SILVESTRE DIGNOS VS.

COURT OF APPEALS

G.R. NO. 59266 FEBRUARY 29, 1988

BIDIN, J.

DOCTRINE: A deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale"
where nowhere in the contract is 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.

FACTS: The Dignos spouses sold their land to Atilano Jabil, payable in two installments with the
assumption of indebtedness with the First Insular Bank of Cebu. The Spouses sold the same land in favor
of the Cabigas spouses, who were U.S. citizens. The Dignos spouses refused to accept the balance of the
purchase price from Jabil. Jabil discovered the second sale and filed a complaint before the CFI. The Dignos
spouses aver that the instrument executed was merely a contract to sell, and nothing in the instrument
indicates that the vendors thereby transfer their ownership.

ISSUE: Whether or not a contract indicated as a "Deed of Conditional Sale" may be denominated as an
absolute contract of sale

RULING: Yes, a deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale"
in the absence of any stipulation that title to property is reserved in the vendor until full payment of the
purchase price and that the vendor has the right to unilaterally rescind the contract the moment the
vendee does not pay within the fixed period. In the absence of these provisos, the instrument is one of an
absolute contract of sale. All the elements of a valid contract of sale are present and the Dignos spouses
never notified Jabil that they were rescinding the contract. It is evident that when petitioners sold said
land to the Cabigas spouses, they were no longer owners of the same and the sale is null and void.
DELFIN TAN VS. ERLINDA BENOLIRAO

G.R. NO. 153820 OCTOBER 16, 2009

BRION, J.

DOCTRINE: Where the seller promises to execute a deed of absolute sale upon the completion by the
buyer of the payment of the purchase price, the contract is only a contract to sell.

FACTS: Spouses Benolirao and spouses Taningco were the co-owners of a parcel of land. They executed a
Deed of Conditional Sale in favor of Tan. The vendors demand the payment of the remaining balance,
otherwise would rescind the conditional sale. Tan refused to comply with the demand and claimed that
the annotation on the title constituted an encumbrance on the title of the property. Tan caused the
annotation on the title of a notice of lis pendens. The vendors sold the subject land to another party and
moved for the cancellation of the notice of lis pendens, claiming that the contract was merely a contract
to sell and Tan had no right to cause for the notice of lis pendens.

ISSUE: Whether or not a contract indicating that upon full payment of the purchase price, the seller shall
execute a deed of absolute sale is considered as a contract to sell

RULING: Yes, the contract between the parties is merely a contract to sell and therefore does not vest any
right or ownership to the buyer until the full payment of the purchase price. Jurisprudence has established
that where the seller promises to execute a deed of absolute sale upon the completion by the buyer of
the payment of the price, the contract is only a contract to sell. Thus, while the contract is denominated
as a Deed of Conditional Sale, the presence of the above-quoted provision identifies the contract as being
a mere contract to sell.
LINO ARTATES VS. DANIEL URBI

G.R. NO. L-29421 JANUARY 30, 1971

REYES, J.B.L., J.

DOCTRINE: The provision under the Public Land Law against the alienation or encumbrance of public lands
granted within 5 years from the issuance of the patent, is mandatory and a sale made in violation thereof
is null and void.

FACTS: Spouses Lino Artates and Manuela Pojas sought the annulment of the execution of a homestead
issued to them in 1952, by the land authorities. The public sale conducted was made to satisfy a judgement
against the spouses and awarded to Daniel Urbi in a civil case for physical injuries. The property was sold
to the only bidder. The spouses filed a complaint alleging that the sale of the homestead to satisfy an
indebtedness that occured in 1955, violated the Public Land Law, exempting said property from execution
from any debt contracted within five years and that Urbi, with the intention of fraud, sold the same to a
minor.

ISSUE: Whether or not a property violating the Public Land Law may be an object of a contract of sale

RULING: No, the subject property may not be an object of a contract of sale. Under Art 1347 of the Civil
Code, the subject matter must be licit and must be within the commerce of man. A contract whose object
is outside the commerce of man is considered void under Art 1409 of the same code. The execution of the
sale is null and void and the possession of the land should be returned to the spouses, in accordance with
the Public Land Law.
HEIRS OF ZAMBALES VS. COURT OF APPEALS

G.R. NO. L-54070 FEBRUARY 28, 1983

MELENCIO-HERRERA, J.

DOCTRINE: A bilateral promise to buy and sell a homestead lot entered into within the five-year
prohibition is null and void for contravening the Public Land Law. Said law does not distinguish between
executory and consummated sales.

FACTS: Spouses Zambales were homestead patentees of a parcel of land issued in 1955. They claim that
Nin Bay Mining Corp. removed silica sand from their land and destroyed the plants and improvements
thereto. A compromise agreement was entered into in 1959, between the parties for the transfer of the
property and for the corporation to pay the purchase price. The corporation thereafter sold the land to
Joaquin Preysler. Ten years after the trial court's decision on the said agreement, the spouses filed a civil
case, contending that they were unschooled and did not understand the agreement made between them
and the corporation and it was never their intention to sell the said lot.

ISSUE: Whether or not a compromise agreement conveying transfer of ownership of a homestead lot and
payment of purchase price made within the five-year prohibition is void

RULING: Yes, the compromise agreement was in violation of the Public Land Law which prohibits
alienation and encumbrance of a homestead lot within the five years from the date of issuance. The sale
of a homestead lot within the five-year prohibitory period is illegal and void. The law does not distinguish
between executory and consummated sales. There was an actual executory sale perfected during the
period of prohibition except that it was reciprocally demandable thereafter and the agency to sell to any
third party was deferred until after the expiration of the prohibitory period.
ANDRES QUIROGA VS. PARSONS HARDWARE CO.

G.R. NO. L-11491 AUGUST 23, 1918

AVANCEÑA, J.

DOCTRINE: In order to classify a contract, due regard must be given to its essential clauses.

FACTS: Andres Quiroga and J. Parsons entered into a contract where the former shall furnish beds for the
latter's establishment under certain conditions and grants Parsons the exclusive rights to sell his beds in
the Visayan Islands. Quiroga, in a complaint, assert that Parsons violated certain obligations embodied in
the contract. None of the alleged obligations were imputed on the contract, however Quiroga assert that
said obligations are implied in a contract of commercial agency and alleged that Parsons was but a mere
agent.

ISSUE: Whether or not the contract entered into between the parties was a contract of agency

RULING: No, the contract in question is a perfected contract of sale. In order to classify a contract, due
regard must be given to its essential clauses. The essential clauses in the subject contract was the cause
and subject matter thereof, the furnishing of Quiroga with the beds for Parsons, which the latter might
order and pay for the same at a fixed period. These are precisely the essential features of a contract of
purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the
part of the defendant, to pay their price. These features exclude the legal conception of an agency or
order to sell.
CONCRETE AGGREGATED, INC. VS. COURT OF TAX APPEALS

G.R. NO. 55793 MAY 18, 1990

REGALADO, J.

DOCTRINE: A contract for the sale of an article which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether the same is on hand at the time or not is a
contract for the sale of goods.

FACTS: Petitioner is a domestic corporation which processes rock aggregates mined by it from private
lands and operates a plant for the production of ready-mixed concrete and plant-mixed hot asphalt.
Agents of the CIR conducted an investigation of petitioner's liabilities and demanded payment for sales
and ad valorem taxes. Petitioner disputed the said assessment and disclaims liability, asserting that it was
a contractor, liable for 3% tax and not a manufacturer, liable for 7% sales tax. Petitioner contends that he
is classified as a general engineering contractor and specialty asphalt and concrete contractor. Petitioner
further contends that it produced asphalt and concrete mix only upon previous orders.

ISSUE: Whether or not petitioner is a contractor considering it only produces its asphalt or concrete mix
only upon previous job orders

RULING: No, petitioner is a manufacturer and selling or distribution is an essential ingredient of

manufacturing. The power to sell is an indispensable adjunct to a manufacturing business. Petitioner, as
a manufacturer, not only manufactures the finished articles but also sells or distributes them to others. A
contract for the sale of an article which the vendor in the ordinary course of his business manufactures or
procures for the general market, whether the same is on hand at the time or not is a contract for the sale
of goods. And what prevents petitioner from mass production and storage is the nature of its products.
PEOPLE'S HOMESITE & HOUSING CORP. VS. COURT OF APPEALS

G.R. NO. L-61623 DECEMBER 26, 1984

AQUINO, J.

DOCTRINE: In conditional obligations, the acquisition of rights as well as the extinguishment or loss of
those already acquired, shall depend upon the happening of the event, which constitutes the condition

FACTS: The PHHC passed a resolution where it awarded a parcel of land to Rizalino and Adelaida Mendoza.
The city council disapproved the proposed consolidation aubdivision plan, hence another plan was
submitted, which reduced the area. The Mendozas never paid the price nor made an initil deposit thereof.
The PHHC withdrew the award to the Mendozas and awarded the same to five other awardees. The latter
made initial deposits and a deeed of sale was executed. The Mendozas filed an action for specific
performance and damages.

ISSUE: Whether or not there exists a contract of sale between the parties considering that such sale was
subject to a condition which was not met

RULING: No, there was no contract of sale between the parties. The sale was contingently awarded to the
Mendozas, subject to the approval of the city council. When the city council disapproved the consolidation
plan, the Mendozas were advised, and when the revised plan was approved, the Mendozas should have
manifested in writing their acceptance of the award to show they were still interested. There lacks a
meeting of the minds between the parties. The PHHC acted within its rights in withdrawing the tentative
award. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those
already acquired, shall depend upon the happening of the event which constitutes the condition.
TOYOTA SHAW, INC. VS. COURT OF APPEALS

G.R. NO. L-116650 MAY 23, 1995

DAVIDE, JR., J.

DOCTRINE: An agreement showing no obligation to transfer ownership of a determinate thing is not a

contract of sale and a definite agreement on the manner of payment of the price is an essential element
in the formation of a binding and enforceable contract of sale in an installment basis.

FACTS: Luna Sosa wanted to purchase a Toyota Lite Ace. Sosa and his son went to Toyota Shaw, where
they met with Popong Bernando, a sales representative thereof. The parties entered into an agreement,
which states that all necessary documents will be submitted to Toyota upon arrival of Mr. Sosa, that down
payment shall be paid and that the said unit will be released. Sosa delivered the downpayment for the
vehicle and he was thereafter issued a VSP. However, the unit was not delivered, and due to this, Sosa
demanded a refund of the downpayment. Toyota asserted that the non-delivery of the unit was due to
Sosa's credit financing.

ISSUE: Whether or not there exists a contract of sale between the parties, vesting the other party to have
a demandable right to the delivery of the vehicle despite the non-payment of the consideration and the
non-approval of his credit application

RULING: No, there was no perfected contract of sale. The agreement showed no obligation of Toyota to
transfer ownership of a determinate thing and for Sosa to pay. Further, the provision on the
downpayment made no specific reference to a sale of a vehicle. The agreement could not even be
denominated a contract of sale on installment basis, because there was no mention of the full price and
the manner of payment thereof. The agreement between the parties was only in the initial phase of a
contract of sale. And lastly, the VSP, was but a mere proposal which created no demandable right.
SAMPAGUITA PICTURES, INC. VS. JALWINDOR MANUFACTURERS, INC.

G.R. NO. L-43059 OCTOBER 11, 1979

DE CASTRO, J.

DOCTRINE: Ownership is not transferred by perfection of the contract but by delivery, either actual or
constructive. Payment of the purchase price is not essential to the transfer of ownership as long as the
property sold has been delivered.

FACTS: Sampaguita is the owner of a building in Cubao, Q.C. The roofdeck of said building and all existing
improvements thereon were leased by Capitol 300 Inc. Capitol purchased on credit from Jalwindor, glass
and wooden jalousies, which were installed in the leased premises. Jalwindor filed an action for collection
for sum of money against Capitol, due to the latter's failure to pay. Capitol failed to pay rentals, therefore
Sampaguita filed a complaint for ejectment and collection of sum of money. The sheriff made levy on the
jalousies. Sampaguita claimed ownership of the said materials.

ISSUE: Whether or not payment of purchase price is material in the transfer of ownership by virtue of a
contract of sale considering there was already delivery

RULING: No, payment of purchase price is not essential to the transfer of ownership as long as the
property sold has been delivered. Ownership is acquired from the moment the thing sold was delivered
to vendee, as when it is placed in his control and possession. When the glass and wooden jalousies in
question were delivered and installed in the leased premises, Capitol became the owner thereof.
Ownership is not transferred by perfection of the contract, but by delivery, either actual or constructively.
And by virtue of the lease agreement with Sampaguita, the latter is the owner of the subject materials.
SOUTHWESTERN SUGAR AND MMOLASSES CO. VS. ATLANTIC GULF & PACIFIC CO.

G.R. NO. L-7382 JUNE 29, 1955

BAUTISTA ANGELO, J.

DOCTRINE: Under Art. 1479 of the new Civil Code an option to sell, or a promise to buy or to sell, as used
in said article, to be valid must be supported by a consideration distinct from the price. The general rule
under Art 1324 of the same code must be interpreted as modified by the provision of Art. 1479, which
applies to a promise to buy and sell specifically.

FACTS: Atlantic Gulf granted an option to Southwestern to buy its barge no. 10 for P30,000, to be exercised
within 90 days. Southwestern wrote to Atlantic that it wanted to exercise the option at the earliest
convenience. Atlantic replied that the offer of the option is to be in cash transaction and to be effected
when it is available. Due to unavailability, because of further work, the barge could not be turned over.
Thereafter, Southwestern filed an action to compel Atlantic to sell. Atlantic withdrew the said option,
stating that it was merely a favor and asserts that the option to sell is null and void because it is not
supported by any consideration.

ISSUE: Whether or not the option herein is valid and binding considering that such is not supported by a
consideration

RULING: No, the option in the instant case is invalid because in pursuant to Art. 1479 par. 2 of the Civil
Code, an option to sell, or a promise to buy or to sell, as used in said article, to be valid must be supported
by a consideration distinct from the price. It is true that under Art. 1324 of the same code, the general
rule regarding offer and acceptance is that, when the offerer gives to the offeree a certain period to
accept, the offer may be withdrawn at any time before acceptance except when the option is founded
upon consideration, but this general rule must be interpreted as modified by the provision of Art.1479.
ATKINS, KROLL AND CO., INC. B. CUA HIAN TEK

G.R. NO. L-9871 JANUARY 31, 1958

BENGZON, J.

DOCTRINE: If the option is given without a consideration, it is a mere offer of a contract of sale, which is
not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding
contract of sale, even though the option was not supported by a sufficient consideration.

FACTS: In 1951, petitioner sent to respondent a letter, offering Luneta Sardines at a fixed price thereof.
Cua Hian Tek accepted the offer unconditionally and delivered his letter of acceptance. However, due to
shortage of catch of sardines, Atkins failed to deliver the commodities. For petitioner's failure to deliver,
private respondent instituted a claim for damages. Petitioner asserts that no contract of sale was
executed, it was but a mere option to buy, which was not enforceable for lack of consideration distinct
from the purchase price, in accordance with Art. 1479 of the Civil Code.

ISSUE: Whether or not a bilateral promise to sell and buy was ensued between the parties

RULING: Yes, a bilateral cotract to sell and to buy was created upon acceptance. So much so that B. Cua
Hian Tek could be sued, he had backed out after accepting, by refusing to get the sardines and/or to pay
for their price. An option is unilateral, a promise to sell, at the price fixed whenever the offeree should
decide to exercise his option within the specified time. After accepting the promise and before he
exercises his option, the holder of the option is not bound to buy. He is free either to buy or not to later.
In this case, however, upon accepeting herein petitioner's offer a bilateral promise to sell and to buy
ensued, and the respondent ipso facto assumed the obligations of a purchaser. He did not just get the
right subsequently to buy or not to buy. It was not a mere option, but was bilalteral contract of sale
SPOUSES TRINIDAD AND EPIFANIO NATINO VS. THE INTERMEDIATE APPELLATE COURT

G.R. NO. 73573 MAY 23, 1991

DAVIDE, JR., J.

DOCTRINE: An option not supported by a consideration distinct from the purchase price is not binding
upon the promissor in accordance with Art 1479 of the Civil Code.

FACTS: Petitioners executed a real estate mortgage in favor of Rural Bank, as security for a loan, however,
petitioners failed to pay the sadi loan. Thereafter, the bank applied for an extrajudicial foreclosure of the
mortgage, the bank, being the highest bidder, was issued a certificate of sale for the said property. Since
no redemption was made by petitioners within the two-year period, the sheriff issued a final deed of sale
in favor of the bank. The bank filed a petition for a writ of possession, which was opposed by the
petitioners, alleging that they had consigned the redemption money. Petitioners instituted a complaint
for the annulment of the deed of sale, contending that said deed was prematurely issued since they were
granted an extension of time to redeem the property.

ISSUE: Whether or not the promissor was bound by the promise to redeem the subject property
considering such was not supported by a consideration distinct from the re-purchase price

RULING: No, the bank was not bound by the promise which was accepted by the petitioners, not only
because it was not approved or ratified by the Board of Directors but also because, and more decisively,
it was a promise unsupported by a consideration distinct from the re-purchase price. This is in accordance
with the provision under Art 1479 par. 2 of the Civil Code.
FEDERICO SERRA VS. COURT OF APPEALS

G.R. NO. 103338 JANUARY 4, 1994

NOCON, J.

DOCTRINE: In a unilateral promise to sell, where the debtor fails to withdraw the promise before the
acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy

FACTS: Petitioner is the owner of a parcel of land in Masbate. RCBC negotiated with the former for the
purchase of the unregistered property for the establishment of a branch office. The parties entered into
a contract of lease with an option to buy. Petitioner kept on pursuing the manager of the branch office to
effect the sale. After sometime, the bank decided to exercise its option, however petitioner replied,
stating that he is no longer selling the property. The bank sued for specific performance and damages.
The petitioner asserts that the option was not binding because such was not supported by a consideration.

ISSUE: Whether or not the contract of lease with option to buy was valid between the parties

RULING: Yes, the contract is valid and existing between the parties. In a unilateral promise to sell, where
the debtor fails to withdraw the promise before the acceptance by the creditor, the transaction becomes
a bilateral contract to sell and to buy, because upon acceptance by the creditor of the offer to sell by the
debtor, there is already a meeting of the minds of the parties as to the thing which is determinate and the
price which is certain. In the instant case, the consideration is even more onerous on the part of the lessee
since it entails transferring of the building and/or improvements on the property to petitioner, should
respondent bank fail to exercise its option within the period stipulated.
PEDRO ROMAN VS. ANDRES GRIMALT

G.R. NO. L-2412 APRIL 11, 1906

TORRES, J.

DOCTRINE: If no contract of sale was actually executed by the parties the loss of the vessel must be borne
by its owner and not by a party who only intended to purchase it and who was unable to do so on account
of failure on the part of the owner to show proper title to the vessel and thus enable them to draw up the
contract of sale.

FACTS: In 1904, Roman and Grimalt, through one Fernando Agustin Pastor, verbally agreed upon the sale
of a schooner "Santa Marina". Grimalt agreed to purchase and offered to pay in three installments, to
which Roman accepted. The schooner was ready for delivery, however met an accident and sunk in the
harbor of Manila. Roman thereafter filed a complaint before the CFI, demanding the payment of the
purchase price. Grimalt asserts that he accepted the offer subject to the condition that the title papers
were found to be satisfactory and the vessel to be seaworthy. However, Roman did nothing to perfect his
title.

ISSUE: Whether or not there exists a perfected contract of sale between the parties to entitle the seller
thereof to payment of the price despite the loss of the thing

RULING: No, the sale of the schooner was not perfected. The purchaser did not consent to the execution
of the deed of transfer and the title was in the name of one Paulina Giron, the alleged owner thereof. If
no contract of sale was actually executed by the parties the loss of the vessel must be borne by its owner
and not by a party who only intended to purchase it and who was unable to do so on account of failure
on the part of the owner to show proper title to the vessel and thus enable them to draw up the contract
of sale.
EQUATORIAL REALTY DEVELOPMENT, INC. VS. MAYFAIR THEATER, INC.

G.R. NO. 106063 NOVEMBER 21, 1996

HERMOSISIMA, JR., J.

DOCTRINE: Absent a choice granted to another for a distinct and separate consideration as to whether or
not to purchase a determinate thing at a predetermined fixed price, such should not be treated as an
option contract.

FACTS: Carmelo & Bauermann, Inc. owned a parcel of land with a two-story building thereon. Carmelo
entered into a contract of lease with Mayfair for the latter's lease of the property's portion for a motion
picture theater. The contract provided that if the lessor desires to sell the leased premises, the lessee shall
be given 30 days exclusive option to purchase the same and the new buyer must be bound by the terms
and conditions in the contract. Carmelo informed Mayfair that Jose Araneta was offering to buy the entire
property. Mayfair expressed his interest to buy the property if the price is reasonable. A few years later,
Carmelo sold the property to Equatorial. Mayfair thereafter sued for specific performance and the
annulment of the sale. Carmelo asserts that the option to purchase invoked by Mayfair is null and void for
lack of consideration.

ISSUE: Whether or not the contractual stipulation is an optional clause which is not binding due to lack of
a distinct consideration

RULING: No, the contractual stipulation therein is a right of first refusal. An option is a contract granting a
privilege to buy or sell within an agreed time and at a determined price. It is a separate and distinct
contract from that which the parties may enter into upon the consummation of the option. It must be
supported by consideration. In the instant case, the right of first refusal is an integral part of the contracts
of lease. The consideration is built into the reciprocal obligations of the parties.
NORKIS DISTRIBUTORS, INC. VS. COURT OF APPEALS

G.R. NO. 91029 FEBRUARY 7, 1991

GRIÑO-AQUINO, J.

DOCTRINE: In the absence of an express assumption of risk by the buyer, the things sold remain at seller's
risk until the ownership thereof is transferred to the buyer, in accordance with Art. 1504 of the Civil Code.

FACTS: Petitioner is the distributor of Yamaha motorcycles. Alberto Nepales bought a brand new
motorcycle, where the price was payable by means of a letter of guaranty from DBP, credit was thereafter
extended to Nepales. The branch manager issued a sales invoice, however possession remained with
Norkis. The motorcycle was registered in the LTO under Nepales' name. While the motorcycle was being
driven, it met an accident which led to its total wreck. Upon discovery of the accident, Nepales filed an
action for specific performance with damages. Norkis avers that the risk of loss or damage is borne by
Nepales as owner, because there was constructive delivery thereof due to the sales invoice issued and
the registration thereof.

ISSUE: Whether or not the seller should bear the loss of the thing due after the perfection of the contract
but before delivery thereof

RULING: Yes, Norkis should bear the loss of the motorcycle, because in the absence of an express
assumption of risk by the buyer, the things sold remain at seller's risk until the ownership thereof is
transferred to the buyer, for there was neither an actual nor constructive delivery of the thing sold, hence,
the risk of loss should be borne by the seller, in accordance with Art. 1504 of the Civil Code. An invoice is
nothing more than a detailed statement of the nature, quality and cost of the thing sold, and not a bill of
sale. When the motorcycle was registered, Norkis did not intend yet to transfer the title or ownership to
Nepales, but only to facilitate the execution of a chattel mortgage in favor of the DBP for the release of
the buyer's motorcycle loan. There was no delivery, actual nor constructive.
SOUTHERN MOTORS, INC. VS. ANGEL MOSCOSO

G.R. NO. L-14475 MAY 30, 1961

PAREDES, J.

DOCTRINE: In sales on installments, where the action instituted is for specific performance and the
mortgaged property is subsequently attached and sold, the sale thereof does not amount to a foreclosure
of the mortgaged, hence the seller-creditor is entitled to deficiency judgment.

FACTS: Southern Motors sold to Moscoso a Chevrolet truck on installment basis. To secure payment, a
chattel mortgage was constituted on the truck. Moscoso failed to pay three installment on the balance of
the purchase price. Thereafter, petitioner filed a complaint to recover the unpaid balance of the
promissory note. A writ of attachment was issued by the court, and the subject truck was sold at public
auction. The court condemned the defendant to pay the expenses, to which the latter refused and
contended that the action of the plaintiff amounted to a foreclosure of the chattel maortgage, hence he
could not be made liable for any unpaid balance.

ISSUE: Whether or not an attachment to a chattel mortgage to an action for specific performance amounts
to a foreclosure of the same

RULING: No, the sale of mortgaged property in an action for specific performance is different from
foreclosure of a chattel mortgage. The appellee had chosen the first remedy under Art 1484 of the Civil
Code. The complaint is an ordinary civil action for recovery of the remaining unpaid balance due on the
promissory note. The plaintiff had not adopted the procedure or methods outlined by Sec. 14 of the
Chattel Mortgage Law. Since the plaintiff has chosen to exact the fulfillment of the appellant's obligation,
it may enforce execution of the judgment that may be favorably rendered hereon, on all personal and real
properties of the latter not exempt from execution sufficient to satisfy such judgment.
LORENZO PASCUAL VS. UNIVERSAL MOTORS CORP.

G.R. NO. L-27862 NOVEMBER 20, 1974

MAKALINTAL, J.

DOCTRINE: The vendor cannot, after the foreclosure of the chattel mortgage, proceed against any third
party who may have guaranteed the vendee's performance of his obligation

FACTS: Spouses Lorenzo Pascual and Leonila Torres executed a real estate mortgage to secure the
payment of the indebtedness of PDP Transit, for the purchase of five units of Merecedez Benz trucks, but
the guarantee shall not exceed P50,000, which is the value of the mortgage. PDP Transit paid to Universal
Motors Corp. the sum, with reference to the units, leaving a balance thereof. Universal Motors filed a
complaint against PDP Transit, with a writ of replevin to collect the balance under the chattel mortgage
and to repossess all the units sold, including the units guaranteed under the real estate mortgage. The
spouses obtained a favorable judgement in the cancellation of the mortgage constituted.

ISSUE: Whether or not the vendor has any recourse against other securities given by a third party to secure
the purchase price after the foreclosure of the chattel mortgage

RULING: No, the vendor cannot, after the foreclosure of the chattel mortgage, proceed against any third
party who may have guaranteed the vendee's performance of his obligation, if so, the guarantor will, be
entitled to recover what he has paid from the vendee. In that case, it will be the vendee who will ultimately
be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel
mortgage given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and
public policy overturned.
FILINVEST CREDIT CORPORATION VS. COURT OF APPEALS

G.R. NO. 82508 SEPTEMBER 29, 1989

SARMIENTO, J.

DOCTRINE: In a contract of lease with option to buy, the vendor, in the guise of being the lessor, retains
ownership of the property and the right to repossess the same in the event the lessee defaults in payment
of the installments. There is no need to constitute a chattel mortgage over the movable sold and the
vendor has no right to foreclose the same.

FACTS: Spouses Jose Sy Bang and Illuminada Tan were engaged in the sale of gravel, produced from
crushed rocks and used for construction purposes. The spouses applied for financial assistance from
Filinvest, on the condition that the machinery will be purchased in the latter’s name, that such will be
leased to the spouses and that the spouses are to execute a real estate mortgage as security. A contract
of lease of machinery, with option to purchase was entered into between the parties. The spouses
stopped making payments thereon. Filinvest thereafter, extrajudicially foreclosed the real estate
mortgage. The spouses filed a complaint for recission of the contract of lease, with a writ of preliminary
injunction.

ISSUE: Whether or not the lessor has the right to foreclose the chattel mortgage attached to the property
in question in a contract of lease with option to purchase

RULING: No, petitioner may not foreclose the chattel mortgage after cancelling the contract of sale. The
remedies provided for under Art. 1484 are alternative and not cumulative, therefore the exercise of one
bars the exercise of others. A contract of lease with option to buy, is at times resorted to as a means to
circumvent Article 1484. Through the set-up, the vendor, by retaining ownership over the property in the
guise of being the lessor, retains, likewise, the right to repossess the same, without going through the
process of foreclosure, in the event the vendee-lessee defaults in the payment of the installments.
LUIS RIDAD AND LOURDES RIDAD VS. FILIPINAS INVESTMENT AND FINANCE CORP.

G.R. NO. L-39806 JANUARY 27, 1983

DE CASTRO, J.

DOCTRINE: After the foreclosure of the chattel mortgage, the vendor is precluded from further
extrajudicially foreclosing the additional security put up by the vendees themselves.

FACTS: Spouses Ridad purchased from the Supreme Sales and Development Corp. two Ford consul sedans,
payable in 24 monthly installments. To secure payment thereof, the former executed a promissory note
covering the purchase price and a deed of chattel mortgage on the two vehicles and another car, and their
franchise for the operation of a taxi fleet. The vendor assigned its rights to Filipinas Investment and
Finance Corp. Due to the failure of the spouses to pay their monthly installments, Filipinas Investment
foreclosed the chattel mortgage extrajudicially. Another auction sale was held, involving the remaining
properties, since the obligation was not fully satisfied by the sale of the vehicles in the public auction.

ISSUE: Whether or not the vendor, after foreclosure of the chattel mortgage, may further bring action
against the vendee for the satisfaction of the obligation of the latter

RULING: No, the vendor may not, if he avails himself of the right to foreclose his mortgage, further bring
an action against the vendee for the purpose of recovering whatever balance of the debt secured not
satisfied by the foreclosure sale. Where the appellant corporation elected to foreclose its mortgage upon
default by the appellee in the payment of the agreed installments and having chosen to foreclose the
chattel mortgage, bought the purchased vehicles at public auction as the highest bidder, it submitted itself
to the consequences of Article 1484 of the Civil Code and the lower court rightly declared the nullity of
the chattel mortgage in question in so far as the taxicab franchise and the used car of plaintiffs are
concerned.
SPOUSES ROMULO AND DELIA DE LA CRUZ VS. ASIAN CONSUMER AND INDUSTRIAL FINANCE CORP.

G.R. NO. 94828 SEPTEMBER 18, 1992

BELLOSILLO, J.

DOCTRINE: The delivery of possession of the mortgaged property to the mortgagee can only operate to
extinguish mortgagor's liability if the former had actually caused the foreclosure sale of the mortgaged
property when it recovered possession thereof.

FACTS: Spouses de la Cruz and Daniel Fajardo, purchased on installment basis, a Hino truck from Benter
Motor Sales Corp. To secure payment, the former executed a chattel mortgage over the vehicle and a
promissory note, payable in thirty monthly installments. Benter assigned its rights in favor of Asian
Consumer and Industrial. Petitioners defaulted in more than two installments, hence by virtue of a
petition for extrajudicial foreclosure of chattel mortgage, the sheriff attempted to repossess the vehicle,
but was unsuccessful because of the refusal of the son of the petitioner to surrender the same. The son
of the petitioner, brought the vehicle to Asian Consumer. The latter filed an ordinary action for the
collection of the unpaid balance. Petitioners contend that such action is not allowed for having recovered
the mortgaged chattel.

ISSUE: Whether or not the vendor, after opting to foreclose the chattel mortgage, but failing to sell at a
public auction, may still sue to recover the unpaid balance of the purchase price

RULING: Yes, the vendor may still sue to recover the unpaid balance of the purchase price, because,
although Asian Consumer succeeded in taking possession of the mortgaged vehicle, it did not pursue the
foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle was ever conducted.
Under the law, the delivery of possession of the mortgaged property to the mortgagee, the herein
appellee, can only operate to extinguish appellant's liability if the appellee had actually caused the
foreclosure sale of the mortgaged property when it recovered possession thereof.
LEOVILLO AGUSTIN VS. COURT OF APPEALS & FILINVEST FINANCE CORP.

G.R. NO. 107846 APRIL 18, 1997

FRANCISCO, J.

DOCTRINE: Where the mortgagor plainly refuses to deliver the chattel subject of the mortgage upon his
failure to pay two or more installments, or if he conceals the chattel to place it beyond the reach of the
mortgagee, it is but logical that the necessary expenses incurred in the prosecution should be borne by
the mortgagor.

FACTS: Leovillo Agustin executed a promissory note, payable in monthly installments, in favor of ERM
Commercial and secured by a chattel mortgage over an Isuzu diesel truck. The latter assigned such rights
to Filinvest Finance Corp. When petitioner defaulted in payment, Filinvest demanded payment of the
entire balance or the possession of the mortgaged vehicle, however neither was complied with. Filinvest
filed a complaint for the issuance of a writ of replevin, and by virtue of which, it acquired possession of
the vehicle. Upon repossession, it was discovered that the vehicle was no longer in running condition and
that several parts thereof were missing. The vehicle was then foreclosed and sold at public auction.
Filinvest subsequently filed another complaint, claiming additional reimbursement and for expenses
incurred.

ISSUE: Whether or not repossession expenses may be availed of by the mortgagor despite foreclosure of
the mortgaged property, considering the same the award was already settled by the appellate court and
has acquired finality

RULING: Yes, the issue of the awarding of the repossession expenses in favor of Filinvest has become the
law of the case. Where the mortgagor plainly refuses to deliver the chattel subject of the mortgage upon
his failure to pay two or more installments, or if he conceals the chattel to place it beyond the reach of
the mortgagee, it is but logical that the necessary expenses incurred in the prosecution by the mortgagee
of the action for replevin so that he can regain possession of the chattel, should be borne by the
mortgagor.
DIONISIO FIESTAN VS. COURT OF APPEALS

G.R. NO. 81552 MAY 28, 1990

FERNAN, C.J.

DOCTRINE: The prohibition mandated by par. 2 of Article 1491 in relation to Article 1409 of the Civil Code
does not apply in the case where the sale of the property in dispute was made under a special power
inserted in or attached to the real estate mortgage pursuant to Act No. 3135, as amended.

FACTS: Petitioner spouses were owners of a parcel of land which was mortgaged to the DBP as security
for a loan. For failure of the spouses to pay their mortgage indebtedness, DBP extrajudicially foreclosed
said land. DBP sold the lot to Francisco Peria. The petitioners filed a complaint for annulment of sale,
mortgage and the cancellation of the transfer certificates. Petitioners maintain that the land was not first
levied before the extrajudicial foreclosure sale, and that under Art. 1491 par.2 of the Civil Code, agents
are prohibited from acquiring by purchase, the property whose administration or sale may have been
entrusted to them unless the consent of the principal has been given.

ISSUE: Whether or not the prohibition under Art. 1491 par. 2 applies to an extrajudicial foreclosure of real
estate mortgage, thereby disallowing the mortgagee-creditor to purchase the property in question

RULING: No, the prohibition mandated by par. 2 of Article 1491 in relation to Article 1409 of the Civil Code
does not apply in the instant case where the sale of the property in dispute was made under a special
power inserted in or attached to the real estate mortgage pursuant to Act No. 3135, as amended. The
power to foreclose is not an ordinary agency that contemplates exclusively the representation of the
principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own
protection.
DANIEL BORBON II VS. SERVICEWIDE SPECIALISTS, INC.

G.R. NO. 106418 JULY 11, 1996

VITUG, J.

DOCTRINE: When the seller assigns his credit to another person, the latter is likewise bound by the same
law. Accordingly, when the assignee forecloses on the mortgage, there can be no further recovery of the
deficiency, and the seller-mortgagee is deemed to have renounced any right thereto.

FACTS: Daniel and Francisco Borbon executed a promissory note in favor of Pangasinan Auto Mart Inc.
(PAMI), payable in installments. A chattel mortgage was likewise executed. The rights of PAMI was later
assigned to Filinvest Credit Corp, and the latter assigned its rights to Servicewide Specialists. The Borbons
failed to pay their monthly installments. The Borbons claim that what they intended to buy from PAMI
was a jeepney type Isuzu, however was not complied with, hence they should not be in default due to
PAMI’s non-fulfillment of the contract. PAMI was not able to replace the vehicle, until the same was seized
by the order of the court. The petitioners seek a modification and invoke the provisions under Art. 1484
of the Civil Code.

ISSUE: Whether or not after the foreclosure of the chattel mortgage, the vendor-mortgagee may still be
entitled to liquidated damages as deficiency

RULING: No, the award for liquidated damages must be deleted, although the award for attorney's fees
are found to be reasonable. When the seller assigns his credit to another person, the latter is likewise
bound by the same law. The protection given to the buyer-mortgagor should not be considered to be
without circumscription or as being preclusive of all other laws or legal principles. Where the mortgagor
unjustifiably refused to surrender the chattel subject of the mortgage upon failure of two or more
installments, or if he concealed the chattel to place it beyond the reach of the mortgagee, that thereby
constrained the latter to seek court relief, the expenses, incurred for the prosecution of the case, such as
attorney's fees, could rightly be awarded.
DOMINADOR DIZON VS. LOURDES SUNTAY

G.R. NO. L-30817 SEPTEMBER 29, 1972

FERNANDO, J.

DOCTRINE: The possession of movable property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from
the person in possession of the same

FACTS: Lourdes Suntay owned a three-carat diamond ring valued at P5,500.00. In 1962, Suntay and one
Clarita Sison entered into a transaction where the former's ring was delivered to Sison for sale on
commission. Sison gave Suntay the price of the ring, however the latter demanded the return of the ring,
but to no avail, because the ring was already pledged. Suntay filed a case of estafa, asking the delivery of
the ring pledged from Dominador Dizon, the owner of the pawnshop. The lower court issued the writ of
replevin prayed for and Suntay was able to take possession of the ring.

ISSUE: Whether or not the owner of a movable who was unlawfully deprived of such is entitled to recovery
of the thing from the possessor thereof

RULING: Yes, one who has lost or has been unlawfully deprived of a movable may recover the same from
the person in possession of the same and the only defense the latter may have, if such was acquired in
good faith at a public sale, in which case the owner cannot obtain its return without reimbursing the price
paid, said rule is in accordance with Art. 559 of the Civil Code. The accused, acting in bad faith, disposed
of the ring and pledged the same, contrary to agreement, with no right of ownership, and to the prejudice
of the injured party.
EDCA PUBLISHING & DISTRIBUTING CORP. VS. THE SPOUSES LEONOR AND GERARDO SANTOS

G.R. NO. 80298 APRIL 26, 1990

CRUZ, J.

DOCTRINE: In pursuant to Art. 1477 and 1478 of the Civil Code, ownership in the thing sold shall not pass
to the buyer until full payment of the purchase price only if there is a stipulation to that effect. Non-
payment only creates a right to demand payment or to rescind the contract.

FACTS: In 1981, a person identifying himself as Prof. Jose Cruz placed an order by telephone with EDCA
Publishing for 406 books, payable on delivery. The latter prepared the corresponding invoice and
delivered the books as ordered, for which Cruz issued a personal check thereto. Cruz sold 120 of the books
to spouses Santos, as owners of Santos Bookstore. EDCA became suspicious over the second order placed
by Cruz. Investigation disclosed that the true name of the perpetrator was Tomas de la Peña. The police
thereafter seized the stolen books from the spouses' bookstore. The spouses sued for recovery after
demand for their return was rejected by EDCA. The latter contends that the spouses have not established
ownership of the books for they could not produce the receipt thereof.

ISSUE: Whether or not possessor who acquired the movables in good faith have ownership thereof,
considering such were sold by an impostor who never paid for the movables

RULING: Yes, the spouses have ownership over the subject books, for actual delivery having been made
thereto. In pursuant to Art. 1477 and 1478 of the Civil Code, ownership in the thing sold shall not pass to
the buyer until full payment of the purchase price only if there is a stipulation to that effect. Non-payment
only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case
of bouncing checks. But absent any stipulation, delivery of the thing sold will effectively transfer
ownership to the buyer who can in turn transfer it to another.
ANTONIO LAYUG VS. INTERMEDIATE APPELLATE COURT

G.R. NO. 75364 NOVEMBER 23, 1988

NARVASA, J.

DOCTRINE: R.A. 6552 governs sales of real estate on installments. It recognizes the vendor's right to cancel
such contracts upon failure of the vendee to comply with the terms of the sale, but imposes, chiefly for
the latter's protection, certain conditions thereon

FACTS: A contract for the purchase of 12 lots, payable on installments was entered into by Antonio Layug
and Rodrigo Gabuya. Layug paid the first two installments, but failed to pay the last installment. Gabuya
made demands of payments, but to no avail, he thereafter brought suit before the CFI for the annulment
of the contract and recovery of damages. Layug claims that he is entitled to a conveyance of at least 8 of
the 12 lots, since the total price of the 12 lots was P120,000.00, each lot then had a value of P10,000.00
and, therefore with his P80,000.00, he had paid in full the price for 8 lots.

ISSUE: Whether or not vendee is entitled to recover the payment made by him in pursuant to RA 6552
considering the presence of an automatic cancellation stipulated in the contract

RULING: Yes, the vendee is entitled to recover the amount paid by him. In all transactions or contracts
involving the sale or financing of real estate on installment payments, where the buyer has paid at least
two years of installments, the buyer is entitled to a grace period or the refund of the cash surrender value
equivalent to 50% of the total payments made, in case he defaults in the payment of succeeding
installments. In the case at bar, Layug paid 2 installments, he is left only with the right to a refund of the
cash surrender value of the payments on the property equivalent to 50% of the total payments made, or
P40,000.00. Such refund will be the operative act to make effective the cancellation of the contract by
Gabuya.
POWER COMMERCIAL AND INDUSTRIAL CORP. VS. CA

G.R. NO. 119745 JUNE 20, 1997

PANGANIBAN, J.

DOCTRINE: In order that this symbolic delivery may produce the effect of tradition, it is necessary that the
vendor shall have had such control over the thing sold.

FACTS: Petitioner corporation entered into a contract of sale with spouses Quiambao. The contract
involved a parcel of land located in Makati. Petitioner assumed the existing mortgage on the said land.
The parties executed a deed of absolute sale with assumption of mortgage. PNB informed the spouses
that, for petitioner's failure to submit the papers necessary for the assumption of mortgage, such was
considered withdrawn and the balance was deemed due and demandable. Petitioner paid PNB to be
applied to the loan, the latter also received a letter from petitioner, stating its desire to remove the people
who are currently occupying the subject land, as the previous owners have not taken any action thereto.
The mortgage was foreclosed and PNB subsequently bought the same at a public auction.

ISSUE: Whether or not the execution of the deed of sale of a land transferred possession to the buyer,
considering said land were occupied by informal settlers

RULING: Yes, the ownership and control of the subject land was transferred to petitioner corporation
through the execution of the deed of sale. Considering that the deed of sale between the parties did not
stipulate or infer otherwise, delivery was effected through the execution of said deed. This deed operates
as a formal or symbolic delivery of the property sold and authorizes the buyer to use the document as
proof of ownership in pursuant to Art 1498 of the Civil Code. The alleged failure of the spouses to eject
the lessees from the lot in question and to deliver actual and physical possession thereof cannot be
considered a substantial breach of a condition to rescind the contract, and the subsequent foreclosure of
the land was due to petitioner’s failure to pay the amortizations due.
A.A. ADDISON VS. MARCIANA FELIX & BALBINO TIOCO

G.R. NO. 12342 AUGUST 3, 1918

FISHER, J.

DOCTRINE: It is the duty of the vendor to deliver the thing sold. Symbolic delivery by the execution of a
public Instrument is equivalent to actual delivery only when the thing sold is subject to the control of the
vendor.

FACTS: A public instrument was executed wherein Addison sold to Marciana Felix four parcels of land.
Felix paid the purchase price and bound herself to pay the remainder in installments. Addison filed a suit
to compel Felix to make payment of the first installment and the interests therein. Felix posit that there
was no delivery of the subject lands. At trial, it was shown that after the execution of the deed of sale,
plaintiff went to the lands to designate and deliver the same, however he was able to designate only two
of the four parcels of land and that more than 2/3 of such were occupied by the Villafuerte brothers. The
plaintiff admitted that the purchaser would have to bring suit to obtain possession of the land.

ISSUE: Whether or not the execution of the deed of sale amounted to delivery of the subject land,
considering that the vendor thereof had no control of such at the time of the sale

RULING: No, the mere execution of the instrument was not a fulfillment of the vendor's obligation to
deliver the thing sold, and that from such non-fulfillment arises the purchaser's right to demand the
rescission of the sale and the return of the price. It was expressly stipulated in the contract that the
purchaser should deliver to the vendor one-fourth of the products of the four parcels from the moment
when she takes possession of them until the Torrens certificate of title be issued in her favor. This shows
that it was rested on the assumption that she was to have, during said period, the material possession
and enjoyment of the four parcels of land.
TEN FORTY REALTY & DEVELOPMENT CORP. VS. MARINA CRUZ

G.R. NO. 151212 SEPTEMBER 10, 2003

PANGANIBAN, J.

DOCTRINE: Article 1498 of the Civil Code states that the execution of a public instrument shall be
equivalent to the delivery of the thing if the contrary does not appear. However, nowhere in the Civil Code
is it provided that the execution of a Deed of Sale is a conclusive presumption of delivery of possession of
a piece of land

FACTS: In October 1998, complaint for ejectment was filed by petitioner Ten Forty Realty against Marina
Cruz, the former alleging that it is the true owner of a parcel of lot and residential house in Olongapo City,
acquired from Barbara Galino through a deed of absolute sale. It was discovered that Galino sold the
subject land to petitioner in December 1996, but for failure to arrive at an amicable settlement, Galino
sold the same to Cruz in April 1998. Cruz contends that petitioner is not qualified to own a residential lot,
such being a public land, and there was no prior possession and occupation by the petitioner on the said
lot.

ISSUE: Whether or not an execution of a deed of sale serves as a conclusive proof of delivery, thereby
transferring ownership to the purchaser

RULING: No, the execution of a public instrument is not a conclusive presumption of delivery of possession
of a real estate. Ownership is transferred not by contract, but by delivery. Article 1498 of the Civil Code
lays down the general rule, that the execution of a public instrument shall be equivalent to the delivery
of the thing if the contrary does not appear. In relation to the ejectment complaint, although the same
was crafted as an unlawful detainer suit, petitioner’s real cause of action was for forcible entry, which had
already prescribed. And in case of a double sale, the order of preference would be that who acquired the
property in good faith and recorded the same with the Registry of Deeds, which petitioner was not able
to do so. And lastly, petitioner was not able to prove the land was of private ownership, hence it remains
to be a public land, where petitioner is disqualified to acquire, but may only lease.
ROSARIO CARBONELL VS. COURT OF APPEALS

G.R. NO. L-29972 JANUARY 26, 1976

MAKASIAR, J.

DOCTRINE: Where the first buyer was not aware, and could not have been aware of any sale to another
person as there was no such sale, the buyer's prior purchase of the land was made in good faith.

FACTS: Jose Poncio was the owner of a land in San Juan, Rizal. Both Carbonell and Emma Infante offered
to buy the same. Poncio approached Carbonell and offered to sell the lot and the latter accepted.
Carbonell asked for the procurement of the formal deed of sale, however was informed that it could no
longer be done, because Poncio had already sold the lot to one Emma Infante. Carbonell filed an adverse
claim and was registered. The deed of sale between Infante and Poncio was registered and a TCT was
issued but with the annotation pf the adverse claim of Carbonell. Infante took immediate possession of
the land. Carbonell filed a complaint for lawful ownership.

ISSUE: Whether or not good faith of the first buyer ceased when he had knowledge of the second sale

RULING: No, when Carbonell bought the lot from Poncio, she was the only buyer thereof and the title of
Poncio was still in his name solely encumbered by bank mortgage duly annotated thereon. Carbonell was
not aware and she could not have been aware of any sale to Infante as there was no such sale to Infante
then. Hence, Carbonell's prior purchase of the land was made in good faith. Her good faith subsisted and
continued to exist when she recorded her adverse claim four days prior to the registration of Infante's
deed of sale. The fact that Poncio was no longer in possession of his mortgage passbook and that the said
mortgage passbook was already in possession of Carbonell, should have compelled Infante to inquire from
Poncio why he was no longer in possession of the mortgage passbook and from Carbonell why she was in
possession of the same
DAGUPAN TRADING CO. VS. RUSTICO MACAM

G.R. NO. L-18497 MAY 31, 1965

DIZON, J.

DOCTRINE: Where one of two conflicting sales of a piece of land was executed before the land was
registered, while the other was an execution sale in favor of the judgment creditor of the owner made
after the same property had been registered, what should determine the issue are the provisions of the
last paragraph of Section 35, Rule 39 of the Rules of Court

FACTS: In 1955, Sammy Maron and his siblings were pro-indiviso owners of an unregistered land in
Pangasinan. While their application for registration was pending, they executed two deeds of sale
conveying the subject property to Macam, who thereafter took possession and introduced improvements
on said lot. The OCT was issued in the name of the Marons, free from all liens and encumbrances. The
Municipal Court of Manila, by virtue of a final judgment against Maron and in favor of Manila Trading &
Supply Co. and levy was made and was sold at public auction.

ISSUE: Whether or not the sale of an unregistered land falls under the application of Art 1544 on double
sale

RULING: No, Art. 1544 of the Civil Code has no application in this case. The sale in favor of appellee was
executed before the land subject matter thereof was registered, while the conflicting sale in favor of
appellant was executed after the same property had been registered. What should determine the issue
are the provisions of the last paragraph of Section 35, Rule 39 of the Rules of Court, to the effect that
upon the execution and delivery of the final certificate of sale in favor of the purchaser of land sold in an
execution sale, such purchaser shall be substituted to and acquire all the right, title, interest and claim of
the judgment debtor to the property as of the time of the levy. The prior sale, albeit unregistered, cannot
be deemed automatically cancelled upon the subsequent issuance of the Torrens title over the land.
FELIPE DAVID & ANTONIA DAVID VS. EULOGIO BANDIN

G.R. NO. L-48322 APRIL 8, 1987

YAP, J.

DOCTRINE: The defense of having purchased the property in good faith may be availed of only where
registered land is involved and the buyer had relied in good faith on the clear title of the registered owner.
One who purchases an unregistered land does so at his peril.

FACTS: Spouses Juan Ramos and Fortunata Calibo died intestate, leaving the lands they own to their heirs.
Their daughter Candida Ramos assumed administration of the properties until her death. Candida Ramos
prevailed upon her niece, Agapita Ramos to sell a portion of the Talon property to spouses Rufino Miranda
and Natividad Guinto. Another property, the Laong property was sold to Lucena, who sold the same to
the spouses Venturanza and conveyed the same to the spouses David. The trial court declared the
subsequent sales void for they form part of the estate of the spouses Calibo.

ISSUE: Whether or not the defense of a purchaser in good faith may be availed of considering that the
subject land is not registered

RULING: No, the defense of having purchased the property in good faith may be availed of only where
registered land is involved. The petitioner spouses David purchased portions of the Laong property, from
the spouses Venturanza, who, in turn, purchased the property from Juanita Lucena. At the time both
purchases took place, the property in question was still an unregistered land. The land was registered in
the name of Lucena subsequently.
MOISES OLIVARES VS. HON. CARLOS GONZALES

G.R. NO. L-34500 MARCH 18, 1988

MELENCIO-HERRERA,J.

DOCTRINE: The fact that the first sale was notarized does not mean that the second sale cannot be given
effect. The act of registration is the operative act that conveys or affects the land insofar as third persons
are concerned.

FACTS: A piece of unregistered land was owned by Jacinto and Ceferino Tuvilla. The Tuvillas executed a
deed of sale with right to repurchase in favor of Juan Tumabini. The Tuvillas executed a deed of sale with
pacto de retro in favor of Moises Olivares and Juanito Olivares, which was registered. Tumabini filed a
case against the latter for consolidation of ownership over the land. Olivares filed a case to quiet title,
however the same was dismissed. The trial court issued a writ of possession in favor of Tumabini.

ISSUE: Whether or not the first sale, only being notarized but not registered should prevail over the second
sale which was registered

RULING: No, the second sale should prevail over the first sale made between the parties, in pursuant to
Art. 1544 of the Civil Code, provided there was good faith. The Consolidation Case instituted by Tumabini
against the Tuvillas for consolidation of his ownership did not include the Olivares as parties defendants
even though they were then in possession of the property. Justice and equity demand, therefore, that
their side be heard. It would be more in keeping with substantial justice if the controversy between the
parties to be resolved on the merits rather than on a procedural technicality. The dismissal of actions is
based on sound judicial discretion and such discretion must be exercised wisely and prudently, never
capriciously, with a view to substantial justice.
FERMIN CARAM JR. VS. CARLO LAURETA

G.R. NO. L-28740 FEBRUARY 24, 1981

FERNANDEZ, J.

DOCTRINE: The principle that a person dealing with the owner of the registered land is not bound to go
behind the certificate and inquire into transactions the existence of which is not there intimated should
not apply when such facts should have put the purchaser in inquiry with the defects in the title of the
vendor.

FACTS: In 1945, Marcos Mata conveyed a large tract of agricultural land in favor of Claro Laureta. The deed
of absolute sale was not registered because it was not acknowledged before a notary public. Laureta had
been in occupation of the land. In 1947, the same land was sold by Marcos to Fermin Caram. The deed of
sale was acknowledged before Atty. Aportadera and such was registered. Laureta filed an action to
recover ownership over the land. Caram asserts that he had no knowledge of the prior sale, because the
current sale was made through his representatives.

ISSUE: Whether or not knowledge of the prior sale gained by the second purchaser amounts to a
registration in bad faith

RULING: Yes, one who purchases real estate with knowledge of a defect or lack of title in his vendor cannot
claim that he has acquired title thereto in good faith, as against the true owner of the land or of an interest
therein, and the same rule must be applied to one who has knowledge of facts which should have put him
upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of
his vendor. Irespe and Aportadera had knowledge of circumstances which ought to have put them on
inquiry. Irespe and Aportadera, acting as agents of Caram, purchased the property of Mata in bad faith.
Applying the principle of agency, Caram, as principal, should also be deemed to have acted in bad faith.
SABELARDO CRUZ VS. LEODEGARIA CABANA

G.R. NO. 56232 JUNE 22, 1984

TEEHANKEE, J.

DOCTRINE: Knowledge gained by the second buyer of the first sale defeats his rights even if he is first to
register the second sale, since such knowledge taints his prior registration with bad faith

FACTS: In 1968, Cabaña sold a land to spouses Teofilio Legaspi and Illuminada Cabana. The spouses
attempted to register the deed of sale but could not do so because the owner's duplicate of title was at
the time in possession of PNB, as mortgage. In 1970, Cruz tried to register the deed of sale executed but
was informed that the owner had already sold the same to the spouses, nevertheless, he was able to
register the same. It appears that months after the sale of lot to the spouses, Cabaña sold the same to
Cruz.

ISSUE: Whether or not knowledge of the second buyer of a prior sale amounts to bad faith even though
the second sale was registered first

RULING: Yes, while the title was registered in Cruz name it appears that he knew of the sale of the land to
the spouses Legaspi as he was informed in the Office of the Register of Deeds. It appears that the spouses
registered their document of sale. The right of ownership and title to the land must be resolved in favor
of the spouses Legaspi. It cannot be set up by a second purchaser who comes into possession of the
property that has already been acquired by the first purchaser in full, this notwithstanding that the second
purchaser records his title in the public registry, if the registration be done in bad faith.
SPOUSES PASTOR AND VIRGINIA VALDEZ VS. COURT OF APPEALS

G.R. NO. 85082 FEBRUARY 25, 1991

GANCAYCO, J.

DOCTRINE: A prior right is accorded to the vendee who first recorded his right in good faith over an
immovable property

FACTS: Spouses Ante were the registered owners of a land in Quezon City. They executed a special power
of attorney in favor of their son, Antonio Ante. Antonio offered to sell the lot to Eliseo Viernes, the latter
refused as he had no money. Antonio then told Viernes that he will sell the property to spouses Valdez.
Valdez started fencing the lot in the presence the Viernes. Valdez tried to register the deed of sale,
however was informed a TCT in the name of Viernes was issued as per a deed of assignment.

ISSUE: Whether or not a deed of assignment subsequently made should prevail over a prior sale made
over the same property, considering a TCT was already issued in pursuant of the deed of assignment

RULING: No, the sale of the subject lot to petitioners was made long before the execution of the Deed of
Assignment of said lot to Viernes and that petitioners annotated their adverse claim as vendees of the
property as early as September 1982 with the Register of Deeds. On the other hand, the deed of
Assignment in favor of Viernes of the lot was registered with the Register of Deeds only on November
1982 whereby a new title was issued in the name of Viernes. The rule is clear that a prior right is accorded
to the vendee who first recorded his right in good faith over an immovable property.
SPOUSES DIOSDADO NUGUID AND MARIQUETA VENEGAS VS. COURT OF APPEALS

G.R. NO. 77423 MARCH 13, 1989

SARMIENTO, J.

DOCTRINE: The general rule is that if the property sold is registered land, the purchaser in good faith has
a right to rely on the certificate of title and is under no duty to go behind it to look for flaws.

FACTS: Spouses Victorino and Crisanta dela Rosa were the registered owners of a land in Bataan. In 1931,
Victorino sold half of the prop to Juliana Salazar evidenced by a document which was not registered.
Salazar constructed a house on the said lot. The Spouses Nuguid caused the registration of a document,
which states that the whole property was sold to them by the heirs of dela Rosa. The respondent heirs
claimed that said document is a forged deed, and discovered such when they were about to register the
land in 1978.

ISSUE: Whether or not petitioners are considered purchasers in good faith for they did not merely relied
on the certificate of title but also conducted an ocular inspection of the subject property

RULING: Yes, the petitioners are the rightful owners of the subject lot, for they are purchasers in good
faith. The certificate of title covering the entire property was clean and free from any annotation of an
encumbrance, and there was nothing whatsoever to indicate on its face any vice or infirmity in the title of
the registered owners. The petitioners could not have known of the prior sale to Juliana Salazar as,
precisely, it was not registered. The general rule is that if the property sold is registered land, the
purchaser in good faith has a right to rely on the certificate of title and is under no duty to go behind it to
look for flaws. This notwithstanding, the petitioners did not rely solely upon the certificate of title. They
personally inspected the subject property.
RADIOWEALTH FINANCE COMPANY VS. MANUELITO PALILEO

G.R. NO. 83432 MAY 20, 1991

GANCAYCO, J.

DOCTRINE: A bona fide purchaser of a registered land at an execution sale acquires a good title as against
a prior transferee, if such transfer was unrecorded.

FACTS: In 1970, spouses Enrique and Herminia Castro sold to Manuelito Palileo a parcel of unregistered
coconut land in Surigao del Norte. The deed of absolute sale between them was not registered. Palileo
exercised acts of ownership over the land through his mother, and paid realty taxes. In 1976, a judgement
was rendered against castro to pay Radiowealth. A writ of execution was issued and the sheriff levied and
sold at public auction the subject land. A certificate of sale was issued in favor of Radiowealth. Palileo filed
an action to quiet title over the land.

ISSUE: Whether or not a purchaser in an execution sale who registered the same prevails over a purchaser
of a prior unregistered sale, considering the land involved was unregistered

RULING: No, the purchaser of the prior sale has a superior right over the purchaser on the subsequent
execution sale. Under Act No. 3344, registration of instruments affecting unregistered lands is without
prejudice to a third party with a better right. The mere registration of a sale in one's favor does not give
him any right over the land if the vendor was not anymore the owner of the land having previously sold
the same to somebody else even if the earlier sale was unrecorded. The purchaser of unregistered land
at a sheriff's execution sale only steps into the shoes of the judgment debtor, and merely acquires the
latter's interest in the property sold as of the time the property was levied upon.
BELINDA TAÑEDO VS COURT OF APPEALS

G.R. NO. 104482 JANUARY 22, 1996

PANGANIBAN, J.

DOCTRINE: As between two purchasers, the one who registered the sale in his favor has a preferred right
over the other who has not registered his title, even if the latter is in actual possession of the immovable
property.

FACTS: In1962, Lazardo Tanedo executed a notarized deed of absolute sale in favor of his brother Ricardo
and the latter's wife, where he conveyed his future inheritance over a parcel of land. Upon the death of
his father, Lazardo executed an affidavit of conformity to re-affirm and validate the sale made. In 1981,
Ricardo learned that Lazardo sold the same property was sold to Lazardo's children dated December 1980.
Ricardo recorded the deed of sale and a TCT was issued in his favor. The heirs of Lazardo filed a complaint
for recission of the deeds of sale executed by Lazardo in favor of Ricardo.

ISSUE: Whether or not registration prevails over possession with regard to two sales involving the same
property

RULING: Yes, in this case, Art. 1544 of the Civil Code should be given effect. The ownership shall belong to
the buyer who in good faith registers it first in the registry of property. Thus, although the deed of sale in
favor of private respondents was later than the one in favor of petitioners, ownership would vest in the
former because of the undisputed fact of registration. On the other hand, petitioners have not registered
the sale to them at all. Petitioners contend that they were in possession of the property and that private
respondents never took possession thereof. As between two purchasers, the one who registered the sale
in his favor has a preferred right over the other who has not registered his title, even if the latter is in
actual possession of the immovable property.
SPOUSES TOMAS AND SILVINA OCCEÑA VS. LYDIA ESPONILLA

G.R. NO. 156973 JUNE 4, 2004

PINO, J.

DOCTRINE: A buyer of real property in the possession of persons other than the seller must be wary and
should investigate the rights of those in possession.

FACTS: Spouses Tordesillas owned a parcel of land in Antique. After the death of the spouses, the lot was
inherited by their children Harod and Angela, and grandchildren Arnold and Lilia. In 1951, the heirs
executed a Deed of Pacto de Retro Sale in favor of Alberta Morales. In 1954, Arnold and Lilia executed a
Deed of Definite Sale of Shares, Rights, Interests and Particpations in favor of Alberta Morales. Morales
possessed the lot as owner and constructed a house on it and appointed a caretaker to oversee her
property. Morales’ nieces succeeded in the ownership of the lot. In 1986, Arnold sold the same to spouses
Occena.

ISSUE: Whether or not knowledge of the second buyer of other persons’ possession of the land is
tantamount to a purchaser in bad faith, absent any inquiry made by the former

RULING: Yes, the spouses Occena failed to prove good faith in their purchase and registration of the land.
A purchaser in good faith and for value is one who buys property without notice that some other person
has a right to or interest in such property and pays its fair price before he has notice of the adverse claims
and interest of another person in the same property. Tomas Occeña admitted that he found houses built
on the land during its ocular inspection prior to his purchase. Tomas should have verified from the
occupants of the land the nature and authority of their possession instead of merely relying on the
representation of the vendor. As petitioner-spouses failed to register the subject land in good faith,
ownership of the land pertains to respondent-heirs who first possessed it in good faith.
JERRY MOLES VS. INTERMEDIATE APPELLATE COURT

G.R. NO. 73913 JANUARY 31, 1989

REGALADO, J.

DOCTRINE: A certification issued by the vendor that a secondhand machine was in A-1 condition is an
express warranty binding on the vendor

FACTS: Petitioner Moles needed a linotype printing machine for his printing business so he applied for an
industrial loan with DBP for the purchase thereof. An agent of Smith Bell and Co. introduced petitioner to
Mariano Diolosa, an owner of Diolosa Publishing House, who had 2 available machines. Petitioner
inspected the machines and was informed that the same were secondhand but functional. The
transaction was verbal in nature and a pro forma invoice was signed as consideration of the sale. The
machine was delivered and installed. Thereafter, Diolosa issued a certification where he warranted that
the machine sold was in A-1 condition, together with other express warrants. Petitioner wrote to Diolosa
that the machine was not functioning properly as it needed a new distributor. Diolosa purchased a new
distributor bar and asked for the share of the payment but was denied. Petitioner then brought an action
for recission of contract with damages

ISSUE: Whether or not an implied warranty arises in the sale of secondhand items

RULING: No, it is generally held that in the sale of a specific article sold as secondhand, there is no implied
warranty as to its quality or fitness for the purpose intended, at least where it is subject to inspection at
the time of the sale. On the other hand, there is also authority to the effect that in a sale of a secondhand
articles there may be, under some circumstances, an implied warranty of fitness for the ordinary purpose
of the article sold or for the particular purpose of the buyer. A certification issued by the vendor that a
secondhand machine was in A-1 condition is an express warranty binding on the vendor
ENGINEERING & MACHINERY CORPORATION VS. COURT OF APPEALS

G.R. NO. 52267 JANUARY 24, 1996

PANGANIBAN, J.

DOCTRINE: The prescriptive period for redhibitory action with regard to implied warranties is 6 months,
while a period of 4 years is provided for in express warranties. However, a party may pursue a last resort
which is an action for breach of contract, which has provided a prescriptive period of 10 years.

FACTS: Pursuant to a contract made in 1962, between petitioner corporation and Ponciano Almeda, the
former undertook to fabricate, furnish and install the air-conditioning system in the latter's building. In
1965, Almeda sold the building to the NIDC, who took possession but did not comply with the terms and
conditions of the contract of sale, so Almeda was able to secure judicial recisison in her favor. In 1971,
Almeda learned from NIDC employees of the defects in the air-conditioning system and thereafter filed
an action for damages against petitioner corporation.

ISSUE: Whether or not the action instituted has already prescribed in pursuant to the prescription
provided for against hidden defects

RULING: No, the action has not prescribed. The remedy against violations of the warranty against hidden
defects is either to withdraw from the contract or to demand a proportionate reduction of the price, with
damages in either case. It would appear that this suit is barred by prescription because the complaint was
filed more than four years after the execution of the contract and the completion of the air-conditioning
system. However, a close scrutiny of the complaint filed in the trial court reveals that the original action
is not really for enforcement of the warranties against hidden defects, but one for breach of the contract
itself. It alleged that the petitioner did not comply with the specifications provided. Therefore, the general
law on prescription upon written contracts will apply, which is ten years.
SONNY LO VS. KJS ECO-FORMWORK SYSTEM PHIL., INC.

G.R. NO. 149420 OCTOBER 8, 2003

YNARES-SANTIAGO, J.

DOCTRINE: There exists an implied warranty in deeds of assignment, the legality and existence thereof to
which the assignor must comply with before the same would produce the extinguishment of the contract
of sale.

FACTS: KJS is a corporation engaged in the sale of steel scaffoldings, and petitioner Sonny is a building
contractor. Petitioner ordered scaffolding equipment from KJS, payable in monthly installments. Sonny
paid the the first two installments, however his business experienced financial difficulties and was unable
to settle his obligation. Parties executed a deed of assignment where Sonny assigned to KJS his receivables
from Jomero Realty Corp. When KJS tried to collect the credit, Jomero refused because petitioner was
indebted to it. KJS demanded payment, however Sonny posits that the obligation had been extinguished
due to the deed of assignment executed. KJS filed an action for recovery of sum of money.

ISSUE: Whether or not the execution of a deed of assignment in lieu of a contract of sale extinguishes the
obligation of the parties

RULING: No, the assignment of credit made by petitioner does not extinguish his obligation under the
contract of sale with KJS. Petitioner, as vendor or assignor, is bound to warrant the existence and legality
of the credit at the time of the sale or assignment. When Jomero claimed that it was no longer indebted
to petitioner since the latter also had an unpaid obligation to it, it essentially meant that its obligation to
petitioner has been extinguished by compensation. By warranting the existence of the credit, petitioner
should be deemed to have ensured the performance thereof in case the same is later found to be
inexistent. He should be held liable to pay to respondent the amount of his indebtedness.
ROLANDO CATUNGAL ET AL. VS. ANGEL RODRIGUEZ

G.R. NO. 146839 MARCH 23, 2011

LEONARDO-DE CASTRO, J.

DOCTRINE: When the condition is imposed merely on the performance of an obligation and not on the
perfection of the contract, it gives the other party the option to either refuse to proceed with the sale or
to waive the condition

FACTS: Agapita Catungal entered into a contract to sell with Rodriguez involving a parcel of land, to which
later on became a conditional deed of sale. The Catungal spouses requested an advance payment for the
land, however was refused by Rodriguez. The Catungals aver that they would sell to other parties if
Rodriguez would not comply. Rodriguez was able to actively negotiate in the road right of way stipulated
in the contract. Thereafter, Rodriguez received a letter from the Catungals stating that the contract had
been cancelled. A complaint for damages and injunction was filed by respondent. The spouses aver that
they had the right to rescind the contract due to respondent's failure to pay the advance payment and
successfully negotiate the road right of way in the contract.

ISSUE: Whether or not the seller has the right to rescind the contract of sale due to the refusal of the
buyer to pay an advance payment and fulfill the condition in the contract

RULING: No, the spouses cannot rescind the contract between them and Rodriguez. The obligation to pay
the balance is conditioned upon the acquisition of the road right of way. It is a condition imposed only on
respondent’s obligation to pay the remainder of the purchase price. Therefore, spouses Catungal cannot
rescind the contract nor demand the fulfillment of Rodriguez’ obligation to pay the balance. In the event
the condition is not fulfilled, Rodriguez can either proceed with the sale and demand return of his down
payment or to waive the condition and still pay the purchase price despite the lack of road access.
OSCAR RAMOS VS. COURT OF APPEALS

G.R. NO. L-42108 DECEMBER 29, 1989

REGALADO, J.

DOCTRINE: Whenever it is clearly shown that a deed of sale with pacto de retro, regular on its face, is
given as security for a loan, it must be regarded as an equitable mortgage

FACTS: Adelaida Ramos borrowed from her brother Oscar Ramos, in connection with her business
transaction with Flor Ramiro, Fred Naboa, Atty. Sarandi involving the recovery of a parcel of land in
Malabon. As security for the loan, Adelaida executed two deeds of conditional sale over her lot. Upon
failure of Adelaida to exercise her right of repurchase, petitioner filed a petition for consolidation and
approval of the conditional sale and a petition for approval of the pacto de retro sale. Private respondents
remained in possession of the properties until when petitioner took possession thereof and filed for a
declaration of nullity of the deeds of sale, alleging they were mere mortgages.

ISSUE: Whether or not a deed of sale sale with a right of repurchase is regarded as an equitable mortgage
considering it was given as a security for a loan

RULING: Yes, the deed of sale between the parties is considered an equitabole mortgage because it shows
that the true intention of the parties is that the transaction shall secure the payment of said debt and,
therefore, shall be presumed to be an equitable mortgage under Paragraph 6 of Article 1602. Settled is
the rule that to create the presumption enunciated by Article 1602, the existence of one circumstance is
enough. On the faces thereof, the contracts purport to be sales with pacto de retro however, since the
same were actually executed in consideration of the aforesaid loans said contracts are indubitably
equitable mortgages.
AURORA DE LEON VS. HON. SERAFIN SALVADOR

G.R. NO L-30871 DECEMBER 28, 1970

TEEHANKEE, J.

DOCTRINE: While in ordinary sales for reasons of equity a transaction may be invalidated on the ground
of inadequacy of price, such does not follow when the law gives to the owner the right to redeem

FACTS: A favorable judgement was obtained by Enrique de Leon against Eusebio Bernabe in a civil case
presided by judge Cruz. The city sheriff levied on execution two parcels of Bernabe’s land. Enrique’s sister,
Aurora was the highest bidder. Two weeks before the expiration of the redemption period, Bernabe filed
a separate civil suit against petitioner for the annulment of the sale and gross inadequacy of the price paid
by the latter. Petitioner moved to dismiss on the ground of laches and lack of jurisdiction. Judge Salvador
allowed Bernabe to redeem the lands sold. Petitioner filed before judge Cruz a motion for consolidation
and for the cpurt to issue a certificate in her favor.

ISSUE: Whether or not gross inadequacy of price may invalidate a sale with pacto de retro

RULING: No, in ordinary sales for reasons of equity a transaction may be invalidated on the ground of
inadequacy of price, such does not follow when the law gives to the owner the right to redeem, as when
a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner to
effect the redemption. As to the alleged gross inadequacy of the price, such was not raised at all before
judge Cruz’ nor judge Salvador to rule thereupon. The failure of Bernabe to timely sell the properties for
their fair value through negotiated sales with third persons either before or after the execution sale in
order to be able to discharge his judgment debt or redeem the properties within the redemption period,
or to raise the necessary amount therefrom to so effect redemption can be attributed only to his own
failings and gross improvidence.
ALFONSO FLORES & VALENTIN GALLANO VS. JOHNSON SO

G.R. NO. L-28527 JUNE 16, 1988

YAP, C.J.

DOCTRINE: Since the pacto de retro sale in question was executed before the effectivity of the New Civil
Code, the provisions of the old Civil Code should apply.

FACTS: Johnson So filed an action for specific performance before the CFI against Alfonso Flores to effect
the redemption of a parcel of land. The land was alleged to have been sold to Flores by Valentin Gallano
with right of repurchase within 4 years from date of sale. Gallano sold the same land to Johnson So. So
alleged that the first sale was but a mere mortgage to seure a loan. The trial court ruled against So and
held that the execution of affidavit of consolidation of ownership by Flores and its subsequent registration
did not make his ownership absolute because of non-compliance with Art 1606 and 1607 which require a
judicial order for consolidation of the title of vendee a retro.

ISSUE: Whether or not the provisions under the New Civil Code should apply to the sale in question
between the parties

RULING: No, under the old Civil Code, the ownership was consolidated in the vendee a retro by operation
of law. Accordingly, upon the failure of Valentin Gallano, as the vendor a retro, to redeem the property
subject of the pacto de retro sale within the period agreed upon, the vendee a retro, Alfonso Flores,
became the absolute owner of the subject property. This right of ownership which had already vested in
Alfonso Flores way back in 1954 upon Gallano's failure to redeem within the stipulated period cannot be
defeated by the application of Articles 1606 and 1607 of the New Civil Code which requires registration
of the consolidation of ownership in the vendee a retro only by judicial order
CARLOS ALONZO & CASIMIRA ALONZO VS. INTERMEDIATE APPELLATE COURT

G.R. NO. L-72873 MAY 28, 1987

CRUZ, J.

DOCTRINE: In the exercise of legal pre-emption or redemption, the need for written notification may be
dispensed with depending on the circumstances of the case

FACTS: Five siblings inherited in equal shares a parcel of land in Tarlac. In 1963, Celestino Padua
transferred his undivided share through an absolute sale. In 1964, Eustaquia Padua sold her own share to
the same vendees through a pacto de retro sale. In 1976, Mariano Padua sought to redeem the area sold
to spouses Alonzo but said complaint was dismissed for he was an American citizen. In 1977, Tecla Padua
filed her own complaint invoking the right of redemption claimed by her brother. The trial court dismissed
the complaint on the ground that the right had lapsed and although there was no written notice, it was
held that actual knowledge of the sales was satisfied. The IAC reversed the said decision for written notice
was required.

ISSUE: Whether or not written notice is required as per Art 1623 considering the parties have actual
knowledge of the alleged sales

RULING: No, in requiring written notice, the law seeks to ensure that the redemptioner is properly notified
of the sale and to indicate the date of such notice as the starting time of the 30-day period of redemption.
The Court dispensed with the need for written notification considering the purchaser lived and were thus
deemed to have actual knowledge of the sales. The Court stated that that the 30-day period of redemption
started, not from the date of sales, but sometime between those years and 1976, when the first complaint
for redemption was filed. For 13 years, none of the co-heirs moved to redeem the property.
MANUEL LAO VS. COURT OF APPEALS

G.R. NO. 115307 JULY 8, 1997

PANGANIBAN, J.

DOCTRINE: A pacto de retro sale should be treated as a mortgage where the property sold never left the
possession of the vendors.

FACTS: Better Homes Realty and Housing Corp. filed with MeTC a complaint for unlawful detainer against
Manuel Lao, alleging that it is the owner of a lot in Quezon City. Lao claimed that he is the true owner of
the lot which he purchased from N. Domingo Realty and Development Corp. but the agreement was
actually a loan secured by mortgage. The MeTC rendered judgement in favor of Better Homes. On appeal,
the RTC reversed said decision and held that the property was acquired by Better Homes from N. Domingo
Realty by deed of sale, but in truth, the petitioner is the beneficial owner of the property because the real
transaction was not of sale but a loan secured by a mortgage thereon. The appellate court reversed the
decision of the RTC.

ISSUE: Whether or not the agreement is regarded as an equitable mortgage considering the vendors
remained in possession of the property sold

RULING: Yes, the agreement between the parties is an equitable mortgage. The possession of the property
remained with petitioner Lao who was the beneficial owner, before, during and after the alleged sale. It
is settled that a pacto de retro sale should be treated as a mortgage where the property sold never left
the possession of the vendors. The option to give Lao to purchase the prop had been extended twice,
hence the parties really intended to be bound by a loan with a mortgage.
MARIA BAUTISTA VDA. DE REYES ET AL, RODOLFO LANUZA VS. MARTIN DE LEON

G.R. NO. L-2233 JUNE 6, 1967

REGALA, J.

DOCTRINE: When the vendors remained in possession of the property and the period of redemption was
extended, such contract is to be regarded as an equitable mortgage

FACTS: Rodolfo Lanuza and his wife Belen were the owners of a house. The former executed deed of sale
with right of repurchase, conveying to Maria Bautista Vda. de Reyes and Aurelia Navarro the said lot. The
original period of redemption expired and the parties extended such period. Thereafter, the spouses
mortgaged the same lot in favor of Martin de Leon. As the spouses failed to pay their obligation, De Leon
filed a petition for extrajudicial foreclosure of the mortgage. While Reyes and Navarro filed a petition for
consolidation of ownership. The trial court ruled in favor Reyes and Navarro. De leon appealed, alleging
that the first sale was a mortgage, hence cannot be the basis of a petition for consolidation.

ISSUE: Whether or not an unrecorded sale of prior date should prevail over a recorded mortgage
considering that the former was in reality an equitable mortgage

RULING: No, the Court held that the first transaction was in reality an equitable mortgage and the claims
of De leon are preferred because his mortgage was registered. The Lanuzas remained in possession of the
thing sold and the 3-month period of redemption expired which the parties extended, indicate that it is
an equitable mortgage. But these circumstances have relevance only in perspective of other
circumstances, which were present in the instant case, namely gross inadequacy of the price, non-
transmission of ownership to the vendees and delay in the filing of petition for consolidation. The vendors
did not really transfer their ownership to Reyes and Navarro.
AURORA CAPULONG VS. COURT OF APPEALS

G.R. NO. L-61337 JUNE 29, 1984

GUTIERREZ, JR., J.

DOCTRINE: Where any of the above circumstances defined in Article 1602 is present, a contract of sale
with right to repurchase is presumed to be an equitable mortgage

FACTS: Jovita Ponce Vda. Capulong obtained a series of loans from Dr. Delfin Tolentino. The loans were
secured by a continuing mortgage on Capulong's property. Capulong failed to liquidate the mortgage upon
maturity. Dr. Tolentino accepted the former's proposal to sell the mortggaed property. An absolute sale
was executed by the parties. In another document, Capulong was given an option to purchase the
property but she failed to exercise the option in due time. Capulong filed the complaint for annulment of
usurious contracts and declaration of the deed of sale as an equitable mortgage.

ISSUE: Whether or not the transaction between the parties was an equitable mortgage considering that
the vendor remained in actual possession of the land sold and enjoyed the fruits thereof

RULING: Yes, the deed of sale taken together with the companion right to redeem contract is only an
equitable mortgage. Therefore, private respondent Tolentino could not validly sell the land to his brother
and the latter's wife. Capulong remained in actual physical possession of the land and enjoyed the fruits
thereof confirms the real intention of the parties to secure the payment of the loans with the land as
security.
SOLID HOMES, INC. VS. COURT OF APPEALS

G.R. NO. 117501 JULY 8, 1997

PANGANIBAN, J.

DOCTRINE: Art 1616 is not rrestrictive or exclusive, barring additional amounts that the parties may agree
upon. Said provision should be construed together with Art 1601.

FACTS: Solid Homes executed in favor of State Financing a real estate mortgage on its properties, in order
to secure the payment of a loan which the former obtained from the latter. Solid Homes failed to pay the
obligations, hence State Financing filed for extrajudicial foreclosure. Before the sale, a memorandum of
agreement was entered into between the parties. Before the expiration of the redemption period, Solid
Homes sought the annulment of the memorandum alleging that such constitutes a pactum commisorium.
The trial court held that said memorandum was valid and granted Solid Homes to exercise its right of
repurchase within a period. The appellate court ruled in favor of State financing and ordered the delivery
of possession.

ISSUE: Whether or not failure to annotate the right of repurchase constitutes bad faith and may entitle
the other party to damages

RULING: No, the failure to annotate right of repurchase of vendor a retro is not by itself bad faith or malice,
State Financing was not legally bounded to cause its annotation. The only legal transgression of State
Financing was its failure to observe the proper procedure in affecting the consolidation of the titles in its
name. But this does not automatically entitle the petitioner to damages absent convincing proof of malice
and bad faith. The Court allowed the recovery of 30% interest and penalty in the total redemption price
as provided in the agreement between the parties.
PRIMARY STRUCTURES CORP. VS. SPS. ANTHONY & SUSAN VALENCIA

G.R. NO 150060 UGUST 19, 2003

VITUG, J.

DOCTRINE: Whenever a piece of rural land not exceeding one hectare is alienated, the law grants to the
adjoining owners a right of redemption except when the grantee or buyer does not own any other rural
land.

FACTS: Petitioner is a private corporation and the registered owner of a lot in Cebu. Adjacent to said lot
are three parcels of land which have been sold by Hermogenes Mendoza to spouses Valencia in 1994.
Petitioner learned of the sale only in 1996, when Mendoza sold to petitioner a lot also adjacent to its
current lot. Petitioner sent a letter to respondents signifying its intention to redeem the three lots and
another letter tendering payment of the same, invoking Art 1621 and 1623, but to no avail. Petitioner
filed an action to compel legal redemption and claims that no notice of sale was acquired by it.

ISSUE: Whether or not petitioner is entitled to legal redemption considering the lands involved are rural
lands.

RULING: Yes, petitioner is entitled to redemption. Whenever a piece of rural land not exceeding one
hectare is alienated, the law grants to the adjoining owners a right of redemption except when the grantee
or buyer does not own any other rural land. In order that the right may arise, the land sought to be
redeemed and the adjacent property belonging to the person exercising the right of redemption must
both be rural lands. Article 1621 of the Civil Code expresses that the right of redemption it grants to an
adjoining owner of the property conveyed may be defeated if it can be shown that the buyer or grantee
does not own any other rural land.
DOMINICO ETCUBAN VS. COURT OF APPEALS

G.R. NO L-45164 MARCH 16, 1987

PARAS, J.

DOCTRINE: The period within which the right of legal redemption or pre-emption may be exercised is non-
extendible

FACTS: Ectuban inherited a land together with his co-heirs from their deceased father. The co-heirs
executed in favor of private respondents, Jesus and Songalia Guadalupe deeds of sale of their respective
shares in the co-ownership. The plaintiff alleged that his co-owners leased and/or sold their respective
shares without giving due notice to him as co-owner notwithstanding his imitations to them that he was
willing to buy all their respective shares. The trial court ruled in favor of plaintiff. The appellate court held
that written notice was given to plaintiff in form of answer with counterclaim to the complaint in the civil
case, said notice is sufficient to inform the plaintiff about the sale and the reckoning date for the 30-day
period commenced upon receipt thereof.

ISSUE: Whether or not petitioner is barred from exercising legal redemption considering the notice was
in the form of a counterclaim

RULING: Yes, the records reveal that on May 27, 1974, plaintiff deposited with the lower court the
redemption price. Since the answer with counterclaim was filed on March 18, 1972, the deposit made on
May 27, 1974 was clearly outside the 30-day period of legal redemption. The period within which the right
of legal redemption or pre-emption may be exercised is non-extendible. Furnishing of a copy of the
disputed deed of sale to the redemptioner, was equivalent to the giving of written notice required by law
in a more authentic manner than any other writing could have done.
GUZMAN, BOCALING & CO. VS. RAUL S.V. BONNEVIE

G.R. NO. 86150 MARCH 2, 1992

CRUZ, J.

DOCTRINE: Lessees have the right to rescind the subsequent contract of sale executed in favor of a third
person for failure of the lessor to comply with the lessees’ right of first priority over the subject property
as stipulated in the contract of lease

FACTS: A land belonging to the estate of Jose Reynoso was leasd to Raoul and Christopher Bonnevie for a
period of one year. The contract of lease provided that in case the lessor decides to sell the land, the lssee
shall be given a first priority to purchse the same. Reynoso notified private respondents that he was selling
the land and gave the latter 30 days to exercise their right, otherwise they shall vaccate the same. Reynoso
demanded the vacation of respondents for failure to pay the monthly rentals. Pending the ejectment suit,
private respondnets filed an action for annulment of sale between Reynoso and petitioner corporation.

ISSUE: whether or not acquisition by petitioner of the property in the contract bars the action for its
recission considering he was a purchaser in bad faith

RULING: No, petitioner herein is a purchaser in bad faith due to his knowledge of the lease in favor of the
Bonnevies and should have inquired unto the priority right granted to the latter, hence recission of the
contract of sale in favor of petitioner may take place. It is true that the acquisition by a third person of the
property subject of the contract is an obstacle to the action of recission where it is shown that such third
person is in lawful possession of the subject of the contract and that he did not act in bad faith. However,
this rule is not applicable in the case at bar.
YEK SENG CO. VS. COURT OF APPEALS

G.R. NO. 87415 JANUARYY 23, 1992

CRUZ, J.

DOCTRINE: If the contract of lease had not yet expired, its extension would still be subject to the sound
discretion of the court and was by no means obligatory upon it as a merely ministerial duty.

FACTST: A verbal contract of lease was entered into between petitioner as lessee and private respondents
Dewey and David Yap as lessors over a portion of a building belonging to the latter. The leased premises
have been used by petitioner for its general merchandise for more than 20 years. The lessors notified
petitioner that they were terminating the lease, however petitioner refused to vacate. A complaint for
ejectment ensued, which was affirmed by the trial court. Petitioner posits that the court erred in not
granting him an extension of the lease as per Art. 1687 of the Civil Code.

ISSUE: Whether or not the courts are mandated to grant the extension of a contract of lease in accordance
with Art 1687 of the Civil Code

RULING: No, the power of the courts to fix a longer term for lease is discretionary. The Court held that the
rental in the subject lease was paid monthly and the term had not been expressly agreed upon, the lease
was understood under Art 1687 to be terminable from month to month. At the time the petitioner was
asked to vacate the leased premises, the lease contract had already expired and therefore, could no longer
be extended, and even if such contract had not yet expired, its extension would still be subject to the
sound discretion of the court.
SPOUSES CLUTARIO VS. COURT OF APPEALS

G.R. NO. 76656 DECEMBER 11, 1992

ROMERO, J.

DOCTRINE: Acceptance by the lessor of the payment by the lessee of the rentals in arrears does not
constitute a waiver of the default in the payment of rentals as a valid cause of action for ejectment.

FACTS: Spouses Gandia are the owners of a two-storey residential apartment and have been occupying
the upper storey, while petitioners have been staying on the ground floor by vitue of a verbal lease.
Spouses Gandia wrote to petitioners giving them 90 days within which to vacate the premises, for the
former have decided to occupy the entire apartment due to advanced age and failing health. Petitioners
refused to do so and from then on, they were in arrears in the payment of their rentals. An ejectment suit
ensued, however was dismissed for lack of cause of action.

ISSUE: Whether or not acceptance the payment of back rentals amount to a waiver of non-payment of
rentals as a ground for ejectment

RULING: No, by accepting payments of back rentals, does not constitute a waiver of the default in the
payment of rentals as a valid cause of action for ejectment. B.P. Blg. 25, which was the governing law at
the time of the filing of the complaint, provides for 6 grounds for ejectment. Among them were, arrears
in payment of rent for 3 months at any one time and the need of the lessors to repossess their property
for their own use or for the use of any immediate member of their family as a residential unit.
DR. MA. WENDELYN YAP VS. DR. VERGEL CRUZ

G.R. NO. 89307 MAY 08, 1992

MEDIALDEA, J.

DOCTRINE: The transfer of the leasehold rights is conditional in nature and has no force and effect if the
condition is not complied with

FACTS: Dr. Cruz was a tenant of Amado Bugayon for almost 5 years in the latter’s premises and has
introduced several improvements and operated a veterinary clinic thereon. Cruz offered for sale the
goodwill of the clinic to dr. Yap and others, however no negotiations materialized. Petitioner and others
were able to enter into a contract of lease with the landlord. Hence, Cruz filed for forcible entry with
damages against peitioners and the landlord.

ISSUE: Whether or not the leasehold rights of private respondents relinquished considering that such was
subject to a condition

RULING: No, when the petitioners executed and the landlord executed a new contract of lease, the lease
of private respondent was still valid and subsisting. There is no question that private respondent has not
effectively relinquished his leasehold rights in view of the failure of negotiations for the sale of the
goodwill. The transfer of the leasehold rights is conditional in nature and has no force and effect if the
condition is not complied with. Also, the lack of proper notice or demand to vacate upon the private
respondent is clearly evident, as a result, the said lease continues to be in force and cannot be deemed to
have expired as of the end of the month automatically.
UNITED REALTY CORPORATION VS. COURT OF APPEALS

G.R. NO. 62603 MARCH 27, 1990

GANGCAYCO, J.

DOCTRINE: A lease on a month to month basis expires after the last day of the 30th day period repeating
the same cycle of the 30-day period until either part express their prerogative under their agreement to
terminate the same

FACTS: Petitioner and Rev. Fr. Sy entered into separate contracts of lease over two apartments on a
monthly basis. Sy converted the same into a Buddhist chapel. Petitioner sent a letter to Sy to inform the
latter of the new rental for the premises. Sy complained to the Dept. of Public Information and alleged a
violation of P.D. 20. The Asst. Secretary held that the increase was in violation of such law, however the
Presidential Assistant for Legal Affairs stated that the prohibition against rental increase applies only to
dwelling units or lots used for residential purposes. Hence, petitioner filed a complaint for unlawful
detainer.

ISSUE: Whether or not petitioner is entitled to terminate the lease due to its eexpiration considering the
agreement was for a definite period

RULING: Yes, since the lease agreement between the parties is for a definite period, petitioner has a right
to judicially eject private respondent from the premises as an exception to the rule provided in P.D. 20.
The contracts of lease showed that its period is from month to month and that the lease may be
terminated when either party gives a 5 days notice in writing. Such demonstrates that the agreement is
for a definite period. Due to the failure of private respondent to pay the increased rental demanded,
petitioner elected to terminate the contract and asked for the former’s ejectment.
LEGAR MANAGEMENT & REALTY CORP. VS. COURT OF APPEALS

G.R. NO. 117423 JANUARY 24, 1996

PUNO, J.

DOCTRINE: Lease agreements with no specified period, but in which rentals are paid monthly, are
considered to be on a month to month basis and expire after the last day of any given 30-day period, upon
proper demand and notice

FACTS: Spouses Legasto owned an apartment building and entered into a contract of lease with no definite
period with Pascual and Ancheta, covering a unit of the building. Legasto spouses organized petitioner
Legar Management and transferred to the latter all their rights. Petitioner allowed private respondents to
continue occupying their unit by a verbal contract of lease, renewable from month to month. Petitioner
sent a notice, requesting the vacation of the respondents, however the latter refused. An ejectment case
ensued. The trial court held that the mere expiration of the month to month basis lease in accord with Art
1687 does not automatically give rise to an ejectment case, absent any grounds under B.P. Blg. 887.

ISSUE: Whether or not the lessee covered by the Rent Control Law may be ejected on the basis alone of
the expiration of the verbal lease on a monthly basis

RULING: Yes, lease agreements with no specified period, but in which rentals are paid monthly, are
considered to be on a month to month basis. They are for a definite period and expire after the last day
of any given 30-day period, upon proper demand and notice by the lessor to vacate. In the case at bar,
the lease was on a month to month basis and that there was proper notice of non-renewal of contract
and demand for vacation of premises made by petitioners on private respondent. Also, the expiration of
the period under BP Blg 887 is a sufficient ground for ejectment.