SOUTHERN MOTORS, INC. vs.

MOSCOSO

FACTS:

Plaintiff Southern Motors, Inc. sold to defendant Angel Moscoso one Chevrolet truck on
installment basis for P6,445.00. Upon making a down payment, the defendant executed
a promissory note for the sum of P4,915.00, representing the unpaid balance of the
purchase price to secure the payment of which, a chattel mortgage was constituted on
the truck in favor of the plaintiff. Of said account, the defendant had paid a total of
P550.00, of which P110.00 was applied to the interest and P400.00 to the principal, thus
leaving an unpaid balance of P4,475.00. The defendant failed to pay 3 installments on
the balance of the purchase price. Plaintiff filed a complaint against the defendant, to
recover the unpaid balance of the promissory note. Upon plaintiff's petition, a writ of
attachment was issued by the lower court on the properties of the defendant. Pursuant
thereto, the said Chevrolet truck, and a house and lot belonging to defendant, were
attached by the Sheriff and said truck was brought to the plaintiff's compound for safe
keeping. After attachment and before the trial of the case on the merits, acting upon the
plaintiff's motion for the immediate sale of the mortgaged truck, the Provincial Sheriff of
Iloilo sold the truck at public auction in which plaintiff itself was the only bidder for
P1,OOO.OO. The trial court condemned the defendant to pay the plaintiff the amount of
P4,475.00 with interest at the rate of 12% per annum from August 16, 1957,until fully
paid, plus 10% thereof as attorneys fees and costs. Hence, this appeal by the defendant.

ISSUE:

Whether or not the attachment caused to be levied on the truck and its immediate sale
at public auction, was tantamount to the foreclosure of the chattel mortgage on said
truck.

HELD:

No. Article 1484 of the Civil Code provides that in a contract of sale of personal property
the price of which is payable in installments, the vendor may exercise any of the
following remedies: (I) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
and (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendee's failure to pay cover two or more installments. In this case, he shall
have no further action against the purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void. The plaintiff had chosen the first remedy.
The complaint is an ordinary civil action for recovery of the remaining unpaid balance
due on the promissory note.
PASCUAL vs UNIVERSAL MOTORS CORP.

FACTS:

Petitioners executed a real estate mortgage to secure the payment of the indebtedness
of PDP Transit, Inc. for the purchase of 5 units of Mercedez Benz trucks, with a total
purchase price or principal obligation of Php 152, 506.50. Sometime in April 1961, PDP
Transit, Inc., petitioner’s principal, had paid to respondent company the sum of Php
92,964.91, leaving a balance of Php 68,641.69, plus interest. The aforementioned
obligation guaranteed by the petitioners under the Real Estate Mortgage is further
secured by separate deeds of chattel mortgages on the Mercedez Benz units.

In 1965, respondent filed a complaint against PDP Transit, Inc. with a petition for a writ
of replevin, to collect the balance due under the Chattel Mortgages and to repossess all
the units sold to PDP Transit, Inc., including the 5 units guaranteed under the subject
Real Estate Mortgage.

Respondent admitted during the hearing that in its suit (C.C. No. 60201) against the PDP
Transit, Inc. it was able to repossess all the units sold to the latter, including the 5 units
guaranteed by the subject real estate mortgage, and to foreclose all the chattel
mortgages constituted thereon, resulting in the sale of the trucks at public auction.

With the foregoing background, the spouses Lorenzo Pascual and Leonila Torres, the
real estate mortgagors, filed for the cancellation of the mortgage they constituted on two
(2) parcels of land in favor of respondent to guarantee the obligation of PDP Transit, Inc.
to the extent of P50,000. The court rendered judgment for the petitioners, ordered the
cancellation of the mortgage, and directed the respondent to pay attorney's fees to the
petitioners. Respondent interposed the present appeal.

ISSUE:

Whether or not Art. 1484 of the Civil Code applies in the case at bar.

HELD:

Yes. In rendering judgment for the plaintiffs the lower court said in part: "... there does
not seem to be any doubt that Art. 1484 of the New Civil Code may be applied in relation
to a chattel mortgage constituted upon personal property on the installment basis (as in
the present case) precluding the mortgagee to maintain any further action against the
debtor for the purpose of recovering whatever balance of the debt secured, and even
adding that any agreement to the contrary shall be null and void." What article 1484
withholds from the vendor is the right to recover any deficiency from the purchaser
after the foreclosure of the chattel mortgage and not a recourse to the additional
security put up by a third party to guarantee the purchaser's performance of his
obligation.
FILINVEST CREDIT CORP. vs CA

FACTS:

Herein private respondents’ spouses Jose Sy Bang and Iluminada Tan were engaged in
the sale of gravel produced from crushed rocks and used for construction purposes.
They intended to buy rock crusher from

Rizal Consolidated Corporation which carried a cash price tag of P550,000.00. They
applied for financial assistance from herein petitioner Filinvest Credit Corporation, who
agreed to extend financial aid on the certain conditions.

A contract of lease of machinery (with option to purchase) was entered into by the
parties whereby the private respondents agreed to lease from the petitioner the rock
crusher for two years starting from July 5, 1981, payable as follows: P10,000.00 – first 3
months, P23,000.00 – next 6 months, P24,800.00 – next 15 months. It was likewise
stipulated that at the end of the two-year period, the machine would be owned by the
private respondents. Thus the private respondent issued in favor of the petitioner a
check for P150,550.00, as initial rental (or guaranty deposit), and 24 postdated checks
corresponding to the 24 monthly rentals. In addition, to guarantee their compliance
with the lease contract, the private respondent executed a real estate mortgage over two
parcels of land in favor of the petitioner. The rock crusher was delivered to the spouses.

However, 3 months later, the souses stopped payment when petitioner had not acted on
the complaints of the spouses about the machine. As a consequence, petitioner
extrajudicially foreclosed the real estate mortgage. The spouses filed a complaint before
the RTC. The RTC rendered a decision in favor of private respondent. The petitioner
elevated the case to CA which affirmed the decision in toto. Hence, this petition.

ISSUES:

1. Whether or not the nature of the contract is one of a contract of sale.

2. Whether or not the remedies of the seller provided for in Article 1484 are cumulative.

HELD:

1. Yes. The intent of the parties to the subject contract is for the so-called rentals to be
the installment payments. Upon the completion of the payments, then the rock crusher,
subject matter of the contract, would become the property of the private respondents.
This form of agreement has been criticized as a lease only in name.

Sellers desirous of making conditional sales of their goods, but who do not wish openly
to make a bargain in that form, for one reason or another, have frequently restored to
the device of making contracts in the form of leases either with options to the buyer to
purchase for a small consideration at the end of term, provided the so- called rent has
been duly paid, or with stipulations that if the rent throughout the term is paid, title
shall thereupon vest in the lessee. It is obvious that such transactions are leases only in
name. The so-called rent must necessarily be regarded as payment of the price in
installments since the due payment of the agreed amount results, by the terms of
bargain, in the transfer of title to the lessee.

2. No, it is alternative. The seller of movable in installments, in case the buyer fails to pay
2 or more installments, may elect to pursue either of the following remedies: (1) exact
fulfillment by the purchaser of the obligation; (2) cancel the sale; or (3) foreclose the
mortgage on the purchased property if one was constituted thereon. It is now settled
that the said remedies are alternative and not cumulative, and therefore, the exercise of
one bars the exercise of the others. Indubitably, the device – contract of lease with
option to buy – is at times resorted to as a means to circumvent Article 1484,
particularly paragraph (3) thereof. 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. There arises therefore no
need to constitute a chattel mortgage over the movable sold. More important, the
vendor, after repossessing the property and, in effect, canceling the contract of sale, gets
to keep all the installments-cum-rentals already paid.
RIDAD vs. FILIPINAS INVESTMENTS

FACTS:

Plaintiffs purchased from the Supreme Sales and Development Corporation two (2)
brand new Ford Consul Sedans complete with accessories, for P26,887 payable in 24
monthly installments.

To secure payment thereof, plaintiffs executed on the same date a promissory note
covering the purchase price and a deed of chattel mortgage not only on the two vehicles
purchased but also on another car (Chevrolet) and plaintiffs' franchise or certificate of
public convenience granted by the defunct Public Service Commission for the operation
of a taxi fleet.

Then, with the conformity of the plaintiffs, the vendor assigned its rights, title and
interest to the above-mentioned promissory note and chattel mortgage to defendant
Filipinas Investment and Finance Corporation.

Due to the failure of the plaintiffs to pay their monthly installments as per promissory
note, the defendant corporation foreclosed the chattel mortgage extra-judicially, and at
the public auction sale of the two Ford Consul cars, of which the plaintiffs were not
notified, the defendant corporation was the highest bidder and purchaser.

Another auction sale was held on November 16, 1965, involving the remaining
properties subject of the deed of chattel mortgage since plaintiffs' obligation was not
fully satisfied by the sale of the aforesaid vehicles, and at the public auction sale, the
franchise of plaintiffs to operate five units of taxicab service was sold for P8,000 to the
highest bidder, herein defendant corporation, which subsequently sold and conveyed
the same to herein defendant Jose D. Sebastian, who then filed with the Public Service
Commission an application for approval of said sale in his favor.

Plaintiffs filed an action for annulment of contract before the Court of First Instance of
Rizal, Branch I, with Filipinas Investment and Finance Corporation, Jose D. Sebastian and
Sheriff Jose San Agustin, as party-defendants.

CFI ruling: The chattel mortgage was null and void in so far as the taxi franchise and the
used Chevrolet car were concerned, and the sale at public auction of the taxicab
franchise was to be of no legal effect. The Certificate of Sale issued by the Sheriff of
Manila in favor of Filipinas concerning the taxi franchise was cancelled and set aside.
The assignment made by Filipinas in favor of Jose Sebastian was also declared void and
of no legal effect.

ISSUE :

The decisive issue for consideration is the validity of the chattel mortgage in so far as
the franchise and the subsequent sale thereof are concerned.

HELD:

NO. The resolution of said issue is unquestionably governed by the provisions of Article
1484 of the Civil Code which states:

Art. 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise y of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more
installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendee's failure to pay cover two or more installments. In this case, he shall
have no further action against the purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void.”

If the vendor avails himself of the right to foreclose the mortgage, the law prohibits him
from further bringing an action against the vendee for the purpose of recovering
whatever balance of the debt secured is not satisfied by the foreclosure sale.

Citing Levy Hermanos Inc. v. Pacific Commercial Co., et al. “This Court sustained the
pronouncement made by the lower court on the nullity of the mortgage in so far as it
included the house and lot of the vendees, holding that under the law, should the vendor
choose to foreclose the mortgage, he has to content himself with the proceeds of the sale
at the public auction of the chattels which were sold on installment and mortgaged to
him and having chosen the remedy of foreclosure, he cannot nor should he be allowed to
insist on the sale of the house and lot of the vendees, for to do so would be equivalent to
obtaining a writ of execution against them concerning other properties which are
separate and distinct from those which were sold on installment. This would indeed be
contrary to public policy and the very spirit and purpose of the law, limiting the
vendor's right to foreclose the chattel mortgage only on the thing sold.”
AGUSTIN vs. CA

FACTS:

Petitioner Agustin, an owner of a Volkswagen beetle car, alleged that letter of

instruction no. 229 violates the provisions and delegations of police power. Under the
1968 Vienna convention which was ratified by P.D. No. 207, it recommended the
enactment of local legislation for the installation of road safety signs and devices which
directs all vehicle owners except motorcycles and trailers to have at least one pair of
reflectorized early warning device in their vehicles for use whenever a vehicle is
stationary and to be installed at least four meters away the front and rear of the motor
vehicle staged, disabled and parked. The petitioner contended that the letter of
instructions no. 229 is oppressive, unreasonable, arbitrary, confiscatory, nay
unconstitutional and contrary to the precepts of the society.

Petitioner reinstated that the Volkswagen beetle car is already properly equipped with
blinking lights fore and aft, which could serve as an early warning device. Petitioner
therefore prayed for a judgment both the assailed letters of instructions and
memorandum circular void and unconstitutional and for a restraining order in the
meanwhile.

ISSUE:

Whether or not letter of instruction no. 229 violates the provisions and delegation of
police power.

HELD:

Police power is a state authority to enact legislations that may interfere with personal
liberty or property in order to promote the general welfare.

The said letter of instruction no. 229 was clearly intended to promote public safety
through safe transit and to avoid obstruction on roads and streets designated as
national roads. The hazards posed by such obstructions to traffic have been recognized
by international bodies concerned with traffic safety, the 1968 vienna convention which
was ratified by the Philippine government under P.D. No. 207, recommended the
enactment of local legislation for the installation of road safety signs and devices. Such
early warning device requirement is not an expensive redundancy, nor oppressive, for
car owners whose cars are already equipped with blinking lights in the fore and aft of
said motor vehicles, built-in reflectorized tapes on front and rear bumpers of motor
vehicles, which

is visible even under adverse conditions at a distance of at least 400 meters. The
Philippines adopts the generally accepted principles of international law as part of the
law of the land. As long as laws do not violate any constitutional provision, the courts
merely interpret and apply them.

Wherefore, this petition is dismissed. The restraining order is lifted. This decision is
immediately executory. No costs.
FIESTAN vs. CA

FACTS:

Petitioners spouses Dionisio Fiestan and Juanita Arconada were the owners of a parcel
of land situated in Ilocos Sur which they mortgaged to the DBP as security for their
P22,400.00 loan. For failure of petitioners to pay their mortgage indebtedness, the lot
was acquired by the DBP as the highest bidder at a public auction sale after it was
extrajudicially foreclosed by the DBP. A certificate of sale was subsequently issued by
the Provincial Sheriff on the same day and the same was registered in the Office of the
Register of Deeds. Earlier, petitioners executed a Deed of Sale in favor of DBP which was
likewise registered. Upon failure of petitioners to redeem the property within the one-
year period, petitioners’ TCT lot was cancelled by the Register of Deeds and in lieu
thereof, it was issued to the DBP upon presentation of a duly executed affidavit of
consolidation of ownership. The DBP sold the lot to Francisco and the same was
registered in the Office of the Register of Deeds. Subsequently, the DBP’s title over the
lot was cancelled and in lieu thereof, the TCT was issued to Francisco Peria.

Francisco Peria secured a tax declaration for said lot and accordingly paid the taxes due
thereon. He thereafter mortgaged to the PNB as security for his loan of P15,000.00 as
required by the bank to increase his original loan since petitioners were still in
possession of the lot, the Provincial Sheriff ordered them to vacate the premises. On the
other hand, petitioners filed on August 23, 1982 a complaint for annulment of sale,
mortgage and cancellation of transfer certificates of title against the DBP, PNB, Francisco
Peria and the Register of Deeds before the RTC.

ISSUE:

Whether or not that the extrajudicial foreclosure sale is null and void by virtue of lack of
a valid levy.

HELD:

No. The formalities of a levy, as an essential requisite of a valid execution sale under
Section 15 of Rule 39 and a valid attachment lien under Rule 57 of the Rules of Court, are
not basic requirements before an extrajudicially foreclosed property be sold at public
auction. The case at bar, as the facts disclose, involves an extrajudicial foreclosure sale.

In extrajudicial foreclosure of mortgage, the property sought to be foreclosed need not

be identified or set apart by the sheriff from the whole mass of property of the
mortgagor for the purpose of satisfying the mortgage indebtedness. For, the essence of a
contract of mortgage indebtedness is that a property has been identified or set apart
from the mass of the property of the debtor-mortgagor as security for the payment or
fulfillment of the obligation to answer the amount of indebtedness, in case of default of

payment. By virtue of the special power inserted or attached to the mortgage contract,
the mortgagor has authorized the mortgagee-¬creditor or any other person authorized
to act for him to sell said property in accordance with the formalities required under Act
No. 3135, as amended.

The Court finds that the formalities prescribed under Sections 2, 3 and 4 of Act No. 3135,
as amended, were substantially complied with in the instant case.
BORBON II vs. SERVICEWIDE SPECIALIST, INC.

FACTS:

Defendants Daniel L. Borbon and Francisco Borbon signed a promissory note to the
order of Pangasinan Auto Mart Inc., to pay without notice or demand the amount of P
122856 payable in installment for twelve months and a late payment charge of 3% shall
be added on each unpaid installment. It was further stipulated that acceptance by the
holder of payment of any installment after due date will not be considered as extending
the time for payment nor the failure of the holder to exercise any of its rights be deemed
a waiver of such rights. The rights of Pangasinan Auto Mart was later assigned to
Filinvest Credit Corporation. Filinvest assigned all its rights, interest and titleover the
Promissory notes and the chattel mortgate to the plaintiff. Defendants failed to pay their
monthly installments, Filinvest demanded from defendants payment of their
installments. After accounts were assigned to the plaintiff, it attempted to collect by
sending a demand letter to the defendant for them to pay their entire obligation.
Defendants claim that what they intend to buy from Pangasinan was a jeepney type
isuzu K.C Cab. The vehicle they bought was not delivered. nstead, through
misinterpretation and machination, the Pangasinan Motor Inc. delivered an Isuzu crew
cab, as this is the unit available at their warehouse. Later the representative of
Pangasinan Auto mart, Inc. (assignor) told the defendants that their available stock is an
Isuzu Cab but minus the rear body, which the defendants agreed to deliver with the
understanding that the Pangasinan Auto Mart, Inc. will refund the defendants the
amount of P10,000.00 to have the rear body completed Despite communications with
the Pangasinan Auto Mart, Inc. the latter was not able to replace the vehicle until the
vehicle delivered was seized by order of this court. the defendants argue that an asignee
stands in the place of an assignor which, to the mind of the court, is correct. The asignee
exercise all the rights of the assignor The defendants further claim that they are not in
default of their obligation because the Pangasinan Auto Mart was first guilty of not
fulfilling its obligation in the contract. the defendants claim that neither party incurs
delay if the other does not comply with his obligation.

ISSUE:

Whether or not the petitioners may recover the deficiency?

HELD:

No. 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. A contrario, in the event of the seller-mortgagee first seeks,
instead, the enforcement of the additional mortgages, guarantees or other security
arrangements, he must be then be held to have lost by waiver or non-choice his lien on
the chattel mortgage of the personal property sold by and mortgaged back to him,
although, similar to an action for specific performance, he may still levy on it.

In ordinary alternative obligations, a mere choice categorically an unequivocally made

and then communicated by the person entitled to exercise the option concludes the
parties. The creditor may not thereafter exercise any other option, unless the chosen
alternative proves to be ineffectual or unavailing due to no fault on his part. This rule, in
essence, is the difference between alternative obligations, on the one hand, and
alternative remedies, upon the other hand, where, in the latter case, the choice generally
becomes conclusive only upon the exercise of the remedy. For instance, in one of the
remedies expressed in Article 1484 of the Civil Code, it is only when there has been a
foreclosure of the chattel mortgage that the vendee-mortgagor would be permitted to
escape from a deficiency liability. Thus, if the case is one for specific performance, even
when this action is selected after the vendee has refused to surrender the mortgaged
property to permit an extrajudicial foreclosure, that property may still be levied on
execution and an alias writ may be issued if the proceeds thereof are insufficient to
satisfy the judgment credit. So, also, a mere demand to surrender the object which is not
heeded by the mortgagor will not amount to a foreclosure, but the repossession thereof
by the vendor-mortgagee would have the effect of a foreclosure.

The parties here concede that the action for replevin has been instituted for the
foreclosure of the vehicle in question (now in the possession of private respondent). The
sole issue raised before us in this appeal is focused on the legal propriety of the
affirmance by the appellate court of the awards made by the court a quo of liquidated
damages and attorney's fees to private respondent. Petitioners hold that under Article
1484 of the Civil Code, aforequoted, the vendor-mortgagee or its assignees loses any
right "to recover any unpaid balance of the price" and any "agreement to the contrary
(would be) void.

The argument is aptly made. In Macondray & Co. vs. Eustaquio, we have said that the
phrase "any unpaid balance" can only mean the deficiency judgment to which the
mortgagee may be entitled to when the proceeds from the auction sale are insufficient
to cover the "full amount of the secured obligations which . . . include interest on the
principal, attorney's fees, expenses of collection, and the costs." In sum, we have
observed that the legislative intent is not to merely limit the proscription of any further
action to the "unpaid balance of the principal" but, as so later ruled in Luneta Motor Co.
vs. Salvador, to all other claims that may be likewise be called in for in the
accompanying promissory note against the buyer-mortgagor or his guarantor, including
costs and attorney's fees.

In Filipinas Investment & Finance Corporation vs. Ridad while we reiterated and
expressed our agreement on the basic philosophy behind Article 1484, we stressed,
nevertheless, that 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.
Hence, borrowing from the examples made in Filipinas Investment, 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.
ADDISON vs. FELIX and TIOCO

FACTS:

The defendants-appellees spouses Maciana Felix and Balbino Tioco purchased from
plaintiff-appellant A.A. Addison four parcels of land to which Felix paid, at the time of
the execution of the deed, the sum of P3,000 on account of the purchase price. She
likewise bound herself to the remainder in installments, the first of P,2000 on July 15,
1914, the second of P5,000 thirty days after the issuance to her of a certificate of title
under the Land Registration Act, and further, within ten years from the date of such title,
P10 for each cocoanut tree in bearing and P5 for each such tree not in bearing that
might be growing on said parcels of land on the date of the issuance of title to her, with
the condition that the total price should not exceed P85,000. It was further stipulated
that Felix was to deliver to the Addison 25% of the value of the products that she might
obtain from the four parcels "from the moment she takes possession of them until the
Torrens certificate of title be issued in her favor," and that within 1 year from the date of
the certificate of title in her favor, Marciana Felix may rescind the contract of purchase
and sale.

In January 1915, Addison , filed suit in the CFI of Manila to compel Felix to pay the first
installment of P2,000, demandable, in accordance with the terms of the contract of sale.
The defendants Felix and her husband Tioco contended that Addison had absolutely
failed to deliver the lands that were the subject matter of the sale, notwithstanding the
demands they made upon him for this purpose. The evidence adduced shows Addison
was able to designate only two of the four parcels, and more than two-thirds of these
two were found to be in the possession of one Juan Villafuerte, who claimed to be the
owner of the parts he so occupied. The trial court held the contract of sale to be
rescinded and ordered Addison to return to Felix the P3,000 paid on account of the
price, together with interest thereon at the rate of 10% per annum.

ISSUE: Whether or not there was a delivery made and, therefore, a transfer of ownership
of the thing sold.

HELD: No. The record shows that the plaintiff did not deliver the thing sold. With
respect to two of the parcels of land, he was not even able to show them to the
purchaser; and as regards the other two, more than two-thirds of their area was in the
hostile and adverse possession of a third person.

The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is
considered to be delivered when it is placed "in the hands and possession of the
vendee." (Civ. Code, art. 1462.) It is true that the same article declares that the execution
of a public instruments is equivalent to the delivery of the thing which is the object of
the contract, but, 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 that, at the
moment of the sale, its material delivery could have been made. It is not enough to
confer upon the purchaser the ownership and the right of possession. The thing sold
must be placed in his control. When there is no impediment whatever to prevent the
thing sold passing into the tenancy of the purchaser by the sole will of the vendor,
symbolic delivery through the execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and make use of it himself or through
another in his name, because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality — the delivery has not been
effected.
It is evident, then, in the case at bar, that the mere execution of the instrument was not a
fulfillment of the vendors' obligation to deliver the thing sold, and that from such non-
fulfillment arises the purchaser's right to demand, as she has demanded, the rescission
of the sale and the return of the price. (Civ. Code, arts. 1506 and 1124.)

Of course if the sale had been made under the express agreement of imposing upon the
purchaser the obligation to take the necessary steps to obtain the material possession of
the thing sold, and it were proven that she knew that the thing was in the possession of a
third person claiming to have property rights therein, such agreement would be
perfectly valid. But there is nothing in the instrument which would indicate, even
implicitly, that such was the agreement.
TEN FORTY REALTY AND DEVELOPMENT CORPORATION vs CRUZ

DOCTRINE: The execution of public instrument gives rise only to a prima facie
presumption of delivery, presumption is destroyed when the delivery is not effected
because of a legal impediment of failure to take actual possession of the property sold.

FACTS:

An ejectment suit was filed by petitioner Ten Forty against Marina Cruz alleging that the
former is the true and absolute owner of a parcel of land and residential house located
in #71 18th St., E.B.B. Olongapo City with an area of 324 square meters having acquired
said property from Barbara Galino by virtue of Deed of Absolute Sale. After few years,
petitioner Ten Forty learned that same property was sold to Cruz who immediately
occupied the property. Failure to arrive at an amicable settlement, a demand letter was
sent to respondent Cruz to vacate and pay reasonable amount for the occupation of the
same, however, Cruz refused to vacate the premises. A counterclaim was submitted by
respondent contending that petitioner is not qualified to the property being a public
land, that Galino did not sell the property to petitioner but merely obtained a loan from
Veronica Lorenzana, president of the corporation, no allegation as to the prior
possession of petitioner of the subject land wherein Galino was the actual possessor
when it was sold and vacated the premises in favor of the respondent. MTCC ruled in
favor of petitioner and ordered respondent to vacate the property and surrender the
possession thereof to Ten Forty. RTC reversed MTCC’s decision and ruled that the
execution of Deed of Absolute Sale in favor of petitioner Ten Forty without actual
transfer of the physical possession did not have the effect of making the petitioner the
owner of the property because there was no delivery of the object of the sale. An appeal
was submitted to Court of Appeals which sustained the ruling of RTC.

ISSUE:

Whether or not delivery occurred upon the execution of Deed of Sale to warrant
possession over the subject land.

HELD:

Art. 1498 lays down the rule that an execution of public instrument shall be equivalent
to the delivery of the thing that is the object of the contract if, from the deed, the
contrary does not appear or cannot be clearly inferred. Ownership is transferred not by
contract but by actual delivery, Civil Code did not indicate that the execution of Deed of
Sale is a conclusive presumption of delivery of possession of real estate. Supreme Court
held that the execution of public instrument is a prima facie presumption of delivery and
may be destroyed when actual delivery is not effected because of a legal impediment.
Petitioner Ten Forty never acquired the property from the time it was sold to the
corporation since Galino remained in possession of the subject land and later vacated it
after the second sale to Cruz, hence, it remained under the control and possession of
Galino and was never transferred to petitioner. Tax declarations of Galino and Cruz
represented an adverse claim over the unregistered property and derogated its claim of
control and possession of the subject land.