ANDAYA VS MAMANSALA

FACTS:

On June 13, 1934, Isidro Fenis sold the land in question to Eustaquia Llanes, with right of
repurchase within a period of five years. After the expiry of said period, and without repurchasing the
said property, Isidro Fenis sold it again to Maria Viloria. Then, Maria Viloria sold by way of sale with
right to repurchase within a period of one year, the said property together with another parcel of land
to defendant Melencio Manansala. Upon the expiry of the said period, Manansala registered with the
Register of Deeds an affidavit consolidating his title on the property. A year later, Maria Viloria sold by
way of absolute sale the same property to Ciriaco Casiño, Fidela Valdez, and the plaintiff spouses
Ariston Andaya and Micaela Cabrito, for P4,800.00.

Then, Llanes instituted a civil case to quiet title and recover possession from Casino.
Subsequently, Manansala sold the land to Valdez and Casino for P1500. It was stipulated that there
was a warranty (i)that said land is free from all liens and encumbrances and (ii) in case of eviction, the
vendor shall answer to the vendee in the manner provided by law.

Subsequently, Llanes included Manansala, Valdez, Cabrito and Andaya as co-defendants. The
case was decided in favor of Llanes. A writ of execution was issued and the land was sold at a public
auction.

Andaya and Cabrito instituted a case against Manansala in the CFI of Ilocos Sur for the
recovery of damages because of the breach of warranty of title and against eviction. Manansala denied
liability and stated that his co-purchasers pleaded him to sell to them at a low price after the case
instituted by Llanes against them.

The lower court decided that it is inequitable to hold defendant liable under ART 1555 since
plaintiffs apparently knew that the warranty could not have been intended. And that the obligation of
the defendant is that of a vendor in cases of a rescission of contract.

ISSUE:

Whether Manansala shall be liable as a vendor in cases of a rescission of a contract

HELD:

NO. HE is exempt from liability.

The vendor's liability for warranty against eviction in a contract of sale is waivable and may be
renounced by the vendee (ART 1548). Not having appealed from the decision of the lower court,
appellees are bound by these findings, the implication of which is that they not only renounced or
waived the warranty against eviction, but that they knew of the danger of eviction and assumed its
consequences. Therefore, the appellant is not even obliged to restore to them the price of the land at
the time of eviction, but is completely exempt from liability whatsoever.

ART 1544: When the vendee has waived the right to warranty in case of eviction, and eviction shall
occur, the vendor shall only pay the price which the thing sold had at the time of the eviction, unless
the vendee has made the waiver with knowledge of the danger of eviction and assumed its
consequences.

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 Neither may appellant be condemned to return the price received from appellees on the
theory of rescission of their contract of sale, as held by the court below. In the first place, the remedy
of rescission contemplates that the one demanding it is able to return whatever he has received under
the contract; and when this cannot be done, rescission cannot be carried out (Art. 1385). It is for this
reason that the law on sales does not make rescission a remedy in case the vendee is totally evicted
from the thing sold, as in this case, for he can no longer restore the thing to the vendor. It is only when
the vendee loses "a part of the thing sold of such importance, in relation to the whole, that he would
not have purchased it without said part" that he may ask for rescission, but he has "the obligation
return the thing without other encumbrances than those which it had when he acquired it" (Art. 1556).
In the second place, appellees, as already stated, assumed the risk of eviction, which stops them from
asking for rescission even were it possible for them to restore what they had received under the
contract.

On their part, appellees claim that in view of the eviction from the land in question, they are
entitled to recover from appellant more items of damages under Article 1555 than the mere return of
the price with interests as ordered by the trial court. The claim is untenable, not only because
appellant, as we have held, is exempt from any liability for appellees eviction, but also because not
having appealed from the decision of the lower court, appellees cannot ask for a modification thereof
or an award of damages not included therein.

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 BARENG VS CA

FACTS:

Vicente Bareng purchased from respondent Alegria the cinematographic equipment installed
at the Pioneer Theater in Laoag, Ilocos Norte, for the sum of P15,000. P10,000 of which was paid, and
Bareng signed 4 promissory notes for the balance. The first promissory note amounting to P1,000 was
duly paid by Bareng. On February 15, 1952, shortly before the second note fell due, the other
respondent Agustin Ruiz informed Bareng that he was a co-owner of the equipment in question, and
several days later, Ruiz sent Bareng a telegram instructing him to suspend payments to Alegria for
thebalance of the price as he was not agreeable to the sale. When Alegria sought to collect the second
note on the same day, Bareng only paid P400 and refused to make any more payments on account of
Ruiz’s claims.

On March 31, 1952, Ruiz filed suit against Alegria and Bareng for his share in the price of the
cinema equipment. Thereafter in May of the same year, Alegria and Ruiz reached a compromise
wherein the former recognized the latter as co-owner of the equipment sold to Bareng and promised
to pay 2/3 of whatever amount he could recover from the latter. Alegria then sued Bareng for the
amount of P13,500, allegedly the unpaid balance of the price. But Bareng answered that only P3,600
had not been paid, and prayed for the rescission of the sale for the supposed violation of Alegria of
certain express warranties as to the quality of the equipment, and asked for payment of damages for
alleged violation of Alegria’s warranty of title. Bareng added that he is not liable to pay interests to
Alegria because he was justified in suspending payment of the balance of the price of the equipment
from the time he learned of Ruiz’s adverse claims over said equipment, pursuant to Art. 1590 of the
Civil Code.

ISSUE:

Whether or not Bareng is liable to pay interest of the unpaid balance of the price of the equipment.

HELD:

Bareng is liable to pay interest of the unpaid balance of the price of the equipment in question.
Art. 1590 of the Civil Code provides that: “Should the vendee be disturbed in the possession or
ownership of the thing acquired, or should he have reasonable grounds to fear such disturbance, by a
vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price until the
vendor has caused the disturbance or danger to cease, unless the latter gives security for the return
of the price in a proper case, or it has been stipulated that, notwithstanding any such contingency, the
vendee shall be bound to make the payment. A mere act of trespass shall not authorize the suspension
of the payment of the price.”

It is undisputed that petitioner had the right to suspend payment of the balance of the price
of the cinema equipment in question to his vendor from the time he was informed by Ruiz of the
latter’s claims of co-ownership thereof, especially upon his receipt of Ruiz’s telegram wherein the
latter asserted that he was not agreeable to the sale. However, said right of Barend ended as soon as
“the vendor has caused the disturbance or danger to cease,” which, in this case, was when Alegria
reached a compromise with Ruiz whereby Ruiz expressed his conformity to the sale to Bareng, subject
to the payment of his share in the price by Alegria. From the time Alegria and Ruiz reached this
settlement, there was no longer any danger of threat to Bareng’s ownership and full enjoyment of the
equipment he bought from Alegria, by virtue of which Alegria sued petitioner for the unpaid balance.

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Bareng admitted his indebtedness in the amount of P3,600, yet he did not tender payment of said
amount nor did he deposit the same in court, but instead sought for rescission of the sale. It is clear
that Bareng was in default on the unpaid balance of the price of the equipment from the date of filing
of the complaint by Alegria, and under Art. 2209 of the Civil Code, he must pay legal interests thereon
from said date.

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 LUZON BROKERAGE CO. VS MARITIME BUILDING CO.

DOCTRINE:

The distinction between contracts of sale and contract to sell with reserved title has been
recognized by this Court in repeated decisions upholding the power of promisors under contracts to
sell in case of failure of the other party to complete payment, to extra judicially terminate the
operation of the contract, refuse conveyance and retain the sums or installments already received,
where such rights are expressly provided for, as in this case.

FACTS:

Myers Corp sold a land to Maritime. In the agreement, they agreed on an installment plan and
that if Maritime missed a payment, the contract will be annulled and the payments already made will
be forfeited. Maritime failed to pay so Myers annulled the contract and did not return payments. SC
says Myers can do this because under contracts to sell, promisors, in case of failure of the other party
to complete payment, can extra judicially terminate the contract, refuse conveyance, and retain
installments already received, where such rights are provided.

In Manila, Myers owned 3 parcels of land w/ improvements. Myers then entered into a
contract called a “Deed of Conditional Sale” with Maritime Building. Myers sold the land for P1 Million.
They agreed on the manner of payment (installment, initial payment upon execution of contract,
interest rate). In the contract it was stipulated that in case of failure of buyer to pay any of the
installments, the contract will be annulled at the option of the seller and all payments made by the
buyer is forfeited.

Later on, the stipulated installment of P10k with 5% interest was amended to P5k with 5.5%
per annum. Maritime paid the monthly instalments but failed to pay the monthly instalment of March.
The VP of Maritime wrote to the Pres of Myers requesting for a moratorium on the monthly payment
of the installments because the company was undergoing financial problems. Myers refused. For the
months of March, April, and May, Maritime failed to pay and did not heed the demand of Myers.
Myers wrote Maritime cancelling the “Deed of Conditional Sale”. Myers demanded return of
possession of properties. Held Maritime liable for use and occupation amounting to P10k per month.

In the meantime, Luzon Brokerage was leasing the property from Maritime. Myers demanded
from Luzon the payment of monthly rentals of P10k. Myers also demanded surrender of property.
While actions and cross claims between Myers and Maritime were happening, the contract between
Maritime and Luzon was extended for 4 more years. Turns out, Maritime’s suspension of its payments
to Myers Corp arose from a previous event: An award of back wages made by the Court of Industrial
Relations in favor of Luzon Labor Union (employees employed by Luzon). FH Myers was a major
stockholder of Luzon Brokerage. FH Myers promised to indemnify Schedler (who controlled Maritime)
when Schedler purchased FH Myers’s stock in Luzon Brokerage company. (This indemnification is for
the award of back wages by the CIR). Schedler claims that after FH Myers estates closed, he was
notified that the indemnity on the Labor Union case will not be honored anymore. And so, Schedler
advised Myers Corp that Maritime is withholding payments to Myers Corp in order to offset the
liability when Myers heirs failed to honor the indemnity agreement. TC ruled Maritime in breach of
contract.

ISSUE:

Whether or not Myers can extra judicially terminate the contract?

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HELD:

Yes. Failure to pay monthly installments constitute a breach of contract. Default was not made
in good faith. The letter to Myers Corp means that the non-payment of installments was deliberately
made to coerce Myers Corp into answering for an alleged promise of the dead FH Myers. Whatever
obligation FH Myers had assumed is not an obligation of Myers Corp. No proof that the board of Myers
Corp agreed to assume responsibility to debts of FH Myers and heirs.

Schedler allowed the estate proceedings of FH Myers to close without providing liability. By
the balance (of payment) in the Deed of Conditional Sale, Maritime was attempting to burden Myers
Corp with an uncollectible debt, since enforcement against FH Myers estate was already barred.
Maritime acted in bad faith. Maritime’s contract with Myers is not the ordinary sale contemplated in
NCC 1592 (transferring ownership simultaneously with delivery). The distinction between contracts of
sale and contract to sell with reserved title has been recognized by this Court in repeated decisions
upholding the power of promisors under contracts to sell in case of failure of the other party to
complete payment, to extra judicially terminate the operation of the contract, refuse conveyance and
retain the sums or installments already received, where such rights are expressly provided for, as in
this case.

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 HOLGADO VS CA

FACTS:

Spouses Nombre and Cari-an died without a child. Nombre’s heirs include his nephews and
grandnephews. Two parcels of land formed part of the estate of Nombre and Cari-an. The Private
Respondents, heirs of Cari-an executed a Deed of Sale in favor of petitioners Escanlar and Holgado.
Petitioners paid P50,000.00 as a form of downpayment, but was unable to pay the remaining balance
(paid only 12 installments). Being former lessees, petitioners continued in possession of the said lots,
and continued to pay rent. Private Respondent later sold the said lots to the Chua spouses. Private
Respondent then filed an action for cancellation of sale against petitioners, for failure to pay the
balance. Petitioners however, sold their rights and interests over the said lots to Jayme, and turned
over possession.

The Regional Trial Court ruled that the Sale to petitioners was nullified since all the properties
of the estate had been transferred and titled to in the name of the Chua spouses. On appeal, the Court
of Appeals affirmed, questioned deed of sale (one with petitioners) is a contract to sell because it shall
become effective only upon approval by the probate court and upon full payment of the purchase
price.

ISSUE:

Whether or not the sale was a contract to sell and therefore, private respondents may rescind the
contract the moment the buyer fails to pay.

HELD:

The sale of rights, interests and participation as to 1/2 portion pro indiviso of the two subject
lots is a contract of sale for the following reasons:

First, private respondents as sellers did not reserve unto themselves the ownership of the
property until full payment of the unpaid balance of P225,000.00.

Second, there is no stipulation giving the sellers the right to unilaterally rescind the contract
the moment the buyer fails to pay within the fixed period. Prior to the sale, petitioners were already
in possession of the subject property as lessees. Upon sale to them of the rights, interests and
participation as to the 1/2 portion pro indiviso, they remained in possession, not in concept of lessees
anymore but as owners through symbolic delivery known as traditio brevi manu.

Under Article 1477 of the Civil Code, the ownership of the thing sold is acquired by the vendee
upon actual or constructive delivery thereof. In a contract of sale, the non-payment of the price is a
resolutory condition which extinguishes the transaction that, for a time, existed and discharges the
obligations created thereunder. The remedy of an unpaid seller in a contract of sale is to seek either
specific performance or rescission. In contracts to sell, ownership is retained by the seller and is not
to pass until the full payment of the price. Such payment is a positive suspensive condition, the failure
of which is not a breach of contract but simply an event that prevented the obligation of the vendor
to convey title from acquiring binding force. To illustrate, although a deed of conditional sale is
denominated as such, absent a proviso that title to the property sold is reserved in the vendor until
full payment of the purchase price nor a stipulation giving the vendor the right to unilaterally rescind
the contract the moment the vendee fails to pay within a fixed period, by its nature, it shall be declared
a deed of absolute sale.

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 BANDONG VS AUSTRIA

FACTS:

This case is about the land sold by the plaintiff sometime in 1905 for 350 to Antonio Ventenilla,
since decease. The contact stipulates that the plaintiff reserves the right to repurchase the land at the
same price and not subject to interest on the money or the products of the land, but in the month of
March of any year, if we repurchase. However, it is only in 1913 that the vendors offered to repurchase
in the month of March. This offer was declined on the ground that the right to repurchase had
prescribed: a contention which is renewed by the defendant in this action, who is the widow of original
vendee, deriving title through him.

ISSUE:

Whether or not the right to repurchase the land has prescribed.

HELD:

No, the plaintiff right has still not prescribed. The court believes that the right to repurchase
expired at the end of four years from the date of the contract, relying in support of this ruling on the
provisions of article 1508 of the Civil Code, which are as follows: The right mentioned in the preceding
article (right to repurchase), in the absence of an express agreement, shall last four years counted
from the date of the contract. In case of stipulation, the period of redemption shall not exceed ten
years.

Evidently, the parties having expressly agreed that the vendors should have the right to
repurchase in the month of March of any year after the date of the contract, the only statutory
limitation placed upon them in the exercise of that right is the limitation found in the second
paragraph of article 1508 of the Civil Code cited above, which limits the power of the vendor, even by
express agreement, to reserve a right to repurchase for a longer period than ten years. We conclude,
therefore, that the provisions of the contract of sale, whereby the parties undertook by express
agreement to secure to the vendors a right to repurchase in the month of March of any year after the
date of the contract, were valid and binding upon the parties for a period of ten years from the date
of the contract but wholly without force and effect thereafter. It is admitted that the vendors offered
to repurchase the land in question in the month of March, 1913, less than eight years from the date
of the contract.

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 REYES VS ROSALES

On July 29, 1902, Rivera sold a parcel of land to Reyes and Ordoveza for 800 pesos under pacto
de recto, on the condition, however, that the repurchase could not be made until after three years
from the date of the contract of sale. On May 29, 1903, Rivera sold his right to repurchase to Rosales
for 1,075 pesos. Rosales alleges that in January, 1908, he tendered 800 pesos to Reyes and Ordoveza
with the request that the land be surrendered to him in accordance with the contract entered into
between them and Rivera in 1902, but that they refused to accept the money and comply with his
request.

The objection to the complaint is that the right to repurchase had expired before Rosales
attempted to exercise it. This is based upon the first paragraph of article 1508 of the Civil Code, which
reads: "The right (to repurchase) . . . in the absence of an express agreement, shall last four years
counted from the date of the contract."

The contract of 1902 provided that the right to repurchase could not be exercised within three
years from the date of the contract.

The second paragraph of article 1508 reads: "Should there be an agreement, the period shall
not exceed ten years."

In the present case, the only stipulation of the parties with reference to the right to repurchase
was that it could not be exercised within three years from the date of the sale. Had it not been for this
condition, it is evident that the right would have expired four years from the date of the sale. But if it
were held that, regardless of such a provision, the redemption right expires within four years from the
date of the contract unless there is a special provision as to how long this right, once effective, shall
continue, many otherwise perfectly valid contracts can be conceived in which the redemption
privilege would be unenforceable.

"The starting point for calculating it (the redemption period) we understand is always the date
of the contract, since, although the Code only so states in the first of the two said cases, in the second
it is expressly prohibited that the period shall exist more than ten years, and it is clear that it would
last longer if it were agreed, for example, that it would not begin to run until a certain time had elapsed
after the date of the contract. This agreement, in so far as it might imply an extension of ten years, we
believe would be null as being contrary to the manifest spirit of the law."

We are of the opinion that the effect of the express stipulation or agreement in the contract
which we have been discussing was to extend the life of the contract to seven years from the date of
its execution.

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 MEDEL VS FRANCISCO

On May 16, 1917, Carlos N. Francisco sold the land belonging to him, described in transfer
certificate of title No. 3598 to Telesforo Calasan with a right of repurchase, which was noted on the
back thereof on May 16, 1917. Telesforo Calasan, in turn, sold this land to Ponciano Medel on
December 4, 1926.

On January 17, 1927 Ponciano Medel brought this action in the Court of First Instance for the
purpose of compelling the register of deeds to cancel the notation of the right of repurchase on the
title to this land on account of the time within which to exercise said right having expired, Ponciano
Medel contends that the period within which to exercise this right is four years while Carlos N.
Francisco, on the other hand, contends that it is ten years. The trial court admitting that the period is
ten years and it not having expired yet when this action was filed, denied the petition.

The only question involved in this appeal is whether the period for the repurchase of the land,
which Carlos N. Francisco reserved the right to do when the sale was made, is four or ten years. The
stipulation is noted on the title in the following terms:

"This sale is made with the condition that the vendor Carlos N. Francisco reserves the right to
repurchase, at the cost price of this sale, a fourth part of the land above described from which he can
remove earth for the sole and exclusive use of his earthen jar factory when, the same is established."

According to article 1508 of the Civil Code, the right of repurchase, in the absence of any
express agreement, lasts four years and, in case of stipulation, the period shall not exceed ten years.

A term means a period of time within which an act may, or must, be performed or a fact take
place. Applied to the right of repurchase, it is the time within which this right may be exercised. It
necessarily involves a beginning and an end of time. The clause of the contract quoted does not
express, in this sense, a stipulation of time. According to its terms, the vendor Carlos N. Francisco
reserved the right to redeem the land when he might have an earthen jar factory. This does not mean
that he could repurchase the land any time before he had the earthen jar factory, but when he had it
. That is especially so when it is taken into consideration that there is a condition imposed for the
repurchase of the land, to wit that it is to be used solely and exclusively for the manufacture of earthen
jars. According to this clause of the contract, it is evident that the establishment of an earthen jar
factory is the fact that would give birth to the right of repurchase. In this sense, what is really stipulated
in the clause is the suspension of the right of repurchase until the earthen jar factory has been
established. If this is all, the meaning of this clause is then clear that the parties did not stipulate any
time for exercising the right of repurchase; and, in accordance with the law, the right lasts no longer
than four years from the date of the contract, which period has already expired without having been
made use of.

These four years must be counted from the date of the contract notwithstanding the
suspension of the exercise of the right of repurchase, because the stipulation of this suspension is null
and void, it having exceeded four years, which constitutes the legal period of this right.

The judgment appealed from is reversed and it is held that the right of repurchase reserved
by the vendor Carlos N. Francisco has expired, and the cancellation by the register of deeds of the
notation of this right on the title must be, as it is hereby, ordered, without special pronouncement as
to costs. So ordered.

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 BALUYOT VS VENEGAS

FACTS:

Plaintiffs are the heirs of Crisanto Baluyot, who in life sold a parcel of land to defendant
Eulogio E. Venegas. The sale, executed on July 24, 1951 the condition of repurchase which stipulates
that at any time after the expiration of the period of ten (10) years to be computed from October 1,
1951, the Vendor, his heirs or successors-in-interest has the option and priority to purchase the afore
described parcel of land for the same consideration of P4,000.00.

On July 18, 1963 plaintiffs filed a complaint against the defendant compelling them to convey
the land pursuant to the agreement stipulated in the contact. The CFI ruled in favor of the plaintiff but
the CA reversed its decision ruling that the stipulation in the contract giving the vendor the "option"
to purchase back the land after 10 years is void and contrary to law. Hence, reason for this petition.

ISSUE:

Whether or not the plaintiff has the right to repurchase the land after 10 years.

HELD:

No, the petition is devoid of merits. The contract here was executed in July 1951. The option
or right to repurchase was sought to be exercised twelve (12) years thereafter, or in 1963. Indeed, by
express agreement it could not have been exercised except "after the expiration of the period of ten
(10) years . . . from October 1, 1951." Such a stipulation is not legally feasible because it is prohibited
by Article 1606, which limits the period for repurchase, in case there is an agreement, to the maximum
of ten years from the date of the contract. In other words, the right to repurchase in the present case
did not even arise, since by the time it was supposed to begin it was already interdicted by the law.

Plaintiffs stress the obligatory force of obligation arising from contract (Art. 1159 Civil Code).
But the same code provides in Article 1306 that while the contracting parties are free to establish any
claims or conditions they may deem advisable, the same must not be contrary to law, morals, good
customs, public order or public policy.

It is suggested that the defense in this case is in the nature of prescription of action and
consequently may not be pleaded for the first time on appeal, as defendant does in this case. However,
Article 1606 of the Civil Code concerning the period of repurchase is not a statute of limitation. It is a
rule of substantive law which goes into the validity of the period agreed upon, and requires no
affirmative plea in the answer to be applicable.

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 TACDORO VS ARCENAS

On December 22, 1958, petitioner-appellee Juan Tacdoro filed in the Court of First Instance
of Davao a petition (docketed as Misc. Case No. 374) alleging, among other things, that appellant Jesus
Arcenas had sold to the petitioner, con pacto de retro, a residential house situated at Bolton Street,
Davao City, and covered under Tax Declaration No. R-1452; that February 16, 1957 was the original
expiry dated fixed by the parties for the repurchase, but, upon subsequent agreement, the period was
extended for another year counted from the aforesaid date; and that the term of the repurchase had
expired without the right of repurchase having been exercised by the vendor. Accordingly, petitioner
prayed that the court order a judicial consolidation of ownership over the property sold pursuant to
the provisions of Article 1607 of the Civil Code.

The petition was heard on December 24, 1958, the date set by the petitioner. Appellant was
served a copy of the said petition two days previously, or on December 22, 1958; but no summons
was served by the court.

On January 6, 1959, the court a quo entered an order consolidating ownership of the property
in question in favor of the petitioner. On January 10, 1959, appellant filed a motion for
reconsideration, contending that the lower court had no jurisdiction to consider the petition of the
appellee for lack of summons, and that the denominated pacto de retro sale was in fact an equitable
mortgage. This motion was denied by the court in its order of January 21, 1959.

From the two orders aforesaid, Jesus Arcenas appealed to us on points of law.

The appeal is well taken. Article 1607 of the Civil Code states:

"In case of real property, the consolidation of ownership in the vendee by virtue of the failure
of the vendor to comply with the provisions of article 1616 shall not be recorded in the Registry of
Property without a judicial order, after the vendor has been duly heard." (Italics supplied)

The code did not provide for any specific procedure to be observed in securing the judicial
order above-mentioned. Accordingly, we should fall back on the ordinary rules of procedure
applicable. As correctly pointed out by the appellant, the petition to consolidate ownership under the
article aforequoted does not partake of the nature of a motion, 1 it not being merely an incident to
an action or a special proceeding (see Sec. 1, Rule 26, Rules of Court; 60 C.J.S. 7), but is an ordinary
civil action cognizable by the Court of First Instance. As such ordinary action, it should be governed by
the rules established for summons found in Rule 7 of the Rules of Court, stating, among other things,
that upon the "filing of the complaint, the clerk of court shall forthwith issue the corresponding
summons to the defendant" (Sec. 1). The defendant would then be entitled to a period of fifteen (15)
days from service of such summons within which to file either a motion to dismiss the petition (Sec.
1, Rule 8) or an answer (Sec. 1, Rule 9). The failure of the court to properly observe these rules is
sufficient cause for validly attacking its consequent judgments and or orders even on jurisdictional
grounds

That the vendor or retro should be made a party-defendant to the proceedings and, therefore,
be entitled to notice of the same, is clearly inferable from the codal provision that the judicial order
consolidating ownership in the vendee a retro shall not issue unless "after the vendor has been duly
heard" (Art. 1607, Civil Code, supra); which statement would also imply that the proceedings therein
to be taken are in no way to be construed as merely summary in nature. This conclusion is further
fortified by other provisions of the new Civil code such as articles 1602, 1603, 1604, 1605 and 1606,

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which are all indicated of the legislative intent to accord the vendor a retro the maximum safeguards
for the protection of his legal rights under the true agreement of the parties. Experience has
demonstrated too often that many sales with right of repurchase have been devised only to
circumvent or ignore our usury laws and for this reason, the law looks upon them with disfavor (Report
of the Code Commission, pp. 63-64). When, therefore, Article 1607 speaks of a judicial order after the
vendor shall have been duly heard, it contemplates none other than a regular court proceeding under
the governing Rules of Court, wherein the parties are given full opportunity to lay bare before the
court their real covenant. Furthermore, the obvious intent of our Civil Code, in requiring a judicial
confirmation of the consolidation in the vendee a retro of the ownership over the property sold, is not
only to have all doubts over the true nature of the transaction speedily ascertained and decided, but
also to prevent the interposition of buyers in good faith while such determination is being made.
Under the former method of consolidation by a mere extra-judicial affidavit of the buyer a retro, the
latter could easily cut off any claims of the seller by disposing of the property, after such consolidation,
to strangers in good faith and without notice. The chances of the seller a retro to recover his property
would thus be nullified, even if the transaction were really proved to be a mortgage and not a sale.

The Court below, therefor, erred in considering that judicial consolidation of ownership under
Article 1607 of the new Civil Code can be had by a mere motion with three days’ notice, instead of
requiring an independent proceeding, for which docket fees are chargeable. As aforesaid, a motion
could only exist as an incident to a principal suit or proceeding.

It is still premature to decide here and now whether the agreement in question is a true pacto
de retro sale or in reality a mere equitable mortgage. Upon the other hand, the arguments advanced
by the appellant convince us that his exceptions to the orders appealed from were not taken merely
for frivolous reasons.

Wherefore, the orders appealed from are set aside; and appellant Jesus Arcenas is hereby
given a period of 15 days from the finality of this judgment within which to file in the court below his
answer to the petition. The case is ordered remanded to the lower court for further proceedings in
accordance with this opinion. Costs in this instance against petitioner-appellee Juan Tacdoro.

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 ONGCOCO VS HONORABLE JUDGE OF CFI - BATAAN

FACTS:

Felix Ongoco and Belen Consunji, spouses, were owners of a parcel of land, 695 square meters
in area, at Abucay, Bataan, covered by Transfer Certificate of Title No. T-8185 in their names. On May
2, 1959 the aforesaid spouses sold their land to Apolonio Soriano and Cirila Mina, for P1,500.00, with
right to repurchase within three years from said date. No repurchase was made within the agreed
period. On August 29, 1962, Apolonio Soriano and Cirila Mina filed in the Court of First Instance of
Bataan a "petition" for an order declaring them the absolute owners of the land and transferring the
certificate of title to their names.

Although the petition was docketed as "Special Civil Case No. 2827" the respondents-vendors
were not served with summons but only sent a copy of the petition by registered mail. The petitioners
asked that the case be set for hearing on September 11, 1962 at 8:00 a.m. On September 4, 1962,
however, respondents-vendors moved for postponement of the hearing.

On September 11, 1962 , the date set for hearing, respondents-vendors were not present in
court when the case was called. The Court of First Instance denied their motion for postponement and
thereupon rendered judgment declaring the petitioners-vendees absolute owners of the land and
ordering registration thereof in their names.

Respondents-vendors moved, on October 4, 1962, to set aside the judgment but on October
25, 1962 the motion was denied. Subsequently, on February 26, 1963, the respondents-vendors in
said case filed the present suit herein for certiorari.

Petitioners contend that respondent Judge gravely abused his discretion and/or acted without
or in excess of jurisdiction in rendering the judgment aforementioned.

ISSUE:

WON respondents-vendors were deprived of their right to be heard, in violation of Article 1607 of the
New Civil Code?

HELD:

Article 1607 of the New Civil Code provides:

ART. 1607. In case of real property, the consolidation of ownership in the vendee by virtue of
the failure of the vendor to comply with the provisions of article 1616 shall not be recorded in the
Registry of Property without a judicial order, after the vendor has been duly heard.

This Court has already ruled that the foregoing article requires the filing of an ordinary civil
action and, consequently, service of summons on parties-defendants as well as opportunity to answer
or move to dismiss within 15 days therefrom. We quote from Tacdoro vs. Arcenas:

The code did not provide for any specific procedure to be observed in securing the judicial order
above-mentioned. Accordingly, we should fall back on the ordinary rules of procedure applicable. As
correctly pointed out by the appellant, the petition to consolidate ownership under the article
aforequoted does not partake of the nature of a motion, it not being merely an incident to an action
or a special proceeding, but is an ordinary civil action cognizable by the Court of First Instance. As such
ordinary action, it should be governed by the rules established for summons found in Rule 7 of the Rules

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of Court, stating, among other things, that upon the "filing of the complaint, the clerk of court shall
forthwith issue the corresponding summons to the defendant" (Sec. 1). The defendant would then be
entitled to a period of fifteen (15) days from service of such summons within which to file either a
motion to dismiss the petition (See. 1, Rule 8) or an answer (Sec. 1, Rule 9). The failure of the court to
properly observe these rules is sufficient cause for validly attacking its consequent judgments and/or
orders even on jurisdictional grounds

That the vendor a retro should be made a party-defendant to the proceedings and, therefore,
be entitled to notice of the same, is clearly inferable from the codal provision that the judicial order
consolidating ownership in the vendee a retro shall not issue unless "after the vendor has been duly
heard" (Art. 1607, Civil Code, supra); which statement would also imply that the proceedings therein
to be taken are in no way to be construed as merely summary in nature. This conclusion is further
fortified by other provisions of the new Civil Code such as articles 1602, 1603, 1604, 1605 and 1606,
which are all indicative of the legislative intent to accord to the vendor a retro the maximum
safeguards for the protection of his legal rights under the true agreement of the parties. Experience
has demonstrated too often that many sales with right of repurchase have been devised only to
circumvent or ignore our usury laws and for this reason, the law looks upon them with disfavor. When,
therefore, Article 1607 speaks of a judicial order after the vendor shall have been duly heard, it
contemplates none other than a regular court proceeding under the governing Rules of Court, wherein
the parties are given full opportunity to lay bare before the court their real covenant. Furthermore, the
obvious intent of our Civil Code, in requiring a judicial confirmation of the consolidation in the vendee
a retro of the ownership over the property sold, is not only to have all doubts over the true nature of
the transaction speedily ascertained and decided, but also to prevent the interposition of buyers in
good faith while such determination is being made. Under the former method of consolidation by a
mere extra-judicial affidavit of the buyer a retro, the latter could easily cut off any claims of the seller
by disposing of the property, after such consolidation, to strangers in good faith and without notice.
The chances of the seller a retro to recover his property would thus be nullified, even if the transaction
were really proved to be a mortgage and not a sale.

From the facts of this case it is clear that the requisite of an ordinary civil action has not been
followed. For, as stated, no summons was served on the respondents-vendors. Assuming that
respondents-vendors' motion to postpone may be taken as voluntary submission to the lower court's
jurisdiction — producing the effect or service of summons — still, they should have been given 15 days
therefrom to file an answer. The Court of First Instance instead forthwith rendered judgment, so that
respondents-vendors were deprived of their right to be heard, in violation of Article 1607 of the New
Civil Code.

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 HEIRS OF ARCHES VS VDA. DE DIAZ

On July 6, 1966 the heirs of Jose A. Arches filed a complaint against Maria B. Vda. de Diaz in
the court a quo, alleging inter alia: that on January 21, 1954 the defendant executed in favor of the
late Jose A. Arches a deed of sale with pacto de retro * over a parcel of land known as Lot No. 2706 of
the Cadastral Survey of Capiz for and in consideration of P12,500.00 that Jose A. Arches during his
lifetime filed a petition on November 20, 1958 in Cadastral Case No. 6, L.R.C. Record No. 338 of the
Court of First Instance of Capiz, to consolidate ownership over the lot; that the defendant opposed
the petition alleging among other things that the said deed of sale with pacto de retro did not express
the true intention of the parties, which was merely to constitute a mortgage on the proper security
for a loan; that after hearing the case on the merit trial court, in its order dated March 8, 1960, denied
the petition holding in effect that the contract was an equitable mortgage; that Jose A. Arches
appealed to the Court of Appeals, which on December 29, 1964 rendered judgment affirming the
order of the trial court; that Jose A. Arches filed in this Court a petition for certiorari to review the
decision of the appellate court, but in a resolution dated March 29, 1965, which became final and
executory on May 29, 1965, this Court dismissed the petition on the ground that the issues involved
were factual; that in addition to the sum of P12,500.00, the consideration mentioned in the deed of
sale a retro, Jose A. Arches spent P1,543.70 in connection with the reconstitution of the title to Lot
No. 2706 in the name of the vendor and in paying the real estate taxes on said lot for the years 1951
to 1960; that Jose A. Arches died on August 18, 1965, before he could file an action in court for the
collection of the aforestated sums from the defendant; that on May 31, 1966, the petitioners, as
forced heirs of the deceased Jose A. Arches, demanded by registered letter from defendant the
payment of the sum of P12,500.00, the consideration mentioned in the sale a retro, and
reimbursement of the sum of P1,543.70; and that the defendant failed and refused to pay. They,
therefore, prayed among things that the defendant be ordered to pay the aforementioned sums, plus
damages.

Instead of answering the complaint the defendant moved to dismiss it on the ground that the
first cause of action recovery of the sum of P12,500.00 was barred by the statute limitations and that
the second cause of action for reimbursement of the sum of P1,543.70, standing alone not within the
jurisdiction of the trial court. The plaintiffs filed their opposition. The court overruled the plea of
prescription, stating that the ten-year prescriptive commenced on August 29, 1965, when the
resolution of this Court dismissing the petition for certiorari filed by the late Jose A. Arches became
final and executory, and not from January 21, 1955, the date the one-year period of repurchase
expired, as claimed by the defendant. The defendant moved to reconsider, alleging res judicata and
multiplicity of suits as additional grounds for dismissal. In an order dated September 8, 1966, the trial
court set aside its previous order and dismissed the complaint. Said the court:

When an action is barred by a prior judgment, by res judicata and estoppel, such action in
effect is devoid of cause. Failure to specifically invoke it in the motion to dismiss does not operate as
waiver or abandonment thereof. This should be more so, inasmuch as the facts are apparent from the
complaint itself.

For it appears that when the late Jose A. Arches, father and predecessor in interest of plaintiffs
herein, petitioned this Court on November 20, 1958, to consolidate in his name ownership and title
over Lot 2706, Capiz Cadastre, by virtue of the alleged sale a retro executed by defendant herein in
his favor on January 21, 1954, with reservation of vendor's right to repurchase in one year, said Jose
A. Arches, had two remedies, inconsistent though they certainly were — (a) to consolidate title and

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ownership, and (b) to foreclose in the event the deed of sale a retro be declared one of equitable
mortgage.

Said Jose A. Arches elected to consolidate without alternatively opting to foreclose. When he
opted to consolidate and prosecuted his option to a final determination he was thereby barred from
pursuing the other alternative and inconsistent remedy of foreclosure of mortgage or collection of
debt.

Having failed to obtain a reconsideration of the order of dismissal, the plaintiffs instituted the
instant appeal.

We find the appeal well taken. In the first place, res judicata as a ground to dismiss was waived
by the appellee when she failed to include it in her motion for that purpose. Rule 15, Section 8, of the
Rules of Court provides that "(A) motion attacking a pleading or proceeding shall include all objections
then available, and all objections not so included shall be deemed waived." Secondly, the decision of
the cadastral court, holding in effect that the sale with pacto de retro was an equitable mortgage and
consequently dismissing the petition to consolidate ownership, did not constitute an adjudication of
the right to foreclose the mortgage or to collect the indebtedness. In the case of Correa vs. Mateo and
Icasiano,1 wherein an unrecorded pacto de retro sale was construed as an equitable mortgage, it was
ruled that the plaintiff had the right "within sixty days after final judgment, for a failure to pay the
amount due and owing him, to foreclose his mortgage in a proper proceeding and sell all or any part
of the ten parcels of land to satisfy his debt." In effect this Court recognized the right of the plaintiff
to enforce his lien in a separate proceeding notwithstanding the fact that he had failed to obtain
judgment declaring him the sole and absolute owner of the parcels of land in question.

The law abhors injustice. It would be unjust in this case to allow the defendant to escape
payment of his debt and, worse still, to rationalize such a result by his very claim that he is a debtor
and not, as the plaintiff says, a vendor of property in favor of the latter. Strictly speaking, where the
petition of the vendee in a pacto de retro sale is for a judicial order pursuant to Article 1607 of the
Civil Code, so that consolidation of ownership by virtue of the failure of the vendor to redeem may be
recorded in the Registry of Property, the right of action to foreclose the mortgage or to collect the
indebtedness arises from the judgment of the court declaring the contract as equitable mortgage.
Although an alternative prayer to this effect may be made in the petition, the same cannot but be
conditional, that is, only in the event such a declaration made, contrary to the plaintiff's claim and the
principal relief he seeks. His failure to make that alternative prayer, and the failure of the court to
grant it in the judgment dismissing the petition, should not be considered as a bar to collecting the
indebtedness in a proper action for that purpose.

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 LABASAN VS LACUESTA

Sometime in 1927, spouses Lacuesta were the owners of an unregistered, irrigated riceland
located in the municipality of Badoc, province of Ilocos Norte, and declared for taxation purposes
under Tax Declaration No. 026181 in the name of Hermenigilda Lacuesta. On April 20, 1927, the
spouses executed in favor of spouses Labasan a document written in the Ilocano dialect, the English
translation is as follows:

We, the spouses, Clemente Lacuesta and Hermenigilda Lacuesta, both of legal age, are
residents of barrio Salapasap No. 16, Badoc, Ilocos Norte. We declare the truth that in view of our
urgent necessity for money, we thought of selling one parcel of land owned by us situated in Sitio
Mabusay No. 18 within the jurisdiction of said municipality, to the spouses Gelacio Labasan and
Marcela Coloma, residents of barrio Puzo of the municipality of Pinili, Ilocos Norte, for the amount of
TWO HUNDRED TWENTY-FIVE (P225.00) pesos, Philippine Currency, which we have already received
in lump sum.

The sale of this parcel of land owned by us to the said spouses can be reconveyed provided ten
years shall not have elapsed and we have the same amount of the money which we had taken from
them, as agreed upon by us.

This parcel of land has a circumference of 240 square meters, yielding two 'uyones' and three
baares of palay. Bounded on the north by Fernando Lacuesta and Vicente Coloma; on the east by
Matias Coloma, on the south by Valeriana Lacuesta and on the west by Fernando Lacuesta.

We further agreed that during the period of their ownership of this parcel of land, I will be
responsible for all tenancy matters over this land.

For this reason this receipt is made as security to the spouses for all matters pertaining thereto.
But in case there shall arise adverse claims with respect to the ownership of the vendees over this
parcel of land I and my wife shall answer the same as well as defray all expenses of litigation an if we
shall be adjudged otherwise, and, if the vendees of this parcel of land shall be deprived of their
ownership, we shall give another parcel of land with the same yield and area so that our sacred
agreement shall not be beclouded with bad faith.

In witness to the truth of what we have done, we sign our names for those who know how to
write and affix the cross for those who do not know how to write, together with the signatures of the
witnesses.

Done this 20th of April, 1927.

On April 23, 1948 spouses Lacuesta filed with the Court of First Instance of Ilocos Norte a
complaint against spouses Labasan, seeking the reconveyance of the parcel of land subject of the
above-quoted document. During the pendency of the case, the Lacuesta died and were substituted by
their children, all surnamed Lacuesta. In the meantime, defendant Gleacio Labasan also died and was
substituted by his children.

In the complaint, it was alleged that spouses Lacuesta secured a loan P225.00 from Gelacio
Labasan and as security for the payment of that loan, they offered their riceland; sometime in 1943,
they tendered payment of the loan but Labasan refused to accept it; after "liberation" they offered
again to pay their loan and demanded the return of their land but they were once more refused
because defendants claimed that they were the owners of the property.

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 In the answer to the complaint only one special defense was raised — that the Lacuesta
conveyed by means of a written document the land with right to repurchase the same within the
period of ten years, but because of plaintiff's failure to exercise that right within the stipulated period,
the vendees a retro have became the absolute owners of the land and the latter in fact donated the
property to their son Roberto Labasan who is now the owner of the property.

On the basis of the evidence adduced by the parties the trial court presided then by Judge
Wenceslao M. Ortega rendered on May 11, 1959 a decision declaring that the document executed by
the Lecuestas was a pacto de retro sale and that the latter lost their right to redeem the land for not
having taken any step within the agreed of ten years.

The Court of Appeals, in its decision of February 18, 1966, set aside the judgment of the trial
court and declared the contract an equitable mortgage and ordered the defendants Labasan to
reconvey the land to the Lacuestas without the latter paying the loan of P225.00 inasmuch as the same
was deemed paid from the fruits of the property which the Labasans had been receiving for the past
thirty-two years.

We affirm the decision of the appellate court under well-settled principles embodied in the
law and existing jurisprudence.

1. It is a basic fundamental rule in the interpretation of a contract that if the terms thereof are
clear and leave no doubt upon the intention of the contracting parties the literal meaning of the
stipulation shall control, but when the words appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former.

It is evident that the terms of the document are not clear and explicit on the real intent of the
parties when they executed the aforesaid document. For instance, the words or clauses, vis: "urgent
necessity for money," "selling the land," ownership," I will be responsible for all tenancy matters,"
"This receipt is made as security," are sufficient to create a doubt as to what the document truly
purports to be. Under those terms is the contract one of loan with security or a pacto de retro sale?

2. In view of the ambiguity caused by conflicting terminologies in the document, it becomes

necessary to inquire into the reason behind the transaction and other circumstances accompanying it
so as to determine the true intent of the parties. Once the intent becomes clear then it shall be made
to prevail over what on its face the document appears to be. Each case is to be resolved on the basis
of the circumstances attending the transaction.

Article 1371, New Civil Code: In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered.

In the case at bar, the collective weight of the following considerations lead Us to agree with
the findings and conclusion of the appellate court that the document is a mere loan with security and
not a pacto de retro sale.

First, the reason behind the execution of the document was that the Lacuestas were in "urgent
necessity for money" and had to secure a loan of P225.00 from Gelacio Labasan for which the riceland
was given as "security”. The Court through Justice Norberto Romualdez stated that while it was true
that plaintiffs were aware of the contents of the contracts, the preponderance of the evidence showed
however that they signed knowing that said contracts did not express their real intention, and if they
did so notwithstanding this, it was due to the urgent necessity of obtaining funds.

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 Second, the amount of P225.00, even in 1927, was too inadequate for a purchase price of an
irrigated riceland with an alleged "perimeter" of 240 meters and an "area of 1,269 square meters"
yielding annually one "uyon" and five "baares" of palay, the land being valued at the time for no less
than P1,000.00.

Article 1602 paragraph 1 of the New Civil Code expressly provides that in case of doubt a
contract purporting to be a sale with a right to repurchase shall be construed as an equitable mortgage
when the price or consideration of the sale is unusually inadequate.

Third, although symbolically the possession of the property was transferred to Gelacio
Labasan, it was Lacuesta, the supposed vendor, who continued to be in physical possession of the
property, took charge of its cultivation, and all tenancy matters. The second paragraph of Article 1602
of the New Civil Code provides that when the vendor remains in possession as lessee or otherwise,
the contract shall be construed as an equitable mortgage.

Fourth, Gelacio Labasan, the supposed vendee a retro never declared the property in his name
for taxation purposes nor did he pay the taxes thereon since the execution of the document in 1927.
Roberto Labasan, now one of the petitioners and who claims to have acquired the property from his
father Gelacio by way of donation, declared the property in his name under Tax Declaration No. 55683-
C-1 only sometime in 1944. In Santos v. Duata, this Court, in affirming a decision of the Court of
Appeals, considered the facts that the vendor remained in possession of the land and continued
paying the taxes thereon significant circumstances which justified a judgment holding the transaction
between the parties as an equitable mortgage and not a pacto de retro sale, thereby applying Article
1602 of the New Civil Code.

Fifth, as noted in the decision of the appellate court, the supposed vendees a retro, now the
herein petitioners, failed to take any step since 1927 to consolidate their alleged ownership over the
land. Under Article 1509 of the Old or Spanish Civil Code, if the vendor failed to redeem within the
period agreed upon, the vendee's title became irrevocable by the mere registration of an affidavit of
consolidation. Thus, under the old law, a judicial order was not necessary as is required now under
Article 1607 of the New Civil Code. The failure of Gelacio Labasan or his heirs to carry out that act of
consolidation strongly corroborates the claim of Lacuesta that there was no intent at all on the part
of the parties to transfer ownership of the riceland in question.

Finally, We have the rule that in case of any doubt concerning the surrounding circumstances
in the execution of a contract, the least transmission of rights and interests shall prevail if the contract
is gratuitous, and, if onerous the doubt is to be settled in favor of the greatest reciprocity of interest.

With the foregoing considerations, there is no further necessity for Us to dwell on the other
reasons given by the Court of Appeals in rendering judgment in favor of private respondents, which
reasons We believe are not decisive of the issue posed in this case.

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 BUTTE VS MANUEL UY AND SONS, INC

FACTS:

Jose V. Ramirez was a co-owner of a house and lot located at Sta Cruz, Manila. Upon the death
of Jose V. Ramirez, all his property including the 1/6 undivided share was bequeathed to his children
and grandchildren and 1/3 of the free portion to Mrs. Angela M. Butte. Mrs. Marie Garnier Vda de
Ramirez sold the property to Manuel Uy and Sons, Inc. including the undivided 1/6 share property in
Sta Cruz, Manila. On the same day, a copy of letter regarding the above-mentioned sell was sent to
Bank of the Philippine Islands, as administrator of the property of Jose V. Ramirez. Mrs. Angela M.
Butte filed a case against Manuel Uy and Sons, Inc for legal redemption when the latter refused Mrs.
Butte to redeem the said sold property.

ISSUE:

Whether or not Mrs. Angela M. Butte has the right of succession to exercise legal redemption over
the share sold by Mrs. Marie Garnier Vda de Ramirez.

HELD:

Yes, Mrs. Angela M. Butte has the right of succession to exercise legal redemption over the
share sold by Mrs. Marie Garnier Vda de Ramirez for being one of the co-owners of the heirs of the
1/6 undivided property of Jose V. Ramirez.

By law, the rights to the succession of a deceased person are transmitted to his heirs from the
moment of his death, and the right of succession includes all property, rights and obligations that
survive the decedent so from the instant of Jose Ramirez’ death, his heirs became co-owners of an
undivided share and co-owner of the whole property thus they became entitled to exercise the right
of legal redemption as soon as another co-owner has sold his undivided share to a stranger.

According to Article 1620 of the Civil Code of the Philippines, a co-owner of a thing may
exercise the right of redemption in case the shares of all the other co-owners or of any of them, are
sold to a third person. If the price of the alienation is gross expensive, the redemptioner shall pay only
a reasonable one.

Should two or more co-owners desire to exercise the right to redemption, they may only do
so in proportion to the share that may respectively have in the thing owned in common.

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 CRESENCIANO DE LA CRUZ VS JULIO CRUZ

FACTS:

The spouses Julio Cruz and Zenaida Montes were once the owners of a parcel of land covered
by Transfer Certificate of Title No. 10680 of the Office of the Registry of Deeds for Pasay City, which
parcel of land is more particularly described therein as follows:

A PARCEL OF LAND (Lot 10) of the subdivision plan Psd-790, being a portion of the land
described on plan Psu-2031-Amd. 2-A, LRC (G.L.R.O.) Record No. 2484, situated in the Barrio of
Malibay, Municipality of Pasay, Province of Rizal. Bounded on NE., by Lot 9 of the subdivision plan:
containing an area of SIX HUNDRED SIXTY TWO (662) SQUARE METERS.'" On 16 December 1965, Julio
Cruz and Zenaida Montes sold a portion of the aforesaid parcel of land to the plaintiff-appellant,
Cresenciano de la Cruz. The deed of absolute sale described the portion sold as —

... a portion with an area of Three Hundred and Thirty-One Square Meters (331 sq. m.) on the northern
part ..

Inserted in the deed was a stipulation, reading as follows:

It is hereby agreed that a plan will be made on the whole parcel of land above-described
showing the portion with an area of Three Hundred and Thirty-one Square Meters (331 sq. m), hereby
conveyed, and the remaining portion with an area of Three Hundred Thirty-One Square Meters (331
sq. m.), together with the technical description of each portion, that is, the portion hereby conveyed,
and the portion remaining.

On 28 February 1966, Julio Cruz and Zenaida Montes sold the remaining portion of the land to Alfonso
Miranda. The deed of sale described the portion sold as —

... that unsegregated portion with an area of THREE HUNDRED THIRTY ONE (331) SQUARE METERS
bordering C. Jose and F. Francisco Streets, Malibay, Pasay City, which is at the southern part of the
parcel of land covered by T.C.T. No. 10680 above-described.

Under date of 25 April 1966, Cresenciano de la Cruz, filed a complaint against Julio Cruz, Zenaida
Montes and Alfonso Miranda, praying the court to have himself (plaintiff-appellant Cresenciano de la
Cruz) declared as entitled to purchase, by way of pre-emption and legal redemption, the one-half (½)
portion of the land that was sold to Miranda.

ISSUES:

1. The trial court erred in holding that plaintiff-appellant and defendants-appellees Julio Cruz and
Zenaida Montes are not co-owners of the parcel of land embraced in Transfer Certificate of Title No.
10680 of the Office of the Register of Deeds for Pasay City.

2. The trial court erred in concluding that plaintiff is not entitled to the right of pre-emption or legal
redemption.

HELD:

Appellant's theory, under his first two assignments of error, is that after he bought from the
spouses Julio Cruz and Zenaida Montes the northern half of the parcel of land embraced by Transfer
Certificate of Title No. 10680, he and the spouses became co-owners of the said parcel of land, "the

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plaintiff owning one-half (½) (northern part) and defendants Julio Cruz and Zenaida Montes owning
the remaining one-half (1/2) portion (southern part)"; or that, "considering the situation or location
of the parts being owned by plaintiff and defendants Julio Cruz and Zenaida Montes, respectively, ...
the parts are adjacent to each other, and consequently, plaintiff and defendants Julio Cruz and Zenaida
Montes are adjacent owners", such that plaintiff has the right of pre-emption or legal redemption over
the portion that was subsequently sold to Alfonso Miranda

The foregoing theory is untenable. Tested against the concept of co-ownership, as

authoritatively expressed by the commentators, appellant is not a co-owner of the registered parcel
of land, taken as a unit or subject of co-ownership, since he and the spouses do not "have a spiritual
part of a thing which is not physically divided", nor is each of them an "owner of the whole, and over
the whole he exercises the right of dominion, but he is at the same time the owner of a portion which
is truly abstract ...”. The portions of appellant-plaintiff and of the defendant spouses are concretely
determined and identifiable, for to the former belongs the northern half, and to the latter belongs the
remaining southern half, of the land. That their respective portions are not technically described, or
that said portions are still embraced in one and the same certificate of title, does not make said
portions less determinable or identifiable or distinguishable, one from the other, nor that dominion
over each portion less exclusive, in their respective owners. Hence, no right of redemption among co-
owners exists.

Nor is plaintiff-appellant entitled, as an adjoining owner, to the right of pre-emption or

redemption over the southern portion of the parcel of land because he had not alleged in his
complaint and has not proved that said portion is so small and so situated that a major portion thereof
cannot be used for any practical purpose within a reasonable time, having been bought merely for
speculation.

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