lease, respondent corporation has the right to equal the highest offer.

Issue:

Whether the complaint for reformation filed by respondent Leyte Gulf Traders, Inc. has prescribed

Whether it is entitled to the remedy of reformation sought

Held:

The remedy of reformation of an instrument is grounded on the principle of equity where, in order to express the true intention
of the contracting parties, an instrument already executed is allowed by law to be reformed. The right of reformation is necessarily
an invasion or limitation of the parol evidence rule since, when a writing is reformed, the result is that an oral agreement is by
court decree made legally effective. The remedy, being an extraordinary one, must be subject to limitations as may be provided
by law. Our law and jurisprudence set such limitations, among which is laches.

A suit for reformation of an instrument may be barred by lapse of time. The prescriptive period for actions based upon a written
contract and for reformation of an instrument is ten (10) years under Article 1144 of the Civil Code. Prescription is intended to
suppress stale and fraudulent claims arising from transactions like the one at bar which facts had become so obscure from the
lapse of time or defective memory. In the case at bar, respondent corporation had ten (10) years from 1968, the time when the
contract of lease was executed, to file an action for reformation. Sadly, it did so only on May 15, 1992 or twenty-four (24) years
after the cause of action accrued, hence, its cause of action has become stale, hence, time-barred.

The prescriptive period of ten (10) years provided for in Art. 1144 applies by operation of law, not by the will of the parties.
Therefore, the right of action for reformation accrued from the date of execution of the contract of lease in 1968.

Prescription; Reformation of an instrument is that remedy in equity by means of which a written instrument is made or construed
so as to express or conform to the real intention of the parties when some error or mistake has been committed. It is predicated
on the equitable maxim that equity treats as done that which ought to be done. The rationale of the doctrine is that it would be
unjust and unequitable to allow the enforcement of a written instrument which does not reflect or disclose the real meeting of
the minds of the parties. However, an action for reformation must be brought within the period prescribed by law, otherwise, it
will be barred by the mere lapse of time.

7. PROCESO QUIROS and LEONARDA VILLEGAS vs. MARCELO ARJONA, TERESITA BALARBAR, JOSEPHINE ARJONA,
and CONCHITA ARJONA
G.R. No. 158901. 9 March 2004.
Petition for review of the decision of the CA
Ynares-Santiago, J.:

Facts: In Dec 1996, petitioners Proceso Quiros and Leonarda Villegas filed with the office of the barangay captain of
Labney, San Jacinto, Pangasinan, a complaint for recovery of ownership and possession of a parcel of land located at
Labney, San Jacinto, Pangasinan. Petitioners sought to recover from their uncle Marcelo Arjona, one of the
respondents herein, their lawful share of the inheritance from their late grandmother Rosa Arjona Quiros alias Doza.
In 1997, an amicable settlement was reached between the parties. By reason thereof, respondent Arjona executed a
document denominated as "PAKNAAN" ("Agreement", in Pangasinan dialect).
Petitioners filed a complaint with the MCTC with prayer for the issuance of a writ of execution of the compromise
agreement which was denied because the subject property cannot be determined with certainty. The RTC reversed
the decision of the municipal court on appeal and ordered the issuance of the writ of execution. Respondents
appealed to the CA, which reversed the decision of the RTC and reinstated the decision of the MCTC.

Issue: WON CA erred in reversing the decision of the RTC and reinstating that of the MCTC.

Ruling: Petition denied.

Generally, the rule is that where no repudiation was made during the 10-day period, the amicable settlement attains
the status of finality and it becomes the ministerial duty of the court to implement and enforce it. However, such rule
is not inflexible for it admits of certain exceptions. In the case at bar, the ends of justice would be frustrated if a writ
of execution is issued considering the uncertainty of the object of the agreement. To do so would open the possibility
of error and future litigations.
Both parties acknowledge that petitioners are entitled to their inheritance, hence, the remedy of nullification, which
invalidates the Paknaan, would prejudice petitioners and deprive them of their just share of the inheritance.
Respondent cannot, as an afterthought, be allowed to renege on his legal obligation to transfer the property to its
rightful heirs. A refusal to reform the Paknaan under such circumstances would have the effect of penalizing one party
for negligent conduct, and at the same time permitting the other party to escape the consequences of his negligence
and profit thereby. No person shall be unjustly enriched at the expense of another.

RITA SARMING, et. al vs. CRESENCIO DY, et al

G.R. No. 133643 June 6, 2002

Facts:
Valentina Unto Flores, who owned, among others, Lot 5734, covered by OCT 4918-A;
and Lot 4163. After the death of Valentina, her three children, namely: Jose, Venancio, and
Silveria, took possession of Lot 5734 with each occupying a one-third portion. Upon their
death, their children and grandchildren took possession of their respective shares. The other
parcel, Lot 4163 which is solely registered under the name of Silveria, was sub-divided
between Silveria and Jose. Two rows of coconut trees planted in the middle of this lot serves
as boundary line.
The grandchildren of Jose and now owners of one-half of Lot 4163, entered into a
contract with plaintiff Alejandra Delfino, for the sale of one-half share of Lot 4163 after
offering the same to their co-owner, Silveria, who declined for lack of money. Silveria did not
object to the sale of said portion to Alejandra Delfino.
The late Atty. Pinili, Alejandra's lawyer, called Silveria and the heirs of Venancio to a
conference where Silveria declared that she owned half of the lot while the other half belonged
to the vendors; and that she was selling her three coconut trees found in the half portion
offered to Alejandra Delfino for P15. When Pinili asked for the title of the land, Silveria Flores,
through her daughter, Cristita Corsame, delivered Original Certificate of Title No. 4918-A,
covering Lot No. 5734, and not the correct title covering Lot 4163. At that time, the parties
knew the location of Lot 4163 but not the OCT Number corresponding to said lot.
 Believing that OCT No. 4918-A was the correct title corresponding to Lot 4163, Pinili
prepared a notarized Settlement of Estate and Sale (hereinafter "deed") duly signed by the
parties. As a result, OCT No. 4918-A was cancelled and in lieu thereof, TCT No. 5078 was
issued in the names of Silveria Flores and Alejandra Delfino, with one-half share each.
Silveria Flores was present during the preparation and signing of the deed and she stated
that the title presented covered Lot No. 4163. Alejandra Delfino immediately took possession
and introduced improvements on the purchased lot, which was actually one-half of Lot 4163
instead of Lot 5734 as designated in the deed.
Two years later, when Alejandra Delfino purchased the adjoining portion of the lot she
had been occupying, she discovered that what was designated in the deed, Lot 5734, was the
wrong lot. She sought the assistance of Pinili who approached Silveria and together they
inquired from the Registry of Deeds about the status of Lot 4163. They found out that OCT
No. 3129-A covering Lot 4163 was still on file. Alejandra Delfino paid the necessary fees so
that the title to Lot 4163 could be released to Silveria Flores, who promised to turn it over to
Pinili for the reformation of the deed of sale. However, despite repeated demands, Silveria did
not do so, prompting Alejandra and the vendors to file a complaint against Silveria for
reformation of the deed of sale.

Issue:
Whether or not a reformation of the contract can take place

Ruling:
The Supreme Court Held that reformation is that remedy in equity by means of which
a written instrument is made or construed so as to express or conform to the real intention
of the parties. As provided in Article 1359 of the Civil Code:
Art. 1359. When, there having been a meeting of the minds of the parties to a contract,
their true intention is not expressed in the instrument purporting to embody the agreement
by reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for
the reformation of the instrument to the end that such true intention may be expressed.
If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the
minds of the parties, the proper remedy is not reformation of the instrument but annulment
of the contract.
An action for reformation of instrument under this provision of law may prosper only
upon the concurrence of the following requisites: (1) there must have been a meeting of the
minds of the parties to the contact; (2) the instrument does not express the true intention of
the parties; and (3) the failure of the instrument to express the true intention of the parties
is due to mistake, fraud, inequitable conduct or accident.

All of these requisites, in our view, are present in this case. There was a meeting of the
minds between the parties to the contract but the deed did not express the true intention of
the parties due to mistake in the designation of the lot subject of the deed. There is no dispute
as to the intention of the parties to sell the land to Alejandra Delfino but there was a mistake
as to the designation of the lot intended to be sold as stated in the Settlement of Estate and
Sale.

9. SPS. FELIPE AND LETICIA CANNU versus SPS. GIL AND FERNANDINA GALANG AND NATIONAL HOME MORTGAGE
FINANCE CORPORATION

G.R. No. 139523, 2005 May 26

FACTS:

Respondents-spouses Gil and Fernandina Galang obtained a loan from Fortune Savings & Loan
Association for P173,800.00 to purchase a house and lot located at Pulang Lupa, Las Piñas, in the names of
respondents-spouses. To secure payment, a real estate mortgage was constituted on the said house and lot in favor
of Fortune Savings & Loan Association. In early 1990, NHMFC purchased the mortgage loan of respondents-spouses
from Fortune Savings & Loan Association for P173,800.00. Petitioner Leticia Cannu agreed to buy the property for
P120,000.00 and to assume the balance of the mortgage obligations with the NHMFC and with CERF Realty (the
Developer of the property).

A Deed of Sale with Assumption of Mortgage Obligation dated 20 August 1990 was made and entered
into by and between spouses Fernandina and Gil Galang (vendors) and spouses Leticia and Felipe Cannu (vendees)
over the house and lot and petitioners immediately took possession and occupied the house and lot. However, despite
requests from Adelina R. Timbang and Fernandina Galang to pay the balance of P45,000.00 or in the alternative to
vacate the property in question, petitioners refused to do so. Because the Cannus failed to fully comply with their
obligations, respondent Fernandina Galang, on 21 May 1993, paid P233,957.64 as full payment of her remaining
mortgage loan with NHMFC.

From 1991 until the present, no other payments were made by plaintiffs-appellants to defendants-
appellees spouses Galang. Out of the P250,000.00 purchase price which was supposed to be paid on the day of the
execution of contract in July, 1990 plaintiffs-appellants have paid, in the span of eight (8) years, from 1990 to present,
the amount of only P75,000.00. Plaintiffs-appellants should have paid the P250,000.00 at the time of the execution
of contract in 1990. Eight (8) years have already lapsed and plaintiffs-appellants have not yet complied with their
obligation.

ISSUE:

Whether or not the action for rescission was subsidiary, and that there was a substantial breach of the
obligation.

RULING:

Rescission or, more accurately, resolution, of a party to an obligation under Article 1191 is predicated
on a breach of faith by the other party that violates the reciprocity between them. Art. 1191 states that the power to
rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent
upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment
of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should
become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of
a period.

Rescission will not be permitted for a slight or casual breach of the contract. Rescission may be had only
for such breaches that are substantial and fundamental as to defeat the object of the parties in making the agreement.
The question of whether a breach of contract is substantial depends upon the attending circumstances and not merely
on the percentage of the amount not paid.Thus, the petitioners’ failure to pay the remaining balance of P45,000.00 is
substantial. Even assuming arguendo that only said amount was left out of the supposed consideration of
P250,000.00, or eighteen percent thereof, this percentage is still substantial. Their failure to fulfill their obligation gave
the respondents-spouses Galang the right to rescission.

10. EQUATORIAL REALTY DEVELOPMENT, Inc. vs. MAYFAIR THEATER, Inc.,

G.R. No. 133879 2001 Nov 21
FACTS:

Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of land, together with two 2-storey buildings
constructed thereon, located at Claro M. Recto Avenue, Manila, and covered by TCT No. 18529 issued in its name by
the Register of Deeds of Manila. On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater Inc.
(Mayfair) for a period of 20 years. Two years later, on March 31, 1969, Mayfair entered into a second Contract of Lease
with Carmelo for the lease of another portion of the latter’s property -- namely, a part of the second floor of the two-
storey building, and two store spaces on the ground floor and the mezzanine. In that space, Mayfair put up another
movie house known as Miramar Theater. The Contract of Lease was likewise for a period of 20 years. Both leases
contained a provision granting Mayfair a right of first refusal to purchase the subject properties. However, on July 30,
1978 - within the 20-year-lease term -- the subject properties were sold by Carmelo to Equatorial Realty Development,
Inc. (“Equatorial”) for the total sum of P11,300,000, without their first being offered to Mayfair.

As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint before the Regional
Trial Court of Manila for the annulment of the Deed of Absolute Sale between Carmelo and Equatorial, specific
performance, and damages. After trial on the merits, the lower court rendered a Decision in favor of Carmelo and
Equatorial. On appeal CA completely reversed and set aside the judgment of the lower court. The decision of the Court
became final and executory on March 17, 1997. On April 25, 1997, Mayfair filed a Motion for Execution, which the trial
court granted. However, Carmelo could no longer be located. Thus, following the order of execution of the trial court,
Mayfair deposited with the clerk of court a quo its payment to Carmelo in the sum of P11,300,000 less P847,000 as
withholding tax. The lower court issued a Deed of Reconveyance in favor of Carmelo and a Deed of Sale in favor of
Mayfair. On the basis of these documents, the Registry of Deeds of Manila cancelled Equatorial’s titles and issued
new Certificates of Title in the name of Mayfair.

ISSUES:

1. Whether or not the contract of sale is validly rescinded though there was no actual delivery made.

2. Whether or not the rentals paid concede actual delivery.

RULING:

A contract of sale is valid until rescinded, and ownership of the thing sold is not acquired by mere agreement,
but by tradition or delivery. In the case, it shows that delivery was not actually effected; in fact, it was prevented by a
legally effective impediment. Not having been the owner, petitioner cannot be entitled to the civil fruits of ownership
like rentals of the thing sold. Furthermore, petitioner’s bad faith, as again demonstrated by the specific factual milieu
of said Decision, bars the grant of such benefits.

In this case, it is clear that petitioner never took actual control and possession of the property sold, in view of
respondent’s timely objection to the sale and the continued actual possession of the property. The objection took
the form of a court action impugning the sale which, as we know, was rescinded by a judgment rendered by this Court
in the mother case. It has been held that the execution of a contract of sale as a form of constructive delivery is a legal
fiction. It holds true only when there is no impediment that may prevent the passing of the property from the hands
of the vendor into those of the vendee. When there is such impediment, “fiction yields to reality - the delivery has not
been effected.” Hence, respondent’s opposition to the transfer of the property by way of sale to Equatorial was a
legally sufficient impediment that effectively prevented the passing of the property into the latter’s hands.

11. ADELFA S. RIVERA V. FIDELA DEL ROSARIO

G.R. No. 144934. January 15, 2004

FACTS:

Mariano Rivera and to secure the loan, she and Mariano Rivera agreed to execute a deed of REM and an
agreement to sell the land. Mariano went to his lawyer to have 3 documents drafted: the Deed of REM, a
Kasunduan (Agreement to Sell), and a Deed of Absolute Sale.

for a consideration of P2M, to be paid in 3 installments. It also provided that the Deed of Absolute Sale would
be executed only after the 2nd installment is paid and a postdated check for the last installment is deposited
with Fidela.

and her son Oscar, so that the latter two may sign the mortgage and the Kasunduan there. Although Fidela
intended to sign only the Kasunduan and the REM, she inadvertently affixed her signature on all 3
documents. Mariano then gave Fidela the amount for the 1st installment. Later, he also gave Fidela a check
for the 2nd installment. Mariano also gave Oscar several amounts upon the latter’s demand for the payment
of the balance despite his lack of authority to receive payments under the Kasunduan. Fidela entrusted the
owner’s copy of TCT to Mariano to guarantee compliance with the Kasunduan.

Affidavit of Loss of the owner’s duplicate copy of the title. However, Mariano then registered the Deed of
Absolute Sale and got a new TCT.

comply with its conditions, with damages. They also sought the annulment of the Deed of Absolute Sale on
the ground of fraud.

ents claimed that Fidela never intended to enter into a deed of sale at the time of its execution
and that she signed the said deed on the mistaken belief that she was merely signing copies of the
Kasunduan.

ISSUE: WON the Deed of Absolute Sale is valid and binding?

HELD: NO. The deed is void in its entirety.

Rescission of reciprocal obligations under Article 1191 of the New Civil Code should be distinguished from
rescission of contracts under Article 1383 of the same Code. Both presuppose contracts validly entered into
as well as subsisting, and both require mutual restitution when proper, nevertheless they are not entirely
identical. While Article 1191 uses the term rescission, the original term used in Article 1124 of the old Civil
Code, from which Article 1191 was based, was resolution. Resolution is a principal action that is based on
breach of a party, while rescission under Article 1383 is a subsidiary action limited to cases of rescission for
lesion under Article 1381 of the New Civil Code. Obviously, the Kasunduan does not fall under any of those
situations mentioned in Article 1381. Consequently, Article 1383 is inapplicable. Hence, we rule in favor of the
respondents. May the contract entered into between the parties, however, be rescinded based on Article
1191? A careful reading of the Kasunduan reveals that it is in the nature of a contract to sell, as distinguished
from a contract of sale. In a contract of sale, the title to the property passes to the vendee upon the delivery
of the thing sold; while in a contract to sell, ownership is, by agreement, reserved in the vendor and is not
to pass to the vendee until full payment of the purchase price. In a contract to sell, 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 in this case bound themselves to deliver a deed of absolute sale and clean title covering Lot
No. 1083-C after petitioners have made the second installment. This promise to sell was subject to the
fulfillment of the suspensive condition that petitioners pay P750,000 on August 31, 1987, and deposit a
postdated check for the third installment of P1M. Petitioners, however, failed to complete payment of the
second installment. The non-fulfillment of the condition rendered the contract to sell ineffective and without
force and effect. It must be stressed 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. Failure to pay, in this instance, is not even a breach but an event that prevents the vendor’s
obligation to convey title from acquiring binding force. Hence, the agreement of the parties in the instant
case may be set aside, but not because of a breach on the part of petitioners for failure to complete payment
of the second installment. Rather, their failure to do so prevented the obligation of respondents to convey
title from acquiring an obligatory force. Coming now to the matter of prescription. Contrary to petitioners’
assertion, we find that prescription has not yet set in. Article 1391 states that the action for annulment of
void contracts shall be brought within four years. This period shall begin from the time the fraud or mistake
is discovered. Here, the fraud was discovered in 1992 and the complaint filed in 1993. Thus, the case is well
within the prescriptive period.

12. China Banking Corporation v. Court of Appeals327 SCRA 378

Facts:

Alfonso Roxas Chua and his wife Kiang Ming Chu Chua were the owners of a residentialland in San Juan,
Metro Manila, covered by Transfer Certificate of Title No. 410603. On June19, 1985, petitioner China Bank
filed with the Regional Trial Court of Manila, Branch 29, anaction for collection of sum of money against
Pacific Multi Agro-Industrial Corporation andAlfonso Chua which was docketed as Civil Case No. 85-31257.
On November 7, 1985, the trialcourt promulgated its decision in Civil Case No. 85-31257 in favor of China
BankingCorporation.On November 21, 1988, Alfonso Roxas Chua executed a public instrumentdenominated
as "Assignment of Rights to Redeem," whereby he assigned his rights to redeemthe one-half undivided
portion of the property to his son, private respondent Paulino RoxasChua. Paulino redeemed said one-half
share on the very same day. On the other hand, inconnection with Civil Case No. 85-31257, another notice of
levy on execution was issued onFebruary 4, 1991 by the Deputy Sheriff of Manila against the right and
interest of Alfonso RoxasChua in TCT 410603. Thereafter, a certificate of sale on execution dated April 13,
1992 wasissued by the Sheriff of Branch 39, RTC Manila in Civil Case No. 85-31257, in favor of ChinaBank and
inscribed at the back of TCT 410603 as Entry No. 01896 on May 4, 1992. On May 20,1993, Paulino Roxas Chua
and Kiang Ming Chu Chua instituted Civil Case No. 63199 before theRTC of Pasig, Metro Manila against China
Bank, averring that Paulino has a prior and better right over the rights, title, interest and participation of
China Banking Corporation in TCT410603. The trial court rendered a decision on July 15, 1994 in favor of
private respondentPaulino Roxas Chua.:On appeal, the Court of Appeals affirmed the ruling of the trial court.

Issue:

Whether or not the assignment of the right of redemption made by Alfonso Roxas Chuain favor of private
respondent Paulino was done to defraud his creditors and may be rescindedunder Article 1387 of the Civil
Code.

Held:
Existence of fraud or intent to defraud creditors may either be presumed in accordancewith Article 1387 of
the Civil Code or duly proved as the case may be.After his conjugal share inTCT 410603 was foreclosed by
Metrobank, the only property that Alfonso Roxas Chua had washis right to redeem the same, it forming part
of his patrimony. "Property" under civil lawcomprehends every species of title, inchoate or complete, legal
or equitable. In the case at bar,the presumption that the conveyance is fraudulent has not been overcome.
At the time a judgment was rendered in favor of China Bank against Alfonso and the corporation, Paulino
wasstill living with his parents in the subject property. Paulino himself admitted that he knew hisfather was
heavily indebted and could not afford to pay his debts. The transfer was undoubtedlymade between father
and son at a time when the father was insolvent and had no other propertyto pay off his creditors. Hence,
it is of no consequence whether or not Paulino had given valuableconsideration for the conveyance. Petition
is granted.

13. MR Holdings Ltd. vs. Sheriff Bajar

[GR 138104, April 11, 2002]

FACTS:

Marcopper Mining Corporation was unable to pay its loans from the Asian Development Bank (ADB). Later,
ADB transferred all its rights to collect from Marcopper to MR Holdings, Ltd. In order to pay MR Holdings,
Marcopper assigned all its assets to MR Holdings and executed therefor a Deed of Assignment in MR
Holdings favor.

Meanwhile, another creditor of Marcopper, Solidbank Corporation, won a case against Marcopper. The
court then issued a writ of execution directing Sheriff Carlos Bajar to levy Marcopper’s assets.

MR Holdings then filed an opposition asserting that it is now the owner of Marcopper’s assets hence, Bajar
cannot levy them. The lower court denied MR Holdings on the ground that the Deed of Assignment was
made in bad faith and that MR Holdings was a foreign corporation doing business without a license in the
Philippines (by virtue of the Deed of Assignment) and as such cannot sue in the Philippines.

ISSUE: Whether or not MR Holdings may sue on this particular transaction.

HELD: Yes. The Supreme Court emphasized the following rules when it comes to foreign corporations doing
business here in the Philippines:

1. if a foreign corporation does business in the Philippines without a license, it cannot sue before
the Philippine courts;
2. if a foreign corporation is not doing business in the Philippines, it needs no license to
sue before Philippine courts on an isolated transaction or on a cause of action entirely
independent of any business transaction;
3. if a foreign corporation does business in the Philippines with the required license, it can
sue before Philippine courts on any transaction.

Being a mere assignee does not constitute “doing business” in the Philippines. MR Holdings, a foreign
corporation, cannot be said to be doing business simply because it became an assignee of Marcopper. MR
Holdings was not doing anything else other than being a mere assignee. The only time that MR Holdings is
considered to be doing business here is that if it continues the business of Marcopper – which it did not.

Therefore, since it is not doing business here, pursuant to the rules above, it can sue without any license
before Philippine courts on an isolated transaction or on a cause of action entirely independent of any
business transaction.

Anent the issue of bad faith, the same was not proven. It appears that the deed of assignment was an earlier
agreement incidental to the loan agreement between ADB and Marcopper which precedes the action
brought by Solidbank against Marcopper.

14. [G.R. No. 158314. June 3, 2004]

SAMAHAN NG MAGSASAKA SA SAN JOSEP, represented by DOMINADOR MAGLALANG, petitioner, vs.

MARIETTA VALISNO, ADELA, AQUILES, LEANDRO, HONORIO, LUMEN, NICOLAS, all surnamed VALISNO;
RANDY V. WAGNER, MARIA MARTA B. VALISNO, NOELITO VALISNO, MARY ANN L. VALISNO, PHILIP V.
BRANZUELA and BRENDON V. YUJUICO; MA. CRISTINA VALISNO, BENEDICTO V. YUJUICO, GREGORIO V.
YUJUICO and LEONORA V. YUJUICO, respondents.

DECISION

YNARES-SANTIAGO, J.:

The sole issue in this petition for review on certiorari is whether or not the grandchildren of the late Dr.
Nicolas Valisno Sr. are entitled to retention rights as landowners under Republic Act No. 6657, or the
Comprehensive Agrarian Reform Law (hereafter, CARL).

The original 57-hectare property, situated in La Fuente, Sta. Rosa, Nueva Ecija, was formerly registered in
the name of Dr. Nicolas Valisno, Sr. under Transfer Certificate of Title No. NT-38406. Before the effectivity
of Presidential Decree No. 27,1[1] the land was the subject of a judicial ejectment suit, whereby in 1971, the
Valisnos tenants were ejected from the property.2[2] Among these tenants was Dominador Maglalang, who
represents the SMSJ in the instant proceedings.

Meanwhile, on October 20 and 21, 1972, Dr. Valisno mortgaged 12 hectares of his property to Renato and
Angelito Banting.3[3] Thereafter, the property was subdivided into ten lots and on November 8, 1972,
individual titles were issued in the name of the eight children of Nicolas, Angelito Banting, and Renato
Banting.4[4]

After the mortgage on the 12 hectare portion was foreclosed and the property sold at public auction, four
grandchildren of Dr. Nicolas Valisno, namely: Maria Cristina F. Valisno, daughter of Romulo D. Valisno; and
Leonora Valisno Yujuico, Benedicto Valisno Yujuico and Gregorio Valisno Yujuico, children of Marietta Valisno
redeemed the same from the mortgagees.5[5] At the time of the redemption, Maria Cristina, Leonora and
Gregorio were all minors; only Benedicto was of legal age, being then 26 years old.6[6] The redemption was
made on October 25, 1973, but the titles to the land were not transferred to the redemptioners until
November 26, 1998.7[7]

Subsequently, the entire 57-hectare property became the subject of expropriation proceedings before the
Department of Agrarian Reform (DAR). In 1994, Dominador Maglalang, in behalf of the SMSP, filed a petition
for coverage of the subject landholding under the CARL, which petition was dismissed for want of
jurisdiction.8[8] On June 14, 1995, Rogelio Chaves, DAR Provincial Agrarian Reform Officer (PARO), issued a
Memorandum stating that the property had been subdivided among the heirs of Dr. Nicolas Valisno Sr.
before the issuance of PD 27 into tracts of approximately six hectares each. 9[9] Nevertheless, PARO Chaves
added that the excess over the five-hectare retention limit could still be covered under RA 6657. 10[10]

On appeal, the Office of the Regional Director issued an Order dated January 2, 1996, declaring the Valisno
property exempt from the coverage of PD 27 and RA 6657. 11[11] This was reversed by then Secretary Garilao,
who held that the property is covered by the Comprehensive Agrarian Reform Program, subject to the
retention rights of the heirs of Nicolas, Sr. The Valisno heirs filed a motion for reconsideration of the said
order, but the same was denied.

On September 25, 1997, the Valisno heirs filed a Consolidated Application for Retention and Award under RA
6657. Specifically, the petition was filed by (1) Adela, Aquiles, Leandro, Honorio, Lumen, Nicolas and Marietta
Valisno, seven children of Nicolas Valisno, Sr., who applied for retention rights as landowners; (2) Randy V.
Wagner, Maria Marta B. Valisno, Noelito Valisno, Mary Ann L. Valisno, Philip V. Branzuela and Brendon V.
Yujuico, grandchildren of Nicolas Sr. (hereafter collectively the Grandchildren-Awardees), who applied to be
considered qualified child-awardees; and (3) Ma. Cristina Valisno, Benedicto V. Yujuico, Gregorio V. Yujuico
and Leonora V. Yujuico, likewise grandchildren of Nicolas Sr. (hereafter collectively the Redemptioner-
Grandchildren), who applied for retention rights as landowners over the 12-hectare portion of the property
alleged to have been mortgaged by Nicolas Sr. in 1972 to Angelito and Renato Banting.

The SMSJ, through Dominador Maglalang, opposed the Consolidated Application for Retention, specifically
objecting to the award in favor of the Grandchildren-Awardees because they are not actually tilling nor
directly managing the land in question as required by law.

On November 4, 1998, Regional Director Renato F. Herrera issued an Order which pertinently reads:

WHEREFORE, premises considered, an ORDER is hereby issued as follows:

1. GRANTING the application for retention of the heirs of Dr. Nicolas Valisno, Sr., namely: Marietta
Valisno; Honorio Valisno; Leandro Valisno; Adela Valisno; Nicolas Valisno, Jr.; Aquiles Valisno; and Lumen
Valisno of not more than five (5) hectares each or a total of 35 hectares covered by Title Nos. 118446, 118443,
118442, 118440, 118445, 118441 and 118444, respectively, all located at La Fuente, Sta. Rosa, Nueva Ecija;

2. PLACING the excess of 19.0 hectares, more or less, under RA 6657 and acquiring the same thru
Compulsory Acquisition for distribution to qualified farmer-beneficiaries taking into consideration the basic
qualifications set forth by law;

3. DENYING the request for the award to children of the applicants for utter lack of merit; and

4. DIRECTING the applicants-heirs to cause the segregation and survey of the retained area at their own
expense and to submit within thirty (30) days the final approved survey plan to this Office.

SO ORDERED.12[12]

On appeal, the DAR Secretary affirmed the Order of the Regional Director with the following relevant
ratiocination:

In the second assignment of error, appellants faulted the Regional Director for not giving due consideration
to the two (2) mortgages constituted by the original owner over a portion of his landholding in 1972 and
redeemed by the latters grandchildren in 1973, when the 12-hectare land subject of the mortgages were
ordered to be distributed to CARP beneficiaries.

xxx xxx xxx

The alleged redemption of the mortgaged property by the four (4) grandchildren of Nicolas Valisno, Sr.,
namely Ma. Cristina, Leonora, Gregorio and Benedicto, is not likewise worthy of any credence. The
mortgaged property was allegedly redeemed on October 25, 1973. From the evidence on record, three (3)
of the alleged redemptioners represented to be of legal age in the Discharge of Mortgage were still minors,
hence, without any legal capacity at the time the redemption was made. 13[13]

On June 23, 2000, the motion for reconsideration filed by the heirs of Dr. Valisno was denied. 14[14]

Respondent heirs filed a petition for review with the Court of Appeals, arguing that the Secretary of Agrarian
Reform erred (1) in disallowing the award of one hectare to each of the seven Grandchildren-Awardees of
Dr. Nicolas Valisno, as qualified children-awardees under the CARL; and (2) in not recognizing the
redemption made by the four grandchildren of Dr. Nicolas Valisno over the 12-hectare riceland mortgaged
to Renato and Angelito Banting.15[15]
On March 26, 2002, the Court of Appeals reversed the Orders of the DAR Secretary, granted the award of
one hectare each for the seven Grandchildren-Awardees, and affirmed the retention rights of the
Redemptioner-Grandchildren over three hectares each, or a total of 12 hectares.16[16]

Petitioners filed a partial motion for reconsideration, assailing the right of retention of the four
Redemptioner-Grandchildren over the 12-hectare property, and praying that an amended decision be
rendered placing the 12 hectares under the coverage of the CARP.17[17] This motion was denied on March 25,
2003. 18[18]

Hence, this appeal, on the sole assignment of error:

THE HONORABLE COURT OF APPEALS ERRED WHEN, IN EFFECT, IT RULED THAT THE REDEMPTIONERS
(GRANDCHILDREN OF THE DECEASED NICOLAS VALISNO, SR.) WERE ENTITLED TO RETENTION RIGHTS AS
LANDOWNERS UNDER THE AGRARIAN REFORM LAW DESPITE THE FACT THAT THE REDEMPTION WAS
DONE BY THEIR PARENTS (CHILDREN OF THE DECEASED) ONLY IN THEIR NAME AND FOR THEIR
BENEFIT.19[19]

The appeal lacks merit.

The Court of Appeals found the following facts relevant: First, that the mortgages were constituted over a
12-hectare portion of Dr. Valisnos estate in 1972. Second, that the titles to the property were transferred to
the names of the mortgagees in 1972, viz., TCT No. NT-118447, covering a 6-hectare property in La Fuente,
Sta. Rosa, Nueva Ecija, issued in the name of Angelito Banting; and TCT No. NT-118448, likewise covering a
6-hectare property in La Fuente, Sta. Rosa, Nueva Ecija, issued in the name of Renato Banting. Third, these
properties were redeemed by the Redemptioner-Grandchildren on October 25, 1973, at the time of which
redemption three of the four Redemptioner-Grandchildren were minors.

It is a well-settled rule that only questions of law may be reviewed by the Supreme Court in an appeal by
certiorari.20[20] Findings of fact by the Court of Appeals are final and conclusive and cannot be reviewed on
appeal to the Supreme Court.21[21] The only time this Court will disregard the factual findings of the Court of
Appeals (which are ordinarily accorded great respect) is when these are based on speculation, surmises or
conjectures or when these are not based on substantial evidence. 22[22]

In the case at bar, no reason exists for us to disregard the findings of fact of the Court of Appeals. The factual
findings are borne out by the record and are supported by substantial evidence.
Given these settled facts, the resolution of the sole issue in this case hinges on (1) the validity of the
redemption in 1973, made when three of the Redemptioner-Grandchildren were minors; and (2) if the
redemption was valid, the determination of the retention rights of the Redemptioner-Grandchildren, if any,
under RA 6557.

The relevant laws governing the minors redemption in 1973 are the general Civil Code provisions on legal
capacity to enter into contractual relations. Article 1327 of the Civil Code provides that minors are incapable
of giving consent to a contract. Article 1390 provides that a contract where one of the parties is incapable
of giving consent is voidable or annullable. Thus, the redemption made by the minors in 1973 was merely
voidable or annullable, and was not void ab initio, as petitioners argue.

Any action for the annulment of the contracts thus entered into by the minors would require that: (1) the
plaintiff must have an interest in the contract; and (2) the action must be brought by the victim and not the
party responsible for the defect.23[23] Thus, Article 1397 of the Civil Code provides in part that [t]he action for
the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily.
However, persons who are capable cannot allege the incapacity of those with whom they contracted. The
action to annul the minors redemption in 1973, therefore, was one that could only have been initiated by the
minors themselves, as the victims or the aggrieved parties in whom the law itself vests the right to file suit.
This action was never initiated by the minors. We thus quote with approval the ratiocination of the Court of
Appeals:

Respondents contend that the redemption made by the petitioners was simulated, calculated to avoid the
effects of agrarian reform considering that at the time of redemption the latter were still minors and could
not have resources, in their own right, to pay the price thereof.

We are not persuaded. While it is true that a transaction entered into by a party who is incapable of consent
is voidable, however such transaction is valid until annulled. The redemption made by the four petitioners
has never been annulled, thus, it is valid. 24[24]

The transfer of the titles to the two 6-hectare properties in 1972 removed the parcels of land from the entire
Valisno estate. The evidence clearly demonstrates that Renato Banting and Angelito Banting became the
registered owners of the property in 1972. These two separate properties were then transferred to the
Redemptioner-Grandchildren in 1973. Regardless of the source of their funds, and regardless of their
minority, they became the legal owners of the property in 1973.

Moreover, although Maria Cristina, Leonora and Gregorio were all minors in 1973, they were undoubtedly of
legal age in 1994, when SMSP initiated the petition for coverage of the subject landholding under the CARL,
and of course were likewise of legal age in 1997, when all the Valisno heirs filed their Consolidated
Application for Retention and Award under RA 6657.

As owners in their own right of the questioned properties, Redemptioner-Grandchildren enjoyed the right
of retention granted to all landowners. This right of retention is a constitutionally guaranteed right, which is
subject to qualification by the legislature.25[25] It serves to mitigate the effects of compulsory land acquisition
by balancing the rights of the landowner and the tenant and by implementing the doctrine that social justice
was not meant to perpetrate an injustice against the landowner. 26[26] A retained area, as its name denotes,
is land which is not supposed to leave the landowners dominion, thus sparing the government from the
inconvenience of taking land only to return it to the landowner afterwards, which would be a pointless
process.

In the landmark case of Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian
Reform,27[27] we held that landowners who have not yet exercised their retention rights under PD 27 are
entitled to the new retention rights under RA 6657. 28[28] The retention rights of landowners are provided in
Sec. 6 of RA 6657, which reads in relevant part:

SECTION 6. Retention Limits. Except as otherwise provided in this Act, no person may own or retain, directly
or indirectly, any public or private agricultural land, the size of which shall vary according to factors
governing a viable family-size, such as commodity produced, terrain, infrastructure, and soil fertility as
determined by the Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall
retention by the landowner exceed five (5) hectares. Three (3) hectares may be awarded to each child of
the landowner, subject to the following qualifications: (1) that he is at least fifteen (15) years of age; and (2)
that he is actually tilling the land or directly managing the farm; Provided, That landowners whose land have
been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them
thereunder, Provided further, That original homestead grantees or direct compulsory heirs who still own the
original homestead at the time of the approval of this Act shall retain the same areas as long as they continue
to cultivate said homestead.

The right to choose the area to be retained, which shall be compact or contiguous, shall pertain to the
landowner. Provided, however, That in case the area selected for retention by the landowner is tenanted,
the tenant shall have the option to choose whether to remain therein or be a beneficiary in the same or
another agricultural land with similar or comparable features. In case the tenant chooses to remain in the
retained area, he shall be considered a leaseholder and shall lose his right to be a beneficiary under this Act.
In case the tenant chooses to be a beneficiary in another agricultural land, he loses his right as a lease-holder
to the land retained by the landowner. The tenant must exercise this option within a period of one (1) year
from the time the landowner manifests his choice of the area for retention.

This section defines the nature and incidents of a landowners right of retention. For as long as the area to
be retained is compact or contiguous and it does not exceed the retention ceiling of five hectares, a
landowners choice of the area to be retained must prevail.

Each of the four Redemptioner-Grandchildren is thus entitled to retain a parcel of land with a ceiling of five
hectares, for a total of 20 hectares. The parcels of land in question total only 12 hectares, or only three
hectares each, which is well within the statutory retention limits.

WHEREFORE, premises considered, the Decision of the Court of Appeals in CA-G.R. SP No. 59752 dated
March 26, 2002, and Resolution of the Court of Appeals dated March 25, 2003, which upheld the retention
rights of respondents Ma. Cristina Valisno, Benedicto V. Yujuico, Gregorio V. Yujuico and Leonora V. Yujuico,
are AFFIRMED.

SO ORDERED.

15. Spouses MARIANO Z. VELARDE and AVELINA D. VELARDE vs. COURT OF APPEALS, DAVID A. RAYMUNDO and
GEORGE RAYMUNDO

G.R. No. 108346 2001 Jul 11

FACTS:

David Raymundo is the absolute and registered owner of a parcel of land, together with the house and other
improvements thereon. Private Respondent George Raymundo is David’s father who negotiated with plaintiffs
Avelina and Mariano Velarde, the petitioners, for the sale of said property, which was, however, under lease. On
August 8, 1986, a Deed of Sale with Assumption of Mortgage was executed by defendant David Raymundo, as vendor,
in favor of plaintiff Avelina Velarde, as vendee. It is further agreed and understood by the parties that the capital gains
tax and documentary stamps on the sale shall be for the account of the vendor; whereas, the registration fees and
transfer tax thereon shall be for the account of the vendee. On the same date, and as part of the above-document,
plaintiff Avelina Velarde, with the consent of her husband, Mariano, executed an Undertaking.

It appears that the negotiated terms for the payment of the balance of P1.8 million was from the proceeds of
a loan that plaintiffs were to secure from a bank with defendant’s help. Defendants had a standing approved credit
line with the Bank of the Philippine Islands (BPI). The parties agreed to avail of this, subject to BPI’s approval of an
application for assumption of mortgage by plaintiffs. Pending BPI’s approval of the application, plaintiffs were to
continue paying the monthly interests of the loan secured by a real estate mortgage. Pursuant to said agreements,
plaintiffs paid BPI the monthly interest on the loan secured by the aforementioned mortgage for three (3) months,
however, plaintiffs were advised that the Application for Assumption of Mortgage with BPI was not approved, which
prompted plaintiffs not to make any further payment. On January 5, 1987, defendants, thru counsel, wrote plaintiffs
informing the latter that their non-payment to the mortgage bank constituted non-performance of their obligation.
Thereafter, defendants sent plaintiffs a notarial notice of cancellation/rescission of the intended sale of the subject
property allegedly due to the latter’s failure to comply with the terms and conditions of the Deed of Sale with
Assumption of Mortgage and the Undertaking.

ISSUE:

Whether or not the Court of Appeals erred in holding that the rescission (resolution) of the contract by private
respondents was justified.

RULING:

A substantial breach of a reciprocal obligation entitles the injured party to rescind the obligation. Rescission
abrogates the contract from its inception and requires a mutual restitution of benefits received. The breach
committed by petitioners was not so much their nonpayment of the mortgage obligations, as their nonperformance
of their reciprocal obligation to pay the purchase price under the contract of sale. Private respondents’ right to rescind
the contract finds basis in Article 1191 of the Civil Code.

The right of rescission of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach
of faith by the other party who violates the reciprocity between them. The breach contemplated in the said provision
is the obligor’s failure to comply with an existing obligation. When the obligor cannot comply with what is incumbent
upon it, the obligee may seek rescission and, in the absence of any just cause for the court to determine the period of
compliance, the court shall decree the rescission. The private respondents therefore validly exercised their right to
rescind the contract, because of the failure of petitioners to comply with their obligation to pay the balance of the
purchase price.

The breach committed by petitioners was the nonperformance of a reciprocal obligation, not a violation of
the terms and conditions of the mortgage contract. Therefore, the automatic rescission and forfeiture of payment
clauses stipulated in the contract does not apply. Instead, Civil Code provisions shall govern and regulate the
resolution of this controversy. Considering that the rescission of the contract is based on Article 1191 of the Civil Code,
mutual restitution is required to bring back the parties to their original situation prior to the inception of the contract.

16. G.R. No. 142310 September 20, 2004ARRA REALTY CORPORATION vs. GUARANTEE DEVELOPMENT
CORPORATION AND INSURANCE AGENCY andENGR. ERLINDA EÑALOZA,

FACTS:

Arra Realty Corporation was the owner of a parcel of land, located in Alvarado Street, Legaspi Village, Makati
City. Through its president, Architect Carlos D. Arguelles, the ARC decided to construct a five-story building
on its property and engaged the services of Engineer Erlinda Peñaloza as project and structural engineer.
Peñaloza andthe ARC, agreed that Peñaloza would share the purchase price of one floor of the building for
the price of P3,105,838 Sometime in May 1983, Peñaloza took possession of the one-half portion of the
second floor where she put up her office and a school. Unknown to her, ARC had executed a real estate
mortgage over the lot and the entire building in favor of the China Banking Corporation. Peñaloza was able
to pay P1,175,124.59 for the portion of the second floor of the building she had purchased from the ARC.
Then she learned that the property had been mortgaged to the China Banking Corporation sometime. 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. Peñaloza filed a
complaint for "specific performance or damages" with a prayer for a writ of preliminary injunction against
the petitioners.

Issue: whether or not there has been a perfected contract of sale?

Held:

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 a price payable in installments. As soon
as the secondfloor 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 had agreed on the three
elements of subject matter, price, and terms of payment. Hence, the contract of sale was perfected, it being
consensual in nature, perfected by mere consent, which, in turn, was manifested the moment there was a
meeting of the minds as to the offer and the acceptance thereof. The perfection of the sale is not negated
by the fact that the property subject of the sale was not yet in existence. This is so because the ownership
by the seller of the thing sold at the time of the perfection of the contract of sale is not an element of its
perfection. A perfected contract of sale cannot be challenged on the ground of non-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 does not transfer ownership which occurs
upon the actual or constructive delivery of the thing sold. Peñaloza took possession of a portion of the
second floor of the building the moment she put up her office and operated the school. Art. 1477. The
ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery
thereof. Admittedly, respondent Peñaloza failed to pay the down payment 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.

17. CHAVEZ VS PCGG

G.R. No. 130716

FACTS: Petitioner Francisco I. Chavez, in his capacity as taxpayer, citizen and a former government official asked the
court to prohibit and enjoin respondents [PCGG and its chairman] from privately entering into, perfecting and/or
executing any agreement with the heirs of the late President Ferdinand E. Marcos . . . relating to and concerning the
properties and assets of Ferdinand Marcos located in the Philippines and/or abroad — including the so-called Marcos
gold hoard.

Chavez assailed the validity of the General and Supplemental Agreement executed by the government (through PCGG)
and the Marcos heirs on December 28,1993.

Item No. 2 of the General Agreement states that the assets of the PRIVATE PARTY (Marcos heirs) shall be net of and
exempt from, any form of taxes due the Republic of the Philippines.

ISSUE: W/N the compromise agreement entered into by the PCGG and the Marcos heirs which committing to exempt
from all forms of taxes the properties to be retained by the Marcos heirs is valid.

HELD: The petition is GRANTED. The General and Supplemental Agreement dated December 28, 1993, which PCGG
and the Marcos heirs entered into are hereby declared NULL AND VOID for being contrary to law and the Constitution.

Under Item No. 2 of the General Agreement, the PCGG commits to exempt from all forms of taxes the properties to
be retained by the Marcos heirs. This is a clear violation of the Construction. The power to tax and to grant tax
exemptions is vested in the Congress and, to a certain extent, in the local legislative bodies. Section 28 (4), Article VI
of the Constitution, specifically provides: "No law granting any tax exemption shall be passed without the concurrence
of a majority of all the Member of the Congress." The PCGG has absolutely no power to grant tax exemptions, even
under the cover of its authority to compromise ill-gotten wealth cases.

Even granting that Congress enacts a law exempting the Marcoses form paying taxes on their properties, such law
will definitely not pass the test of the equal protection clause under the Bill of Rights. Any special grant of tax
exemption in favor only of the Marcos heirs will constitute class legislation. It will also violate the constitutional rule
that "taxation shall be uniform and equitable."

Neither can the stipulation be construed to fall within the power of the commissioner of internal revenue to
compromise taxes. Such authority may be exercised only when (1) there is reasonable doubt as to the validity of the
claim against the taxpayer, and (2) the taxpayer's financial position demonstrates a clear inability to pay. Definitely,
neither requisite is present in the case of the Marcoses, because under the Agreement they are effectively conceding
the validity of the claims against their properties, part of which they will be allowed to retain. Nor can the PCGG grant
of tax exemption fall within the power of the commissioner to abate or cancel a tax liability. This power can be
exercised only when (1) the tax appears to be unjustly or excessively assessed, or (2) the administration and collection
costs involved do not justify the collection of the tax due. In this instance, the cancellation of tax liability is done even
before the determination of the amount due. In any event, criminal violations of the Tax Code, for which legal actions
have been filed in court or in which fraud is involved, cannot be compromised.

18. MENCHAVEZ v. TEVES, 26 January 2005

FACTS:

Menchavez and Teves entered into a Contract of Lease for an area covered for a fishpond application for a period of
five years. During this period, Cebu RTC sheriffs demolished the fishpond dikes constructed by Teves. As a
consequence, Teves filed for damages with application for preliminary attachment against Menchavez. In his
Complaint, he alleged that the lessors had violated their Contract of Lease, specifically the provision on peaceful and
adequate enjoyment of the property for the entire duration of the Contract. Respondent further asserted that the
lessors had withheld from him the findings of the trial court in Civil Case No. 510-T, entitled "Eufracia Colongan
andPaulino Pamplona v. Juan Menchavez Sr. and Sevillana S. Menchavez." In that caseinvolving the same property,
subject of the lease, the Menchavez spouses were orderedto remove the dikes illegally constructed and to pay
damages and attorney's fees.

ISSUE:

Whether or not Menchavez is liable for Teves for the sheriff’s act of demolishing the constructed dikes.

HELD:

No. A void contract is deemed legally non-existent. It produces no legal effect. As a general rule, courts leave parties
to such a contract as they are, because they are in pari delicto or equally at fault. Neither party is entitled to legal
protection.

RATIO: The defendants ought to have known that they cannot lease what does not belong to them for as a matter of
fact, they themselves are still applying for a lease of the same property under litigation from the government. On the
other hand, FlorentinoTeves, being fully aware that petitioners were not yet the owners, had assumed the risks and
under the principle of VOLENTI NON FIT INJURIA NEQUES DOLUS - He who voluntarily assumes a risk, does not suffer
damages thereby. As a consequence, when Teves leased the fishpond area from petitioners who were mere holders
or possessors thereof, he took the risk that it may turn out later that his application for lease may not be approved.
Unfortunately however, even granting that the lease of petitioners and their application in 1972 were to be approved,
still they could not sublease the same. In view therefore of these, the parties must be left in the same situation in
which the court finds them, under the principle IN PARI DELICTO NONORITOR ACTIO, meaning: Where both are at
fault, no one can found a claim.

19. LEONARDO ACABAL and RAMON NICOLAS, petitioners, vs.

VILLANER ACABAL, EDUARDO ACABAL, SOLOMON ACABAL, GRACE ACABAL, MELBA ACABAL, EVELYN
ACABAL, ARMIN ACABAL, RAMIL ACABAL, and BYRON ACABAL, respondents.

G.R. No. 148376 - March 31, 2005 – Carpio-Morales, J.

FACTS: “Alejandro Acabal and Felicidad Balasabas, owned a parcel of land situated in Barrio Tanglad,
Manjuyod, Negros Oriental, containing an area of 18.15 hectares more or less, described in Tax Declaration
No. 15856. By a Deed of Absolute Sale dated July 6, 1971, his parents transferred for P2,000.00 ownership of
the said land to [Villaner Acabal], who was then married to Justiniana Lipajan.” On April 19, 1990, Villaner
executed the deed in question, by which the lot was transferred to his nephew and godson Leonardo Acabal,
who later sold it to Ramon Nicolas. On October 11, 1993 Villaner filed a case for annulment of the sale to
Leonardo and to Nicolas. Villaner claimed that he did not know the contents of the deed he signed, which
he claimed was a Deed of Sale (earlier in the proceedings he said it was a Lease Contract). The RTC dismissed
the complaint. Villaner appealed to the CA, who reversed the RTC and held that the deed in question was
simulated and fictitious. Leonardo and Ramon thus appealed to the SC on certiorari.

ISSUE:
1) W/N the deed is valid
2) W/N the property in question is conjugal property

HELD/RATIO:
1) YES. The failure to deny the genuineness and due execution of an actionable document does not preclude
a party from arguing against it by evidence of fraud, mistake, compromise, payment, statute of limitations,
estoppel, and want of consideration. It is a basic rule in evidence that the burden of proof lies on the party
who makes the allegations. If he claims a right granted by law, he must prove it by competent evidence,
relying on the strength of his own evidence and not upon the weakness of that of his opponent. Villaner
failed to prove his allegations for he failed to adduce evidence to support his claims of simulation and lack
of knowledge as to the nature of the deed. Leonardo’s witness (the drafter of the actual deed) on the other
hand was able to prove that the deed was duly drafted, read and signed by Villaner.
“Even assuming that the disposition of the property by Villaner was contrary to law, he would still have no
remedy under the law as he and Leonardo were in pari delicto, hence, he is not entitled to afirmative relief –
one who seeks equity and justice must come to court with clean hands. In pari delicto potior est conditio
defendentis.”

2) YES. The issue arose when Villaner’s co-heirs denied the validity of the transfer as to their shares because
they did not consent to such transfer. Art. 160 of the Civil Code gives rise to a presumption that properties
acquired during the marriage are conjugal. In this case it was clear that Villaner was married when he
acquired the land. A tax declaration or “[r]egistration of the properties in the name of the husband does not
destroy the conjugal nature of the properties. What is material is the time when the land was acquired by
Villaner, and that was during the lawful existence of his marriage to Justiniana”. Upon his wife’s death, the
conjugal partnership was dissolved and Villaner became entitled to a ½ undivided share. The other share
accrued to Justiniana’s heirs: Villaner and their 8 children. They are now the co-owners of the lot in question.
“With respect to Justiniana’s one-half share in the conjugal partnership which her heirs inherited, applying the
provisions on the law of succession, her eight children and Villaner each receives one-ninth (1/9) thereof. Having
inherited one-ninth (1/9) of his wife’s share in the conjugal partnership or one eighteenth (1/18) of the entire
conjugal partnership and is himself already the owner of one half (1/2) or nine-eighteenths (9/18), Villaner’s total
interest amounts to ten-eighteenths (10/18) or five-ninths (5/9). While Villaner owns five-ninths (5/9) of the
disputed property, he could not claim title to any definite portion of the community property until its actual
partition by agreement or judicial decree. Prior to partition, all that he has is an ideal or abstract quota or
proportionate share in the property. Villaner, however, as a co-owner of the property has the right to sell his
undivided share thereof”, by virtue of NCC 493; but such sale will only be valid as to the portion pertaining to
Villaner. In effect, the buyer becomes a co-owner of the property. “The proper action in cases like this is not
for the nullification of the sale or the recovery of possession of the thing owned in common from the third
person who substituted the co-owner or co-owners who alienated their shares, but the DIVISION of the
common property as if it continued to remain in the possession of the co-owners who possessed and
administered it.” The proper action is partition under Rule 69. The rule in Cruz v. Leis, which held that
“[w]here a parcel of land, forming part of the undistributed properties of the dissolved conjugal partnership of
gains, is sold by a widow to a purchaser who merely relied on the face of the certificate of title thereto, issued
solely in the name of the widow, the purchaser acquires a valid title to the land even as against the heirs of the
deceased spouse” does not apply because the land subject of that case was unregistered. “The issue of good
faith or bad faith of a buyer is relevant only where the subject of the sale is a registered land but not where the
property is an unregistered land.”

DISPOSITION
WHEREFORE, the petition is GRANTED. The Court of Appeals February 15, 2001 Decision in CA-G.R. CV No.
56148 is REVERSED and SET ASIDE and another is rendered declaring the sale in favor of petitioner Leonardo
Acabal and the subsequent sale in favor of petitioner Ramon Nicolas valid but only insofar as five-ninths (5/9)
of the subject property is concerned.
No pronouncement as to costs.