Villarica vs. Court of Appeals November 29, 1968.

FACTS:
Spouses Villarica sold a parcel of land in Davao with an area of 1,174 sq. meters for P35,000 tospouses
Consunji and Montaverde.
The instrument of absolute sale and vendors’ transfer of certificate of title was delivered to the vendees.
On the same day, Spouses Consunji executed another instrument granting ithespouses Villarica an
option to buy the same property within one year for P37, 750.00. The spousces Consunjiregistered the
absolute deed of sale and a new certificate was issued in their names. The Spouses Consunjithen sold
the lot to Jovito Francisco for P47, 000.00 by means of a public instrument which was registered
andissued a new title. The spouses Villarica brought an action for the reformation of the instrument of
absolutesale between Spouses Consunji and Francisco into an equitable mortgage as a security for a
usurious loan ofP28,000.00 alleging that such was the real intention of the parties. Spouses Villarica
contended that itshouldbe presumed as an equitable mortgage on the grounds that (1) the price of
P35,000 was unusually inadequate; (2) the vendors remained in possession of the property sold; (3) the
period of one year forrepurchase granted in the instrument was extended for one month; and (4) the
vendors pay the taxes on theland sold.

ISSUE:

WON the public instrument between the spouses Villarica and Spouses Consunji is one of absolute sale
or equitable mortgage.

HELD:
The instrument was one of absolute sale. The price was not inadequate; Spouses Consunji did not
remain inpossession of the property but instead were allowed to collect monthly rents; the taxes paid
were back taxeswhich a vendor has an obligation to pay as they sell the land free from all liens; andsaid
option to buy isdifferent and distinct from the right of repurchase.In the latter basis, it was discussed that
the right of repurchase is not a right granted the vendor bythe vendee in a subsequent instrument, but is a
right reserved by the vendor in the same instrument of saleas one of the contract. Once the instrument of
absolute sale is executed, the vendor can no longer reserve theright to repurchase, and any right
thereafter granted the vendor by the vendee in a separate instrumentcannot be a right of repurchase but
some other right like the option to buy in the instant case. Once theinstrument of absolute sale is
executed, the vendor can no longer reserve the right to repurchase, and anyright thereafter granted the
vendor by the vendee in a separate instrument cannot be a right of repurchasebut some other right like
the option to buy in the instant case.

Vda de Urbano vs. GSIS

Facts:
Urbano mortgaged their property to respondent GSIS to secure a housing loan. Aspetitioners failed to pay
their load when it fell due, GSIS foreclosed the mortgage. PetitionerVda. de Urbano wrote the GSIS
Board of Trustees to inform them of her desire to redeem thesubject property and for advice on the
procedure for redemption. GSIS responded advising herto pay the total redemption price of P154, 896.00
on or before the expiry date of redemption. Unable to find financing to repurchase the subject property,
petitioners requested for re-mortgage through repurchase of the subject property. Respondent Crsipina
dela Cruz commenced negotiations with respondent GSIS for her purchase of the petitioners' foreclosed
property. A Deed of Absolute Sale over the subject property was executed between GSIS and private
respondent dela Cruz. Having learned about the sale of the subject property to delaCruz, petitioner
Aurelio Arrienda wrote to the GSIS protesting the said sale and requesting itsreconsideration and recall.
Petitioners filed the instant case before the RTC of Quezon City. Thelower court dismissed the complaint.
This was affirmed by the Court of Appeals.

ISSUES:

Do the petitioners have a right to repurchase the subject property?

Ruling:
At the time petitioners offered to repurchase the subject property from GSIS, the charter of the GSIS then
in force was P.D. 1146 or the Revised Government Insurance Act of 1977. Based on these laws, the
Board could exercise its discretion on whether to accept or reject petitioners' offer to repurchase the
subject property taking into account the dual purpose enunciated in the "whereas clause" of P.D. 1981,
i.e., making the GSIS "more responsive to the needs of the members of the GSIS" and assuring "the
actuarial solvency of the Fund administered by the GSIS."

Jurisprudence also supports the Board's exercise of discretion in case of repurchase, viz:

"The right to redeem becomes functus officio on the date of its expiry, and its exercise after the period is
not really one of redemption but a repurchase. Distinction must be made because redemption is by force
of law; the purchaser at public auction is bound to accept redemption. Repurchase however of foreclosed
property, after redemption period, imposes no such obligation. After expiry, the purchaser may or may not
re-sell the property but no law will compel him to do so. And, he is not bound by the bid price; it is entirely
within his discretion to set a higher price, for after all, the property already belongs to him as owner.''15
(emphasis supplied)

The Board's denial of petitioners' request to purchase the subject property was based not on whim or
caprice, but on a factual assessment of the financial capacity of the petitioners to make good their
repeated offers to purchase the subject property. Respondent GSIS struck a balance between being
"responsive to the needs of the members of the GSIS" and assuring "the actuarial solvency of the Fund
administered by the GSIS", and tilted the scale in favor of the latter. Under the then GSIS charter or P.D.
1146, this was well within the powers of the Board.

Petitioners, in addition, fault their failure to meet the GSIS' terms for repurchase on the GSIS' inaction on
their January 20, 1987 request to re-acquire the subject property through the GSIS Operation Pabahay.
In sum, insofar as the petitioners' request for repurchase is concerned, they are not entitled to repurchase
as a matter of right. The Board exercised its discretion in accordance with law in denying their requests
and the GSIS cannot be faulted for petitioners' failure to repurchase as it acted upon petitioners'
application under the Operation Pabahay. The sale of the subject property to respondent dela Cruz
cannot therefore be annulled on the basis of petitioners' alleged right to repurchase.

Neither can petitioners invoke Maharlika Publishing Corporation v. Tagle,18 as a precedent insofar as the
Board's exercise of its discretion to grant loan restructuring is concerned.19 Petitioners point out that in
that case, the Supreme Court found that the GSIS "created an agreement of binding nature", with the
owner of the foreclosed property when the owners proposed to repurchase the property and the then
GSIS General Manager Roman Cruz, Jr. ordered that the public bidding of the property be stopped and
the repurchase be discussed with him a day before the scheduled date of the bidding. The case is not in
point. In the Maharlika case, this Court ruled that GSIS was deemed to have accepted the offer to
repurchase when it ordered the bidding to be stopped pending discussion of the repurchase with the
owner of the property. In the case at bar, however, the GSIS granted petitioners two opportunities under
Resolutions No. 929 dated November 16, 1984 and Resolution No. 593 dated July 6, 1985 to repurchase
the subject property, but petitioners failed to comply with the GSIS' terms of repurchase

Legaspi vs. CA

FACTS:
Legaspi is the registered owner of twoparcels of land which he sold to his son-in-law,Leonardo B.
Salcedo, on October 15, 1965 for the sumof P25,000.00 with the right to repurchase the samewithin five
years from the execution of the deed of sale.Before the expiry date of the repurchase period,Legaspi
offered and tendered to Salcedo the sum ofP25,000.00 for the repurchase of the two parcels ofland which
was refused by Salcedo without justifiable or legal cause. Salcedo refused to convey theproperties to
Legaspi as requested by the latter and so Legaspi deposited in the Office of the Clerk of Court ofFirst
Instance of Cavite City the amount of P25,125.00.

Despite earnest efforts towards a compromise afterconsignation of the repurchase money had
been made,Salcedo refused to reconvey the properties in question.Plaintiff now petitioner filed a
complaint with the Courtof First Instance of Cavite for reconveyance to enforcehis right to repurchase two
parcels of land which hesold to the defendant, now private respondent,pursuant to a sale with pacto de
retro. Salcedo denied that Legaspi ever offered and tenderedto him the sum of P25,000.00 or requested
theexecution of the corresponding deed of reconveyance.He alleged that Legaspi asked for an extension
of oneyear within which to repurchase the two parcels of land.He also denied that earnest efforts towards
acompromise were pursued by Legaspi for the lattermerely proposed for an extension of one year of
theright to repurchase.Salcedo claimed that Legaspi was no longer entitled torepurchase the properties in
question for failure toexercise his right within the stipulated period inaccordance with Article 1250 of the
Civil Code underwhich Salcedo maintained he was entitled to thepayment of P42,250.00 instead of only
P25,000.00. Article 1250 of the Civil Code provides as follows:

In case an extraordinary inflation or deflation of the currencystipulated should supervene, the value of the
currency at thetime of the establishment of the obligation shall be the basis ofpayment, unless there is an
agreement to the contrary.

ISSUE:

Whether or not the petitioner validly exercisedhis right to repurchase the properties within the five-year
period as stipulated in the sale.

RULING:

Yes.

Tender of payment is the manifestation made by the debtor to the creditor of his desire to comply with his
obligation, with the offer of immediate performance. (Tolentino, Civil Code of the Phil....ippines, Vol. IV
[1985]). Generally, it is an act preparatory to consignation as an attempt to make a private settlement
before proceeding to the solemnities of consignation. (8 Manresa 325). Consignation is the act of
depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or
refuses to accept payment and it generally requires a prior tender of payment. (Limkako v. Teodoro, 74
Phil..... 313). In instances where no debt is due and owing, consignation is not proper. (Asturias Sugar
Central vs. Pure Cane Molasses Co., 60 Phil..... 255) We have early held that:

Consignation is not required to preserve the right of repurchase as a mere tender of payment is enough if
made on time as a basis for an action to compel the vendee a retro to resell the property. (Villegas vs.
Capistrano, 9 Phil..... 416; Resales vs. Reyes, et al. 25 Phil..... 495; Paez, et al., vs. Magno, 46 O.G. p.
5425).

Since the case at bar involves the exercise of the right to repurchase, a showing that petitioner made a
valid tender of payment is sufficient. It is enough that a sincere or genuine tender of payment and not a
mock or deceptive one was made. The fact that he deposited the amount of the repurchase money with
the Clerk of Court was simply an additional security for the petitioner. It was not an essential act that had
to be performed after tender of payment was refused by the private respondent although it may serve to
indicate the veracity of the desire to comply with the obligation.
On the issue of whether or not the tender of payment in the manner described by the petitioner resulted in
the exercise of the right to repurchase, we rule that it was erroneous on the part of the respondent court
to reverse the factual finding of the trial court that a valid tender of payment was made seasonably. The
records do not show that this finding is grounded entirely on speculation, surmises, or conjectures.

ERLINDA SAN PEDRO vs. RUBEN LEE and LILIAN SISON

Facts:

Petitioner claims that she desperately needed money to support her children’s college education,4 and
approached one Philip dela Torre, who introduced her to respondent Ruben Lee.5 From Lee and his wife
Lilian Sison, San Pedro was able to secure a loan in the amount of P105,000.00, with interest of
P45,000.00, or a total indebtedness of P150,000.00.6 As security for this loan, she agreed to mortgage a
17,235-square meter parcel of agricultural land located at San Juan, Balagtas, Bulacan, covered by
Transfer Certificate of Title (TCT) No. T-290387.7 This transaction took place in the office of Atty.
Venustiano Roxas, where she met Lee for the first time.8
San Pedro claims that Atty. Roxas and Lee coerced her to sign the "Kasulatan ng Ganap na Bilihan ng
Lupa" and that the document was executed merely as written evidence of the loan and mortgage. She
alleges that Atty. Venustiano Roxas and Ruben Lee told her that the document was just a formality, with
the assurance from Atty. Roxas and Lee that respondents would never enforce the contract against her.
She readily agreed because she believed in good faith that the spouses were "tunay na tao". She further
claims that she continued in possession of the parcel of land through her tenant, Federico Santos, and
continued to receive her landowner’s share of the harvest from 1985 until 1995.12

In 1986,13 petitioner attempted to pay the real property tax on the subject agricultural land.14 To her
surprise, she learned that the property had already been transferred to the names of respondents. saving
enough money to pay her indebtedness, San Pedro attempted to redeem her mortgage. She approached
Ruben Lee’s brother, Carlito, offering to pay her debt, but she was continually rebuffed.17 Nine years
after the contract was executed, she initiated this suit to recover title to the subject property.

Issue:

Whether the contract is one of equitable mortgage, in accordance with the statutory presumptions set
forth in Article 1602 of the Civil Code
Ruling:

Article 1602 provides:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the period
of redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall be subject to the usury laws.

It is well-settled that the presence of even one of the foregoing circumstances is sufficient to declare a
contract as an equitable mortgage, in consonance with the rule that the law favors the least transmission
of property rights.For the presumption of an equitable mortgage to arise under Article 1602, two requisites
must concur: (1) that the parties entered into a contract denominated as a sale; and (2) that their intention
was to secure an existing debt by way of a mortgage.

Absent any evidence of the market value of the locale as of the date of the contract, it cannot be
concluded that the price at which the property was sold, or about P8.70 per square meter, was grossly
inadequate. Mere inadequacy of price would not be sufficient. The price must be grossly inadequate, or
purely shocking to the conscience. Since the property in question could have been worth as little as
P20.00 per square meter in 1994, the price of P8.70 per square meter nine years earlier, in 1985, does
not seem to be grossly inadequate. Indeed, respondents’ Declaration of Real Property No. 10786, for the
year 1987, shows the market value of the property to be only P34,470.00 for that year.
As regards the alleged continuous possession of the property in question, San Pedro presented Federico
Santos, who testified that he is a farmer by occupation, currently tilling a farmholding of less than two
hectares located at San Juan, Balagtas, Bulacan, owned by Erlinda San Pedro, to whom he has been
paying lease rentals of 18 cavans a year. The testimony of the witness was offered to prove that he was
the agricultural leasehold tenant of the petitioner on the parcel of land which was described in the
complaint.
However, while the witness may have established that he was, indeed, the agricultural tenant of the
petitioner, the identity of the parcel of land which he tills and the parcel of land described in the complaint
was not established As another ground for the establishment of the purported equitable mortgage,
petitioner argues that paragraph 5 of Article 1602 is present.86 Again, petitioner presented no proof that
she, as vendor of property, bound herself to pay taxes on the thing sold.

Respondents presented documentary evidence which shows that the contract was indeed a sale: (1) a
receipt for P150,000.00 dated May 23, 1985, issued by Erlinda San Pedro, attesting full receipt of the
amount in question;87 (2) an authority to pay capital gains tax, executed by Erlinda San Pedro in favor of
Ruben Lee;88 and (3) an affidavit of non-tenancy executed by Erlinda San Pedro.89

The "Kasulatan ng Ganap na Bilihan ng Lupa" unequivocally states the absolute sale of the property
covered by Transfer Certificate of Title No. T-290387. Being a notarized document, it carries the
evidentiary weight conferred upon duly executed instruments provided by law,90 and is entitled to full
faith and credit upon its face.

MYRNA RAMO,vs. SUSANA S. SARAO and JONAS RAMOS

Facts:
On February 21, 1991, Spouses Jonas Ramos and Myrna Ramos executed a contract over their conjugal
house and lot in favor of Susana S. Sarao for and in consideration of 1,310,430.4 Entitled "DEED OF
SALE UNDER PACTO DE RETRO," the contract, inter alia, granted the Ramos spouses the option to
repurchase the property within six months from February 21, 1991, for 1,310,430 plus an interest of 4.5
percent a month.5 It was further agreed that should the spouses fail to pay the monthly interest or to
exercise the right to repurchase within the stipulated period, the conveyance would be deemed an
absolute sale.6

On July 30, 1991, Myrna Ramos tendered to Sarao the amount of 1,633,034.20 in the form of two
manager’s checks, which the latter refused to accept for being allegedly insufficient.7 On August 8, 1991,
Myrna filed a Complaint for the redemption of the property and moral damages plus attorney’s fees. On
August 13, 1991, she deposited with the RTC two checks that Sarao refused to accept.9

On December 21, 1991, Sarao filed against the Ramos spouses a Petition "for consolidation of ownership
in pacto de retro sale.

The appellate court sustained the RTC’s finding that the disputed contract was a bonafide pacto de retro
sale, not a mortgage to secure a loan.14 It ruled that Myrna Ramos had failed to exercise the right of
repurchase, as the consignation of the two manager’s checks was deemed invalid. She allegedly failed
(1) to deposit the correct repurchase price and (2) to comply with the required notice of consignation.15

Issue:

Whether the the parties intended the contract to be a bona fide pacto de retrosale or an equitable
mortgage.

Ruling:

In a pacto de retro, ownership of the property sold is immediately transferred to the vendee a retro,
subject only to the repurchase by the vendor a retro within the stipulated period.21 The vendor a retro’s
failure to exercise the right of repurchase within the agreed time vests upon the vendee a retro, by
operation of law, absolute title to the property.22 Such title is not impaired even if the vendee a retro fails
to consolidate title under Article 1607 of the Civil Code.23

On the other hand, an equitable mortgage is a contract that -- although lacking the formality, the form or
words, or other requisites demanded by a statute -- nevertheless reveals the intention of the parties to
burden a piece or pieces of real property as security for a debt.24 The essential requisites of such a
contract are as follows: (1) the parties enter into what appears to be a contract of sale, but (2) their
intention is to secure an existing debt by way of a mortgage.25 The nonpayment of the debt when due
gives the mortgagee the right to foreclose the mortgage, sell the property, and apply the proceeds of the
sale to the satisfaction of the loan obligation.26

This Court has consistently decreed that the nomenclature used by the contracting parties to describe a
contract does not determine its nature.27 The decisive factor is their intention -- as shown by their
conduct, words, actions and deeds -- prior to, during, and after executing the agreement.28 This juristic
principle is supported by the following provision of law:

Article 1371. In order to judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered.29
Even if a contract is denominated as a pacto de retro, the owner of the property may still disprove it by
means of parol evidence,30 provided that the nature of the agreement is placed in issue by the pleadings
filed with the trial court.31

There is no single conclusive test to determine whether a deed absolute on its face is really a simple loan
accommodation secured by a mortgage.32 However, the law enumerates several instances that show
when a contract is presumed to be an equitable mortgage, as follows:

Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the period
of redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall be subject to the usury laws.
Furthermore, a contract purporting to be a pacto de retro is construed as an equitable mortgage when the
terms of the document and the surrounding circumstances so require. The law discourages the use of a
pacto de retro,because this scheme is frequently used to circumvent a contract known as a pactum
commissorium. The Court has frequently noted that a pacto de retro is used to conceal a contract of loan
secured by a mortgage. Such construction is consistent with the doctrine that the law favors the least
transmission of rights.

Jurisprudence has consistently declared that the presence of even just one of the circumstances set forth
in the forgoing Civil Code provision suffices to convert a contract to an equitable mortgage.

In the present factual milieu, the vendor retained possession of the property allegedly sold. Petitioner and
her children continued to use it as their residence, even after Jonas Ramos had abandoned them. In fact,
it remained as her address for the service of court orders and copies of Respondent Sarao’s pleadings.

The presumption of equitable mortgage imposes a burden on Sarao to present clear evidence to rebut it.
Corollary to this principle, the favored party need not introduce proof to establish such presumption; the
party challenging it must overthrow it, lest it persist. To overturn that prima facie fact that operated against
her, Sarao needed to adduce substantial and credible evidence to prove that the contract was a bona fide
pacto de retro. This evidentiary burden she miserably failed to discharge.

Contrary to Sarao’s bare assertions, a meticulous review of the evidence reveals that the alleged contract
was executed merely as security for a loan.
Respondent herself stressed that the pacto de retro had been entered into on the very same day that the
property was to be foreclosed by a commercial bank. Such circumstance proves that the spouses direly
needed funds to avert a foreclosure sale. Had they intended to sell the property just to realize some profit,
as Sarao suggests they would not have retained possession of the house and continued to live there.
Clearly, the spouses had entered into the alleged pacto de retro sale to secure a loan obligation, not to
transfer ownership of the property.

The property had been used solely as securety for the ₱1,310,430 loan; it was therefore improper to
include in that amount payments for gasoline and miscellaneous expenses, taxes, attorney’s fees, and
other alleged loans. When Sarao unjustly refused the tender of payment in the amount of ₱1,633,034.20,
petitioner correctly filed suit and consigned the amount in order to be released from the latter’s obligation.

5. G.R. No. 149756 February 11, 2005

MYRNA RAMOSvs. SUSANA S. SARAO and JONAS RAMOS
PANGANIBAN, J.:

Facts:Spouses Ramos executed a contract over their conjugal house and lot in favor of Susana S.
Sarao. Entitled "DEED OF SALE UNDER PACTO DE RETRO," the contract granted the Ramos spouses
the option to repurchase the property within six months plus an interest of 4.5 percent a month.It was
further agreed that should the spouses fail to pay the monthly interest or to exercise the right to
repurchase within the stipulated period, the conveyance would be deemed an absolute sale.

Before the expiration of redemption period, Myrna Ramos tendered to Saraothe redemption price in the
form of two manager’s checks, which the latter refused to accept for being allegedly insufficient.Myrna
filed a complaint for the redemption of the property. and moral damages plus attorney’s fees. She
deposited with the RTC two checks that Sarao refused to accept.

On the other hand, Sarao filed against the Ramos spouses a petition for consolidation of ownership
in pacto de retro sale.

RTC dismissed the complaint and granted the prayer of Sarao. On appeal, the CA sustained the RTC’s
finding. It ruled that Myrna Ramos had failed to exercise the right of repurchase, as the consignation of
the two manager’s checks was deemed invalid. She allegedly failed (1) to deposit the correct repurchase
price and (2) to comply with the required notice of consignation.

Issues: 1) Whether the parties intended the contract to be a bona fide pacto de retrosale or an equitable
mortgage; and 2) whether there was no valid tender of payment of the redemption price neither a valid
consignation in the instant case.

Ruling: 1) In a pacto de retro, ownership of the property sold is immediately transferred to the vendee
a retro, subject only to the repurchase by the vendor a retro within the stipulated period. 21 The vendor
a retro’s failure to exercise the right of repurchase within the agreed time vests upon the vendee a retro,
by operation of law, absolute title to the property.Such title is not impaired even if the vendee a retro fails
to consolidate title under Article 1607 of the Civil Code.

On the other hand, an equitable mortgage is a contract that -- although lacking the formality, the form or
words, or other requisites demanded by a statute -- nevertheless reveals the intention of the parties to
burden a piece or pieces of real property as security for a debt.The essential requisites of such a contract
are as follows: (1) the parties enter into what appears to be a contract of sale, but (2) their intention is to
secure an existing debt by way of a mortgage.The nonpayment of the debt when due gives the
mortgagee the right to foreclose the mortgage, sell the property, and apply the proceeds of the sale to the
satisfaction of the loan obligation.

Article 1602 of the Civil Code enumerates several instances that show when a contract is presumed to be
an equitable mortgage.

Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the period
of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall be subject to the usury laws.

Furthermore, a contract which appears to be a pacto de retro is construed as an equitable mortgage

when the terms of the document and the surrounding circumstances so require.

Jurisprudence has consistently declared that the presence of even just one of the circumstances set forth
in the forgoing Civil Code provision suffices to convert a contract to an equitable mortgage. Article 1602
specifically states that the equitable presumption applies to any of the cases therein enumerated.

Here, the vendor retained possession of the property allegedly sold.3Petitioner and her children continued
to use it as their residence. In fact, it remained as her address for the service of court orders and copies of
Respondent Sarao’s pleadings.

The presumption of equitable mortgage imposes a burden on Sarao to present clear evidence to rebut it.
To overturn that prima facie fact that operated against her, Sarao needed to adduce substantial and
credible evidence to prove that the contract was a bona fide pacto de retro. This evidentiary burden she
miserably failed to discharge.

Contrary to Sarao’s bare assertions, a meticulous review of the evidence reveals that the alleged contract
was executed merely as security for a loan.Inasmuch as the contract between the parties was an
equitable mortgage, Respondent Sarao’s remedy was to recover the loan amount from petitioner by filing
an action for the amount due or by foreclosing the property.

2) Tender of payment is the manifestation by debtors of their desire to comply with or to pay their
obligation.If the creditor refuses the tender of payment without just cause, the debtors are discharged
from the obligation by the consignation of the sum due.Consignation is made by depositing the proper
amount to the judicial authority, before whom the tender of payment and the announcement of the
consignation shall be proved.All interested parties are to be notified of the consignation.Compliance with
these requisites is mandatory.

When Sarao unjustly refused the tender of payment, petitioner correctly filed suit and consigned the
amount in order to be released from the latter’s obligation.

The facts show that the notice requirement was complied with. In her letter, petitioner said that should the
respondent fail to accept payment, the former would consign the amount. This statement was an
unequivocal announcement of consignation. Concededly, sending to the creditor a tender of payment and
notice of consignation -- which was precisely what petitioner did -- may be done in the same act.

Because petitioners’ consignation was valid, it produced the effect of payment."The consignation,
however, has a retroactive effect, and the payment is deemed to have been made at the time of the
deposit of the thing in court or when it was placed at the disposal of the judicial authority."The rationale for
consignation is to avoid making the performance of an obligation more onerous to the debtor by reason of
causes not imputable to him.

6. G.R. No. 166714 February 9, 2007

AMELIA S. ROBERTS, Petitioner, vs. MARTIN B. PAPIO, Respondent.
CALLEJO, SR., J.:

Facts: Spouses Papio were the owners of a parcel of land in Makati City which they mortgaged in order
to secure a loan from theAmparo Investments Corporation. Since the couple needed money to redeem
the property and to prevent the foreclosure of the real estate mortgage, they executed a Deed of Absolute
Sale over the property in favor of Martin Papio’s cousin, Amelia Roberts.

Once the spouses settled their obligation, the corporation returned the TCT, which was then delivered to
Amelia Roberts.Thereafter, the parties (Amelia Roberts as lessor and Martin Papio as lessee) executed a
two-year contract of lease. However, Papio refused to vacate upon expiration of contract and refused to
pay rentals despite demands from Roberts. Roberts then filed a complaint for unlawful detainer against
Papio.

Paprio raised the defense that in the original contract of sale, Roberts gavehim the right to redeem the
property at any time for a reasonable amount. Infact, he remitted to Roberts’ authorized representative,
PerlitaVentura, the amount of P250,000 as repurchase price. Allegedly, Robertsonly refused to execute a
deed of absolute sale because Venturamisappropriated a portion of the amount from the supposed
repurchase price.

Issue: Whether the contract of sale entered by Papio and Roberts is actually an equitable mortgage.

Ruling: An equitable mortgage is one that, although lacking in some formality, form or words, or other
requisites demanded by a statute, nevertheless reveals the intention of the parties to change a real
property as security for a debt and contain nothing impossible or contrary to law.A contract between the
parties is an equitable mortgage if the following requisites are present: (a) the parties entered into a
contract denominated as a contract of sale; and (b) the intention was to secure an existing debt by way of
mortgage.The decisive factor is the intention of the parties.

In an equitable mortgage, the mortgagor retains ownership over the property but subject to foreclosure
and sale at public auction upon failure of the mortgagor to pay his obligation.In contrast, in a pacto de
retro sale, ownership of the property sold is immediately transferred to the vendee a retro subject only to
the right of the vendor a retro to repurchase the property upon compliance with legal requirements for the
repurchase.

The right to repurchase presupposes a valid contract of sale between the same parties. By insisting that
he had repurchased the property, Papio actually admits that the deed of absolute sale executed by him
and petitioner was really a contract of sale and not an equitable mortgage. Respondent is thus bound by
his admission of petitioner’s ownership of the property and is barred from claiming otherwise.

Issue on pacto de retro sale

The right of respondent to repurchase the property is not incorporated in the deed of absolute sale. The
right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a
right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract.
Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to
repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument cannot
be a right of repurchase but some other right like the option to buy in the instant case.An option to buy or
a promise to sell is different and distinct from the right of repurchase that must be reserved by means of
stipulations to that effect in the contract of sale.

Issue on Ventura’s right to sell

There is no documentary evidence showing that Ventura was authorized to offer for sale or sell the
property for and in behalf of petitioner for ₱250,000.00, or to receive the said amount from respondent as
purchase price of the property. The rule is that when a sale of a piece of land or any interest therein is
through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void and
cannot produce any legal effect as to transfer the property from its lawful owner.Being inexistent and void
from the very beginning, said contract cannot be ratified.Any contract entered into by Ventura for and in
behalf of petitioner relative to the sale of the property is void and cannot be ratified by the latter. A void
contract produces no effect either against or in favor of anyone.

7. G.R. No. 122047 October 12, 2000

SPOUSES SIvs. COURT OF APPEALS
QUISUMBING, J.:

*facts from batasnatin

Facts: Spouses Armada transferred their property to the names of their three sons namely, Crisotomo,
Jose and Severo. Crisostomo through Cresencia (atty-in-fact) executed a deed of sale in favor Anita Si.

Spouses Jose Armada (other brother) filed a complaint to annul the sale on the ground that there was no
written notice of such sale whereas the deed stated that “the co-owners are not interested in buying the
land”. Further, there was misrepresentation on the citizenship of Cresencia is a Filipino citizen.

Petitioners claimed that there was really no co-ownership since the parents executed three deeds of sale
assigning specific properties to the brothers. Since there is no co-ownership it follows that there is no right
to redemption. Petitioners pointed out that it was only because the brothers failed to submit a subdivision
plan which is the reason why there is only one certificate of title.

Lower court dismissed the petition. CA reversed and said that co-ownership still exists and that the land
was undivided. Petitioners filed a motion for new trial on the basis that there was annotation at the back of
the original TCT due to the sale in favor of the brothers. CA denied because the reglementary period had
lapsed and the decision has become final and executory.

Issue: Whether private respondents are co-owners who are legally entitled to redeem the lot under Article
1623 of the Civil Code.

Ruling: The lot in question had already been partitioned when their parents executed three (3) deed of
sales in favor of Jose, Crisostomo and Severo, all surnamed Armadawhich documents purports to have
been registered with the Register of Deeds. Notably, every portion conveyed and transferred to the three
sons was definitely described and segregated and with the corresponding technical description. In short,
there was extrajudicial partition. Moreover, every portion belonging to the three sons has been declared
for taxation purposes with the Assessor's Office. The fact that the three portions are embraced in one
certificate of title does not make said portions less determinable or identifiable or distinguishable, one
from the other, nor that dominion over each portion less exclusive, in their respective owners. Hence, no
right of redemption among co-owners exists.

After the physical division of the lot among the brothers, the community ownership terminated, and the
right of preemption or redemption for each brother was no longer available.

Under Art. 484 of the Civil Code, there is co-ownership whenever the ownership of an undivided thing or
right belongs to different persons. There is no co-ownership when the different portions owned by
different people are already concretely determined and separately identifiable, even if not yet technically
described. This situation makes inapplicable the provision on the right of redemption of a co-owner in the
Civil Code, as follows:

"Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days
from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of
sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor
that he has given written notice thereof to all possible redemptioners.

The right of redemption of co-owners excludes that of adjoining owners."

Moreover, that private respondent Jose Armada was well informed of the impending sale of Crisostomo's
share in the land. Co-owners with actual notice of the sale are not entitled to written notice.

8. I cant find the case.

9. G.R. No. 141613 December 16, 2005

SENEN B. AGUILARvs. VIRGILIO B. AGUILAR and ANGEL B. AGUILAR
SANDOVAL-GUTIERREZ, J.:
Facts: Senen and Virgilio purchased a house and lot for the benefit of their father. They executed a
written agreement stipulating that their shares in the house and lot would be equal and that Senen would
live with their father. Upon the death of their father, Virgilio demanded that Senen vacate the house and
that the property be sold, the proceeds to be divided between them. Senen refused to comply with
Virgilio’s demand.

Virgilio filed a complaint to compel the sale of the property. During the pre-trial, neither Senen nor his
counsel appeared. Thus, Senen was declared as in default and Virgilio was allowed to present his
evidence ex-parte. The trial court ordered that the property be sold, the proceeds to be divided equally
between them. On appeal, the Court of Appeals reversed the trial court’s decision. The SC reinstated the
trial court’s decision.

Senenthen filed with an action for legal redemption against Virgilio and Angel.Senen alleged that while he
knows that Virgilio sold his ½ share of the property to Angel, he (Senen) was not furnished any written
notice of the sale. Consequently, as a co-owner, he has the right to redeem the property.

Issue: Whether Senen’s complaint for legal redemption is barred by laches.

Ruling: With respect to redemption by co-owners, in case the share of a co-owner is sold to a third
person, the governing law is Article 1620 and 1623 of the Civil Code. From said provisions, the following
are the requisites for the exercise of legal redemption: (1) There must be a co-ownership; (2) one of the
co-owners sold his right to a stranger; (3) the sale was made before the partition of the co-owned
property; (4) the right of redemption must be exercised by one or more co-owners within a period of thirty
days to be counted from the time that he or they were notified in writing by the vendee or by the co-owner
vendor; and (5) the vendee must be reimbursed for the price of the sale.

Senen admits that he has actual knowledge of the sale. As provided by Article 1623, Senenhas thirty
days from such actual knowledge within which to exercise his right to redeem the property. However, he
only asserted his right to redeem the property after seven years. Definitely, such an unexplained delay is
tantamount to laches. Also, a co-owner with actual notice of the sale is not entitled to a written notice for
such would be superfluous. The law does not demand what is unnecessary.

10. G.R. No. L-38120 June 27, 1988

FLAVIA SALATANDOLvs. CATALINA RETES
PADILLA, J.

Facts: Plaintiffs and one EufemiaOmole are the co-owners of Lot No 513, each owning 1/3 share.
EufemiaOmole sold her one-third (1/3) share of said lot to defendant Catalina Retesas evidenced by a
Deed of Sale. TheRegister of Deeds wrote to plaintiff Flavia Salatandol informing her of the document
presented for registration affecting the one-third (1/3) share of Lot No. 513 in favor of Defendant Catalina
Salatandol. However, plaintiffs were never notified by the Eufemia nor by Catalina about the proposed
sale;

Plaintiffs wrote toCatalina Retes informing her of their desire to repurchase the said one-third (1/3) share
of Lot No. 513 sold to her by EufemiaOmole. Failing to get a favorable action from Catalina Retes,
plaintiffs deposited the amount of Pl,000.00 with the Clerk of the Court who later wrote Defendant
Catalina Retes informing the latter about the deposit and of plaintiffs' desire to exercise their right of pre-
emption as co-owners of EufemiaOmole.

While the case was pending Catalina resold the portion to Eufemia, who then donated the share back to
Catalina.

Issue: Whether pre-emption or redemption is available as a legal right to the plaintiffs.

Ruling: Art. 1623 of the Civil Code clearly and expressly prescribes that the thirty (30) days for making
the pre-emption or redemption are to be counted from notice in writing by the vendor. Here, the plaintiffs
have not been furnished any written notice of sale or a copy thereof by EufemiaOmole, the vendor. Said
plaintiffs' right to exercise the legal right of preemption or redemption, given to a co-owner when any one
of the other co-owners sells his share in the thing owned in common to a third person, as provided for in
Article 1623 of the Civil Code, has not yet accrued.

But, assuming that the notice from the Register of Deeds was equivalent to notice from the vendor, still, it
appears thatthere had been an actual partition of the land described in the certificate of title and each co-
owner is in possession of his respective share. As expressed in Article 484 of the Civil Code, a co-
ownership exists whenever the ownership of an undivided thing or right belongs to different persons.
Under such concept, a co-owner cannot point to a particular portion of the property owned in common as
his own, because his portion thereof is intangible rather than identifiable. Here, the portion of
EufemiaOmole as well as those of the plaintiffs had been identified and localized, so that co-ownership, in
its real sense, no longer exists. Hence, the right of redemption or pre-emption under Article 1620 of the
Civil Code can no longer be invoked by the plaintiffs over the portion appertaining to EufemiaOmole.

*Notice must be given by vendor in writing, notice given to redemptioner by the Register of Deeds was
held to be insufficient.

11. CABRERA VS. VILLANUEVA

FACTS: Petitioner is a co-owner of a real property situated in Manila, originally covered by TCT No.
64950 of the Registry of Deeds of Manila. On March 12, 1968, by way of a Deed of Absolute Sale,
Feliciano Oropesa and Antonio Oropesa, co-owners of said property, sold their shares of 14/112 each pro
indiviso or 28/112 share, for and in consideration of the sum of P6,000.00 each or a total of P12,000.00 to
Victoriana E. Villanueva (private respondent herein).

In 1969, by reason of said sale TCT No. 64950 was cancelled and in lieu thereof, TCT No. 96437, was
issued by the Registry of Deeds of Manila wherein the buyer was constituted as a co-owner pro indiviso
of the entire parcel, to the extent of the 28/112 share. This was after the former owners Feliciano and
Antonio, both surnamed Oropesa, had executed a Joint Affidavit attesting to the fact that they had notified
in writing the co-owners of the property in question and said co-owners did not and could not offer any
objection thereto.

Several years after, the buyer Victoriana E. Villanueva as the new co-owner, sent a letter dated
September 23, 1980 thru her counsel, to Erlinda 0. Cabrera, the other co-owner, proposing to her the
partition of the property in question. The latter did not agree to such proposal; instead, in her letter, dated
October 30, 1980, addressed to Villanueva, she offered to redeem the 28/112 share of the latter in the
property. Villanueva refused such proposal, hence the filing of an action for legal redemption by the
former. Both parties admitted the aforementioned facts by stating them in their Stipulation of Facts
submitted to the trial court.

ISSUE: Whether the petitioner was legally and duly notified of the sale of the 28/112 share of the property
in question in the light of Art. 1623 of the New Civil Code.

RULING: YES. We have no doubt that petitioner had actual knowledge of the sale, she having been
informed verbally by the private respondent herself as they were neighbors. But we have adhered to the
principle that notwithstanding the actual knowledge of a owner, he or she is still entitled to a written notice
from the vendor-co-owner in order to remove all uncertainty as to the sale, its terms and validity and to
quiet any doubts that the alienation is not definitive.

Here, for more than ten years, petitioner remained unperturbed by the fact that private respondent was
already registered as a co-owner and her uncles were no longer co-owners. It was only several years
later when the value of the property considerably increased that petitioner asserted her claim re the right
to redeem under Art. 1623. Petitioner has thus slept on her rights and is now estopped from questioning
the validity of the sale. We may even regard the receipt of a copy of the transfer certificate of title,
indicating private respondent as one of the co-owners, as service of the written notice required by Art.
1623. Clearly, petitioner's right to redeem expired a long time ago.

12. FRANCISCO vs. BOISER

FACTS: Petitioner Adalia Francisco and 3 of her sisters were co-owners of 4 parcels of registered lands
on which stands the Ten Commandments Building @ 689 Rizal Avenue Extension, Caloocan City. They
sold 1/5 of their undivided share in said realty to their mother, Adela Blas, for P10k, thus making the latter
a co-owner of said property to the extent of the share sold. Unknown to her children-co-owners, Blas sold
her 1/5 share for P10k to respondent, another sister of petitioner. Thereafter, petitioner received
summons from respondent demanding her share in the rentals being collected by petitioner from the
building’s tenants. Petitioner then informed respondent she was exercising her right of redemption as a
co-owner of said property and thus, she deposited the P10k as redemption price with the Clerk of Court.
The case was however dismissed. Petitioner filed her own case alleging that the 30-day period for
redemption under A.1623; NCC had not begun to run against her since Blas never informed her and the
other owners of the sale to the respondent. It was only on August 5, 1992, after she received summons,
did she learn of said sale. Respondent said that petitioner already knew of the sale, the deed of which
was attached, as early as May 30, 1992 when she wrote a demand letter.

ISSUE: Whether the letter-demand by Zenaida to Adalia can be considered as sufficient compliance with
the notice requirement of Art. 1623 for the purpose of legal redemption.

HELD: NO. Art.1623, NCC is clear in requiring that the written notification should come from the
vendor/prospective vendor, not from any other person. The vendor of an undivided interest is in the best
position to know who his co-owners are, who, under the law, must be notified of the sale. By not
immediately notifying the co-owner, a vendor can delay or even effectively prevent the meaningful
exercise of the right of redemption.

Here, the sale took place in 1986 but it was kept secret till 1992 when vendee, private respondent,
needed to notify t petitioner about the sale to demand 1/5 rentals from the property sold. However, to
prevent injustice, the SC held that the receipt by petitioner of summons on August 05, 1992 constitutes
actual knowledge on the basis of which petitioner may now exercise her right of redemption within 30
days from finality of the SC’s decision.

13. ETCUBAN vs. CA

FACTS: Petitioner inherited a piece of land together with his co-heirs, eleven in total, from their deceased
father. Thereafter the 11 co-heirs executed in favor of private respondents 11 deeds of sale of their
respective shares in the co-ownership for the total sum of P26,340.00. It is not disputed that the earliest
of the 11 deeds of sale was made on December 9, 1963 and the last one in December 1967. Petitioner
filed a complaint for legal redemption against the respondents before the Trial Court upon knowledge that
his co-heirs sold the land in question to the private respondents. Alleging that he should have been given
notice first before sale to respondents as he had informed his co-heirs his desire to buy their respective
shares. Defendant in response stated that the plaintiff has no cause of action against them, and that the
action is barred by prescription or laches, petitioners in- action after knowledge of the said sale caused
him to lose his right to redeem under Art. 1623 of the new Civil Code because the right of redemption
may be exercised only within 30 days from notice of sale and plaintiff was definitely notified of the sale
years ago as shown by the records. Court however in favor of the petitioner, hence the petition.

ISSUE: Whether the lower court erred in holding that petitioner is not barred from filing a complaint for
legal redemption when the latter failed to make an offer to redeem the property.
RULING: YES. While it is true that written notice is required by the law (Art. 1623), it is equally true that
the same "Art. 1623 does not prescribe any particular form of notice, nor any distinctive method for
notifying the redemptioner. " So long, therefore, as the latter is informed in writing of the sale and the
particulars thereof, the 30 days for redemption start running, and the redemptioner has no real cause to
complain.

In the Conejero case, the court ruled that the 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," and that we cannot adopt a stand of having to sacrifice
substance to technicality.

More so in the case at bar, where the vendors or co-owners of petitioner stated under oath in the deeds
of sale that notice of sale had been given to prospective redemptioners in accordance with Art. 1623 of
the Civil Code. "A sworn statement or clause in a deed of sale to the effect that a written notice of sale
was given to possible redemptioners or co-owners might be used to determine whether an offer to
redeem was made on or out of time, or whether there was substantial compliance with the requirement of
said Art. 1623.

In resume, the Court find that petitioner (defendant) failed to substantially comply with the requirements of
Art. 1623 on legal redemption and the court see no reason to reverse the assailed decision of the
respondent court.

14. C & C COMMERCIAL CORPORATION and CLARA REYES PASTOR and other
STOCKHOLDERS OF C & C COMMERCIAL CORPORATION similarly situated, petitioners,
vs. PHILIPPINE NATIONAL BANK, ET.AL

FACTS: C & C Commercial Corporation (now Abestos Cements Products Phils ACPPI) opened 7 letter
so credits with PNB to import machineries and equipments for its plant. But ACCPI failed to pay its
obligations under the said letters of credit and so through a Voting Trust Agreement, NIDC headed the
new management of ACCPI to help pay of its debt to PNB and NIDC. An accounting of SGV however,
showed that the management and operations for the first 3 years of the Voting Trust Agreement under
PNB/NIDC was a complete and disastrous failure. Leading to court action for receivership. Meanwhile,
DBP executed a deed of assignment in favor of PNB whereby DBP assigned to PNB its rights and
interests under the promissory noted and deeds of real estate mortgages executed by ACCPI in favor of
DBP. These credits together with the original letters of credits executed by ACCPI in favor of PNB was
foreclosed by PNB through court action.

ISSUE: Whether the assignment of credit by DBP to PNB is proper.

RULING: YES. As to the DBP-assigned credits, there is no doubt that foreclosure can proceed as these
were secured by appropriate mortgages. Morever, contrary to petitioner’s pretensions, the validity of the
assignment of the mortgage credit by DBP to PNB is beyond question. Article 1624 of the Civil Code
provides that “an assignment of credits and other incorporeal rights shall be perfected in accordance with
the provisions of Article 1475” which in turn states that “the contract of sale is perfected at the moment
there is a meeting of the minds upon the thing which is the object of the contract and upon the price.”
The meeting of the minds contemplated here is that between the assignor of the credit and his assignee,
there being no necessity for the consent of the debtor, contrary to petitioner‟s claim. It is sufficient that the
assignment be brought to his knowledge in order to be binding upon him. This may be inferred from
Article 1626 of the Civil Code which declares that “the debtor who, before having knowledge of the
assignment, pays his creditor shall be released from the obligation.”

15. NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION (NIDC) vs. HONORABLE

WALFRIDO DE LOS ANGELES

FACTS: The private respondents herein sold several lots registered in their names to Araceli W. Vda. de
Del Rosario who, after securing registration of the said lots in her name, mortgaged them to the PCIB. Del
Rosario failed to complete payment of the purchase price agreed upon, for which reason, the herein
private respondents filed a complaint against her and the PCIB for reconveyance to them of the said lots
or rescission of the contracts of sale executed thereon and the cancellation of the mortgages held by the
PCIB.

The PCIB assigned its mortgage rights over the lots covered by TCTs 70809, 70813, 70814 and 76401 to
76472 to the NIDC, as well as its rights as highest bidder for the lots covered by the first three titles
mentioned. This assignment was duly inscribed and annotated at the back of the certificates of the title
concerned on May 16, 1966.

The private respondents filed with the trial court, in the same civil case Q-8407, a motion to cancel time
encumbrance held by the NIDC appearing at the back of TCTs 76401 to 76472 and 70809.

ISSUE: Whether a valid assignment has been made by the PCIB to the NIDC of its mortgage rights as
well as its rights as purchaser of the lots in question.

RULING: YES. It would appear, however, from the facts admitted by the parties, that a valid assignment,
binding upon the private respondents, has been made by the PCIB to the NIDC of its mortgage rights as
well as its rights as purchaser of the lots in question. There does not appear to be anything in our statutes
or jurisprudence which prohibits a creditor without the consent of the debtor from making an assignment
of his credit and the rights accessory thereto; and, certainly, an assignment of credit and its accessory
rights does not at all obliterate the obligation of the debtor to pay, but merely puts the assignee in the
place of his assignor.

Indeed, article 1634 of the new Civil Code definitely recognizes the likelihood that credits and other
incorporeal rights in litigation may be assigned pendente lite, and, in such event, provides that the debtor
may extinguish his obligation by making appropriate reimbursement to the assignee. In other words, an
assignment of credit pendente lite, contrary to the respondent Judge's opinion of March 31, 1967,
under which it was construed that the mortgage rights and rights as purchaser of the PCIB over the lots in
question were still in custodia legis at the time of their assignment to the NIDC, does not extinguish the
credit or accessory rights assigned, but simply changes the bag into which the debtor must empty
his money in payment.

G.R. No. 162333, December 23, 2008

BIENVENIDO C. TEOCO and JUAN C. TEOCO, JR., Petitioners, vs. METROPOLITAN BANK AND
TRUST COMPANY, Respondent.

Facts: Lydia T. Co, married to Ramon Co, was the registered owner of two parcels of land. Ramon Co
mortgaged the said parcels of land to Metrobank for a sum of P200,000.00.
The properties were sold to Metrobank in an extrajudicial foreclosure sale under Act No. 3135. One year
after the registration of the Certificates of Sale, the titles to the properties were consolidated in the name
of Metrobank for failure of Ramon Co to redeem the same within the one year period provided for by law.

Metrobank filed a petition for the issuance of a writ of possession against Ramon Co and Lydia Co (the
spouses Co).

The brothers Teoco filed an answer-in-intervention alleging that they are the successors-in-interest of the
spouses Co, and that they had duly and validly redeemed the subject properties within the reglementary
period provided by law. Teoco had deposited the amount of P356,297.57 to the clerk of court of the RTC.
Metrobank refused to accept the amount deposited by the brothers Teoco, alleging that they are obligated
to pay the spouses Co’s subsequent obligations to Metrobank as well.

Issues:
1. WON petitioners need to pay not only the P200,000 principal obligation but also that
previously extended.
2. WON additional loan granted by Metrobank to Sps. Co were secured by the real estate
mortgage.
Held:

No. But without prejudice to the right of Metrobank to foreclose anew the mortgage. Neither petitioners,
the brothers Teoco, nor respondent, Metrobank, were able to present sufficient evidence to prove
whether the additional loans granted to the spouses Co by Metrobank were covered by the mortgage
agreement between them. While we agree with Metrobank that mortgages intended to secure future
advancements are valid and legal contracts,[13]entering into such mortgage contracts does not
necessarily put within its coverage all loan agreements that may be subsequently entered into by the
parties.

In order to prevent any injustice to, or unjust enrichment of, any of the parties, this Court holds that the
fairest resolution is to allow the brothers Teoco to redeem the foreclosed properties based on the amount
for which it was foreclosed (P255,441.14 plus interest). This is subject, however, to the right of Metrobank
to foreclose the same property anew in order to satisfy the succeeding loans entered into by the spouses
Co, if they were, indeed, covered by the mortgage contract.

In the case at bar, Metrobank would not be prejudiced by the assignment by the spouses Co of their right
of redemption in favor of the brothers Teoco. As conceded by Metrobank, the assignees, the brothers
Teoco, would merely step into the shoes of the assignors, the spouses Co.

WHEREFORE, the decision of the Court of Appeals is SET ASIDE. The decision of the Regional Trial
Court in Catbalogan, Samar is REINSTATED with the following MODIFICATION: the redemption by
Bienvenido C. Teoco and Juan C. Teoco, Jr. of the properties covered by TCT Nos. T-6910 and T-6220
shall be without prejudice to the subsequent foreclosure of same properties by Metropolitan Bank and
Trust Company to satisfy other loans covered by the Real Estate Mortgage.

LICAROS v GATMAITAN

FACTS:
Abelardo Licaros invested his money worth$150,000 with Anglo-Asean Bank, a money market
placement by way of deposit, based in the Republic of Venatu. Unexpectedly, he had a hard time getting
back his investments as well as the interest earned. He then sought the counsel of Antonio Gatmaitan, a
reputable banker and investor. They entered into an agreement,where a non-negotiable promissory note
was to be executed in favor of Licaros worth $150,000, and that Gatmaitan would take over the value of
the investment made by Licaros with the Anglo-Asean Bank at the former's expense. When Gatmaitan
contacted the foreign bank, it said they will look into it, but it didn't prosper. Because of the inability to
collect,Gatmaitan did not bother to pay Licaros the value of the promissory note. Licaros, however,
believing that he had a right to collect from Gatmaitan regardless of the outcome, demanded payment,
but was ignore. Licaros filed a complaint against Gatmaitan for the collection of the note. The trial court
ruled in favor of Licaros, but CA reversed.

ISSUE:
Whether the memorandum of agreement between petitioner and respondent is one of assignment
of credit or one of conventional subrogation

RULING:
It is a conventional subrogation. An assignment of credit has been defined as the process of
transferring the right of the assignor to the assignee who would then have a right to proceed against the
debtor. Consent of the debtor is not required is not necessary to product its legal effects, since notice of
the assignment would be enough. On the other hand, subrogation of credit has been defined as the
transfer of all the rights of the creditor to a third person, who substitutes him in all his rights. It requires
that all the related parties thereto,the original creditor, the new creditor and the debtor,enter into a new
agreement, requiring the consent of the debtor of such transfer of rights. In the case at hand, it was
clearly stipulated by the parties in the memorandum of agreement that the express conformity of the third
party (debtor) is needed. The memorandum contains a space for the signature of the Anglo-Asean Bank
written therein "with our conforme". Without such signature, there was no transfer of rights. The usage of
the word "Assignment" was used as a general term, since Gatmaitan was not a lawyer, and therefore was
not well-versed with the language of the law.

TANAY RECREATION CENTER AND DEVELOPMENT CORP. vs. CATALINA MATIENZO FAUSTO
G.R. No. 140182. April 12, 2005

FACTS: Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee of a 3,090-
square meter property located in Sitio Gayas, Tanay, Rizal, owned by Catalina Matienzo Fausto, under a
Contract of Lease. On this property stands the Tanay Coliseum Cockpit operated by petitioner. The lease
contract provided for a 20-year term, subject to renewal within sixty days prior to its expiration. The
contract also provided that should Fausto decide to sell the property, petitioner shall have the “priority
right” to purchase the same.

On June 17, 1991, petitioner wrote Fausto informing her of its intention to renew the lease. However, it
was Fausto’s daughter, respondent Anunciacion F. Pacunayen, who replied, asking that petitioner
remove the improvements built thereon, as she is now the absolute owner of the property. It appears that
Fausto had earlier sold the property to Pacunayen and title has already been transferred in her name.
Petitioner filed an Amended Complaint for Annulment of Deed of Sale, Specific Performance with
Damages, and Injunction.

In her Answer, respondent claimed that petitioner is estopped from assailing the validity of the deed of
sale as the latter acknowledged her ownership when it merely asked for a renewal of the lease. According
to respondent, when they met to discuss the matter, petitioner did not demand for the exercise of its
option to purchase the property, and it even asked for grace period to vacate the premises.

ISSUE: The contention in this case refers to petitioner’s priority right to purchase, also referred to as the
right of first refusal.

RULING: When a lease contract contains a right of first refusal, the lessor is under a legal duty to the
lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain
price and the lessee has failed to accept it. The lessee has a right that the lessor's first offer shall be in his
favor. Petitioner’s right of first refusal is an integral and indivisible part of the contract of lease and is
inseparable from the whole contract. The consideration for the lease includes the consideration for the
right of first refusal and is built into the reciprocal obligations of the parties.

It was erroneous for the CA to rule that the right of first refusal does not apply when the property is sold to
Fausto’s relative. When the terms of an agreement have been reduced to writing, it is considered as
containing all the terms agreed upon. As such, there can be, between the parties and their successors in
interest, no evidence of such terms other than the contents of the written agreement, except when it fails
to express the true intent and agreement of the parties. In this case, the wording of the stipulation giving
petitioner the right of first refusal is plain and unambiguous, and leaves no room for interpretation. It
simply means that should Fausto decide to sell the leased property during the term of the lease, such
sale should first be offered to petitioner. The stipulation does not provide for the qualification that such
right may be exercised only when the sale is made to strangers or persons other than Fausto’s kin. Thus,
under the terms of petitioner’s right of first refusal, Fausto has the legal duty to petitioner not to sell the
property to anybody, even her relatives, at any price until after she has made an offer to sell to petitioner
at a certain price and said offer was rejected by petitioner.

Iringan v. Court of Appeals

G.R. No. 129107, September 26, 2001, 366 SCRA 41

FACTS:

Private respondent Antonio Palao sold to petitioner Alfonso Iringan, an undivided portion of Lot No. 992 of
the Tuguegarao Cadastre, located at the Poblacion of Tuguegarao and covered by Transfer Certificate of
Title No. T-5790. The parties executed a Deed of Sale] on the same date with the purchase price of
P295,000.00,payable as follows:(a) P10,000.00 upon the execution of this instrument ;(b) P140,000.00 on
or before April 30, 1985;(c) P145,000.00 on or before December 31, 1985.

When the second payment was due, Iringan paid only P40,000. Thus, Palao sent a letter to Iringan
stating that he considered the contract as rescinded and that he would not accept any further payment
considering that Iringan failed to comply with his obligation to pay the full amount of the second
installment. Iringan through his counsel Atty. Hilarion L. Aquino, replied that they were not opposing the
revocation of the Deed of Sale but asked for the reimbursement of the following amounts:(a) P50,000.00
cash received;(b) P3,200.00 geodetic engineers fee;(c) P500.00 attorneys fee;(d) the current interest on
P53,700.00. In response, Palao sent a letter dated January 10, 1986 to Atty. Aquino, stating that he was
not amenable to the reimbursements claimed by Iringan.

On February 21, 1989, Iringan, now represented by a new counsel Atty. Carmelo Z. Lasam, proposed
that the P50,000 which he had already paid Palao be reimbursed or Palao could sell to Iringan, an
equivalent portion of the land. Palao instead wrote Iringan that the latters standing obligation had reached
P61,600, representing payment of arrears for rentals from October 1985 up to March 1989.[9] The parties
failed to arrive at an agreement. On July 1, 1991, Palao filed a Complaint[10] for Judicial Confirmation of
Rescission of Contract and Damages against Iringan and his wife.

ISSUE:

Whether or not the contract of sale was validly rescinded.

RULING:

Article 1592 of the Civil Code is the applicable provision regarding the sale of an immovable
property. Article 1592. In the sale of immovable property, even though it may have been stipulated that
upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take
place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of
the contract has been made upon him either judicially or by a notarial act. After the demand, the court
may not grant him a new term. Article 1592 requires the rescinding party to serve judicial or notarial
notice of his intent to resolve the contract.

Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him. The injured party may choose between the fulfillment
and the rescission of the obligation, with payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall
decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the Mortgage Law.

But in our view, even if Article 1191 were applicable, petitioner would still not be entitled to automatic
rescission. In Escueta v. Pando, we ruled that under Article 1124 (now Article 1191) of the Civil Code,
the right to resolve reciprocal obligations, is deemed implied in case one of the obligors shall fail to
comply with what is incumbent upon him. But that right must be invoked judicially. The same article also
provides: The Court shall decree the resolution demanded, unless there should be grounds, which justify
the allowance of a term for the performance of the obligation. This requirement has been retained in the
third paragraph of Article 1191, which states that the court shall decree the rescission claimed, unless
there be just cause authorizing the fixing of a period.

Consequently, even if the right to rescind is made available to the injured party, the obligation is not ipso
facto erased by the failure of the other party to comply with what is incumbent upon him. The party
entitled to rescind should apply to the court for a decree of rescission.The right cannot be exercised solely
on a party’s own judgment that the other committed a breach of the obligation.The operative act which
produces the resolution of the contract is the decree of the court and not the mere act of the vendor.
Since a judicial or notarial act is required by law for a valid rescission to take place, the letter written by
respondent declaring his intention to rescind did not operate to validly rescind the contract.

OCAMPO VS. CA

OCAMPO v. CA 233 SCRA 551, June 1994

FACTS: Two documents, an Agreement to Sell Real Property and a Contract to Sell, covering the same
parcel of land were executed by a seller in favor of 2 different buyers who now assert against each other
a better title to the property, which is registered in the name of seller Severino Tolosa. Tolosa mortgaged
the land to the Philippine Veterans Bank and had the encumbrance annotated on his certificate. The
parties entered into an Agreement to Sell Real Property whereby Tolosa sells, cedes and transfers the
land to Ocampo in consideration of P25,000.00, P12,500.00 of which was paid upon signing of the deed
and the balance to be due within 6 months thereafter. Paragraph 4 of the contract provides that
immediately upon complete payment of the purchase price . . . by the VENDEE, the VENDOR . . . agrees
to execute and deliver unto the VENDEE whatever pertinent document or documents necessary to
implement this sale and to transfer title to the VENDEE. Before the 6-month period to complete the
payment of the purchase price expired, Ocampo paid but only the total of P16,700.00.

Nevertheless, Tolosa accepted her subsequent late payments amounting to P3,900.00. Upon learning of
the mortgage lien, Ocampo caused her adverse claim to be annotated on Tolosa’s certificate of
title. Tolosa sought the cancellation of Ocampo’s adverse claim and presented her with two options,
namely, a refund of payments made, or a share from the net proceeds if sold to a third party. Tolosa and
Magdalena S. Villaruz executed a Contract to Sell whereby Tolosa sells, cedes, transfers, and conveys to
Villaruz the same land in consideration of P94,300.00. The amount of P15,000.00 was to be paid upon
execution and the balance upon cancellation of all liens and encumbrances from the certificate of title.
The contract stipulated the immediate conveyance of the physical possession of the land to Villaruz,
although no deed of definite sale would be delivered to her unless the price was fully paid. Tolosa wrote
Ocampo offering to reimburse her what she paid provided she would sign a document canceling her
adverse claim. Failing to convince Ocampo, Tolosa filed a petition in the Court of First Instance of Iloilo to
cancel the adverse claim of Ocampo. Borres claimed in her answer that she was merely the agent of
Ocampo who was the real party in interest. Borres however died so that the trial court ordered her
substitution by defendant Ocampo. Magdalena S. Villaruz, then claiming to have already bought the land,
intervened in the case. Villar uz appealed to the Court of Appeals, which then reversed and set aside
the trial court’s decision.

ISSUE: Whether the contract entered into by the parties has been properly rescinded

HELD : The agreement between Tolosa and Ocampo dated 21 April 1975 although titled Agreement to
Sell Real Property was a perfected contract of absolute sale wherein Tolosa forthwith sold, ceded and
transferred the land to Ocampo. Paragraph 4 pertains to the undertaking of the seller to execute and
deliver to the buyer any document deemed necessary by law to implement the sale and transfer title since
the parties were unsure of what documents were pertinent. The failure of the buyer to pay the price in
full within a fixed period does not, by itself, bar the transfer of the ownership or possession, much less
dissolve the contract of sale. Under Art. 1592 of the Civil Code, the failure of Ocampo to complete her
payment of the purchase price within the stipulated period merely accorded Tolosa the option to rescind
the contract of sale upon judicial or notarial demand. However, the letter of 2 August 1977 claimed to
have been sent by Tolosa to Ocampo rescinding the contract of sale was defective because it was not
notarized and, more importantly, it was not proven to have been received by Ocampo. Although the
complaint sought the cancellation of Ocampo’s adverse claim on Tolosa’s OCT and for the refund of the
payments made, these could not be equivalent to a rescission. In other words, seeking discharge from
contractual obligations and an offer for restitution is not the same as abrogation of the contract. To
rescind is [t]o declare a contract void in its inception and to put an end to it as though it never were. It is
[n]ot merely to terminate it and release parties from further obligations to each other but to abrogate it
from the beginning and restore parties to relative positions which they would have occupied had no
contract ever been made.

Article 1234 of the Civil Code which provides that [I]f the obligation has been substantially performed in
good faith, the obligator may recover as though there had been a strict and complete fulfillment, less
damages suffered by the obligee, also militates against the unilateral act of the defendants-appellants in
canceling the contract. . . . We agree with the plaintiffs-appellees that when the defendants-appellants,
instead of availing of their right to rescind, have accepted and received delayed payments of installments,
though the plaintiffs-appellees have been in arrears beyond the grace period mentioned in paragraph 6 of
the contract, the defendants-appellants have waived and are now estopped from exercising their alleged
right of rescission. We cannot but agree with the lower court that at the time appellees exercised their
option, appellants had already forfeited their right to invoke the provision regarding the nullifying effect of
the non-payment of six-months rentals by appellees by their having accepted without qualification on July
21, 1964 the full payment by appellees of all their arrearages.