PART TWO: SALES AND LEASE

SPRING HOMES SUBDIVISION vs. SPOUSES TABLADA

G.R. No. 200009. January 23, 2017

FACTS: Spouses Tablada entered into a Contract to Sell with Spring Homes in 1995 which was followed
by a Deed of Absolute Sale in 1996. Second, in 2000, the Spouses Lumbres and Spring Homes executed a
Deed of Absolute Sale over the same property. The Spouses Lumbres persistently insist that the first Deed
of Sale executed by the Spouses Tablada is void for having no valuable consideration. They argue that out
of the 409,500.00-purchase price under the Contract to Sell, the Spouses Tablada merely paid 179,500.00,
failing to pay the rest in the amount of 230,000.00 despite demands.

ISSUE: Whether or not Spouses Lumbres has a better right over the property?

RULING: NO. The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of a double sale of immovable property. Thus, the Court has consistently ruled that
ownership of an immovable property which is the subject of a double sale shall be transferred: (1) to the
person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to
the person who in good faith was first in possession; and (3) in default thereof, to the person who presents
the oldest title, provided there is good faith.

The Spouses Lumbres cannot claim good faith since at the time of the execution of their Compromise
Agreement with Spring Homes, they were indisputably and reasonably informed that the subject lot was
previously sold to the Spouses Tablada. They were also already aware that the Spouses Tablada had
constmcted a house thereon and were in physical possession thereof. They cannot, therefore, be permitted
to freely claim good faith on their part for the simple reason that the First Deed of Absolute Sale between
Spring Homes and the Spouses Tablada was not annotated at the back of the subject property's title.

Indeed, knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights except
only as provided by law, as in cases where the second buyer first registers in good faith the second sale
ahead of the first. Such knowledge of the first buyer does bar her from availing of her rights under the
law, among them, first her purchase as against the second buyer. But conversely, knowledge gained by
the second buyer of the first sale defeats his rights even if he is first to register the second sale, since such
knowledge taints his prior registration with bad faith.

Accordingly, in order for the Spouses Lumbres to obtain priority over the Spouses Tablada, the law
requires a continuing good faith and innocence or lack of knowledge of the first sale that would enable
their contract to ripen into full ownership through prior registration. But from the very beginning, the
Spouses Lumbres had already known of the fact that the subject property had previously been sold to the
Spouses Tablada, by virtue of a valid Deed of Absolute Sale. In fact, the Spouses Tablada were already in
possession of said property and had even constructed a house thereon. Clearly then, the Spouses Lumbres
were in bad faith the moment they entered into the second Deed of Absolute Sale and thereafter registered
the subject property in their names.

LAND BANK OF THE PHILIPPINES vs. MUSNI

G.R. NO. 206343. February 22, 2017

DOCTRINE: Banks must show that they exercised the required due diligence before claiming to be
mortgagees in good faith or innocent purchasers for value.

FACTS: Respondent Lorenzo Musni was the compulsory heir of Jovita Musni, who was the owner of a
lot in Comillas, La Paz, Tarlac. Musni filed before the Regional Trial Court of Tarlac City a complaint for
reconveyance of land and cancellation of TCT against Spouses Nenita Sonza Santos and Ireneo Santos
(Spouses Santos), Eduardo Sonza, and Land Bank of the Philippines. Musni alleged that Nenita falsified a
Deed of Sale and caused the transfer of title of the lot in her and her brother Eduardo's name. Then the
spouses Santos and Eduardo mortgaged the lot to Land Bank as security for their loan. Musni said that he
was dispossessed of the lot when Land Bank foreclosed the property upon Nenita and Eduardo's failure to
pay their loan. Later, the titles of the lot and another foreclosed land were consolidated in another TCT,
under the name of Land Bank. Musni also claimed that Nenita and Eduardo was convicted for
falsification of a public document which he filed against them before the MTC of Tarlac.

Land Bank filed its Amended Answer to the RTC with Counterclaim and Crossclaim. It asserted that the
transfer of the title in its name was because of a decision rendered by the Department of Agrarian Reform
Adjudication Board, Region III. Land Bank prayed that it be paid the value of the property and the
expenses it incurred, should the trial court order the reconveyance of the property to Musni.

On June 27, 2008, the trial court rendered a Decision, in favor of Musni. It relied on the fact that Nenita
was convicted of falsification of the Deed of Sale. The trial court found that Musni did not agree to sell
the property to the Spouses Santos and Eduardo. However, the Court of Appeals ruled in favor of Musni.
Land Bank moved for reconsideration, but the same was denied. Hence, the present petition.

ISSUE: 1. Whether or not petitioner is a mortgagee in good faith and an innocent purchaser for value?
2. Whether or not petitioner is entitled to the award of damages?

HELD: 1. The Court ruled in the negative. Petitioner is neither a mortgagee in good faith nor an innocent
purchaser for value. Petitioner's defense that it could not have known the criminal action since it was not a
party to the case and that there was no notice of lis pendens filed by respondent Musni, is unavailing. Had
petitioner exercised the degree of diligence required of banks, it would have ascertained the ownership of
one of the properties mortgaged to it. Where "the findings of fact of the trial courts are affirmed by the
Court of Appeals, the same are accorded the highest degree of respect and, generally, will not be
disturbed on appeal. Such findings are binding and conclusive on this Court.”

2. The Court ruled in the negative. Petitioner is not entitled to the award of damages. In its Decision, the
trial court ordered respondents Nenita and Eduardo to pay petitioner damages in the amount equivalent to
the appraised value of the property being claimed by respondent Musni. The Court of Appeals deleted the
award. It considered the grant of award as a partial extinguishment of the real estate mortgage, which is
not allowed. Since the mortgage is indivisible, the Court of Appeals nullified the real estate mortgage
involving the two properties, and deleted the award. Although the Court of Appeals' basis for deleting the
award is erroneous, this Court affirms the removal on a different ground since petitioner did not seek
relief from the Court with clean hands. Petitioner may have incurred losses when it entered into the
mortgage transaction with respondents Spouses Santos and Eduardo, and the corresponding foreclosure
sale. However, the losses could have been avoided if only petitioner exercised the required due diligence.

REPUBLIC OF THE PHILIPPINES vs. PHILIPPINE INTERNATIONAL CORPORATION

G.R. No. 181984. March 20, 2017

DOCTRINE: When the statutory term of a non-incorporated agency expires, the powers, duties and
functions, as well as the assets and liabilities of that agency, revert to and are re-assumed by the Republic
of the Philippines (Republic).

FACTS: In 1976, the Cultural Center of the Philippines (CCP) and respondent PIC entered into a Lease
Agreement.4 In that agreement, CCP leased to PIC a parcel of land located within the CCP Complex in
Pasay City, including the building erected on a portion thereon (subject property).

The term of the lease shall be twenty-five (25) years from and after the date of this Contract, renewable
for a like period under the same terms and conditions at the option of the LESSEE.

Eight years later, CCP alienated the subject property in favor of Philippine National Bank (PNB) through
a Deed of Dacion in Payment with Lease.7 In the same deed, PNB leased the subject property back to
CCP for a period of five years.8 Accordingly, the latter's title over the subject property was cancelled and
Transfer Certificate Title (TCT) No. 908169 issued to PNB.

On 8 December 1986, Proclamation No. 50 was issued. It launched a program for the privatization of
certain government corporations and/or assets and created the Committee on Privatization and the Asset
Privatization Trust.

ISSUE: Whether or not PMO is bound by the Lease Agreement?

RULING: PMO is bound by the Lease Agreement. It is undisputed that PMO is the successor agency of
APT. Consequently, it assumes the existing obligations of APT upon the termination of the latter's
existence. In Iron and Steel Authority v. Court of Appeals,37 this Court explained that when the statutory
term of a non-incorporated agency expires, the powers, duties and functions, as well as the assets and
liabilities of that agency, revert to and are re-assumed by the Republic of the Philippines (Republic). This
rule holds in the absence of special provisions of law specifying some other manner of disposition - the
devolution or transmission of such powers, duties, and functions - to some other identified successor
agency or instrumentality of the Republic.
It is settled that once a lease is recorded, as in this case, it becomes binding on third persons. Therefore,
from the time of the execution of the lease contract, its efficacy continues until it is terminated on the
grounds provided for by law.

PHILIPPINE STEEL COATING CORP. vs. QUINONES

G.R. No. 194533. April19, 2017

FACTS: This case arose from a Complaint for damages filed by respondent Quiñones (owner of
Amianan Motors) against petitioner PhilSteel. The Complaint alleged that in early 1994, Richard Lopez, a
sales engineer of PhilSteel, offered Quiñones their new product: primer-coated, long-span, rolled
galvanized iron (G.I.) sheets. The latter showed interest, but asked Lopez if the primer-coated sheets were
compatible with the Guilder acrylic paint process used by Amianan Motors in the finishing of its
assembled buses. Uncertain, Lopez referred the query to his immediate superior, Ferdinand Angbengco,
PhilSteel's sales manager.

Quiñones then sent a letter-complaint to PhilSteel invoking the warranties given by the latter. According
to respondent, the damage to the vehicles was attributable to the hidden defects of the primer-coated
sheets and/or their incompatibility with the Guilder acrylic paint process used by Amianan Motors,
contrary to the prior evaluations and assurances of PhilSteel. Because of the barrage of complaints,
Quiñones was forced to repair the damaged buses.

PhilSteel counters that Quiñones himself offered to purchase the subject product directly from the former
without being induced by any of PhilSteel's representatives. According to its own investigation, PhilSteel
discovered that the breaking and peeling off of the paint was caused by the erroneous painting application
done by Quiñones.

ISSUE: whether or not there were express warranties?

HELD: In Carrascoso, Jr. v. CA, the following requisites must be established in order to prove that there
is an express warranty in a contract of sale: (1) the express warranty must be an affirmation of fact or any
promise by the seller relating to the subject matter of the sale; (2) the natural effect of the affirmation or
promise is to induce the buyer to purchase the thing; and (3) the buyer purchases the thing relying on that
affirmation or promise.

An express warranty can be oral when it is a positive affirmation of a fact that the buyer relied on.

A warranty is not necessarily written. It may be oral as long as it is not given as a mere opinion or
judgment. Rather, it is a positive affirmation of a fact that buyers rely upon, and that influences or induces
them to purchase the product.9

Petitioner expressly represented to respondent that the primer-coated G.I. sheets were compatible with the
acrylic paint process used by the latter on his bus units. This representation was made in the face of
respondent's express concerns regarding incompatibility. Petitioner also claimed that the use of their
product by Quiñones would cut costs.

The oral statements of Angbengco created an express warranty. They were positive affirmations of fact
that the buyer relied on, and that induced him to buy petitioner's primer-coated G.I. sheets.

PhilSteel, through its representative, was in effect inducing in the mind of the buyer the belief that the
former was an expert on the primed G.I. sheets in question; and that the statements made by petitioner's
representatives, particularly Angbengco (its sales manager), 17 could be relied on. Thus, petitioner did
induce the buyer to purchase the former's G.I. sheets. Petition is denied.

DOLORES ALEJO vs. SPOUSES CORTEZ

G.R. No. 206114. June 19, 2017

FACTS: The property belonged to the conjugal property/absolute community of property of the
respondent Spouses Jorge and Jacinta Leonardo. Jorge's father, Ricardo, approached his sister, herein
petitioner Dolores Alejo (Dolores), to negotiate the sale of the subject property.8 Accordingly, on March
29, 1996, Jacinta executed a Kasunduan with Dolores for the sale of the property. The Kasunduan was
signed by Jacinta and Ricardo as witness. Jorge, however, did not sign the agreement.

It further appears that the down payment of PhP70,000 and the PhP230,000 were paid by Dolores10 on
the dates agreed upon and thereafter, Dolores was allowed to possess the property and introduce
improvements thereon.

Jorge wrote a letter to Dolores denying knowledge and consent to the Kasunduan. Jorge further informed
Dolores that Jacinta was retracting her consent to the Kasunduan due to Dolores' failure to comply with
her obligations.

However, during the pendency of said cases, the subject property was sold by Jorge and Jacinta to
respondents Spouses Ernesto Cortez and Priscilla San Pedro (Spouses Cortez) under a Deed of Absolute
Sale dated September 4, 1998 for a purchase price of PhP700,000. A new transfer certificate of title was
Issued in the latter's names. At the time of said sale, Dolores was in possession of the subject property. 16

Consequently, Dolores filed the case a quo for annulment of deed of sale and damages against the
Spouses Cortez and the Spouses Leonardo.

ISSUE: Whether the Kasunduan for the sale of a conjugal real property between Jacinta and Dolores as a
continuing offer has been converted to a perfected and binding contract?

HELD: Yes. As a rule, the sale by one Spouse of Conjugal Real Property is Void Without the Written
Consent of the other Spouse.
Any alienation or encumbrance of conjugal property made during the effectivity of the Family Code is
governed by Article 124 thereof which provides:

Article 124. The administration and enjoyment of the conjugal partnership property shall belong to both
spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the
court by the wife for proper remedy, which must be availed of within five years from the date of the
contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the
conjugal properties, the other spouse may assume sole powers of administration. These powers do not
include disposition or encumbrance without authority of the court or the written consent of the other
spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void.
However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and
the third person and may be perfected as a binding contract upon the acceptance by the other spouse or
authorization by the court before the offer is withdrawn by either or both offerors.

Nevertheless, the void Kasunduan constitutes a continuing offer from Jacinta and Dolores and that Jorge
had the option of either accepting or rejecting the offer before it was withdrawn by either, or both, Jacinta
and Dolores.

Jorge's failure to expressly repudiate the Kasunduan and his demand that Dolores comply with her
undertakings therein show Jorge's acceptance of the sale of the conjugal property. On the other hand, the
CA noted that in varying the terms of the Kasunduan, i.e., in the time of payment and the purchase price,
Jorge is deemed to have only qualifiedly accepted the same.

ROGELIA R. GATAN AND THE HEIRS OF BERNARDINO GATAN vs. JESUSA VINARAO

G.R. No. 205912. October 18, 2017

DOCTRINE: A notarized deed of sale enjoys the presumption of validity and absentany clear, positive,
and convincing evidence. Burden lies on the party alleging forgery.

FACTS: Spouses Gatan, acquired a parcel of land in Casibarag Sur, Cabagan, Isabela, with an area of
around 406 square meters. According to petitioners, sometime in January 2002, respondent spouses
Cabauatan asked petitioner Rogelia if they could temporarily erect a house on the spouses Gatan's
property. Petitioner Rogelia agreed since respondent Mildred Cabauatan was Bernardino's relative.
Sometime in March 2006, petitioner Rogelia learned of a Deed of Absolute Sale supposedly executed by
Bernadino on December 30, 1989 conveying a portion of the spouses Gatan's property, measuring around
245 square meters, in favor of respondent Mildred's parents, namely, Spouses Vinarao, for the
consideration of ₱4,000.00.

Petitioner Rogelia questioned the Deed of Absolute Sale, averring that Bernardino could not have signed
the said Deed because he was illiterate; and that the Deed of Absolute Sale lacked her marital consent
since it was signed not by her, but by a certain Aurelia Ramos Gatan. Petitioner Rogelia then confronted
the spouses Vinarao regarding the falsified Deed of Absolute Sale and demanded that the respondent
spouses Cabauatan vacate the subject property. Respondents countered that the subject property was
previously owned by Pedro Gatan, the father of Bernardino and Carmen Gatan. Carmen, the mother and
grandmother of Sostones and respondent Mildred, respectively, had always been in actual possession of
the subject property.

While respondents admitted that the spouses Gatan eventually came to own the subject property,
respondents asserted that the spouses Gatan sold the subject property to the spouses Vinarao by virtue of
the Deed of Absolute Sale dated December 30, 1989, which was notarized by Atty. Alfredo C. Mabbayad.

Respondents denied that they falsified Bernardino's signature on the Deed of Absolute Sale and insisted
that Bernardino could write his own name. Respondents also claimed that petitioner Rogelia signed the
Deed of Absolute Sale in her real name, which is Aurelia Ramos Gatan.

After trial on the merits, the RTC rendered a Decision on October 1, 2009, dismissing petitioners'
Complaint.

ISSUE: Whether or not the Deed of Sale is null and void?

HELD: No. Rogelia Gatan maintained that the signature of the purported vendor appearing in the Deed
of Absolute Sale cannot possibly belong to Bernardino Gatan for the reason that the latter is unschooled,
unlettered and cannot write. As a general rule, forgery cannot be presumed and must be proved by clear,
positive and convincing evidence. The burden of proof lies on the party alleging forgery. Hence, it was
incumbent upon Rogelia to prove the fact of forgery and the inability of Bernardino Gatan to sign his
name. Rogelia, in this case failed to present any other clear and convincing evidence to substantiate their
bare allegations. Neither did Rogelia Gatan sufficiently prove that her signature appearing on the Deed
was likewise forged. She merely dwelt on her argument that she was not Aurelia Gatan but nothing was
presented to substantiate her allegation that the signature therein was not hers. She did not even present
corroborating witnesses much less an independent expert witness who could declare with authority and
objectivity that the questioned signatures are forged.

As a last note, the Court states its observations as regards the signatures of Bernardino and Aurelia Ramos
Gatan on the Deed of Absolute Sale as compared to the specimen signatures of Bernardino and petitioner
Rogelia submitted by petitioners, since the RTC and the Court of Appeals did not elaborate on the same.
While there are marked differences between Bernardino's signature on the Deed and the specimen
signature submitted by petitioners, these do not necessarily prove that Bernardino's signature on the Deed
is a forgery. The differences are explainable by the fact that Bernardino's signature on the Deed was
affixed by Bernardino himself, as witnessed by Carlos; while the specimen signature submitted by
petitioners was Bernardino's name in petitioner Rogelia's handwriting. As for the signatures of Aurelia
Ramos Gatan and petitioner Rogelia, visual comparison reveals that they actually look similar, especially
the way the surname "Gatan" is written. Two of respondents' witnesses, Nenita and Jesusa, testified that
they know petitioner Rogelia, Bernardino's wife, also by the name "Aurelia." Therefore, even taking into
consideration the submitted specimen signatures, petitioners still failed to present clear, positive,
convincing, and more than preponderant evidence to overcome the presumption of authenticity and due
execution of the notarized Deed of Absolute Sale and to prove that the signatures of Bernardino and his
wife appearing on said Deed are forgeries.

Quiroga v. Parsons Hardware, 38 Phil. 501

FACTS: The contract between the parties stipulates that Don Andres Quiroga, herein petitioner, grants
exclusive rights to sell his beds in the Visayan region to J. Parsons. The contract only stipulates that
J.Parsons should pay Quiroga within 6 months upon the delivery of beds. In the causes of action by the
plaintiff, only two of them constitute the subject matter of this appeal and both substantially amount to the
averment that the defendant violated the following obligations: not to sell the beds at higher prices than
those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the
beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds
by the dozen and in no other manner.

The plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said
obligations are implied in a contract of commercial agency. The whole question, therefore, reduced itself
to a determination as to whether the defendant, by reason of the contract hereinbefore transcribed, was a
purchaser or an agent of the plaintiff for the sale of his beds.

ISSUE: Was the contract between the parties amounted to a Contract of Agency to Sell or a Contract of
Sale?

RULING: For the classification of contracts, due regard must be paid to their essential clauses. In the
contract in the instant case, what was essential, constituting its cause and subject matter, was that the
plaintiff was to furnish the defendant with the beds which the latter might order, at the stipulated price,
and that the defendant was to pay this price in the manner agreed upon. These are precisely the essential
features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply
the beds, and, on that of the defendant, to pay their price. These features exclude the legal conception of
an agency or older to sell whereby the mandatary or agent receives the thing to sell it, and does not pay its
price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if
he does not succeed in selling it, he returns it, Held: That this contract is one of purchase and sale, and not
of commercial agency.

Ker & Co. v. Lingad, 38 SCRA 524

DOCTRINE: The decisions say the transfer of title or agreement to transfer it for a price paid or
promised is the essence of sale. If such transfer puts the transferee in the attitude or position of an owner
and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who
must account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to sell
is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner
and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the
agentÊs commission on sales made.

The mere disclaimer in a contract that an entity like petitioner is not “the agent or legal representative x x
x for any purpose whatsoever” does not suffice to yield the conclusion that it is an independent merchant
if the control over the goods for resale of the goods consigned is pervasive in character.

FACTS: Melecio R. Domingo, then Commissioner of Internal Revenue, assessed Ker & Co. and found
the sum of P20,272.33 as the commercial broker’s percentage tax, surcharge, and compromise penalty for
the period -- July 1, 1949 to December 31, 1953. Ker & Co. petitioned that the request be cancelled, but
the petition was turned down. Ker & Co. then filed a petition for review with the Court of Tax Appeals.
Commissioner Domingo maintained his stand that the petitioner should be taxed in such amount as a
commercial broker. The liability arose from a contract that Ker & Co. had with the United States Rubber
International, where Ker & Co. was designated as the distributor and United States Rubber International
as the company. Ker & Co., as distributor, is required to exert every effort to have the shipment of the
products in the maximum quantity and to promote in every way the sale thereof. The prices, discounts,
terms of payment, terms of delivery and other conditions of sale were subject to change in the discretion
of United States Rubber International. All specifications for the goods ordered were subject to acceptance
of United States Rubber International and required to accept such goods shipped as well as to clear the
same through customs and to arrange for delivery in its warehouse in Cebu City.

ISSUE: What is the relationship created between Ker & Co. and United States Rubber International, is it
one of vendor and vendee or one of broker and principal?

HELD: The relationship between Ker & Co. is one of brokerage or agency. According to the National
Internal Revenue Code, a commercial broker “includes all persons, other than importers, manufacturers,
producers, or bona fide employees, who, for compensation or profit, sell or bring about sales or purchases
of merchandise for other persons or bring proposed buyers and sellers together, or negotiate freights or
other business for owners of vessels or other means of transportation, or for the shippers, or consignors or
consignees of freight carried by vessels or other means of transportation. The term includes commission
merchants.” In the language of Justice J. B. L. Reyes, who penned the opinion: “Since the company
retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers,
the price and terms of which were subject to the company’s control, the relationship between the
company and the dealer is one of agency.” The relationship between Ker & Co. and United States Rubber
International was not one of seller and purchaser, if that was the intention, then it would not have
included covenants which in their totality would negate the concept of a firm acquiring as vendee goods
from another. Instead, the stipulations were so worded as to lead to no other conclusion than that the
control by the United States Rubber International over the goods in question is, in the language of the
Constantino opinion, “pervasive”.

Delpher Trades Corp. v. Intermediate Appellate Court, G.R. No. 19259, January
26, 1988

Doctrine: LEASE CONTRACT; RIGHT OF FIRST REFUSAL – The right of first refusal cannot be
availed by the lessee when the ownership of the property remained in the hands of the owner albeit in a
different form when it was transferred.

Facts: In 1974, Delfin Pacheco and his sister, Pelagia Pacheco, were the owners of 27,169 square meters
of real estate identified as Lot No. 1095, Malinta Estate, in the Municipality of Polo (now Valenzuela),
Province of Bulacan (now Metro Manila) which is covered by Transfer Certificate of Title No. T-4240 of
the Bulacan land registry. "On April 3, 1974, the said co-owners leased to Construction Components
International Inc. the same property and providing 'that during the existence or after the term of this lease'
the lessor should he decide to sell the property leased shall first offer the same to the lessee and the latter
has the priority to buy under similar conditions. "On August 3, 1974, lessee Construction Components
International, Inc. assigned its rights and obligations under the contract of lease in favor of Hydro Pipes
Philippines, Inc. with the signed conformity and consent of lessors Delfin Pacheco and Pelagia
Pacheco."The contract of lease, as well as the assignment of lease were annotated at the back of the title,
as per stipulation of the parties."On January 3, 3976, a deed of exchange was executed between lessors
Delfin and Pelagia Pacheco and defendant Delpher Trades Corporation whereby the former conveyed to
the latter the leased property (TCT No. T-4240) together with another parcel of land also located in
Malinta Estate, Valenzuela, Metro Manila (TCT No, 4273) for 2,500 shares of stock of defendant
corporation with a total value of P1,500,000.00 (Exhs. C to C-5, inclusive). On the ground that it was not
given the first option to buy the leased property pursuant to the proviso in the lease agreement, respondent
Hydro Pipes Philippines, Inc., filed an amended complaint for reconveyance.

Issue: Whether or not the "Deed of Exchange" of the properties executed by the Pachecos on the one
hand and the Delpher Trades Corporation on the other was meant to be a contract of sale which, in effect,
prejudiced the private respondent's right of first refusal over the leased property included in the "deed of
exchange”?

Held: No. In effect, the Delpher Trades Corporation is a business conduit of the Pachecos. What they
really did was to invest their properties and change the nature of their ownership from unincorporated to
incorporated form by organizing Delpher Trades Corporation to take control of their properties and at the
same time save on inheritance taxes. The records do not point to anything wrong or objectionable about
this "estate planning" scheme resorted to by the Pachecos. "The legal right of a taxpayer to decrease the
amount of what otherwise could be his taxes or altogether avoid them, by means which the law permits,
cannot be doubted." The "Deed of Exchange" of property between the Pachecos and Delpher Trades
Corporation cannot be considered a contract of sale. There was no transfer of actual ownership interests
by the Pachecos to a third party. The Pacheco family merely changed their ownership from one form to
another. The ownership remained in the same hands. Hence, the private respondent has no basis for its
claim of a right of first refusal under the lease contract.

Sanchez v. Rigos, 1972

Doctrine: In order that a unilateral promise may be "binding" upon the promisor, Article 1479 requires
the concurrence of a condition namely, that the promise be "supported by a consideration distinct from the
price." Accordingly, the promisee can not compel the promisor to comply with the promise, unless the
former establishes the existence of said distinct consideration. In other words, the promisee has the
burden of proving such consideration.

Facts: Plaintiff Nicolas Sanchez and defendant Severina Rigos executed an instrument, entitled "Option
to Purchase," whereby Mrs. Rigos "agreed, promised and committed . . . to sell" to Sanchez, for the sum
of P1,510.00, a parcel of land within two (2) years from said date with the understanding that said option
shall be deemed "terminated and elapsed," if "Sanchez shall fail to exercise his right to buy the property"
within the stipulated period. Inasmuch as several tenders of payment of the sum of P1,510.00, made by
Sanchez within said period, were rejected by Mrs. Rigos, the former deposited said amount with the Court
of First Instance of Nueva Ecija and commenced against the latter the present action, for specific
performance and damages. Defendent alleged that the contract between the parties is a unilateral promise
to sell, and the same being unsupported by any valuable consideration, by force of the New Civil Code, is
null and void.

Issue: Whether or not the law on sales (Art. 1479) or contracts (Art. 1354) should apply in this case

Held: Art. 1479 applies. The option did not impose upon plaintiff the obligation to purchase defendant's
property. Annex A is not a "contract to buy and sell." It merely granted plaintiff an "option" to buy. And
both parties so understood it, as indicated by the caption, "Option to Purchase," given by them to said
instrument. Under the provisions thereof, the defendant "agreed, promised and committed" herself to sell
the land therein described to the plaintiff for P1,510.00, but there is nothing in the contract to indicate that
her aforementioned agreement, promise and undertaking is supported by a consideration "distinct from
the price" stipulated for the sale of the land. Article 1354 applies to contracts in general, whereas the
second paragraph of Article 1479 refers to "sales" in particular, and, more specifically, to "an accepted
unilateral promise to buy or to sell." In other words, Article 1479 is controlling in the case at bar. In order
that said unilateral promise may be "binding" upon the promisor, Article 1479 requires the concurrence of
a condition, namely, that the promise be "supported by a consideration distinct from the price."
Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former
establishes the existence of said distinct consideration. In other words, the promisee has the burden of
proving such consideration.

However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, saw no distinction
between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to
sell similar to the one sued upon here was involved, treating such promise as an option which, although
not binding as a contract in itself for lack of a separate consideration, nevertheless generated a bilateral
contract of purchase and sale upon acceptance. Since there may be no valid contract without a cause or
consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending
notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if
accepted, results in a perfected contract of sale.

Mendoza v. Comple, G.R. No. L-19311, October 29, 1965

Case Doctrine: New Civil Code provides that such promise is binding upon the promisor if the promise
is supported by a consideration distinct from the price

Summary of Facts: Plaintiffs have appealed from the order of Judge Honorio Romero of the Batangas
court of first instance, that dismissed their action to require defendant to comply with their alleged
contract of purchase and sale of a parcel of land. His honor held that the complaint merely described an
accepted promise to sell by defendant, which promise could be withdrawn (and was withdrawn on time)
because it was not supported by "a consideration distinct" from the price of the sale.

Legal Issue: Was there a perfected contract to sell?

Ruling: It will be observed that there is no allegation that plaintiffs had agreed to buy the land. So,
according to the facts described in the complaint, if plaintiffs did not produce or have the money on or
before May 6, 1961, no liability attached to them. Neither could defendant (if she so elected) compel
them to buy.

The negotiations as thus related in the complaint merely amounted to an undertaking by defendant that if
plaintiffs had the amount of P4,500.00 on or before May 6, 1961, she would sell the lot to them for that
sum upon the execution of the contract; and that plaintiffs accepted or agreed to such promise. The New
Civil Code provides that such promise is binding upon the promisor if the promise is supported by a
consideration distinct from the price (Art. 1479). Now, as there was no such "distinct" consideration (no
allegation as to it), the defendant was not bound to stand by her promise even if accepted, before
withdrawal.

Equatorial Realty Development Corp. v. Mayfair Theaters, Inc. 264 SCRA 483

CASE DOCTRINES: 1. OPTION CONTRACT — An option is a contract granting a privilege to buy or

sell within an agreed time and at a determined price. It is a separate and distinct contract from that which
the parties may enter into upon the consummation of the option. It must be supported by consideration. In
the instant case, the right of first refusal is an integral part of the contracts of lease. The consideration is
built into the reciprocal obligations of the parties. xxx It is also not correct to say that there is no
consideration in an agreement of right of first refusal. The stipulation is part and parcel of the entire
contract of lease. The consideration for the lease includes the consideration for the right of first refusal.

2. THE RIGHT OF FIRST REFUSAL SHOULD BE ENFORCED ACCORDING TO THE LAW ON

CONTRACTS INSTEAD OF THE CODAL PROVISIONS ON HUMAN RELATIONS. — Under the
Ang Yu Asuncion vs. Court of Appeals decision, the Court stated that there was nothing to execute
because a contract over the right of first refusal belongs to a class of preparatory juridical relations
governed not by the law on contracts but by the codal provision on human relations. This may apply here
if the contract is limited to the buying and selling of the real property. However, the obligation of
Carmelo to first offer the property to Mayfair is embodied in a contract. It should the be enforced
according to the law on contracts instead of the panoramic and indefinite rule on human relations. The
latter remedy encourages multiplicity of suits. There is something to execute and that is for Carmelo
to comply with its obligation to the property under the right of the first refusal according to the
terms at which they should have been offered then to Mayfair, at the price when that offer
should have been made. Also, Mayfair has to accept the offer. This juridical relation is not
amorphous nor is it merely preparatory. Paragraphs 8 of the two leases can be executed
according to their terms.

SUMMARY OF FACTS: Carmelo owned a parcel of land with two 2-storey buildings constructed
thereon. He entered into a 20-year lease contract with Mayfair as to a portion of the second floor of one of
the buildings, and the second floor and mezzanine of the other building. The purpose of the lease is for
the use as a motion picture theater. Aftewards, Mayfair constructed a movie house, Maxim Theatre, on
the leased property.

Mayfair entered into a second 20-year lease contract with Carmelo for the lease of another portion of the
property—a portion of the second floor and two (2) store spaces at the ground floor and mezzanine for a
similar use as a movie theater.

Both contracts provide that should the lessor desire to sell the leased premises, the lessee shall be given
30-days exclusive option to purchase the same. Should the premises be sold to someone other than the
lessee, it shall be stipulated on the deed of sale that the purchaser shall recognize the lease contracts
executed.

A certain Jose Araneta desired to buy the whole property, prompting Carmelo to ask Mayfair if it was
willing to buy the property. Mayfair expressed its interest in buying the leased premises. It sent another
letter, within the next month, in acquiring not only the leased premises but the entire building and other
improvements if the price is reasonable.

Four years later, Carmelo sold the entire property, including the constructed theaters, to Equatorial.
Mayfair filed a complaint for specific performance and annulment of the sale to Equatorial. Carmelo
alleged that it did inform Mayfair of its desire to sell but the latter was interested only in buying the areas
under lease, which was impossible as they were attached to the whole property. Equatorial, in its Answer,
pleaded void for lack of consideration and unenforceability by reason of impossibility of performance as
the leased portions could not be sold separately.

The trial court decided in favor of the defendants. It adjudged that the provisions in the lease contracts
were an option clause which cannot be deemed binding on Carmelo due to lack of distinct consideration.
It further stated that the promisee has the burden of proving the existence of a distinct consideration.

On appeal, the decision was reversed. It stated that the provision does not provide for an option contract,
but grants a right of first refusal. In the right of first refusal, the requirement of distinct consideration
finds no application.

ISSUE:

1. Is the contractual stipulation an option clause or a grant of the right of first refusal?

2. What are the consequential rights, obligations and liabilities of Carmelo, Mayfair and Equatorial?

RULING:

1. The contractual stipulation provides for a right of first refusal in favor of Mayfair. It is not an option
clause or an option contract.

Citing Beaumont vs. Prieto, an option contract is one that necessarily invokes the choice granted to
another for a distinct and separate consideration as to whether or not to purchase a determinate thing at a
predetermined fixed price.

Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not the
obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the
option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to
comply with their respective undertakings.

An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price.
It is a separate and distinct contract from that which the parties may enter into upon the consummation of
the option. It must be supported by consideration. In the instant case, the right of first refusal is an integral
part of the lease contracts. The consideration is built into the reciprocal obligations of the parties.

The Court of Appeals is correct in stating that the contractual stipulations were incorporated into the
contracts of lease for the benefit of Mayfair which wanted to b assured that it shall be given the first
option to buy the property at the price which Carmelo is willing to accept. It is not also correct to say that
there is no consideration in an agreement of right of first refusal. The stipulation is part and parcel of the
entire contract of lease. The consideration for the lease includes the consideration for the right of first
refusal. Thus, Mayfair is in effect stating that it consents to lease the premises and to pay the price agreed
upon provided the lessor also consents that, should it sell the leased property, then, Mayfair shall be given
the right to match the offered purchase price and to buy the property at that price.

2. Carmelo and Equatorial acted in bad faith for rendering the contractual stipulation inutile.

Equatorial is a buyer in bad faith, the sale of the subject property is rescissible. Accordingly, even as it
recognizes the right of first refusal, this Court should also order that Mayfair be authorized to exercise its
right of first refusal under the contract to include the entirety of the indivisible property. The boundaries
of the property sold should be the boundaries of the offer under the right of first refusal.

Rescission is a relief allowed for the protection of one of the contracting parties and even third persons
from all injury and damage the contract may cause or to protect some incompatible and preferred right by
the contract.

To follow an alternative solution that Carmelo and Mayfair may resume negotiations for the sale to the
latter of the disputed property would be unjust and unkind to Mayfair because it is once more compelled
to litigate to enforce its right. It is not proper to give it an empty or vacuous victory in this case. From the
viewpoint of Carmelo, it is like asking a fish if it would accept the choice of being thrown back into the
river.

Under the Ang Yu Asuncion vs. Court of Appeals decision, the Court stated that there was nothing to
execute because a contract over the right of first refusal belongs to a class of preparatory juridical
relations governed not by the law on contracts but by the codal provision on human relations. This may
apply here if the contract is limited to the buying and selling of the real property. However, the obligation
of Carmelo to first offer the property to Mayfair is embodied in a contract. It should the be enforced
according to the law on contracts instead of the panoramic and indefinite rule on human relations. The
latter remedy encourages multiplicity of suits. There is something to execute and that is for Carmelo
to comply with its obligation to the property under the right of the first refusal according to the
terms at which they should have been offered then to Mayfair, at the price when that offer
should have been made. Also, Mayfair has to accept the offer. This juridical relation is not
amorphous nor is it merely preparatory. Paragraphs 8 of the two leases can be executed
according to their terms.

On the part of Equatorial, it cannot be a buyer in good faith because it bought the property with
notice and full knowledge that Mayfair had a right to or interest in the property superior to its
own. Carmelo and Equatorial took unconscientious advantage of Mayfair. Neither may Carmelo
and Equatorial avail of considerations based on equity which might warrant the grant of interests.
The vendor received as payment from the vendee what, at the time, was a full and fair price for
the property. It has used the P11,300,000.00 all these years earning income or interest from the
amount. Equatorial, on the other hand, has received rents and otherwise profited from the use of
the property turned over to it by Carmelo. In fact, during all the years that this controversy was
being litigated, Mayfair paid rentals regularly to the buyer who had an inferior right to purchase
the property. Mayfair is under no obligation to pay any interests arising from this judgment to
either Carmelo or Equatorial.

Vda. de Quirino v. Palarca

DOCTRINE: In reciprocal contracts, the obligation or promise of each party is the consideration for that
of the other.In the language of Article 1350 of our Civil Code, "(i)n onerous contracts the cause is
understood to be, for each contracting party, the prestation or promise of a thing or service by the
other ... ." As a consequence, "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."

SUMMARY OF FACTS: On October 4, 1947, said petitioner — hereinafter referred to as the lessor —
and respondent Jose Palarca — hereinafter referred to as the lessee — entered into a lease contract
whereby the former leased to the latter a parcel of land known as Lot 30 of block 84 of the Sulucan
Subdivision, located at Sampaloc, Manila, with an area of about 150 square meters, and more particularly
described in TCT No. 59442 of the Office of the Register of Deeds of Manila.

In their written contract of lease it was stipulated, inter alia,

1.that the term thereof would be ten (10) years, from November 1, 1947 to November 1, 1957;

2.that the monthly rental would be P250, payable in advance;

3.that the lessee could demolish the lessor's old building on the leased premises and construct thereon any
building and/or improvements suitable for school purposes, which new building and/or improvements
shall belong to the lessee;
4.that within one (1) year after the expiration of the lease, the lessee would have "the right and option to
buy the leased premises" for P12,000;

5.that, should the lessee fail to exercise this option, said (new) building and/or improvements shall be
evaluated by a committee organized therefor, as set forth in the contract;

6.that, after such "valuation," the lessor shall "have the option to buy" said "building and/or improvements
within ... one (1) year, after the expiration of the contract"; and

7.that, should neither of the parties exercise their respective options, both "shall be free to look for a buyer
for his or her respective property."

By a letter, dated September 15, 1958, the lessee informed the lessor that the former (lessee) was
exercising "his right to buy the leased property for the agreed price of P12,000," Soon thereafter, before
the expiration of the term of his option, the lessee wrote a follow-up letter to the lessor, advising her that
the former had in his "possession the amount of P12,000 with which to purchase" the leased premises,
and, asked her, once more, "when" she would be ready to execute the corresponding deed of sale, in order
that he (lessee) could pay said price.

Through her counsel, the lessor replied, however, on October 10, 1958, that she "cannot accede" to the
lessee's requests "because the ... contract of October 4, 1947, has been novated by another agreement,
wherein the rent of P250 a month was reduced to P100.00."

Thereupon, that same month, the lessee instituted the present action to compel the lessor to comply with
her obligation to execute the corresponding deed of sale in his (lessee's) favor, upon payment by him of
said sum of P12,000. The lessor filed her answer admitting some allegations of the complaint and denying
other allegations thereof, as well as alleging, as special defense, that the lease contract had been
"modified" by a subsequent agreement of the parties, which had been observed and carried out by them,
and that payment of the stipulated price had not been properly tendered or validly consigned. The lessor,
likewise, set up a counterclaim for damages, attorney's fees and expenses of litigation

After appropriate proceedings, the Court of First Instance rendered the decision adverted to above, which
was affirmed by the Court of Appeals. Hence, this petition for review on certiorari, in which the lessor
maintains: (1) that the lessee's option to purchase the leased premises was null and void for want of
consideration; (2) that the lessee should have been sentenced to pay rentals, during the pendency of this
case; and (3) that the lessee should have been sentenced, also, to pay damages, attorney's fees and the
costs of the suit.

ISSUE: Is the Lessee’s option to purchase the leased premises null and void for want of consideration?

RULING: No. In reciprocal contracts, the obligation or promise of each party is the consideration for that
of the other.In the language of Article 1350 of our Civil Code, "in onerous contracts the cause is
understood to be, for each contracting party, the prestation or promise of a thing or service by the
other ... ." As a consequence, "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 consideration for the lessor's obligation to sell the leased premises to the lessee, should he choose to
exercise his option to purchase the same, is the obligation of the lessee to sell to the lessor the building
and/or improvements constructed and/or made by the former, if he fails to exercise his option to buy said
premises.
Then, too, the consignation referred to in Article 1256 of our Civil Code is inapplicable to the present
case, because said provision refers to consignation as one of the means for the payment or discharge of a
"debt," whereas the lessee was not indebted to the lessor for the price of the leased premises. The lessee
merely exercised a right of option and had no obligation to pay said price until the execution of the deed
of sale in his favor, which the lessor refused to do.

Luzon Brokerage Co. v. Maritime Bldg., 43 SCRA 93

DOCTRINE: Art. 1190. When the conditions have for their purpose the extinguishment of an obligation
to give, the parties, upon the fulfillment of said conditions, shall return to each other what they have
received.

FACTS: Myers Building Co. entered into a Deed of Conditional Sale, in favor of Maritime Building Co.
over 3 parcels of land with improvements in Manila City for P1M. Maritime paid P50, 000.00 upon
execution. The balance was to be paid in monthly instalments of P10, 000.00 at 5% interest per annum
(later lowered to P5, 000.00 at 5.5% interest per annum). The parties further agreed that: a. If Maritime
defaults, the contract would be annulled at Myers’ option; b. All payments already made shall be
forfeited; and c. Myers shall have the right to re-enter the property and take possession. Moreover, if
Maritime refuses to peacefully deliver the possession of the properties subject of this contract to the
Myers in case of rescission, a suit should be brought in court by the Myers to seek judicial declaration of
rescission.

Unfortunately, Maritime failed to pay the installment for March 1961, for which the Vice-President,
George Schedler,of the Maritime Building Co., Inc., wrote a letter to the President of Myers, Mr. C.
Parsons, requesting for a moratorium on the monthly payment of the installments until the end of the year
1961, for the reason that the said company was encountering difficulties in connection with the operation
of the warehouse business. Consequently, on May 1961, Myers made a demand upon Maritime for the
unpaid installments; also, Myers advised Maritime of the cancellation of the Deed of Conditional Sale
and demanded the return of the property, holding Maritime liable for rentals at P10, 000.00 monthly.
Myers thereafter demanded from its lessee, Luzon Brokerage, to avoid paying to the wrong party, filed an
action for interpleader. After the filing of this action, the Myers Building Co., Inc. in its answer filed a
cross-claim against the Maritime Building Co., Inc. praying for the confirmation of its right to cancel the
said contract.

ISSUE: Is Myer’s entitled to extra judicially rescind the deed of Conditional sale?

HELD: YES. The Court held in Lopez v. Commissioner of Customs that a judicial action for the
rescission of a contract is not necessary where the contract provides that it may be revoked and cancelled
for violation of any of its terms. As further explained in UP v. de los Angeles, the party who deems the
contract violated may consider it resolved or rescinded without previous court action, but it proceeds at its
own risk. For it is only the final judgment of the corresponding court that will conclusively and finally
settle whether the action taken was or was not correct in law. But the law definitely does not require that
the contracting party who believes itself injured must first file suit and wait for a judgment before taking
extrajudicial steps to protect its interest. Neither can Maritime invoke Civil Code Art. 1592 (where
vendee in default can continue to make payments as long as no judicial/notarial demand for rescission has
been made) because the cross-claim filed by Myers constitutes a judicial demand for rescission that
satisfies the said article.

Masiclat v. Centeno, 99 Phil. 1043

DOCTRINE: Although a contract of sale is perfected upon the parties having agreed as to the thing
which is the subject matter of the contract and the price, ownership is not considered transmitted until the
property is actually delivered and the purchaser has taken possession and paid the price agreed upon.

FACTS: Defendant-respondent Centeno owned 15 sacks of rice offered for sale at her store situated on a
street near public market. In the morning of Jan. 21, 1951, a person approached defendant and
offered her to purchase the rice in question. Defendant agreed to sell 15 sacks of rice in question at
P26/sack, which the buyer promised to pay as soon as he would receive the price of his adobe stones
which were being then unloaded from a truck owned by Francisco Tan, then parked at the opposite
side of the street in front of the Union Grocery facing the defendant’s store. Relying on this promise and
upon the request of said purchaser, the defendant ordered the rice in question loaded in the said truck, of
which the plaintiff was the caretaker, expecting that as soon as the adobe stones would be paid,
said purchaser would pay her the price of the rice.

While the rice was being loaded on the truck and even thereafter, defendant kept an eye on it waiting for
the purchaser to come to pay her. When the adobe stones were completely unloaded from the truck, the
defendant looked for the purchaser, but the latter was not found. So defendant decided to unload the rice
from the truck but to her surprise plaintiff-petitioner Masiclat objected on the ground that he has bought
it at P26/sack from a person whom he did not know and whom he met only that morning for the first
time. Defendant insisted in unloading the rice and the plaintiff objected. Hence, defendant called a
policeman to investigate the matter and the latter brought the rice in question to the Municipal building
where it was deposited pending investigation. Plaintiff then initiated this action for recovery of possession
of the rice in question

ISSUE: Was the contract of sale consummated?

HELD: The evidence does not clearly show the identity of the person who tried to buy the rice in
question from the respondent, and neither does it show that the same person was the one who sold the
commodity to Ramon Masiclat.

The sale between the respondent Centeno and the unknown purchaser was not consummated because
although the former allowed the rice in question to be loaded in the truck, she did not intend to transfer its
ownership until she was paid the stipulated price; and this is very evident from the fact that respondent
continually watched her rice and demanded its unloading as soon as the unknown purchaser was missing.
Respondent thus has not lost ownership and legal possession thereof.

The general principle of law as enunciated in A1505 CC that where one of 2 persons must suffer the fraud
of a third, the loss should fall upon him who has enabled the third person to do the wrong, does not apply
for the ff. reasons: there was no definite finding that the unknown purchaser was same person who sold
the rice to Masiclat, Centeno could not have been so negligent as to allow the unknown purchaser to run
away with said rice and enable him to sell it to Masiclat, it evident that in fact Centeno kept an eye on the
rice in question.

UP v. De los Angeles, G.R. No. L-28602, September 29, 1970

Doctrine : The party who deems the contract violated may consider it resolved or rescinded, and act
accordingly, without previous court action, but it proceeds at its own risk. For it is only the final judgment
of the corresponding court that will conclusively and finally settle whether the action taken was or was
not correct in law. But the law definitely does not require that the contracting party who believes itself
injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest.

Facts :A Land Grant awarding logging rights over its timber concession situated at the Labuyat a reas
was given to the University of the Philippines for the purpose of raising additional income for its support.
UP thereafter entered into a logging agreement with ALUMCO. After an unpaid account of P219,362.94,
despite repeated demands, UP sent notice to ALUMCO that it would rescind or terminate the logging
agreement. ALUMCO continued to incur a debt of P61,133.74 on top of the former by December 9, 1964.
UP informed respondent that is had, as of July 19, 1965, considered the contract rescinded. UP conducted
a bidding for the logging rights, from which, the concession was awarded to Sta. Clara Lumber Company.

Issue : Whether or not UP can treat its contract with ALUMCO rescinded

Ruling : Yes. The act of party in treating a contract as cancelled or resolved on account of infractions by
the other contracting party must be made known to the other and is always provisional, being ever subject
to scrutiny and review by the proper court. If the other party denies that rescission is justified, it is free to
resort to judicial action in its own behalf, and bring the matter to court. Then, should the court, after due
hearing, decide that the resolution of the contract was not warranted, the responsible party will be
sentenced to damages; in the contrary case, the resolution will be affirmed, and the consequent indemnity
awarded to the party prejudiced.

Fears have been expressed that a stipulation providing for a unilateral rescission in case of breach of
contract may render nugatory the general rule requiring judicial action (v. Footnote, Padilla, Civil Law,
Civil Code Anno., 1967 ed. Vol. IV, page 140) but, as already observed, in case of abuse or error by the
rescinder the other party is not barred from questioning in court such abuse or error, the practical effect of
the stipulation being merely to transfer to the defaulter the initiative of instituting suit, instead of the
rescinder.

Olivarez v. Castillo, G.R. No. 196251, July 9, 2014

Facts: Castillo was the owner of a parcel of land covered by TCT 19972. The Philippine Tourism
Authority allegedly claimed ownership of the same parcel of land based on TCT 18493. Castillo and
Olivarez Realty Corporation, represented by Dr. Pablo Olivarez, entered into a contract of conditional
sale over the property. The details were as follows:

1. Under the deed of conditional sale, Castillo agreed to sell his property to Olivarez
Realty; with Olivarez Realty delivering the downpayment and the rest to be paid in 30
equal monthly installments every 8th of the month beginning in the month that the
parties would receive a decision voiding the PTA’s title to the property.

2. Under the same deed, Olivarez Realty will file the action against PTA with full
assistance of Castillo; and that should the petition be denied, Castillo shall reimburse
all the amounts paid by Olivarez Realty.

3. Under the same contract, Olivarez Realty undertook to pay the legitimate tenants of
the land disturbance compensation, while Castillo undertook to clear the land of the
tenants within 6 months from the signing of the deed; that should Castillo fail to clear
the land within 6 months, Olivarez Realty may suspend its monthly downpayment until
the tenants vacate the property.

4. The parties agreed that Olivarez Realty Corporation may immediately occupy the
property upon signing of the deed. Should the contract be cancelled, Olivarez Realty
Corporation agreed to return the property’s possession to Castillo and forfeit all the
improvements it may have introduced on the property.

Olivarez Realty failed to comply with the conditions, to wit: a) pay the full purchase price; b) failed to file
any action against PTA; c) failed to clear the land of the tenants nor paying them disturbance
compensation. For breaching the contract, Castillo prayed for rescission of contract under Art. 1191 of
Civil Code, plus damages.

In their defense, Olivarez Realty alleged that Castillo failed to fully assist in filing the action against PTA;
that Castillo failed to clear the property of the tenants within 6 months from the signing of the deed. Thus,
they had all the legal right to withhold the subsequent payments to fully pay the purchase price.

Both RTC and CA ruled that Olivarez Realty breached the contract and ordered the rescission of the sale
plus damages.

Issue/s:

1. What is the nature of obligations undertaken by both parties?

2. Is the rescission of the contract proper?

Held/Ruling:
1. Olivarez Realty’s obligation to pay the disturbance compensation is a pure obligation, and
hence, demandable at once. With respect to Castillo’s obligation to clear the land of the tenants within six
months from the signing of the contract, his obligation was an obligation with a resolutory period. The
obligation to clear the land of the tenants took effect at once, specifically, upon the parties’ signing of the
deed of conditional sale. Castillo had until October 2, 2000, six months from April 5, 2000 when the
parties signed the deed of conditional sale, to clear the land of the tenants. Olivarez Realty Corporation,
therefore, had no right to withhold payments of the purchase price. As the trial court ruled, Olivarez
Realty Corporation “can only claim non-compliance of the obligation to clear the land of the tenants in
October 2000.

2. NO. The SC characterized the contract as a contract to sell, not a contract of conditional sale. In
a contract of conditional sale, the buyer automatically acquires title to the property upon full payment of
the purchase price. This transfer of title is “by operation of law without any further act having to be
performed by the seller.” In a contract to sell, transfer of title to the prospective buyer is not automatic.
“The prospective seller must convey title to the property through a deed of conditional sale.” The
distinction is important to determine the applicable laws and remedies in case a party does not fulfill his
or her obligations under the contract. In contracts of conditional sale, our laws on sales under the Civil
Code of the Philippines apply. On the other hand, contracts to sell are not governed by our law on sales
but by the Civil Code provisions on conditional obligations.

Specifically, Article 1191 of the Civil Code on the right to rescind reciprocal obligations does not apply
to contracts to sell. Failure to fully pay the purchase price in contracts to sell is not the breach of contract
under Art. 1191. Failure to fully pay the purchase price is merely an event, which prevents the seller’s
obligation to convey title from acquiring binding force. This is because there can be no rescission of an
obligation that is still nonexistent, the suspensive condition (the condition of having the buyer pay the full
purchase price) having not happened.

In this case, Castillo reserved his title to the property and undertook to execute a deed of absolute sale
upon Olivarez Realty Corporation’s full payment of the purchase price. Since Castillo still has to execute
a deed of absolute sale to Olivarez Realty Corporation upon full payment of the purchase price, the
transfer of title is not automatic. As this case involves a contract to sell, Article 1191 of the Civil Code of
the Philippines does not apply. The contract to sell is instead cancelled, and the parties shall stand as if the
obligation to sell never existed.

Pelayo v. Court of Appeals, G.R. No. 141323, June 8, 2005

Case Doctrine: Under Article 173, in relation to Article 166, both of the New Civil Code, which was still
in effect on January 11, 1988 when the deed in question was executed, the lack of marital consent to the
disposition of conjugal property does not make the contract void ab initio but merely voidable.

Facts: Pelayo, by a Deed of Absolute Sale executed on January 11, 1988, conveyed to Perez two parcels
of agricultural land situated in Panabo, Davao. Loreza, wife of Pelayo, and another one whose signature is
illegible witnessed the execution of the deed. Loreza, however, signed only on the third page in the space
provided for witnesses on account of which Perez' application for registration of the deed with the Office
of the Register of Deeds in Tagum, Davao was denied. Perez thereupon asked Loreza to sign on the first
and second pages of the deed but she refused, hence, he instituted on August 8, 1991 the instant complaint
for specific performance against her and her husband Pelayo. Pelayo claimed that the deed was without
his wife Loreza’s consent, hence, in light of Art. 166 of the Civil Code, it is null and void.

Issue: Was there marital consent given by the wife of Pelayo?

Ruling: YES. Lorenza, by affixing her signature to the Deed of Sale on the space provided for witnesses,
is deemed to have given her implied consent to the contract of sale. Sale is a consensual contract that is
perfected by mere consent, which may either be express or implied. A wife’s consent to the husband’s
disposition of conjugal property does not always have to be explicit or set forth in any particular
document, so long as it is shown by acts of the wife that such consent or approval was indeed given. In
the present case, although it appears on the face of the deed of sale that Lorenza signed only as an
instrumental witness, circumstances leading to the execution of said document point to the fact that
Lorenza was fully aware of the sale of their conjugal property and consented to the sale. Moreover, under
Article 173, in relation to Article 166, both of the New Civil Code, which was still in effect on January
11, 1988 when the deed in question was executed, the lack of marital consent to the disposition of
conjugal property does not make the contract void ab initio but merely voidable.
Rubias v. Batiller, 51 SCRA 120

Doctrine: Action On Contract. — Even when the contract is void or inexistent, an action is necessary to
declare its inexistence, when it has already been fulfilled. Nobody can take the law into his own hands;
hence, the intervention of the competent court is necessary to declare the absolute nullity of the contract
and to decree the restitution of what has been given under it. The judgment, however, will retroact to the
very day when the contract was entered into.

Facts: Francisco Militante claimed that he owned a parcel of land located in Iloilo. He filed with the CFI
of Iloilo an application for the registration of title of the land. This was opposed by the Director of Lands,
the Director of Forestry, and other oppositors. The case was docked as a land case, and after trial the court
dismissed the application for registration. Militante appealed to the Court of Appeals. Pending that
appeal, he sold to Rubias (his son-in-law and a lawyer) the land. The CA rendered a decision, dismissing
the application for registration. Rubias filed a Forcible Entry and Detainer case against Batiller. In that
case, the court held that Rubias has no cause of action because the property in dispute which Rubias
allegedly bought from Militante was the subject matter of a land case, in which case Rubias was the
counsel on record of Militante himself. It thus falls under Article 1491 of the Civil Code. (Hence, this
appeal.)

Issue: Whether the sale of the land is prohibited under Article 1491?

Held: YES. Article 1491 says that “The following persons cannot acquire any purchase, even at a public
or judicial auction, either in person or through the mediation of another.... (5) Justices, judges,
prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected
with the administration of justice, the property and rights in litigation or levied upon an execution before
the court within whose jurisdiction or territory they exercise their respective functions; this prohibition
includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and
rights which may be the object of any litigation in which they may take part by virtue of their profession.”
The present case clearly falls under this, especially since the case was still pending appeal when the sale
was made.

Parties Affected. — Any person may invoke the in existence of the contract whenever juridical effects
founded thereon are asserted against him. Thus, if there has been a void transfer of property, the
transferor can recover it by the accion reinvindicatoria; and any prossessor may refuse to deliver it to the
transferee, who cannot enforce the contract. Creditors may attach property of the debtor which has been
alienated by the latter under a void contract; a mortgagee can allege the inexistence of a prior
encumbrance; a debtor can assert the nullity of an assignment of credit as a defense to an action by the
assignee.

Action On Contract. — Even when the contract is void or inexistent, an action is necessary to declare its
inexistence, when it has already been fulfilled. Nobody can take the law into his own hands; hence, the
intervention of the competent court is necessary to declare the absolute nullity of the contract and to
decree the restitution of what has been given under it. The judgment, however, will retroact to the very
day when the contract was entered into.

If the void contract is still fully executory, no party need bring an action to declare its nullity; but if any
party should bring an action to enforce it, the other party can simply set up the nullity as a defense. 20

Issue: Legal effect of a sale falling under Article 1491?

Held: NULL AND VOID.CANNOT BE RATIFIED. Manresa considered such prohibited acquisitions
(which fell under the Spanish Civil Code) as merely voidable because the Spanish Code did not recognize
nullity. But our Civil Code does recognize the absolute nullity of contracts “whose cause, object or
purpose is contract to law, morals, good customs, public order or public policy” or which are “expressly
prohibited or declared void by law” and declares such contracts “inexistent and void from the beginning.”
The nullity of such prohibited contracts is definite and permanent, and cannot be cured by ratification.

The public interest and public policy remain paramount and do not permit of compromise or ratification.
In this aspect, the permanent disqualification of public and judicial officers and lawyers grounded on
public policy differs from the first three cases of guardians agents and administrators (under Art 1491).
As to their transactions, it has been opined that they may be “ratified” by means of and in “the form of a
new contract, in which case its validity shall be determined only by the circumstances at the time of
execution of such new contract.” In those cases, the object which was illegal at the time of the first
contract may have already become lawful at the time of the ratification or second contract, or the intent,
or the service which was impossible. The ratification or second contract would then be valid from its
execution; however, it does not retroact to the date of the first contract.

Del Rosario v. Millado, A.C.

No. 724,
January
31, 1969
FACTS: One Eladio Tibursio, now deceased, claimed title to a tract of land of about 430 ha. In Diliman,
Quezon City. That said parts of land were the object of two ejectment cases of the City Court of Quezon
City against La Paz Mesina Vda. De Pascual, one of the heirs of the said deceased. One of the two
ejectment cases was filed by herein petitioner Florentino del Rosario, and the other one was by Leonor
Sta. Clara. Before the institution of the said cases , one Conrado Baluyot, who claimed to be another heir
of Eladio Tibursio, offered to allow respondent to construct a house on part of said land, in consideration
of his professional services in defense of the claim of the Tiburcio’s. That should Atty. Millado succeed
in securing a decision favorable to the Tiburcio’s, he could buy the land on which his house was built by
paying the current value thereof. Meanwhile, Mrs. Pascual, who occupied another lot in the same block,
knew that Atty. Millado was in possession of lots 4 and 5 and had constructed thereon a house by
agreement with Baluyot. Mrs. Pacual, who claimed interest in the whole Block E-102, asked Atty.
Millado to be her counsel in said ejectment cases. After filing the answer of Mrs. Pascual, as defendant in
the said 2 cases, Atty. Millado ceased to be her counsel therein

ISSUE: Did Atty. Millado violated Art. 1491 of the Civil Code?

RULING: The provisions of the Civil Code and of the Canons of Legal Ethics prohibit the purchase by
lawyers of any interest in the subject matter of the litigation in which they participated by reason of their
profession. However, in this case, petitioner has not established a violation of such injunction. The
records show that respondent’s alleged interest in said lots was acquired before he intervened as counsel
for Mrs. Pascual in the ejectment cases against her. Moreover, said interest of Atty. Millado is not
necessarily inconsistent with that of his aforementioned client.

Barreto & Sons, Inc. v. Compania Maritima, G.R. No. L-22358, January 29, 1975

DOCTRINE: Delivery and payment in a contract of sale, or for that matter in quasi-contracts, are so
interrelated and intertwined with each other that without delivery of the goods there is no corresponding
obligation to pay.

FACTS: Petitioner Pio Barretto Sons (PBS) as plaintiff filed a complaint for collection of a sum of
money against respondent Compania Maritima, alleging that the latter purchased on credit and received
from plaintiff lumber worth P6,054.36 with stipulated interest of 12% per annum.

Respondent as defendant denied all the material allegations of the complaint and, by way of counterclaim,
prayed that plaintiff-petitioner be ordered to pay the sums of P500.00 as expenses of litigation and
P1,500.90 as Attorney's fees, plus costs. Trial court ruled in favor of plaintiff-petitioner. The Court of
Appeals reversed the judgment of the trial court and ordered the dismissal of the case on the ground that
delivery of the lumber by plaintiff-petitioner to defendant-respondent was not duly proved. Petitioner
assails the decision, claiming that the CA erred in creating and raising, motu proprio, for the first time a
new issue – that of the question of delivery, upon which the CA based its decision.

ISSUE: Did the Court of Appeals decide the case on a new issue not raised in the pleadings before the
lower courts?

RULING: No. The Supreme Court held that the issue of delivery on which the Court of Appeals based its
decision reversing that of the trial court is no new issue at all. For delivery and payment in a contract of
sale, or for that matter in quasi-contracts, are so interrelated and intertwined with each other that without
delivery of the goods there is no corresponding obligation to pay. The two complement each other. Thus,
"by the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent." (Art.
1458, 1st par., New Civil Code)

The source of this provision of law is Article 1445 of the old Code, which provides:

By the contract of purchase and sale one of the contracting parties obligates himself to deliver a
determinate thing and the other to pay a certain price therefor in money or in something
representing the same.

It is clear that the two elements cannot be dissociated, for "the contract of purchase and sale is,
essentially, a bilateral contract, as it gives rise to reciprocal obligations; to wit, on the part of the seller,
"to deliver a determinate thing, and on the part of the buyer, to pay a certain price therefor in money or in
something representing it."" (p. 1, Capistrano, The Law of Purchase and Sale)

Addison v. Felix, 38 Phil. 404

CASE DOCTRINE: Art. 1497. The thing sold shall be understood as delivered, when it is placed in the
control and possession of the vendee.

FACTS: By a public instrument dated June 11, 1914, the plaintiff sold to the defendant Marciana Felix,
with the consent of her husband, the defendant Balbino Tioco, four parcels of land, described in the
instrument. The defendant Felix paid, at the time of the execution of the deed, the sum of P3,000 on
account of the purchase price, and bound herself to pay the remainder in installments, the first of P2,000
on July 15, 1914, and 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
coconut tree in bearing and P5 for each such tree not in bearing, that might be growing on said four
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 the purchaser was to deliver to the vendor 25 per centum 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."

It was also covenanted that "within one year from the date of the certificate of title in favor of Marciana
Felix, this latter may rescind the present contract of purchase and sale, in which case Marciana Felix shall
be obliged to return to me, A. A. Addison, the net value of all the products of the four parcels sold, and I
shall obliged to return to her, Marciana Felix, all the sums that she may have paid me, together with
interest at the rate of 10 per cent per annum."

In January, 1915, the vendor, A. A. Addison, filed suit in Court of First Instance of Manila to compel
Marciana Felix to make payment of the first installment of P2,000, demandable in accordance with the
terms of the contract of sale aforementioned, on July 15, 1914, and of the interest in arrears, at the
stipulated rate of 8 per cent per annum. The defendant, jointly with her husband, answered the complaint
and alleged by way of special defense that the plaintiff had absolutely failed to deliver to the defendant
the lands that were the subject matter of the sale, notwithstanding the demands made upon him for this
purpose. She therefore asked that she be absolved from the complaint, and that, after a declaration of the
rescission of the contract of the purchase and sale of said lands,

ISSUE: When thing sold is delivered

RULING: 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.

Martin v. Reyes, G.R. No. L-4402, July 20, 1952

Doctrine: Property or goods which, at the time of the sale, are not owned by the seller, but which are
thereafter to be acquired by him, cannot be the subject of an executed sale, but may be the subject of a
contract for the future sale and delivery thereof, and it has been held that even though the contract is in
the form of the present sale it will not pass the title, after the goods have been acquired, until the seller has
done some act appropriating them to the contract. Such a contract of the future sale and delivery of goods,
which the seller has not in possession but which he intends to acquire by producing, manufacturing, or
purchasing before the day of delivery, is valid as an executory contract to be fulfilled by acquiring and
delivering the goods specified in the contract, even though the acquisition of the goods by the seller
depends upon a contingency which may or may not happen.

Facts: It seems that La Previsora at the same time, or immediately thereafter conveyed the property by
Exhibit C to petitioner Canuto Martin, who then executed the document Exhibit D undertaking to allow
respondents to repurchase the property within sixty days from October 31, 1941, but at the price of
P14,000. This document Exhibit D was signed by Maria Reyes signifying her assent. At the trial she
pleaded that the document, without embodying their true agreement, had been obtained thru deceit and
abuse of confidence. However, her assertions were not credited by the Court of Appeals. Nevertheless,
that court declared the document void (Exhibit D) for the only reasons that it had been signed by Canuto
Martin before acquiring ownership of the property by the cession of Maria Reyes and Pedro Revilla to the
La Previsora, and from the latter to them. The Court noted that whereas Exhibit E was acknowledged
before the notary on November 3, 1941, Exhibit Dbore the date October 30, 1941, a few days before.cha

Issue: Is exhibit D void?

Ruling: No. The above principles express the same the ideas in articles 1462 and 1459 of the New Civil
CodenTherefore erroneous is the ruling that, because executed before Canuto Martin became the owner,
Exhibit D, was null and void. Consequently, as Reyes voluntarily agreed under Exhibit D, to repurchase
at P14,000, she should not repurchase at any other price.
 Power Commercial & Industrial Corp. v. Court of Appeals, 274 SCRA 597

Doctrine: A breach of this warranty requires the concurrence of the following circumstances:

(1) The purchaser has been deprived of the whole or part of the thing sold;

(2) This eviction is by a final judgment;

(3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and

(4) The vendor has been summoned and made co-defendant in the suit for eviction at the instance of the
vendee.

Facts: Petitioner Power Commercial and Industrial Corporation bought the property of spouses Reynaldo
and Angelita Quiambao located in Makati City. Since there are lessees occupying the subject land,
petitioner claims that the presence of the lessees are in breach of the warranty against eviction and
prevents a peaceful possession in favor of the petitioners. The property is mortgage to PNP and as such,
petitioners filed a request to assume responsibility of the mortgage. Because of petitioners' failure to
produce the required papers, their petition was denied. Petitioners allege that the contract should be
rescinded because of failure of delivery.

ISSUE: WON the contract is recissible due to breach of contract.

HELD: Obvious to us in the ambivalent stance of petitioner is its failure to establish any breach of the
warranty against eviction. Despite its protestation that its acquisition of the lot was to enable it to set up a
warehouse for its asbestos products and that failure to deliver actual possession thereof defeated this
purpose, still no breach of warranty against eviction can be appreciated because the facts of the case do
not show that the requisites for such breach have been satisfied. A breach of this warranty requires the
concurrence of the following circumstances:

(1) The purchaser has been deprived of the whole or part of the thing sold;

(2) This eviction is by a final judgment;

(3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and

(4) The vendor has been summoned and made co-defendant in the suit for eviction at the
instance of the vendee.

In the absence of these requisites, a breach of the warranty against eviction under Article 1547
cannot be declared.

Petitioner argues in its memorandum that it has not yet ejected the occupants of said lot, and not that it
has been evicted therefrom. As correctly pointed out by Respondent Court, the presence of lessees does
not constitute an encumbrance of the land, nor does it deprive petitioner of its control thereof. Because
petitionr failed to impugn its integrity, the contract is presumed, under the law, to be valid and subsisting.

Katigbak v. Court of Appeals, 4 SCRA 243

FACTS: Katigbak read an advertisement for the sale of the winch placed by Lundberg, the owner and
operator of Intl. Tractor and Equipment Co., Ltd. Katigbak, upon knowing the price of the winch of
P12,000.00, desired to reduce the price by meeting the owner, Evangelista. It was agreed upon that the
winch would be payable at P5,000.00 upon delivery and the balance of P7,000.00 shall be paid within 60
days upon the condition that the sale will be delivered in good condition. However, Katigbak found out
that the winch needed some repairs in the shop of Lundberg. The agreement was revised. The amount for
repairs will be advanced by Katigbak but will be deducted from the initial payment. The repairs were
undertaken for the amount of P2,029.85. However, the sale was not consummated because Evangelista
sold the winch to a third person upon the failure of Katigbak to take delivery and purchase the same.

Katigbak sued Evangelista and Lundberg for refund. Lundberg alleged his non-liability because the
obligation for refund was purely a personal account between Katigbak and Evangelista. On the part of
Evangelista, he alleged that Katigbak refused to comply with the contract of purchasing the winch and
that Katigbak’s refusal forced Evangelista to sell the winch to a third person for P10,000.00 only. The
lower court ruled in favor of Katibgak, ordering Lundberg and Evangelista to pay Katigbak P2,029.85.
On appeal, the Court of Appeals reversed the judgment. Hence, this case.

ISSUE: Whether or not Katigbak has the right to claim for refund.

HELD: No. The Supreme Court in Hanlon vs. Hausserman, the vendor is entitled to resell the goods in
cases of business transactions in which the purchaser of goods upon an executory contract fails to take
delivery and pay the purchase price. If he is obliged to sell for less than the contract price, he holds the
buyer for the difference; if he sells for as much as or more than the contract price, the breach of contract
by the original buyer is damnum absque injuria. But it has never been held that there is any need of an
action of rescission to authorize the vendor, who is still in possession, to dispose of the property where
the buyer fails to pay the price and take delivery. Therefore, the petition of Katigbak is dismissed.

Katigbak read an advertisement for the sale of the winch placed by Lundberg, the owner and operator of
Intl. Tractor and Equipment Co., Ltd. Katigbak, upon knowing the price of the winch of P12,000.00,
desired to reduce the price by meeting the owner, Evangelista. It was agreed upon that the winch would
be payable at P5,000.00 upon delivery and the balance of P7,000.00 shall be paid within 60 days upon the
condition that the sale will be delivered in good condition. However, Katigbak found out that the winch
needed some repairs in the shop of Lundberg. The agreement was revised. The amount for repairs will be
advanced by Katigbak but will be deducted from the initial payment. The repairs were undertaken for the
amount of P2,029.85. However, the sale was not consummated because Evangelista sold the winch to a
third person upon the failure of Katigbak to take delivery and purchase the same.

Katigbak sued Evangelista and Lundberg for refund. Lundberg alleged his non-liability because the
obligation for refund was purely a personal account between Katigbak and Evangelista. On the part of
Evangelista, he alleged that Katigbak refused to comply with the contract of purchasing the winch and
that Katigbak’s refusal forced Evangelista to sell the winch to a third person for P10,000.00 only. The
lower court ruled in favor of Katibgak, ordering Lundberg and Evangelista to pay Katigbak P2,029.85.
On appeal, the Court of Appeals reversed the judgment. Hence, this case.

ISSUE: Whether or not Katigbak has the right to claim for refund.

HELD: No. The Supreme Court in Hanlon vs. Hausserman, the vendor is entitled to resell the goods in
cases of business transactions in which the purchaser of goods upon an executory contract fails to take
delivery and pay the purchase price. If he is obliged to sell for less than the contract price, he holds the
buyer for the difference; if he sells for as much as or more than the contract price, the breach of contract
by the original buyer is damnum absque injuria. But it has never been held that there is any need of an
action of rescission to authorize the vendor, who is still in possession, to dispose of the property where
the buyer fails to pay the price and take delivery. Therefore, the petition of Katigbak is dismissed.

Hernandez v. Vda. de Salas, 69 Phil. 744

Doctrine: LTD – Mirror Doctrine - In an execution sale of and registered under the Torrens system, the
purchaser acquires such right interest as appear on the certificate of title, unaffected by any prior lien or
encumbrance not noted therein. The purchaser is thus not required to explore farther than what the
Torrens title, upon its face, indicates in quest for any hidden defect or inchoate right that may
subsequently defeat his right thereto.

Facts: Encarnacion was the registered owner of lots Nos. 27, 28 and 29 of the Hacienda Maysilo, located
at Caloocan, Rizal, with an aggregate area of 234 hectares, and covered by Torrens certificates with the
register of deeds of Rizal. Rivera repurchased, in pursuance of his registered right to that effect, 40
hectares of these three lots, and later sold to Leuterio an unsegregrated portion of about 18 hectares
thereof. The latter, in turn, sold a total area of 16,900 square meters to Villanueva by deeds which had
never been registered. These deeds are dated September 21, 1920, September 24, 1920, August 31, 1922
and September 1, 1922, respectively. Later Villanueva sold to the herein plaintiff, Hernandez, all rights in
the said total area of 16,900 square meters.

In civil case No. 2861 of the Rizal CFI, instituted by Salas-Rodriguez, against Leuterio, a writ of
execution was issued against the defendant, and, in pursuance thereof, the provincial sheriff of Rizal
levied upon the properties of said defendant, among them, a parcel of land containing an area of
177,557.4 square meters. This is the same property that the defendant bought from Rivera. The levy was
duly recorded in the office of the Register of Deeds and noted on transfer certificate of title No. 8540
covering lot No. 28. Villanueva filed with the sheriff a third party claim, but as the judgment creditor
gave an indemnity bond, the sheriff proceeded with the execution and sold the property at a public
auction at which the judgment creditor himself was the highest bidder. On March 30, 1926, said officer
executed the corresponding deed in favor of the purchaser.

Prior to the execution of the officer's deed, or on March 1, 1926, the 40 hectares bought by Rivera from
Encarnacion were segregated, and on March 5, 1926, two transfer certificates of title were issued in favor
of Nicolas Rivera designated as lots Nos. 27-A and 29-A, respectively. The execution lien of Salas-
Rodriguez as well as the auction sale held on March 30, 1926, which were annotated on the transfer
certificate of title, were transferred to and annotated on the new certificate of title covering lot No. 28-A.
And there having been no redemption, a final deed of sale was executed on March 30, 1927 by the sheriff
in favor of the purchaser, Salas-Rodriguez, and a new TCT was issued the following day in the latter's
name. He died, and by virtue of a partition approved by the probate court, lot No. 29-A was adjudicated to
his widow, Katigbak Vda. de Salas, now defendant, in whose favor transfer certificate of title No. 22157
was issued by the Register of Deeds of Rizal on August 9, 1932.
On the basis of the foregoing facts, the Rizal CFI rendered judgment, ordering the defendant to segregate
from lot No. 28-A, covered by her transfer certificate of title No. 22157, a portion equivalent to 16,900
square meters, and to execute, in due form, the corresponding deed in favor of the herein plaintiff.

Issue: Who has a better right in a sale of land registered under the Torrens System — the purchaser at the
execution sale, Salas-Rodriguez, predecessor in interest of the defendant, or the purchaser in the private
sale, Villanueva, predecessor in interest of the plaintiff?

Held: The two purchasers derived their title from Leuterio, who in turn acquired his from Nicolas Rivera.
The purchase made by Villanueva took place prior to the execution sale, but was never registered. The
property is registered under the Torrens system, there being a certificate of title issued in favor of Nicolas
Rivera bearing No. 10533 on lot No. 28-A. No certificate of title was ever issued in favor of Leuterio, but
the levy and the execution sale of the property were noted on the transfer certificate of title of Rivera
without the latter's objection, and in the notation it appeared that the property had been sold by Rivera to
Leuterio. It was, therefore, Leuterio alone who, in Rivera's certificate of title, appeared as the sole owner
of the property at the time of the levy and execution sale.

It is a well-settled rule that, when the property sold on execution is registered under the Torrens systems,
registration is the operative act that gives validity to the transfer, or creates a lien on the land, and a
purchaser, on execution sale, is not required to go behind the registry to determine the conditions of the
property. Such purchaser acquires such right, title and interest as appear on the certificate of title issued
on the property, subject to no aliens encumbrances or burdens that are noted thereon. It follows that, on
the property in question, defendant has a better right than the plaintiff.

Judgment is reversed, with costs against plaintiff-appellee.

MORAN, J.:

The old doctrine, which purports to give effect to all liens and encumbrances existing prior to the
execution sale of a property registered under the Torrens system, even if such liens and encumbrances are
not noted in the certificate of title, has been abandoned by this court.

The new doctrine, is that, in an execution sale of and registered under the Torrens system, the purchaser
acquires such right interest as appear on the certificate of title, unaffected by any prior lien or
encumbrance not noted therein. The purchaser is thus not required to explore farther than what the
Torrens title, upon its face, indicates in quest for any hidden defect or inchoate right that may
subsequently defeat his right thereto. If the rule were otherwise, the efficacy and conclusiveness of the
certificate of title which the Torrens system seeks to insure, would entirely be futile and nugatory.

The only reception to this rule is where the purchaser had acknowledged, prior to or at the time of the
levy, of such previous lien or encumbrance. In such a case, his knowledge is equivalent to registration and
taints his purchase with bad faith. But if knowledge of any lien or encumbrance upon the property is
acquired after the levy, the purchaser cannot be said to have acted in bad faith in making the purchase
and, therefore, such lien or encumbrance cannot affect his title.

In the present case, the third-party claim was filed about one month after the levy was recorded. The
validity of the levy is thus unaffected by any subsequent knowledge which the judgment creditor might
have derived from the third-party claim. The fact that this third-party claim was presented one day before
the execution sale, is immaterial. If the levy is valid, as it was, the execution sale made in pursuance
thereof is also validly foreclosed regardless of any equities that may have arisen after its constitution.
 Carumba v. Court of Appeals, 31 SCRA 558

CASE DOCTRINE: While under Article 1544, registration in good faith prevails over possession in the
event of a double sale by the vendor of the same piece of land to different vendees, said article is of no
application to the case at bar. The reason is that the purchaser of unregistered land at a sheriff's execution
sale only steps into the shoes of the judgment debtor. He merely acquires the latter's interest in the
property sold as of the time the property was levied upon.

SUMMARY OF FACTS: Spouses Amado Canuto and Nemesia Ibasco sold a parcel of land with an area
of 359.09 square meters, to the spouses Amado Carumba and Benita Canuto. However, the deed of sale
was never registered in the Register of Deeds. On January 21, 1957, a complaint for a sum of money was
filed by Santiago Balbuena against Amado Canuto and Nemesia Ibasco. A decision was rendered in favor
of Santiago Balbuena. Subsequently, the sheriff issued a "Definite Deed of Sale” of the property now in
question in favor of Santiago Balbuena, which instrument of sale was registered before the Register of
Deeds. The Court of First Instance, however, held void the execution levy made by the sheriff, and
nullified the sale in favor of the judgment creditor, Santiago Balbuena. The CFI found that Carumba had
taken possession of the land, and declared him to be the owner of the property under a consummated sale.
On appeal, however, the CA declared that there having been a double sale of the land subject of the suit,
Balbuena's title was superior to that of his adversary under Article 1644 of the Civil Code of the
Philippines, since the execution sale had been properly registered in good faith and the sale to Carumba
was not recorded.

ISSUE: Does registration in good faith prevail over possession in the event of a double sale, even if the
purchaser of the unregistered land at a sheriff's execution sale buys it from a vendor who no longer had
dominical interest nor any real right over the land that could pass to the purchaser?

RULING: NO. The deed of sale in favor of Canuto was executed two years before the levy was made by
the Sheriff. While it is true that the said deed of sale was only embodied in a private document, the same,
coupled with the fact that the buyer (petitioner Carumba) had taken possession of the unregistered land
sold, sufficed to vest ownership on the said buyer. When levy was made by the Sheriff, the judgment
debtor no longer had dominical interest nor any real right over the land that could pass to the purchaser at
the execution sale. Hence, the latter must yield the land to petitioner Carumba.

Dagupan Trading Co. v. Macam, 14 SCRA 179

FACTS: Sammy Maron and his seven brothers and sisters were pro-indiviso owners of a parcel of
unregistered land located in barrio Parayao, Binmaley, Pangasinan. In 1955, while their application for
registration of said land under Act No. 496 was pending, they executed, on June 19 and on September 21,
two deeds of sale conveying the property to herein respondent Rustico Macam who thereafter took
possession of the property and made substantial improvements upon it. On October 14, 1955, OCT No.
6942 covering the land was issued in the name of the Marons, free from all liens and encumbrances.
On August 4, 1956, however, by virtue of a final judgment of the Municipal Court of Manila in a civil
case in favor of Manila Trading and Supply Co. (Manila Trading) against Sammy Maron, levy was made
upon whatever interest he had in the subject property. Thereafter, said interest was sold at public auction
to the judgment creditor Manila Trading. The corresponding notice of levy, certificate of sale and the
sheriff's certificate of final sale in favor of Manila Trading - because nobody exercised the right of
redemption - were duly registered, and on March 1, 1958, the latter sold all its rights and title in the
property to herein petitioner Dagupan Trading Company (Dagupan Trading).

On September 4, 1958, Dagupan Trading filed an action against Macam, praying that it be declared owner
of one-eighth portion of the subject property. The CFI of Pangasinan dismissed the said complaint, and
the Court of Appeals affirmed its decision.

ISSUE: Who has the superior right over the one-eight portion of the subject property?

HELD: If the property were unregistered land, Macam would have the better right because his claim
would then be based on a prior sale coupled with public, exclusive and continuous possession as owner.

If the property were registered land, Dagupan would have a better right. The Court consistently held that
in case of conveyance of registered real estate, the registration of the deed of sale is the operative act that
gives validity to the transfer.

The deeds of sale executed in Macam’s favor were not registered while the levy in execution and the
provisional certificate of sale as well as the final deed of sale in favor of Dagupan were registered.

Consequently, this registered conveyance must prevail although posterior to the one executed in favor of
Macam, and Dagupan must be deemed to have acquired such right, title and interest as appeared on the
certificate of title issued in favor of Sammy Maron, subject to no lien, encumbrance or burden not noted
thereon.

The present case, however, does not fall within either, situation. Here, the sale in favor of Macam was
executed before the subject land was registered, while the conflicting sale in favor of Dagupan was
executed after the same property had been registered.

Section 35, Rule 39 of the Rules of Court: Upon the execution and delivery of the final certificate of sale
in favor of the purchaser of land sold in an execution sale, such purchaser "shall be substituted to and
acquire all the right, title, interest and claim of the judgment debtor to the property as of the time of the
levy.

At the time of the levy, Maron had no interest and claim on the 1/8 portion of the property inherited by
him and his co-heirs because for a considerable time prior to the levy, his interest had already been
conveyed to Macam. Consequently, subsequent levy made on the property for the purpose of satisfying
the judgment rendered against Sammy Maron in favor of the Manila Trading Company was void and of
no effect.

The unregistered sale and the consequent conveyance of title and ownership in favor of Macam could not
have been cancelled and rendered of no effect upon the subsequent issuance of the Torrens title over the
entire parcel of land.

To quote the CA decision:

... . Separate and apart from this however, we believe that in the inevitable conflict between a right of
ownership already fixed and established under the Civil Law and/or the Spanish Mortgage Law — which
cannot be affected by any subsequent levy or attachment or execution — and a new law or system which
would make possible the overthrowing of such ownership on admittedly artificial and technical grounds,
the former must be upheld and applied.

As stated, upon the execution of the deed of sale in his favor by Maron, Macam took possession of the
land as owner, and introduced considerable improvement. To deprive him now of the same by sheer force
of technicality would be against both justice and equity.

Sta. Romana v. Imperio

Facts:On January 6, 1946, Silvio R. Viola, hereinafter referred to as the Principal, executed in favor of
his brother, Dr. Jose R. Viola, hereinafter referred to as the Agent, a power of attorney, Exhibit A-1.
vesting in the latter the authority to take charge of, manage and administer seven (7) parcels of registered
land situated in the municipality of San Miguel, Province of Bulacan, to be converted into a "subdivision"
for residential purposes, until all of the subdivision lots therein shall have been sold. It would seem that
some of these parcels of land, one of which was known as Lot No. 622 of the Cadastral Survey of San
Miguel, Bulacan, were covered by Transfer Certificates of Title Nos. 19556 and 19559 of said province.
On April 26, 1946, the Principal asked the Court of First Instance of Bulacan to order the issuance of a
second owner's duplicate of said transfer certificate of title, upon the ground that his duplicates thereof
had been lost; but on June 25, 1946, he amended the motion to exclude therefrom TCT No. 19559, his
copy thereof having been seemingly located in the meanwhile. Soon, later, or on June 29, 1946, the court
granted said motion, as amended, and ordered the Register of Deeds to issue a second owner's duplicate
of TCT No. 19556.

Meanwhile, or on June 18, 1946, the agent had executed, in favor of Pablo Ignacio, a deed (Exhibit A) in
which he undertook to sell on installments six (6) lots covered by said TCT No. 19556, with an aggregate
area of 3,804 square meters. This instrument (Exhibit A) and the Agent's aforementioned power of
attorney (Exhibit A-1) were filed with the office of the register of deeds and annotated on said TCT No.
19556 on July 2, 1946. This notwithstanding, four (4) months later, or on October 18, 1946, the Principal
sold a land of about thirty (30) hectares, including said Lot No. 622, to appellant herein (See Exhibit B).
A week later, or on October 25, 1946, the latter, in turn, conveyed said land to the appellee, by virtue of
the deed Exhibit C, which was filed with the office of the register of deeds on November 4, 1946.
Thereupon, TCT No. 19556 was cancelled and, in lieu thereof, TCT No. 28946 was issued in appellee's
name. On December 14, 1946, appellee sold portions of said lot No. 622 to the following persons,
hereinafter referred to as occupants, who had been and were holding, as lessees thereof, the portions
respectively purchased by them.

Having failed to take possession of the land sold to him by the Agent, on April 22, 1947, Pablo Ignacio
commenced this action in the Court of First Instance of Bulacan, against said occupants, as well as against
appellee, appellant, and the Principal, to annul the sales made by the latter to appellant, by appellant to
appellee and by appellee to said occupants, as well as for the possession of the land in question and
damages.

On May 7, 1947, a pleading was filed, purporting to be defendants' answer, alleging, inter alia, that
appellees had, in good faith and for value, purchased said land from appellant, in whose name the title to
said land was free from any lien or encumbrance in favor of Ignacio; that the occupants had purchased the
portions assigned to them by appellee under similar conditions; that the sale in favor of Ignacio was
fraudulent; and that Ignacio knew that said occupants were in possession of said portions, and had a right
of pre-emption thereto.

On June 20, 1947, the Principal filed his own answer alleging that the land conveyed by him to Ignacio is
different from the one covered by the sale made by the Agent to appellant and that he (the Principal) had
instituted Civil Case No. 137 of the Court of First Instance of Bulacan against appellant to annul the
aforementioned Sale by the Agent.

Subsequently, or on January 5, 1949, appellee and said occupants filed a cross-claim against the Principal,
the Agent and appellant herein. On January 24, 1949, said occupants filed against the appellee, a cross-
claim which was amended on October 17, 1949.

Issue:Is the appellee in pari delicto?

Held:Appellant alleges in support of the third alleged error that appellee had never filed a cross-claim
against him and that, at any rate, appellee is not entitled to reimbursement from him because they are in
pari delicto. Although it is true that the appellee has not filed a cross-claim against the appellant, it is a
fact that the occupants had filed a cross-claim against both of them; and that upon payment to the
occupants of the amount of the cross-claim adjudged to be due to them, the appellee becomes subrogated
into their rights, under said cross-claim, against the appellant. Moreover, it is an elementary principle of
law (Articles 1495, 1547 and 1555, Civil Code of the Philippines), as well as of justice and equity that,
unless a contrary intention appears, the vendor warrants his title to the thing sold, and that, in the event of
eviction, the vendee shall be entitled to the return of the value which the thing sold has at the time of the
eviction, be it greater or less than the price of the sale. In the case at bar, it has been established that the
land in dispute was, at the time of the eviction, worth at least the sum of P8,463, which is the aggregate
amount charged by the appellee from said occupants.

Appellant cites Article 1412 of the Civil Code of the Philippines, in support of the view that appellee may
not recover said amount from appellant, upon the ground that both are in pari delicto. This provision is
part of Title II of Book IV of the Civil Code, on contracts in general, and it refers to contracts which are
null and void ab initio, pursuant to Article 1409 of the Civil Code. The contract between appellant and
appellee does not fall, however, under this provision, and is, accordingly, beyond the purview of the
aforementioned Article 1412. Said contract is governed by Title VI of the same Book, on Sales in
particular, specially by the aforesaid Articles 1495, 1547 and 1555, which are part of said Title VI,
regarding breach of the warranty arising from a valid contract of sale, due to the application of Art. 1544
of the same title, regulating the effects of double sales. Incidentally, these provisions suggest, also, the
remedies available to appellant herein.

Bernales v. Intermediate Appellate Court

G.R. No. 71491, June 28, 1988

Facts: Henry Siagan is the father of both Elpidio, whose mother is Cagaoay, and Augusto Siagan, whose
mother is Dagaoan. Agusto has a son named Constante who is one of the petitioners in this case. Both
sons of Henry and their successors in interest are contending parties in this case claiming ownership of
the land in question which was originally public land. Cagaoay, Henry, Dagoan and Agusto later died in
separate years.

When Dagaoan died Augusto inherited the lot but his son Constante alleging in a Deed of Absolute Sale
that he inherited the same from his grandmother, sold the lot in question to the Pasimio spouses and
registered said instrument under Act 3344. The Pasimio spouses in turn sold the same lot to the Roman
Catholic Bishop of Bangued who bought the same for the sole purpose of disposing of the same at cost to
the actual occupants-tenants in furtherance of the Land Reform Program of the government. Said tenants
are now the petitioners herein.

Petitioners allege that they have been in possession and have tilled the lot as tenants of Dagaoan from
1949-1965 and thereafter occupied and tilled the same to date.

Respondents maintain that Lot 1494 was originally owned by Henry who died intestate and that as early
as 1958 the ownership of said lot was already the subject of litigation as said lot was being claimed by
Elpidio as part of Henry’s estate. They add that more or less six months after Constante sold the lot to
spouses Pasimio, Elpidio and Agusto mutually recognized and accepted each other as the only heirs
entitled to inherit the estate of Henry. It was also stated that Agusto renounced and waived any interest
and right he had over the lot in favor of Elpidio.

Elpidio later applied for free patent over the said lot and was subsequently issued. After 5 years, Elpidio
sold the lot to Alfonso Cadiam. Following their purchase saud spouses took possession of the land, fenced
it and planted it with rice but petitioners forcibly dispossessed them uprooting the plants. This led to the
referral of the criminal charge to the Court of Agrarian Relations but because petitioners claimed
ownership spouses Cadiam filed a civil case for recovery of ownership.
Issue: Who has the better right to ownership?

Held: The Cadiam Spouses have a better right. It has been established beyond dispute that Elpidio and
Agusto mutually recognized each other as the only heirs of Henry. In the agreement Agusto waived any
interest and right he had over the lot in question. Because of such waiver and quit claim Elpidio became
the sole claimant of the lot. He applied for and was granted Free Patent and Original Certificate of Title
for said lot. After the lapse of five years from the issuance, Elpidio sold the lot to Cadiam in whose favor
a Transfer Certificate was issued.

In the case at bar, the Free patent was granted to Elpidio, the very person as successor in interest of
Agusto with a claim of continuous and adverse possession in the concept of an owner since time
immemorial through the latter’s predecessors, is entitled to the subject land. An original Certificate of
Title was issued in favor of Elpidio. As held by this Court, once a homestead patent granted in accordance
with the Public Land Act is registered under the Torrens System, the certificate of title issued in virtue of
said patent has the force and effect of a Torrens title under the Land Registration Act. Corollary thereto,
the Director of Patents, being a public officer has in his favor the presumption of regularity in issuing the
question homestead patent.

Vda. de Reyes v. De Leon

G.R No. L-22331, June 6, 1967

Facts: Rodolfo Lanuza and his wife Belen were the owners of a two-story house in Tondo, which they
leased from Consolidated Asiatic Co. Manila. On January 12, 1961, Lanuza sold the same to Maria Vda.
de Reyes and Aurelia R. Navarro with the leasehold rights to the lot, with a right to repurchase. In this
instrument, the wife of Lanuza did not sign the deed. However, on the extension of the redemption period,
she signed her name on the annotation.

After the sale, Lanuza and his wife mortgaged the same house in favor of private respondent, and was
later on foreclosed by the latter. At the same time, petitioners filed a suit for the consolidation of
ownership of the house on the ground that the period of redemption has expired without the vendors
exercising their right to repurchase. Few days after the filing of the suit, the house was sold to De Leon
and he took possession of the house and sought for the dismissal of the suit on the ground that he cannot
be affected thereof being a third party.

Issue:Is the ownership of the subject house vested in respondent’s title?

Held: The court ruled in the negative. The failure to sign by the wife (Belen Geronimo-Lanuza), was
merely voidable, and susceptible of ratification. Her act of signing ratified the contract (extending the
redemption period) as it appears that there was no other instrument executed, but instead it was annotated
on the deed of sale the extension of the period of redemption. The purchasers a retro, in the exercise of
their freedom to make contracts, have the power to extend the period of repurchase and it is valid.

Private respondent based his claim that the pacto de retro sale is actually an equitable mortgage since the
vendors remained in possession of the house and the extension of the redemption period. These
contemplate an equitable mortgage. Moreover, there was no transmission of ownership to the vendees.
The stipulation in the deed of sale that if the vendor fails to pay the amount of 3,000, ownership is
therefore vested in petitioners, is in fact a nullity. It is contrary to the nature of a true pacto de retro sale
under which a vendee acquires ownership of the thing sold immediately upon execution of the sale,
subject only to the vendor’s right of redemption.

Valdevieso vs. Damalerio

Facts: Bernardo Valdevieso (petitioner) bought from spouses Lorenzo and Elenita Uy a parcel of
land located at General Santos City. The deed of sale was not registered, nor was the title of the
land transferred to the petitioner. The said property was immediately declared by petitioner for
taxation purposes. It came to pass that spouses Candelario and Aurea Damalerio (respondents) filed
with the RTC - General Santos City, a complaint for a sum of money against spouses Lorenzo and
Elenita Uy with application for the issuance of a Writ of Preliminary Attachment. The trial court
issued a Writ of Preliminary Attachment by virtue of which the property, then still in the name of
Lorenzo Uy but which had already been sold to petitioner, was levied. The levy was duly recorded
in the Register of Deeds of General Santos City and annotated upon TCT No. T-30586. TCT No. T-
30586 in the name of Lorenzo Uy was cancelled and, in lieu thereof, TCT No. T-74439 was issued
in the name of petitioner. This new TCT carried with it the attachment in favor of respondents.
Petitioner filed a third-party claim to discharge or annul the attachment levied on the property
covered on the ground that the said property belongs to him and no longer to Lorenzo and Elenita
Uy.

Issue: Is a registered writ of attachment on the land a superior lien over that of an earlier
unregistered deed of sale?

Held: Yes. Though the subject land was deeded to petitioner as early as 05 December 1995, it was
not until 06 June 1996 that the conveyance was registered, and, during that interregnum, the land
was subjected to a levy on attachment. At the time of the attachment of the property on 23 April
1996, the spouses Uy were still the registered owners of said property. Under Section 51 of P.D.
No. 1529, the execution of the deed of sale in favor of petitioner was not enough as a succeeding
step had to be taken, which was the registration of the sale from the spouses Uy to him. Insofar as
third persons are concerned, what validly transfers or conveys a person's interest in real property is
the registration of the deed. Thus, when petitioner bought the property on 05 December 1995, it
was, at that point, no more than a private transaction between him and the spouses Uy. It needed to
be registered before it could bind third parties, including respondents. When the registration finally
took place on 06 June 1996, it was already too late because, by then, the levy in favor of
respondents, pursuant to the preliminary attachment ordered by the General Santos City RTC, had
already been annotated on the title.

Andaya v. Manansala, April 30, 1960

FACTS: On June 13, 1934, one Isidro Fenis sold the land in question to Eustaquia Llanes, with right of
repurchase within a period of five years. After the expiry of said period, and without repurchasing the said
property, Isidro Fenis sold it again to Maria Viloria on January 13, 1944. Seven months later, Maria
Viloria sold by way of sale with right to repurchase within a period of one year, the said property together
with another parcel of land to the defendant Melencio Manansala. On August 1, 1946, upon the expiry of
the said period, Manansala registered with the Register of Deeds an affidavit consolidating his title on the
property. A year later, Maria Viloria sold by way of absolute sale the same property to Ciriaco Casiño,
Fidela Valdez, and the plaintiff spouses Ariston Andaya and Micaela Cabrito, for P4,800.00.

On March 23, 1956, plaintiffs spouses Ariston Andaya and Micaela Cabrito commenced this case in the
Court of First Instance of Ilocos Sur against defendant Melencio Manansala to recover damages suffered
by them by reason of the latter's breach of his warranty of title or against eviction embodied in his sale of
the land in question to plaintiffs. Defendant Manansala denied liability for the damages claimed, and
alleged that it was plaintiffs and their co-purchasers who pleaded with him to sell said land to them at a
low price after they had been sued by Eustaquia Llanes.

RTC ruled Considering that the same land was already sold to the plaintiffs and their co-vendee, Ciriaco
Casiño and Fidela Valdez, it is obvious that their only purpose in acquiring the same land from the
defendant at the low price of P1,500.00 was to enable them to register the prior deed of sale executed by
Maria Viloria. This is true, because the title of the defendant had already consolidated pursuant to Article
1509 of the Spanish Civil Code as shown by an affidavit of the defendant registered with the Register of
Deeds of this province. This was clearly the understanding of the parties, and the plaintiffs apparently
knew that the stipulation on warranty in the deed was made pro forma and could not have been intended,
considering the above circumstances from the fact that said property was then subject of a pending
litigation as an actual warranty on the title and possession of the purchasers. In determining therefore the
obligations of the defendant, those applicable to a vendor in cases of rescission of a contract should be
applied. The defendant Melencio Manansala appealed, claiming that after finding that he was not liable to
plaintiffs-appellees for breach of warranty against eviction, the lower court erred in holding him liable as
in rescission of sale and ordering him to return to plaintiffs-appellees the price of the land in question
with interests.

ISSUE: Is the defendant liable as in rescission of sale after finding that he was not liable as for breach of
warranty?

HELD: No. according to Article 1477 of the old Code (the law applicable when the contract in this case
was made), when the vendee has waived the right to warranty in case of eviction, and eviction shall occur,
the vendor shall only pay the price which the thing sold had at the time of the eviction, unless the vendee
has made the waiver with knowledge of the danger of eviction and assumed its consequences. (Same as
Art. 1554 of the new Code)
As already stated, appellees knew of the danger of eviction at the time they purchased the land in question
from appellant, and assumed its consequences. Therefore, the appellant is not even obliged to restore to
them the price of the land at the time of eviction, but is completely exempt from liability whatsoever.

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

CASE TITLE: Bareng v Court of Appeals, GR No L-12973 April 25, 1960

TOPICS

SALES – Article 1590 of the Civil Code provides that the vendee has the right to suspend payment of the
price of the thing sold in the face of any danger that he might be disturbed in its possession or ownership
thereof.

PAYMENT OF INTEREST; VENDEE’S DEFAULT TO PAY THE PRICE OF THE THING SOLD – If
the vendee is in default in the payment of the price of the thing sold, under the provision of Article 2209
of the Civil Code, he is liable to pay legal interest from the date of the filing of the complaint, unless he
deposits in the Court the amount due at the start of the action

PONENTE: Reyes, J.B.L, J

FACTS: Petitioner Bareng purchased from respondent Algeria the cinematographic equipment installed
at the Pioneer Theater for the sum of P15k, P10k of which was paid, and for the balance, Bareng signed
four promissory notes.

The first promissory note was duly paid by the petitioner. Shortly before the second note fell due, the
other respondent Agustin Ruiz informed petitioner that he was a co-owner of the equipment in question,
and several days thereafter, Ruiz sent petitioner a telegram instructing him to suspend payments to
Alegria of the balance of the price as he was not agreeable to the sale. On the same day, Alegria sought to
collect upon the second note, but petitioner refused to pay on account of Ruiz’s claims. Petitioner refused
to make any more payments to Alegria until the latter had settled his dispute with Ruiz.

Eventually after Aleria and Ruiz reached a compromise, the former sued Bareng the unpaid amount and
the interest due. Petitioner Bareng claims he is not liable to pay interests to Alegria because he was
justified in suspending payment of the balance of the price.

ISSUE: Did petitioner incur default in his obligation to pay

HELD: Yes, the petitioner in this was in default on the unpaid balance of the price. While it is true that
petitioner Bareng had the right to suspend payment of the balance from the time he was informed by Ruiz
of the latter’s claims of co-ownership thereof, specially upon his receipt of Ruiz’ telegram wherein the
latter asserted that he was not agreeable to the sale, his right to suspend ceased after Ruiz and Alegria
reached a compromise because in this case there was no longer any danger of threat to Bareng’s
ownership and full enjoyment of the thing bought from Alegria. It was by virtue of the settlement that
Alegria sued petitioner for the unpaid balance. Yet the petitioner did not tender payment and instead
sought to have the sale rescinded upon claims of violations of warranties by Alegria.

Petitioner also argues that his indebtedness was unliquidated until its amount was determined by the CA
and that consequently, he cannot be made answerable for interests on the amount due. The argument is
completely untenable. The price was determined and known, hence, liquidated; and the obligation to pay
unpaid balance did not cease to be liquidated and determined simply because the vendor and vendee
disagreed as to its amount.

CASE TITLE: HEIRS OF PEDRO ESCANLAR, et al. va. COURT OF APPEALS, et al.

G.R. No. 119777, October 23, 1997

TOPIC: Contract ; Contract to Sell as distinguished from Contract of Sale

PONENTE:Romero, J

DOCTRINE: In contracts to sell, ownership is retained by the seller and is not to pass until the full
payment of the price. Such payment is a positive suspensive condition, the failure of which is not a breach
of contract but simply an event that prevented the obligation of the vendor to convey title from acquiring
binding force.

FACTS: Spouses Guillermo Nombre and Victoriana Cari-an died without issue. The heirs of Nobre
included his nephews and grandnephews. Her late brother's son Gregorio Cari-an succeeded Victoria
Cari-an. Upon Gregorio's death, however, his wife Generosa Martinez and his children succeeded him.

The subject matter of this case are two parcels of land which formed part of the estate of Nombre and
Cari-an. On September 15, 1978, Gregorio Cari-an's heirs executed a Deed of Sale of Rights, Interests
and Participation in favor of herein petitioners Pedro Escanlar and Francisco Holgado, concurrently the
lessees of the aforesaid lots. Petitioners continued in possession of the subject lots and continued to pay
rent based on their lease contract. The petitioners' motion for approval of the sale filed before the same
probate court was opposed by private respondents Cari-an.

On September 16, 1982, the probate court approved a motion 􏰁led by the heirs of Cari-an and Nombre to
sell their respective shares in the estate. On September 21, 1982, the Cari-ans and some heirs of
Guillermo Nombre sold their shares in eight parcels of land including the two lots in question to the
respondents spouses Chua.

On November 3, 1982, private respondents Cari-an instituted suit for cancellation of sale against
petitioners Escanlar and Holgado. They complained of petitioners' failure to pay the balance of the
purchase price on due date.

On December 3, 1984, the probate court approved the September 21, 1982 sale and the certificates of title
over the eight lots sold were issued in the name of respondents Ney Sarrosa Chua and Paquito Chua.

The case was resolved by the trial court upholding the sale in favor of the spouses Chua and cancelling
the sale made to Escanlar and Holgado. Petitioners went to the Court of Appeals. The respondent Court
affirmed the decision of the trial court, hence, this petition.

LEGAL ISSUES: 1. Is rescission a proper remedy for non-payment in Contracts of Sale? As

distinguished from Contracts to Sell?

2. Was there a valid rescission of the September 15, 1978 contract?

RULING:

1. YES. In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes
the transaction that, for a time, existed and discharges the obligations created thereunder. The remedy of
an unpaid seller in a contract of sale is to seek either specific performance or rescission.

In contracts to sell, ownership is retained by the seller and is not to pass until the full payment of the
price. Such payment is a positive suspensive condition, the failure of which is not a breach of contract but
simply an event that prevented the obligation of the vendor to convey title from acquiring binding force.
To illustrate, although a deed of conditional sale is denominated as such, absent a proviso that title to the
property sold is reserved in the vendor until full payment of the purchase price nor a stipulation giving the
vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed
period, by its nature, it shall be declared a deed of absolute sale.
In this case, there was a Contract of Sale. The September 15, 1978 sale of rights, interests and
participation as to Â1⁄2 portion pro indiviso of the two subject lots is a contract of sale for the following
reasons: First, private respondents as sellers did not reserve unto themselves the ownership of the
property until full payment of the unpaid balance of P225,000.00. Second, there is no stipulation giving
the sellers the right to unilaterally rescind the contract the moment the buyer fails to pay within the fixed
period.Prior to the sale, petitioners were in possession of the subject property as lessees. Upon sale to
them of the rights, interests and participation as to the Â1⁄2 portion pro indiviso, they remained in
possession, not in concept of lessees anymore but as owners now through symbolic delivery known as
traditio brevi manu. Under Article 1477 of the Civil Code, the ownership of the thing sold is acquired by
the vendee upon actual or constructive delivery thereof.

2. With respect to rescission of a sale of real property, Article 1592 of the Civil Code governs. In the
instant case, the sellers gave the buyers until May 1979 to pay the balance of the purchase price. After the
latter failed to pay installments due, the former made no judicial demand for rescission of the contract nor
did they execute any notarial act demanding the same, as required under Article 1592. Consequently, the
buyers could lawfully make payments even after the May 1979 deadline, as in fact they paid several
installments to the sellers which the latter accepted. Thus, upon the expiration of the period to pay, the
sellers made no move to rescind but continued accepting late payments, an act which cannot but be
construed as a waiver of the right to rescind. When the sellers, instead of availing of their right to rescind,
accepted and received delayed payments of installments beyond the period stipulated, and the buyers
were in arrears, the sellers in effect waived and are now estopped from exercising said right to rescind.

Case Title: Luzon Brokerage Company V. Maritime Building, G.R. No. L-25885, Jan. 31, 1972

Topic: Breach of Contract tainted with Fraud or Malice

Ponente: Reyes, J.B.L., J.

Doctrine: A judicial action for the rescission of a contract is not necessary where the contract provides
that it may be revoked and cancelled for violation of any of its terms and conditions.

Facts: On April 30, 1949, the defendant Myers Building Co. entered into a Deed of Conditional Sale, in
favor of Maritime Building Co. over 3 parcels of land with improvements in Manila City for P1M.
Maritime paid P50, 000.00 upon execution. The balance was to be paid in monthly instalments of P10,
000.00 at 5% interest per annum (later lowered to P5, 000.00 at 5.5% interest per annum). The parties
further agreed that: a. If Maritime defaults, the contract would be annulled at Myers’ option; b. All
payments already made shall be forfeited; and c. Myers shall have the right to re-enter the property and
take possession. Moreover, if Maritime refuses to peacefully deliver the possession of the properties
subject of this contract to the Myers in case of rescission, a suit should be brought in court by the Myers
to seek judicial declaration of rescission.

Unfortunately, Maritime failed to pay the installment for March 1961, for which the Vice-President,
George Schedler,of the Maritime Building Co., Inc., wrote a letter to the President of Myers, Mr. C.
Parsons, requesting for a moratorium on the monthly payment of the installments until the end of the year
1961, for the reason that the said company was encountering difficulties in connection with the operation
of the warehouse business. Consequently, on May 1961, Myers made a demand upon Maritime for the
unpaid installments; also, Myers advised Maritime of the cancellation of the Deed of Conditional Sale
and demanded the return of the property, holding Maritime liable for rentals at P10, 000.00 monthly.
Myers thereafter demanded from its lessee, Luzon Brokerage, to avoid paying to the wrong party, filed an
action for interpleader. After the filing of this action, the Myers Building Co., Inc. in its answer filed a
cross-claim against the Maritime Building Co., Inc. praying for the confirmation of its right to cancel the
said contract.

Issue: Whether or not Myers Company is entitled to extra-judicially rescind the Deed of Conditional
Sale?

Held: YES. The Court held in Lopez v. Commissioner of Customs that a judicial action for the rescission
of a contract is not necessary where the contract provides that it may be revoked and cancelled for
violation of any of its terms. As further explained in UP v. de los Angeles, the party who deems the
contract violated may consider it resolved or rescinded without previous court action, but it proceeds at its
own risk. For it is only the final judgment of the corresponding court that will conclusively and finally
settle whether the action taken was or was not correct in law. But the law definitely does not require that
the contracting party who believes itself injured must first file suit and wait for a judgment before taking
extrajudicial steps to protect its interest.

Case Title:Spouses Rayos vs Reyes

Topic:Obligations and Contracts

Ponente:Bellosillo, J

Doctrine: In order that consignation may be effective the debtor must show that (a) there was a debt due;
(b) the consignation of the obligation had been made because the creditor to whom a valid tender of
payment was made refused to accept it; (c) previous notice of the consignation had been given to the
person interested in the performance of the obligation; (d) the amount due was placed at the disposal of
the court; and, (e) after the consignation had been made the person interested was notified thereof.

Facts:Three parcels of unregistered land in Pangasinan were formerly owned by the spouses Tazal who
on September 1, 1957 sold them to respondents’ predecessor-in-interest, Reyes, with right to repurchase
within two 2 years from date thereof by paying to the vendee the purchase price and all expenses incident
to their reconveyance. After the sale the vendee a retro took physical possession of the properties and paid
the taxes thereon. The otherwise inconsequential sale became controversial when 2 of the 3 parcels were
again sold by Tazal in favor of petitioners’ predecessor-in-interest Rayos without first availing of his right
to repurchase the properties. In the meantime, the conventional right of redemption in favor of spouses
Tazal expired without the right being exercised by either the Tazal spouses or the vendee Rayos.
ISSUE:Whether or not there is a valid consignation in this case

HELD:No. In order that consignation may be effective the debtor must show that:(a)there was a debt due;
(b) the consignation of the obligation had been made because the creditor to whom a valid tender of
payment was made refused to accept it;(c)previous notice of the consignation had been given to the
person interested in the performance of the obligation;(d) the amount due was placed at the disposal of the
court; and, (e) after the consignation had been made the person interested was notified thereof.

In the instant case, petitioners failed, first, to offer a valid and unconditional tender of payment; second, to
notify respondents of the intention to deposit the amount with the court; and third, to show the acceptance
by the creditor of the amount deposited as full settlement of the obligation, or in the alternative, a
declaration by the court of the validity of the consignation. The failure of petitioners to comply with any
of these requirements rendered the consignation ineffective.

Case Title: Ong vs. Court of Appeals (G.R. No. 97347, July 6, 1999)

Topic: Obligations and Contracts, Rescission and Resolution, Novation

Ponente: Ynares-Santiago, J.

Doctrine: The breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to
comply with an obligation already extant, not a failure of a condition to render binding that obligation.
Failure to pay, in this instance, is not even a breach but merely an event which prevents the vendor's
obligation to convey title from acquiring binding force. Hence, the agreement of the parties in the case at
bench may be set aside, but not because of a breach on the part of petitioner for failure to complete
payment of the purchase price. Rather, his failure to do so brought about a situation which prevented the
obligation of respondent spouses to convey title from acquiring an obligatory force.

Facts: Petitioner Jaime Ong, on the one hand, and respondent spouses Miguel K. Robles and Alejandra
Robles, on the other hand, executed an "Agreement of Purchase and Sale" respecting two parcels of land.
Ong paid the initial payment but left a balance. Ong took possession of the subject parcels of land. To
answer for his balance Ong issued four (4) post-dated checks. When presented for payment, however, the
checks were dishonored due to insufficient funds. Petitioner promised to replace the checks but failed to
do so.

Respondent spouses, through counsel, sent petitioner a demand letter asking for the return of the
properties. Their demand was left unheeded, so they filed with the Regional Trial Court a complaint for
rescission of contract and recovery of properties with damages. The trial court rendered a decision
ordering the contract entered into be set aside, the defendant Ong to deliver the parcels of land to the
respondent spouses, and the respondent spouses to return to Ong the initial payment he made. Petitioner
appealed to the Court of Appeals, which affirmed the decision of the Regional Trial Court.

Petitioner contends that Article 1191 of the New Civil Code is not applicable since he has already paid
respondent spouses a considerable sum and has therefore substantially complied with his obligation. He
cites Article 1383 instead, to the effect that where specific performance is available as a remedy,
rescission may not be resorted to. In addition, Ong insists, however, that the contract was novated as to
the manner and time of payment.

Issues:

1. Is the contract entered into by the parties may be validly rescinded under Article 1191 of the
New Civil Code?

2. Are the parties had novated their original contract as to the time and manner of payment?

Held:

1. The contract entered into by the parties in the case at bar does not fall under any of those
mentioned by Article 1381. Consequently, Article 1383 is inapplicable. A careful reading of
the parties' "Agreement of Purchase and Sale" shows that it is in the nature of a contract to
sell, as distinguished from a contract of sale. In a contract of sale, the title to the property
passes to the vendee upon the delivery of the thing sold; while in a contract to sell, ownership
is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of
the purchase price. 18 In a contract to sell, the payment of the purchase price is a positive
suspensive condition, the failure of which is not a breach, casual or serious, but a situation
that prevents the obligation of the vendor to convey title from acquiring an obligatory force.

a. This promise to sell was subject to the fulfillment of the suspensive condition of
full payment of the purchase price by the petitioner. Petitioner, however, failed to
complete payment of the purchase price. The non-fulfillment of the condition of
full payment rendered the contract to sell ineffective and without force and
effect. It must be stressed that the breach contemplated in Article 1191 of the
New Civil Code is the obligor's failure to comply with an obligation. Failure to
pay, in this instance, is not even a breach but merely an event which prevents the
vendor's obligation to convey title from acquiring binding force. Hence, the
agreement of the parties in the case at bench may be set aside, but not because of
a breach on the part of petitioner for failure to complete payment of the purchase
price. Rather, his failure to do so brought about a situation which prevented the
obligation of respondent spouses to convey title from acquiring an obligatory
force.

2. No. Novation is never presumed, it must be proven as a fact either by express stipulation of
the parties or by implication derived from an irreconcilable incompatibility between the old
and the new obligation. Records show that the parties never even intended to novate their
previous agreement. It is true that petitioner paid respondents small sums of money, in
contravention of the manner of payment stipulated in their contract. These installments were,
 however, objected to by respondent spouses, and petitioner replied that these represented the
interest of the principal amount which he owed them.

a. In order for novation to take place, the concurrence of the following requisites is
indispensable: (1) there must be a previous valid obligation; (2) there must be an
agreement of the parties concerned to a new contract; (3) there must be the
extinguishment of the old contract; and (4) there must be the validity of the new
contract. The aforesaid requisites are not found in the case at bench. The
subsequent acts of the parties hardly demonstrate their intent to dissolve the old
obligation as a consideration for the emergence of the new one.

Case Title: Iringan v. Court of Appeals, G.R. No. 129107, 26 September 2001

Topic: Rescission of contracts of sale regarding immovable property

Ponente: Quisumbing, J.

Doctrine: A judicial or notarial act is necessary before a valid rescission can take place, whether or not
automatic rescission has been stipulated.

Facts: Palao sold to Iringan executed a Deed of Sale whereby the former sold to the latter a lot payable in
three installments. When Iringan failed to pay the full amount of the second installment, Palao wrote a
letter informing petitioner that he considered the contract as rescinded. Iringan did not oppose the
revocation of the contract but proposed for reimbursement of the amount, which he had already paid, or
Palao could sell to him an equivalent portion of the land. Palao, however, did not agree and filed a
complaint for Judicial Confirmation of Rescission and Damages against Iringan to compel the latter to
formalize in a public document their mutual agreement of revocation and rescission and to have a judicial
confirmation of the said revocation under the terms and conditions fair, proper and just for both parties.

Iringan contends that no rescission was effected simply by virtue of the letter sent by respondent stating
that he considered the contract of sale rescinded. He asserts that a judicial or notarial act is necessary
before one party can unilaterally effect a rescission. Palao, on the other hand, contends that the right to
rescind is vested by law on the obligee and since petitioner did not oppose the intent to rescind the
contract, Iringan in effect agreed to it and had the legal effect of a mutually agreed rescission.

Issue:Was the contract of sale validly rescinded?

Held: Yes. Article 1592 of the Civil Code is the applicable provision regarding the sale of an immovable
property. Article 1592 requires the rescinding party to serve judicial or notarial notice of his intent to
resolve the contract.

Clearly, a judicial or notarial act is necessary before a valid rescission can take place, whether or not
automatic rescission has been stipulated. It is to be noted that the law uses the phrase "even though"
emphasizing that when no stipulation is found on automatic rescission, the judicial or notarial requirement
still applies.
Consequently, even if the right to rescind is made available to the injured part, the obligation is not ipso
factoerased 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.

Notwithstanding the above, however, in our view when private respondent filed an action for Judicial
Confirmation of Rescission and Damages before the RTC, he complied with the requirement of the law
for judicial decree of rescission. The complaint categorically stated that the purpose was 1) to compel
appellants to formalize in a public document, their mutual agreement of revocation and rescission; and/or
2) to have a judicial confirmation of the said revocation/rescission under terms and conditions fair, proper
and just for both parties. In Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., we held that even a
crossclaim found in the Answer could constitute a judicial demand for rescission that satisfies the
requirement of the law.

Case title: Tiana vs Torrejon, 21 Phil 127

Topic: Warranty of Title to the Property

Ponente: Johnson, J.

Doctrine: The vendor cannot escape his obligation of warranty by alleging that although there may be
a final judgment against the vendee, such judgment became final with the latter's consent.

Facts: The plaintiff, Don Leopoldo Canizares Tiana, purchased from the defendant, Don Jose Maria
Torrejon, for the sum of P2,500, a lot with buildings and improvements, situated in the municipality of
Jolo, Moro Province, Philippine Islands. At the sale of the said lot and improvements, the vendor, Jose
Maria Torrejon, warranted the title thereto as appears from the wording of the contract of sale and
purchase. Before executing the deed of sale to the estate in question, the defendant seller, Jose Maria
Torrejon, filed an application in the Court of Land Registration (case No. 1440), requesting registration
of the land and improvements. Although the said Torrejon had executed the deed of sale to the land and
improvements in favor of Tiana, he continued to prosecute the case No. 1440.

Tiana continued the prosecution of the case in the usual manner until decision therein was rendered.
Tiana asked the court for a continuation in order to present more evidence in support of the requested
registration of the property which is the subject of the present litigation, doing this in compliance with
instructions from Torrejon. The court granted this request and continued the case, and notification of this
action by the court was transmitted to Torrejon. During the period granted by the court, the plaintiff Tiana
requested the defendant Torrejon, on various occasions, to bring forward the evidence required but the
latter failed to do so. On August 8, 1908, the court issued a decree dismissing the application in case No.
1440 and declaring the estate in question to be public property and notification thereof was sent to
Torrejon. It further appears that the lot with its buildings and improvements, the subject of this litigation,
passed into the possession of the military authorities; that the plaintiff Tiana received no payment
whatsoever for it; and that, at that time, the value of it was P2,500, the amount for which Torrejon sold it
to Tiana. Since the said month of May, 1908, or about the middle thereof, when the plaintiff in the
present suit was deprived of possession, the estate has produced rent at the rate of P36 a month, of which
the plaintiff has also been deprived. On December 14, 1909, the plaintiff Tiana demanded that the
defendant Torrejon return or repay him the sum of P2,500. It further appears that Torrejon knew of the
Government's objection to the application in case No. 1440, and that the land, buildings and
improvements, described in case No. 1440, were wholly included within the boundaries of the military
reservation of Jolo, Sulu, Moro Province.

Issue: Can the vendor escape his obligation of warranty by alleging that although there may be a final
judgment against the vendee, such judgment became final with the latter's consent?

Held: No, and the vendee's right does not suffer the least impairment because he did not appeal. This is
an action upon the warranty of the title to the property in case of eviction, under article 1475 of the Civil
Code. In such case there are three indispensable requisites: (1) Final judgment; (2) that the vendee be
deprived of the whole or a part of the thing sold; and, (3) a right prior to the sale; and, finally, another
indispensable requisite is that prescribed in article 1481 of the Civil Code: that the vendor be given notice
of the suit at the instance of the vendee. On the merits of the present case, and the preponderance of the
plaintiff's evidence, and from the facts established, all the foregoing requisites appear herein. In his brief
the defendant alleges that the decree issued in case No. 1440 was not final and that the plaintiff could
and should have appealed from it.

With reference to the allegation of the defendant, Torrejon, that he was not notified of the suit, that is,
of the objection presented by the government in case No. 1440, he cannot set up such a defense, for he
was himself the applicant in that case, without the intervention of Tiana, and such objection on the part
of the government to his claims already subsisted.

By virtue of the foregoing considerations, and of the facts established in this cause, the court held that
the plaintiff, Don Leopoldo Canizares Tiana, is entitled to recover from the defendant, Don Jose Maria
Torrejon, the sum of P2,500, the price of the real estate involved in the present suit, and that he is also
entitled to receive the sum of P36 a month from May, 1908, up to the day on which this judgment is
executed.

Case Title: Southern Motors Inc. v. Angelo Moscoso

GR no. L-14475 May 30 1961

Topic: Recto Law or Article 1484

Ponente:Paredes, J.

Doctrine: Availing the first remedy provided under Article 1484 entitles the plaintiff of the remedy to
recover the balance of the unpaid debt. Meanwhile, availing the third remedy which is the foreclosure of
the chattel mortgage shall bar the plaintiff from recovering any remaining unpaid balance of the price and
any agreement to the contrary shall be void.

Facts: Plaintiff sold to defendant a Chevrolet Truck. The down payment was made and the remaining
balance was represented by a promissory note issued by defendant, to be paid on installment basis. A
chattel mortgage was issued against the Chevrolet truck to secure the payment. When the defendant failed
to pay the installment, Plaintiff filed an action for collection of sum of money with preliminary
attachment attaching thereby several properties of the defendant including the said truck. The plaintiff
obtained a favorable judgment and the properties, subject of the attachment, were sold on the public
auction. The same truck was sold to the plaintiff for only 1000 pesos, insufficient to cover the whole debt.
The plaintiff filed an action in the same proceeding for collection of the remaining balance to which the
court granted. Defendant appealed the RTC’s decision arguing that under Art. 1484, availing the third
remedy shall bar the plaintiff from recovering the remaining balance. Plaintiff argued that he proceeded
with the first remedy under Art. 1484.

Issue: Is the plaintiff entitled to the recovery of the remaining balance?

Held: Yes. We do not share the views of the appellant on this matter. Manifestly, the appellee had chosen
the first remedy. The complaint is an ordinary civil action for recovery of the remaining unpaid balance
due on the promissory note. The plaintiff had not adopted the procedure or methods outlined by Sec. 14
of the Chattel Mortgage Law but those prescribed for ordinary civil actions, under the Rules of Court.
Had appellee elected the foreclosure, it would not have instituted this case in court; it would not have
caused the chattel to be attached under Rule 59, and had it sold at public auction, in the manner prescribed
by Rule 39. That the herein appellee did not intend to foreclose the mortgage truck, is further evinced by
the fact that it had also attached the house and lot of the appellant.

We perceive nothing unlawful or irregular in appellee's act of attaching the mortgaged truck itself. Since
herein appellee has chosen to exact the fulfillment of the appellant's obligation, it may enforce execution
of the judgment that may be favorably rendered hereon, on all personal and real properties of the latter not
exempt from execution sufficient to satisfy such judgment. It should be noted that a house and lot at San
Jose, Antique were also attached. No one can successfully contest that the attachment was merely an
incident to an ordinary civil action. (Sections 1 & 11, Rule 59; Sec. 16, Rule 39). The mortgage creditor
may recover judgment on the mortgage debt and cause an execution on the mortgaged property and may
cause an attachment to be issued and levied on such property, upon beginning his civil action (Tizon vs.
Valdez, 48 Phil. 910-911).

Case Title: Cruz v. Filipinas Investment & Finance Corp., G.R. No. L-24772, [May 27, 1968]

Topic: SALES

Ponente: REYES, J.B.L.

Doctrine: The established rule is to the effect that the foreclosure and actual sale of a mortgaged chattel
bars further recovery by the vendor of any balance on the purchaser's outstanding obligation not so
satisfied by the sale.

Facts: On July 15, 1963, plaintiff purchased on installments from the Far East Motor Corporation one
unit of Isuzu Diesel Bus. To secure the payment of the promissory note Cruz executed in favor of the
seller a chattel mortgage over the aforesaid motor vehicle. Since no down payment was made by Cruz,
additional security was given by plaintiff Felicidad Vda. de Reyes in the form of SECOND MORTGAGE
on a parcel of land owned by her, together with the building and improvements thereon, in San Miguel,
Bulacan it was at the time mortgaged to the Development Bank of the Philippines to secure a loan
obtained by Mrs. Reyes from that bank.

Far East Motor Corporation for value received indorsed the promissory note and assigned all its rights
and interest to the defendant, Filipinas Investment & Finance Corporation. That by reason of Cruz's
default in the payment of the promissory note, defendant foreclosed the chattel mortgage on the bus
which had been damaged in an accident while in the possession of plaintiff. The proceeds of the sale of
the bus were not sufficient to discharge fully the indebtedness of plaintiff Cruz to the defendant and
pursuant to a provision of the real estate mortgage contract, authorizing the mortgagee to foreclose the
mortgage judicially or extra-judicially, defendant requested the Provincial Sheriff to take possession of,
and sell, the land subject of the Real Estate Mortgage. Plaintiff Reyes through counsel, wrote a letter to
the defendant asking for the cancellation of the real estate mortgage on her land, but defendant did not
comply with such demand as it was of the belief that plaintiff's request was without any legal basis.
Provincial Sheriff of Bulacan held in abeyance the sale of the mortgaged real estate pending the result of
this action.

Issue: Whether or not the defendant which has already extrajudicially foreclosed the chattel mortgage
may also extrajudicially foreclose the real estate mortgage constituted as additional security for the
payment of the balance of Cruz' obligation?

Held: No. There is no merit to the claim that what is being withheld from the vendor, by the proviso of
Article 1484 of theCivil Code, is only the right to recover "against the purchaser" and not a recourse to
the additional security put up, not by the purchaser himself but by a third person, because if the guarantor
should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to
recover what he has paid from the debtor vendee (Article 2066, Civil Code); so that ultimately, it will be
the vendee who will be made to bear the payment of the balance of the price, despite the earlier
foreclosure of the chattel mortgage given by him. Thus, the protection given by Article 1484 would be
indirectly subverted, and public policy overturned.

Considering the purpose for which the prohibition contained in Article 1484 was intended, the word
"action" used therein may be construed as referring to any judicial or extra-judicial proceeding by virtue
of which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the
purchase price from the purchaser or his privy. Certainly, an extrajudicial foreclosure of a real estate
mortgage is one such proceeding.

Case Title: FILIPINAS INVESTMENT & FINANCE CORPORATION, Plaintiff-Appellant, v. JULIAN

R. VITUG, JR. and SUPREME SALES & DEVELOPMENT CORPORATION, Defendants-Appellees.

Wilhelmina V. Joven, for Plaintiff-Appellant.

Antonio V. Borromeo for Defendants-Appellees.

Topic:SALE OF CHATTEL BY INSTALLMENTS

Ponente:BARREDO, J.

Doctrine:RULE THAT VENDOR AFTER RECOVERY OF PROPERTY CANNOT RECOVER

UNPAID BALANCE OF PRICE, NOT APPLICABLE TO ASSIGNEE IN INSTANT CASE.

FACTS:The defendant, Julian R. Vitug Jr., executed and delivered to appellee a promissory note in the
amount of P14,605.00 payable in monthly installments according to a schedule of payments; the payment
of the aforesaid amount which was the purchase price of a motor vehicle, a 4-door Consul sedan, bought
by said defendant from appellee, was secured by a chattel mortgage over such automobile; on the same
day, appellee negotiated the above-mentioned promissory note in favor of appellant Filipinas Investment
& Finance Corporation, assigning thereto all its rights, title and interests to the same, the assignment
including the right of recourse against appellee; defendant Vitug defaulted in the payment of part of the
installment which fell due on January 6, 1965, as well as the subsequent three consecutive monthly
installments which he was supposed to have paid on February 6, March 6 and April 6, 1965; there being a
provision in the aforesaid promissory note and chattel mortgage that failure to pay the installments due
would result in the entire obligation becoming due and demandable, appellant demanded from appellee
the payment of such outstanding balance; in turn, appellee "authorized (appellant) to take such action as
may be necessary to enable (it) to take possession of the . . . motor vehicle." Pursuant to such authority,
appellant secured possession of the mortgaged vehicle by means of the writ of replevin duly obtained
from the court, preparatory to the foreclosure of the mortgage, but said writ became unnecessary because
upon learning of the same, defendant Vitug voluntarily surrendered the car to appellant; thereafter, the
said car was sold at public auction, but the proceeds still left a deficiency of P8,349.35, plus interest of
12% per annum from April 21, 1965; and appellant, the above foreclosure and sale notwithstanding,
would hold appellee liable for the payment of such outstanding balance, plus attorney’s fees and costs.On
August 4, 1965, appellee filed an urgent motion to dismiss on the ground, inter alia that under Article
1484 of the Civil Code of the Philippines, which particular provision is otherwise known as the Recto
Law, appellant has no cause of action against appellee. On September 23, 1965, appellant filed a motion
for reconsideration but this was denied on October 26, 1965, hence, this appeal. The principal error
assigned by appellant has reference to the applicability of Art. 1484 of the Civil Code, as amended, to the
facts of this case.
ISSUE:WHETHER OR NOT THE TRIAL COURT ERRED IN HOLDING THAT ARTICLE 1484 OF
THE CIVIL CODE OF THE PHILIPPINES IS APPLICABLE TO THE TRANSACTION BETWEEN
PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE?

HELD: YES. It can be seen that the assignment made by appellee to appellant of the promissory note and
mortgage of defendant Vitug was on a with-recourse basis. In other words, there was a definite and clear
agreement between appellant and appellee that should appellant fail to secure full recovery from
defendant Vitug, the right was reserved to appellant to seek recourse for the deficiency against appel lee.
Accordingly, the question for resolution by the Court now is whether or not this provision regarding
recourse contained in the agreement between appellant and appellee violates the Recto Law which
declares null and void any agreement in contravention thereof. We do not believe that it does. It is the
contention of appellee that since whatwere assigned to appellant were only whatever rights it had against
the buyer, it should follow that inasmuch as appellee has no right to recover from the defendant beyond
the proceeds of the foreclosure sale, the appellant, as assignee, should also have no right to recover any
deficiency. We do not view the matter that way. The very fact that the assignee was given the stipulated
right of recourse against the assignor negates the idea that the parties contemplated to limit the recovery
of the assignee to only the proceeds of the mortgage sale.

ACCORDINGLY, the order of dismissal of the lower court is reversed and this case is ordered remanded
to the lower court for further proceedings, with costs against appellee Supreme Sales & Development
Corporation.

Case Title:U.S. Commercial Co. v Halili

Topic:Recto Law

Ponente:J. Makasiar

Doctrine:Leases of personal property with option to purchase are subject to the provision that when the
lessor “has chosen to deprive the lessee of the enjoyment of such personal property, he shall have no
further action against the lessee “for the recovery of any unpaid balance” owing by the latter, any
agreement to the contrary being null and void.

Facts:Plaintiff entered into a contract for the leasing of used US Army Jeeps with defendant. The contract
provided for the fixed value of the jeeps and that after substantial initial payment, the balance was divided
into twelve equal parts which were made as the monthly rental or payment for the vehicles. It was also
stipulated that the lessor would retain the title to the vehicles and that in the event that the rentals should
equal the balance of the total value, then further rental payments would stop and that the lessor would
transfer the title thereof to the lessee. The lessee subsequently defaulted in the payments and
consequently, the lessor requested the lessee to return all eight vehicles, to which the latter complied.
However, the lessee refused to pay all rentals in arrears.
Issue:May the plaintiff still collect the said payments?

Held:The Court ruled that there can hardly be any question that the so-called contracts of lease were
veritable lease of personal property with option to purchase, and as such, come within the purview of
Article 1454-A of the Civil Code. Article 1454-A provides that: In a contract for the sale of personal
property payable in installments, failure to pay two or more installments shall confer upon the vendor the
right to cancel the sale or foreclose the mortgage if one has been given the property, without
reimbursement to the purchaser of the installments already paid, if there be an agreement to this effect.
"However, if the vendor has chosen to foreclose the mortgage he shall have no further action against the
purchaser for the recovery of any unpaid balance owing by the same, and any agreement to the contrary
shall be null and void. "The same rule shall apply to leases of personal property with option to purchase,
when the lessor has chosen to deprive the lessee of the enjoyment of such personal property. Being leases
of personal property with option to purchase, the contracts in question are subject to the provision that
when the lessor “has chosen to deprive the lessee of the enjoyment of such personal property, he shall
have no further action against the lessee “for the recovery of any unpaid balance” owing by the latter, any
agreement to the contrary being null and void.”

CASE TITLE: RILLO V. CA G.R. NO. 125347. JUNE 19, 1997.

TOPIC: SALES - RA 6552 (MACEDA LAW)

PONENTE: J. PUNO.

DOCTRINE: Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real
estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment
of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to
convey title from acquiring binding force.

FACTS: Rillo signed a "Contract To Sell of Condominium Unit" with private respondent
Corb Realty Investment Corporation. Under the contract, CORB REALTY agreed to sell to RILLO
condominium unit. The contract price was P150,000.00, one half of which was paid upon its execution,
while the balance of P75,000.00 was to be paid in twelve (12) equal monthly installments of P7,092.00
beginning July 18, 1985.

It was further agreed that should petitioner default in the payment of three (3) or four (4) monthly
installments, forfeiture proceedings would be governed by existing laws, particularly the Condominium
Act.2

RILLO failed to pay the initial monthly amortization. On August 18, 1985, he again defaulted in his
payment. On September 20, 1985, he paid the first monthly installment of P7,092.00. On October 2,
1985, he paid the second monthly installment of P7,092.00. His third payment was on February 2, 1986
but he paid only P5,000.00 instead of the stipulated P7,092.00. 3
On July 20, 1987 or seventeen (17) months after RILLO's last payment, CORB REALTY informed him
by letter that it is cancelling their contract due to his failure to settle his accounts on time. CORB
REALTY also expressed its willingness to refund RILLO's money. 4

CORB REALTY, however, did not cancel the contract for on September 28, 1987, it received P60,000.00
from petitioner. 5

RILLO defaulted again in his monthly installment payment. Consequently, CORB REALTY informed
RILLO through letter that it was proceeding to rescind their contract. 6In a letter dated August 29, 1988, it
requested RILLO to come to its office and withdraw P102,459.35 less the rentals of the unit from July 1,
1985 to February 28, 1989. 7Again the threatened rescission did not materialize.

ISSUE: Whether or not R.A. 6552 applies and not Articles 1191 and 1592 of the Civil
Code.

HELD: Yes.

The contract between the parties is not an absolute conveyance of real property but a contract to sell.

In a contract to sell real property on installments, the full payment of the purchase price is a positive
suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an
event which prevented the obligation of the vendor to convey title from acquiring any obligatory force."
14
The transfer of ownership and title would occur after full payment of the purchase price.

Given the nature of the contract of the parties, the respondent court correctly applied Republic Act No.
6552. Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate
(industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an
installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey
title from acquiring binding force. 16It also provides the right of the buyer on installments in case he
defaults in the payment of succeeding installments, viz:

Petitioner RILLO paid less than two years in installment payments, hence, he is only entitled to a grace
period of not less than sixty (60) days from the due date within which to make his installment payment.
CORB REALTY, on the otherhand, has the right to cancel the contract after thirty (30) days from receipt
by RILLO of the notice of cancellation. Hence, the respondent court did not err when it upheld CORB
REALTY's right to cancel the subject contract upon repeated defaults in payment by RILLO.

Case Title:Leaño v. Court of appeals

Topic:Not connected to Civ 2

Ponente:

Doctrine:

Facts:

Issue:

Held:
Case Title:Jestra Development And Management Corporation vs Daniel Pacifico

G.R. No. 167452 January 30, 2007

Topic: Cancellation of contract due to non-payment of installments

Ponente: Carpio-Morales, J.

Doctrine: Cancellation of the contract, under the law, requires that the seller should extend the buyer a
grace period of at least 60 days from the due date of the installment, and at the end of the grace period,
the seller shall furnish the buyer with a notice of cancellation or demand for rescission.

Facts: On June 5, 1996, Respondent Daniel Pacifico signed a Reservation Application with Fil-Estate
Marketing Association for the purchase of a house and lot located at the Municipality of Parañaque and
paid the reservation fee of P20,000.

Under the Reservation Application, the total purchase price of the property was P2,500,000, and
the down payment equivalent to 30% of the purchase price was to be paid interest-free in six monthly
installments, that upon full payment of the 30% down payment by respondent, he was to sign a contract to
sell with the owner and developer of the property, Petitioner Jestra Development. And the 70% balance
on the purchase price was to be payable in 10 years, to bear interest at 21% per annum.

When respondent was unable to comply with the schedule of payments, he requested petitioner to
allow him to make periodic payments on the down payment to which the latter agreed to provided that
late payment penalties are paid. Still unable to comply, the petitioner sent the respondent a final demand
for the payment of the 11 installments due on the 70% balance of the purchase price, inclusive of the
interest. Further, the petitioner demanded the payment of the penalties for the belated settlement of the
down payment." And it reminded the respondent that "as provided in Section 5 of the said contract, Jestra
reserves its right to automatically cancel or rescind the same on account of failure/refusal to comply with
the terms thereof.”

Respondent then informed petitioner that due to sudden financial difficulties, he was suspending
payment of his obligation during the 10-month period, and that he wanted to dispose of the property to
recover his investment. And he requested that the postdated checks he issued be returned to him.
Petitioner denied respondent’s request to suspend payment and for the return of the postdated checks.
Thereafter, petitioner sent the respondent a notarial Notice of Cancellation, notifying him that it was,
within 30 days after his receipt thereof, exercising its right to cancel the Contract to Sell.

Issue: Is the respondent entitled to the refund of the cash surrender value of his previous payments under
R.A. No. 6552?

Held: No. R.A. No. 6552 was enacted to protect buyers of real estate on installment against onerous and
oppressive conditions. While the seller has under the Act the option to cancel the contract due to non-
payment of installments, he must afford the buyer a grace period to pay them and, if at least two years
installments have already been paid, to refund the cash surrender value of the payments.

Respondent failed to pay at least two years of installments, making him not, under Section 3 of
R.A. No. 6552, entitled to a refund of the cash surrender value of his payments. But what applies to the
case instead is Section 4 of the same law,
 SECTION 4. In case where less than two years of installments were paid, the seller shall give the
buyer a grace period of not less than sixty days from the date the installment became due.

If the buyer fails to pay the installments due at the expiration of the grace period, the seller may
cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act.

While respondent was notified of the dishonor of the checks, he took no action thereon, hence,
the 60 days grace period lapsed. Respondent made no further payments thereafter. Instead, he requested
for suspension of payment and for time to dispose of the property to recover his investment.

Case Title: BANDONG v. AUSTRIA, G.R. No. 9785, 31 PHIL 479-482, September 24, 1915

TOPIC:Prescription of the right to repurchase in the contract of sale

PONENTE:J. Carson

DOCTRINE: The provisions of the contract of sale which empowers the vendors a right to
repurchase were valid and binding upon the parties for a period of ten years from the date of the
contract.

FACTS:On 29 April 1905, Bandong and Ferrer sold to Ventenilla a parcel of land for the sum of P350.
The written contract provides the following stipulation: “We also set forth that one of the promises we
have made to Don Antonio is that we will repurchase this land at the same price; neither of us make any
stipulation as to interest on the money or the products of the land, but in the month of March of any year,
if we repurchase.”

The vendors offered to repurchase in March 1913 but it was declined on the ground that the right to
repurchase had prescribed: a contention which is renewed by the defendant in this action, who is the
widow of the original vendee. The lower court ruled that the right to repurchase expired at the end of four
(4) years from the date of the contract pursuant to Article 1508 of the Civil Code which provides that the
right to repurchase, in the absence of an express agreement, shall last four years counted from the date of
the contract, and in case of stipulation, the period of redemption shall not exceed ten years.

ISSUE:Is the provision in the written contract an express agreement with respect to the term of the right
to repurchase?
HELD: YES.The parties having expressly agreed that the vendors should have the right to repurchase in
the month of March of any year after the date of the contract, the only statutory limitation placed upon
them in the exercise of that right is the limitation found in the second paragraph of article 1508 of the
Civil Code, which limits the power of the vendor even by express agreement, to reserve a right to
repurchase for a longer period than ten years. The provisions of the contract of sale, whereby the parties
undertook by express agreement to cure to the vendors a right to repurchase in the month of March of any
year after the date of the contract, were valid and binding upon the parties for a period of ten years from
the date of the contract but wholly without force and effect thereafter.

It is admitted that the vendors ordered to repurchase the land in question in the month of March, 1913,
less than eight years from the date of the contract. This they had a perfect right to do, and the judgment of
the trial court which denies their right to enforce the terms of their contract on the ground that the period
of redemption had expired by statutory limitation cannot, therefore, be sustained.

Title:Fausto Rosales vs Vicente Reyes G.R. No. 8162; October 10, 1913

Topic:Sales – Right of Redemption

Ponente:Trent, J.

Doctrine: Right of Repurchase:Where a sale is made with pacto de retro on the condition that the
redemption shall not be made within three years from the date of the sale, and nothing is said as to how
long the right to redeem shall continue, its duration is seven years from the date of the contract.
Construction of Doubtful Clause:There are many characteristics of sales with pacto de retro which
stamp them as being in the nature of usurious loans. Consequently, doubtful conditions in such a contract
should not be construed too harshly against the vendor. Redemption Price: That the settled rule in this
jurisdiction is that a bona fide offer of the redemption price, where that is fixed and certain, is sufficient to
protect the rights of the vendor in case the vendee refuses to deliver the property.

Facts:On July 29, 1902, Rivera sold a parcel of land to Reyes and Ordoveza for 800 pesos under pacto de
recto, on the condition that the repurchase could not be made until after three years from the date of the
contract of sale. Rivera states that he was of age. On May 29, 1903, Rivera sold his right to repurchase to
Rosales for 1,075 pesos. In the document evidencing this sale, Rivera states that he is 23 years of age.
Rosales alleges that in January, 1908, he tendered 800 pesos to Reyes and Ordoveza with the request that
the land be surrendered to him in accordance with the contract entered into between them and Rivera in
1902, but that they refused to accept the money and comply with his request.

Issue:1. Whether or not the right to repurchase had expired before Rosales attempted to exercise it? 2.
Whether or not the complaint is defective as it does not allege that the redemption price was judicially
deposited upon the refusal of the defendants to surrender the property?
Ruling:1. No. A stipulation in the contract providing that the right to repurchase is suspended for a
certain time is undoubtedly a benefit to both the vendor and the purchaser. To the latter it affords a basis
upon which he may plan his management and use of the property with some accuracy during the time it is
in his possession, as he is no danger of being suddenly ousted by the vendor’s confronting him with the
redemption price and demanding the surrender of the property. And for the security thus afforded to the
purchaser in the enjoyment of the property he will be more inclined to pay a greater sum for it than he
would in the absence of such a provision, thereby benefiting the vendor.

In the present case, the only stipulation of the parties with reference to the right to repurchase was that it
could not be exercised within three years from the date of the sale. Had it not been for this condition, it is
evident that the right would have expired four years from the date of the sale. But if it were held that,
regardless of such a provision, the redemption right expires within four years from the date of the contract
unless there is a special provision as to how long this right, once effective, shall continue, many otherwise
perfectly valid contracts can be conceived in which the redemption privilege would be unenforceable. For
instance, if the stipulation in question had provided that the right to redeem could not be exercised within
five years from the date of the contract, it is quite apparent that, according to the argument advanced by
the defendants, the vendor could not have redeemed the property at all, for the right to do so would have
expired one year previously.

In such a case the question arises, Upon what basis must the duration of the right to repurchase be
calculated? Any such contract must necessarily be terminated ten years from the date of its execution, but
should the vendor have the privilege to exercise this right for the balance of the ten years, or should he be
allowed only for years on the ground that there was no express agreement of the parties upon this point?
In all such case it would seem that the vendor should be allowed four years from the expiration of the
time within which the right to redeem could not be exercised, or in the event that four years would extent
the life of the contract beyond ten years, the balance of the ten year period, on the ground that the
vendors, where the right to redeem is not thus suspended and no express agreement as to length of time
during which it may be exercised is made, are also allowed four years. This construction, it must be
conceded, is the most logical and just."When a statute or instrument is equally susceptible of two
interpretations, one in favor of natural right and the other against it, the former is to be adopted." The
provisions of article 1508 are strictly analogous to the statute of limitations upon actions. As the date on
which a right of action expires is determined by the date it accrues and not be some prior event which
might be considered as its inchoate beginning, so the right to repurchase is to be calculated from the day
upon which that right may be freely exercised by the vendor, subject, of course, to the ten-year limitation
of the law. Manresa (vol. 10, p. 303) touches upon this question: "The starting point for calculating it (the
redemption period) we understand is always the date of the contract, since, although the Code only so
states in the first of the two said cases, in the second it is expressly prohibited that the period shall exist
more than ten years, and it is clear that it would last longer if it were agreed, for example, that it would
not begin to run until a certain time had elapsed after the date of the contract. This agreement, in so far as
it might imply an extension of ten years, we believe would be null as being contrary to the manifest spirit
of the law." We are of the opinion that the effect of the express stipulation or agreement in the contract
which we have been discussing was to extend the life of the contract to seven years from the date of its
execution.
2. No. the settled rule in this jurisdiction upon the precise question involved in this case is that an offer of
the money, where the sum required is fixed and certain, is sufficient, and that it is unnecessary to deposit
it.

Case Title:Medel v. Francisco

Topic:Right of repurchase

Ponente:Avancena, J.

Doctrine:The right of repurchase, in the absence of any express agreement, lasts four years and, in case
of stipulation, the period shall not exceed ten years.

Facts:On May 16, 1917, Carlos N. Francisco sold the land belonging to him, described in transfer
certificate of title No. 3598 to Telesforo Calasan with a right of repurchase, which was noted on the back
thereof on May 16, 1917. Telesforo Calasan, in turn, sold this land to Ponciano Medel on December 4,
1926. On January 17, 1927 Ponciano Medel brought this action in the Court of First Instance for the
purpose of compelling the register of deeds to cancel the notation of the right of repurchase on the title to
this land on account of the time within which to exercise said right having expired, Ponciano Medel
contends that the period within which to exercise this right is four years while Carlos N. Francisco, on the
other hand, contends that it is ten years. The trial court admitting that the period is ten years and it not
having expired yet when this action was filed, denied the petition. Issue: Whether or not the period for the
repurchase of the land, which Carlos N. Francisco reserved the right to do when the sale was made, is
four or ten years.

Issue:Is the period for the repurchase of the land, which Carlos N. Francisco reserved the right to do
when the sale was made, is four or ten years?

Held:According to article 1508 of the Civil Code, the right of repurchase, in the absence of any express
agreement, lasts four years and, in case of stipulation, the period shall not exceed ten years. A term means
a period of time within which an act may, or must, be performed or a fact take place. Applied to the right
of repurchase, it is the time within which this right may be exercised. It necessarily involves a beginning
and an end of time. The clause of the contract quoted does not express, in this sense, a stipulation of time.
According to its terms, the vendor Carlos N. Francisco reserved the right to redeem the land when he
might have an earthen jar factory. This does not mean that he could repurchase the land any time before
he had the earthen jar factory, but when he had it. That is especially so when it is taken into consideration
that there is a condition imposed for the repurchase of the land, to wit that it is to be used solely and
exclusively for the manufacture of earthen jars. According to this clause of the contract, it is evident that
the establishment of an earthen jar factory is the fact that would give birth to the right of repurchase. In
this sense, what is really stipulated in the clause is the suspension of the right of repurchase until the
earthen jar factory has been established. If this is all, the meaning of this clause is then clear that the
parties did not stipulate any time for exercising the right of repurchase; and, in accordance with the law,
the right lasts no longer than four years from the date of the contract, which period has already expired
without having been made use of.

Case Title: BENEDICTO BALUYOT, ET AL., plaintiffs-appellees, vs. EULOGIO E. VENEGAS,

defendant-appellant, G.R. No. L-22968. January 31, 1968

TOPIC: CONTRACTS; SALES; PACTO DE RETRO SALES

PONENTE: MAKALINTAL, J p:

DOCTRINE:

CONTRACTS; SALES; PACTO DE RETRO SALES; REPURCHASE AFTER THE EXPIRATION OF

THE PERIOD OF TEN (10) YEARS; ILLEGALITY OF STIPULATION. — The contract here was
executed in July, 1951. The option or right to repurchase was sought to be exercised twelve (12) years
thereafter, or in 1963. Indeed, by express agreement it could not have been exercised except "after the
expiration of the period of ten (10) years from October 1, 1951. Such a stipulation is not legally feasible
because it is prohibited by article 1606, which limits the period for repurchase, in case there be an
agreement, to the maximum of ten years from the date of the contract. In other words, the right to
repurchase in the present case did not even arise, since by the time it was supposed to begin it was already
interdicted by the law.

FACTS:

Plaintiffs are the heirs of Crisanto Baluyot, who in life sold a parcel of land to defendant Eulogio E.
Venegas. The sale, executed on July 24, 1951, contains the following provision for repurchase:

"3. That the parties hereto stipulated that at anytime after the expiration of the period of 10 years to be
computed from October 1, 1951, the Vendor, his heirs or successors-in-interest has the option and priority
to purchase the aforedescribed parcel of land for the same consideration of P4,000.00,

"4. That the Vendee hereby accept and agrees with the conditions and terms of this sale."

On July 18, 1963 plaintiffs commenced this action in the CFI of Bataan to compel defendant to reconvey
the land to them pursuant to the contractual provision aforequoted, alleging that previous offers on their
part to exercise the right therein granted had proven unavailing.

CFI rendered judgment for plaintiffs.

ISSUE:

Is the stipulation in the contract giving the vendor the "option" to purchase back the land is void and
contrary to law?
HELD:

Yes. "ART. 1606. The right referred to in article 1601, in the absence of an express agreement, shall last
four years from the date of the contract. Should there be an agreement, the period cannot exceed ten
years. However, the vendor may still exercise the right to repurchase within thirty days from the time
final judgment was rendered in a civil action on the basis that the contract was a true sale with right to
repurchase."

The contract here was executed in July 1951. The option or right to repurchase was sought to be exercised
twelve (12) years thereafter, or in 1963. Indeed by express agreement it could not have been exercised
except "after the expiration of the period of ten (10) years . . . from October 1 1951." Such a stipulation is
not legally feasible because it is prohibited by Article 1606, which limits the period for repurchase, in
case there be an agreement, to the maximum of ten years from the date of the contract. In other words, the
right to repurchase in the present case did not even arise, since by the time it was supposed to begin it was
already interdicted by the law.

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

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

The judgment appealed from is reversed and the complaint is dismissed, without pronouncement as to
costs.

Case Title: Ceynas v Ulanday, 105 Phil. 1007

Topic: Law on Sales

Ponente: Bautista Angelo, J.

Doctrine: In the sale of shares of property owned severally with right to repurchase, an action to seek
finality as to whether the same may be considered an equitable mortgage tolls the period to repurchase. In
this case, though only one co-owner raised the action, the Civil Code grants the same right to repurchase
for all fellow co-owners as well, pursuant to Art. 1606 par. 3.

Facts: Petitioner Ceynas and siblings sold in 1944 for Php 2,200 their shares of parcels of land to Sps.
Ulanday, with a right to repurchase within 10 years. Some time in 1953, Ceynas filed a case in court
seeking declaration of the pacto de retro sale as an equitable mortgage instead, which was dismissed. An
amended complaint included the siblings of Ceynas as parties, which the spouses Ulanday contested - as
the reglementary period of the pacto de retro sale has lapsed insofar as the siblings are concerned. Further,
the spouses raise the issue of legal tender as the property was originally sold for Japanese notes during the
occupation, and that under the Ballantyne schedule a conversion to Philippine peso is due.

Issue: Are the siblings, co-vendors a retro to the shared property, in laches for not prosecuting their
right to repurchase on time?

Held: NO. Under the Spanish Code, the rule is that vendors who are neither impleaded or fail to
prosecute their right to repurchase are deemed to be in laches. However, under the Civil Code, a period of
30 days from the finality of judgment questioning whether the sale is one of equitable mortgage or pacto
de retro is granted. Thus, the siblings are not in laches. Payment must be made in the current legal tender,
or Philippine Peso.

Case Title: De Bayquen v. Baloro, G.R. No. 28161, August 13, 1986

Topic:Sales

Ponente:Justice Paras

Doctrine:"Where the contract between the parties is admitted and which has been stipulated by the
parties to be a deed of sale with right to repurchase, there should be no issue or dispute about the effects
thereof - that once there is failure to redeem within the stipulated period, ownership thereof becomes
vested or consolidated by operation of law on the vendee. Any other interpretation would be violative of
the sanctity of the contract between the parties."

Facts:De Bayquen sold the property in question and subsequently reserved their right to repurchase the
same within four years. However, De Bayqen failed to repurchase the land within the stipulated time.
Now, despite such, they assert their right to repurchase the subject property after more than thirteen years.
The trial court, then, ruled that De Bayquen have already lost their right to repurchase and that by
operation of law, ownership of such land had become consolidated to Balaoro. Here, De Bayquen
contended that there was no dispute between them and Baloro regarding the nature of the purported "deed
of sale with right to repurchase", as the transaction is a mortgage and not a deed of sale.

Issue:Was there a mortgage and not a deed of sale?

Held:No. The Supreme Court reiterates that they agree with the trial court's findings that the contract is
not an equitable mortgage but a deed of sale with right to repurchase. They added that Balaoro took
immediate possession after the execution of the contract since not only that there was no extension of the
period to repurchase, but also after the expiration De Bayquen did nothing to regain the property. Thus,
there was no doubt as to the true nature of the transaction as it is a contract of sale with a right to
repurchase.

Case Title: Crisologo vs. Centeno, GR. No. L-20014November 27, 1968

Ponente:Capistrano, J.

Facts:

On January 18, 1955, the spouses Francisco Crisologo and Consolacion Florentino filed in the Court of
First Instance of Ilocos Sur an ex parte petition for consolidation of ownership in them as vendees a retro
of two parcels of land situated at Barrio Lapting, Lapog, Ilocos Sur, on the ground that the vendors, the
spouses Isaac Centeno and Asuncion Aquino, have failed to exercise their right of repurchase within the
periods stipulated in the two contracts of sale with pacto de retro. On January 28, 1955, after hearing at
which the petitioners presented evidence in support of the petition, the court a quo, through Judge
Francisco Geronimo, granted the petition. On July 19, 1956, the vendors filed a motion to set aside the
Order of January 28, 1955, and on July 27, 1956, the court a quo, through Judge Felix Q. Antonio,
granted the motion on the ground that the movants had not been duly notified of the hearing. On motion
by the petitioners to set aside the Order of July 27, 1956, on the ground that the vendors had been notified
by registered mail of the hearing, the lower court, by its Order of February 27, 1957, granted the motion
and set aside the Order of July 27, 1956. The vendors appealed the Order of February 27, 1957, to the
Court of Appeals. On June 27, 1958, the Court of Appeals rendered judgment in the appeal setting aside
the lower court's Order of February 27, 1957, after holding that the vendors had not been legally notified
of the petition and the hearing, and that the Order of January 28, 1955, was a patent nullity. The Court of
Appeals remanded the record to the lower court for reopening and for further proceedings. Accordingly,
after the vendors had been duly summoned as respondents, they filed their answer alleging that the two
contracts of sale with pacto de retro were really intended as equitable mortgages as securities for usurious
loans. After trial, the lower court rendered its decision on October 26, 1960, holding that respondents'
allegation was substantiated by their evidence

Issue:

Whether or not the petition for consolidation of title should be granted

Ruling:

The SC ruled in favor of the lower court. Under article 1607 of the Civil Code which provides that:
In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the
vendor to comply with the provisions of article 1616 shall not be recorded in the Registry of Property
without a judicial order, after the vendor has been duly heard.

Case Title:Yturralde v Court of appeals

Topic:Consolidation of Ownership, Article 1607 NCC

Ponente:Makasiar, J.

Doctrine:The action for consolidation should be brought against all the indispensable parties, without
whom no final determination can be had of the action; and such indispensable parties who are joined as
party defendants must be properly summoned pursuant to Rule 14 of the Revised Rules of Court. If
anyone of the party defendants, who are all indispensable parties is not properly summoned, the court
acquires no jurisdiction over the entire case and its decision and orders therein are null and void.

Facts:Spouses Francisco Yturralde and Margarita de los Reyes, owned a parcel of agricultural land
located in Guilinan, Tungawan, Zamboanga del Sur, containing an area of 14.1079 hectares, more or less,
and registered in their names. Sometime in the year 1944, Francisco Yturralde died intestate, survived by
his wife, Margarita de los Reyes, and their children who are the petitioners herein. In 1950, Margarita de
los Reyes contracted a second marriage with her brother-in-law and uncle of the petitioners herein,
Damaso Yturralde . Damaso Yturralde and Margarita de los Reyes executed a deed of sale with right of
repurchase in favor of the respondent herein, Isabelo Rebollos, covering the above-mentioned property in
consideration of the sum of P1,715.00. The vendors a retro failed to exercise the right to repurchase the
property within the three-year period agreed upon. In 1961, Margarita de los Reyes died. The respondent,
Isabelo Rebollos, filed a petition for consolidation of ownership with the Court of First Instance of
Zamboanga del Sur, docketed as Civil Case No. 436 therein, naming as respondents in the case the
petitioners herein and Damaso Yturralde. Summons was then issued, and received on June 17, 1965 by
the respondent therein, Damaso, Ernesto, Fortunata, Montano, Guadalupe, Luis and Rosalia, all surnamed
Yturralde. However, summons could not be served on three of the respondents therein, Josefina, Zosima
and Ramon Yturralde, as they were no longer residing at their last known addresses. The presiding judge
directed that summons be served upon the said three respondents but returned without service. Thereafter,
on motion filed by Rebollos to declare the respondents in the case in default, the Court issued an order
declaring all the respondents therein in default, after which Rebollos presented his evidence. The Court
rendered a decision consolidating the ownership of the subject property in favor of Rebollos, new TCT
was issued in his name. On motion filed by Rebollos, the respondent Judge ordered the execution of the
judgment in Civil Case No. 436, and the corresponding writ of execution was issued. After a series of
appeals, the petitioners instituted the prohibition proceedings. The petition was given due course by this
Court, and a writ of preliminary injunction was issued, restraining the respondents from enforcing the
decision and the orders complained of in Civil Case No. 436, until further orders. In his answer to the
petition filed by the respondent, Isabelo Rebollos, he averred that he sold the property in question to Pilar
M. vda. de Reyes under a deed of absolute sale and, accordingly, a Transfer Certificate of Title was
issued in favor of said vendee covering the subject property by the Register of Deeds CA- It will not
prosper; because prohibition is a preventive remedy to restrain the exercise of a power or the performance
of an act and not a remedy against acts already accomplished, which cannot be undone through a writ of
prohibition, and in the instant case, the judgment of the lower trial court consolidates the ownership of the
entire property involved in Civil Case No. 436 in favor of respondent Isabelo Rebollos, orders the
cancellation of the original certificate of title covering the same, and directs the issuance of a new
certificate of title in the name of respondent Rebollos.

Issue:WON the requirements for consolidation of ownershipby vendee a retro had been complied with?

Held:NO. Unlike the old Civil Code, Article 1607 of the new Civil Code of 1950 provides that
consolidation of ownership in the vendee a retro of real property by virtue of the failure of the vendor a
retro "to comply with the provisions of Article 1616 shall not be recorded in the Registry of Property
without a judicial order, after the vendor has been duly heard." The action for consolidation should be
brought against all the indispensable parties, without whom no final determination can be had of the
action; and such indispensable parties who are joined as party defendants must be properly summoned
pursuant to Rule 14 of the Revised Rules of Court. If anyone of the party defendants, who are all
indispensable parties is not properly summoned, the court acquires no jurisdiction over the entire case and
its decision and orders therein are null and void. The pacto de retro sale executed by Margarita de los
Reyes "casada en segundas nuptias con Damaso Yturralde," expressly stipulates that she only sold all her
rights, interests and participation in the lot covered by O.C.T. No. 2356. Margarita therefore, could not,
for she had no right to, sell the entire lot as it a conjugal property. What she validly disposed of under the
aforesaid pacto de retro sale of 1952 was only her conjugal share in the lot plus her successional right as
heir in the conjugal share of her deceased husband Francisco. Consequently, the vendee a retro, Isabelo
Rebollos, cannot legally petition for the consolidation of his ownership over the entire lot. The petition
for consolidation filed by herein private respondent Rebollos is similar in effect to an action for partition
by a co-owner, wherein each co-owner is an indispensable party; for without him no valid judgment for
partition may be rendered. That the three children, herein petitioners Josefina, Zosima and Ramon, are
essential parties, without whom no valid judgment may be rendered, is further underscored by the fact
that the agricultural land in question was owned by them in common and pro indiviso with their mother
and their brothers and sisters and was not then as now physically partitioned among them.

TITLE: ERLINDA CABRERA vs.VICTORIANA VILLANUEVA and IAC; G.R. No. 75069. April
15, 1988.
TOPIC: SALE BY CO-OWNER; REDEMPTION; WRITTEN NOTICE OF ALIENATION
INDISPENSABLE DESPITE ACTUAL NOTICE.
PONENTE: PARAS, J.
DOCTRINE: We have adhered to the principle that notwithstanding the actual knowledge of a co-
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. The law however does not require a specific form of written notice to the redemptioner.
FACTS: ERLINDA CABRERAis a co-owner of a real property in Manila. By way of a Deed of
Absolute Sale, her co-owners, Feliciano Oropesa and Antonio Oropesa sold their shares to Victoriana
Villanueva. The following year, in 1969, a new TCT was issued by the Registry of Deeds of Manila,
constituting Villanueva as a co-owner pro indivisoof the entire parcel. This was after the former owners
Feliciano and Antonio, both surnamed Oropesa, had executed a Joint Affidavit dated April 1, 1968
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, Villanueva as the new
co-owner sent a letter dated September 23, 1980 to Cabrera, proposing to her the partition of the
property in question. Cabrera did not accept the proposal, but instead she offered to redeem the share of
Villanueva in the property. After Villanueva refused the proposal, Cabrera filed an action for legal
redemption. Cabrera alleges that she never received from her co-owners any written notice of the sale
of their respective shares to Villanueva and that she only came to know of such sale on September 30,
1980 when she received a letter from Villanueva, proposing the partition of the property in question.
ISSUE:Whether or not Cabrera has lost her right of legal redemption, because, in accordance with
Article 1623, Civil Code, she had been notified in writing by her previous co-owners that they were
selling their interest in the property in question, and yet, she allowed 30 days from receipt of such
notice in writing to expire, without making any offer to purchase the interest of her selling co-owners?
HELD: YES. We have no doubt that Cabrera had actual knowledge of the sale, she having been
informed verbally by the Villanueva herself as they were neighbors. But We have adhered to the
principle that notwithstanding the actual knowledge of a co-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. The law however does not require a specific
form of written notice to the redemptioner.
A reading of the Joint Affidavit, executed by the vendors Feliciano and Antonio both surnamed
Oropesa, affirms the fact that a written notice of the sale was really sent by them to their co-owner
petitioner herein. We agree with petitioner that the Joint Affidavit does not amount to that written
notice required by law. However, it is clearly a written affirmation under oath that the required written
notice of sale was given to the other co-owner. Against affiants' own sworn written admission that
indeed the required written notice of sale was duly served upon their co-owners, the oral denials thereof
should not be given much credence.
Furthermore, on April 21, 1969, T.C.T. No. 96437 was issued by the Registry of Deeds of Manila. In
said title it is already reflected that Victoriana Villanueva is a co-owner (to the extent of a 28/112
portion) of the property in question. It can be safely assumed that copy of the title reflecting private
respondent as a co-owner was also issued to petitioner on 1969. Finally, We should not lose sight of the
fact that the letter of private respondent (thru counsel) dated September 23, 1980 to petitioner informing
the latter of the acquisition of a portion of the property is by ITSELF a written notice of the purchase.
Since the 30-day period expired by October 30, 1980 without redemption being exercised it follows that
the right to redeem has already been lost.

Case Title: Doromal vs. Court of Appeals, GR No. L-36083 September 5, 1975

Topic: Legal Redemption of Co-owner

Ponente: Barredo, J.
Doctrine:Article 1623 provides that 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. This notice pertains not only of a perfected sale but of the actual execution and delivery of
the deed of sale.

Facts:In the will of Justice Antonio Horilleno, he attested that the land decreed in his name was co-
owned by his other 6 siblings. After his death, the co-owners wanted to sold their shares or, if possible, to
sell the entire property. Filomena Javellana, heir of one of the co-owners, was informed by 2 letters of the
intent to sell of the other co-owners at a price of P4 a square meter to the Doromals and of the fact that
Carlos, a co-owner had already received P5,000 as earnest money and that the price agreed upon for the
sale was P5 a square meter. However, she refused to sign the SPA authorizing a co-owner to sell her 1/7
share and refused to sell the same. The rest of the co-owners were able to sell their 6/7 share in the land.
After the cadastral case filed by Carlos, a new title was issued in the name of the co-owners which was
later on cancelled and a new title was issued in the name of the Doromals and Filomena. Filomena, then,
sought to redeem the 6/7 share of the land from the Doromals for P30,000 as the amount stated in the
Deed of Sale. The Doromals refused contending that the true and real price paid by them was P115, 250,
the amount they should be paid for the redemption. Filomena filed a complaint against the Doromals. The
trial court dismissed the complaint. CA reversed on the grounds that although Filomena was informed of
her co-owners' proposal to sell the land in question to petitioners she was, however, "never notified, least
of all, in writing", of the actual execution and registration of the corresponding deed of sale, hence, her
right to redeem had not yet expired at the time she made her offer for that purpose and that the
redemption price to be paid by her should be that stated in the deed of sale which is P30,000
notwithstanding that the preponderance of the evidence proves that the actual price paid by the Doromals
was P115,250. Hence, this petition.

Issue:Does Filomena’s right to redeem has prescribed? If not, at what price should the 6/7 share be
redeemed?

Held:No, Filomena’s right to redeem has not yet prescribed. Article 1623 provides that 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. This notice pertains not only of a perfected
sale but of the actual execution and delivery of the deed of sale. This is implied from the latter portion of
Article 1623 which requires that before a register of deeds can record a sale by a co-owner, there must be
presented to him, an affidavit to the effect that the notice of the sale had been sent in writing to the other
co-owners. In the case, the required notice was not given to Filomena. The 2 letters she received
informing her of the supposed price of P4 and of the receipt of Carlos of the P5000 did not constitute the
notice required by law because these do not contemplate that a sale has already been perfected. It was also
found that she was never been notified in writing of the execution of the deed of sale by which the
Doromals acquired the 6/7 portion of the land. Thus, his tender to redeem the property has not yet
prescribed.

Filomena is should also only P30,000 as redemption price. Article 1619 provides that legal
redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in
the place of one who acquires a thing by purchase or dation in payment, or by any other transaction
whereby ownership is transmitted by onerous title. In this case, the deed of sale stated the amount
P30,000.
Case Title: BUTTE V. MANUEL UY AND SONS, INC, GR NO L-15499 FEBRUARY 28, 1962

Topic: Legal Redemption

Ponente: Reyes, J.B.L., J.

Doctrine: A co-owner of a thing may exercise the right of redemption in case the shares of all other co-
owners or of any of them, are sold to a third person.

FACTS:Jose Ramirez was a co-owner of a house and lot in Manila of which he owns 1/6. Thereafter, he
died. Settling his estate and his 1/6 undivided share in the co-ownership aforementioned, his will was
admitted to probate. It was stated that he bequeathed his estate to his children and grandchildren, and 1/3
of the free portion to Mrs. Angela Butte. BPI was appointed judicial administrator.

Mrs. De Ramirez, one of the co-owners of the house and lot, sold her 1/6 undivided share to Manuel Uy
& Sons, Inc. for P500,000. After notices of sale had been sent to all possible redemptioners, the deed of
sale was duly registered and the old TCT was cancelled in lieu which, a new one was issued in the name
of the vendee and other co-owners.

Manuel Uy & Sons, Inc. sent a letter to BPI as judicial administrator of the estate of Jose Ramirez
informing BPI of the sale, which letter was forwarded to Mrs. Butte.

Mrs. Butte sent a letter and check of P500,000 to Manuel Uy & Sons, Inc. offering to redeem the share
sold by Mrs. De Ramirez, but was refused. Mrs. Butte then filed an action for legal redemption against
Manuel Uy & Sons, Inc.

ISSUE:WON Mrs. Butte has the right of succession to exercise legal redemption over the share sold by
Mrs. De Ramirez

HELD:YES because Mrs. Butte herself was one of the co-owners of the heirs of the 1/6 undivided
property of Jose Ramirez.

According to Article 1620 of the Civil Code, a co-owner of a thing may exercise the right of redemption
in case the shares of all other co-owners or of any of them, are sold to a third person. If the price of the
alienation is grossly expensive, the redemptioner shall pay only a reasonable one. And if two or more co-
owners desire to exercise the right of redemption, they may only do so in proportion to the share that may
respectively have in the thing owned in common.

Thus, Jose Ramirez’ heirs became co-owners of the undivided share and co-owner then of the whole
property entitling them to exercise the right of legal redemption as soon as another co-owner sells his
undivided share to a third person.

CASE TITLE: CRESENCIANO DE LA CRUZ,vs. JULIO CRUZ, ZENAIDA MONTES and

ALFONSO MIRANDA., G.R. No. L-27759 April 17, 1970

TOPIC: DAMAGES; Award of Attorney’s Fees.

PONENTE: REYES, J.B.L., J.:

DOCTRINE: Award of attorney's fees as damages is discretionary with the trial court under Art. 2208
of the Civil Code, especially where the action is clearly unfounded.

FACTS: The defendant-spouses Julio Cruz and Zenaida Montes sold a portion of land to the
plaintiff Cresenciano De La Cruz (the northern portion) and a Deed of Absolute Sale was executed.
Subsequently, the defendant-spouses sold the remaining portion (southern part) of the land to Alfonso
Miranda. Plaintiff De La Cruz filed a complaint against the defendants praying the court to have himself
declared as entitled to purchase, by way of pre-emption and legal redemption, the one-half portion of the
land. Plaintiff alleged that he and the spouses became co-owners of the said parcel of land after he bought
the northern portion. The trial court dismissed the complaint and ruled in favor of the defendants and
ordered the plaintiff to pay damages and attorney’s fees. Plaintiff filed an appeal alleging that the trial
court erred in awarding the damages and attorney’s fees in favor of the defendants on the ground that
such fees do not accrue merely because of an adverse decision.

ISSUE: Is plaintiff De La Cruz liable to pay for damages?

HELD:YES. The Court held that he does not claim that the court below had abused its discretion in
giving the award, which is a matter that is discretionary with it under Article 2208, Civil Code of the
Philippines, especially since the action was clearly unfounded.

CASE TITLE: Legaspi vs. CA

TOPIC: Property

PONENTE: Esguerra, J.

DOCTRINE: Where the parcel of land involved is urban land a portion of the house of the petitioner is
standing on a portion of the lot in question; where her possession and improvements thereon were
tolerated by the adjoining owners; where the right of pre-emption was availed of by petitioner when she
offered to buy said lot but was refused: the issue of who among the adjoining owners has the a better right
to buy the small piece of land (measuring only 59 sq. meters) whereon part of the house of petitioner is
standing, is to be resolved by applying the determinative factor provided for in paragraph 3 of Art. 1622
of the Civil Code.

FACTS:

Petitioner and respondent Romana Yap Vda. de Aguilar (substituted by her heirs) are adjoining owners of
Lot No. 268, located at Binakayan. Kawit, Cavite. The said property was sold by the Pestejos (co-
respondents herein) to said Aguilar despite petitioner's offer to exercise her right of pre-emption over the
property as a portion of her ancestral home occupies part of the same. After knowledge of the sale,
petitioner sought the redemption of the property in her favor from private respondents but it was flatly
denied. A civil suit of legal redemption was filed in the court a quo. Judgment was rendered in favor of
petitioner. Respondents appealed to the Court of Appeals. A reversal of the trial court's judgment was
obtained. Petitioner, after the denial of her motion for reconsideration, interposed this instant petition for
review and reversal of the appellate court's decision.

ISSUE:

Who among the adjoining owners has a better right to buy the small piece of land?
HELD:

The Supreme Court ruled that petitioner has the preferential right of pre-emption and/or redemption over
the lot in question as against private respondents Aguilar. Where the parcel of land involved is urban land
a portion of the house of the petitioner is standing on a portion of the lot in question; where her
possession and improvements thereon were tolerated by the adjoining owners; where the right of pre-
emption was availed of by petitioner when she offered to buy said lot but was refused: the issue of who
among the adjoining owners has the a better right to buy the small piece of land (measuring only 59 sq.
meters) whereon part of the house of petitioner is standing, is to be resolved by applying the
determinative factor provided for in paragraph 3 of Art. 1622 of the Civil Code — the intended use that
appears best justified. Under the circumstances obtaining in the instant case, petitioner has the preferential
right over the property in question.

CASE TITLE: SOCORRO MONTEVIRGEN, et. al. v. CA; G.R. No. L-44943 March 17, 1982

TOPIC:“Relations between parties to a contract of Mortgage (in re: Art. 2088, New Civil Code)”

PONENTE: De Castro, J.

DOCTRINE:“The mortgagee does not become the owner of the mortgaged property because the
ownership remains with the mortgagor (Art. 2088, New Civil Code)”

FACTS:Petitioners Montevirgen filed an action against respondent-spouses Serafin Abutin and Carmen
Senir in Cavite, for the annulment of a deed of sale with pacto de retro,over a parcel of land situated in
Barrio Alima, Bacoor, Cavite, title to which was transferred to respondents upon the registration of the
deed of pacto de retrosale. On July 1, 1971, the trial court, by virtue of the agreement reached by the
parties, rendered a decision declaring the transaction an equitable mortgage and fixing a period of ten (10)
months from July 1, 1971 within which the petitioners must pay their obligation with legal interest,
otherwise execution would follow.

The Petitioners subsequently failed to pay for their obligations within the said period and the Respondents
then moved for the execution of the earlier decision. The Petitioners contended that there must be a
foreclosure of the mortgage first before the execution sale which was denied by the trial court who then
issued a writ of execution. The land was then registered in the names of Respondents under TCT 35236.

ISSUE:Does the failure of the Petitioners to settle their mortgage amount to the waiver of their right of
redemption?
HELD:NO. It contradicts the agreement between the parties and the declaration in the decision that the
contract between the parties was an equitable mortgage, not a pacto de retro sale.It would produce the
same effect as a pactum commissurium, a forfeiture clause that has traditionally been held as contrary to
good morals and public policy and, therefore, void. The only right of a mortgagee in case of non-payment
of a debt secured by mortgage would be to foreclose the mortgage and have the encumbered property sold
to satisfy the outstanding indebtedness. The mortgagor's default does not operate to vest in the mortgagee
the ownership of the encumbered property, for any such effect is against public policy as enunciated by
the Civil Code.

The declaration, therefore, in the decision of July 1, 1971 to the effect that absolute ownership over the
subject premises has become consolidated in the respondents upon failure of the petitioners to pay their
obligation within the specified period, is a nullity, for consolidation of ownership is an improper and
inappropriate remedy to enforce a transaction declared to be one of mortgage. Finally, the circumstance
that the original transaction was subsequently declared to be an equitable mortgage must mean that the
title to the subject land which had been transferred to private respondents actually remained or is
transferred back to petitioners herein as owners-mortgagors, conformably to the well-established doctrine
that the mortgagee does not become the owner of the mortgaged property because the ownership remains
with the mortgagor (Art. 2088, New Civil Code).

CASE TITLE: Crisostomo v. CA

FACTS:

Petitioner contracted the services of respondent Caravan Travel and Tours International, Inc. to arrange
and facilitate her booking, ticketing and accommodation in a tour dubbed Jewels of Europe. Pursuant to
said contract, the travel documents and plane tickets were delivered to the petitioner who in turn gave the
full payment for the package tour on June 12, 1991. Without checking her travel documents, petitioner
went to NAIA on Saturday, June 15, 1991, to take the flight for the first leg of her journey from Manila to
Hongkong. To petitioner’s dismay, she discovered that the flight she was supposed to take had already
departed the previous day. She learned that her plane ticket was for the flight scheduled on June 14, 1991.
She thus called up Menor to complain. Subsequently, Menor prevailed upon petitioner to take another
tour- the British Pageant. Upon petitioner’s return from Europe, she demanded from respondent the
reimbursement of the difference between the sum she paid for Jewels of Europe and the amount she owed
respondent for the British Pageant tour.

Petitioner filed a complaint against respondent for breach of contract of carriage and damages alleging
that her failure to join Jewels of Europe was due to respondent’s fault since it did not clearly indicate the
departure date on the plane, failing to observe the standard of care required of a common carrier when it
informed her wrongly of the flight schedule. For its part, respondent company, denied responsibility for
petitioner’s failure to join the first tour, insisting that petitioner was informed of the correct departure
date, which was clearly and legibly printed on the plane ticket. The travel documents were given to
petitioner two days ahead of the scheduled trip. Respondent further contend that petitioner had only
herself to blame for missing the flight, as she did not bother to read or confirm her flight schedule as
printed on the ticket.

ISSUE:

Whether or not Caravan Travel & Tours International Inc. is negligent in the fulfilment of its obligation to
petitioner Crisostomo thus granting to the petitioner the consequential damages due her as a result of
breach of contract of carriage.

RULING:

Contention of petitioner has no merit. A contract of carriage or transportation is one whereby a certain
person or association of persons obligate themselves to transport persons, things, or news from one place
to another for a fixed price. Such person or association of persons are regarded as carriers and are
classified as private or special carriers and common or public carriers. Respondent is not an entity
engaged in the business of transporting either passengers or goods and is therefore, neither a private nor a
common carrier. Respondent did not undertake to transport petitioner from one place to another since its
covenant with its customers is simply to make travel arrangements in their behalf. Respondent’s services
as a travel agency include procuring tickets and facilitating travel permits or visas as well as booking
customers for tours.

The object of petitioner’s contractual relation with respondent is the service of arranging and facilitating
petitioners booking, ticketing and accommodation in the package tour. In contrast, the object of a contract
of carriage is the transportation of passengers or goods. It is in this sense that the contract between the
parties in this case was an ordinary one for services and not one of carriage. Since the contract between
the parties is an ordinary one for services, the standard of care required of respondent is that of a good
father of a family under Article 1173 of the Civil Code. The evidence on record shows that respondent
exercised due diligence in performing its obligations under the contract and followed standard procedure
in rendering its services to petitioner. As correctly observed by the lower court, the plane ticket issued to
petitioner clearly reflected the departure date and time, contrary to petitioner’s contention. The travel
documents, consisting of the tour itinerary, vouchers and instructions, were likewise delivered to
petitioner two days prior to the trip. Respondent also properly booked petitioner for the tour, prepared the
necessary documents and procured the plane tickets. It arranged petitioner’s hotel accommodation as well
as food, land transfers and sightseeing excursions, in accordance with its avowed undertaking. The
evidence on record shows that respondent company performed its duty diligently and did not commit any
contractual breach. Hence, petitioner cannot recover and must bear her own damage.
Case Title: Heirs of Arches v. Vda. de Diaz, 50 SCRA 440

Topic: Pacto de retro sale; mortgage

Ponente: MAKALINTAL, Actg. C.J.:

Doctrine: Where the petition of the vendee in a pacto de retro sale is for a judicial order pursuant to
Article 1607 of the Civil Code, so that consolidation of ownership by virtue of the failure of the vendor to
redeem may be recorded in the Registry of Property, the right of action to foreclose the mortgage or to
collect the indebtedness arises from the judgment of the court declaring the contract as equitable
mortgage.

Facts: The heirs of Jose A. Arches filed a complaint against Maria B. Vda. de Diaz in the court a quo,
alleging inter alia: that on January 21, 1954 the defendant executed in favor of the late Jose A. Arches a
deed of sale with pacto de retro over a parcel of land known as Lot No. 2706 of the Cadastral Survey of
Capiz for and in consideration of P12,500.00; that Jose A. Arches during his lifetime filed a petition on
November 20, 1958 in Cadastral Case No. 6 of the Court of First Instance of Capiz, to consolidate
ownership over the lot; that the defendant opposed the petition alleging among other things that the said
deed of sale with pacto de retro did not express the true intention of the parties, which was merely to
constitute a mortgage on the proper security for a loan.

The trial court, in its order dated March 8, 1960, denied the petition holding in effect that the contract was
an equitable mortgage. Jose A. Arches appealed to the Court of Appeals, which on December 29, 1964
rendered judgment affirming the order of the trial court. Jose A. Arches filed in this Court a petition for
certiorari to review the decision of the appellate court, which dismissed the petition on the ground that the
issues involved were factual; that in addition to the sum of P12,500.00, the consideration mentioned in the
deed of sale a retro, Jose A. Arches spent P1,543.70 in connection with the reconstitution of the title to
Lot No. 2706 in the name of the vendor and in paying the real estate taxes on said lot for the years 1951
to 1960; that Jose A. Arches died on August 18, 1965, before he could file an action in court for the
collection of the aforestated sums from the defendant; that on May 31, 1966, the petitioners, as forced
heirs of the deceased Jose A. Arches, demanded from defendant the payment of the sum of P12,500.00,
the consideration mentioned in the sale a retro, and reimbursement of the sum of P1,543.70; and that the
defendant failed and refused to pay. They, therefore, prayed among things that the defendant be ordered
to pay the aforementioned sums, plus damages.

The trial court set aside its previous order and dismissed the complaint. Jose A. Arches elected to
consolidate without alternatively opting to foreclose. When he opted to consolidate and prosecuted his
option to a final determination he was thereby barred from pursuing the other alternative and inconsistent
remedy of foreclosure of mortgage or collection of debt.

Issue: Whether or not the plaintiffs are barred from constituting any actions against the defendant.

Held: No. In the case of Correa vs. Mateo and Icasiano, wherein an unrecorded pacto de retro sale was
construed as an equitable mortgage, it was ruled that the plaintiff had the right "within sixty days after
final judgment, for a failure to pay the amount due and owing him, to foreclose his mortgage in a proper
proceeding and sell all or any part of the ten parcels of land to satisfy his debt." In effect this Court
recognized the right of the plaintiff to enforce his lien in a separate proceeding notwithstanding the fact
that he had failed to obtain judgment declaring him the sole and absolute owner of the parcels of land in
question.
It would be unjust in this case to allow the defendant to escape payment of his debt and, worse still, to
rationalize such a result by his very claim that he is a debtor and not, as the plaintiff says, a vendor of
property in favor of the latter. Strictly speaking, where the petition of the vendee in a pacto de retro sale is
for a judicial order pursuant to Article 1607 of the Civil Code, so that consolidation of ownership by
virtue of the failure of the vendor to redeem may be recorded in the Registry of Property, the right of
action to foreclose the mortgage or to collect the indebtedness arises from the judgment of the court
declaring the contract as equitable mortgage.

Case Title: LABASAN v. LACUESTA

Topic: Equitable mortgage

Ponente: Muñoz Palma, J.

Doctrine: In case of doubt concerning the surrounding circumstances in the execution of a contract, the
least transmission of rights and interest shall prevail if the contract is gratuitous, and if onerous, the doubt
is to be settled in favor of the greatest reciprocity of interest.

Facts: Sometime in 1927, spouses Lacuesta were the owners of an unregistered, irrigated riceland located
in the municipality of Badoc, province of Ilocos Norte, and declared for taxation purposes under Tax
Declaration No. 026181 in the name of Hermenigilda Lacuesta. On April 20, 1927, the spouses executed
in favor of spouses Labasan a document written in the Ilocano dialect the English translation of which
marked as Exhibit "1-A" follows:

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

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

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

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

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

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

Done this 20th of April, 1927. (pp. 8-10, Petitioner's brief)

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

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

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

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

The plaintiffs elevated the case to the Court of Appeals on the sole issue of the nature of the document
marked Exhibit "1-A".

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

Issue: Is the contract entered into between spouses Clemente and Hermenigilda Lacuesta on one hand and
spouses Gelacio and Marcela Labasan on the other a pacto de retro sale or an equitable mortgage?

Held: The contract is an equitable mortgage.

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

Article 1371, New Civil Code: In order to judge the intention of the contracting parties,
their contemporaneous and subsequent acts shall be principally considered. (same as Art.
1282, Old Civil Code)

In the case at bar, the collective weight of the following considerations lead the Court to agree with the
findings and conclusion of the appellate court that Exhibit "1-A" is a mere loan with security and not a
pacto de retrosale.

First,the reason behind the execution of Exhibit "1-A" was that the Lacuestas were in "urgent necessity
for money" and had to secure a loan of P225.00 from Gelacio Labasan for which the riceland was given
as "security". The Court through Justice Norberto Romualdez in the case of Jayme, et al. v. Salvador,
stated that while it was true that plaintiffs were aware of the contents of the contracts, the preponderance
of the evidence showed however that they signed knowing that said contracts did not express their real
intention, and if they did so notwithstanding this, it was due to the urgent necessity of obtaining funds.
"Necessitous men are not, truly speaking, free men; but to answer a present emergency, will submit to any
terms that the crafty may impose upon them."

Second,the amount of P225.00, even in 1927, was too inadequate for a purchase price of an irrigated
riceland with an alleged "perimeter" of 240 meters and an "area of 1,269 square meters" yielding annually
one "uyon" and five "baares" of palay, the land being valued at the time for no less than P1,000.00. In
Quinga v. Court of Appeals, et al., 1961, although the contract between the parties upon its face was one
of sale, nevertheless, this Court upheldthe findings of the Court of Appeals that the transaction was not a
sale but a loan secured by an equitable mortgage under the prevailing circumstances of the case, such as,
that the price of the land was grossly inadequate and the vendor remained in possession of the land and
enjoyed the fruits.

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

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

Fourth,Gelacio Labasan, the supposed vendee a retro never declared the property in his name for taxation
purposes nor did he pay the taxes thereon since the execution of the document in 1927. Roberto Labasan,
now one of the petitioners and who claims to have acquired the property from his father Gelacio by way
of donation, declared the property in his name under Tax Declaration No. 55683-C-1 only sometime in
1944.
Fifth,as noted in the decision of the appellate court, the supposed vendees a retro, now the herein
petitioners, failed to take any step since 1927 to consolidate their alleged ownership over the land. Under
Article 1509 of the Old or Spanish Civil Code, if the vendor failed to redeem within the period agreed
upon, the vendee's title became irrevocable by the mere registration of an affidavit of consolidation. Thus,
under the old law, a judicial order was not necessary as is required now under Article 1607 of the New
Civil Code. The failure of Gelacio Labasan or his heirs to carry out that act of consolidation strongly
corroborates the claim of Lacuesta that there was no intent at all on the part of the parties to transfer
ownership of the riceland in question.

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

CASE TITLE: Villarica v. Court of Appeals

TOPIC: Sales; “Option to Buy” and right of repurchase

DOCTRINE: An option to buy is different and distinct from the right of repurchase which must be
reserved by the vendor, by stipulation to that effect, in the contract of sale. This is clear from the
provision of art. 1601, NCC.

FACTS: Sps. Villarica sold to Sps. Consunji a lot for the price of 35,000PHP, through a deed of absolute
sale. The deed wa delivered to the Consunji’s, and thereafter, the Consunji’s executed a public instrument
which granted the Sps. Villarica an option to buy the same property within a period of one year for the
amount of 37,750PHP. Later on, absent any exercise of granted right by the Villaricas, Consunji
consolidated the title of the lot in their name and sold it to Jovito Francisco for 47,000PHP. Two months
after the TCT was issued to the name of Francisco, Villaricas filed a complaint for the reformation of the
instrument of absolute sale against Consunji and Francisco, claiming the sale of be an equitable mortgage.
The Court of First Instance ruled in favor of Villarica, but the Court of Appeals overturned and affirmed
the existence of an absolute sale. On appeal, Villarica contends that the finding of the CA was erroneous
inadequate price, the period of granted right to repurchase, among other claims.

ISSUE: WON Deed of Absolute Sale is one of Equitable Mortage due to the appearance of “right to
repurchase”?

HELD: No, there is no equitable mortgage. The Consunji’s as new owners of the lot granted the
Villaricas an option to buy the property within The period of one year from the date of purchase. Said
option to buy is different and distinct from the right of repurchase which must be reserved by the vender,
by stipulation to that effect, in the contract of sale. The right of repurchase is not a right granted the
vendor by the vended in a subsequ t instrument, but a right reserved by the vendor in the same instrument
of sale as one of the stipulations of the contract. Once the instrument of sale is executed, the vendor can
no longer reserve the right to repurchase, and any right granted the vendor by the venue in a separate
instrument cannot be a right of repurchase but some other right like that of an option to buy.

Case Title: Spouses Mamaril vs.The Boy Scout Of The Philippines, Aib Security Agency, Inc.,Cesario
Peña, And Vicente Gaddi

G.R. No. 179382, January 14, 2013

Topic: Vicarious liability

Ponente: Perlas-Bernabe, J.

Doctrine

It is settled that where the security agency, as here, recruits, hires and assigns the work of its watchmen or
security guards, the agency is the employer of such guards and watchmen. Liability for illegal or harmful
acts committed by the security guards attaches to the employer agency, and not to the clients or customers
of such agency. Vicarious liability lies with the true employer, and not the employer’s client.

Facts

Spouses Benjamin Mamaril and Sonia P. Mamaril are jeepney operators. They would park their six
passenger jeepneys every night at the Boy Scout of the Philippines compound for a fee of P300.00 per
month for each unit. However, one of the vehicles went missing and was never recovered. BSP had
contracted with AIB for its security and protection. Cesario Peña and Vicente Gaddi were assigned by
AIB Security to secure the BSP compound. One night a male person who has the key of the vehicle took
the lost jeepney out of the compound and it was never recovered.

The Spoused Mamaril filed a complaint for damages against BSP, AIB and the two security guards.

Issue

Whether the Boy Scout of the Philippines is not liable for the lost vehicle owned by the Spouses due to
the negligence of the security guards assigned by AIB to BSP under the Guard Service Contract?
Ruling

It is undisputed that the proximate cause of the loss of the Spouses Mamaril’s vehicle was the negligent
act of the security guards in allowing unidentified person to take the vehicle but there is nothing that
points negligence on the part of BSP for it to be liable.

The two security guards are employees of AIB and were thus assigned by AIB to BSP in pursuant of the
Guard Service Contract between them. There is no employer-employee relationship between the security
guard and BSP. The negligence of the security guard cannot be attributed to BSP but rather to its true
employer AIB.

Liability for illegal or harmful acts committed by the security guards attaches to the employer agency, and
not to the clients or customers of such agency. As a general rule, a client or customer of a security agency
has no hand in selecting who among the pool of security guards or watchmen employed by the agency
shall be assigned to it; the duty to observe the diligence of a good father of a family in the selection of the
guards cannot, in ordinary course of events, be demanded from a client company whose premises or
property are protected by the security guards. The fact that a client company may give instruction or
direction to the security guards assigned to it, does not, by itself render the client responsible as an
employer of the security guards concerned and liable for their wrongful acts or omission.

CASE TITLE: JUANITA ERMITAÑO, represented by her Attorney-in-Fact, ISABELO

ERMITAÑO,petitioner, vs. LAILANIE M. PAGLAS,respondent. (Ermitaño v. Paglas, G.R. No.
174436, [January 23, 2013], 702 PHIL 93-109)

TOPIC: Right of Redemption; Lease

PONENTE: Peralta, J.

DOCTRINE: It is only upon the expiration of the redemption period, without the judgment debtor having
made use of his right of redemption, that the ownership of the land sold becomes consolidated in the
purchaser.

FACTS:

Petitioner, through her representative, Isabelo R. Ermitaño, executed a Contract of Lease wherein
petitioner leased in favor of respondent a 336 square meter residential lot and a house standing thereon
located at No. 20 Columbia St., Phase 1, Doña Vicenta Village, Davao City. The contract period is one
year, which commenced on November 4, 1999, with a monthly rental rate of P13,500.00. Subsequent to
the execution of the lease contract, respondent received information that sometime in March 1999,
petitioner mortgaged the subject property in favor of a certain Charlie Yap and that the same was already
foreclosed with Yap as the purchaser of the disputed lot in an extrajudicial foreclosure sale which sale
was subsequently registered. Respondent bought the subject property from Yap for P950,000.00. A Deed
of Sale of Real Property was executed by the parties as evidence of the contract. However, it was made
clear in the said Deed that the property was still subject to petitioner’s right of redemption. Prior to
respondent’s purchase of the subject property, petitioner filed a suit for the declaration of nullity of the
mortgage in favor of Yap as well as the sheriff’s provisional certificate of sale which was issued after the
disputed house and lot were sold on foreclosure. Petitioner sent a letter demanding respondent to pay the
rentals which are due and to vacate the leased premises. A second demand letter was sent. Respondent
ignored both letters.

MTCC – DAVAO CITY

Petitioner filed a case of unlawful detainer against respondent. The MTCC, dismissed the case filed by
petitioner and awarded respondent the amounts of P25,000.00 as attorney’s fees and P2,000.00 as
appearance fee.

RTC – DAVAO CITY

On appeal, the RTC affirmed the MTCC insofar as it dismissed the case for unlawful detainer but
modified it in that the award of attorney’s fees in respondent’s favor is deleted. The respondent is ordered
to pay petitioner the unpaid rentals on the property.

COURT OF APPEALS

The CA affirmed the RTC’s decision with modifications that respondent is not obliged to pay rent. The
CA ruled that respondent did not act in bad faith when she bought the property in question because she
had every right to rely on the validity of the documents evidencing the mortgage and the foreclosure
proceedings. MR denied. Hence the present petition.

ISSUE: Whether or not the petitioner can invoke right of redemption over the property after expiration of
the period?

HELD:

No; Under Act. No. 3135, the purchaser in a foreclosure sale has, during the redemption period, only an
inchoate right and not the absolute right to the property with all the accompanying incidents. He only
becomes an absolute owner of the property if it is not redeemed during the redemption period. As a
consequence of the inchoate character of the purchaser’s right during the redemption period, Act. No.
3135, as amended, allows the purchaser at the foreclosure sale to take possession of the propertyonly
upon the filing of a bond, in an amount equivalent to the use of the property for a period of twelve (12)
months, to indemnify the mortgagor in case it be shown that the sale was made in violation of the
mortgage or without complying with the requirements of the law. In the instant case, there is neither
evidence nor allegation that the respondent, as purchaser of the disputed property, filed a petition and
bond in accordance with the provisions of Section 7 of Act No. 3135. In addition, the respondent
defaulted in the payment of her rents. Thus, absent respondent’s filing of such petition and bond prior to
the expiration of the period of redemption, coupled with her failure to pay her rent, she did not have the
right to possess the subject property. The situation became different, however, after the expiration of the
redemption period on February 23, 2001. Since there is no allegation, much less evidence, that petitioner
redeemed the subject property within one year from the date of registration of the certificate of sale,
respondent became the owner thereof. Consolidation of title becomes a right upon the expiration of the
redemption period. As a consequence, petitioner’s ejectment suit filed against respondent was rendered
moot when the period of redemption expired on February 23, 2001 without petitioner having redeemed
the subject property, for upon expiration of such period petitioner lost his possessory right over the same.

CASE TITLE:MARIMPERIO COMPANIA NAVIERA, S.A. vs. CA, UNION IMPORT & EXPORT
and PHILIPPINES TRADERS CORP.

Topic: Agency; liability of agent with an undisclosed principal

Ponente: Paras, J.

Doctrine:In the law of agency “with an undisclosed principal”, the Civil Code in Article 1883 reads: If an
agent acts in his own name, the principal has no right of action against the persons with whom the agent
has contracted; neither have such persons against the principal. In such case the agent is the one directly
bound in favor of the person with whom he has contracted, as if the transaction were his own, except
when the contract involves things belonging to the principal. The provisions of this article shall be
understood to be without prejudice to the actions between the principal and agent."

FACTS: In 1964, herein private respondents Philippine Traders Corp. (Philin) and Union Import &
Export Corp (Union) entered into a joint business venture for the purchase of copra from Indonesia for
sale in Europe. The President and General Manager of Union, James Liu, took charge of the European
market and the chartering of a vessel to take the copra to Europe. On the other hand, Peter Yap of Philin
found one P.T. Karkam in Dumai Sumatra who had around 4,000 tons of copra for sale. Exequiel Toeg of
Interocean was commissioned to look for a vessel and he found the vessel “SS Paxoi” of herein petitioner
Marimperio available. Philin and Union authorized Toeg to negotiate for its charter but with instructions
to keep confidential the fact that they are the real charterers.

Consequently, on March 21, 1965, in London England, a “Uniform Time Charter” for hire of the vessel
“SS Paxoi” was entered into by the owner Marimperio through its agents, N. & J. Vlassopulos, Ltd. and
Matthews Wrightson Ltd. representing Interocean Shipping Corp. which was made to appear as charterer,
although it merely acted on behalf of the real charterers – herein private respondents.

Under the provisions in the Charter Party, specifically on clause 6, payment is to be made in cash every
15 days in advance, and in default of payment, the owners have the right to withdraw the vessel from the
charterers, without noting any protest and without interference by any court...

In view of the aforesaid charter, Toeg bought the 4,000 tons of copra from P.T. Karkam and proceeded to
ship them. However, after the vessel had left for sail, the charterer incurred delays in his payments twice
to the owner which were supposed to have been done in advance. (The first 15-day hire for the period of
March 27 – April 11 was paid only on April 6 / The second 15-day hire from April 12 – April 27 was
only paid on April 26). However, although the late payments were received and acknowledged by the
agent of Marimperio without comments or protest, said agent thereafter notified the charterers that they
will be withdrawing the vessel for unpaid hirings, in accordance with the Clause 6 of the Charter Party.
The charterers again made payments but it was refused.

As a result of the foregoing, Union and Philin filed a complaint with the CFI for specific performance. In
its answer, petitioner Marimperio interposed a defense alleging that it had entered into a charter party
with Interocean and not with Union and Philin; that it had no agreement or relationship whatsoever with
Union and Philin; and that the charter party it entered into with Interocean does not authorize a sub-
charter of said vessel to other parties, that since it has no knowledge and consent to the sub-charter then
such is not binding upon it. The CFI rendered a decision in favor of Marimperio. Upon appeal, the CA
reversed the decision. Hence the present petition.

ISSUE: Do private respondents have the legal capacity to bring the suit against petitioner based on the
charter party?

HELD:NO. According to Article 1311 of the Civil Code, a contract takes effect between the parties who
made it, and also their assigns and heirs, except in cases where the rights and obligations arising from the
contract are not transmissible by their nature, or by stipulation or by provision of law. Since a contract
may be violated only by the parties, thereto as against each other, in an action upon that contract, the real
parties in interest, either as plaintiff or as defendant, must be parties to said contract. Therefore, a party
who has not taken part in it cannot sue or be sued for performance or for cancellation thereof, unless he
shows that he has a real interest affected thereby.

It is undisputed that the charter party, basis of the complaint, was entered into between petitioner
Marimperio through its duly authorized agent in London, Vlassopulos and the Interocean through the
latter’s duly authorized broker represented by Matthews, for the charter of the “SS Paxoi”. It was also
alleged in the complaints that the Interocean sublet the said vessel to private respondents Union which in
turn sublet the same to Philin. It is obvious from the disclosure made in the charter party that the real
charterer is Interocean.

Furthermore, in the law of agency “with an undisclosed principal”, the Civil Code in Article 1883 reads:

"If an agent acts in his own name, the principal has no right of action against the persons
with whom the agent has contracted; neither have such persons against the principal.

In such case the agent is the one directly bound in favor of the person with whom he has
contracted, as if the transaction were his own, except when the contract involves things belonging
to the principal.

The provisions of this article shall be understood to be without prejudice to the actions
between the principal and agent."

While in the instant case, the true charterers of the vessel were the private respondents herein and they
chartered the vessel through an intermediary which upon instructions from them did not disclose their
names. Article 1883 cannot help the private respondents, because although they were the actual principals
in the charter of the vessel, the law does not allow them to bring any action against the adverse party and
vice-versa.

Case Title: Filoil Refinery Corp. v. Mendoza

Topic:Rescission of Contracts
Substantial Breach
Ponente:Paras, J.
Doctrine:
If there is no express stipulation prohibiting the lessee to sublease the property, the act of the lessee in
subletting the property is not a ground for the rescission of contract.
Delay in payment for a few days does not constitute substantial or fundamental breach so as to defeat the
object of the parties in making the agreement.

Facts:
In a complaint filed by herein private respondents, the lower court rendered a decision rescinding the
contract of lease over a 750 square meters lot situated in Cebu City covered by TCT No. 30712 entered
into between Filoil Refinery Corporation and private respondents Jesus P. Garcia and Severina B. Garcia
and ordering the petitioner herein to vacate the leased premises. It appears that the herein petitioners
violated the terms and conditions of the lease agreement in the sense that the signatory Filoil Refinery
Corporation subleased it to Filoil Marketing and subsequently to petitioner Petrophil Corporation and that
herein petitioners were delayed several times in the payment of the monthly rentals.

Issue:
Whether or not the lower court is correct in rescinding the contract of lease and ordering the petitioner to
vacate the premises.

Ruling:
Yes.
Under the law, when there is no express prohibition, the lessee may sublet the thing leased and all rights
acquired by virtue of an obligation are transmissible, if there has been no stipulation to the contrary. In
the case presented, an examination of the lease contract reveals that there is no express prohibition against
the assignment of the leasehold right. Therefore, the contract cannot be rescinded on such ground.

Furthermore, petitioners admit that on a few occasions, they were late in paying the rentals which were
due within the first 15 days of each month but their delay was only for a few days. Such breaches were
not so substantial and fundamental as to defeat the object of the parties in making the agreement because
the law is not concerned with such trifles.
All these arguments however have become moot and academic considering that the contract of lease
sought to be rescinded expired or terminated.

Case Title: Tan Chiong Sian v. Inchausti Co., 22 Phil. 152

Topic:

According to the Code of Commerce, transportation of merchandise is for account, risk and
hazard of the shipper, unless the contrary has been expressly stipulated. The carrier is exempt from
liability if he prove, as it is incumbent upon him to do, that the loss or destruction of the merchandise was
due to accident and force majeure and not to fraud, fault, or negligence on the part of the captain or
owners of the ship.

Ponente: Torres, J.

Facts:

Tan Chiong Sian filed a written complaint alleging that plaintiff delivered to defendant 205 cases
of general merchandise belonging to him, which Inchausti & Co. upon receiving bound themselves to
deliver to Ong Bieng Sip and in consideration of the obligations contracted by the defendant party, the
plaintiff obligated himself to pay 250 pesos which payment should be made upon delivery of the said
merchandise. But, the defendant company neither carried nor delivered the merchandise to Ong Bieng
Sip. As a result, the merchandise was almost totally lost. Plaintiff now prays for judgment against
defendant for the loss of profit with legal interest.

Counsel for the defendant company, in his answer, alleged that said firm received from Ong
Bieng Sip cases of merchandise to be placed on board the steamer Sorsogon, belonging to defendant, for
shipment and delivered to Ong Bieng Sip. That defendant company upon receiving the said merchandise
from Ong Bieng Sip, and on its entering in to a contract of maritime transportation with him did not know
and was not notified by Tan Chiong Sian had any interest whatever in the said merchandise and had made
with the plaintiff no contract relative to the transportation of such goods for on receiving the latter from
the said Ong Bieng Sip for transportation there were made out and made out three bills of lading which
contained a list of the goods received and printed on the back thereof were the terms of the maritime
transportation contract entered in to by and between the plaintiff and the defendant company. It stated that
Ong Bieng Sip accepted the said bills of lading and the contract extended on the backs thereof; that the
merchandise was put on board the steamer Sorsogon where the vessel arrived. After termination of
necessary work in order for it to be further transported, but before the ship could leave, the ship was
dragged and driven by the force of the storm despite the means employed by the crew to avoid the
accident the ship was wrecked and completely destroyed and the merchandise which it was laden
including the cases taken aboard for the said Chinaman was scattered on the shore. That on the occasion,
the ship was in good condition, provided with all the proper and necessary equipment provided with all
the proper and necessary equipment and accessories and carried a crew of sufficient number.

After hearing the case, judgment was rendered in favor of the plaintiff against the defendant. The
suit was brought for the purpose of collecting a certain sum which it is alleged the defendant firm owes
the plaintiff for losses and damages suffered by the latter as a result of the former’s noncompliance with
the terms of an agreement or contract to transport certain merchandise by sea.

Issue:

Whether the defendant company is relieved from responsibility on the ground of force majeure
Held:

The general rule established in the first of the foregoing articles is that the loss of the vessel and
of its cargo, as the result of shipwreck, shall fall upon the respective owners, save for the exceptions
specified.

These legal provisions are in harmony with those of articles 361 and 362 of the Code of
Commerce, and are applicable whenever it is proved that the loss of, or damage to, the goods was the
result of a fortuitous event or of force majeure; but the carrier shall be liable for the loss or the damage
arising from the causes aforementioned, if it shall have been proven that they occurred through his own
fault or negligence or by his failure to take the same precautions usually adopted by diligent and careful
persons.

In the contract made and entered into by and between the owner of the goods and the defendant,
no term was fixed within which the said merchandise should be delivered to the former at Catarman, nor
was it proved that there was any delay in loading the goods and transporting them to their destination.
When the steamer Sorsogon arrived at Gubat and landed the said goods belonging to Ong Bieng Sip to
await the lorcha Pilar which was to convey them to Catarman, as agreed upon, no vessel carrying
merchandise made the voyage from Gubat to the said pueblo of the Island of Samar, and with Ong Bieng
Sip's merchandise there were also to be shipped goods belonging to the defendant company, which goods
were actually taken on board the said lorcha and suffered the same damage as those belonging to the
Chinaman. So that there was no negligence, abandonment, or delay in the shipment of Ong Bieng Sip's
merchandise, and all that was done by the carrier, Inchausti & Co., was what it regularly and usually did
in the transportation by sea from Manila to Catarman of all classes of merchandise. No attempt has been
made to prove that any course other than the foregoing was pursued by that firm on this occasion.

According to the article 361 of the Code of Commerce, merchandise shall be transported at the
risk and venture of the shipper, unless the contrary be expressly stipulated. No such stipulation appears of
record, therefore, all damages and impairment suffered by the goods in transportation, by reason of
accident, force majeure, or by virtue of the nature or defect of the articles, are for the account and risk of
the shipper.

A final clause of this same article adds that the burden of proof of these accidents is upon the
carrier; the trial record fully discloses that the loss and damage of the goods shipped by the Chinaman,
Ong Bieng Sip, was due to the stranding and wreck of the lorcha Pilar in the heavy storm or hurricane
aforementioned; this the plaintiff did not deny, and admitted that it took place between the afternoon of
the 5th and early in the morning of the 6th of December, 1908, so it is evident that the defendant is
exempt from the obligation imposed by the law to prove the occurrence of the said storm, hurricane, or
cyclone in the port of Gubat, and, therefore, if the said goods were lost or damaged and could not be
delivered in Catarman, it was due to a fortuitous event and a superior, irresistible natural force, or force
majeure, which completely disabled the lorcha intended for their transportation to the said port of the
Island of Samar.

Case Title:Tanio v. Ticson, G.R. No. 154895, November 18, 2004

Topic: Lease
Ponente: PANGANIBAN, J.
Doctrine: The assignment of a lease by the lessee involves a transfer of rights and obligations pertaining
to the contract; hence, the consent of the lessor is necessary. Article 1649 of the Civil Code is explicit:
"Art. 1649. The lessee cannot assign the lease without the consent of the lessor, unless there is a
stipulation to the contrary."
Facts: The Roman Catholic Archbishop of Manila (RCAM) is the owner of an apartment unit originally
leased to Mr. Fernando Lopez Lim. After the demise of Mr. Fernando Lim, his children became the
occupants thereof. One of them, Valentine Lim requested respondent Encarnacion Ticson, for financial
assistance in order to purchase the apartment unit from RCAM. In exchange, Valentine Lim executed a
waiver in favor of respondent.
Respondent executed a contract of lease in favor of petitioner, on the basis of the waiver from Valentine
Lim respecting the apartment unit, for a period of three (3) months. After signing the contract and paying
the rentals, petitioner discovered that the apartment was actually owned by RCAM.
After the expiration of the three (3) month lease, respondent demanded petitioner to vacate the premises
for the use of the former's family members. Petitioner failed to comply, giving rise to the instant case for
unlawful detainer.
Meanwhile petitioner entered into a Contract of Lease over the same property with RCAM for a term of
one year. In that Contract, petitioner assumed to pay the rent corresponding to her use and occupation of
the property prior to its execution.
Issue: WON the contract of lease between petitioner and respondent is binding on RCAM
Held: No
The assignment of a lease by the lessee involves a transfer of rights and obligations pertaining to the
contract; hence, the consent of the lessor is necessary. Article 1649 of the Civil Code is explicit:
"Art. 1649. The lessee cannot assign the lease without the consent of the lessor, unless there is a
stipulation to the contrary."
The objective of the law in prohibiting the assignment of the lease without the lessor's consent is to
protect the owner or lessor of the leased property. In the case of cession or assignment of lease rights on
real property, there is a novation by the substitution of the person of one of the parties -- the lessee. The
personality of the lessee, who dissociates from the lease, disappears; only two persons remain in the
juridical relation -- the lessor and the assignee who is converted into the new lessee.
There is no evidence to show that RCAM subsequently agreed to the substitution of the original lessee by
respondent. In fact, the only lessee it ever recognized was Fernando Lim. In the same letter, it was stated
that "neither [petitioner] nor [respondent] have the right to [possess] said apartment considering that it
[was] Mr. Fernando Lopez Lim whom our client RCAM ha[d] contractual relationship; unfortunately said
tenant [has ceased] to be such."
As against RCAM, which has not consented to the assignment, respondent-assignee obtains no rights to
the leased premises. Consequently, the sublease between her and petitioner is not binding on it. With the
abandonment of the lease by the original lessee through his unauthorized assignment, the right to the
possession of the apartment reverted to the owner.

TITLE: Limpan Investment Corp. v Lim Sy

TOPIC: Termination of Lease

PONENTE: J. Paras

DOCTRINE: The rule is settled that the owner of the land leased has the right not only to terminate the
lease at the expiration of the term, but also to demand a new rate of rent. The tenant or lessee has the
option either to accept the new rent or vacate the premises.

FACTS:

Lim Sy is the lessee of two rooms in Misericordia Street in Manila. In 1953, he paid P400 per room or a
total of P800 to Isabelo P. Lim, the lessor and registered owner, per month.

In October 1953, the lease was reduced to P350 per door or P700.

On October 5, 1954, Isabelo P. Lim filed an action in the Municipal Court of Manila (MTC Manila)
against Lim Sy for the ejectment of the latter from the leased premises and to order him to pay rental at
the rate of P800 a month until he finally vacates the property. The case was dismissed but on appeal it
was reversed by the Court of First Instance of Manila (RTC of Manila).

Eventually, the case reached the Court of Appeals (CA) where it denied the ejectment and that the price
be set at P300 per door or P600 in total.

In July 1959, notice was given to Lim Sy that the rentals beginning August of that year, would be
increased to P750 a month. However, Lim Sy continued to pay only P600 on the basis of the CA ruling.

In 1963, Limpan Investment Corp., joint owner along with Isabelo Lim, sent a notice to Lim Sy that the
rent would increase to P950 a month. Lim Sy continued to pay P600 on the basis of the CA ruling.

Another case was filed against Lim Sy, this time by Isabelo Lim and Limpan Investment Corp. The case
also reached to CA where it ruled that there is no basis for the increase in monthly rental.

Thus, petitioner appealed to the Supreme Court.

ISSUE: Whether or not the lessor can terminate a contract of lease on a month to month basis upon oral
and written notice of termination

HELD:

Yes, the lessor can terminate a contract of lease because the period has expired.

The rule is settled that the owner of the land leased has the right not only to terminate the lease at the
expiration of the term, but also to demand a new rate of rent. The tenant or lessee has the option either to
accept the new rent or vacate the premises. As lessees, after the termination of their lease, refused either
to pay the new rent or to vacate the lots after the termination of their lease, they have evidently become
deforciants, and can be ousted judicially without the need of a demand.

Thus, in a like situation, where petitioner sent a reminder to private respondent as to the impending
expiration of the lease contract with a statement that was in effect an offer or proposal to renew the
contract of lease on the terms and conditions stated, among which is an increase in rental, this Tribunal
categorically stated that: "Only the owner has the light to fix the rents. The Court cannot determine the
rents and compel the lessor or owner to conform thereto and allow the lessee to occupy the premises on
the basis of the rents fixed by it."

Case Title:United States Line v San Miguel Brewery

Topic:Not connected to Civ 2

Ponente:

Doctrine:

Facts:

Issue:

Held:

TITLE: Paterno vs. Court of Appeals

TOPIC: Termination of Lease

PONENTE: Romero, J.

Facts:

Petitioner Pio Q. Paterno owns the apartment unit subject of this case, located at 1640-A J.P. Laurel
Street, San Miguel, Manila. In 1964, petitioner and one Lydia Lim entered into a written contract of lease
of said apartment unit for one year, from August 1, 1964 to August 2, 1965. The contract expressly
provided:

That the lease shall be for a period of one year, commencing from 1st August 1964 and may be renewable
and extended by mutual agreement of both parties. Should the LESSEE be not desirous to continue the
lease the LESSEE is required to notify the LESSOR of his/her intention to terminate the lease 30 days in
advance of the termination of the lease.

Upon expiration of the contract, Lydia Lim opted to continue staying in the leased premises, paying on a
monthly basis. Sometime in 1969, Lim left for the United States as an immigrant, leaving her sister,
private respondent Angelina Reyes, to stay in the apartment.

According to petitioner, he was unaware of Lim's migration and was of the belief that Lim herself was in
continuous occupation of the leased premises. Petitioner also alleged that it was only in December 1991
that he discovered Lim's absence, and that private respondent currently occupied the apartment. On
January 6, 1992, petitioner sent Angelina Reyes a notice to vacate. Private respondent's refusal to leave
the apartment prompted petitioner to sue her for forcible entry in March 1992 before the Metropolitan
Trial Court of Manila, Branch III. 1

On the other hand, private respondent contended that Lim entrusted the care of the leased premises to her
and promised to send money for its monthly rental; hence, she continued to stay in the subject apartment
even as she regularly paid the rent. The rental for the entire year 1990 was even paid in advance on
January 15, 1990 with a yearly ten percent increase. Receipts were made out in the name of Lydia Lim.

Private respondent added that petitioner could not have been unaware of Lim's absence and the fact that
she (Reyes) had been occupying the leased premises since 1969. At times, whenever petitioner was here
in the Philippines and not in the United States where he is a permanent resident, he used to collect the
rents personally. In December 1991, private respondent refused to agree to the rental increase demanded
by petitioner. Not long after, or on January 6, 1992, she received a letter from petitioner demanding that
she vacate the premises. Upon her refusal to accede to said demand, the ejectment case was brought
against her.

On appeal, the Regional Trial Court reversed the Metropolitan Trial Court's decision. The appellate court
held that an implied new lease was created every month after August 1965, the expiry date of the lease
contract. Said lease remains effective because it has not been terminated, there being no notice to vacate
which was served on Lim. The court also held that Lim did not abandon the leased premises because she
continued paying the rent, as proved by the receipts in her name and she intends to return to the
Philippines and reside in the leased apartment. The court did not give credence to petitioner's claim that
from 1969 up to 1991, he was under the impression that Lim personally stayed in the leased premises. It
ruled that Lim continued as lessee and Angelina Reyes was merely the caretaker.

The Court of Appeals found no merit in the petition for review filed by Pio Paterno but modified the
Regional Trial Court's decision by deleting the award of attorney's fees for lack of basis. It upheld the trial
court's conclusion that there is no abandonment in the case at bar.

Issue: Whether or not the lease with a definite period was terminated the moment the lease contract
expired and when the lessee migrated to another country?

Held:

When Lim left, she relinquished her right to the apartment in question and virtually assigned her monthly
lease to her sister, herein private respondent. The assignment of lease involves a transfer of rights and
obligations pertaining to the lease and requires the consent of the lessor. 10 In the case at bar, the Court
finds that petitioner, in all likelihood, consented to said assignment because he should have known the
real lessee after more than two decades of collecting the rent, personally or through a representative.
Feigning complete lack of knowledge of Angelina Reyes as tenant, petitioner should in fact be charged
with knowledge and implied consent of said fact.

Thus respondent appellate court is correct in concluding that forcible entry is not present in the case at
bar.
What private respondent did have was a monthly lease, terminable at the end of each month. The demand
to vacate made by petitioner on January 6, 1992, as well as this ejectment case, sufficiently discloses
petitioner's intention to have private respondent move out of the premises. If it is true, as private
respondent alleges, that petitioner had always known of her occupancy in the apartment and that he was
only raising the rent to a level unacceptable to her, then it is clear that she has no right to maintain
possession of the subject apartment. Private respondent's claim that the Rent Control Law covered her
unit is unsubstantiated and thus, cannot be upheld. Consequently, the lessor can demand his desired rent
for the apartment unit when the lease expires and if both parties cannot come to terms on the rental rate,
lessee should vacate the premises. A lessor has the right, not only to terminate the lease at the expiration
of the term but also to demand a new rate of rent. The lessee has the option either to accept the new rent
or vacate the leased premises. In the case of Vda. de Kraut v. Lontoc, the Court held that a lease on a
month-to-month basis may be terminated at the end of any month and shall be terminated upon the
lessee's refusal to pay the increased monthly rental demanded by the lessor, provided the same is not
exorbitant.

Article 1687 expressly provides that ". . . even though a monthly rent is paid and no period for the lease
has been set, the courts may fix a longer term for the lease after the lessee has occupied the premises for
over one year." In the case at bar, private respondent has been staying in the subject apartment for
approximately twenty-eight years. She continued to enjoy possession of the premises for five more years
from the time petitioner gave her notice to vacate and since the start of the ejectment suit. The Court
which has the discretionary power to fix a longer term for the lease, deems private respondent's length of
stay in the premises sufficient and finds no need to extend it.

Case Title: Divino v. Fabie de Marcos, 4 SCRA 186

Topic:

The power of the courts to "fix a longer term for lease" is protestative or discretionary, — "may"
is the word to be exercised or not in accordance with the particular circumstances of the case; a longer
term to be granted where equities come into play demanding extension, to be denied where none appear,
always with due deference to the parties' freedom to contract.

Since the lot in question had been rented by the same person and his predecessor in interest for
over twenty years, and, although the rentals had been paid monthly, no period for the duration of the lease
had been set, and the lessee had made substantial improvements on the premises with the impression that
he could stay thereon as long as he could pay the rentals, and considering the difficulty of looking for
another place to which the lessee could transfer his improvements, it would only be fair and equitable to
grant the lessee an extension of two years.

Ponente:Paredes, J.
Facts:

The defendant Ramona Fabie de Marcos is the owner of a big parcel of land called Hacienda
Fabie. The lot was being administered by defendant Ventura Marcos. Plaintiff purchased from one
Antonio Castro, a house, the location of which pertains to the Hacienda; that before buying the house,
plaintiff was assured by the owner of the house and the rental collector, that it will remain thereon as long
as rental is paid for; To show that he meant the assurance well, Marcos reduced the rental from P24.00 to
P22.00 a month;

Later, defendants herein filed a complaint for ejectment with the Municipal Court of Manila
against the herein plaintiff for having failed to pay the rentals and to compel him to pay an increased
rental, which the municipal court dismissed; that on appeal, the CFI affirmed the said judgment; that
thereafter, defendants informed the plaintiff that the contract of lease would be terminated; that there was
no written agreement between the parties as to the manner the rentals would be paid; that although they
were usually paid monthly, on several occasions, however, the defendants had allowed the plaintiff to pay
the rentals beyond one month; that if the intention of defendants was to increase the rentals from P22.00
to P40.00 monthly, plaintiff was willing to pay not more than P30.00 monthly; that because of the
ejectment case, plaintiff had suffered damages; that because of the assurances, plaintiff made
improvements, repairs and additions to his house.

The Answer denied the giving of assurances, alleging that the persons who supposedly made
them had no legal capacity or personality to bind the defendants; that the ejectment case was dismissed by
agreement of the parties; that defendants had notified the plaintiff that the lease contract was deemed
terminated on April 30. 1956; that in the instances of failure to pay the rentals on time, the defendants just
permitted the payment at later dates, as an act of grace;

The trial court ruled that there is no written agreement as to the duration of the lease between
plaintiff and defendants. The fact remains that plaintiff entered the premises with the knowledge and
consent of the defendants and with assurance of the latter that the plaintiff could remain occupying the lot
as long as he pays the rent. The court applied Article 1687 of the Civil Code to determine what period
may the Court allow the plaintiff to remain in the premises in question.

Hence, this appeal in which defendants-appellants question the authority of the court to execute a
lease contract in favor of the plaintiff-appellee for a period of 2 years, when the lease contract between
them was already terminated.

Issue: Whether the court has jurisdiction to execute a lease contract between the parties

Held:

Yes. The trial court was correct in applying Article 1687 in connection with Article 1197 of the
New Civil Code. Article 1687 provides that If the period for the lease has not been fixed, it is understood
to be from year to year, if the rent agreed upon is annual; from month to month, if it is monthly; from
week to week, if the rent is weekly; and from day to day, if the rent is to be paid daily. However, even
though a monthly rent is paid, and no period for the lease has been set, the courts may fix a longer term
for the lease after the lessee has occupied the premises for over one year. If the rent is weekly, the Court
may likewise determine a longer period after the lessee has been in possession for over six months. In
case of daily rent, the court may also fix a longer period after the lessee has stayed in the place for over
one month.

The lot in question has been rented to the petitioner for about 20 years and his predecessor in
interest for more. Even though rentals had been paid monthly, still no period for the duration of the lease
had been set. The lease had been consistently and tacitly renewed ("tacita reconduccion") until the
ejectment case was filed. Having made substantial or additional improvements on the lot, and considering
the difficulty of looking for another place to which petitioner could transfer such improvements, and the
length of his occupancy of the lot (since 1936) and the impression acquired by him that he could stay on
the premises, as long as he could pay the rentals, it would seem that there exists just grounds for granting
the extension of lease and that the extension of two years granted by the trial court, is both fair and
equitable.

Casetitle: Luz J. Henson v. The Intermediate Appellate Court

Topic: Law on Contracts

Ponente: Gutierrez, Jr., J.

Doctrine: Contracts are respected as the law between the contracting parties. In the case at bar, the
contract entered into by the parties shall remain as the law between them,

Facts: The petitioner leases out office spaces in her building in Ermita, Manila. On May 15,1980, the
petitioner received a reservation deposit of P8,000.00 for Apartment No. 116 in the same building for
which she issued a receipt. On May 30, 1980, their request was to transfer their office to the leased
premises by petitioner was denied by the Licensing and Inspection Division of the Bureau of Tourism
Services, which prompted them to vacate the leased premises. Petitioner then notified respondent of the
dishonored check, to which the respondent claimed it had already rescinded the lease contract given the
denial of their request. The trial court ruled in favor private respondents, and was affirmed by the
appellate court which ordered the refund of private respondents’ advanced rental fees as the non-
compliance of the obligation to occupy the leased premises came from a third party.

Issue: Does the unilateral rescission of the contract caused by a third party valid?

Held: The Court granted the petition and ruled in favor of petitioners. The lease contract executed by the
petitioners and the private respondent remains as the law between them. In litigations involving the
adjudication of rights and obligations between the lessor and the lessee, the lease contract shall govern.
The disputed lease contract is plain and unequivocal in its terms. The predicament in which the private
respondent found itself is entirely of its own making, it should have ascertained the rules and
requirements for the operation of its business. The petitioner had nothing to do with its violations.
Therefore, the Court has given the right to the petitioners to claim the rentals and the dishonored check.

CaseTitle: Jespajo Realty Corp. vs. CA

Topic: Contracts, Leases

Ponente: Austria - Martinez, J

Doctrine: Article 1687 of the New Civil Code does not apply to contracts where a period is provided for.

Facts:

Jespajo Realty Corporation owned an apartment building in Binondo, Manila. Said corporation entered
into separate contracts of lease with Tan Te Gutierrez and Co Tong. The terms of the contract
among others stipulated: (1) that the lease period shall be effective as of February 1, 1985 and shall
continue for an indefinite period provided the lessee is up-to-date in the payment of his monthly
rentals and (2) that the lessee agrees to an automatic 20% yearly increase in the monthly rentals.
Petitioner filed an ejectment case for non-payment of rentals against private respondents on the
ground that they had failed to pay the demanded P3,500.00 monthly rentals. Private respondents
sought to consign with the court their monthly rentals which petitioner refused since the latter was
demanding an increased rental of P3,500.00 which is much higher than the correct rental in
accordance with their stipulated 20% automatic increase annually in the contract.

Issue:

Is petitioner correct when it insisted that the lease contract did not provide for a denite period, hence,
it falls under the ambit of Art. 1687 of the N.C.C., making the agreement effective on a month-to-
month basis since rental payments are made monthly?

Held:

No. Art. 1687 found no application in the case at bar. The lease contract between petitioner and
respondents is with a period subject to a resolutory condition. The wording of the agreement is
unequivocal: "The lease period … shall continue for an indefinite period provided the lessee is up-
to-date in the payment of his monthly rentals." The condition imposed in order that the contract
shall remain effective is that the lessee is up-to-date in his monthly payments. It is undisputed that
the lessees Gutierrez and Co Tong religiously paid their rent at the increasing rate of 20% annually.
The agreement between the lessor and the lessees are therefore still subsisting, with the original
terms and conditions agreed upon, when the petitioner unilaterally increased the rental payment to
more than 20% or P3,500.00 a month. Petitioner, therefore, has no cause of action to eject the
lessees for their refusal to pay the increased monthly rentals.

TITLE: ROBERTO RANTAEL v. CA, April 30, 1980

TOPIC: LEASE

FACTS: Private respondent Teresa F. Llave and petitioner Roberto Rantael entered into a verbal
agreement by virtue of which the former leased to the latter the premises of unit 51-A of her four-unit
apartment at Stanford St., Cubao, Quezon City, at the monthly rental of P160.00. In July 1973, Llave
sought to increase the monthly rental to P180.00 which caused Rantael to file a complaint against her
with the Presidential Action Unit, Office of the President, charging violation of the provisions of
Presidential Decree No. 20. At the conference called by the Office of the President, Llave agreed to roll
back the monthly rent to P160.00 provided her juridical relationship with Rantael be formalized through a
written lease contract to which Rantael acceded. Thus, on August 1, 1974 Llave and Rantael entered into
an "Agreement on Occupancy of Apartment".

Llave, in a communication dated February 11, 1975, notified Rantael of her decision to terminate the
lease agreement and requested him to vacate the premises of unit 51-A after thirty days from receipt of
the said communication. Notwithstanding his receipt of the notice on February 17, 1976, Rantael refused
to vacate the premises of unit, an ejectment case was filed against him.

After due hearing, the court upholding the right of Llave to terminate the lease agreement and ordering
Rantael to vacate and restore to Llave possession of the leased premises and to pay P200.00 attorney's
fees and costs of suit. Rantael appealed.

ISSUE: Whether or not the terms of agreement on Occupancy of Apartment provide for a fixed or
definite period for the lease which my exempt in the application of right of judicial ejectment.

HELD:No. The provisions of the Agreement on Occupancy of Apartment cannot but be read as
providing for a definite period for the lease. Period relates to "length of existence; duration" 8 or even a
"series of years, months or days in which something is completed."

Definite means "having distinct or certain limits; determinate in extent or character; limited; fixed." A
definite period, therefore, refers to a portion of time certain or ascertainable as to its beginning, duration
and termination. As already stated above, the parties further expressly agreed that — "upon thirty (30)
days notice, either party may terminate this agreement, each fulfilling their respective obligations herein
agreed.

The lease contract is the law between the parties. In the interpretation thereof, the intent of the parties
may be determined. The parties herein sought Malacañang's intervention upon their controversy on the
amount of rental. Then, they settled their dispute by entering into a written lease contract, agreeing on the
basis thereof for rate and duration. It would be the height of injustice to assume that the owner-lessor
intended to tie herself to a very low rental and make that rate indefinite. When they agreed on the
termination of the lease upon a 30-day notice, it is logical to assume that they really fixed the period of
the lease dependent upon the option of either party, not a legal period determinable by a court under
Article 1687 of the Civil Code.

CASE TITLE: F.S Divina Gracia Agro Commercial v CA

GR No-47350 April 21, 1981

TOPICS:

CONTRACT OF LEASE

Article 1687 in relation to Article 1197 provides that the court is accorded the power to fix a longer term
for the lease, which power is potestative or discretionary in nature. This prerogative is addressed to the
court’s sound judgment and is controlled by equitable considerations. Under the principle of expressio
unius est exclusio alterius, the law applies to both residential and commercial lands.

Article 1676 provides: “The purchaser of a piece of land which is under a lease that is not recorded in the
Registry of Property may terminate the lease, save when there is a stipulation to the contrary in the
contract of sale, or when the purchaser knows of the existence of the lease”

PONENTE: Guerrero, J

FACTS:

The private respondent’s father was the original lessee of the building and lot owned by the late Dona
Concepcion Gay de Loring and spouses Kauffman. After his father’s demise, the private respondent
continued the lease. The building and lot subject of the lease was bought by petitioner herein from the
intestate-estate of the original owners for the sum of 250k Php. Before its purchase, the private
respondent was a lessee of said owners and was paying rental of 1.25k Php per month. After the purchase,
the rental corresponding to the first half of the month was paid by private respondent to the original
owners and the second half, to the new owner, the petitioner. In continuance of the lease, it was verbally
agreed by the parties that the rental for the succeeding months would be increased to 2k Php. After two
weeks the private respondent was informed by a representative of the petitioner that his contract would
terminate by the end of the month. When the private respondent refused to vacate, the petitioner gave the
private respondent a final extension to occupy the premises for more a month, for which reason petitioner
refused to accept further payment of rentals. Thereafter, a complaint for unlawful detainer was filed by
petitioner against private respondent.

From the decision of the first level court, fixing the duration of the lease for more than seven and a half
years. The petitioner appealed to the second level court which modified the previous decision extending
the lease to one year instead of seven and a half. From the latter decision, the private respondent filed a
petition for review before the Court of Appeals which modified the previous decision extending the lease
for another five years. Aggrieved, the petitioner herein appealed by certiorari to the Supreme Court,
assigning a single error involving a legal issue that the Court of Appeals committed a grave error in the
application of Article 1687 by extending the lease for another 5 years which is a grave abuse of discretion
amounting to lack or in excess of its jurisdiction. Petitioner, argued that the court of appeals practically
made a contract between the parties which is contrary to the spirit and intent of Article 1687 of the Civil
Code.
ISSUE:

Did Court of Appeals commit grave abuse of discretion in extending the lease for another five years
applying Article 1687 of the Civil Code

HELD:

To answer the issue, Article 1687 must be correlated with Article 1197. Considering both articles
together, it is at once clear and evident that the court is accorded the power to fix a longer term for the
lease, which power is potestative or discretionary in nature. This prerogative is addressed to the court’s
sound judgment and is controlled by equitable considerations. “The court may fix a longer term where
equities come into play demanding an extension.”

It may not, therefore, be contended that the Court of Appeals in the exercise of its discretionary power
made a contract between the parties, since the very purpose of the law is not the fixing of a longer term
for the lease, but to make the indefinite period of the lease definite by fixing once and for all the
remaining duration of the lease.

Case Title:Vda. De Bocaling v Laguda

Topic:Not connected to Civ 2

Ponente:

Doctrine:

Facts:

Issue:

Held:

Case Title: Southwestern University V. Salvador, G.R. No. L-45013, May 28, 1979

Topic: Consignation, when notice is not required

Ponente: De Castro, J.

Doctrine: The requirement of notice to make the consignation effective as provided in Art. 1257 of the
Civil Code applies only in consignation as contemplated by Art. 1256 of said Code which presupposes a
refused tender of payment. This requirement does not apply where the obligation to pay the amount was
imposed by the court not by contract, since the creditor could not have refused the tender of payment
made in compliance with the order of the court.

Facts: On December 6, 1963, SU an educational institution located in Cebu City filed separate actions for
ejectment against Jose Baliguat and Julia Ilaya with the City Court of Cebu. SU alleged that it had
acquired by purchase conditional sale three parcels of land located at Jones Avenue, Cebu City, from the
Development Bank of the Philippines sometime in July 1963. It sought to eject the defendant Baliguat
from the 84 square meters lot which forms part of the three parcels of land on which the defendant built a
house, when the latter failed to pay the P20.00 monthly rental despite repeated demands. Defendant
alleged, on the other hand, that the monthly rental of P20.00 is violative of the agreement between the
Philippine Railway Company which is the original owner of the land in question, the original agreed
rental having been only P5.00. Respondent judge, rendered judgement in favour of Defendant. From the
City Court's decision, SU filed an appeal with the Court of First Instance of Cebu City on July 14, 1969.
On August 21, 1971, petitioner made an alleged consignation of the P3,000.00 in court. Later, after the
appeal was pending for more than three (3) years, it withdrew the appeal on February 1, 1973 on the
ground that it is no longer interested in pursuing the appeal, having been convinced of the fairness and
reasonableness of the judgment. On October 9, 1973, petitioner filed a motion for the execution of the
judgment dated June 18, 1969 with the City Court. The court denied said motion. SU filed a Motion for
Reconsideration. The City Court denied it in an order dated February 28, 1974 for lack of merit and
ordered the plaintiff to withdraw the amount of P8,400.00 from the office of the City Treasurer and
further required him to execute a Deed of Sale in favor of the defendant for the 84 square meters of land
located at Pelaez Street, Cebu City. From the above orders of the City Court, SU filed a petition for
certiorari with the Court of First Instance of Cebu, Branch XIV whereby the actuations of the respondent
judge were assailed for lack, or being in excess, of jurisdiction and tainted with grave abuse of discretion
in issuing the above orders. Hence, this petition.

Issue: Whether or not the requirement of notice to make the consignation is applicable where it is the
court who imposed the obligation to pay?

Held:

No. The consignation cannot be attacked on ground of lack of notice to the defendant because, if
execution has to be made from the time the case is remanded to the court of origin, notice of the
consignation must have come to the knowledge of private respondent when SU moved for execution on
Oct. 9, 1973, following the receipt of the remanded case by said court on Aug. 14, 1973. Less than 90
days expired from the date of receipt of the remanded case by the court of origin to the date of the motion
for execution filed by petitioner. Moreover, the requirement of notice to make the consignation effective
as provided in Art. 1257 of the Civil Code applies only in consignation as contemplated by Art. 1256 of
said Code which presupposes a refused tender of payment. The deposit of the sum of P3,000 with the
Court was not actually preceded by a tender of payment that was refused, for the obligation to pay the
amount to the defendant Baliguat was imposed by the Court not by contract, and Baliguat could not have
refused the tender of payment made in compliance with the order of the Court.

Case Title: CHUA V. C.A. & ERIC CHUA G.R. No. 140886 April 19, 2001
Topic:Obligations and Contracts, Obligations with a period

Ponente:Bellosillo, J

Doctrine:The power of the courts to establish a grace period pursuant to Art. 1687 is potestative or
discretionary, to be exercised or not depending on the particular circumstances of the case: a longer term
to be granted where equities come into play demanding extension, to be denied where none appears,
always with due deference to the parties' freedom to contract.

FACTS:A Complaint for Unlawful Detainer and Damages was filed by respondent Eric Chua against
petitioner Eulogio "Eugui" Lo Chua. Respondent Eric Chua alleged that he was the former owner of a
parcel of land with a 4-storey commercial building thereon known as National Business Center (NBC)
Bldg. where 2 units were leased by petitioner on a month-to-month basis for P12k. Subsequently,
respondent Eric Chua decided to sell the property. Through a letter, he offered petitioner a right of first
refusal to be exercised within 5 days from receipt thereof. Petitioner failed to manifest his intention within
the period. Thus, Chua sold the property to respondent MAGICAIRE for P25M subject to the condition
stated in the Deed of Conditional Sale that P5M would be paid after the building was completely vacated
by the tenants. Respondent Chua through a letter informed petitioner about the sale transaction, the
termination of their lease agreement, and demanded that petitioner vacate the premises after the end of the
period, at the same time waiving the rentals for January to March 1996 in consideration of petitioner's
understanding and cooperation. On 23 January 1996 petitioner tendered payment of the rental for that
month but was declined by respondent Chua.

Consequently, petitioner filed a Petition for Consignation. Respondent Chua made a final demand
on petitioner to vacate the property but was refused. Petitioner contended that he ignored the demand
letters of respondent Chua because upon verification from the Register of Deeds of Manila petitioner
learned that respondent Chua was no longer the owner of the property; that petitioner allowed the Petition
for Consignation to be dismissed because respondent Chua was not the real party-in-interest; and, that
petitioner made a counter offer to purchase the property but respondent Chua nonetheless proceeded with
the sale to respondent MAGICAIRE.

ISSUE:Whether petitioner was entitled to an extension of the lease period conformably with Art. 1687 of
the Civil Code for having occupied the property for more than thirty (30) years.

HELD:No, although the courts may fix the period for the contract, petitioner’s continued possession of
the property pending this case, bar further extension of the contract. Petitioner contradicts himself by
arguing that since he has been occupying the premises for more than 30 years, his lease contract should be
understood as one for an indefinite period entitling him to an extension thereof pursuant to Article 1687
of the Civil Code. Article 1687 reads – “Article 1687. If the period for the lease has not been fixed. It is
understood to be from year to year, if the rent agreed upon is annual; from month to month. If it is
monthly; from week to week, if the rent is weekly; and from day to day, if the rent is to be paid daily.
However, even though a monthly rent is paid, and no period for the lease has been set, the courts may fix
a longer term for the lease after the lessee has occupied the premises for over one year. If the rent is
weekly, the courts may likewise determine a longer period after the lessee has been in possession for over
six months. In case of daily rent, the courts may also fix a longer period after the lessee has stayed in the
place for over one month.”

The power of the courts to establish a grace period pursuant to Art. 1687 is potestative or
discretionary, to be exercised or not depending on the particular circumstances of the case: a longer term
to be granted where equities come into play demanding extension, to be denied where none appears,
always with due deference to the parties' freedom to contract.
Case Title Alcantara vs. Reta (G.R. No. 136996, December 14, 2001)

Topic: Right of First Refusal

Ponente: Pardo, J.

Doctrine: To be able to qualify and avail oneself of the rights and privileges
granted by the Presidential Decree No. 1517, otherwise known as "The Urban Land
Reform Act”, one must be: (1) a legitimate tenant of the land for ten (10) years or more;
(2) must have built his home on the land by contract; and, (3) has resided continuously
for the last ten (10) years. Obviously, those who do not fall within the said category
cannot be considered "legitimate tenants" and, therefore, not entitled to the right of first
refusal to purchase the property should the owner of the land decide to sell the same at a
reasonable price within a reasonable time.

Facts:

Alcantara, et al. filed with the Regional Trial Court a complaint against respondent Reta for the
exercise of the right of first refusal under Presidential Decree No. 1517 otherwise known as "The Urban
Land Reform Act”. The plaintiffs claimed that they were tenants or lessees of the land owned by Reta;
that the land has been converted by Reta into a commercial center; and that Reta is threatening to eject
them from the land. They assert that they have the right of first refusal to purchase the land in accordance
with Section 3(g) of Presidential Decree No. 1517 since they are legitimate tenants or lessees thereof.

On the other hand, Reta claimed that the land is beyond the ambit of Presidential Decree No.
1517 since it has not been proclaimed as an Urban Land Reform Zone; that the applicable law is Batas
Pambansa Blg. 25 for failure of the plaintiffs to pay the rentals for the use of the land.

The trial court rendered a decision dismissing the complaint and ordering the plaintiffs to pay
Reta certain sums representing rentals that had remained unpaid. The plaintiffs appealed the decision to
the Court of Appeals. The Court of Appeals promulgated a decision 7 affirming in toto the decision of the
trial court.

Issue:

Whether petitioners have the right of first refusal under Presidential Decree No. 1517?

Held:

No. The S.C. ruled in favor of the respondent Reta. The area involved has not been proclaimed an
Urban Land Reform Zone (ULRZ). Presidential Decree No. 1517, otherwise known as "The Urban Land
Reform Act," pertains to areas proclaimed as Urban Land Reform Zones. Consequently, petitioners
cannot claim any right under the said law since the land involved is not an ULRZ.
 To be able to qualify and avail oneself of the rights and privileges granted by the said decree, one
must be: (1) a legitimate tenant of the land for ten (10) years or more; (2) must have built his home on the
land by contract; and, (3) has resided continuously for the last ten (10) years. Obviously, those who do not
fall within the said category cannot be considered "legitimate tenants" and, therefore, not entitled to the
right of first refusal to purchase the property should the owner of the land decide to sell the same at a
reasonable price within a reasonable time.

Respondent Reta denies that he has lease agreements with petitioners Edilberto Alcantara and
Ricardo Roble. Edilberto Alcantara, on the other hand, failed to present proof of a lease agreement other
than his testimony in court that he bought the house that he is occupying from his father-in-law.
Respondent Reta allowed petitioner Ricardo Roble to use sixty-two coconut trees for P186 from where he
gathered tuba. This arrangement would show that it is a usufruct and not a lease.

Respondent Reta admitted that he had verbal agreements with them. This notwithstanding, they
are still not the legitimate tenants contemplated by Presidential Decree No. 1517, who can exercise the
right of first refusal. A contract has been defined as "a meeting of the minds between two persons
whereby one binds himself, with respect to the other, to give something or to render some service.''
Clearly, from the moment respondent Reta demanded that the petitioners vacate the premises, the verbal
lease agreements, which were on a monthly basis since rentals were paid monthly, ceased to exist as there
was termination of the lease. Indeed, none of the petitioners is qualified to exercise the right of first
refusal under P.D. No. 1517.

Another factor which militates against petitioners' claim is the fact that there is no intention on
the part of respondent Reta to sell the property. Hence, even if the petitioners had the right of first refusal,
the situation which would allow the exercise of that right, that is, the sale or intended sale of the land, has
not happened. P.D. No. 1517 applies where the owner of the property intends to sell it to a third party.

PARTNERSHIP, AGENCY, AND TRUSTS

CaseTitle: Yulo v. Yang Chiaco Seng, G.R. No. L-12541, 28 August 1959

Topic: Circumstances that negate partnership and prove a contract of lease

Ponente: Labrador, J.

Doctrine: Where one of the parties to a contract does not contribute the capital he is supposed to
contribute to a common fund; does not furnish any help or intervention in the management of the business
subject of the contract; does not demand from the other party an accounting of the expenses and earnings
of the business; and is absolutely silent with respect to any of the acts that a partner should have done,
but, on the other hand, receives a fixed monthly sum from the other party, there can be no other
conclusion than that the contract between the parties is one of lease and not of partnership.

Facts: Defendant Yang Chiao Seng wrote a letter to the plaintiff Mrs. Rosario U. Yulo, proposing the
formation of a partnership between them to run and operate a theatre on the premises owned by Marina.
The principal conditions of the offer include that that Yang Chiao Seng guarantees Mrs. Yulo a monthly
participation of P3,000, and that the partnership shall start from July 1, 1945 to December 31, 1950, with
the condition that if the land is expropriated or rendered impracticable for the business, or if the owner
constructs a permanent building thereon, or Mrs. Yulo's right of lease is terminated by the owner, then the
partnership shall be terminated even if the period for which the partnership was agreed to be established
has not yet expired. The land on which the theatre was constructed was leased by plaintiff Mrs. Yulo from
Marina. But on April 12, 1949, the owners notified Mrs. Yulo of their desire to cancel the contract of
lease on July 31, 1949. Mrs. Yulo then demanded from Yang Chiao Seng her share in the profits of the
business. Yang answered the letter saying that upon the advice of his counsel he had to suspend the
payment (of the rentals) because of the pendency of the ejectment suit by the owners of the land against
Mrs. Yulo.

In view of the refusal of Yang to pay to her the amount agreed upon, plaintiff alleges the existence of a
partnership between them. Defendant alleges that the real agreement between the plaintiff and the
defendant was one of lease and not of partnership; that the partnership was adopted as a subterfuge to get
around the prohibition contained in the contract of lease between the owners and the plaintiff against the
sublease of the said property.

Issue: Was there a valid contract of partnership?

Held: No. We have gone over the evidence and we fully agree with the conclusion of the trial court that
the agreement was a sublease, not a partnership. The following are the requisites of partnership: (1) two
or more persons who bind themselves to contribute money, property, or industry to a common fund; (2)
intention on the part of the partners to divide the profits among themselves. (Art. 1767, Civil Code.)

In the first place, plaintiff did not furnish the supposed P20,000 capital. In the second place, she did not
furnish any help or intervention in the management of the theatre. In the third place, it does not appear
that she has ever demanded from defendant any accounting of the expenses and earnings of the business.
Were she really a partner, her first concern should have been to find out how the business was
progressing, whether the expenses were legitimate, whether the earnings were correct, etc. She was
absolutely silent with respect to any of the acts that a partner should have done; all that she did was to
receive her share of P3,000 a month, which can not be interpreted in any manner than a payment for the
use of the premises which she had leased from the owners. Clearly, plaintiff had always acted in
accordance with the original letter of defendant of June 17, 1945 (Exh. "A"), which shows that both
parties considered this offer as the real contract between them.

Case Title: Commissioner of Internal Revenue vs William J. Suter, 27 SCRA 152

Topic: Disestablishment of a Partnership after the marriage of the partners / Corporate personality being
disregarded for income tax purposes

Ponente: Reyes, J.B.L., J.

--- Case not connected to Civil Law

Case Title:aurbach v sanitary wares manufacturing

Note: Case is not related to civil law but to corporation law.

CaseTitle: Catalan v. Gatchalian 105 Phil. 1270, April 22, 1959

Topic: PARTNERSHIP

*no full text available on the internet*

Ponente:

Doctrine:

FACTS: Catalan and Gatchalian are partners. They mortgaged two lots to Dr. Marave together with the
improvements thereon to secure a credit from the latter. The partnership failed to pay the obligation. The
properties were sold to Dr. Marave at a public auction. Catalan redeemed the property and he contends
that title should be cancelled and a new one must be issued in his name.

ISSUE: Whether or not Catalan’s redemption of the properties make him the absolute owner of the lands?

HELD: No. Under Article 1807 of the NCC every partner becomes a trustee for his copartner with regard
to any benefits or profits derived from his act as a partner. Consequently, when Catalan redeemed the
properties in question, he became a trustee and held the same in trust for his copartner Gatchalian, subject
to his right to demand from the latter his contribution to the amount of redemption.

Case Title: BENITO LIWANAG and MARIA LIWANAG REYES,petitioners-appellants, vs.

WORKMEN'S COMPENSATION COMMISSION, ET AL.,respondents-appellees. J. de Guia for
appellants.Estanislao R. Bayot for appellees.

Topic:Solidary Liability. Application of Arts. 1711 and 1712 of the new Civil Code to the Workmen’s
compensation act.

Ponente:ENDENCIA, J

Doctrine:The provisions of the new Civil Code taken together with those of Section 2 of the Workmen's
Compensation Act, reasonably indicate that in compensation cases, the liability of business partners, like
appellants, should be solidary; otherwise, the right of the employee may be defeated, or at least crippled.
FACTS:Appellants Benito Liwanag and Maria Liwanag Reyes are co-owners of Liwanag Auto Supply, a
commercial guard who while in line of duty, was skilled by criminal hands. His widow Ciriaca Vda. de
Balderama and minor children Genara, Carlos and Leogardo, all surnamed Balderama, in due time filed a
claim for compensation with the Workmen's Compensation Commission, which was granted in an award.
In appealing the case to this Tribunal, appellants do not question the right of appellees to compensation
nor the amount awarded. They only claim that, under the Workmen's Compensation Act, the
compensation is divisible, hence the commission erred in ordering appellants to payjointly and severally
the amount awarded. They argue that there is nothing in the compensation Act which provides that the
obligation of an employer arising from compensable injury or death of an employee should be solidary
obligation, the same should have been specifically provided, and that, in absence of such clear provision,
the responsibility of appellants should not be solidary but merely joint.

ISSUE:Whether or not the defendants herein be regarded as co-partners or as mere co-owners in their
liability for the indemnity due their deceased employee?

HELD:Liability is Solidary. The provisions of the new Civil Code taken together with those of Section 2
of the Workmen's Compensation Act, reasonably indicate that in compensation cases, the liability of
business partners, like appellants, should be solidary; otherwise, the right of the employee may be
defeated, or at least crippled. If the responsibility of appellants were to be merely joint and solidary, and
one of them happens to be insolvent, the amount awarded to the appellees would only be partially
satisfied, which is evidently contrary to the intent and purposes of the Act. In the previous cases we have
already held that the Workmen's Compensation Act should be construed fairly, reasonably and liberally in
favor of and for the benefit of the employee and his dependents; that all doubts as to the right of
compensation resolved in his favor; and that it should be interpreted to promote its purpose. Accordingly,
the present controversy should be decided in favor of the appellees.

Mauricio Agad vs Severino Mabato

G.R. No. L-24193; June 28, 1968

Topic: Partnership

Concepcion, C.J.

Doctrine:

“Considering that no fishpond or a real right thereto was contributed to the partnership, or
became a part of the capital thereof, Article 1773 of the Civil Code does not apply.”
Facts:

Plaintiff Agad filed a complaint against Defendant Mabato for rendering an accounting of their
partnership business for the years 1957-1963, and to deliver to him the profits due to him. Defendant
admitted that they dei agree to form a partnership for the operation of a fishpond business, but that the
said agreement was null and void pursuant to Art. 1773 because an inventory of the fishpond was not
attached to the agreement.

Issue:

Whether or not immovable property or real rights have been contributed to the partnership

Ruling:

The Court ruled that the partnership was established to operate a fishpond business and not to
engage in a fishpond business. Moreover, none of the partners contributed either a fishpond or a real right
to any fishpond as their contribution was limited to P1,000.00 each. Thus, considering that no fishpond or
a real right thereto was contributed to the partnership, or became a part of the capital thereof, Article 1773
of the Civil Code does not apply.

Case Title:emnace v Court of appeals

Topic:Not connected to Civ 2

Ponente:

Doctrine:

Facts:

Issue:

Held:

CASETITLE: Shell Co. v. Fireman’s Insurance Co., G.R. No. L-8169, January 29, 1957.

TOPIC: PAT - Agency

PONENTE: J. PADILLA.

DOCTRINE: As the act of the agent or his employees acting within the scope of his authority
is the act of the principal, the breach of the undertaking by the agent is one for which the principal is
answerable.
FACTS: An automobile belonging to the plaintiff Salvador Sison was brought by his son, Perlito Sison,
to the gasoline and service station, owned by the defendant The Shell Company of the Philippine Islands,
Limited, but operated by the defendant Porfirio de la Fuente, for the purpose of having said car washed
and greased for a consideration of P8.00. Said car was insured against loss or damage by Firemen's
Insurance Company of Newark, New Jersey, and Commercial Casualty Insurance Company jointly for
the sum of P10,000.

The job of washing and greasing was undertaken by defendant Porfirio de la Fuente through his two
employees, Alfonso M. Adriano, as greaseman and one surnamed de los Reyes, a helper and washer.To
perform the job the car was carefully and centrally placed on the platform of the lifter in the gasoline and
service station aforementioned before raising up said platform to a height of about 5 feet and then the
servicing job was started. After more than one hour of washing and greasing, the job was about to be
completed except for an ungreased portion underneath the vehicle which could not be reached by the
greasemen. So, the lifter was lowered a little by Alfonso M. Adriano and while doing so, the car for
unknown reason accidentally fell and suffered damage to the value of P1, 651.38.

The defendant Porfirio de la Fuente denied negligence in the operation of the lifter in his separate answer
and contended further that the accidental fall of the car was caused by unforseen event.

ISSUE: Whether or not de la Fuente is an agent of Shell Co.

HELD: Yes.

De la Fuente owned his position to the Shell Company which could remove him terminate his services at
any time from the said Company, and he undertook to sell the Shell Company's products exculusively at
the said Station.

De la Fuente was the operator of the station "by grace" of the Defendant Company which could and did
remove him as it pleased;

As the act of the agent or his employees acting within the scope of his authority is the act of the principal,
the breach of the undertaking by the agent is one for which the principal is answerable. Moreover, the
company undertook to "answer and see to it that the equipments are in good running order and usable
condition;" and the Court of Appeals found that the Company's mechanic failed to make a thorough check
up of the hydraulic lifter and the check up made by its mechanic was "merely routine" by raising "the
lifter once or twice and after observing that the operator was satisfactory, he (the mechanic) left the
place." The latter was negligent and the company must answer for the negligent act of its mechanic which
was the cause of the fall of the car from the hydraulic lifter.

CaseTitle: Cosmic Lumber Corporation vs Court of Appeal and Isidro Perez, G.R. No. 114311,
November 29, 1996

Topic: Special Power of Attorney

Ponente: Bellosillo, J.

Doctrine: When the sale of a piece of land or any interest thereon is through an agent, the authority of
the latter shall be in writing otherwise, the sale shall be void. Thus the authority of an agent to execute a
contract for the sale of real estate must be conferred in writing and must give him specific authority,
either to conduct the general business of the principal or to execute a binding contract containing terms
and conditions which are in the contract he did execute.

Facts: Petitioner, executed a Special Power of Attorney appointing Paz G. Villamil-Estrada as attorney-
in-fact to initiate, institute and file any court action for the ejectment of third persons and/or squatters of a
particular, to appear at the pre-trial conference and enter into any stipulation of facts and/or compromise
agreement so far as it shall protect the rights and interest of the corporation in the aforementioned lots.

Villamil-Estrada, by virtue of her power of attorney, instituted an action for the ejectment of
private respondent Isidro Perez and recover the possession of a portion of the lot before the RTC. Later
on, Villamil-Estrada entered into a Compromise Agreement with respondent Perez, allowing the latter to
pay the petitioner through the attorney-in-fact the sum of P26,640.00 in order to take ownership and
possession of the portion of the lot.

The "Compromise Agreement" was approved by the trial court and judgment was rendered in
accordance therewith. The decision became final and executory but it was not executed within the 5-year
period from date of its finality. Only when the respondent filed a complaint to revive the judgment that
the petitioner came to know of the compromise agreement entered into between Paz G. Villamil-Estrada
and respondent Isidro Perez. And upon learning of the fraudulent transaction, petitioner sought annulment
of the decision of the trial court before respondent Court of Appeals on the ground that the compromise
agreement was void.

Issue: Was the sale of the lot, through a compromise agreement entered into by the Attorney-in-Fact and
Perez valid?

Held: No, it is not valid. The authority granted Villamil-Estrada under the special power of attorney was
explicit and exclusionary. Nowhere in the authorization was Villamil-Estrada granted expressly or
impliedly any power to sell the subject property nor a portion thereof. Neither can a conferment of the
power to sell be validly inferred from the specific authority "to enter into a compromise agreement"
because of the explicit limitation fixed by the grantor that the compromise entered into shall only be "so
far as it shall protect the rights and interest of the corporation in the aforementioned lots."

When the sale of a piece of land or any interest thereon is through an agent, the authority of the
latter shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a
contract for the sale of real estate must be conferred in writing and must give him specific authority,
either to conduct the general business of the principal or to execute a binding contract containing terms
and conditions which are in the contract he did execute. A special power of attorney is necessary to enter
into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously
or for a valuable consideration. It is therefore clear that by selling to respondent Perez a portion of
petitioner's land through a compromise agreement, Villamil-Estrada acted without or in obvious authority.
The sale ipso jureis consequently void. So is the compromise agreement.

CASE TITLE: SAN JUAN STRUCTURAL AND STEEL FABRICATORS v. CA

GR No. 129459, 357 Phil. 631

29 September 1998
TOPIC: Contracts inexistent and void from the beginning; susceptibility to ratification

PONENTE: Panganiban, J.

DOCTRINE:A contract that is considered inexistent and void from the beginning is NOT susceptible
to ratification.

FACTS: San Juan Structural and Steel Fabricators, Inc. (San Juan) entered into an agreement with
Motorich Sales Corp. (Motorich) which was allegedly represented by Motorich’s treasurer, Nenita
Gruenberg, for the transfer of the latter’s parcel of land. San Juan paid the down payment. Co, president
of San Juan, wrote a letter course through Motorich’s broker requesting for a computation of the balance
to be paid. They were supposed to meet in the office of San Juan for payment of the balance but Nenita
Gruenberg, did not appear. Despite repeated demands and in utter disregard of its commitments, Motorich
refused to execute the Transfer of Rights/Deed of Assignment necessary to transfer the certificate of title.
ACL Development Corp. (ACL) was impleaded as a necessary party since the TCT was still in its name.
JNM Realty & Development Corp. (JNM) was impleaded as a necessary party in view of the fact that it is
the transferor of right in favor of Motorich. Subsequently, ACL and Motorich entered into a Deed of
Absolute Sale and by reason thereof, the Registry of Deeds of Quezon City issued a new title in the name
of Motorich, represented by Nenita and Reynaldo Gruenbereg.

In its complaint, San Juan insists that “[w]hen Gruenberg and Co affixed their signatures on the contract
they both consented to be bound by the terms thereof.” Ergo, San Juan contends that the contract is
binding on the two corporations. It further contends that Motorich has ratified said contract of sale
because of its “acceptance of benefits,” as evidence by the receipt issued by Gruenberg.

ISSUE:Is a contract entered into by a corporate treasurer, by herself and without any authorization from
the board of directors, valid or may be ratified?

HELD: NO.It is true that pursuant to the signed agreement, a lot owned by Motorich was purportedly
sold to San Juan. However, the contract cannot bind Motorich because it NEVER authorized or ratified
such sale. As a general rule, the acts of corporate officers within the scope of their authority are binding
on the corporation but when these officers exceed their authority, their actions “cannot bind the
corporation, unless it has ratified such acts or is estopped from disclaiming them.”
Article 1318 of the Civil Code lists the requisites of a valid and perfected contract: "(1) consent of the
contracting parties; (2) object certain which is the subject matter of the contract; (3) cause of the
obligation which is established." As found by the trial court and affirmed by the Court of Appeals, there is
no evidence that Gruenberg was authorized to enter into the contract of sale, or that the said contract was
ratified by Motorich. This factual finding of the two courts is binding on this Court. As the consent of the
seller was not obtained, no contract to bind the obligor was perfected. Therefore, there can be no valid
contract of sale between petitioner and Motorich.

Because Motorich had never given a written authorization to Gruenberg to sell its parcel of land, the
Agreement entered into by the latter with San Juan is VOID under Article 1874 of the Civil Code. Being
inexistent and void from the beginning, the contract cannot be ratified.

Case Title: Manila Memorial Park Cemetery Inc. Vs Pedro L. Linsangan; G.R. No. 151319;
November 22, 2004

Topic:Angecy - Agent

Ponente:Tinga; J.

Doctrine:The ignorance of a person dealing with an agent as to the scope of the latter's authority is no
excuse to such person and the fault cannot be thrown upon the principal. A person dealing with an agent
assumes the risk of lack of authority in the agent. He cannot charge the principal by relying upon the
agent's assumption of authority that proves to be unfounded. The principal, on the other hand, may act on
the presumption that third persons dealing with his agent will not be negligent in failing to ascertain the
extent of his authority as well as the existence of his agency.

Facts:Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the Holy Cross
Memorial Park owned by MMPCI. According to Baluyot, a former owner of a memorial lot under
Contract No. 25012 was no longer interested in acquiring the lot and had opted to sell his rights subject to
reimbursement of the amounts he already paid. The contract was for P95,000.00. Baluyot reassured Atty.
Linsangan that once reimbursement is made to the former buyer, the contract would be transferred to him.
Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the amount to be reimbursed to the
original buyer and to complete the down payment to MMPCI. Baluyot issued handwritten and typewritten
receipts for these payments. In March 1985, Baluyot informed Atty. Linsangan that he would be issued
Contract No. 28660, a new contract covering the subject lot in the name of the latter instead of old
Contract No. 25012. Atty. Linsangan protested, but Baluyot assured him that he would still be paying the
old price of P95,000.00 with P19,838.00 credited as full down payment leaving a balance of about
P75,000.00. On 8 April 1985, Baluyot brought an Offer to Purchase Lot No. A11 (15), Block 83, Garden
Estate I denominated as Contract No. 28660 and the Official Receipt No. 118912 dated 6 April 1985 for
the amount of P19,838.00. Contract No. 28660 has a listed price of P132,250.00. Atty. Linsangan
objected to the new contract price, as the same was not the amount previously agreed upon. To convince
Atty. Linsangan, Baluyot executed a document6 confirming that while the contract price is P132,250.00,
Atty. Linsangan would pay only the original price of P95,000.00. By virtue of this letter, Atty. Linsangan
signed Contract No. 28660 and accepted Official Receipt No. 118912. As requested by Baluyot, Atty.
Linsangan issued twelve (12) postdated checks of P1,800.00 each in favor of MMPCI. The next year, or
on 29 April 1986, Atty. Linsangan again issued twelve (12) postdated checks in favor of MMPCI. On 25
May 1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled for reasons
the latter could not explain, and presented to him another proposal for the purchase of an equivalent
property. He refused the new proposal and insisted that Baluyot and MMPCI honor their undertaking. For
the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty. Linsangan filed a
Complaint for Breach of Contract and Damages against the former.Baluyot did not present any evidence.
For its part, MMPCI alleged that Contract No. 28660 was cancelled conformably with the terms of the
contract8 because of non-payment of arrearages. MMPCI stated that Baluyot was not an agent but an
independent contractor, and as such was not authorized to represent MMPCI or to use its name except as
to the extent expressly stated in the Agency Manager Agreement. Moreover, MMPCI was not aware of
the arrangements entered into by Atty. Linsangan and Baluyot, as it in fact received a down payment and
monthly installments as indicated in the contract.

Issue:Whether or not Baluyot is an agent?

Ruling:No. By the contract of agency, a person binds himself to render some service or to do something
in representation or on behalf of another, with the consent or authority of the latter. Thus, the elements of
agency are (i) consent, express or implied, of the parties to establish the relationship; (ii) the object is the
execution of a juridical act in relation to a third person; (iii) the agent acts as a representative and not for
himself; and (iv) the agent acts within the scope of his authority. It is a settled rule that persons dealing
with an agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact
of agency but also the nature and extent of authority, and in case either is controverted, the burden of
proof is upon them to establish it. The basis for agency is representation and a person dealing with an
agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make
such an inquiry, he is chargeable with knowledge of the agent's authority and his ignorance of that
authority will not be any excuse. The ignorance of a person dealing with an agent as to the scope of the
latter's authority is no excuse to such person and the fault cannot be thrown upon the principal. A person
dealing with an agent assumes the risk of lack of authority in the agent. He cannot charge the principal by
relying upon the agent's assumption of authority that proves to be unfounded. The principal, on the other
hand, may act on the presumption that third persons dealing with his agent will not be negligent in failing
to ascertain the extent of his authority as well as the existence of his agency. In the instant case, it has not
been established that Atty. Linsangan even bothered to inquire whether Baluyot was authorized to agree
to terms contrary to those indicated in the written contract, much less bind MMPCI by her commitment
with respect to such agreements. Even if Baluyot was Atty. Linsangan's friend and known to be an agent
of MMPCI, her declarations and actions alone are not sufficient to establish the fact or extent of her
authority.

Case Title: Philpotts vs. Phil. Manufacturing Co.

Topic: Right of Inspection

Ponente: Street, J.
Doctrine: The right of inspection given to a stockholder can be exercised either by himself or by any
proper representative or atty-in-fact and either with or without the attendance of the stockholder.

Facts: The petitioner seeks to compel the respondent to permit the plaintiff in person or an authorized
agent/ attorney to inspect and examine the records of the business transacted by the company.

Issue: Whether or not the right to inspect the records can be exercised by a proper agent or attorney of the
stockholder as well as the stockholder

Held: YES. The right of inspection given to a stockholder can be exercised either by himself or by any
proper representative or atty-in-fact and either with or without the attendance of the stockholder. What a
man may do in person, he may do through another. The right of inspection to stockholders of corporations
are to be liberally construed and that said right may be exercised through any other properly authorized
person.

CASE TITLE: DR. CARLOS L. SEVILLA and LINA O. SEVILLA , petitioners-appellants, vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S. CANILAO, and
SEGUNDINA NOGUERA, respondents-appellees.

G.R. No. L-41182-3 April 16, 1988

TOPIC: CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; CONSTRUED.

PONENTE: SARMIENTO, J

DOCTRINE:

When the petitioner, Lina Sevilla, agreed to (wo)man the private respondent, Tourist World Service, Inc.'s
Ermita Office, she must have done so pursuant to a contract of agency. It is the essence of this contract
that the agent renders services "in representation or on behalf of another."

The parties had contemplated a principal-agent relationship, rather than a joint management or a
partnership. Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World.
Sevilla is entitled to damages because the agency created is compatible with the intent of the parties, and
cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been
created for the mutual interest of the agent and the principal.

FACTS:

Mrs. Noguera entered into a contract of lease w/ TWSI. Mr. Canilao signed in behalf of TWSI. Mrs.
Sevilla also signed as someone solidarily liable with TWSI for the prompt payment of the monthly rental.
The area leased is to be used as branch office of TWSI. The branch was run by Mrs. Sevilla. Mrs. Sevilla
is also an independent agent selling tickets of various airlines. She receives commission of 7%. She gives
3% of which to TWSI. TWSI was informed that Mrs. Sevilla was connected with a rival firm, the
Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist World Service
considered closing down its branch office. The corporate secretary Gabino Canilao went over to the
branch office, and, finding the premises locked, and, being unable to contact Mrs. Sevilla, he padlocked
the premises on June to protect the interest of TWSI. When neither Mrs. Lina Sevilla nor any of her
employees could enter the locked premises, a complaint was filed. Mrs. Sevilla contends that she and
TWSI entered into a Joint Venture business. Hence, she has a right on the premises.

RTC – TWSI being the true lessee, it was within its prerogative to terminate the lease and padlock the
premises. Lina Sevilla is a mere employee and as such, she was bound by the acts of her employer. CA
affirmed. Sevilla appeals.

ISSUE:

(1) Is Mrs. Sevilla an employee of TWSI? Does the Bureau of Labor Relations has jurisdiction, not the
trial court? NO.

(2) Did Mrs. Sevilla and TWSI enter into a Joint Venture Agreement? NO.

(3) Did Mrs. Sevilla and TWSI enter into a contract of agency? YES.

HELD:

(1) In this jurisdiction, there has been no uniform test to determine the existence of an employer-
employee relation. In general, we have relied on the so-called right of control test, “where the person for
whom the services are performed reserves a right to control not only the end to be achieved but also the
means to be used in reaching such end. Subsequently, however, we have considered, in addition the
existing economic conditions prevailing between the parties, like the inclusion of the employee in the
payrolls. Mrs. Sevilla is not an employee because: Under the lease contract, she had bound herself as
guaranty. A true employee cannot be made to part with his own money in pursuance of his employer’s
business, or otherwise, assume any liability thereof. When the branch office was opened, the same was
run by Mrs. Sevilla sharing her commissions with TWSI. Under these circumstances, it cannot be said
that Sevilla was under the control of Tourist World Service, Inc. “as to the means used.” It is further
admitted that Sevilla was not in the company’s payroll. As to her title as branch manager, employment is
determined by the right-of-control test and certain economic parameters. Titles are weak indicators of the
relationship.

(2) A joint venture, including a partnership, presupposes generally a parity of standing between the joint
co-venturers or partners, in which each party has an equal proprietary interest in the capital or property
contributed and where each party exercises equal rights in the conduct of the business. Furthermore, the
parties did not hold themselves out as partners, and the building itself was embellished with the electric
sign Tourist World Service, Inc.,” in lieu of a distinct partnership name.

(3) When the petitioner, Lina Sevilla, agreed to (wo)man the TWSI’s Ermita office, she must have done
so pursuant to a contract of agency. It is the essence of this contract that the agent renders services “in
representation or on behalf of another.” In the case at bar, Sevilla solicited airline fares, but she did so for
and on behalf of her principal, TWSI. As compensation, she received 4% of the proceeds in the concept
of commissions. But unlike simple grants of a power of attorney, the agency that we hereby declare to be
compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled
with an interest, the agency having been created for the mutual interest of the agent and the principal. It
appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in
the business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof,
holding herself solidarily liable for the payment of rentals. She continued the business, using her own
name, after Tourist World had stopped further operations. Her interest, obviously, is not limited to the
commissions she earned as a result of her business transactions, but one that extends to the very subject
matter of the power of management delegated to her. It is an agency that, as we said, cannot be revoked at
the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina
Sevilla, to damages

Case Title:barrette v tuazon

Topic:Not connected to Civ 2

Ponente:

Doctrine:

Facts:

Issue:

Held:

Case Title: Domingo vs. Domingo, G.R. No. L-30573, October 29, 1971

Topic:Agency

Ponente:Justice Makasiar

Doctrine: "An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from
the vendee without revealing the same to his principal is guilty of a breach of his loyalty to the latter and
forfeits his right to collect the commission that may be due him, even if the principal does not suffer any
injury by reason of such breach."

Facts:

➔ Vicente granted Gregorio the exclusive agency to sell his lot with a commission of 5%
on the total price, if the property is sold by Vicente or by anyone else during the 30-day
duration of the agency or if the property is sold by Vicente within three months from the
termination of the agency to a purchaser whom it was submitted by Gregorio during the
continuance of the agency with notice to Vicente.

➔ Later, Gregorio authorized Teofilo to look for a buyer, promising him half of his 5%
commission.

➔ Teofilo introduced Oscar to Gregorio as a prospective buyer.

➔ Oscar, then, submitted a written offer which was much lower than the original price.
Vicente, then, directed Gregorio to tell Oscar to raise his offer. After several conferences
between Gregorio and Oscar, the latter raised his offer, to which Vicente agreed.
 ➔ Upon demand of Vicente, Oscar issued a check.

➔ Vicente advanced to Gregorio.

➔ Oscar confirmed his former offer to pay the property.

➔ Vicente asked for an additional amount to which Oscar promised to deliver.

➔ Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina for succeeding
in persuading Vicente to sell his lot. This gift was not disclosed by Gregorio to Vicente.
Neither did Oscar pay Vicente the additional amount.

➔ Oscar told Gregorio that he did not receive his money from his brother in the US. Oscar
did not see him after several weeks. Thus, Gregorio sensed something fishy.

➔ Vicente stated that Gregorio is not entitled to the 5% commission because he sold the
property not to Gregorio's buyer, Oscar, but to another buyer, Amparo, which is the wife
of Oscar.

Issue: Is the failure of Gregorio to disclose the propina for having persuaded Vicente to reduce the
purchase price constitutes fraud as to cause a forfeiture of his 5% commission?

Held: Yes. The Supreme Court stated that the duties and liabilities of a broker to his employer are
essentially those which an agent owes to his principal. Consequently, the decisive legal provisions are
found in Articles 1891 and 1909 of the New Civil Code. The aforecited provisions demand the utmost
good faith, fidelity, honesty, candor and fairness on the part of the agent, the real estate broker in this
case, to his principal, the vendor. The law imposes upon the agent the absolute obligation to make a full
disclosure or complete account to his principal of all his transactions and other material facts relevant to
the agency, so much so that the law as amended does not countenance any stipulation exempting the
agent from such an obligation and considers such an exemption as void. The duly of an agent is likened to
that of a trustee. This is not a technical or arbitrary rule but a rule founded on the highest and truest
principle of morality as well as of the strictest justice. An agent who takes a secret pro t in the nature of a
bonus, gratuity or personal bene t from the vendee, without revealing the same to his principal, the
vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission
from his principal, even if the principal does not suffer any injury by reason of such breach of fidelity, or
that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it,
because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage. By
taking such pro t or bonus or gift or propina from the vendee, the agent thereby assumes a position wholly
inconsistent with that of being an agent for his principal, who has a right to treat him, insofar as his
commission is concerned, as if no agency had existed. The fact that the principal may have been bene ted
by the valuable services of the said agent does not exculpate the agent who has only himself to blame for
such a result by reason of his treachery or perfidy.

Case Title: Behn Meyer & Co vs Notling, 35 Phil. 274

TAX Case
Case Title: Commissioner of Internal Revenue vs William J. Suter, 27 SCRA 152

Topic: Disestablishment of a Partnership after the marriage of the partners / Corporate personality being
disregarded for income tax purposes

Ponente: Reyes, J.B.L., J.

--- Case not connected to Civil Law

CASE TITLE: JAMES BARTON vs. LEYTE ASPHALT & MINERAL OIL CO.; [G.R. No. 21237.
March 22, 1924.]
TOPIC: PRINCIPAL AND AGENT; AUTHORITY OF SELLING AGENT; SALES TO
SUBAGENT.
PONENTE: STREET,J.
DOCTRINE:An agent who is clothed with authority to sell a given commodity cannot bind the
principal by selling to himself, either directly or indirectly. It results that the principal is not obligated to
fill orders taken by the agent from his own subagent, unless the principal ratifies such sale with full
knowledge of the facts.
FACTS: Leyte Asphalt & Mineral Oil Co. is the owner of Lucio mine where there exists a valuable
deposit of bituminous limestone and other asphalt products. William Anderson, as president and general
manager of Leyte Asphalt, sent a letter to James Barton, authorizing the latter to sell the products of the
Luciomine in Australia and New Zealand. Thereafter, Leyte Asphalt sent a second letter, expanding the
territories over which Barton is given the sole and exclusive sales agency for bituminous limestone and
other asphalt, Ltd., until May first, 1922, to include Tasmania, Saigon, Java, China, India, Sumatra, US,
Siam, and Hongkong.
Meanwhile, Barton went to San Francisco and entered into an agreement with Ludvigsen & McCurdy,
whereby said firm was constituted a subagent and given the sole selling rights for the bituminous
limestone products of Leyte Asphalt. When Barton went to Australia, he also made a similar agreement
with Frank B. Smith, of Sydney. Thereafter, Ludvigsen & McCurdy advised Barton of an order for
6,000 tons of bituminous limestone to be loaded at Leyte not later than May 5, 1921. Barton accepted
such and when he returned to Manila, he informed Anderson of the San Francisco order. Anderson then
said that, owing to lack of capita, adequate facilities had not been provided by the company for filling
large orders and suggested that Barton had better hold up in the matter of taking orders. Later, Frank B.
Smith advised Barton of an order for 5,000 tons of bituminuos limestone, and Barton informed Leyte
Asphalt to be prepared to ship another 5,000 tons of bituminuos limestone, on or about May 6, 1921, in
addition to the consignment for San Francisco. It will be noted in connection with this letter of Barton,
that no mention was made of the names of the person, or firm, for whom the shipments were really
intended. The obvious explanation that occurs in connection with this is that Barton did not then care to
reveal the fact that the two orders had originated from his own subagents in San Francisco and Sydney.
Then, while in Tokyo, Japan, Barton came in contact with one H. Hiwatari, who speaks of himself as if
he had been appointed exclusive sales agent for the plaintiff in Japan. While Barton was in Tokyo, he
procured a letter addressed to himself, to be signed by Hiwatari, which contains an order for 1,000 tons
of bituminous limestone.
ISSUE: Whether or not James Barton, as an agent of Leyte Asphalt, may be allowed to recover
damages for breach of contract, in light of the orders given by Ludvigsen & McCurdy, by Frank B.
Smith, and by Hiwatari, who are all subagents of Barton?
HELD: NO. The transaction indicated in the orders from Ludvigsen & McCurdy and from Frank B.
Smith must, in our opinion, be at once excluded from consideration as emanating from persons who had
been constituted mere agents of the plaintiff. The San Francisco order and the Australian orders are the
same in legal effect as if they were orders signed by the plaintiff and drawn upon himself; and it cannot
be pretended that those orders represent sales to bona fidepurchasers found by the plaintiff. The original
contract by which the plaintiff was appointed sales agent for a limited period of time in Australia and
the United States contemplated that he should find reliable and solvent buyers who should be prepared
to obligate themselves to take the quantity of bituminous limestone contracted for upon terms consistent
with the contract. These conditions were not met by the taking of these orders from the plaintiff's own
subagents, which was as if the plaintiff had bought for himself the commodity which he was authorized
to sell to others. Article 267 of the Code of Commerce declares that no agent shall purchase for himself
or for another that which he has been ordered to sell. The law has placed its ban upon a broker's
purchasing from his principal unless the latter with full knowledge of all the facts and circumstances
acquiesces in such course; and even then the broker's action must be characterized by the utmost good
faith. A sale made by a broker to himself without the consent of the principal is ineffectual whether the
broker has been guilty of fraudulent conduct or not. We think, therefore, that the position of the
defendant company is indubitably sound in so far as it rests upon the contention that the plaintiff has not
in fact found anybona fide purchasers ready and able to take the commodity contracted for upon terms
compatible with the contract which is the basis of the action.

Case Title: Eurotech Industrial Technologies, Inc. vs. Cuizon, GR. No. 167552, April 23, 2007

Topic: Liability of Agent

Ponente:Chico-Nazario, J.

Doctrine:Under Article 1987, an agent becomes personally liable to a third person when he exceeds his
authority. If the act of the agent is "reasonably necessary" or is required in order for him to protect the
business of his principal, he is not deem to have exceeded his authority.

Facts:Impact System owned by Erwin Cuizon sought to buy from Eurotech Insudtrial Technologies, Inc.
1 unit of sludge pump at P250,000 with down payment of P50,000. When the sludge pump arrived from
the UK, Eurotech refused to deliver the same to Impact System without it having fully settled its account.
Thus, Edwin Cuizon, sales manager of Impact System, and Alberto de Jesus, general manager of
Eurotech, executed a Deed of Assignment of it receivables in favor of Eurotech. Unknown to Eurotech,
Impact System collected the amount of the receivables assigned. Alarmed by this development, Eurotech
demanded that the remaining obligations be paid. Impact System was not able to fully pay the remaining
balance. Thus, Eurotech filed a complaint for sum of money. In his answer, Edwin alleged among others
that he is not a real party in interest in this case. According to him, he was acting as mere agent of his
principal, which was the Impact Systems, in his transaction with Eurotech and the latter was very much
aware of this fact. The trial court dropped Edwin as a party defendant in the case on the ground that
Impact System has ratified the act of Edwin of assignment when it paid the down payment 2 days after
the execution of the Deed of Assignment and that Eurotech knew of such ratification. CA affirmed.
Hence, this petition. Eurotech contended that Erwin’s act of collecting the receivables assigned, while it
did not revoked the agency relations of Erwin and Edwin, it repudiated Edwin’s power to sign the Deed
of Assignment. As Edwin did not sufficiently notify Eurotech of the extent of his powers as an agent, it
claims that he should be made personally liable for the obligations of his principal.

Issue:Did Edwin exceeded his authority when he signed the Deed of Assignment thereby binding himself
personally to pay the obligations to Impact System?

Held:No. Article 1897 provides that an agent who acts as such, is not personally liable to the party with
whom he contracts. It, however, presents two instances when an agent becomes personally liable to a
third person. The first is when he expressly binds himself to the obligation and the second is when he
exceeds his authority. In the last instance, the agent can be held liable if he does not give the third party
sufficient notice of his powers. In the case, Edwin does not fall within any of the exceptions. The Deed of
Assignment clearly states that Edwin signed thereon as the sales manager of Impact Systems. Further, the
significant amount of time spent on the negotiation for the sale of the sludge pump underscores Impact
Systems' perseverance to get hold of the said equipment. There is, therefore, no doubt that Edwin's
participation in the Deed of Assignment was "reasonably necessary" or was required in order for him to
protect the business of his principal. Had he not acted in the way he did, the business of his principal
would have been adversely affected and he would have violated his fiduciary relation with his principal.

Case Title: INFANTE V. CUNANAN, GR L-5180, AUGUST 31, 1953

Topic: Cancelled authority to sell

Ponente: Bautista Angelo, J.

Doctrine: Principal acting in bad faith cannot evade payment of commission to the agents contracted by
cancelling the contract after learning that a buyer has shown his willingness to purchase property.

FACTS: Infante, who owns a land with a house built on it, contracted Cunanan and Mijares to sell the
property from which they would receive commission. A certain Noche agreed to purchase the said
property. However, Infante changed her mind and informed Cunanan and Mijares of said decision and
made the two sign an agreement stating that their authority to sell was already cancelled.

Infante then sold the property to Noche. Finding out about the transaction, Cunanan and Mijares
demanded for their commission but Infante opposed thereto.

RTC ordered Infante to pay the commission in which CA affirmed.

ISSUE: WON Infante was duty bound to pay commission notwithstanding that authority to sell has been
cancelled

HELD: YES. A principal may withdraw the authority given to an agent at will.

In this case, Cunanan and Mijares agreed to cancel the authority given to them upon assurance by Infante
that should the property be sold to Noche, the former would be given commission. The fact that Infante
changed her mind even if Cunanan and Mijares already found a buyer who was willing to close the deal is
a matter that would not give rise to a legal consequence if Cunanan and Mijares agree to call off the
transaction in deference to the request of Infante.

Infante took advantage of the services of Cunanan and Mijares believing that she could evade payment of
their commission, she made use of a tactic inducing them to sign the deed of cancellation of their
authority to sell. This act of subversion cannot be sanctioned and cannot serve as basis for Infante to
escape payment of the commissions agreed upon. Infante acted in her own selfish interest and in bad
faith. This act cannot be sanctioned without according to the party prejudiced the reward which is due
him.

CASE TITLE: MANUEL BUASON and LOLITA M. REYES vs. MARIANO PANUYAS., G.R.
No. L-11415, May 25, 1959.

TOPIC: 1) SALES; DOUBLE SALE.

2) AGENCY

PONENTE: PADILLA, J.:

DOCTRINE: If it does not appear that the second purchasers had actual knowledge of the previous sale
to the plaintiff, they had a right to rely on the face of the certificate of title of the registered owners and of
the authority conferred by them upon the agent with a power of attorney recorded on the back of the
certificate. In case of double sale of land registered under the Land Registration Act, he who records the
sale in the Registry of Deeds has a better right than he who did not.

FACTS: Spouses Buenaventura Dayao and Eugenia Vega acquired by homestead patent a parcel
of land. The spouses executed a power of attorney authorizing Eustaquio Bayuga to engage the services
of an attorney to prosecute their case against Leonardo Gambito for annulment of a contract of sale of the
parcel of land and after the termination of the case in their favor to sell it. Buenaventura died leaving his
spouse and his four children. On March 21, 1939, his children executed a deed of sale conveying 12.8413
hectares of the parcel of land to the Plaintiff Manuel Buason and Lolita Reyes. The Plaintiff took
possession of the land. Subsequently, or on July 18, 1944, Eustaquio Bayuga sold 8 hectares of the same
parcel of land to spouses Mariano Panuyas, defendant. Both the plaintiff and the defendant claim
ownership. Plaintiff filed a complaint praying that the deed of sale in favor of the defendant be declared
null and void. The defendant alleged that they were buyers in good faith and for valuable consideration.
The trial court dismissed the complaint for being barred by the statute of limitation.

ISSUE:1) Was the defendant, the second purchaser, in good faith?

2) Was the death of the principal, Buenaventura, extinguishes the authority of the agent Bayuga
to sell?

HELD:1) YES. It appears that the plaintiff did not register the sale of the parcel of land in question
executed in their favor by the Dayao children on 21 March 1939. On the other hand, the power of attorney
executed by Buenaventura Dayao authorizing Eustaquio Bayuga to sell the parcel of land was annotated
on the back of original certificate of title, and the sale executed by Eustaquio in favor of defendant
Mariano under the said power of attorney was annotated on the back of the same original certificate of
title. It does not appear that the appellee and his wife had actual knowledge of the previous sale. In the
absence of such knowledge, they had a right to rely on the face of the certificate of title of the registered
owners and of the authority conferred by them upon the agent also recorded on the back of the certificate
of title. As this is a case of double sale of land registered under the Land Registration Act, he who
recorded the sale in the Registry of Deeds has a better right than he who did not.

2)No.As to the plaintiff’s contention that, as the death of the principal ended the authority of the
agent, therefore the sale in favor of the defendant was null and void. The Court held that Article 1931 of
the New Civil Code is the law applicable which provides that:

Anything done by the agent, without knowledge of the death of the principal or of any other cause
which extinguishes the agency, is valid and shall be fully effective with respect to third persons
who may have contracted with him in good faith.

Case Title: Rallos vs. Felix Go

NOT RELATED TO Civil Law Review 2

CASE TITLE: BISAYA TRANSPORTATION CO. INC. v. SANCHEZ; G.R. No. 74623 August 31,
1987

TOPIC: PERFECTION OF CONTRACTS

PONENTE: Padilla, J.

DOCTRINE:Contracts are perfected by mere consent, and from that moment the parties are bound not
only to the fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law.

FACTS:On 27 July 1976, a formal Contract of Agency, was executed between BISTRANCO,
represented by Receiver Atty. Adolfo V. Amor and Marciano C. Sanchez, represented by his authorized
representative Exequiel Aranas. Thereafter, on 30 July 1976, after Sanchez found that Paragraph 16 of the
Contract of agency was quite prejudicial to him, he executed with BISTRANCO a Supplemental Shipping
Agency Contract, which was duly signed by Receiver Atty. Adolfo V. Amor on behalf of BISTRANCO
and Marciano C. Sanchez himself. As a Shipping Agent, Sanchez was able to build good business
relations with Butuan City and expand BISTRANCO’s operations in the region, succeeding in increasing
the volume of the shipping business of BISTRANCO at the Butuan City port, so much so that his
earnings on freight alone increased from an average of P8,535.00 a month in 1975 to an average of about
P32,000.00 a month in the last seven months of 1979.

However, in December of 1979 BISTRANCO wrote Sanchez informing him that the company would be
opening a branch office in Butuan City which the latter realized to be a repudiation of his Contract of
Agency with the Petitioner. Sanchez was then constrained to file an action for Specific Performance with
Preliminary Injunction and Damages in view of the serious detriment to his business once the branch
office opened.

ISSUE:Did BISTRANCO violate its Contract of Agency with Sanchez in opening a Branch Office in
Butuan City?

HELD:YES. It may be true that there is no express prohibition for BISTRANCO to open its branch in
Butuan City. But, the very reason why BISTRANCO agreed not to employ or appoint another agent in
Butuan City was to prevent competition against Sanchez' agency, in order that he might recover what he
invested and eventually maximize his profits. The opening by BISTRANCO of a branch in Butuan City
virtually resulted in consequences to Sanchez worse than if another agent had been appointed. In effect,
the opening of a branch office in Butuan City was a violation of the Contracts of agency. Article 1315 of
the Civil Code provides:

“Contracts are perfected by mere consent, and from that moment the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all the consequences which, according to
their nature, may be in keeping with good faith, usage and law.”

In the case at bar, good faith required that BISTRANCO refrain from opening its branch in Butuan City
during the effectivity of the agency contract with Sanchez, or until 27 July 1981.

Moreover, the opening of the branch office which, in effect, was a revocation of the contracts of agency is
not sanctioned by law because the agency was the means by which Sanchez could fulfill his obligations
under his contract with BISTRANCO. Article 1927 of the Civil Code, among others, provides: "An
agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an
obligation already contracted".

CaseTitle: Pasno V Ravina

Facts:

Gabina Labitoria during her lifetime mortgaged three parcels of land to the Philippine National Bank to
secure an indebtedness of P1,600. It was stipulated in the mortgage, among other things, that the
mortgagee "may remove, sell or dispose of the mortgaged property or any buildings, improvements or
other property in, on or attached to it and belonging to the mortgagor in accordance with the provisions of
Act No. 3135 or take other legal action that it may deem necessary." The mortgagor died, and a petition
was presented in court for the probate of her last will and testament. During the pendency of these
proceedings, a special administrator was appointed by the lower court who took possession of the estate
of the deceased, including the three parcels of land mortgaged to the Philippine National Bank. The estate
having failed to comply with the conditions of the mortgage, the Philippine National Bank, pursuant to
the stipulations contained in the same, asked the sheriff of Tayabas to proceed with the sale of the parcels
of land. When the attorney for the special administrator received notice of the proposed action, he filed a
motion in court in which an order was asked requiring the sheriff to vacate the attachment over the
mortgaged properties and to abstain from selling the same. The lower court granted the petition in an
order of February 14, 1929, and later denied a motion for reconsideration presented on behalf of the
Philippine National Bank.

Issue:

WON the right of sale of the mortgage property can survive and can be enforced under special power
while the mortgaged property is in custodia legis

Ruling:

The power of sale given in a mortgage is a power coupled with an interest which survives the death of the
grantor. One case, that of Carter vs. Slocomb, has gone so far as to hold that a sale after the death of the
mortgagor is valid without notice to the heirs of the mortgagor. However that may be, conceding that the
power of sale is not revoked by the death of the mortgagor, nevertheless in view of the silence of Act No.
3135 and in view of what is found in section 708 of the Code of Civil Procedure, it would be preferable to
reach the conclusion that the mortgagee with a power of sale should be made to foreclose the mortgage in
conformity with the procedure pointed out in section 708 of the Code of Civil Procedure. That would
safeguard the interests of the estate by putting the estate on notice while it would not jeopardize any rights
of the mortgagee. The only result is to suspend temporarily the power to sell so as not to interfere with the
orderly administration of the estate of a decedent. A contrary holding would be inconsistent with the
portion of our law governing the settlement of estates of deceased persons.

It results that the trial judge committed no error in sustaining the petition of the administrator of the estate
of the deceased Gabina Labitoria and in denying the motion of the Philippine National Bank.

Case Title: Del Rosario v. Abad, G.R. No. L-10881, September 30, 1958

Topic: Agency
Ponente: PADILLA, J

Doctrine: A mere statement in the power of attorney that it is coupled with an interest is not enough. In
what does such interest consist must be stated in the power of attorney. As the agency was not coupled
with an interest, it was terminated upon the death of the principal and the agent could no longer validly
convey the parcel of land. The sale, therefore, to the latter was null and void.

Facts: Within the prohibitive period of five years, the homesteader mortgaged the improvements of the
homestead in favor of defendant P. A. At the same time, he executed an "irrevocable special power of
attorney coupled with interest" in favor of the mortgagee authorizing him to sell the land. After the lapse
of the prohibitive period, the mortgagor died leaving the mortgage debt unpaid. Thereafter, acting on the
power of attorney, the mortgagee sold the land.

Issue: Whether or not the sale is valid

Held: No. The power of attorney executed by the homesteader in favor of defendant did not create an
agency with interest nor did it clothe the agency with irrevocable character. A mere statement in the
power of attorney that it is coupled with interest is not enough. In what does such interest consist must be
stated in the power of attorney. The mortgage has nothing to do with the power of attorney and may be
foreclosed by the mortgagee upon failure of the mortgagor to comply with his obligation. As the agency
was not coupled with an interest, it was terminated upon the death of the principal, and the agent could no
longer validly convey the land. Hence, the sale was null and void.

CaseTitle: RAMOS v. RAMOS

Topic: Prescription

Ponente: Aquino, J.

Doctrine: In express trusts, a trustee cannot acquire by prescription the ownership of property entrusted
to him; an action to compel a trustee to convey property registered in his name in trust for the benefit of
the cestui qui trust does not prescribe; the defense of prescription cannot be set up in an action to recover
property held by a person in trust for the benefit of another; and that property held in trust can be
recovered by the beneficiary regardless of the lapse of time. However, the rule of imprescriptibility of the
action to recover property held in trust may possibly apply to resulting trusts as long as the trustee has not
repudiated the trust

Facts: Spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October 26, 1880,
respectively. They were survived by their 3 children. Moreover, Martin was survived by his 7 natural
children. In December 1906, a special proceeding for the settlement of the intestate estate of said spouses
was conducted. Rafael Ramos, a brother of Martin, administered the estate for more than 6 years.
Eventually, a partition project was submitted which was signed by the 3 legitimate children and 2 of the 7
natural children. A certain Timoteo Zayco signed in representation of the other 5 natural children who
were minors. The partition was sworn to before a justice of peace.
The conjugal hereditary estate was appraised at P74,984.93, consisting of 18 parcels of land, some head
of cattle and the advances to the legitimate children. ½ thereof represented the estate of Martin. 1/3
thereof was the free portion or P12,497.98. The shares of the 7 natural children were to be taken from that
1/3 free portion. Indeed, the partition was made in accordance with the Old Civil code. Thereafter, Judge
Richard Campbell approved the partition project. The court declared that the proceeding will be
considered closed and the record should be archived as soon as proof was submitted that each he3ir had
received the portion adjudicated to him.

On February 3, 1914, Judge Nepumoceno asked the administrator to submit a report showing that the
shares of the heirs had been delivered to them as required by the previous decision. Nevertheless, the
manifestation was not in strict conformity with the terms of the judge’s order and with the partition
project itself. Eight lots of the Himamaylan Cadastre were registered in equal shares in the names of
Gregoria (widow of Jose Ramos) and her daughter, when in fact the administrator was supposed to pay
the cash adjudications to each of them as enshrined in the partition project. Plaintiffs were then
constrained to bring the suit before the court seeking for the reconveyance in their favor their
corresponding participations in said parcels of land in accordance with Article 840 of the old Civil Code.
Note that 1/6 of the subject lots represents the 1/3 free portion of martin’s shares which will eventually
redound to the shares of his 7 legally acknowledged natural children. The petitioners’ action was
predicated on the theory that their shares were merely held in trust by defendants. Nonetheless, no Deed
of Trust was alleged and proven. Ultimately, the lower court dismissed the complaint on the grounds of
res judicata, prescription and laches.

Issue: Is the plaintiffs’ action barred by prescription, laches and res judicata?

Held: The answer is in the affirmative. There was inexcusable delay thereby making the plaintiffs’
action unquestionably barred by prescription and laches and also by res judicata. Inextricably interwoven
with the questions of prescription and res judicata is the question on the existence of a trust. It is
noteworthy that the main thrust of plaintiffs’ action is the alleged holding of their shares in trust by
defendants. Emanating from such, the Supreme Court elucidated on the nature of trusts and the
availability of prescription and laches to bar the action for reconveyance of property allegedly held in
trust. It is said that trust is the right, enforceable solely in equity to the beneficial enjoyment of property,
the legal title to which is vested in another. It may either be express or implied. The latter is further
subdivided into resulting and constructive trusts. Applying it now to the case at bar, the plaintiffs did not
prove any express trust. Neither did they specify the kind of implied trust contemplated in their action.
Therefore, its enforcement maybe barred by laches and prescription whether they contemplate a resulting
or a constructive trust.

Under Act 190, whose statute of limitations applies to this case (Art. 116, Civil Code), the longest period
of extinctive prescription was only ten years.

Atanacia, Modesto and Manuel, all surnamed Ramos, were already of age in 1914. From that year, they
could have brought the action to annul the partition. Maria Ramos and Emiliano Ramos were both born in
1896. They reached the age of twenty-one years in 1917. They could have brought the action from that
year.

The instant action was filed only in 1957. As to Atanacia, Modesto and Manuel, the action was filed
forty-three years after it accrued and, as to Maria and Emiliano, the action was filed forty years after it
accrued. The delay was inexcusable. The instant action is unquestionably barred by prescription and res
judicata.
CASETITLE: Huang v. Court of Appeals

TOPIC: Trusts; Resulting Trust

DOCTRINE: There is implied trust when property is Oslo and the legal estate is granted to one party but
the price is paid by another for the purpose of having the beneficial interest for the property. A resulting
trust arises because of the presumption that he who pays for a thing intends a beneficial interest therein
for himself.

FACTS: Dolores Sandoval purchased two lots in Dasmariñas, Makati. One in her name and another in
the name of Ricardo Huang. The second purchase was made in his name in compliance with the
subdivision policy that ‘no one owner can own two lots’. Later on, Ricardo was just allowed to encumber
the second lot in order that lot may receive improvements. In protection of her right, Dolores sought the
Sps. Huang to execute a deed of absolute sale with assumption of mortgage in her favor. The Huangs
complied, however years later, without Dolores’ consent, The Huangs leased the property to Deltron-
Sprague. Deltron forbade Dolores’ from using the improvements found on the second lot. Thereafter, The
Huangs field a complaint against Dolores claiming that Dolores forced them into signing the existing
deed of absolute sale in her name over the property. Meanwhile, Dolores tried to pay the mortgage
balance of Ricardo with the SSS, but the SSS refused to receive her payment. Dolores filed a complaint
against the SSS and demanded that the TCT in the name of the Huangs over the second lot be cancelled,
and that the TCT over the property in her name be released. The article Court consolidates the cases, and
ruled in favor of Dolores, that she owns both lots, and that the executed Deed of Absolute Sale with
assumption of mortgage was voluntarily made by the Huangs. The Huangs raised in the CA on appeal
that there is no resulting trust, but in fact, only equitable mortgage .

ISSUE: WON there is the existence of resulting trust over the second lot?

HELD: YES, there is resulting trust on part of the second lot, where the Huangs are considered the
trustee of the Lot for the benefit of Owner-Dolores. Dolores provided for the money of the purchase of
the lot, but the corresponding T T were placed in the name of Ricardo Huang because of the subdivision
policy. Ricardo was made into a trustee over the lot and it’s improvements, where he has the fiduciary
relationship with respect to the property, to hold it and convey it the benefit of Dolores. A constructive or
resulting trust is imposed where a person holding title to property is subject to an equitable duty to convey
it to another on the ground that he would be unjustly enriched, if he were permitted to retain it.
Case Title: Cuaycong v. Cuaycong

G.R. No. L-21616, December 11, 1967

Topic: Express Trust

Ponente: Bengzon, J.P., J.

Doctrine

If the intention to establish a trust is clear, the trust is express; if the intent to establish a trust is to be
taken from circumstances or other matters indicative of such intent, then the trust is implied; See Article
1441 of the Civil Code.

Facts

Eduardo Cuaycong, married to Clotilde de Leon, died without issue but with three brothers and a sister
surviving him: Lino, Justo, Meliton and Basilisa. Upon his death, his properties were distributed to his
heirs as he willed except two haciendas both known as Hacienda Bacayan. Hacienda Bacayan is
comprised of eight (8) lots all of which are titled in the name of Luis D. Cuaycong, son of Justo
Cuaycong. Meliton and Basilisa died without any issue. Plaintiffs, surviving heirs of Lino, filed a suit
against Justo, Luis and Benjamin Cuaycong for conveyance of inheritance and accounting alleging,
among others, that Luis thru clever strategy, fraud, misrepresentation and in disregard of Eduardo’s
wishes by causing the issuance in his name of certificates of title covering Hacienda Bacayan’s
properties. The plaintiffs also claimed that Eduardo had an arrangement with Justo and Luis that the latter
will hold in trust what might belong to his brothers and sister as a result of the arrangements and deliver
to them their share when the proper time comes. The plaintiffs repeatedly demanded for their share in the
property after Eduardo and Clotilde’s death.

On the other hand, Luis Cuaycong moved to dismiss the case on the grounds of unenforceability of the
claim under the statute of frauds, no cause of action, and bar of causes of action by the statute of
limitations. The CFI dismissed the case for the plaintiffs’ failure to file an amended complaint mentioning
or alleging therein the written evidence of the alleged trust. Plaintiff thereafter manifested that the claim is
based on an implied trust as shown by paragraph 8 of the complaint. They added that there being no
written instrument of trust- they could not amend the complaint to include such instrument.

Issue

Whether the trust is express or implied

Ruling

The Supreme Court held that the alleged trust is an express trust. The Civil Code defines an express trust
as one created by the intention of the trustor or of the parties, and an implied trust as one that comes into
being by operation of law. Express trusts are those created by the direct and positive acts of the parties, by
some writing or deed or will or by words evidencing an intention to create a trust.

On the other hand, implied trusts are those, which, without being expressed, are deducible from the nature
of the transaction by operation of law as matters of equity, independently of the particular intention of the
parties (Artice 1441, Civil Code). Thus, if the intention to establish a trust is clear, the trust is express; if
the intent to establish a trust is to be taken from circumstances or other matters indicative of such intent,
then the trust is implied. From these and from the provisions of the complaint itself, it is clear that the
plaintiffs alleged an express trust over an immovable, especially since it is alleged that the trustor
expressly told the defendants of his intention to establish the trust. Such a situation definitely falls under
Article 1443 of the Civil Code.

CASE TITLE: ESPERANZA FABIAN, BENITA FABIAN and DAMASO PAPA Y

FABIAN,plaintiffs-appellants, vs. SILBINA FABIAN, FELICIANO LANDRITO, TEODORA FABIAN
and FRANCISCO DEL MONTE, defendants-appellees.(Fabian v. Fabian, G.R. No. L-20449, [January
29, 1968], 130 PHIL 214-224)

TOPIC:

A) FRIAR LANDS ACTS; PURCHASE OF LOT ON INSTALLMENT; OWNERSHIP

TRANSFERRED TO PURCHASER UPON PAYMENT OF THE FIRST
INSTALLMENT.

B) SALE OF LAND BY THE GOVERNMENT TO NON-HEIR OF HOLDER OF

CERTIFICATE IS NULL AND VOID; PROPERTY ACQUIRED THROUGH FRAUD;
PURCHASERS CONSIDERED TRUSTEES OF AN IMPLIED TRUST.

C) ACTION FOR RECONVEYANCE; LACHES BAR TO AN ACTION TO ENFORCE A

CONSTRUCTIVE TRUST.

PONENTE: Castro, J.

DOCTRINE:

A) The purchaser of a piece of land, which was part of the Friar Lands Estate of Muntinlupa,
Rizal, who prior to his death had paid five annual installments to the Government and
had, in fact been issued a sale certificate therefor, was at the time of his death already the
 owner of said piece of land. While under section 15 of Act 1120, otherwise known as the
Friar Lands Act, title to the land sold is reserved to the Government until the purchaser
makes full payment of all the required installments and interest thereon, this legal
reservation refers to the bare, naked title. The equitable and beneficial title really passed
to the purchaser the moment he paid the first installment and was given a certificate of
sale. The reservation of the title in favor of the Government is made merely to protect the
interest of the Government so as to preclude or prevent the purchaser from encumbering
or disposing of the lot purchased before the payment in full of the purchase price. Outside
of this protection the Government retains no right as owner.

B) Since the purchaser of the land in question left four daughters upon his death, pursuant to
the provisions of Sec. 16, Act 1120, the interest of said purchaser over the land shall
descend and the deed shall issue to his four daughters. The assignment and sale of the lot
by the government to a niece and a daughter were therefore null and void as to that
portion sold to the niece, and as well as to that portion which lawfully devolved in favor
of the three other daughters. The principle thus applies that since the property was
acquired through fraud, the persons obtaining the same are considered trustees of an
implied trust for the benefit of the persons from whom the property comes.

C) An action for reconveyance of real property based upon a constructive or implied trust,
resulting from fraud, may be barred by the statute of limitations. The action therefore
should be filed within four years from the discovery of the fraud. Since present action for
conveyance was instituted only in 1960 while the constructive trust began in 1929, when
the appellees bought the lot from the government and forthwith took physical possession
of the same and since then up to the present have been in possession of the land publicly
and continuously under claim of ownership then not only has appellants' action to enforce
the constructive trust created in their favor prescribed, but also, a valid, full and complete
title has vested in the appellees by acquisitive prescription.

FACTS:

Pablo Fabian bought from the Philippine Government lot 164 of the Friar Lands Estate in Muntinlupa,
Rizal. By virtue of this purchase, he was issued a sale certificate 547. He died on August 2, 1928,
survived by four children, namely, Esperanza, Benita I, Benita II,and Silbina. On October 5, 1928 Silbina
Fabian and Teodora Fabian, niece of the deceased, executed an affidavit. On the strength of this affidavit,
sale certificate 547 was assigned to them. The acting Director of Lands, on behalf of the Government,
sold lot 164 to Silbina Fabian Teodora Fabian. The vendees spouses forthwith took physical possession
thereof, cultivated it, and appropriated the produce. In that same year, they declared the lot in their names
for taxation purposes. In 1937 the RD of Rizal issued a TCT over lot 164 in their names. They later
subdivided the lot into 2 equal parts. The plaintiff filed the present action for reconveyance against the
defendants spouses, averring that Silbina and Teodora, through fraud perpetrated in their affidavit
aforesaid. That by virtue of this affidavit, the said defendants succeeded in having the sale certificate
assigned to them and thereafter in having lot 164 covered by said certificate transferred in their names;
and that by virtue also of these assignment and transfer, the defendants succeeded fraudulently in having
lot 164 registered in their names. They further allege that the land has not been transferred to an innocent
purchaser for value. A reconveyance thereof is prayed for. In their answer, the defendants spouses claim
that Pablo Fabian was not the owner of lot 164 at the time of his death on August 2, 1928 because he had
not paid in full the amortizations on the lot; that they are the absolute owners thereof, having purchased it
from the Government, and from that year having exercised all the attributes of ownership thereof up to
the present; and that the present action for reconveyance has already prescribed. The dismissal of the
complaint is prayed for. The lower court rendered judgment declaring that the defendants spouses had
acquired a valid and complete title to the property by acquisitive prescription, and accordingly dismissed
the complaint. The latter’s motion for reconsideration was thereafter denied. Hence, the present recourse.

ISSUE:

(1) Was Pablo Fabian the owner of lot 164 at the time of his death, in the face of the fact, admitted by the
defendants-appellees, that he had not then paid the entire purchase price thereof?

(2) May laches constitute a bar to an action to enforce a constructive trust?

(3) Has title to the land vested in the appellees through the mode of acquisitive prescription?

HELD:

1. YES. Lot 164 was a part of the Friar Lands Estate of Muntinlupa, Rizal; its sale to Pablo Fabian was
therefore governed by Act 1120, otherwise known as the Friar Lands Act. While under section 15 of the
said Act, title to the land sold is reserved to the Government until the purchaser makes full
paymentof all the required installments and the interest thereon, this legal reservation refers to the
bare, naked title.The equitable and beneficial title really went to the purchaser the moment he paid
the first installment and was given a certificate of sale. The reservation of the title in favor of the
Government is made merely to protect the interest of the Government so as to preclude or prevent the
purchaser from encumbering or disposing of the lot purchased before the payment in full of the purchase
price. Outside of this protection the Government retains no right as an owner. For instance, after
issuance of the sales certificate and pending payment in full of the purchase price, the Government may
not sell the lot to another. It may not even encumber it. It may not occupy the land to use or cultivate;
neither may it lease it or even participate or share in its fruits. In other words, the Government does not
and cannot exercise the rights and prerogatives of owner. And when said purchaser finally pays the final
installment on the purchase price and is given a deed of conveyance and a certificate of title, the title at
least in equity, retroacts to the time he first occupied the land, paid the first installment and was issued the
corresponding certificate of sale. In other words, pending the completion of the payment of the
purchase price, the purchaser is entitled to all the benefits and advantages which may accrue to the
land as well as suffer the losses that may befall it. That Pablo Fabian had paid five annual installments
to the Government, and in fact been issued a sale certificate in his name, are conceded. He was therefore
the owner of lot 164 at the time of his death. He left four daughters, namely, Esperanza, Benita I, Benita
II and Silbina to whom all his rights and interest over lot 164 passed upon his demise.

In case a holder of a certificate dies before the giving of the deed and does not leave a widow, then the
interest of the holder of the certificate shall descend and deed shall issue to the person who under the laws
of the Philippine Islands would have taken had the title been perfected before the death of the holder of
the certificate, upon proof of the holders thus entitled of compliance with all the requirements of the
certificate.

2. The assignment and sale of the lot to the defendants Silbina and Teodora were therefore null and void.
To the extent of the participation of the appellants, application must be made of the principle that if
property is acquired through fraud, the person obtaining it is considered a trustee of an implied trustfor
the benefit of the person from whom the property comes.

Laches may bar an action brought to enforce a constructive trust such as the one in the case at bar.
Illuminating are the following excerpts from a decision penned by Mr. Justice Reyes:
But in constructive trusts, . . . the rule is that laches constitutes a bar to actions to enforce the trust, and
repudiation is not required, unless there is a concealment of the facts giving rise to the trust …

The assignment of sale certificate was effected in October 1928; and the actual transfer of lot 164 was
made on the following November 14. It was only on July 8, 1960, 32 big years later, that the appellants
for the first time came forward with their claim to the land. The record does not reveal, and it is not
seriously asserted, that the appellees concealedthe facts giving rise to the trust. Upon the contrary,
paragraph 13 of the stipulation of facts of the parties states with striking clarity “that defendants herein
have been in possession of the land in questionsince 1928 up to the present publicly and continuously
under claim of ownership; they have cultivated it, harvested and appropriated the fruits for themselves.”

3. it is already settled in this jurisdiction that an action for reconveyance of real property based upon a
constructive or implied trusts, resulting from fraud, may be barred by the statute of limitations. the
discovery in that case being deemed to have taken place when new certificates of title were issued
exclusively in the names of the respondents therein.

[A]lthough, as a general rule, an action for partition among co-heirs does not prescribe, this is true only as
long as the defendants do not hold the property in question under an adverse title. The statute of
limitations operates, as in other cases, from the moment such adverse title is asserted by the possessor of
the property.

Inasmuch as petitioners seek to annul the aforementioned deed of “extra-judicial settlement” upon the
ground of fraud in the execution thereof, the action therefor may be filed within four(4) years from the
discovery of the fraud.Upon the undisputed facts in the case at bar, not only had laches set in when the
appellants instituted their action for, reconveyance in 1960, but as well their right to enforce the
constructive trust had already prescribed.

It logically follows from the above disquisition that acquisitive prescription has likewise operated to vest
absolute title in the appellees, pursuant to the provisions of section 41 of Act 190 that:

Ten years actual adverse possession by any person claiming to be the owner for that time of any land or
interest in land, uninterruptedly continued for ten years by occupancy, descent, grants, or otherwise, in
whatever way such occupancy may have commenced or continued,shall vest in every actual occupant or
possessor of such land a full and complete title

Upon the foregoing disquisition, we hold not only that the appellants’ action to enforce the constructive
trust created in their favor has prescribed, but as well that a valid, full and complete title has vested in the
appellees by acquisitive prescription.

CASE TITLE: GERONA vs. DE GUZMAN

TOPIC:WILLS AND SUCCESSION - NOT RELATED TO CIV 2

Case Title:Rufino Bueno et. al v. Mateo H. Reyes et. al.

Topic:Prescription of action based on Implied Trust as distinguished from Express Trust
Ponente: Makalintal, J.

Doctrine:
Only action based on implied trust, and not express trust, prescribes in ten (10) years as contemplated by
law.

Facts:
After the subject lot was adjudicated in favor of Francisco Reyes, and his two brothers, Mateo and Juan,
the plaintiffs filed the action below for reconveyance of the subject land alleging that the lot originally
belonged to Jorge Bueno, who died leaving three children, namely, Brigida, Eugenia and Rufino to whom
the property descended by intestate succession; That Francisco Reyes declared the said parcel of land
above-described in his name, and either in bad faith or by mistake filed an answer in the cadastral
proceedings and obtained title thereto in his name and those of brothers, Mateo and Juan, who connived
and consented to the malicious or erroneous acts of the late Francisco Reyes, knowing fully well that said
parcel of land was never owned by them and has never been in their possession, and knowing further that
said parcel of land belonged to, and possessed by the wife of Francisco Reyes in conjunction with her
sister and brother, Brigida and Rufino, respectively.

The lower court dismissed the complaint alleging that there is prescription of action. Hence, this appeal.

Issue:
Whether or not, the action already prescribed.

Ruling:
Yes.

The acquisition of the property is based on implied trust which prescribes in 10 years. The case, however,
was remanded for further proceeding. The law provides that if property is acquired through mistake or
fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of
the person from whom the property comes. If any trust can be deduced at all from the foregoing facts it
was an implied one, arising by operation of law not from any presumed intention of the parties but to
satisfy the demands of justice and equity and as a protection against unfair dealing or downright fraud.

Under Section 40 of the old Code of Civil Procedure, all actions for recovery of real property prescribed
in 10 years, excepting only actions based on continuing or subsisting trusts that were considered by
section 38 as imprescriptible. As held in the case of Diaz v. Gorricho, L-11229, March 29, 1958,
however, the continuing or subsisting trusts contemplated in section 38 of the Code of Civil Procedure
referred only to express unrepudiated trusts, and did not include constructive trusts (that are imposed by
law) where no fiduciary relation exists and the trustee does not recognize the trust at all.
Case Title: Tongoy v. Court of Appeals, 123 SCRA 99

Topic:

A void or in existent contract is one which has no force and effect from the very beginning, as if
it has never been into. and which cannot be validated either by time or by ratification. A void contract
procedures no effect what so ever either against or in favor of anyone; it does not create, modify or
extinguish the juridicial relation to which refers.

Ponente: Makasiar, J.

Facts:

Hacienda Pulo was mortgaged by its registered co-owners to the Philippine National Bank as
security for a loan. The mortgagors however were unable to keep up with the yearly amortizations. As a
result, PNB instituted judicial foreclosure proceedings over Hacienda Pulo. To avoid foreclose, one of the
co-owners and mortgagors, Jose, proposed to the PNB an amortization plan that would enable them to
liquidate their account. PNB rejected and that the foreclosure suit had been continued. The Supreme
Court affirmed the decision of the CFI giving the PNB the right to foreclose the mortgage. In the
meantime, Patricio and Luis executed a Declaration of Inheritance wherein they declared themselves to be
the only heirs entitled to Francisco’s share in the Hacienda. The other supposed heirs executed an
Escriture de Venta which by its terms transferred for consideration their rights and interests. Jesus and
Jose followed suit by executing a similar Escritura de Venta pertaining to their corresponding rights and
interest over Hacienda Pulo. In the case of Jose, the execution was preceded by the execution of an
Assignment of Rights in favor of Luis by the Pacific Commercial company as judgment lien holder
(subordinate to PNB mortgage) of Jose’s share in the hacienda.On this, the Hacienda was placed in the
name of Luis. In the following year, the title of the adjacent Cuaycong property also came under the name
of Luis. An Escriture de Venta executed in his favor by the owner Basilisa purportedly for 4,000.

Luis later executed a real estate mortgage over the Cuaycong property in favor of PNB as security
for a loan. Three days after, he also executed a real estate mortgage on Hacienda Pulo in favor of the
same bank to secure an indebtedness. After two decades, Luis paid of all his obligations to PNB for both
properties. However, it was only only on April 22, 2958 that a release of real estate mortgage was
executed by the bank in Favor of Luis. Luis died leaving his wife and son Francisco. Just before his death,
Luis received a letter from Jesus demanding the return of the shares in the properties to the co-owners.
Not long after the death of Luis, a case was filed alleging in sum that plaintiffs transferred their interest
on the two lots to Luis by means of simulated sales, pursuant to a trust arrangement where the latter
would return such interests after the mortgage obligations had been settled.

In the answer, defendants denied the causes of action and maintaining among others that the sale
to Luis of the lots was genuine and for a valuable consideration and that no trust agreement of whatever
nature existed between him and the plaintiff.
 After trial on the merits, the lower court rendered its decision finding the existence of an implied
trust in favor of plaintiffs, but at the same time holding their actions barred by prescription. Both parties
appealed the decision of the lower court, the Court of Appeals modified the judgment. Disagreeing with
the court, the parties filed this petition.

Issue:

Whether or not the rights of respondent over the subject properties which were the subjects of
simulated or fictitious transactions have prescribed

Held:

No. the aforesaid query is found in 1409 and 1410 of the New Civil Code.

The characteristic of simulation is the fact that the apparent contract is not really desired nor
intended to produce legal effects nor in any way alter the juridical situation of the parties. Thus, where a
person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to
another, he does not really intend to divest himself of his title and control of the property; hence, the deed
of transfer is but a sham.

A void or inexistent contract is one which has no force and effect from the very beginning, as if it
had never been entered into, and which cannot be validated either by time or by ratification. A void
contract produces no effect whatsoever either against or in favor of anyone; hence, it does not create,
modify or extinguish the juridical relation to which it refers.

The following are the most fundamental characteristics of void or inexistent contracts:

1) As a general rule, they produce no legal effects whatsoever in accordance with the principle "quod
nullum est nullum producit effectum” 2) They are not susceptible of ratification 3) The right to set up the
defense of inexistence or absolute nullity cannot be waived or renounced 4) The action or defense for the
declaration of their inexistence or absolute nullity is imprescriptible 5) The inexistence or absolute nullity
of a contract cannot be invoked by a person whose interests are not directly affected.

The nullity of these contracts is definite and cannot he cured by ratification. The nullity is
permanent, even if the cause thereof has ceased to exist, or even when the parties have complied with the
contract spontaneously. Evidently, therefore, the deeds of transfer executed in favor of Luis Tongoy were
from the very beginning absolutely simulated or fictitious, since the same were made merely for the
purpose of restructuring the mortgage over the subject properties and thus preventing the foreclosure by
the PNB.

Considering the law and jurisprudence on simulated or fictitious contracts as aforestated, the
within action for reconveyance instituted by herein respondents which is anchored on the said simulated
deeds of transfer cannot and should not be barred by prescription. No amount of time could accord
validity or efficacy to such fictitious transactions, the defect of which is permanent.

There is no implied trust that was generated by the simulated transfers; because being fictitious or
simulated, the transfers were null and void ab initio — from the very beginning — and thus vested no
rights whatsoever in favor of Luis Tongoy or his heirs. That which is inexistent cannot give life to
anything at all.

CaseTitle: Caragay-Lagno v. Court of Appeals, G.R. No. L-52064

Topic: Reconveyance of real property
Ponente: MELENCIO-HERRERA, J.:
Doctrine: The remedy of the landowner whose property has been wrongfully or erroneously registered in
another's name is, after one year from the date of the decree, not to set aside the decree, but, respecting
the decree as incontrovertible and no longer open to review, to bring an ordinary action in the ordinary
court of justice for reconveyance or, if the property has passed into the hands of an innocent purchaser for
value, for damages.
Facts: Petitioner, JULIANA Caragay, and the decedent, Mariano DE VERA, were first cousins, "both
orphans, who lived together under one roof in the care of a common aunt." As Administratrix, DE
VERA's widow filed a Special Proceedings for an Inventory of all properties of the deceased, which
included "a parcel of land in the poblacion of Calasiao, Pangasinan covered by Tax Declaration No.
12664."
Because of a discrepancy in area mentioned in the Inventory, they found that the northwestern portion
was occupied by petitioner-spouses Juliana Caragay Layno and Benito Layno. ESTRADA demanded that
they vacate the Disputed Portion since it was titled in the name of the deceased DE VERA, but petitioners
refused claiming that the land belonged to them and, before them, to JULIANA's father Juan Caragay.
ESTRADA then instituted suit against JULIANA for the recovery of the Disputed Portion, which she
resisted, mainly on the ground that the Disputed Portion had been fraudulently or mistakenly included in
OCT No. 63, so that an implied or constructive trust existed in her favor. She then counterclaimed for
reconveyance of property.
Issue: WON Juliana is entitled to reconveyance?
Held: Yes
The evidence discloses that the Disputed Portion was originally possessed openly, continuously and
uninterruptedly in the concept of an owner by Juan Caragay, the deceased father of JULIANA, and had
been declared in his name under Tax Declaration No. 28694 beginning with the year 1921. Upon the
demise of her father, JULIANA adjudicated the property to herself as his sole heir, and declared it in her
name under Tax Declaration No. 22522. Tacking the previous possession of her father to her own, they
had been in actual open, continuous and uninterrupted possession in the concept of owner for about forty
five (45) years, until said possession was disturbed in 1966 when ESTRADA informed JULIANA that the
Disputed Portion was registered in Mariano DE VERA's name.
Respondents are guilty of laches as would effectively derail their cause of action. Of significance is the
fact that for twenty (20) years from the date of registration of title in 1947 up to 1967 when this suit for
recovery of possession was instituted, neither the deceased DE VERA up to the time of his death in 1951,
nor his successors-in-interest, had taken steps to possess or lay adverse claim to the Disputed Portion.
The remedy of the landowner whose property has been wrongfully or erroneously registered in another's
name is, after one year from the date of the decree, not to set aside the decree, but, respecting the decree
as incontrovertible and no longer open to review, to bring an ordinary action in the ordinary court of
justice for reconveyance or, if the property has passed into the hands of an innocent purchaser for value,
for damages.
Prescription cannot be invoked against JULIANA for the reason that as lawful possessor and owner of the
Disputed Portion, her cause of action for reconveyance which, in effect, seeks to quiet title to the
property, falls within settled jurisprudence that an action to quiet title to property in one's possession is
imprescriptible. Besides, under the circumstances, JULIANA's right to quiet title, to seek reconveyance,
and to annul OCT. No. 63 accrued only in 1966 when she was made aware of a claim adverse to her own.

PART FOUR - CREDIT TRANSACTIONS

Yulo v. Yang Chiaco Seng

G.R. No. L-12541, 28 August 1959

Facts: Defendant Yang Chiao Seng wrote a letter to the plaintiff Mrs. Rosario U. Yulo, proposing the
formation of a partnership between them to run and operate a theatre on the premises owned by Marina.
The principal conditions of the offer include that that Yang Chiao Seng guarantees Mrs. Yulo a monthly
participation of P3,000, and that the partnership shall start from July 1, 1945 to December 31, 1950, with
the condition that if the land is expropriated or rendered impracticable for the business, or if the owner
constructs a permanent building thereon, or Mrs. Yulo's right of lease is terminated by the owner, then the
partnership shall be terminated even if the period for which the partnership was agreed to be established
has not yet expired. The land on which the theatre was constructed was leased by plaintiff Mrs. Yulo from
Marina. But on April 12, 1949, the owners notified Mrs. Yulo of their desire to cancel the contract of
lease on July 31, 1949. Mrs. Yulo then demanded from Yang Chiao Seng her share in the profits of the
business. Yang answered the letter saying that upon the advice of his counsel he had to suspend the
payment (of the rentals) because of the pendency of the ejectment suit by the owners of the land against
Mrs. Yulo.

In view of the refusal of Yang to pay to her the amount agreed upon, plaintiff alleges the existence of a
partnership between them. Defendant alleges that the real agreement between the plaintiff and the
defendant was one of lease and not of partnership; that the partnership was adopted as a subterfuge to get
around the prohibition contained in the contract of lease between the owners and the plaintiff against the
sublease of the said property.

Issue: Was there a valid contract of partnership?

Held: No. We have gone over the evidence and we fully agree with the conclusion of the trial court that
the agreement was a sublease, not a partnership. The following are the requisites of partnership: (1) two
or more persons who bind themselves to contribute money, property, or industry to a common fund; (2)
intention on the part of the partners to divide the profits among themselves. (Art. 1767, Civil Code.)

In the first place, plaintiff did not furnish the supposed P20,000 capital. In the second place, she did not
furnish any help or intervention in the management of the theatre. In the third place, it does not appear
that she has ever demanded from defendant any accounting of the expenses and earnings of the business.
Were she really a partner, her first concern should have been to find out how the business was
progressing, whether the expenses were legitimate, whether the earnings were correct, etc. She was
absolutely silent with respect to any of the acts that a partner should have done; all that she did was to
receive her share of P3,000 a month, which can not be interpreted in any manner than a payment for the
use of the premises which she had leased from the owners. Clearly, plaintiff had always acted in
accordance with the original letter of defendant of June 17, 1945 (Exh. "A"), which shows that both
parties considered this offer as the real contract between them.

Catalan v. Gatchalian

105 Phil. 1270

FACTS: Catalan and Gatchalian are partners. They mortgaged two lots to Dr. Marave together with the
improvements thereon to secure a credit from the latter. The partnership failed to pay the obligation. The
properties were sold to Dr. Marave at a public auction. Catalan redeemed the property and he contends
that title should be cancelled and a new one must be issued in his name.

ISSUE: Whether or not Catalan’s redemption of the properties make him the absolute owner of the lands?

HELD: No. Under Article 1807 of the NCC every partner becomes a trustee for his copartner with regard
to any benefits or profits derived from his act as a partner. Consequently, when Catalan redeemed the
properties in question, he became a trustee and held the same in trust for his copartner Gatchalian, subject
to his right to demand from the latter his contribution to the amount of redemption.

BENITO LIWANAG and MARIA LIWANAG REYES vs.

WORKMEN'S COMPENSATION COMMISSION

FACTS:Appellants Benito Liwanag and Maria Liwanag Reyes are co-owners of Liwanag Auto Supply, a
commercial guard who while in line of duty, was skilled by criminal hands. His widow Ciriaca Vda. de
Balderama and minor children Genara, Carlos and Leogardo, all surnamed Balderama, in due time filed a
claim for compensation with the Workmen's Compensation Commission, which was granted in an award.
In appealing the case to this Tribunal, appellants do not question the right of appellees to compensation
nor the amount awarded. They only claim that, under the Workmen's Compensation Act, the
compensation is divisible, hence the commission erred in ordering appellants to payjointly and severally
the amount awarded. They argue that there is nothing in the compensation Act which provides that the
obligation of an employer arising from compensable injury or death of an employee should be solidary
obligation, the same should have been specifically provided, and that, in absence of such clear provision,
the responsibility of appellants should not be solidary but merely joint.
ISSUE:Whether or not the defendants herein be regarded as co-partners or as mere co-owners in their
liability for the indemnity due their deceased employee?

HELD:Liability is Solidary. The provisions of the new Civil Code taken together with those of Section 2
of the Workmen's Compensation Act, reasonably indicate that in compensation cases, the liability of
business partners, like appellants, should be solidary; otherwise, the right of the employee may be
defeated, or at least crippled. If the responsibility of appellants were to be merely joint and solidary, and
one of them happens to be insolvent, the amount awarded to the appellees would only be partially
satisfied, which is evidently contrary to the intent and purposes of the Act. In the previous cases we have
already held that the Workmen's Compensation Act should be construed fairly, reasonably and liberally in
favor of and for the benefit of the employee and his dependents; that all doubts as to the right of
compensation resolved in his favor; and that it should be interpreted to promote its purpose. Accordingly,
the present controversy should be decided in favor of the appellees.

Mauricio Agad vs Severino Mabato

G.R. No. L-24193; June 28, 1968

Facts:

Plaintiff Agad filed a complaint against Defendant Mabato for rendering an accounting of their
partnership business for the years 1957-1963, and to deliver to him the profits due to him. Defendant
admitted that they dei agree to form a partnership for the operation of a fishpond business, but that the
said agreement was null and void pursuant to Art. 1773 because an inventory of the fishpond was not
attached to the agreement.

Issue:

Is immovable property or real rights contributed to the partnership?

Ruling:

The Court ruled that the partnership was established to operate a fishpond business and not to
engage in a fishpond business. Moreover, none of the partners contributed either a fishpond or a real right
to any fishpond as their contribution was limited to P1,000.00 each. Thus, considering that no fishpond or
a real right thereto was contributed to the partnership, or became a part of the capital thereof, Article 1773
of the Civil Code does not apply.

Shell Co. v. Fireman’s Insurance Co.

G.R. No. L-8169, January 29, 1957

FACTS: An automobile belonging to the plaintiff Salvador Sison was brought by his son, Perlito Sison,
to the gasoline and service station, owned by the defendant The Shell Company of the Philippine Islands,
Limited, but operated by the defendant Porfirio de la Fuente, for the purpose of having said car washed
and greased for a consideration of P8.00. Said car was insured against loss or damage by Firemen's
Insurance Company of Newark, New Jersey, and Commercial Casualty Insurance Company jointly for
the sum of P10,000.

The job of washing and greasing was undertaken by defendant Porfirio de la Fuente through his two
employees, Alfonso M. Adriano, as greaseman and one surnamed de los Reyes, a helper and washer.To
perform the job the car was carefully and centrally placed on the platform of the lifter in the gasoline and
service station aforementioned before raising up said platform to a height of about 5 feet and then the
servicing job was started. After more than one hour of washing and greasing, the job was about to be
completed except for an ungreased portion underneath the vehicle which could not be reached by the
greasemen. So, the lifter was lowered a little by Alfonso M. Adriano and while doing so, the car for
unknown reason accidentally fell and suffered damage to the value of P1, 651.38.

The defendant Porfirio de la Fuente denied negligence in the operation of the lifter in his separate answer
and contended further that the accidental fall of the car was caused by unforseen event.

ISSUE: Whether or not de la Fuente is an agent of Shell Co.

HELD: Yes.

De la Fuente owned his position to the Shell Company which could remove him terminate his services at
any time from the said Company, and he undertook to sell the Shell Company's products exculusively at
the said Station.

De la Fuente was the operator of the station "by grace" of the Defendant Company which could and did
remove him as it pleased;

As the act of the agent or his employees acting within the scope of his authority is the act of the principal,
the breach of the undertaking by the agent is one for which the principal is answerable. Moreover, the
company undertook to "answer and see to it that the equipments are in good running order and usable
condition;" and the Court of Appeals found that the Company's mechanic failed to make a thorough check
up of the hydraulic lifter and the check up made by its mechanic was "merely routine" by raising "the
lifter once or twice and after observing that the operator was satisfactory, he (the mechanic) left the
place." The latter was negligent and the company must answer for the negligent act of its mechanic which
was the cause of the fall of the car from the hydraulic lifter.

Cosmic Lumber Corporation vs Court of Appeal and Isidro Perez

G.R. No. 114311, November 29, 1996

Facts: Petitioner, executed a Special Power of Attorney appointing Paz G. Villamil-Estrada as attorney-
in-fact to initiate, institute and file any court action for the ejectment of third persons and/or squatters of a
particular, to appear at the pre-trial conference and enter into any stipulation of facts and/or compromise
agreement so far as it shall protect the rights and interest of the corporation in the aforementioned lots.
 Villamil-Estrada, by virtue of her power of attorney, instituted an action for the ejectment of
private respondent Isidro Perez and recover the possession of a portion of the lot before the RTC. Later
on, Villamil-Estrada entered into a Compromise Agreement with respondent Perez, allowing the latter to
pay the petitioner through the attorney-in-fact the sum of P26,640.00 in order to take ownership and
possession of the portion of the lot.

The "Compromise Agreement" was approved by the trial court and judgment was rendered in
accordance therewith. The decision became final and executory but it was not executed within the 5-year
period from date of its finality. Only when the respondent filed a complaint to revive the judgment that
the petitioner came to know of the compromise agreement entered into between Paz G. Villamil-Estrada
and respondent Isidro Perez. And upon learning of the fraudulent transaction, petitioner sought annulment
of the decision of the trial court before respondent Court of Appeals on the ground that the compromise
agreement was void.

Issue: Was the sale of the lot, through a compromise agreement entered into by the Attorney-in-Fact and
Perez valid?

Held: No, it is not valid. The authority granted Villamil-Estrada under the special power of attorney was
explicit and exclusionary. Nowhere in the authorization was Villamil-Estrada granted expressly or
impliedly any power to sell the subject property nor a portion thereof. Neither can a conferment of the
power to sell be validly inferred from the specific authority "to enter into a compromise agreement"
because of the explicit limitation fixed by the grantor that the compromise entered into shall only be "so
far as it shall protect the rights and interest of the corporation in the aforementioned lots."

When the sale of a piece of land or any interest thereon is through an agent, the authority of the
latter shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a
contract for the sale of real estate must be conferred in writing and must give him specific authority,
either to conduct the general business of the principal or to execute a binding contract containing terms
and conditions which are in the contract he did execute. A special power of attorney is necessary to enter
into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously
or for a valuable consideration. It is therefore clear that by selling to respondent Perez a portion of
petitioner's land through a compromise agreement, Villamil-Estrada acted without or in obvious authority.
The sale ipso jureis consequently void. So is the compromise agreement.

SAN JUAN STRUCTURAL AND STEEL FABRICATORS v. CA

GR No. 129459, 357 Phil. 631

29 September 1998

FACTS: San Juan Structural and Steel Fabricators, Inc. (San Juan) entered into an agreement with
Motorich Sales Corp. (Motorich) which was allegedly represented by Motorich’s treasurer, Nenita
Gruenberg, for the transfer of the latter’s parcel of land. San Juan paid the down payment. Co, president
of San Juan, wrote a letter course through Motorich’s broker requesting for a computation of the balance
to be paid. They were supposed to meet in the office of San Juan for payment of the balance but Nenita
Gruenberg, did not appear. Despite repeated demands and in utter disregard of its commitments, Motorich
refused to execute the Transfer of Rights/Deed of Assignment necessary to transfer the certificate of title.
ACL Development Corp. (ACL) was impleaded as a necessary party since the TCT was still in its name.
JNM Realty & Development Corp. (JNM) was impleaded as a necessary party in view of the fact that it is
the transferor of right in favor of Motorich. Subsequently, ACL and Motorich entered into a Deed of
Absolute Sale and by reason thereof, the Registry of Deeds of Quezon City issued a new title in the name
of Motorich, represented by Nenita and Reynaldo Gruenbereg.

In its complaint, San Juan insists that “[w]hen Gruenberg and Co affixed their signatures on the contract
they both consented to be bound by the terms thereof.” Ergo, San Juan contends that the contract is
binding on the two corporations. It further contends that Motorich has ratified said contract of sale
because of its “acceptance of benefits,” as evidence by the receipt issued by Gruenberg.

ISSUE:Is a contract entered into by a corporate treasurer, by herself and without any authorization from
the board of directors, valid or may be ratified?

HELD: NO.It is true that pursuant to the signed agreement, a lot owned by Motorich was purportedly
sold to San Juan. However, the contract cannot bind Motorich because it NEVER authorized or ratified
such sale. As a general rule, the acts of corporate officers within the scope of their authority are binding
on the corporation but when these officers exceed their authority, their actions “cannot bind the
corporation, unless it has ratified such acts or is estopped from disclaiming them.”

Article 1318 of the Civil Code lists the requisites of a valid and perfected contract: "(1) consent of the
contracting parties; (2) object certain which is the subject matter of the contract; (3) cause of the
obligation which is established." As found by the trial court and affirmed by the Court of Appeals, there is
no evidence that Gruenberg was authorized to enter into the contract of sale, or that the said contract was
ratified by Motorich. This factual finding of the two courts is binding on this Court. As the consent of the
seller was not obtained, no contract to bind the obligor was perfected. Therefore, there can be no valid
contract of sale between petitioner and Motorich.

Because Motorich had never given a written authorization to Gruenberg to sell its parcel of land, the
Agreement entered into by the latter with San Juan is VOID under Article 1874 of the Civil Code. Being
inexistent and void from the beginning, the contract cannot be ratified.

Manila Memorial Park Cemetery Inc. Vs Pedro L. Linsangan

G.R. No. 151319; November 22, 2004

Facts:Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the Holy Cross
Memorial Park owned by MMPCI. According to Baluyot, a former owner of a memorial lot under
Contract No. 25012 was no longer interested in acquiring the lot and had opted to sell his rights subject to
reimbursement of the amounts he already paid. The contract was for P95,000.00. Baluyot reassured Atty.
Linsangan that once reimbursement is made to the former buyer, the contract would be transferred to him.
Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the amount to be reimbursed to the
original buyer and to complete the down payment to MMPCI. Baluyot issued handwritten and typewritten
receipts for these payments. In March 1985, Baluyot informed Atty. Linsangan that he would be issued
Contract No. 28660, a new contract covering the subject lot in the name of the latter instead of old
Contract No. 25012. Atty. Linsangan protested, but Baluyot assured him that he would still be paying the
old price of P95,000.00 with P19,838.00 credited as full down payment leaving a balance of about
P75,000.00. On 8 April 1985, Baluyot brought an Offer to Purchase Lot No. A11 (15), Block 83, Garden
Estate I denominated as Contract No. 28660 and the Official Receipt No. 118912 dated 6 April 1985 for
the amount of P19,838.00. Contract No. 28660 has a listed price of P132,250.00. Atty. Linsangan
objected to the new contract price, as the same was not the amount previously agreed upon. To convince
Atty. Linsangan, Baluyot executed a document6 confirming that while the contract price is P132,250.00,
Atty. Linsangan would pay only the original price of P95,000.00. By virtue of this letter, Atty. Linsangan
signed Contract No. 28660 and accepted Official Receipt No. 118912. As requested by Baluyot, Atty.
Linsangan issued twelve (12) postdated checks of P1,800.00 each in favor of MMPCI. The next year, or
on 29 April 1986, Atty. Linsangan again issued twelve (12) postdated checks in favor of MMPCI. On 25
May 1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled for reasons
the latter could not explain, and presented to him another proposal for the purchase of an equivalent
property. He refused the new proposal and insisted that Baluyot and MMPCI honor their undertaking. For
the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty. Linsangan filed a
Complaint for Breach of Contract and Damages against the former.Baluyot did not present any evidence.
For its part, MMPCI alleged that Contract No. 28660 was cancelled conformably with the terms of the
contract8 because of non-payment of arrearages. MMPCI stated that Baluyot was not an agent but an
independent contractor, and as such was not authorized to represent MMPCI or to use its name except as
to the extent expressly stated in the Agency Manager Agreement. Moreover, MMPCI was not aware of
the arrangements entered into by Atty. Linsangan and Baluyot, as it in fact received a down payment and
monthly installments as indicated in the contract.

Issue: Is Baluyot an agent?

Ruling: No. By the contract of agency, a person binds himself to render some service or to do something
in representation or on behalf of another, with the consent or authority of the latter. Thus, the elements of
agency are (i) consent, express or implied, of the parties to establish the relationship; (ii) the object is the
execution of a juridical act in relation to a third person; (iii) the agent acts as a representative and not for
himself; and (iv) the agent acts within the scope of his authority. It is a settled rule that persons dealing
with an agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact
of agency but also the nature and extent of authority, and in case either is controverted, the burden of
proof is upon them to establish it. The basis for agency is representation and a person dealing with an
agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make
such an inquiry, he is chargeable with knowledge of the agent's authority and his ignorance of that
authority will not be any excuse. The ignorance of a person dealing with an agent as to the scope of the
latter's authority is no excuse to such person and the fault cannot be thrown upon the principal. A person
dealing with an agent assumes the risk of lack of authority in the agent. He cannot charge the principal by
relying upon the agent's assumption of authority that proves to be unfounded. The principal, on the other
hand, may act on the presumption that third persons dealing with his agent will not be negligent in failing
to ascertain the extent of his authority as well as the existence of his agency. In the instant case, it has not
been established that Atty. Linsangan even bothered to inquire whether Baluyot was authorized to agree
to terms contrary to those indicated in the written contract, much less bind MMPCI by her commitment
with respect to such agreements. Even if Baluyot was Atty. Linsangan's friend and known to be an agent
of MMPCI, her declarations and actions alone are not sufficient to establish the fact or extent of her
authority.

Philpotts vs. Phil. Manufacturing Co.

Facts: The petitioner seeks to compel the respondent to permit the plaintiff in person or an authorized
agent/ attorney to inspect and examine the records of the business transacted by the company.

Issue: Whether or not the right to inspect the records can be exercised by a proper agent or attorney of the
stockholder as well as the stockholder

Held: YES. The right of inspection given to a stockholder can be exercised either by himself or by any
proper representative or atty-in-fact and either with or without the attendance of the stockholder. What a
man may do in person, he may do through another. The right of inspection to stockholders of corporations
are to be liberally construed and that said right may be exercised through any other properly authorized
person.

SEVILLA vs. THE COURT OF APPEALS

G.R. No. L-41182-3 April 16, 1988

FACTS:

Mrs. Noguera entered into a contract of lease w/ TWSI. Mr. Canilao signed in behalf of TWSI. Mrs.
Sevilla also signed as someone solidarily liable with TWSI for the prompt payment of the monthly rental.
The area leased is to be used as branch office of TWSI. The branch was run by Mrs. Sevilla. Mrs. Sevilla
is also an independent agent selling tickets of various airlines. She receives commission of 7%. She gives
3% of which to TWSI. TWSI was informed that Mrs. Sevilla was connected with a rival firm, the
Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist World Service
considered closing down its branch office. The corporate secretary Gabino Canilao went over to the
branch office, and, finding the premises locked, and, being unable to contact Mrs. Sevilla, he padlocked
the premises on June to protect the interest of TWSI. When neither Mrs. Lina Sevilla nor any of her
employees could enter the locked premises, a complaint was filed. Mrs. Sevilla contends that she and
TWSI entered into a Joint Venture business. Hence, she has a right on the premises.
RTC – TWSI being the true lessee, it was within its prerogative to terminate the lease and padlock the
premises. Lina Sevilla is a mere employee and as such, she was bound by the acts of her employer. CA
affirmed. Sevilla appeals.

ISSUE:

(1) Is Mrs. Sevilla an employee of TWSI? Does the Bureau of Labor Relations has jurisdiction, not the
trial court? NO.

(2) Did Mrs. Sevilla and TWSI enter into a Joint Venture Agreement? NO.

(3) Did Mrs. Sevilla and TWSI enter into a contract of agency? YES.

HELD:

(1) In this jurisdiction, there has been no uniform test to determine the existence of an employer-
employee relation. In general, we have relied on the so-called right of control test, “where the person for
whom the services are performed reserves a right to control not only the end to be achieved but also the
means to be used in reaching such end. Subsequently, however, we have considered, in addition the
existing economic conditions prevailing between the parties, like the inclusion of the employee in the
payrolls. Mrs. Sevilla is not an employee because: Under the lease contract, she had bound herself as
guaranty. A true employee cannot be made to part with his own money in pursuance of his employer’s
business, or otherwise, assume any liability thereof. When the branch office was opened, the same was
run by Mrs. Sevilla sharing her commissions with TWSI. Under these circumstances, it cannot be said
that Sevilla was under the control of Tourist World Service, Inc. “as to the means used.” It is further
admitted that Sevilla was not in the company’s payroll. As to her title as branch manager, employment is
determined by the right-of-control test and certain economic parameters. Titles are weak indicators of the
relationship.

(2) A joint venture, including a partnership, presupposes generally a parity of standing between the joint
co-venturers or partners, in which each party has an equal proprietary interest in the capital or property
contributed and where each party exercises equal rights in the conduct of the business. Furthermore, the
parties did not hold themselves out as partners, and the building itself was embellished with the electric
sign Tourist World Service, Inc.,” in lieu of a distinct partnership name.

(3) When the petitioner, Lina Sevilla, agreed to (wo)man the TWSI’s Ermita office, she must have done
so pursuant to a contract of agency. It is the essence of this contract that the agent renders services “in
representation or on behalf of another.” In the case at bar, Sevilla solicited airline fares, but she did so for
and on behalf of her principal, TWSI. As compensation, she received 4% of the proceeds in the concept
of commissions. But unlike simple grants of a power of attorney, the agency that we hereby declare to be
compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled
with an interest, the agency having been created for the mutual interest of the agent and the principal. It
appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in
the business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof,
holding herself solidarily liable for the payment of rentals. She continued the business, using her own
name, after Tourist World had stopped further operations. Her interest, obviously, is not limited to the
commissions she earned as a result of her business transactions, but one that extends to the very subject
matter of the power of management delegated to her. It is an agency that, as we said, cannot be revoked at
the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina
Sevilla, to damages
Case Title:barrette v tuazon

Topic:Not connected to Civ 2

Ponente:

Doctrine:

Facts:

Issue:

Held:

Case Title: Domingo vs. Domingo, G.R. No. L-30573, October 29, 1971

Topic:Agency

Ponente:Justice Makasiar

Doctrine: "An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from
the vendee without revealing the same to his principal is guilty of a breach of his loyalty to the latter and
forfeits his right to collect the commission that may be due him, even if the principal does not suffer any
injury by reason of such breach."

Facts:

➔ Vicente granted Gregorio the exclusive agency to sell his lot with a commission of 5%
on the total price, if the property is sold by Vicente or by anyone else during the 30-day
duration of the agency or if the property is sold by Vicente within three months from the
termination of the agency to a purchaser whom it was submitted by Gregorio during the
continuance of the agency with notice to Vicente.

➔ Later, Gregorio authorized Teofilo to look for a buyer, promising him half of his 5%
commission.

➔ Teofilo introduced Oscar to Gregorio as a prospective buyer.

➔ Oscar, then, submitted a written offer which was much lower than the original price.
Vicente, then, directed Gregorio to tell Oscar to raise his offer. After several conferences
between Gregorio and Oscar, the latter raised his offer, to which Vicente agreed.

➔ Upon demand of Vicente, Oscar issued a check.

 ➔ Vicente advanced to Gregorio.

➔ Oscar confirmed his former offer to pay the property.

➔ Vicente asked for an additional amount to which Oscar promised to deliver.

➔ Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina for succeeding
in persuading Vicente to sell his lot. This gift was not disclosed by Gregorio to Vicente.
Neither did Oscar pay Vicente the additional amount.

➔ Oscar told Gregorio that he did not receive his money from his brother in the US. Oscar
did not see him after several weeks. Thus, Gregorio sensed something fishy.

➔ Vicente stated that Gregorio is not entitled to the 5% commission because he sold the
property not to Gregorio's buyer, Oscar, but to another buyer, Amparo, which is the wife
of Oscar.

Issue: Is the failure of Gregorio to disclose the propina for having persuaded Vicente to reduce the
purchase price constitutes fraud as to cause a forfeiture of his 5% commission?

Held: Yes. The Supreme Court stated that the duties and liabilities of a broker to his employer are
essentially those which an agent owes to his principal. Consequently, the decisive legal provisions are
found in Articles 1891 and 1909 of the New Civil Code. The aforecited provisions demand the utmost
good faith, fidelity, honesty, candor and fairness on the part of the agent, the real estate broker in this
case, to his principal, the vendor. The law imposes upon the agent the absolute obligation to make a full
disclosure or complete account to his principal of all his transactions and other material facts relevant to
the agency, so much so that the law as amended does not countenance any stipulation exempting the
agent from such an obligation and considers such an exemption as void. The duly of an agent is likened to
that of a trustee. This is not a technical or arbitrary rule but a rule founded on the highest and truest
principle of morality as well as of the strictest justice. An agent who takes a secret pro t in the nature of a
bonus, gratuity or personal bene t from the vendee, without revealing the same to his principal, the
vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission
from his principal, even if the principal does not suffer any injury by reason of such breach of fidelity, or
that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it,
because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage. By
taking such pro t or bonus or gift or propina from the vendee, the agent thereby assumes a position wholly
inconsistent with that of being an agent for his principal, who has a right to treat him, insofar as his
commission is concerned, as if no agency had existed. The fact that the principal may have been bene ted
by the valuable services of the said agent does not exculpate the agent who has only himself to blame for
such a result by reason of his treachery or perfidy.

Case Title: Behn Meyer & Co vs Notling, 35 Phil. 274

TAX Case
Case Title: Commissioner of Internal Revenue vs William J. Suter, 27 SCRA 152

Topic: Disestablishment of a Partnership after the marriage of the partners / Corporate personality being
disregarded for income tax purposes

Ponente: Reyes, J.B.L., J.

--- Case not connected to Civil Law

CASE TITLE: JAMES BARTON vs. LEYTE ASPHALT & MINERAL OIL CO.; [G.R. No. 21237.
March 22, 1924.]
TOPIC: PRINCIPAL AND AGENT; AUTHORITY OF SELLING AGENT; SALES TO
SUBAGENT.
PONENTE: STREET,J.
DOCTRINE:An agent who is clothed with authority to sell a given commodity cannot bind the
principal by selling to himself, either directly or indirectly. It results that the principal is not obligated to
fill orders taken by the agent from his own subagent, unless the principal ratifies such sale with full
knowledge of the facts.
FACTS: Leyte Asphalt & Mineral Oil Co. is the owner of Lucio mine where there exists a valuable
deposit of bituminous limestone and other asphalt products. William Anderson, as president and general
manager of Leyte Asphalt, sent a letter to James Barton, authorizing the latter to sell the products of the
Luciomine in Australia and New Zealand. Thereafter, Leyte Asphalt sent a second letter, expanding the
territories over which Barton is given the sole and exclusive sales agency for bituminous limestone and
other asphalt, Ltd., until May first, 1922, to include Tasmania, Saigon, Java, China, India, Sumatra, US,
Siam, and Hongkong.
Meanwhile, Barton went to San Francisco and entered into an agreement with Ludvigsen & McCurdy,
whereby said firm was constituted a subagent and given the sole selling rights for the bituminous
limestone products of Leyte Asphalt. When Barton went to Australia, he also made a similar agreement
with Frank B. Smith, of Sydney. Thereafter, Ludvigsen & McCurdy advised Barton of an order for
6,000 tons of bituminous limestone to be loaded at Leyte not later than May 5, 1921. Barton accepted
such and when he returned to Manila, he informed Anderson of the San Francisco order. Anderson then
said that, owing to lack of capita, adequate facilities had not been provided by the company for filling
large orders and suggested that Barton had better hold up in the matter of taking orders. Later, Frank B.
Smith advised Barton of an order for 5,000 tons of bituminuos limestone, and Barton informed Leyte
Asphalt to be prepared to ship another 5,000 tons of bituminuos limestone, on or about May 6, 1921, in
addition to the consignment for San Francisco. It will be noted in connection with this letter of Barton,
that no mention was made of the names of the person, or firm, for whom the shipments were really
intended. The obvious explanation that occurs in connection with this is that Barton did not then care to
reveal the fact that the two orders had originated from his own subagents in San Francisco and Sydney.
Then, while in Tokyo, Japan, Barton came in contact with one H. Hiwatari, who speaks of himself as if
he had been appointed exclusive sales agent for the plaintiff in Japan. While Barton was in Tokyo, he
procured a letter addressed to himself, to be signed by Hiwatari, which contains an order for 1,000 tons
of bituminous limestone.
ISSUE: Whether or not James Barton, as an agent of Leyte Asphalt, may be allowed to recover
damages for breach of contract, in light of the orders given by Ludvigsen & McCurdy, by Frank B.
Smith, and by Hiwatari, who are all subagents of Barton?
HELD: NO. The transaction indicated in the orders from Ludvigsen & McCurdy and from Frank B.
Smith must, in our opinion, be at once excluded from consideration as emanating from persons who had
been constituted mere agents of the plaintiff. The San Francisco order and the Australian orders are the
same in legal effect as if they were orders signed by the plaintiff and drawn upon himself; and it cannot
be pretended that those orders represent sales to bona fidepurchasers found by the plaintiff. The original
contract by which the plaintiff was appointed sales agent for a limited period of time in Australia and
the United States contemplated that he should find reliable and solvent buyers who should be prepared
to obligate themselves to take the quantity of bituminous limestone contracted for upon terms consistent
with the contract. These conditions were not met by the taking of these orders from the plaintiff's own
subagents, which was as if the plaintiff had bought for himself the commodity which he was authorized
to sell to others. Article 267 of the Code of Commerce declares that no agent shall purchase for himself
or for another that which he has been ordered to sell. The law has placed its ban upon a broker's
purchasing from his principal unless the latter with full knowledge of all the facts and circumstances
acquiesces in such course; and even then the broker's action must be characterized by the utmost good
faith. A sale made by a broker to himself without the consent of the principal is ineffectual whether the
broker has been guilty of fraudulent conduct or not. We think, therefore, that the position of the
defendant company is indubitably sound in so far as it rests upon the contention that the plaintiff has not
in fact found anybona fide purchasers ready and able to take the commodity contracted for upon terms
compatible with the contract which is the basis of the action.

Eurotech Industrial Technologies, Inc. vs. Cuizon,

GR. No. 167552, April 23, 2007

Facts:Impact System owned by Erwin Cuizon sought to buy from Eurotech Insudtrial Technologies, Inc.
1 unit of sludge pump at P250,000 with down payment of P50,000. When the sludge pump arrived from
the UK, Eurotech refused to deliver the same to Impact System without it having fully settled its account.
Thus, Edwin Cuizon, sales manager of Impact System, and Alberto de Jesus, general manager of
Eurotech, executed a Deed of Assignment of it receivables in favor of Eurotech. Unknown to Eurotech,
Impact System collected the amount of the receivables assigned. Alarmed by this development, Eurotech
demanded that the remaining obligations be paid. Impact System was not able to fully pay the remaining
balance. Thus, Eurotech filed a complaint for sum of money. In his answer, Edwin alleged among others
that he is not a real party in interest in this case. According to him, he was acting as mere agent of his
principal, which was the Impact Systems, in his transaction with Eurotech and the latter was very much
aware of this fact. The trial court dropped Edwin as a party defendant in the case on the ground that
Impact System has ratified the act of Edwin of assignment when it paid the down payment 2 days after
the execution of the Deed of Assignment and that Eurotech knew of such ratification. CA affirmed.
Hence, this petition. Eurotech contended that Erwin’s act of collecting the receivables assigned, while it
did not revoked the agency relations of Erwin and Edwin, it repudiated Edwin’s power to sign the Deed
of Assignment. As Edwin did not sufficiently notify Eurotech of the extent of his powers as an agent, it
claims that he should be made personally liable for the obligations of his principal.

Issue:Did Edwin exceed his authority when he signed the Deed of Assignment thereby binding himself
personally to pay the obligations to Impact System?
Held:No. Article 1897 provides that an agent who acts as such, is not personally liable to the party with
whom he contracts. It, however, presents two instances when an agent becomes personally liable to a
third person. The first is when he expressly binds himself to the obligation and the second is when he
exceeds his authority. In the last instance, the agent can be held liable if he does not give the third party
sufficient notice of his powers. In the case, Edwin does not fall within any of the exceptions. The Deed of
Assignment clearly states that Edwin signed thereon as the sales manager of Impact Systems. Further, the
significant amount of time spent on the negotiation for the sale of the sludge pump underscores Impact
Systems' perseverance to get hold of the said equipment. There is, therefore, no doubt that Edwin's
participation in the Deed of Assignment was "reasonably necessary" or was required in order for him to
protect the business of his principal. Had he not acted in the way he did, the business of his principal
would have been adversely affected and he would have violated his fiduciary relation with his principal.

INFANTE V. CUNANAN, GR L-5180, AUGUST 31, 1953

FACTS: Infante, who owns a land with a house built on it, contracted Cunanan and Mijares to sell the
property from which they would receive commission. A certain Noche agreed to purchase the said
property. However, Infante changed her mind and informed Cunanan and Mijares of said decision and
made the two sign an agreement stating that their authority to sell was already cancelled.

Infante then sold the property to Noche. Finding out about the transaction, Cunanan and Mijares
demanded for their commission but Infante opposed thereto.

RTC ordered Infante to pay the commission in which CA affirmed.

ISSUE: WON Infante was duty bound to pay commission notwithstanding that authority to sell has been
cancelled

HELD: YES. A principal may withdraw the authority given to an agent at will.

In this case, Cunanan and Mijares agreed to cancel the authority given to them upon assurance by Infante
that should the property be sold to Noche, the former would be given commission. The fact that Infante
changed her mind even if Cunanan and Mijares already found a buyer who was willing to close the deal is
a matter that would not give rise to a legal consequence if Cunanan and Mijares agree to call off the
transaction in deference to the request of Infante.

Infante took advantage of the services of Cunanan and Mijares believing that she could evade payment of
their commission, she made use of a tactic inducing them to sign the deed of cancellation of their
authority to sell. This act of subversion cannot be sanctioned and cannot serve as basis for Infante to
escape payment of the commissions agreed upon. Infante acted in her own selfish interest and in bad
faith. This act cannot be sanctioned without according to the party prejudiced the reward which is due
him.

MANUEL BUASON and LOLITA M. REYES vs. MARIANO PANUYAS.

 G.R. No. L-11415, May 25, 1959.

FACTS: Spouses Buenaventura Dayao and Eugenia Vega acquired by homestead patent a parcel
of land. The spouses executed a power of attorney authorizing Eustaquio Bayuga to engage the services
of an attorney to prosecute their case against Leonardo Gambito for annulment of a contract of sale of the
parcel of land and after the termination of the case in their favor to sell it. Buenaventura died leaving his
spouse and his four children. On March 21, 1939, his children executed a deed of sale conveying 12.8413
hectares of the parcel of land to the Plaintiff Manuel Buason and Lolita Reyes. The Plaintiff took
possession of the land. Subsequently, or on July 18, 1944, Eustaquio Bayuga sold 8 hectares of the same
parcel of land to spouses Mariano Panuyas, defendant. Both the plaintiff and the defendant claim
ownership. Plaintiff filed a complaint praying that the deed of sale in favor of the defendant be declared
null and void. The defendant alleged that they were buyers in good faith and for valuable consideration.
The trial court dismissed the complaint for being barred by the statute of limitation.

ISSUE:1) Was the defendant, the second purchaser, in good faith?

2) Was the death of the principal, Buenaventura, extinguishes the authority of the agent Bayuga
to sell?

HELD:1) YES. It appears that the plaintiff did not register the sale of the parcel of land in question
executed in their favor by the Dayao children on 21 March 1939. On the other hand, the power of attorney
executed by Buenaventura Dayao authorizing Eustaquio Bayuga to sell the parcel of land was annotated
on the back of original certificate of title, and the sale executed by Eustaquio in favor of defendant
Mariano under the said power of attorney was annotated on the back of the same original certificate of
title. It does not appear that the appellee and his wife had actual knowledge of the previous sale. In the
absence of such knowledge, they had a right to rely on the face of the certificate of title of the registered
owners and of the authority conferred by them upon the agent also recorded on the back of the certificate
of title. As this is a case of double sale of land registered under the Land Registration Act, he who
recorded the sale in the Registry of Deeds has a better right than he who did not.

2)No.As to the plaintiff’s contention that, as the death of the principal ended the authority of the
agent, therefore the sale in favor of the defendant was null and void. The Court held that Article 1931 of
the New Civil Code is the law applicable which provides that:

Anything done by the agent, without knowledge of the death of the principal or of any other cause
which extinguishes the agency, is valid and shall be fully effective with respect to third persons
who may have contracted with him in good faith.

BISAYA TRANSPORTATION CO. INC. v. SANCHEZ; G.R. No. 74623 August 31, 1987
FACTS: On 27 July 1976, a formal Contract of Agency, was executed between BISTRANCO,
represented by Receiver Atty. Adolfo V. Amor and Marciano C. Sanchez, represented by his authorized
representative Exequiel Aranas. Thereafter, on 30 July 1976, after Sanchez found that Paragraph 16 of the
Contract of agency was quite prejudicial to him, he executed with BISTRANCO a Supplemental Shipping
Agency Contract, which was duly signed by Receiver Atty. Adolfo V. Amor on behalf of BISTRANCO
and Marciano C. Sanchez himself. As a Shipping Agent, Sanchez was able to build good business
relations with Butuan City and expand BISTRANCO’s operations in the region, succeeding in increasing
the volume of the shipping business of BISTRANCO at the Butuan City port, so much so that his
earnings on freight alone increased from an average of P8,535.00 a month in 1975 to an average of about
P32,000.00 a month in the last seven months of 1979.

However, in December of 1979 BISTRANCO wrote Sanchez informing him that the company would be
opening a branch office in Butuan City which the latter realized to be a repudiation of his Contract of
Agency with the Petitioner. Sanchez was then constrained to file an action for Specific Performance with
Preliminary Injunction and Damages in view of the serious detriment to his business once the branch
office opened.

ISSUE: Did BISTRANCO violate its Contract of Agency with Sanchez in opening a Branch Office in
Butuan City?

HELD: YES. It may be true that there is no express prohibition for BISTRANCO to open its branch in
Butuan City. But, the very reason why BISTRANCO agreed not to employ or appoint another agent in
Butuan City was to prevent competition against Sanchez' agency, in order that he might recover what he
invested and eventually maximize his profits. The opening by BISTRANCO of a branch in Butuan City
virtually resulted in consequences to Sanchez worse than if another agent had been appointed. In effect,
the opening of a branch office in Butuan City was a violation of the Contracts of agency. Article 1315 of
the Civil Code provides:

“Contracts are perfected by mere consent, and from that moment the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all the consequences which, according to
their nature, may be in keeping with good faith, usage and law.”

In the case at bar, good faith required that BISTRANCO refrain from opening its branch in Butuan City
during the effectivity of the agency contract with Sanchez, or until 27 July 1981.

Moreover, the opening of the branch office which, in effect, was a revocation of the contracts of agency is
not sanctioned by law because the agency was the means by which Sanchez could fulfill his obligations
under his contract with BISTRANCO. Article 1927 of the Civil Code, among others, provides: "An
agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an
obligation already contracted".

Pasno v. Ravina
Facts:

Gabina Labitoria during her lifetime mortgaged three parcels of land to the Philippine National Bank to
secure an indebtedness of P1,600. It was stipulated in the mortgage, among other things, that the
mortgagee "may remove, sell or dispose of the mortgaged property or any buildings, improvements or
other property in, on or attached to it and belonging to the mortgagor in accordance with the provisions of
Act No. 3135 or take other legal action that it may deem necessary." The mortgagor died, and a petition
was presented in court for the probate of her last will and testament. During the pendency of these
proceedings, a special administrator was appointed by the lower court who took possession of the estate
of the deceased, including the three parcels of land mortgaged to the Philippine National Bank. The estate
having failed to comply with the conditions of the mortgage, the Philippine National Bank, pursuant to
the stipulations contained in the same, asked the sheriff of Tayabas to proceed with the sale of the parcels
of land. When the attorney for the special administrator received notice of the proposed action, he filed a
motion in court in which an order was asked requiring the sheriff to vacate the attachment over the
mortgaged properties and to abstain from selling the same. The lower court granted the petition in an
order of February 14, 1929, and later denied a motion for reconsideration presented on behalf of the
Philippine National Bank.

Issue:

WON the right of sale of the mortgage property can survive and can be enforced under special power
while the mortgaged property is in custodia legis

Ruling:

The power of sale given in a mortgage is a power coupled with an interest which survives the death of the
grantor. One case, that of Carter vs. Slocomb, has gone so far as to hold that a sale after the death of the
mortgagor is valid without notice to the heirs of the mortgagor. However that may be, conceding that the
power of sale is not revoked by the death of the mortgagor, nevertheless in view of the silence of Act No.
3135 and in view of what is found in section 708 of the Code of Civil Procedure, it would be preferable to
reach the conclusion that the mortgagee with a power of sale should be made to foreclose the mortgage in
conformity with the procedure pointed out in section 708 of the Code of Civil Procedure. That would
safeguard the interests of the estate by putting the estate on notice while it would not jeopardize any rights
of the mortgagee. The only result is to suspend temporarily the power to sell so as not to interfere with the
orderly administration of the estate of a decedent. A contrary holding would be inconsistent with the
portion of our law governing the settlement of estates of deceased persons.

It results that the trial judge committed no error in sustaining the petition of the administrator of the estate
of the deceased Gabina Labitoria and in denying the motion of the Philippine National Bank.
 Del Rosario v. Abad

G.R. No. L-10881, September 30, 1958

Facts: Within the prohibitive period of five years, the homesteader mortgaged the improvements of the
homestead in favor of defendant P. A. At the same time, he executed an "irrevocable special power of
attorney coupled with interest" in favor of the mortgagee authorizing him to sell the land. After the lapse
of the prohibitive period, the mortgagor died leaving the mortgage debt unpaid. Thereafter, acting on the
power of attorney, the mortgagee sold the land.

Issue: Whether or not the sale is valid

Held: No. The power of attorney executed by the homesteader in favor of defendant did not create an
agency with interest nor did it clothe the agency with irrevocable character. A mere statement in the
power of attorney that it is coupled with interest is not enough. In what does such interest consist must be
stated in the power of attorney. The mortgage has nothing to do with the power of attorney and may be
foreclosed by the mortgagee upon failure of the mortgagor to comply with his obligation. As the agency
was not coupled with an interest, it was terminated upon the death of the principal, and the agent could no
longer validly convey the land. Hence, the sale was null and void.

RAMOS v. RAMOS

Facts: Spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October 26, 1880,
respectively. They were survived by their 3 children. Moreover, Martin was survived by his 7 natural
children. In December 1906, a special proceeding for the settlement of the intestate estate of said spouses
was conducted. Rafael Ramos, a brother of Martin, administered the estate for more than 6 years.
Eventually, a partition project was submitted which was signed by the 3 legitimate children and 2 of the 7
natural children. A certain Timoteo Zayco signed in representation of the other 5 natural children who
were minors. The partition was sworn to before a justice of peace.

The conjugal hereditary estate was appraised at P74,984.93, consisting of 18 parcels of land, some head
of cattle and the advances to the legitimate children. ½ thereof represented the estate of Martin. 1/3
thereof was the free portion or P12,497.98. The shares of the 7 natural children were to be taken from that
1/3 free portion. Indeed, the partition was made in accordance with the Old Civil code. Thereafter, Judge
Richard Campbell approved the partition project. The court declared that the proceeding will be
considered closed and the record should be archived as soon as proof was submitted that each he3ir had
received the portion adjudicated to him.
On February 3, 1914, Judge Nepumoceno asked the administrator to submit a report showing that the
shares of the heirs had been delivered to them as required by the previous decision. Nevertheless, the
manifestation was not in strict conformity with the terms of the judge’s order and with the partition
project itself. Eight lots of the Himamaylan Cadastre were registered in equal shares in the names of
Gregoria (widow of Jose Ramos) and her daughter, when in fact the administrator was supposed to pay
the cash adjudications to each of them as enshrined in the partition project. Plaintiffs were then
constrained to bring the suit before the court seeking for the reconveyance in their favor their
corresponding participations in said parcels of land in accordance with Article 840 of the old Civil Code.
Note that 1/6 of the subject lots represents the 1/3 free portion of martin’s shares which will eventually
redound to the shares of his 7 legally acknowledged natural children. The petitioners’ action was
predicated on the theory that their shares were merely held in trust by defendants. Nonetheless, no Deed
of Trust was alleged and proven. Ultimately, the lower court dismissed the complaint on the grounds of
res judicata, prescription and laches.

Issue: Is the plaintiffs’ action barred by prescription, laches and res judicata?

Held: The answer is in the affirmative. There was inexcusable delay thereby making the plaintiffs’
action unquestionably barred by prescription and laches and also by res judicata. Inextricably interwoven
with the questions of prescription and res judicata is the question on the existence of a trust. It is
noteworthy that the main thrust of plaintiffs’ action is the alleged holding of their shares in trust by
defendants. Emanating from such, the Supreme Court elucidated on the nature of trusts and the
availability of prescription and laches to bar the action for reconveyance of property allegedly held in
trust. It is said that trust is the right, enforceable solely in equity to the beneficial enjoyment of property,
the legal title to which is vested in another. It may either be express or implied. The latter is further
subdivided into resulting and constructive trusts. Applying it now to the case at bar, the plaintiffs did not
prove any express trust. Neither did they specify the kind of implied trust contemplated in their action.
Therefore, its enforcement maybe barred by laches and prescription whether they contemplate a resulting
or a constructive trust.

Under Act 190, whose statute of limitations applies to this case (Art. 116, Civil Code), the longest period
of extinctive prescription was only ten years.

Atanacia, Modesto and Manuel, all surnamed Ramos, were already of age in 1914. From that year, they
could have brought the action to annul the partition. Maria Ramos and Emiliano Ramos were both born in
1896. They reached the age of twenty-one years in 1917. They could have brought the action from that
year.

The instant action was filed only in 1957. As to Atanacia, Modesto and Manuel, the action was filed
forty-three years after it accrued and, as to Maria and Emiliano, the action was filed forty years after it
accrued. The delay was inexcusable. The instant action is unquestionably barred by prescription and res
judicata.

Huang v. Court of Appeals

FACTS: Dolores Sandoval purchased two lots in Dasmariñas, Makati. One in her name and another in
the name of Ricardo Huang. The second purchase was made in his name in compliance with the
subdivision policy that ‘no one owner can own two lots’. Later on, Ricardo was just allowed to encumber
the second lot in order that lot may receive improvements. In protection of her right, Dolores sought the
Sps. Huang to execute a deed of absolute sale with assumption of mortgage in her favor. The Huangs
complied, however years later, without Dolores’ consent, The Huangs leased the property to Deltron-
Sprague. Deltron forbade Dolores’ from using the improvements found on the second lot. Thereafter, The
Huangs field a complaint against Dolores claiming that Dolores forced them into signing the existing
deed of absolute sale in her name over the property. Meanwhile, Dolores tried to pay the mortgage
balance of Ricardo with the SSS, but the SSS refused to receive her payment. Dolores filed a complaint
against the SSS and demanded that the TCT in the name of the Huangs over the second lot be cancelled,
and that the TCT over the property in her name be released. The article Court consolidates the cases, and
ruled in favor of Dolores, that she owns both lots, and that the executed Deed of Absolute Sale with
assumption of mortgage was voluntarily made by the Huangs. The Huangs raised in the CA on appeal
that there is no resulting trust, but in fact, only equitable mortgage .

ISSUE: Is the existence of resulting trust over the second lot?

HELD: YES, there is resulting trust on part of the second lot, where the Huangs are considered the
trustee of the Lot for the benefit of Owner-Dolores. Dolores provided for the money of the purchase of
the lot, but the corresponding T T were placed in the name of Ricardo Huang because of the subdivision
policy. Ricardo was made into a trustee over the lot and it’s improvements, where he has the fiduciary
relationship with respect to the property, to hold it and convey it the benefit of Dolores. A constructive or
resulting trust is imposed where a person holding title to property is subject to an equitable duty to convey
it to another on the ground that he would be unjustly enriched, if he were permitted to retain it.

Cuaycong v. Cuaycong

G.R. No. L-21616, December 11, 1967

Facts

Eduardo Cuaycong, married to Clotilde de Leon, died without issue but with three brothers and a sister
surviving him: Lino, Justo, Meliton and Basilisa. Upon his death, his properties were distributed to his
heirs as he willed except two haciendas both known as Hacienda Bacayan. Hacienda Bacayan is
comprised of eight (8) lots all of which are titled in the name of Luis D. Cuaycong, son of Justo
Cuaycong. Meliton and Basilisa died without any issue. Plaintiffs, surviving heirs of Lino, filed a suit
against Justo, Luis and Benjamin Cuaycong for conveyance of inheritance and accounting alleging,
among others, that Luis thru clever strategy, fraud, misrepresentation and in disregard of Eduardo’s
wishes by causing the issuance in his name of certificates of title covering Hacienda Bacayan’s
properties. The plaintiffs also claimed that Eduardo had an arrangement with Justo and Luis that the latter
will hold in trust what might belong to his brothers and sister as a result of the arrangements and deliver
to them their share when the proper time comes. The plaintiffs repeatedly demanded for their share in the
property after Eduardo and Clotilde’s death.

On the other hand, Luis Cuaycong moved to dismiss the case on the grounds of unenforceability of the
claim under the statute of frauds, no cause of action, and bar of causes of action by the statute of
limitations. The CFI dismissed the case for the plaintiffs’ failure to file an amended complaint mentioning
or alleging therein the written evidence of the alleged trust. Plaintiff thereafter manifested that the claim is
based on an implied trust as shown by paragraph 8 of the complaint. They added that there being no
written instrument of trust- they could not amend the complaint to include such instrument.

Issue

Is the trust express or implied?

Ruling

The Supreme Court held that the alleged trust is an express trust. The Civil Code defines an express trust
as one created by the intention of the trustor or of the parties, and an implied trust as one that comes into
being by operation of law. Express trusts are those created by the direct and positive acts of the parties, by
some writing or deed or will or by words evidencing an intention to create a trust.

On the other hand, implied trusts are those, which, without being expressed, are deducible from the nature
of the transaction by operation of law as matters of equity, independently of the particular intention of the
parties (Artice 1441, Civil Code). Thus, if the intention to establish a trust is clear, the trust is express; if
the intent to establish a trust is to be taken from circumstances or other matters indicative of such intent,
then the trust is implied. From these and from the provisions of the complaint itself, it is clear that the
plaintiffs alleged an express trust over an immovable, especially since it is alleged that the trustor
expressly told the defendants of his intention to establish the trust. Such a situation definitely falls under
Article 1443 of the Civil Code.

ESPERANZA FABIAN, BENITA FABIAN and DAMASO PAPA Y FABIAN,plaintiffs-appellants,

vs. SILBINA FABIAN, FELICIANO LANDRITO, TEODORA FABIAN and FRANCISCO DEL
MONTE, defendants-appellees.(Fabian v. Fabian, G.R. No. L-20449, [January 29, 1968], 130 PHIL
214-224)

FACTS:
Pablo Fabian bought from the Philippine Government lot 164 of the Friar Lands Estate in Muntinlupa,
Rizal. By virtue of this purchase, he was issued a sale certificate 547. He died on August 2, 1928,
survived by four children, namely, Esperanza, Benita I, Benita II,and Silbina. On October 5, 1928 Silbina
Fabian and Teodora Fabian, niece of the deceased, executed an affidavit. On the strength of this affidavit,
sale certificate 547 was assigned to them. The acting Director of Lands, on behalf of the Government,
sold lot 164 to Silbina Fabian Teodora Fabian. The vendees spouses forthwith took physical possession
thereof, cultivated it, and appropriated the produce. In that same year, they declared the lot in their names
for taxation purposes. In 1937 the RD of Rizal issued a TCT over lot 164 in their names. They later
subdivided the lot into 2 equal parts. The plaintiff filed the present action for reconveyance against the
defendants spouses, averring that Silbina and Teodora, through fraud perpetrated in their affidavit
aforesaid. That by virtue of this affidavit, the said defendants succeeded in having the sale certificate
assigned to them and thereafter in having lot 164 covered by said certificate transferred in their names;
and that by virtue also of these assignment and transfer, the defendants succeeded fraudulently in having
lot 164 registered in their names. They further allege that the land has not been transferred to an innocent
purchaser for value. A reconveyance thereof is prayed for. In their answer, the defendants spouses claim
that Pablo Fabian was not the owner of lot 164 at the time of his death on August 2, 1928 because he had
not paid in full the amortizations on the lot; that they are the absolute owners thereof, having purchased it
from the Government, and from that year having exercised all the attributes of ownership thereof up to
the present; and that the present action for reconveyance has already prescribed. The dismissal of the
complaint is prayed for. The lower court rendered judgment declaring that the defendants spouses had
acquired a valid and complete title to the property by acquisitive prescription, and accordingly dismissed
the complaint. The latter’s motion for reconsideration was thereafter denied. Hence, the present recourse.

ISSUE:

(1) Was Pablo Fabian the owner of lot 164 at the time of his death, in the face of the fact, admitted by the
defendants-appellees, that he had not then paid the entire purchase price thereof?

(2) May laches constitute a bar to an action to enforce a constructive trust?

(3) Has title to the land vested in the appellees through the mode of acquisitive prescription?

HELD:

1. YES. Lot 164 was a part of the Friar Lands Estate of Muntinlupa, Rizal; its sale to Pablo Fabian was
therefore governed by Act 1120, otherwise known as the Friar Lands Act. While under section 15 of the
said Act, title to the land sold is reserved to the Government until the purchaser makes full
paymentof all the required installments and the interest thereon, this legal reservation refers to the
bare, naked title.The equitable and beneficial title really went to the purchaser the moment he paid
the first installment and was given a certificate of sale. The reservation of the title in favor of the
Government is made merely to protect the interest of the Government so as to preclude or prevent the
purchaser from encumbering or disposing of the lot purchased before the payment in full of the purchase
price. Outside of this protection the Government retains no right as an owner. For instance, after
issuance of the sales certificate and pending payment in full of the purchase price, the Government may
not sell the lot to another. It may not even encumber it. It may not occupy the land to use or cultivate;
neither may it lease it or even participate or share in its fruits. In other words, the Government does not
and cannot exercise the rights and prerogatives of owner. And when said purchaser finally pays the final
installment on the purchase price and is given a deed of conveyance and a certificate of title, the title at
least in equity, retroacts to the time he first occupied the land, paid the first installment and was issued the
corresponding certificate of sale. In other words, pending the completion of the payment of the
purchase price, the purchaser is entitled to all the benefits and advantages which may accrue to the
land as well as suffer the losses that may befall it. That Pablo Fabian had paid five annual installments
to the Government, and in fact been issued a sale certificate in his name, are conceded. He was therefore
the owner of lot 164 at the time of his death. He left four daughters, namely, Esperanza, Benita I, Benita
II and Silbina to whom all his rights and interest over lot 164 passed upon his demise.

In case a holder of a certificate dies before the giving of the deed and does not leave a widow, then the
interest of the holder of the certificate shall descend and deed shall issue to the person who under the laws
of the Philippine Islands would have taken had the title been perfected before the death of the holder of
the certificate, upon proof of the holders thus entitled of compliance with all the requirements of the
certificate.

2. The assignment and sale of the lot to the defendants Silbina and Teodora were therefore null and void.
To the extent of the participation of the appellants, application must be made of the principle that if
property is acquired through fraud, the person obtaining it is considered a trustee of an implied trustfor
the benefit of the person from whom the property comes.

Laches may bar an action brought to enforce a constructive trust such as the one in the case at bar.
Illuminating are the following excerpts from a decision penned by Mr. Justice Reyes:

But in constructive trusts, . . . the rule is that laches constitutes a bar to actions to enforce the trust, and
repudiation is not required, unless there is a concealment of the facts giving rise to the trust …

The assignment of sale certificate was effected in October 1928; and the actual transfer of lot 164 was
made on the following November 14. It was only on July 8, 1960, 32 big years later, that the appellants
for the first time came forward with their claim to the land. The record does not reveal, and it is not
seriously asserted, that the appellees concealed the facts giving rise to the trust. Upon the contrary,
paragraph 13 of the stipulation of facts of the parties states with striking clarity “that defendants herein
have been in possession of the land in question since 1928 up to the present publicly and continuously
under claim of ownership; they have cultivated it, harvested and appropriated the fruits for themselves.”

3. it is already settled in this jurisdiction that an action for reconveyance of real property based upon a
constructive or implied trusts, resulting from fraud, may be barred by the statute of limitations. the
discovery in that case being deemed to have taken place when new certificates of title were issued
exclusively in the names of the respondents therein.

[A]lthough, as a general rule, an action for partition among co-heirs does not prescribe, this is true only as
long as the defendants do not hold the property in question under an adverse title. The statute of
limitations operates, as in other cases, from the moment such adverse title is asserted by the possessor of
the property.

Inasmuch as petitioners seek to annul the aforementioned deed of “extra-judicial settlement” upon the
ground of fraud in the execution thereof, the action therefor may be filed within four(4) years from the
discovery of the fraud.Upon the undisputed facts in the case at bar, not only had laches set in when the
appellants instituted their action for, reconveyance in 1960, but as well their right to enforce the
constructive trust had already prescribed.

It logically follows from the above disquisition that acquisitive prescription has likewise operated to vest
absolute title in the appellees, pursuant to the provisions of section 41 of Act 190 that:

Ten years actual adverse possession by any person claiming to be the owner for that time of any land or
interest in land, uninterruptedly continued for ten years by occupancy, descent, grants, or otherwise, in
whatever way such occupancy may have commenced or continued,shall vest in every actual occupant or
possessor of such land a full and complete title

Upon the foregoing disquisition, we hold not only that the appellants’ action to enforce the constructive
trust created in their favor has prescribed, but as well that a valid, full and complete title has vested in the
appellees by acquisitive prescription.

Rufino Bueno et. al v. Mateo H. Reyes et. al.

Facts: After the subject lot was adjudicated in favor of Francisco Reyes, and his two brothers, Mateo and
Juan, the plaintiffs filed the action below for reconveyance of the subject land alleging that the lot
originally belonged to Jorge Bueno, who died leaving three children, namely, Brigida, Eugenia and
Rufino to whom the property descended by intestate succession; That Francisco Reyes declared the said
parcel of land above-described in his name, and either in bad faith or by mistake filed an answer in the
cadastral proceedings and obtained title thereto in his name and those of brothers, Mateo and Juan, who
connived and consented to the malicious or erroneous acts of the late Francisco Reyes, knowing fully well
that said parcel of land was never owned by them and has never been in their possession, and knowing
further that said parcel of land belonged to, and possessed by the wife of Francisco Reyes in conjunction
with her sister and brother, Brigida and Rufino, respectively. The lower court dismissed the complaint
alleging that there is prescription of action. Hence, this appeal.

Issue: Has the action already prescribed?

Ruling: Yes. The acquisition of the property is based on implied trust which prescribes in 10 years. The
case, however, was remanded for further proceeding. The law provides that if property is acquired
through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied
trust for the benefit of the person from whom the property comes. If any trust can be deduced at all from
the foregoing facts it was an implied one, arising by operation of law not from any presumed intention of
the parties but to satisfy the demands of justice and equity and as a protection against unfair dealing or
downright fraud. Under Section 40 of the old Code of Civil Procedure, all actions for recovery of real
property prescribed in 10 years, excepting only actions based on continuing or subsisting trusts that were
considered by section 38 as imprescriptible. As held in the case of Diaz v. Gorricho, L-11229, March 29,
1958, however, the continuing or subsisting trusts contemplated in section 38 of the Code of Civil
Procedure referred only to express unrepudiated trusts, and did not include constructive trusts (that are
imposed by law) where no fiduciary relation exists and the trustee does not recognize the trust at all.

Tongoy v. Court of Appeals, 123 SCRA 99

Facts: Hacienda Pulo was mortgaged by its registered co-owners to the Philippine National Bank as
security for a loan. The mortgagors however were unable to keep up with the yearly amortizations. As a
result, PNB instituted judicial foreclosure proceedings over Hacienda Pulo. To avoid foreclose, one of the
co-owners and mortgagors, Jose, proposed to the PNB an amortization plan that would enable them to
liquidate their account. PNB rejected and that the foreclosure suit had been continued. The Supreme
Court affirmed the decision of the CFI giving the PNB the right to foreclose the mortgage. In the
meantime, Patricio and Luis executed a Declaration of Inheritance wherein they declared themselves to be
the only heirs entitled to Francisco’s share in the Hacienda. The other supposed heirs executed an
Escriture de Venta which by its terms transferred for consideration their rights and interests. Jesus and
Jose followed suit by executing a similar Escritura de Venta pertaining to their corresponding rights and
interest over Hacienda Pulo. In the case of Jose, the execution was preceded by the execution of an
Assignment of Rights in favor of Luis by the Pacific Commercial company as judgment lien holder
(subordinate to PNB mortgage) of Jose’s share in the hacienda.On this, the Hacienda was placed in the
name of Luis. In the following year, the title of the adjacent Cuaycong property also came under the name
of Luis. An Escriture de Venta executed in his favor by the owner Basilisa purportedly for 4,000.

Luis later executed a real estate mortgage over the Cuaycong property in favor of PNB as security for a
loan. Three days after, he also executed a real estate mortgage on Hacienda Pulo in favor of the same
bank to secure an indebtedness. After two decades, Luis paid of all his obligations to PNB for both
properties. However, it was only only on April 22, 2958 that a release of real estate mortgage was
executed by the bank in Favor of Luis. Luis died leaving his wife and son Francisco. Just before his death,
Luis received a letter from Jesus demanding the return of the shares in the properties to the co-owners.
Not long after the death of Luis, a case was filed alleging in sum that plaintiffs transferred their interest
on the two lots to Luis by means of simulated sales, pursuant to a trust arrangement where the latter
would return such interests after the mortgage obligations had been settled.

In the answer, defendants denied the causes of action and maintaining among others that the sale to Luis
of the lots was genuine and for a valuable consideration and that no trust agreement of whatever nature
existed between him and the plaintiff.

After trial on the merits, the lower court rendered its decision finding the existence of an implied trust in
favor of plaintiffs, but at the same time holding their actions barred by prescription. Both parties appealed
the decision of the lower court, the Court of Appeals modified the judgment. Disagreeing with the court,
the parties filed this petition.

Issue: Are the rights of the respondent over the subject properties which were the subjects of simulated or
fictitious transactions have prescribed?

Held: No. the aforesaid query is found in 1409 and 1410 of the New Civil Code. The characteristic of
simulation is the fact that the apparent contract is not really desired nor intended to produce legal effects
nor in any way alter the juridical situation of the parties. Thus, where a person, in order to place his
property beyond the reach of his creditors, simulates a transfer of it to another, he does not really intend to
divest himself of his title and control of the property; hence, the deed of transfer is but a sham.
A void or inexistent contract is one which has no force and effect from the very beginning, as if it had
never been entered into, and which cannot be validated either by time or by ratification. A void contract
produces no effect whatsoever either against or in favor of anyone; hence, it does not create, modify or
extinguish the juridical relation to which it refers.

The following are the most fundamental characteristics of void or inexistent contracts:

1) As a general rule, they produce no legal effects whatsoever in accordance with the principle "quod
nullum est nullum producit effectum” 2) They are not susceptible of ratification 3) The right to set up the
defense of inexistence or absolute nullity cannot be waived or renounced 4) The action or defense for the
declaration of their inexistence or absolute nullity is imprescriptible 5) The inexistence or absolute nullity
of a contract cannot be invoked by a person whose interests are not directly affected.

The nullity of these contracts is definite and cannot he cured by ratification. The nullity is permanent,
even if the cause thereof has ceased to exist, or even when the parties have complied with the contract
spontaneously. Evidently, therefore, the deeds of transfer executed in favor of Luis Tongoy were from the
very beginning absolutely simulated or fictitious, since the same were made merely for the purpose of
restructuring the mortgage over the subject properties and thus preventing the foreclosure by the PNB.

Considering the law and jurisprudence on simulated or fictitious contracts as aforestated, the within action
for reconveyance instituted by herein respondents which is anchored on the said simulated deeds of
transfer cannot and should not be barred by prescription. No amount of time could accord validity or
efficacy to such fictitious transactions, the defect of which is permanent.

There is no implied trust that was generated by the simulated transfers; because being fictitious or
simulated, the transfers were null and void ab initio — from the very beginning — and thus vested no
rights whatsoever in favor of Luis Tongoy or his heirs. That which is inexistent cannot give life to
anything at all.

Caragay-Lagno v. Court of Appeals

G.R. No. L-52064
Facts: Petitioner, JULIANA Caragay, and the decedent, Mariano DE VERA, were first cousins, "both
orphans, who lived together under one roof in the care of a common aunt." As Administratrix, DE
VERA's widow filed a Special Proceedings for an Inventory of all properties of the deceased, which
included "a parcel of land in the poblacion of Calasiao, Pangasinan covered by Tax Declaration No.
12664."
Because of a discrepancy in area mentioned in the Inventory, they found that the northwestern portion
was occupied by petitioner-spouses Juliana Caragay Layno and Benito Layno. ESTRADA demanded that
they vacate the Disputed Portion since it was titled in the name of the deceased DE VERA, but petitioners
refused claiming that the land belonged to them and, before them, to JULIANA's father Juan Caragay.
ESTRADA then instituted suit against JULIANA for the recovery of the Disputed Portion, which she
resisted, mainly on the ground that the Disputed Portion had been fraudulently or mistakenly included in
OCT No. 63, so that an implied or constructive trust existed in her favor. She then counterclaimed for
reconveyance of property.
Issue: Is Juliana entitled to reconveyance?
Held: Yes. The evidence discloses that the Disputed Portion was originally possessed openly,
continuously and uninterruptedly in the concept of an owner by Juan Caragay, the deceased father of
JULIANA, and had been declared in his name under Tax Declaration No. 28694 beginning with the year
1921. Upon the demise of her father, JULIANA adjudicated the property to herself as his sole heir, and
declared it in her name under Tax Declaration No. 22522. Tacking the previous possession of her father
to her own, they had been in actual open, continuous and uninterrupted possession in the concept of
owner for about forty five (45) years, until said possession was disturbed in 1966 when ESTRADA
informed JULIANA that the Disputed Portion was registered in Mariano DE VERA's name.
Respondents are guilty of laches as would effectively derail their cause of action. Of significance is the
fact that for twenty (20) years from the date of registration of title in 1947 up to 1967 when this suit for
recovery of possession was instituted, neither the deceased DE VERA up to the time of his death in 1951,
nor his successors-in-interest, had taken steps to possess or lay adverse claim to the Disputed Portion.
The remedy of the landowner whose property has been wrongfully or erroneously registered in another's
name is, after one year from the date of the decree, not to set aside the decree, but, respecting the decree
as incontrovertible and no longer open to review, to bring an ordinary action in the ordinary court of
justice for reconveyance or, if the property has passed into the hands of an innocent purchaser for value,
for damages.
Prescription cannot be invoked against JULIANA for the reason that as lawful possessor and owner of the
Disputed Portion, her cause of action for reconveyance which, in effect, seeks to quiet title to the
property, falls within settled jurisprudence that an action to quiet title to property in one's possession is
imprescriptible. Besides, under the circumstances, JULIANA's right to quiet title, to seek reconveyance,
and to annul OCT. No. 63 accrued only in 1966 when she was made aware of a claim adverse to her own.

Consolidated Rural Bank (Cagayan Valley), Inc. v. Court of Appeals, G.R. No.
132161, January 17, 2005

Doctrine: Art. 1544 contemplates a case of double sale by a single vendor. It is necessary that the
conveyance must have been made by a party who has an existing right in the thing and the power to
dispose of it. It cannot be invoked where the two different contracts of sale are made by two different
persons, one of them not being the owner of the property sold. In the case at bar, the subject property was
not transferred to several purchasers by a single vendor.

Facts: The Madrid brothers were registered owners of Lot No. 7036-A in Isabela per TCT No. T-8121. It
was subdivided into several lots. 1st sale (August 15 1957)- Rizal Madrid sold part of his share to Gamiao
and Dayag by virtue of a deed of sale, to which his brothers offered no objection. The deed of sale was
not registered with the Office of the Register of Deeds, however, Gamiao and Dayag declared the
property in their names for taxation purposes. Gamiao and Dayag sold the southern portion of the land to
Teodoro dela Cruz, and the northern portion was sold to Restituto Hernandez. These buyers took
possession of and cultivated the portions of the property respectively sold to them. 2 nd sale (June 15 1976)
- The Madrid brothers conveyed all their rights and interests to Pacifico Marquez. The deed of sake was
registered with the Office of the Register of Deeds. Marquez subdivided the lot into 8. Lots 7036-A-7-A
until 7036-A-7-D were mortgaged to the Consolidated Rural Bank to secure a loan of P100,000.
Additionally, Marquez mortgaged Lot No. 7036-A-7-E to the Rural Bank of Cauayan to secure a loan of
P10,000. These deeds of real estate mortgage were registered with the Office of the Register of Deeds.
Meanwhile, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto. Marquez defaulted in the payment of
his loan and CRB caused the foreclosure of the mortgages and the lots were sold to it as the highest
bidder. The heirs of Teodoro dela Cruz filed a case for reconveyance and damages as to the southern
portion of the land, claiming to be null and void the issuance of TCTs to Marquez; the foreclosure sale in
favour of CRB; to mortgage to RBC; and the sale to Calixto. Evangeline del Rosario, successor-in-
interest of Hernandez, filed a Complaint inIntervention wherein she claimed the northern portion of Lot
No. 7036-A-7. Marquez argued that he was a buyer in good faith and for value. He argued as well that
being the first registrant, the sale in favour of him must prevail over the sale to Gamiao and Dayag which
shouldn’t be binding upon him, that being unregistered. CRB, on the other hand, insisted that they were
mortgagees in good faith and that they had the right to rely on the titles of Marquez. The RTC ruled in
favour of Marquez, finding nothing to show that Marquez was aware of dela Cruz and del Rosario’s claim
of ownership and holding that it was, indeed, Marquez, who first registered. The CA, however, reversed
the ruling of the RTC, holding that Marquez failed to prove that he was a purchaser in good faith and
noting that while Marquez was the first registrant, there was no showing that the registration was coupled
with good faith. Marquez admitted having knowledge that there was dispute over said property and that
the Heirs of dela Cruz were also in possession of the land. As to the mortgages, the CA held that the
banks merely relied on the certificates o title and this failure to observe diligence in standard banking
procedure constitutes bad faith and on that basis, the mortgages were declared null and void. CRB
insisted that Marquez had the right over the said property being the first registered owners. Hence this
petition.

Issue: Does Marquez, having registered first, has better right over the property?

Held: No. The Supreme Court held that Art 1544 is not applicable in this case. Art. 1544

contemplates a case of double sale by a single vendor. It is necessary that the conveyance must have been
made by a party who has an existing right in the thing and the power to dispose of it. It cannot be invoked
where the two different contracts of sale are made by two different persons, one of them not being the
owner of the property sold. In the case at bar, the subject property was not transferred to several
purchasers by a single vendor. In the first sale, the vendors were Gamiao and Dayag whose right to the
property originated from their acquisition thereof from Rizal Madrid. In the second sale, the vendors were
the Madrid brothers but at that time they were no longer the owners since they had long disposed of the
property. In a situation where not all the requisites are present which would warrant the application of
1544, the principle that “he who is first in time is preferred in right” should apply. In the instant case, the
sale by Gamiao and Dayag who first bought it from Rizal Madrid was anterior to the sale to Marquez.
The Heirs of dela Cruz and Hernandez also had possession of the property first. Thus, applying the
principle, the Heirs have a superior right to the subject property. Moreover, since the Madrid brothers
were no longer the owners of the lot at the time of the sale to Marquez, Marquez did not acquire any right
to it.
 Assuming arguendo that 1544 applies, the claim of Marquez still cannot prevail over the right of the
Heirs since he was not a purchaser in good faith.

Development Bank of the Philippines vs. Bautista

G.R. No. L-21362. November 29, 1968

FACTS: As creditor, the Development Bank of the Philippines (DBP) filed a complaint against one of its
debtors, Lourdes Gaspar Bautista, for the recovery of a sum of money representing the unpaid mortgage
indebtedness, which previously had been wiped out with the creditor bank acquiring the title of the
mortgaged property in an extrajudicial sale. Thereafter, the title was nullified in a judicial proceeding, the
land in question being adjudged as belonging to another claimant, without, however, such debtor having
been cited to appear in such court action. The DBP was unsuccessful, the lower court being of the view
that with the due process requirement thus flagrantly disregarded, since she was not a party in such action
where her title was set aside, such a judgment could in no wise be binding on her and be the source of a
claim by the appellant bank. The complaint was thus dismissed by the lower court, then presided by
Judge, now Justice, Magno Gatmaitan of the Court of Appeals. Hence, this appeal by appellant bank.

ISSUE: What is the right, if any, of a creditor which previously satisfied its claim by foreclosing
extrajudicially on a mortgage executed by the debtor, whose title was thereafter nullified in a judicial
proceeding where she was not brought in as a party?

HELD: The fundamental due process requirement having been disregarded, Bautista could not in any
wise be made to suffer, whether directly or indirectly, from the effects of such decision. After the DBP
had acquired her title by such extrajudicial foreclosure sale, through its own act, seen to it that her
obligation had been satisfied, it could not thereafter, seek to revive the same on the allegation that the title
in question was subsequently annulled, considering that she was not made a party on the occasion of such
nullification. If it were otherwise, then the cardinal requirement that no party should he made to suffer in
person or property without being given a hearing would be brushed aside. The doctrine consistently
adhered to by this Court whenever such a question arises in a series of decisions is that a denial of due
process suffices to cast on the official act taken by whatever branch of the government the impression of
nullity. Article 1558 of the Civil Code which reads: "The vendor shall not be obliged to make good the
proper warranty, unless he is summoned in the suit for eviction at the instance of the vendee." In effect,
the DBP would hold Bautista liable for the warranty on her title, its annulment having the same effect as
that of an eviction. In such a case, it is wisely provided by the Civil Code that Bautista, as vendor, should
have been summoned and given the opportunity to defend herself. In view of her being denied her day in
court, it would follow, if the intent of the above codal provision were to be respected, that she is not
obliged to make good the proper warranty.

SPS. ESMERALDO VALLIDO and ARSENIA VALLIDO vs SPS ELMER PONO and JULIET
PONO ET.AL
GR-200173. April 15,2013

FACTS: Martino Dandan was the registered owner of a parcel of land in Kananga, Leyte covered by
Original Certificate of Title. He sold a portion of the subject property to Purificacion Cerna. Upon
execution of Deed of Absolute Sale, Martino gave to Purificacion the owner’s copy. The transfer however
was not recorded in the Registry of Deeds. Purificacion sold the portion of land to Marianito Pono and
delivered the OCT to him. Pono registered the portion he bought for taxation purposes, paid its taxes,
took possession and allowed his son Elmer and daughter in law to construct a house thereon. The transfer
was not recorded. Meanwhile, Martino Dandan sold the entire property to his grandson Esmeraldo
Vallido and since Dandan can no longer transfer OCT to Vallido, he filed a petition to RTC of Ormoc
seeking for the issuance of a new owner’s duplicate copy of the OCT which he claimed was lost. RTC
granted the same. Vallido then filed before the RTC a claim for quieting of title, recovery of possession of
real property and damages against Pono.

ISSUE: Whether or not Spouses Vallido are buyers and registrants in good faith?

RULING: No. Spouses Vallido are NOT buyers in good faith as they failed to discharge their burden of
proof. Martino is the grandfather of Esmeraldo and as an heir, Esmeraldo cannot be considered as a third
party to the prior transaction between Martino and Purificacion. In Pilapil v. Court of Appeals, it was
written: The purpose of the registration is to give notice to third persons. And, privies are not third
persons. The vendor's heirs are his privies. Against them, failure to register will not vitiate or annul the
vendee's right of ownership conferred by such unregistered deed of sale. The non-registration of the deed
of sale between Martino and Purificacion is immaterial as it is binding on the petitioners who are privies.
Based on the privity between petitioner Esmeraldo and Martino, the petitioner as a second buyer is
charged with constructive knowledge of prior dispositions or encumbrances affecting the subject
property. The second buyer who has actual or constructive knowledge of the prior sale cannot be a
registrant in good faith. Moreover, although it is a recognized principle that a person dealing on a
registered land need not go beyond its certificate of title, it is also a firmly settled rule that where there are
circumstances which would put a party on guard and prompt him to investigate or inspect the property
being sold to him, such as the presence of occupants/tenants thereon, it is expected from the purchaser of
a valued piece of land to inquire first into the status or nature of possession of the occupants. There are
several indicia that should have placed the Elsmeraldo Vallido on guard and prompted them to investigate
or inspect the property being sold to them such as when Martino did not have the owner's duplicate copy
of the title and there are existing permanent improvements on the land. These circumstances are too
glaring to be overlooked and should have prompted the Vallido, as prospective buyers, to investigate or
inspect the land. Where the vendor is not in possession of the property, the prospective vendees are
obligated to investigate the rights of one in possession. As the petitioners cannot be considered buyers in
good faith, they cannot lean on the indefeasibility of their TCT in view of the doctrine that the defense of
indefeasibility of a torrens title does not extend to transferees who take the certificate of title in bad faith.
The Court cannot ascribe good faith to those who have not shown and diligence in protecting their rights.

Jurado vs. Sps Chai

G.R. No. 236516, March 25, 2019
PERLAS-BERNABE, J.:
Topic: Sales

Doctrine:
Persons dealing with administratively reconstituted titles should conduct an inquiry or investigation as
might be necessary to acquaint themselves with the defects in the titles of their vendors.

Facts:
Sometime in 1997, petitioners discovered that respondents unlawfully caused the subdivision of Lot 4900
into several parcels of land under four (4) certificates of title (derivative titles), to wit: (1) TCT No. T-
194346 in the name of Vicente Chai, married to Carmen T. Chai; (2) TCT No. T-194347 in the name of
Eduardo Sarmiento, married to Josefina M. Sarmiento (Spouses Sarmiento); (3) TCT No. T-l94348 in the
name of Anastacio Palermo (Anastacio); and (4) TCT No. T-194349 in the names of Leonora Pariñas and
Margarita Pariñas (Pariñas heirs). This prompted the Zamoras to file an annulment case against
respondents, Spouses Sarmiento, Anastacio, the Pariñas heirs with their spouses, and the Register of
Deeds (RD) for Isabela in Santiago City, Isabela (RD-Santiago), which was later amended to include the
lessee, Petron Corporation (Petron), as defendant (collectively, Chai, et al.). They claimed that the titles of
Chai, et al. proceeded from a fake Original Certificate of Title (OCT) No. 3429 that was reconstituted
judicially and administratively without notice to all concerned parties, and without following the
prescribed procedure.

The RTC declared null and void TCT Nos. T-194346, T-194348, and T-194349. It likewise ruled that
respondents were not purchasers in good faith, pointing out that the fact that Pariñas OCT 3429 was a
reconstituted title should have alerted them to make an investigation in the Register of Deeds, which
could have disclosed such irregularity but they failed to do so.

CA reversed RTC decision.

Issue: Did the CA err in declaring that respondents are purchasers in good faith?

Held: Yes. Respondents are not purchasers in good faith.

Case law states that reconstituted titles shall have the same validity and legal effect as to the originals
thereof unless the reconstitution was made extrajudicially, or administratively. This is because
administrative reconstitution is essentially ex-parte and without notice, and thus, administratively
reconstituted titles do not share the same indefeasible character of the original certificates of title. Anyone
dealing with such copies are put on notice of such fact and warned to be extra-careful.

In this case, Pariñas OCT 3429 was judicially reconstituted on February 28, 1974. However, following
the fire that razed the RD-Ilagan on December 4, 1976, the same was administratively reconstituted on
June 2, 1977. As such, said reconstituted title does not share the same indefeasible character of the
original certificates of title and such fact should have alerted respondents to conduct an inquiry or
investigation as might be necessary to acquaint themselves with the defects therein.

However, respondents only relied on a mere plain photocopy of Pariñas OCT 3429 when they purchased
Lot 4900. Aside from instructing Ms. Masa to verify the existence and genuineness of the said title with
the RD-Ilagan, who claimed that she was shown the original copy thereof, respondents had not conducted
any other inquiry or investigation to acquaint themselves with the defects of the said title. They had not
even secured a certified true copy thereof, and merely relied on the RD-Ilagan Certification stating that
the 7,086-sq. m. Lot 4900 situated in Poblacion, Santiago, Isabela covered by Pariñas OCT 3429 is free
from any liens and encumbrances except Section 7 of RA 26 inscribed at the back of said title on June 2,
1977.

Considering the foregoing, it is therefore apparent that Spouses Pariñas were not issued Pariñas OCT
3429, and said title is totally inexistent. That it was reconstituted is of no moment because an
administrative reconstitution of title is merely a restoration or replacement of a lost or destroyed title in its
original form at the time of the loss or destruction. The issuance of a reconstituted title vests no new
rights and determines no ownership issues, and shall always be without prejudice to any party whose right
or interest in the property was duly noted in the original, at the time it was lost or destroyed, but entry or
notation of which has not been made on the reconstituted certificate of title, as expressly provided under
Section 7 of RA 26, which was duly noted on the reconstituted Pariñas OCT 3429. Consequently, this
Court finds respondents not to be innocent purchasers for value, and as such, acquired no better title to
Lot 4900 than what their predecessors-in-interest had, and which is without prejudice to the rights of
another person who may prove a better right thereto than their transferors.

MIRANDA v. SPS. MALLARI

G.R. No. 218343
November 28, 2018
Topic: Sales
Ponente: CAGUIOA, J.

DOCTRINE: Article 1458 of the Civil Code provides that by the contract of sale one of the contracting
parties obligates himself to transfer ownership and to deliver a determinate thing, and the other to pay a
price certain in money or equivalent. Pursuant to Article 1475, a contract of sale is a consensual one
because it is perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price.

As to transfer of ownership, Article 1477 provides that the ownership of the thing sold shall be transferred
to the vendee upon the actual or constructive delivery thereof. Under Article 712, ownership and other
real rights over property are acquired and transmitted in consequence of certain contracts, by tradition.
However, the parties may stipulate that ownership in the thing shall not pass to the purchaser until he has
fully paid the price under Article 1478.

A judgment creditor or purchaser at an execution sale acquires only whatever rights that the judgment
obligor may have over the property at the time of levy.

FACTS: On January 24, 2000, a Decision was rendered by the RTC of Balanga City granting the
complaint for damages docketed therein as Civil Case No. 6701, entitled Spouses Mallari vs Japhil
Construction Corp. and its owners, the Spouses Reyes.
The Spouses Reyes appealed the foregoing disposition, but the same was dismissed by the CA. The
RTC's disposition was declared final and executory and was annotated in Transfer Certificate of Title. On
March 10, 2003, a Writ of Execution was then issued by the RTC of Balanga. Pursuant thereto, a Notice
of Levy, dated April 2, 2003, was issued covering the parcel of land, located registered under TCT No.
NT-266485 (subject property) in the names of therein judgment debtors, Spouses Reyes. The date of the
inscription of the notice in TCT was indicated as April 3, 2002, when the same should have been April 3,
2003.

On September 12, 2003 and after due notice, a public auction was held whereby the subject property was
sold to the Spouses Mallari, as highest bidders, who came out with a bid of PhP 1,645,000.00. On
September 16, 2003, a Certificate of Sale was then issued to the said spouses who, in turn, caused the
same to be annotated in TCT.

On March 3, 2004, the Spouses Mallari filed the suit for recovery of possession against Jun Miranda.
Thereunder, they alleged that, sometime after causing the Certificate of Sale in their favor to be annotated
in TCT, they conducted an inspection of the subject property. At which time, they discovered that the
same was in the possession of Miranda who claimed to be the owner thereof, having bought the property
from the Spouses Reyes sometime in 1996. Claiming to be entitled to the ownership and possession of the
property, they prayed that Miranda be ordered to vacate and to surrender the possession thereof to them.

On July 12, 2004 and with leave of court, Miranda filed a Third-Party Complaint against the Spouses
Reyes.

On June 3, 2010, the RTC rendered the assailed Decision granting the Spouses Mallari's complaint and
dismissing Miranda's third-party complaint. Miranda is estopped from claiming ownership over the
subject property in view of his failure to annotate his interest thereto in TCT; and, that the levy,
execution, and sale of the subject property to the Spouses Mallari is valid because Miranda's claim of
ownership, even if true, cannot prevail over the rights of the said spouses. In dismissing the third-party
complaint, the RTC ratiocinated that the warranty against eviction does not apply because, first, the
Spouses Reyes, as vendors, had no participation in the execution sale and, second, it was Miranda who
failed to safeguard his right over the property.

The CA in its Decision affirmed the RTC Decision. The CA ruled that the right of Spouses Mallari having
been annotated on TCT through the Notice of Levy prevails over that of Miranda "in line with the
jurisprudential rule that preference is given to a duly registered levy on attachment or execution over a
prior unregistered sale."The CA found Miranda's invocation that he is an innocent purchaser for value
erroneous, and Spouses Mallari are the ones who can claim the right of being innocent purchasers for
value. On Miranda's third-party complaint against Spouses Reyes, the CA ruled that Miranda cannot
anymore seek refuge under the Civil Code provisions on breach of warranty against eviction because
almost eight years have lapsed from the execution of the deed of sale in 1996 up to the filing of the instant
complaint on March 3, 2004.

ISSUE: Who as between Spouses Mallari and Miranda has a better right of possession over the subject
property?
RULING: The Court holds that Miranda has a better right of possession over the subject property having
acquired ownership thereof prior to the levy on execution that Spouses Mallari had caused to be made
upon the subject property.

The Deed of Absolute Sale between Spouses Reyes, the then registered owners of the subject property,
and Miranda was executed in March 1996 and possession was already transferred to Miranda, through
constructive delivery when the Deed of Absolute Sale, a public instrument, was executed conformably to
Article 1498 of the Civil Code, and through real delivery when actual possession was turned over to
Miranda pursuant to Article 1497 of the Civil Code. Pursuant to the applicable provisions of the Civil
Code on the contract of sale and modes of acquiring ownership, Miranda acquired ownership of the
subject property when he took actual physical, or at least constructive, possession thereof. The non-
registration of the Deed of Absolute Sale with the Registry of Deeds for the Province of Nueva Ecija did
not affect the sale's validity and effectivity.

A judgment creditor or purchaser at an execution sale acquires only whatever rights that the judgment
obligor may have over the property at the time of levy. Thus, if the judgment obligor has no right, title or
interest over the levied property — as in this case — there is nothing for him to transfer.

Applied to this, the levy made on the subject property could not have created any lien in favor of Spouses
Mallari because their judgment debtors, Spouses Reyes, had no more right, title or interest thereto or
therein at the time of the levy. To recall, they had sold the property in question to Miranda a whole seven
years earlier. Needless to add, there was nothing that was sold and transferred to Spouses Mallari at the
time of the execution.

The jurisprudential rule that preference is to be given to a duly registered levy on attachment or execution
over a prior unregistered sale, which the CA adverted to in ruling that the right of Spouses Mallari
prevails over that of Miranda, is to be circumscribed within another well-settled rule — that a judgment
debtor can only transfer property in which he has interest to the purchaser at a public execution sale.
Thus, the former rule applies in case ownership has not vested in favor of the buyer in the prior
unregistered sale before the registered levy on attachment or execution, and the latter applies when,
before the levy, ownership of the subject property has already been vested in favor of the buyer in the
prior unregistered sale.

Jose Luis G. Yulo v. Arsenia Javier Celo

G.R. No. 208787
July 30, 2019.
Topic: SALES

Doctrine:
The principle of solutio indebiti under Article 2154 of the Civil Code provides that "[i]f something is
received when there is no right to demand it, and it was unduly delivered through mistake, the obligation
to return it arises." It applies where (1) a payment is made when there exists no binding relation between
the payor, who has no duty to pay, and the person who received the payment, and (2) the payment is made
through mistake, and not through liberality or some other cause.
For encashing the seven checks and receiving their proceeds, therefore, Celo is liable to return the amount
of P1,188,960.00. With respect, however, to the amount of P1,250,000.00, We cannot hold Celo liable to
return the same, as the evidence of both parties show that Catalina received said amount through BPI
Check No. 04 7959 she encashed herself.

Facts
What remains clear is that Yulo acted on the mistaken belief that Celo was duly authorized by the owners
of the lands to receive the payment on their behalf.

Yulo, as the prosecution's lone witness, alleged that sometime in March 1996, he was approached by Celo
who presented herself as the authorized broker/agent of the owners of three parcels of land located in
Barrio Kay Anlog, Calamba City, and covered by Transfer Certificate of Title (TCT) Nos. T-329118 (in
the name of Honorio Javier), and T-118082 and T-118083 (in the name of Spouses Santiago Evangelista
and Catalina Javier). Celo claimed that the lots were for sale and free from any liens or encumbrances.
Having dealt with Celo in the past, and on the basis of her assurances that she was authorized by the
registered owners to negotiate and transact with buyers, Yulo agreed to purchase the properties.

Yulo purchased the properties from Celo because of her very misrepresentation that she was duly
authorized to act on behalf of the registered owners of the properties. Further, Yulo was induced to part
with his money on the undertaking of Celo that she will cause the transfer of the title over the properties
under his name and without any liens or encumbrances. However, the promise of Celo never came into
fruition. The titles of the properties were never transferred to Yulo and worse, he learned that one of the
properties was mortgaged to a bank. Despite receiving the proceeds of the sale, Celo did not turn them
over to the alleged owners.

Issue(s): Was the sale valid?

Is the defendant liable to pay damages?

Ruling
While We cannot, at the moment, decide on the validity of the deeds of the absolute sale or the existence
of the sales as they should be properly resolved in another proceeding where the purported vendors or
their representatives or heirs may litigate their claims, what remains clear is that Yulo acted on the
mistaken belief that Celo was duly authorized by the owners of the lands to receive the payment on their
behalf.

For encashing the seven checks and receiving their proceeds, therefore, Celo is liable to return the amount
of P1,188,960.00. With respect, however, to the amount of P1,250,000.00, We cannot hold Celo liable to
return the same, as the evidence of both parties show that Catalina received said amount through BPI
Check No. 04 7959 she encashed herself.

With regard to damages and attorney's fees, we hold that Yulo is also entitled to these awards, albeit in
reduced amounts than what he prayed for.
Celo is also liable to Yulo for moral damages, it appearing in the record that Celo acted in evident bad
faith and succeeded in defrauding Yulo. Fraud and bad faith of Celo having been proved by the
prosecution, Celo is liable to Yulo for moral damages in a fair, just, and reasonable amount of
P50,000.00.

Furthermore, Article 2229 of the Civil Code provides that "exemplary or corrective damages are imposed,
by way of example or correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages." Thus, in addition to the award of compensatory or actual damages in favor of
Yulo, we also impose the award of exemplary damages in the amount of P25,000.00. The award of
P50,000.00 as attorney's fees is likewise warranted.

Eagleridge Development Corp. v. Cameron Granville 3 Asset Management, Inc.

G.R. No. 204700, April 10, 2013
Topic: Sales
LEONEN, J.

Doctrine:
When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to extinguish it
by reimbursing the assignee for the price the latter paid therefor, the judicial costs incurred by him, and
the interest on the price from the day on which the same was paid.

Facts:
Petitioners Eagleridge Development Corporation (EDC), and sureties Marcelo N. Naval (Naval) and
Crispin I. Oben (Oben) are the defendants in a collection suit initiated by Export and Industry Bank (EIB)
through a Complaint.

By virtue of a Deed of Assignment, EIB transferred EDC's outstanding loan obligations of P10,232,998.00
to respondent Cameron Granville 3 Asset Management, Inc. (Cameron), a special purpose vehicle.

Thereafter, Cameron filed its Motion to Substitute/Join EIB, which was granted by the trial court.
Subsequently, petitioners filed a Motion for Production/Inspection of the Loan Sale and Purchase
Agreement (LSPA) referred to in the Deed of Assignment.

Petitioners explained that the production of the LSPA was for “good cause”. They pointed out that the
claim of Cameron is based on an obligation purchased after litigation had already been instituted in
relation to it. They claimed that pursuant to Article 1634 of the New Civil Code on assignment of credit,
the obligation subject of the case a quo is a credit in litigation, which may be extinguished by reimbursing
the assignee of the price paid therefor, the judicial costs incurred and the interest of the price from the day
on which the same was paid.
As petitioners' alleged loan obligations may be reimbursed up to the extent of the amount paid by
Cameron in the acquisition thereof, it becomes necessary to verify the amount of the consideration from
the LSPA, considering that the Deed of Assignment was silent on this matter.

Issue: Is the equitable right of redemption allowed to a debtor under Article 1634 of the Civil Code
applicable in this case.

Held: Yes.
As petitioners correctly pointed out, they have the right of legal redemption by paying Cameron the
transfer price plus the cost of money up to the time of redemption and the judicial costs. Article 1634
provides:

When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to extinguish it
by reimbursing the assignee for the price the latter paid therefor, the judicial costs incurred by him, and
the interest on the price from the day on which the same was paid.

Certainly, it is necessary for the petitioners to be informed of the actual consideration paid by the SPV in
its acquisition of the loan, because it would be the starting point for them to negotiate for the
extinguishment of their obligation. As pointed out by the petitioners, since the Deed of Assignment merely
states “For value received”, the appropriate information may be supplied by the LSPA. It is self-evident
that in order to be able to intelligently match the price paid by respondent for the acquisition of the loan,
petitioner must be provided with the necessary information to enable it to make a reasonably informed
proposal. Because of the virtual refusal and denial of the production of the LSPA, petitioners were never
accorded the chance to reimburse respondent of the consideration the latter has paid.

Consequently, this Court finds and so holds that the denial of the Motion for Production despite the
existence of “good cause,” relevancy and materiality for the production of the LSPA was unreasonable
and arbitrary constituting grave abuse of discretion on the part of the trial court.

Heirs of Lopez v. Development Bank of the Philippines

G.R. NO. 193551
November 19, 2014
Topic: Sales; Innocent purchaser or mortgagee for value; Sales by persons who are not owners of the
property.
Ponente: Leonen, J.

Doctrine: The Court has consistently upheld the principle that "no one can give what one does not have."
A seller can only sell what he or she owns, or that which he or she does not own but has authority to
transfer, and a buyer can only acquire what the seller can legally transfer.

Facts:
Three brothers inherited from their mother, Gregoria Lopez, a property in Bustos, Bulacan. When they
died, only one brother, Teodoro, was survived by children: Gregorio, Enrique, Simplicio and Severino.
Petitioners discovered that Enrique executed an affidavit of self-adjudication declaring himself to be
Gregoria Lopez’s only surviving heir, thereby adjudicating upon himself the land in Bulacan. He then
sold the property to Marietta Yabut. Marietta obtained a loan from Development Bank of the Philippines
(DBP) and mortgaged the property to DBP as security. Then, an original certificate of title was issued in
Marietta’s name. The petitioners filed a complaint for the annulment of document, recovery of possession
and reconveyance of the property. The regional trial court found that the affidavit of self-adjudication and
the deed of absolute sale did not validly transfer to Marietta the title to the property since three-fourths of
the property belonged to his co-heirs. On appeal, the court reversed the trial court's decision and held that
DBP was a mortgagee in good faith.

Issues:
1. Did Marietta acquire the entire property?
2. Is she an innocent purchaser for value?
3. Can DBP be considered a mortgagee in good faith?

Held:
1. No. The Court has consistently upheld the principle that "no one can give what one does not have." A
seller can only sell what he or she owns, or that which he or she does not own but has authority to
transfer, and a buyer can only acquire what the seller can legally transfer.

This principle is incorporated in our Civil Code. It provides that in a contract of sale, the seller binds
himself to transfer the ownership of the thing sold, thus:
Art. 1458. By the contract of sale, one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.

The seller cannot perform this obligation if he or she does not have a right to convey ownership of the
thing. Hence, Article 1459 of the Civil Code provides:
Art. 1459. The thing must be licit and the vendor must have a right to transfer the
ownership thereof at the time it is delivered.

In this case, Since Enrique's right to the property was limited to his one-fourth share, he had no right to
sell the undivided portions that belonged to his siblings or their respective heirs. Regardless of their
agreement, Enrique could only convey to Marietta his undivided one-fourth share of the property and
Marietta could only acquire that share. This is because Marietta obtained her rights from Enrique who, in
the first place, had no title or interest over the rest of the property that he could convey.

2. Marietta cannot be considered an innocent purchaser in good faith. An innocent purchaser for value
purchases a property without any notice of defect or irregularity as to the right or interest of the seller. He
or she is without notice that another person holds claim to the property being purchased. As a rule, an
ordinary buyer may rely on the certificate of title issued in the name of the seller. He or she need not look
“beyond what appears on the face [of the certificate of title].” However, the ordinary buyer will not be
considered an innocent purchaser for value if there is anything on the certificate of title that arouses
suspicion, and the buyer failed to inquire or take steps to ensure that there is no cloud on the title, right, or
ownership of the property being sold.

In this case, there was no certificate of title to rely on when she purchased the property from Enrique. At
the time of the sale, the property was still unregistered. What was available was only a tax declaration
issued under the name of “Heirs of Lopez.” The unregistered status of the property should have prompted
Marietta to inquire further as to Enrique’s right over the property. She did not. Hence, she was not an
innocent purchaser for value. She acquired no title over petitioners’ portions of the property.

3. DBP acquired no right over the undivided portions since its predecessor-in-interest was not the owner
and held no authority to convey the property.

The Court has ruled that a mortgagee has a right to rely in good faith on the certificate of title of the
mortgagor to the property given as security and in the absence of any sign that might arouse suspicion,
has no obligation to undertake further investigation. Hence, even if the mortgagor is not the rightful
owner of, or does not have a valid title to, the mortgaged property, the mortgagee in good faith is,
nonetheless, entitled to protection.

The exception applies when, at the time of the mortgage, the mortgagor has already obtained a certificate
of title under his or her name. It does not apply when, as in this case, the mortgagor had yet to register
the property under her name.

Cabrera v. Ysaac
G.R. No. 166790, November 19, 2014
Topic: Sales
Leonen, J:

Case Doctrine: Unless all the co-owners have agreed to partition their property, none of them may sell a
definite portion of the land. The co-owner may only sell his or her proportionate interest in the co-
ownership. A contract of sale which purports to sell a specific or definite portion of unpartitioned land is
null and void ab initio.
Facts: It appears that the heirs of Luis and Matilde Ysaac co-owned a 5,517-square- meter parcel of land
located in Sabang, Naga City. One of the co-owners is respondent, Henry Ysaac. Henry Ysaac leased out
portions of the property to several lessees. Juan Cabrera, one of the lessees, leased a 95-square-meter
portion of the land beginning in 1986. On May 6, 1990, Henry Ysaac needed money and offered to sell
the 95-square- meter piece of land to Juan Cabrera. He told Henry Ysaac that the land was too small for
his needs because there was no parking space for his vehicle. In order to address Juan Cabrera's concerns,
Henry Ysaac expanded his offer to include the two adjoining lands that Henry Ysaac was then leasing to
the Borbe family and the Espiritu family. Those three parcels of land have a combined area of 439-
square-meters. However, Henry Ysaac warned Juan Cabrera that the sale for those two parcels could only
proceed if the two families agree to it. Juan Cabrera accepted the new offer. Henry Ysaac and Juan
Cabrera settled on the price of P250.00 per square meter, but Juan Cabrera stated that he could only pay
in full after his retirement on June 15, 1992. Henry Ysaac agreed but demanded for an initial payment of
P1,500.00, which Juan Cabrera paid.

According to Juan Cabrera, Henry Ysaac informed him that the Borbe family and the Espiritu family
were no longer interested in purchasing the properties they were leasing. Since Mamerta Espiritu of the
Espiritu family initially considered purchasing the property and had made an initial deposit for it, Juan
Cabrera agreed to reimburse this earlier payment. On June 9, 1990, Juan Cabrera paid the amount of
P6,100.00. Henry Ysaac issued a receipt for this amount. P3,100.00 of the amount paid was reimbursed to
Mamerta Espiritu and, in turn, she gave Juan Cabrera the receipts issued to her by Henry Ysaac. On June
15, 1992, Juan Cabrera tried to pay the balance of the purchase price to Henry Ysaac. However, at that
time, Henry Ysaac was in the United States. The only person in Henry Ysaac's residence was his wife.
The wife refused to accept Juan Cabrera's payment.
Sometime in September 1993, Juan Cabrera alleged that Henry Ysaac approached him, requesting to
reduce the area of the land subject of their transaction. Part of the 439-square-meter land was going to be
made into a barangay walkway, and another part was being occupied by a family that was difficult to
eject. Juan Cabrera agreed to the proposal. The land was surveyed again. According to Juan Cabrera,
Henry Ysaac agreed to shoulder the costs of the resurvey, which Juan Cabrera advanced in the amount of
P3,000.00. The resurvey shows that the area now covered by the transaction was 321 square meters. Juan
Cabrera intended to show the sketch plan and pay the amount due for the payment of the lot. However, on
that day, Henry Ysaac was in Manila. Once more, Henry Ysaac's wife refused to receive the payment
because of lack of authority from her husband. On September 21, 1994, Henry Ysaac's counsel, Atty. Luis
Ruben General, wrote a letter addressed to Atty. Leoncio Clemente, Juan Cabrera's counsel. Atty. General
informed Atty. Clemente that his client is formally rescinding the contract of sale because Juan Cabrera
failed to pay the balance of the purchase price of the land between May 1990 and May 1992. The letter
also stated that Juan Cabrera's initial payment of P1,500.00 and the subsequent payment of P6,100.00
were going to be applied as payment for overdue rent of the parcel of land Juan Cabrera was leasing from
Henry Ysaac. The letter also denied the allegation of Juan Cabrera that Henry Ysaac agreed to shoulder
the costs of the resurveying of the property. Juan Cabrera, together with his uncle, Delfin Cabrera, went to
Henry Ysaac's house on September 16, 1995 to settle the matter. Henry Ysaac told Juan Cabrera that he
could no longer sell the property because the new administrator of the property was his brother, Franklin
Ysaac.
Due to Juan Cabrera's inability to enforce the contract of sale between him and Henry Ysaac, he decided
to file a civil case for specific performance.

Issue: Was there a valid contract of sale between petitioner and respondent?

Held: We find that there was no contract of sale. It was null ab initio.

As defined by the Civil Code, "[a] contract is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service." For there to be a valid
contract, there must be consent of the contracting parties, an object certain which is the subject matter of
the contract, and cause of the obligation which is established.
Sale is a special contract. The seller obligates himself to deliver a determinate thing and to transfer its
ownership to the buyer. In turn, the buyer pays for a price certain in money or its equivalent. A "contract
of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price." The seller and buyer must agree as to the certain thing that will be subject of
the sale as well as the price in which the thing will be sold. The thing to be sold is the object of the
contract, while the price is the cause or consideration.

The object of a valid sales contract must be owned by the seller. If the seller is not the owner, the seller
must be authorized by the owner to sell the object.

Specific rules attach when the seller co-owns the object of the contract. Sale of a portion of the property is
considered an alteration of the thing owned in common. Under the Civil Code, such disposition requires
the unanimous consent of the other co- owners. However, the rules also allow a co-owner to alienate his
or her part in the co- ownership.

These two rules are reconciled through jurisprudence.

If the alienation precedes the partition, the co-owner cannot sell a definite portion of the land without
consent from his or her co-owners. He or she could only sell the undivided interest of the co-owned
property. As summarized in Lopez v. Ilustre, " [i]f he is the owner of an undivided half of a tract of land,
he has a right to sell and convey an undivided half, but he has no right to divide the lot into two parts, and
convey the whole of one part by metes and bounds.

There was no showing that respondent was authorized by his co-owners to sell the portion of land
occupied by Juan Cabrera, the Espiritu family, or the Borbe family. Without the consent of his co-owners,
respondent could not sell a definite portion of the co-owned property. Respondent had no right to define a
95-square-meter parcel of land, a 439- square-meter parcel of land, or a 321-square-meter parcel of land
for purposes of selling to petitioner. The determination of those metes and bounds are not binding to the
co-ownership and, hence, cannot be subject to sale, unless consented to by all the co-owners.

Makilito B. Mahinay vs. Dura Tire & Rubber Industries, Inc.

G.R. No. 194152
June 5, 2017
Topic: non-extendible period of redemption under act no. 3135
Leonen, J.

Doctrine:
The period to redeem a property sold in an extrajudicial foreclosure sale is not extendible. A pending
action to annul the foreclosure sale does not toll the running of the one (1)-year period of redemption
under act no. 3135.

FACTS:
The parcel of land, located in Barrio Kiot, Cebu City, was covered by Transfer Certificate of Title (TCT)
No. 111078 under the name of A&A Swiss International Commercial, Inc. (A&A Swiss). The property
was mortgaged to Dura Tire and Rubber Industries, Inc. (Dura Tire) as security for credit purchases to be
made by Move Overland Venture and Exploring, Inc. (Move Overland). Under the mortgage agreement,
Dura Tire was given the express authority to extrajudicially foreclose the property should Move Overland
fail to pay its credit purchases. A&A Swiss sold the property to Mahinay for the sum of P540,000.00. In
the Deed of Absolute Sale, Mahinay acknowledged that the property had been previously mortgaged by
A&A Swiss to Dura Tire, holding himself liable for any claims that Dura Tire may have against Move
Overland. For Move Overland’s failure to pay its credit purchases, Dura Tire applied for extrajudicial
foreclosure of the property on January 6, 1995. Mahinay protested the impending sale and filed a third-
party claim before the Office of the Provincial Sheriff of Cebu. Despite the protest, Sheriff Romeo Laurel
(Sheriff Laurel) proceeded with the sale and issued a Certificate of Sale in favor of Dura Tire, the highest
bidder at the sale. The Certificate of Sale was registered on February 20, 1995.

On March 23, 1995, Mahinay filed a Complaint for specific performance and annulment of auction sale
before the Regional Trial Court of Cebu City. After due proceedings, the trial court ultimately dismissed
Mahinay’s Complaint in the Decision dated July 29, 2004. Mahinay’s appeal was dismissed by the Court
of Appeals in the Decision dated June 16, 2006. Mahinay filed a Petition for Review on Certiorari before
the Supreme Court which subsequently denied the petition as well as his Motion for Reconsideration.

Mahinay filed a Complaint for judicial declaration of right to redeem on August 24, 2007. “As the
admitted owner of the [property] at the time of the foreclosure,” Mahinay argued that he “must have
possessed and still continues to possess the absolute right to redeem the [property].” Dura Tire argued that
the period of Mahinay’s right of redemption had already lapsed. Therefore, Mahinay could not be allowed
to belatedly redeem the property. Mahinay maintains that he should be allowed to redeem the property he
bought from A&A Swiss despite the lapse of one (1) year from the registration of the Certificate of Sale
on February 20, 1995. Mahinay primarily argues that the one (1)-year period of redemption was tolled
when he filed the Complaint for annulment of foreclosure sale on March 23, 1995 and resumed when the
June 16, 2006 Decision of the Court of Appeals became final and executory on August 8, 2007.

ISSUE: Does the filing of an action to annul the foreclosure sale toll the one (1)-year period of
redemption under Act No. 3135?

RULING: NO. The period to redeem a property sold in an extrajudicial foreclosure sale is not extendible.
A pending action to annul the foreclosure sale does not toll the running of the one (1)-year period of
redemption under Act No. 3135.

By force of law, specifically, Section 6 of Act No. 3135, Mahinay’s right to redeem arose when the
mortgaged property was extrajudicially foreclosed and sold at public auction. There is no dispute that
Mahinay had a lien on the property subsequent to the mortgage. Consequently, he had the right to buy it
back from the purchaser at the sale, Dura Tire in this case, “from and at any time within the term of one
year from and after the date of the sale.”

The “date of the sale” referred to in Section 6 is the date the certificate of sale is registered with the
Register of Deeds. This is because the sale of registered land does not “’take effect as a conveyance, or
bind the land’ until it is registered.”
The right of redemption being statutory, the mortgagor may compel the purchaser to sell back the
property within the one (1)-year period under Act No. 3135. If the purchaser refuses to sell back the
property, the mortgagor may tender payment to the Sheriff who conducted the foreclosure sale. Here,
Mahinay should have tendered payment to Sheriff Laurel instead of insisting on directly paying Move
Overland’s unpaid credit purchases to Dura Tire.

Since the period of redemption is fixed, it cannot be tolled or interrupted by the filing of cases to annul
the foreclosure sale or to enforce the right of redemption. “To rule otherwise would constitute a
dangerous precedent. A likely offshoot of such a ruling is the institution of frivolous suits for annulment
of mortgage intended merely to give the mortgagor more time to redeem the mortgaged property.”

GOTESCO PROPERTIES, INC., vs. CORPORATION (NOW METROPOLITAN BANK

COMPANY)
G.R no. 209452
Date: July 26, 2017
Topic: Sales
Ponente: LEONEN, J

FACTS:
Gotesco obtained from Solidbank a term loan through its President, Mr. Jose Go (Mr. Go). This loan was
covered by three (3) promissory notes. To secure the loan, Gotesco was required to execute a Mortgage
Trust Indenture (Indenture) naming Solidbank- Trust Division as Trustee. The Indenture,obliged Gotesco
to mortgage several parcels of land in favor of Solidbank. Stipulation in the Indenture also irrevocably
appointed Solidbank-Trust Division as Gotesco's attorney-in-fact. Under the Indenture, Gotesco also
agreed to "at all times maintain the Sound Value of the Collateral." When the loan was about to mature,
Gotesco found it difficult to meet its obligation because of the 1997 Asian Financial Crisis. Gotesco sent
a letter to Solidbank proposing to restructure the loan obligation. The loan restructuring agreement
proposed to extend the payment period to seven (7) years. The suggested period included a two (2)-year
grace period.

Solidbank informed Gotesco of a substantial reduction in the appraised value of its mortgaged properties.
Based on an appraisal report submitted to Solidbank, the sound value of the mortgaged properties at that
time was at P381,245,840.00. Since the necessary collateral to loan ratio was 200%, Solidbank held that
there was a deficiency in the collateral, which Gotesco had to address. Solidbank required Gotesco to
replace or add to the mortgaged properties. Gotesco construed the letter as Solidbank's implied agreement
to the loan restructuring proposal. However, Gotesco found it unnecessary to address the alleged
deficiency in the collateral. It insisted that the aggregate sound value of the mortgaged properties had not
changed and was still at P1,076,905,000.00.

Solidbank sent a demand letter to Gotesco as the loan became due. Despite having received this demand
letter, Gotesco failed to pay the outstanding obligation. Solidbank then led a Petition for the Extrajudicial
Foreclosure of the lot covered by TCT through Atty. Wilfrido Mangiliman (Atty. Mangiliman), a notary
public.
In the Notice of Sale dated July 24, 2000, the public auction of the land located in Pampanga was
announced to be held on August 24, 2000 at 10:00 a.m. However, pursuant to paragraph 5 of A.M. No.
99-10-05-0, the Notice of Sale indicated that if the minimum requirement of two (2) bidders was not met,
the sale was to be postponed and rescheduled on August 31, 2000. The public auction was held on August
31, 2000 and Solidbank was declared the winning bidder. Gotesco led a complaint before Regional Trial
Court for Annulment of Foreclosure Proceedings, Special Performance, and Damages. Gotesco assailed
the validity of the foreclosure proceeding claiming that it was premature and without legal basis.
According to Gotesco, the jurisdictional requirements prescribed under Act No. 3135 were not complied
with. First, Solidbank did not furnish Gotesco copies of the petition for extrajudicial foreclosure, notice of
sale, and certificate of sale. Second, the filing fees were not paid. Lastly, even assuming the original
period for loan payment was not extended, the prerequisites for the foreclosure proceeding provided in
the Indenture were not met.

Petitioner Gotesco maintains that the foreclosure proceeding is null and void. It insists that respondent
Solidbank agreed to restructure its loan, granting a "payment period of seven (7) years with two (2) years
grace period." It continues to argue that respondent impliedly accepted petitioner's proposal when it asked
for an increase in the collateral. Respondent reneged on the restructuring agreement when it caused the
foreclosure of the property prematurely. Petitioner claims that it was not notified that it was in default.
Under the Indenture, the foreclosure proceeding can only be initiated upon petitioner's failure to pay
within 10 days after receipt of the notice of default. Allegedly, respondent did not send any notice.
Respondent's failure to prove that it sent a demand letter means the obligation is not yet due and
demandable. Petitioner avers that the mortgage is void because the principal obligation it secured was still
inexistent when the Indenture was signed. The mortgage was executed on August 9, 1995. The
promissory notes representing the loans were dated August 14, 1995, August 21, 1995, and August 28,
1995. Since the mortgage was only an accessory contract, "it cannot stand alone absent a principal
obligation to secure." Petitioner alleges that Mr. Go was not sanctioned by Gotesco's Board of Directors
"to appoint the bank as the attorney-in-fact to conduct an extra-judicial foreclosure." Thus, the subsequent
proceedings are void. Moreover, petitioner insists that Section 3 of Act No. 3135 was violated. The law
requires that the Notice of Sale be posted for not less than 20 days before the day of the auction sale.
According to the Affidavit of Posting by Janet Torres, Atty. Mangiliman's law clerk, the Notice of Sale
was posted on August 15, 2000. Since the auction sale was conducted on August 31, 2000, the 20-day
period was not followed. Petitioner further contends that the publication of the Notice of Sale in Remate
was defective. Petitioner is of the opinion that the Notice of Sale should have been published in
newspapers "published, edited and circulated" in the same city or province where the foreclosed property
was located. Since the land being sold was situated at San Fernando, Pampanga and Remate was printed
and published in Manila, petitioner suggests that the publication requirement was violated. Consequently,
since the foreclosure proceeding was void, there was no basis for the issuance of the Writ of Possession.
Possession of the property must revert back to petitioner.

ISSUE/s:
Were requirements under Section 3 of Act No. 3135 were complied with, making the foreclosure is valid?

RULING:
The Supreme Court Ruled that, As to the validity of the foreclosure proceeding, this Court rules in the
affirmative. As stated in Section 3 of Act. 3135, it provides that, “Notice shall be given by posting notices
of the sale for not less than twenty days in at least three public places of the municipality or city where
the property is situated, and if such property is worth more than four hundred pesos, such notice shall also
be published once a week for at least three consecutive weeks in a newspaper of general circulation in the
municipality or city.”Section 3 of Act No. 3135 requires that the Notice of Sale be a) physically posted in
three (3) public places and b) be published once a week for at least three (3) consecutive weeks in a
newspaper of general circulation in the city where the property is situated. The court debunked the claim
of the petitioner that, that since the foreclosed property was located in Pampanga, the publication of the
Notice of Sale in Remate was not valid. Petitioner suggests that the Notice of Sale could only be
published in a newspaper printed in the city where the property was located. It posits that because Remate
was printed and published in Manila, not in San Fernando, Pampanga, the publication was defective. The
court said that, If notices are only published in newspapers printed in the city where the property is
located, even newspapers that are circulated nationwide will be disqualified from announcing auction
sales outside their city of publication. This runs contrary to the spirit of the law which is to attain wide
enough publicity so all parties interested in acquiring the property can be informed of the upcoming sale.

To be a newspaper of general circulation, it is enough that "it is published for the dissemination of local
news and general information; that it has a bona fide subscription list of paying subscribers; that it is
published at regular intervals" . . . The newspaper need not have the largest circulation so long as it is of
general circulation. Verily, there is clear emphasis on the audience reached by the paper; the place of
printing is not even considered.

In any case, the alleged defect in the posting is superficial. The Notice of Sale was posted on August 15,
2000, while the auction sale took place on August 31, 2000. The Notice of Sale was posted for 16 days,
only four (4) days less than what the law requires. In, Olizon v. Court of Appeals explained, that, The
object of a notice of sale is to inform the public of the nature and condition of the property to be sold, and
of the time, place and terms of the sale. Notices are given for the purpose of securing bidders and to
prevent a sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not
affect the sufficiency of the notice; but if mistakes or omissions occur in the notices of sale, which are
calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from
bringing a fair price, such mistakes or omissions will be fatal to the validity of the notice, and also to the
sale made pursuant thereto.

DEE HWA LIONG FOUNDATION MEDICAL CENTER AND ANTHONY DEE v. ASIAMED
SUPPLIES AND EQUIPMENT CORPORATION
G.R. No. 205638;
August 23, 2017
TOPIC: Contract of sale

FACTS: On August 2, 2002, petitioner Dee Hwa Liong Foundation Medical Center (DHLFMC) and
respondent Asiamed Supplies and Equipment Corporation (Asiamed) entered into a Contract of Sale. This
Contract of Sale stated that DHLFMC agreed to purchase from Asiamed a GammaMed Plus
Brachytherapy machine and a Gammacell Elan 3000 blood irradiator (collectively, the machines) for the
price of P31,000,000.00. Regarding payment, the Contract of Sale provided that payment of 31Million is
to be made no later than (2) two working days upon delivery of the equipment and prior to the installation
of the same and the guarantee that DEE HWA LIONG FOUNDATION MEDICAL CENTER warrants
unto ASIAMED SUPPLIES & EQUIPMENT CORPORATION the genuineness, validity and
enforceability of any check, note or evidence of obligation as forelisted and DEE HWA LIONG
FOUNDATION MEDICAL CENTER, at the agreed payment terms, shall pay to ASIAMED SUPPLIES
& EQUIPMENT CORPORATION the amount due. These machines were delivered on May 20, 2003 and
July 17, 2003. A Sales Invoice and two (2) Delivery Invoices were signed by petitioner Anthony Dee
(Anthony) and DHLFMC Vice President for Administration, Mr. Alejandro Mateo (Mateo). On January
26, 2004, Asiamed filed a Complaint against DHLFMC and Anthony (petitioners) for sum of money,
with prayer for issuance of a writ of preliminary attachment, before the Regional Trial Court. Asiamed
alleged that DHLFMC agreed to pay the total purchase price of P31,000,000.00 no later than two (2) days
from receiving the machines. Despite receiving the machines on May 20, 2003 and July 17, 2003,
DHLFMC only paid the amounts of P3,500,000.00 on July 25, 2003, P1,000,000.00 on September 16,
2003, and P800,000.00 on October 30, 2003.Asiamed demanded payment, but DHLFMC refused to pay
the balance. In their Answer, DHLFMC and Anthony alleged that the purchase of the equipment was
conditioned on the approval of a loan from Planters Development Bank (Planters Bank). However, this
loan was not approved.

ISSUE: Was the Contract of Sale rescinded?

HELD: Only questions of law are allowed in a petition for review under Rule 45 of the Rules of Court. It
is a general rule that factual findings of the Regional Trial Court are conclusive, especially when they
have been affirmed by the Court of Appeals. The factual findings of the Court of Appeals bind this Court.
Although jurisprudence has provided several exceptions to this rule, exceptions must be alleged,
substantiated, and proved by the parties so this Court may evaluate and review the facts of the case. Here,
the Court of Appeals made a tactual determination that the effectivity of the Contract of Sale did not
depend on any alleged loan application from Planters Bank. It relied on the evidence presented,
particularly the Contract of Sale, which did not mention any loan from Planters Bank. Petitioners have
failed to show how the Court of Appeals' factual determination based on the evidence presented is an
error of law. Indeed, petitioners' argument that respondent was aware of the conditionality of the contract
hinges on an appreciation of evidence. Petitioners have failed to allege, substantiate, or prove any
exception to the general rule allowing only questions of law to be raised in a petition for review so that
this Court may evaluate and review the evidence presented and the facts of the case.

Orbe v. Filinvest Land, Inc.

G.R. No. 208185
September 6,2017
Topic: Maceda Law

Facts:
In 2001, Orbe entered into a purchase agreement with Filinvest over a 385-square-meter lot.The total
contract price was P2,566,795.00, payable on installment basis. From June 17, 2001 to July 14, 2004,
Orbe paid a total of P608,648.20. Orbe was unable to make further payments on account of financial
difficulties. Filinvest sent a notice of cancellation. Orbe filed a complaint for refund with damages at
HLURB. HLURB held that Orbe is entitled to a refund of the cash surrender value equivalent to 50% of
the total payments she had made, pursuant to Section 3 of Republic Act No. 6552. The Court of Appeals
reversed the prior rulings of the Office of the President, of the HLURB Board of Commissioners, and of
Arbiter Soriano; and dismissed Orbe's Complaint. For the reasoned that the phrase "two years of
installments" under Section 3 means that total payments made should at least be equivalent to two years'
worth of installments. Considering that Orbe's total payment of P608,648.20 was short of the required two
(2) years' worth of installments, she could not avail of the benefits of Section 3.

Issue:
Is petitioner Priscilla Zafra Orbe entitled to a refund or to any other benefit under Republic Act No. 6552

Held:
Yes, petitioner was not entitled to bene􏰊fits under Section 3 of Republic Act No. 6552 as she had failed
to pay two (2) years' worth of installments pursuant to the terms of her original agreement with
respondent with the shortage in petitioner's payment, what applies is Section 4, instead of Section 3. This
means that respondent could cancel the contract since petitioner failed to pay within the 60-day grace
period. However, the notice of cancellation made by respondent was an invalid notarial act. Failing to
satisfy all of Section 4's requisites for a valid cancellation, respondent's cancellation was ineffectual. The
contract between petitioner and respondent should then be deemed valid and subsisting.

When Republic Act No. 6552 or the Maceda Law speaks of paying "at least two years of installments" in
order for the benefits under its Section 3 to become available, it refers to the buyer's payment of two (2)
years' worth of the stipulated fractional, periodic payments due to the seller. When the buyer's payments
fall short of the equivalent of two (2) years' worth of installments, the benefits that the buyer may avail of
are limited to those under Section 4.Should the buyer still fail to make payments within Section 4's grace
period, the seller may cancel the contract. Any such cancellation is ineffectual, however, unless it is made
through a valid notarial act.

RACELIS v SPOUSES JAVIER

G.R. No. 189609
January 29, 2018
Topic: Law on Lease; Postponement of rent; Earnest Money
Ponente: Leonen, J.

Doctrine:
A contract of lease is a consensual and bilateral contract by which the owner temporarily grants the use of
his property to another who undertakes to pay rent thereof.. Article 1658 of the Civil Code allows a lessee
to postpone the payment of rent if the lessor fails to (2) maintain the lessee in peaceful and adequate
enjoyment of the property leased.
Facts:
Before his death, the late Pedro Nacu, Sr. appointed his daughter Racelis to administer his properties
among which was a residential house and lot in Marikina City in which he requested to be sold first.
Spouses Javier offered to purchase the Marikina property however, they could not afford to pay the price
so they offered to lease the property instead while they raise enough money. The parties agreed on a
month-to month lease and rent. The spouses used the property as their residence and as the site of their
tutorial school. Racelis inquired whether the spouses were still interested to purchase the property and the
spouses reassured her of their commitment and even promised to pay P100, 000 to buy them more time
within which to pay the purchase price. The spouses tendered the sum of P65, 000 as initial payment of
the P100, 000 but by the end of 2003 they were able to deliver a total of P78, 000 only. Meanwhile they
continued to lease the property and consistently paid the rent but started to fall behind. Realizing the
spouses had no genuine intention of purchasing the property, Racelis wrote to inform them that her family
decided to terminate the lease agreement and to offer the property to other interested buyers and
demanded that the spouses vacate the property and that they will return the P78,000 after the subject
property was sold. The spouses refused to vacate the property and even refused to pay rent for the
succeeding months. As such, Racelis caused the disconnection of the electrical service over the property
forcing the spouses to purchase a generator. Racelis filed a complaint for ejectment claiming that she
agreed to lease the property based on the understanding that they would eventually purchase it. Racelis
also claimed that the spouses failed to pay their rent and that they be order to vacate the leased premises
and to pay accrued rent. The spouses in their answer claim that they never agreed to purchase the property
and that the amount of P78, 000 was actually an advanced rent. The MTC dismissed the complaint of
Racelis ruling that the spouses Javier were entitled to suspend the payment of rent under Article 1658 of
the Civil Code due to Racelis’ act of disconnecting electric service over the property. MTC also held that
the spouses’ obligation had been extinguished, that the P78, 000 advance rent were sufficient to cover
their unpaid rent. The RTC on the other hand reversed MTC’s decision and held that the spouses were not
justified in suspending rental payments and that their liability cannot be offset by the P78, 000 for the
money was not intended as advanced rent but as part of the purchase price of the property. Upon appeal,
CA declared that the spouses are justified in withholding the rental payments due to the disconnection of
electrical service over the property. Thus, this petition for review filed by petitioner stating that she was
justified in causing the temporary disconnection of electrical service over the property because
respondents were remiss in paying rent.

Issue: Can the Spouses Javier invoke their right to suspend payment of rent under Article 1658 of the
Civil Code? Can the P78, 000 initial payment be used to offset Spouses Javier’s accrued rent?

Held: A contract of lease is a consensual and bilateral contract by which the owner temporarily grants the
use of his property to another who undertakes to pay rent therefor. Article 1658 of the Civil Code allows a
lessee to postpone the payment of rent if the lessor fails to (2) maintain the lessee in peaceful and
adequate enjoyment of the property leased. Lessees may suspend payment of rent only if their legal
possession is disrupted. In this case, the disconnection of electrical service over the leased premises was
not just an act of physical disturbance but one that is meant to remove respondents from the leased
premises and disturb their legal possession as lessees. Ordinarily this would have entitled respondents to
invoke the right accorded by Article 1658, however, this rule will not apply in the present case because
the lease had already expired when petitioner requested for the temporary disconnection of electrical
service. When petitioner demanded that respondents vacate the premises, the latter unlawfully withheld
possession of the property. At that point, petitioner was no longer obligated to maintain respondents in the
peaceful and adequate enjoyment of the lease. Therefore, respondent cannot use the disconnection of
electrical service as justification to suspend the payment of rent.

As to the second issue, the P78, 000 initial payment cannot be characterized as an advance payment of
rent. Petitioner and respondent executed a contract to sell and not a contract of sale. Petitioner reserved
ownership of the property and deferred the execution of a deed of sale until receipt of the full purchase
price. In this case, since respondents failed to deliver the purchase price at the end of 2003, the contract to
sell was deemed cancelled. The contract’s cancellation entitles petitioner to retain the earnest money
given by respondents. Earnest money, under Article 1482 is ordinarily given in a perfected contract of
sale. However, earnest money may also be given in a contract to sell which is generally intended to
compensate the seller for the opportunity cost of not looking for any other buyers. Therefore,
respondent’s unpaid rent cannot be offset by the earnest money.

AMOGUIS v. BALLADO
G.R. No. 189626
Date: August 20, 2018
Topic: Sales, Buyers in good faith
Ponente: LEONEN, J

Doctrine:
It is incumbent upon a buyer to prove good faith should he or she assert this status. This burden cannot be
discharged by merely invoking the legal presumption of good faith.

Facts:
On November 24, 1969, Francisco Ballado (Francisco) and Concepcion Ballado (Concepcion)
(collectively, the Ballado Spouses) entered to purchase on installment parcels of land (designated as Lot
Nos. 1 and 2) from St. Joseph Realty, Ltd. (St. Joseph Realty), which were located in Dadiangas Heights
Subdivision, General Santos City. St. Joseph Realty characterized the contracts as contracts to sell and
provided for automatic rescission and cancellation upon failure of the VENDEE to pay when due, three
(3) consecutive monthly installments or to comply with any of the terms and conditions of the contract,
among others.

The Ballado Spouses amortized until 1979 when Crisanto Pinili (Pinili), St. Joseph Realty collector,
refused to receive their payments because they erected a small house made of light materials for their
caretaker. Pinili informed them that it was an eyesore and was against the rules of the subdivision. He
advised to suspend the payment for the lots, and directed the Ballado Spouses to remove the small house
before payments could continue. He also promised to return and collect after he had put their records in
order, but he never did.
On February 17, 1987, the Ballado Spouses discovered that St. Joseph Realty rescinded their contracts.
They found out that St. Joseph Realty had sent written demands to pay to the address of Lot Nos. 1 and 2,
and not to their residence as declared in the contracts. They were only able to receive the last as it had
their home address. Concepcion immediately wrote St. Joseph Realty to ask for reconsideration. She
enclosed a check for their remaining balance worth P30,000.00. After six (6) months, St. Joseph Realty
returned the check to the Ballado Spouses. St. Joseph Realty claimed that it inadvertently received the
check.

Meanwhile, on February 9, 1987, St. Joseph Realty sold Lot Nos. 1 and 2 to Epifanio Amoguis
(Epifanio), father of Gregorio Amoguis (Gregorio) and Tito Amoguis (Tito) (collectively, the Amoguis
Brothers). Epifanio paid P56,280.00 for one lot and P52,650.00 for the other. The Amoguis Brothers then
occupied the lots and titles were issued in their names. Francisco confronted the Amoguis Brothers when
he saw that the barbed fences, which he had installed around the lots, were taken down. Epifanio told him
that he bought the lots from St. Joseph Realty. Thereafter, the Amoguis Brothers took down Francisco's
mango and chico trees.

Compelled by these events, the Ballado Spouses filed a Complaint for damages, injunction with writ of
preliminary injunction, mandatory injunction, cancellation and annulment of titles, and attorney's fees
with a prayer for a temporary restraining order to enjoin the Amoguis Brothers from erecting walls
around the lots.

The Regional Trial Court ruled in favor of the Ballado Spouses, and against St. Joseph Realty and the
Amoguis Brothers. Based on the preponderance of evidence, the RTC ruled that St. Joseph Realty never
made attempts to collect from them and the notices of rescission were deliberately sent to the wrong
address of the lands involved. It was clear that St. Joseph Realty was already negotiating the sale of the
lands to Epifanio when it received Concepcion's check. When St. Joseph Realty saw that it could sell the
lots for higher prices, it returned the check to Concepcion. As regards the Amoguis Brothers, the Regional
Trial Court ruled that they were in bad faith when they bought the lots.

Only the Amoguis Brothers timely filed their appeal brief. The Amoguis Brothers filed this Petition for
Review on Certiorari under Rule 45 of the Rules of Court, seeking a reversal of the Court of Appeals
Decision and Resolution.

Issue:
Are petitioners Gregorio Amoguis and Tito Amoguis buyers in good faith and have preferential right to
Lot Nos. 1 and 2?

Held:
No. This Court rules that based on the evidence on record, petitioners failed to discharge this burden. A
buyer in good faith is one who purchases and pays fair price for a property without notice that another has
an interest over or right to it. This rule does not apply, however, when the party has actual knowledge of
facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the
purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a
reasonably prudent man to inquire into the status of the title of the property in litigation.
The Regional Trial Court ruled that petitioners were in bad faith because they did not deny Francisco's
testimony that he had informed them of his ownership when they occupied the properties. Despite this,
petitioners continued to make improvements on the lands. Though they were informed by Francisco on
his claim to the properties only after their purchase, it is undisputed from the records that mango and
chico trees were planted on the properties, and that they were cordoned off by barbed wires. St. Joseph
Realty also informed them that there were previous buyers, who allegedly abandoned their purchase. To
merely claim that they were buyers in good faith, absent any proof, does not make the case for them.

WHEREFORE, the Petition for Review is DENIED. The Court of Appeals' Decision and resolution is
AFFIRMED.

DESIDERIO DALISAY INVESTMENTS, INC. VS. SOCIAL SECURITY SYSTEM

G.R. No. 231053; April 4, 2018
TOPIC: Dación en pago
PONENTE: Velasco Jr., J.

DOCTRINE: Dación en pago - property is alienated to the creditor in satisfaction of a debt in money.
The debtor delivers and transmits to the creditor the former's ownership over a thing as an accepted
equivalent of the payment or performance of an outstanding debt. The law on sales shall apply, since the
undertaking really partakes — in one sense — of the nature of sale.
The stages of a contract of sale are: (1) negotiation, covering the period from the time the prospective
contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection,
which takes place upon the concurrence of the essential elements of the sale, which is the meeting of the
minds of the parties as to the object of the contract and upon the price; and (3) consummation, which
begins when the parties perform their respective undertakings under the contract of sale, culminating in
the extinguishment thereof.

FACTS: Sometime in the year 1976, respondent Social Security System (SSS) filed a case before the
Social Security Commission (SSC) against the Dalisay Group of Companies (DGC) for the collection of
unremitted SSS premium contributions of the latter's employees. On March 11, 1977, Desiderio Dalisay,
then President of petitioner Desiderio Dalisay Investments, Inc. (DDII), sent a Letter to SSS offering the
subject land and building to offset DGC's liabilities subject of the aforementioned cases at P3,500,000.
The sale was later approved for P2,000,000. However, the properties were not turned over to the SSS. By
1998, the properties were being claimed by both the Estate of Dalisay and the SSS, with both cases
waiting to be resolved by the courts.

ISSUE: Was there a valid dation in payment agreed to by Dalisay and SSS?

HELD: YES. There was a valid dation in payment. There was a valid negotiation. In the instant case, the
late Desiderio Dalisay, on March 11, 1977, offered to SSS that they partially settle their obligations to the
latter via dación. Dalisay offered several properties for P3,500,000 in favor of SSS to partially extinguish
petitioner's obligation. Then, years later or on May 27, 1982, the SSS' Committee met with the
corporation, represented by Atty. Cabarroguis. During the said meeting, Atty. Cabarroguis explained that
he has "the authority to offer [the properties] in the amount of 2 million pesos.” He also gave them an
assurance that they will turn the properties over to SSS free of liens and encumbrances, and that his
clients are ready to vacate the premises and they could have it occupied anytime. While there is no
evidence of Atty. Cabarroguis’ authority to make this offer, no one questioned his authority to do so at the
time. There was perfection. According to the CA, SSC Resolution No. 849-s. 82 constitutes an absolute
and unequivocal acceptance which perfected the offered dación. Thus, when possession of the subject
property was delivered to SSS, this signified a transfer of ownership thereon, consistent with the
supposedly perfected agreement. There was consummation. Agreeing with SSS, the CA held that the
agreement on dación en pago was consummated by DDII's delivery of the property to SSS. We agree. The
third stage of a contract of sale is consummation which begins when the parties perform their respective
undertakings under the contract of sale, culminating in the extinguishment thereof. While a contract of
sale is perfected by mere consent, ownership of the thing sold is acquired only upon its delivery to the
buyer. The aforementioned events that transpired convince Us that contrary to petitioner's claim, the
turnover of the properties to SSS was tantamount to delivery or "tradition" which effectively transferred
the real right of ownership over the properties from DDII to SSS. Even after a review of the records of the
case, this Court is unable to find any indication that when they turned over the properties to SSS, the
company reserved its ownership over the property and only transferred the jus possidendi thereon to SSS.

SPOUSES PAMPLONA V. SPOUSES CUETO

TOPIC: Contract to Sell
PONENTE: Bersamin, J.

DOCTRINE: A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the
vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so
that if the suspensive condition does not take place, the parties would stand as if the conditional
obligation had never existed. The suspensive condition is commonly full payment of the purchase price.

FACTS: Defendants are the registered owners of a lot in Batangas. On 10 January 1989, plaintiff Lilia
and defendants mutually agreed that the former would buy and the latter would sell on installment, the
aforementioned immovable including the house standing thereon for the total sum of US$25,000.00
payable on a monthly installment of US$300.00; the agreement was verbal considering that Lilia and
defendants are sisters and brother-in-law, respectively, and completely trusted each other; however, a
notebook with the personal inscription of defendant Bibiana was sent to Lilia at the latter's address in
Italy, affirming their oral agreement and wherein the list of all the remittances would be entered; on even
date, defendants voluntarily transferred the peaceful possession of the subject property to Lilia and from
the date of the agreement, the latter had remitted to the former her monthly instalments through registered
mail, with a total payment of US$14,000.00 to date, leaving a balance of US$11,000.00; since January
1989, Lilia allowed her son Rolando Cueto to reside at the subject property as Lilia had to leave for
abroad due to her employment in Italy; since January 1989, Lilia through her son, has religiously paid the
annual realty taxes on the premises, including electric and water bills. On 13 August 1997, defendants
filed before the Municipal Trial Court in Cities, Batangas City, with malicious intent and to the prejudice
of plaintiffs' rights, a case for unlawful detainer, against plaintiffs son Rolando and his wife Liza Cueto;
being indigent, spouses Rolando and Liza failed to defend themselves resulting in a judgment by default
and they were finally evicted in January 1998.
ISSUE: Was there a transfer of ownership notwithstanding the fact that there was no full payment of the
price under a contract to sell?

HELD: NO. That Bibiana and Lilia had entered into a contract to sell instead of a contract of sale must be
well-noted. The distinctions between these kinds of contracts are settled. The differences between a
contract to sell and a contract of sale are well-settled in jurisprudence. As early as 1951, in Sing Yee v.
Santos, we held that: x x x [a] distinction must be made between a contract of sale in which title passes to
the buyer upon delivery of the thing sold and a contract to sell x x x where by agreement the ownership is
reserved in the seller and is not to pass until the full payment, of the purchase price is made. In the first
case, non-payment of the price is a negative resolutory condition; in the second case, full payment is a
positive suspensive condition. Being contraries, their effect in law cannot be identical. In the first case,
the vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale
is itself resolved and set aside. In the second case, however, the title remains in the vendor if the vendee
does not comply with the condition precedent of making payment at the time specified in the contract. In
other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until
full payment of the price. xxxx

VILLAMIL VS. SPOUSES ERGUIZA

G.R. No. 195999
TOPIC: Contract to Sell vs Contract of Sell; Principle of Constructive Fulfillment
PONENTE: Martires, J.

DOCTRINE: In a contract to sell, the prospective seller explicitly reserves the transfer of title to the
prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership
of the property subject of the contract to sell until the happening of an event, which for present purposes
we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is
to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered
to him. In other words, the full payment of the purchase price partakes of a suspensive condition, the non-
fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the
prospective seller without further remedies by the prospective buyer.

Article 1186 of the Civil Code reads: Article 1186. The condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment. This provision refers to the constructive fulfillment of a
suspensive condition, whose application calls for two requisites, namely: (a) the intent of the obligor to
prevent the fulfillment of the condition, and (b) the actual prevention of the fulfillment. Mere intention of
the debtor to prevent the happening of the condition, or to place ineffective obstacles to its compliance,
without actually preventing the fulfillment, is insufficient.

Facts: On 6 February 2003, petitioner Lily Villamil filed a Complaint for recovery of possession and
damages against respondent-spouses Juanito and Mila Erguiza before the Municipal Trial Court in Cities
of Dagupan City. The complaint alleges, among others: a) On 20 September 1972, plaintiff together with
her deceased sister, Corazon Villamil, and deceased brother, Teddy Villamil, entered into an agreement
with Juanito Erguiza for the purpose of selling a parcel of land Covered by Transfer Certificate of Title
No. 23988 to the latter subject to the condition that plaintiff and her siblings would file a petition to
secure authorization for minor children from the proper courts. Likewise, that in case of failure of the
plaintiff and her siblings to obtain said authority, the partial payment made by the defendant Juanito
Erguiza shall be applied as rent for twenty (20) years of the premises and that b) Sometime in 1992 or
after the lapse of twenty (20) years and the expiration of the twenty (20) years lease, plaintiff demanded
from the defendants to return possession of the property but the latter failed and refused, and still fails
(sic) and refuses (sic) to return possession of the property to the damage and prejudice of the plaintiff.
The Agreement, which petitioner and respondent-spouses entered into in the sale and purchase of the
subject property, states because there is still lacking document or that court approval of the sale of the
shares of the minor-owners of parts of this land, the final deed of absolute sale be made and executed
upon issuance by the competent court. On 26 May 2003, respondent-spouses filed their Answer, while
averring that the agreement between the co-heirs of plaintiff and defendants is for the sale on condition of
the subject property. A sale even if conditional transfers ownership to the vendees. And before plaintiff
could claim any right, there are certain proceedings which must first be complied [with]. Defendants did
not violate any of the terms and conditions contained in the agreement to which plaintiff is trying to base
her cause of action. It was plaintiff who made sure that the condition contained under the contract to sell
will not be complied with. She caused the execution of documents to violate such rights and it was only
now that defendants learned of the same. They also averred that defendants never received a letter coming
from the plaintiff regarding the subject property. As a matter of fact, defendants are trying to enforce the
agreement although the conditions contained therein will be left to the sole will of the vendors.

ISSUE: Did the parties enter a Contract of Sale or a Contract to Sell? Was the suspensive condition, i.e.,
judicial approval of the sale of the minor owners' shares, upon which the obligation of the sellers to
execute a deed of sale depends, fulfilled?

HELD: As to the first issue, the parties entered into a Contract to Sell. A Contract to Sell may not be
considered as a Contract of Sale because the first essential element is lacking. In a contract to sell, the
prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer ownership of the property subject of the
contract to sell until the happening of an event, which for present purposes we shall take as the full
payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to
sell the subject property when the entire amount of the purchase price is delivered to him. In other words,
the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which
prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer. An examination of the agreement would reveal that
the parties entered into a contract to sell the subject property. First, petitioner and her siblings who were
then co-owners merely promised to sell the subject property, thus, signifying their intention to reserve
ownership. Second, the execution of a deed of absolute sale was made dependent upon the proper court's
approval of the sale of the shares of the minor owners. Third, the agreement between the parties was not
embodied in a deed of sale. The absence of a formal deed of conveyance is a strong indication that the
parties did not intend immediate transfer of ownership. Fourth, petitioner retained possession of the
certificate of title of the lot. This is an additional indication that the agreement did not transfer to private
respondents, either by actual or constructive delivery, ownership of the property. Finally, respondent
Juanito admitted during trial that they have not finalized the sale in 1972 because there were minor
owners such that when they constructed their house thereon, they sought the permission of petitioner.

As to the second issue, Article 1186 of the Civil Code reads: Article 1186. The condition shall be deemed
fulfilled when the obligor voluntarily prevents its fulfillment. This provision refers to the constructive
fulfillment of a suspensive condition, whose application calls for two requisites, namely: (a) the intent of
the obligor to prevent the fulfillment of the condition, and (b) the actual prevention of the fulfillment.
Mere intention of the debtor to prevent the happening of the condition, or to place ineffective obstacles to
its compliance, without actually preventing the fulfillment, is insufficient. Petitioner and her then co-
owners undertook, upon receipt of the down payment from respondent-spouses, the filing of a petition in
court, after which they promised the latter to execute the deed of absolute sale whereupon the latter shall,
in turn, pay the entire balance of the purchase price. The balance of the consideration shall be paid only
upon grant of the court's approval and upon execution of the deed of absolute sale. Here, there is no doubt
that petitioner prevented the fulfillment of the suspensive condition. She herself admitted that they did not
file any petition to seek approval of the court as regards the sale of the shares of the minor owners. In
addition, the other co-owners sold their shares to petitioner such that she was able to consolidate the title
in her name. Thus, the condition is deemed constructively fulfilled, as the intent to prevent fulfillment of
the condition and actual prevention thereof were definitely present. Consequently, it was incumbent upon
the sellers to enter into a contract with respondent-spouses for the purchase of the subject property.

CHRISTOPHER R. SANTOS vs ATTY. JOSEPH A. ARROJADO

A.C. No. 8502, June 27, 2018
Topic: Sales - Capacity to Buy or Sell
Ponente: Del Castillo, J.

Doctrine: The prohibition to purchase in Article 1491(5) of the Civil Code covers only (1) justices; (2)
judges; (3) prosecuting attorneys; (4) clerks of court; (5) other officers and employees connected with the
administration of justice; and (6) lawyers. The enumeration cannot be stretched or extended to include
relatives of the lawyer.

Facts: Santos sought the disbarment of respondent Atty. Arrojado violation of Article 1491 by acquiring
an interest in the land involved in a litigation. Santos alleged that he was the defendant in the unlawful
detainer case filed by Lilia Rodriguez wherein Atty. Arrojado was the counsel for Lilia. While the case
was pending, Lilia sold one of the properties in litis pendentia to Atty. Arrojado’s son, Julius, and that
Atty Arrojado even signed as a witness of that sale. Atty. Arrojado maintained that he did not violate
Article 1491 as he had absolutely no interest in the property purchased by his son; and the proscription in
the said article did not extend to the relatives of the judicial officers mentioned therein. The IBP ruled that
there is no evidence to show that Atty. Arrojado had used his son as a conduit to gain the property in
question considering that Julius is a person separate and distinct from his father. In fact, Article 1491(5) is
quite clear and explicit, stating in unequivocal terms that the prohibition solely applies to lawyers, with
respect to the property and rights to the object in litigation. There is not even the slightest inkling that the
prohibition was qualified to extend to any family member.
Issue: Does the prohibition in Article 1491(5) of the Civil Code extends to their respective immediate
families or relatives?

Held: NO. The rationale advanced for the prohibition in Article 1491(5) is that public policy disallows
the transactions in view of the fiduciary relationship involved, i.e., the relation of trust and confidence and
the peculiar control exercised by these persons. It is founded on public policy because, by virtue of his
office, attorney may easily take advantage of the credulity and ignorance of his client and unduly enrich
himself at the expense of his client. Here, however, respondent lawyer was not the purchaser or buyer of
the property or rights in litigation. For, in point of fact, was his son Julius, and not respondent lawyer,
who purchased the subject property. As worded, Article 1491(5) of the Civil Code covers only (1)
justices; (2) judges; (3) prosecuting attorneys; (4) clerks of court; (5) other officers and employees
connected with the administration of justice; and (6) lawyers. The enumeration cannot be stretched or
extended to include relatives of the lawyer-in this case, Julius, son of respondent lawyer. Concededly,
Article 1491 provides that “[t]he following persons cannot acquire by purchase, even at a public or
judicial auction, either in person or through the mediation of another x x x.” However, perusal of the
records would show that complainant failed to adduce any shred of evidence that Julius acted or mediated
on behalf of respondent lawyer, or that respondent lawyer was the ultimate beneficiary of the sale
transaction.

PILIPINAS MAKRO, INC. V. COCO CHARCOAL PHILIPPINES, INC.

Topic: Sales - Warranty
Ponente: Martires, J.

Doctrine: An implied warranty is one, which the law derives by application or inference from the nature
of transaction or the relative situation or circumstances of the parties, irrespective of any intention of the
seller to create it. The warranty against eviction cannot be enforced if the buyer knew of the risks or
danger of eviction and still assumed its consequences

Facts: Petitioner Pilipinas Makro Inc. and respondent Coco Charcoal Phils., Inc. executed a notarized
Deed of Absolute Sale wherein the latter would sell its parcel of land to the former. On the same date,
Makro entered into another notarized Deed of Absolute Sale with respondent Lim Kim San (Lim) for the
sale of the latter's land. Makro engaged the services of Engineer Josefina M. Vedua to conduct a resurvey
and relocation of the two adjacent lots. As a result of the resurvey, it was discovered that 131 square
meters of the lot purchased from Coco Charcoal had been encroached upon by the Department of Public
Works and Highways (DPWH) for its road widening project and construction of a drainage canal. On the
other hand, 130 square meters of the land bought from Lim had been encroached upon by the same
DPWH project. Makro offered a compromise agreement in consideration of a refund of 75% of the value
of the encroached portions. Failing to recover such, Makro filed separate complaints against Coco
Charcoal and Lim to collect the refund sought.

Issue: Are the parties covered by the warranty?

Held: The courts a quo agree that the DPWH project encroached upon the properties Makro had
purchased from respondents. Section 4(i) of the deeds of sale is not akin to an implied warranty against
eviction. An implied warranty is one, which the law derives by application or inference from the nature of
transaction or the relative situation or circumstances of the parties, irrespective of any intention of the
seller to create it. First, the deeds of sale categorically state that the sellers assure that the properties sold
were free from any encumbrances which may prevent Makro from fully and absolutely possessing the
properties in question. Second, in order for the implied warranty against eviction to be enforceable, the
following requisites must concur: (a) there must be a final judgment; (b) the purchaser has been deprived
of the whole or part of the thing sold; (c) said deprivation was by virtue of a prior right to the sale made
by the vendor; and (d) the vendor has been summoned and made co-defendant in the suit for eviction at
the instance of the vendee. Evidently, there was no final judgment and no opportunity for the vendors to
have been summoned precisely because no judicial action was instituted. It is true that the warranty
against eviction cannot be enforced if the buyer knew of the risks or danger of eviction and still assumed
its consequences. Here, the dimensions of the properties in relation to the DPWH project could have not
been accurately ascertained through the naked eye. A mere ocular inspection could not have possibly
determined the exact extent of the encroachment.

ORBE V. FILINVEST LAND, INC.

Topic: Sales; Maceda Law
Ponente: Leonen, J.

Doctrine: When Republic Act No. 6552 or the Maceda Law speaks of paying "at least two years of
installments" in order for the benefits under its Section 3 to become available, it refers to the buyer's
payment of two (2) years' worth of the stipulated fractional, periodic payments due to the seller. When the
buyer's payments fall short of the equivalent of two (2) years' worth of installments, the benefits that the
buyer may avail of are limited to those under Section 4. Should the buyer still fail to make payments
within Section 4's grace period, the seller may cancel the contract. Any such cancellation is ineffectual,
however, unless it is made through a valid notarial act.

Facts: Orbe entered into a purchase agreement with respondent Filinvest Land, Inc. Orbe was unable to
make further payments allegedly on account of financial difficulties. Filinvest sent a notice of
cancellation. The parcel had since been sold by Filinvest to a certain Ruel Ymana. Orbe filed against
Filinvest a Complaint for refund with damages before the HLURB Field Office. The HLURB Field
Office ruled in favor of Orbe. It held that since Orbe made payments "from 17 June 2001 to 14 July 2004,
or a period of more than two years," all of which should be credited to the principal, she was entitled to a
refund of the cash surrender value equivalent to 50% of the total payments she had made. Filinvest
appealed to the HLURB Board of Commissioners. The HLURB Board of Commissioners affirmed
Arbiter Soriano's Decision. Filinvest then appealed to the Office of the President. The Office of the
President sustained the conclusion that Orbe was entitled to a 50% refund. Filinvest made another appeal
to the Court of Appeals. The Court of Appeals reversed the prior rulings. The Court of Appeals reasoned
that the phrase "two years of installments" under Section 3 means that total payments made should at least
be equivalent to two years' worth of installments. Considering that Orbe's total payment was short of the
required two (2) years' worth of installments, she could not avail of the benefits of Section 3 of Republic
Act No. 6552.

Issue: Was Petitioner entitled to the 50% refund?

Held: YES. Petitioner's case is governed by Section 4 of the Maceda Law. She was "entitled to a grace
period of not less than sixty (60) days from the due date within which to make [her] installment payment.
[Respondent], on the other hand, ha[d] the right to cancel the contract after thirty (30) days from receipt
by [petitioner] of the notice of cancellation. or cancellations under Section 4 to be valid, three (3)
requisites must concur; First, the buyer must have been given a 60-day grace period but failed to utilize it.
Second, the seller must have sent a notice of cancellation or demand for rescission by notarial act And
third, the cancellation shall take effect only after 30 days of the buyer's receipt of the notice of
cancellation: Essentially, the said provision provides for three (3) requisites before the seller may actually
cancel the subject contract: first, the seller shall give the buyer a 60-day grace period to be reckoned from
the date the installment became due; second, the seller must give the buyer a notice of
cancellation/demand for rescission by notarial act if the buyer fails to pay the installments due at the
expiration of the said grace period; and third, the seller may actually cancel the contract only after thirty
(30) days from the buyer's receipt of the said notice of cancellation/demand for rescission by notarial act.
Respondent's notice indicates that petitioner failed to utilize the 60-day grace period. It is not, however,
the valid notarial act contemplated by the Maceda Law. Respondent's notice of cancellation here was
executed by an individual identified only as belonging to respondent's Collection Department. It was also
accompanied not by an acknowledgement, but by a jurat.

PERALTA VS RAVAL
Topic: Lease – Rescission of Lease
Ponente: Reyes, J.

Doctrine: Payment of monthly rentals by the lessee to the assignor – lessor of the contract of lease is still
a valid payment.

Facts: Spouses Arzaga and Peralta agreed on a lease term of 40 years, for monthly rentals at the
following rates: (a) P500.00 beginning May 1974; (b) P600.00 after the 10th year; (c) P700.00 after the
20th year; and (d) P800.00 after the 30th year and until the termination of the lease. Under the lease
contract, Peralta was also to construct on the leased land a building that should become property of the
Spouses Arzaga upon lease termination, to pay realty taxes for both lots, and to develop a water system
for the use of both parties to the lease contract.
Raval came into the picture after Flaviano Jr. ,adopted son and heir of the Spouses Arzaga, assigned to
him via a Deed of Assignment dated July 28, 1995 all his interests, rights and participation in the subject
properties for a consideration of P500,000.00. Peralta refused to recognize the validity of the assignment
to Raval, prompting him to still deposit his rental payments for the account of Flaviano Jr., more
specifically to bank accounts that were opened by Peralta's wife, Gloria Peralta, under the name "Gloria
F. Peralta [in-trust-for] (ITF): Flaviano Arzaga, Jr." Beginning August 1995, Raval demanded from
Peralta compliance with the lease contract's terms and conditions. On October 2, 1995, Raval's father and
counsel, Atty. Castor Raval (Castor), wrote a letter to Peralta demanding the removal of the structures that
the latter built on a portion of Lot No. 9128-B, as he claimed that it was not covered by the lease
agreement. This demand was reiterated by Castor in a letter dated November 4, 1995, by which he also
sought access to the residential house's second floor and an updated accounting of rentals already paid.
Peralta's refusal to heed to the demands of Castor prompted the latter to send several other demand letters
and, eventually, to refer the matter to barangay for conciliation. When the parties still failed to settle the
issue, Castor sent another letter to Peralta on June 14, 1996, informing the latter that a lessee was to
occupy the second storey of the house and demanding that the area be cleared for that purpose. On June
22, 1996, Castor again pointed out to Peralta the structures on Lot No. 9128-B that were allegedly not part
of the lease agreement. He claimed that Peralta had become a builder in bad faith, such that the
improvements made were to be already considered as properties of Raval. After several more demands
and another barangay conciliation, Raval eventually filed in 1998 the subject complaint for rescission of
lease with the RTC of Laoag City against Peralta.

Issue: (1) Is there a valid assignment of the contract of lease? (2) Is the contract of lease should be
rescinded for breach in payment of rentals?

Held: (1) Court sustains the validity of the assignment. Raval cannot be deemed a "total stranger" to
Peralta's contract of lease with the Spouses Arzaga because by the subsequent transfers of rights over the
leased premises, Peralta became the original lessors' successor-in-interest. It is material that the lone heir
of the Spouses Arzaga, Flaviano Jr., has executed the subject deed of assignment. Peralta vehemently
assails the validity and enforceability of the deed of assignment, as he likewise questions the ensuing right
of Raval to seek the rescission of the contract of lease. On this matter, the Court refers to the outcome of a
separate petition for the registration of the deed of assignment and cancellation of TCT Nos. T-3538 and
T-2406 that was filed by Raval with the RTC of Laoag City, Branch 15, and docketed as Cad. Case No.
51. On April 17, 1998, the deed of assignment between Flaviano Jr. and Raval was declared valid by the
trial court, as it ordered the cancellation of the Spouses Arzaga's TCTs, and the issuance of new titles
under Raval's name. This decision had become final and executory. Accordingly, TCT Nos. T-30107 and
T-30108 under Raval's name were issued by the Register of Deeds. The Court sustains the validity of the
deed of assignment upon which Raval anchored his claims against the subject properties and contract of
lease. By being the assignee under the deed, Raval obtained the rights, interests and privileges of his
predecessors-in-interest over the property, including the right to seek the rescission of the agreement,
should valid grounds exist to support it. Peralta's defenses against Raval's claim of rights, in effect,
challenge the prior decision of the trial court to recognize the deed of assignment and more importantly,
the ruling that ordered the issuance of the TCTs under Raval's name. Essentially, it is also a challenge
upon the TCTs that were already issued by the Register of Deeds. By law and jurisprudence, these TCTs
that have been issued by virtue of the assignment, however, cannot be collaterally attacked by Peralta in
this case.
(2) Considering that the subject contract of lease provided for a 40-year term and was executed in 1974,
the agreement had already terminated in 2014. The issue of whether or not the lease should be ordered
rescinded at this point in time, to the end that it would be declared of no further effect, is thus already
moot and academic. The Court, nonetheless, still finds it needed to address other matters that are
intertwined with the issue of rescission, especially as the termination of the lease is not the only necessary
consequence of rescission. In the instant case, [Raval] urges this Court to find for [Raval] on a claim of
contractual breach in the payment of rentals. The evidence shows otherwise. The modus-vivendi earlier
adopted by lessee's wife of opening bank accounts "in-trust-for" the lessor was found by the [CA] as a
proper mode of effecting payments of the monthly rentals on the lease. [Peralta] continued with this
practice even after the execution of the Deed of Assignment. It was understandable for lessee to continue
with this mode of payment because he had no privity of contract with the Deed of Assignment.
Accordingly, this Court is of the same persuasion as the [CA] in CA G.R. No. CV 30396 that [Peralta's]
mode of payment through the "in-trust-for" account is proper and finds that he [Peralta] was not remiss in
the payment of the monthly rentals due on the lease. Even as the Court now declares Raval to be a valid
assignee under the deed that bound Peralta as a lessee, all payments made by the latter for the account of
Flaviano Jr. could not be simply disregarded for the purpose of determining Peralta's compliance with his
obligation to pay the monthly rentals. The RTC itself sustained the acceptability of such measure. Thus,
the mechanism negated the supposed failure to pay, as well as the alleged blatant refusal of Peralta to
satisfy his obligation as a lessee. All payments made by Peralta through the bank accounts in trust for
Flaviano Jr. shall be deemed valid payments for the monthly rentals. Since the records confirmed that
Peralta has been paying his monthly rentals up to the time and even after the complaint for rescission was
filed in 1998, the prayer in the complaint for unpaid rentals should have been denied.

VICTORIA N. RACELIS vs. SPOUSES GERMIL JAVIER and REBECCA JAVIER

Topic: Sales
Ponente: Leonen, J.

Doctrine: In a contract to sell, the payment of earnest money represents the seller's opportunity cost of
holding in abeyance the search for other buyers or better deals. Absent proof of a clear agreement to the
contrary, it should be forfeited if the sale does not happen without the seller's fault. The potential buyer
bears the burden of proving that the earnest money was intended other than as part of the purchase price
and to be forfeited if the sale does not occur without the seller's fault.

Facts: Petitioner Victoria N. Racelis filed for an ejectment case against Spouses Javier on the property
the latter rents and to which they have agreed the spouses would eventually purchase.
On July 26, 2002, the Spouses Javier tendered the sum of P65,000.00 representing "initial payment or
goodwill money." On several occasions, they tendered small sums of money to complete the promised
P100,000.00, but by the end of 2003, they only delivered a total of P78,000.00. Meanwhile, they
continued to lease the property. They consistently paid rent but started to fall behind by February 2004.
Realizing that the Spouses Javier had no genuine intention of purchasing the property, Racelis wrote to
inform them that her family had decided to terminate the lease agreement and to offer the property to
other interested buyers. In the same letter, Racelis demanded that they vacate the property by May 30,
2004.

Issue: Is the payment considered an advance payment to rent?

Held: NO. It is considered as earnest money or good will money. Based on the evidence on record,
petitioner and respondents executed a contract to sell. Petitioner reserved ownership of the property and
deferred the execution of a deed of sale until receipt of the full purchase price. In this case, since
respondents failed to deliver the purchase price at the end of 2003, the contract to sell was deemed
cancelled. The contract's cancellation entitles petitioner to retain the earnest money given by respondents.
In a contract to sell, earnest money is generally intended to compensate the seller for the opportunity cost
of not looking for any other buyers. It is a show of commitment on the part of the party who intimates his
or her willingness to go through with the sale after a specified period or upon compliance with the
conditions stated in the contract to sell. Respondents' unpaid rent amounting to P84,000.00cannot be
offset by the earnest money. However, it should be reduced by respondents' advanced deposit of
P30,000.00. As found by the Regional Trial Court, petitioner failed to establish that respondents'
advanced deposit had already been consumed or deducted from respondents' unpaid rent.
WHEREFORE, the Petition for Review is GRANTED.

SHANGRI-LA PROPERTIES, INC. (now known as SHANG PROPERTIES, INC.), vs. BF

CORPORATION
G.R. Nos. 187552-53 & 187608-09; October 15, 2019
TOPIC: Lease
PONENTE: BERSAMIN, C.J.

DOCTRINE: Article 1724 governs the recovery of costs for any additional work because of a subsequent
change in the original plans. The underlying purpose of the provision is to prevent unnecessary litigation
for additional costs incurred by reason of additions or changes in the original plan. The provision was
undoubtedly adopted to serve as a safeguard or as a substantive condition precedent to recovery. As such,
added costs can only be allowed upon: (a) the written authority from the developer or project owner
ordering or allowing the changes in work; and (b) upon written agreement of the parties on the increase in
price or cost due to the change in work or design modification.

FACTS: The present controversy originated from the agreement of Shangri-la Properties, Inc. (SLPI) and
BF Corporation (BFC) for the execution of the builder's work for Phases I and II, and the Car Parking
Structure (Carpark) of the EDSA Plaza Project (Project) in Mandaluyong City, embodied in the parties'
contract documents. SLPI was the project owner and BFC was the trade contractor. BFC sued SLPI and
the members of the latter's board of directors for the collection of P228,630,807.80. The proceedings
before the trial court was stayed by this court, as affirmed by the Supreme Court, until termination of an
arbitration proceeding as required in their contract. As for BFC's claims for unpaid progress billings, the
Arbitral Tribunal segregated the claims into two types, namely: of the first type were the billings for the
original scope of work under the agreement (contract bills), and of the second were the billings for unpaid
variation orders. The Arbitral Tribunal ruled that BFC was entitled to the payment of the contract bills for
having completed the original scope of work by finishing construction of Phase I, Phase II, and the
Carpark of the Project, but allowed only P1,745,116.07 for the contract bills due to the absence of SLPI's
conformity and in view of the discrepancies in BFC's computation. As to the second type, the Arbitral
Tribunal concluded that SLPI had given the required written authorization for the performance of the
works, and allotted P9,513,987.91 to BFC; hence, it granted P11,709,468.13 for the unpaid progress
billings. For the unpaid change orders not included in the progress billings, the Arbitral Tribunal held that
there was written authorization from SLPI; hence, it granted P6,201,278.50 to BFC for the change orders
shown to have SLPI's written authorization.
According to the Arbitral Tribunal, SLPI gave written instructions to BFC to accommodate all requests
for changes and variations. The Arbitral Tribunal also considered the specific variation orders that were
approved by SLPI.

ISSUE: Is the Arbitral Tribunal correct in granting BFC’s claim for variation works?
HELD: Yes. The Arbitral Tribunal correctly ruled that BFC had complied with the twin requirements
imposed by Article 1724 of the Civil Code which states: Art. 1724. The contractor who undertakes to
build a structure or any other work for a stipulated price, in conformity with plans and specifications
agreed upon with the landowner, can neither withdraw from the contract nor demand an increase in the
price on account of the higher cost of labor or materials, save when there has been a change in the plans
and specifications, provided: (1) Such change has been authorized by the proprietor in writing; and (2)
The additional price to be paid to the contractor has been determined in writing by both parties. Article
1724 governs the recovery of costs for any additional work because of a subsequent change in the original
plans. The underlying purpose of the provision is to prevent unnecessary litigation for additional costs
incurred by reason of additions or changes in the original plan. The provision was undoubtedly adopted to
serve as a safeguard or as a substantive condition precedent to recovery. As such, added costs can only be
allowed upon: (a) the written authority from the developer or project owner ordering or allowing the
changes in work; and (b) upon written agreement of the parties on the increase in price or cost due to the
change in work or design modification. Compliance with the requisites is a condition precedent for
recovery; the absence of one requisite bars the claim for additional costs. Notably, neither the authority
for the changes made nor the additional price to be paid therefor may be proved by any evidence other
than the written authority and agreement as above stated.

VIVE EAGLE LAND, INC. V. NATIONAL HOME MORTGAGE FINANCE CORP.

Topic: Contract of Sale vs Contract to Sell, Doctrine of Apparent Authority, Maceda Law
Ponente: Peralta, J.

Doctrine: A contract to sell is defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the prospective
buyer, binds himself to sell the said property exclusively to the latter upon his fulfillment of the
conditions agreed upon, i.e., the full payment of the purchase price and/or compliance with the other
obligations stated in the contract to sell. In a contract to sell, the fulfillment of the suspensive condition
will not automatically transfer ownership to the buyer although the property may have been previously
delivered to him.

The doctrine of apparent authority is a species of the doctrine of estoppel. Article 1431 of the Civil Code
provides that through estoppel, an admission or representation is rendered conclusive upon the person
making it and cannot be denied or disproved as against the person relying thereon. Court has recognized
presumed or apparent authority or capacity to bind corporate representatives in cases when the
corporation, through its silence or other acts of recognition, allowed others to believe that persons,
through their usual exercise.

The declared policy of the Maceda Law is to protect the innocent, low-income buyers of real estate who
are eager to acquire property upon which to build their homes from the exploitative and onerous
installment schemes of private housing developers who get to forfeit all payments upon default by the
buyer and resell the same property under the same exigent conditions.|||

Facts: On April 18, 2006, petitioner Vive Eagle Land, Inc., filed a complaint for declaration of nullity of
rescission, declaration of suspension of payment of purchase price and interest, and other reliefs against
respondents National Home Mortgage Finance Corporation (NHMFC). Vive alleged that it entered into a
Deed of Sale of Rights, Interests, and Participation Over Foreclosed Assets, whereby it agreed to
purchase NHMFC's rights, interests, and participation in the foreclosed property of Alyansa ng mga
Maka-Maralitang Asosasyon at Kapatirang Organisasyon, Inc. payable in the following manner: (1) the
amount of P8,000,000.00 as 20% downpayment payable in two equal installments, and the second, from
the execution of the Deed of Conditional Sale, (2) the balance of P32,000,000.00 shall be paid in 10 equal
installments plus 14% interest per annum. Pursuant to the Deed of Sale, Vive paid the first installment of
the downpayment but did not pay the subsequent installments due to issues on the subject property, and
requested NHMFC for a moratorium, waiver of interest, and a 10% reduction of the purchase price.
NHMFC, through its then President, Atty. Angelico T. Salud, initially agreed on the moratorium but
advised Vive to submit its request of waiver and interest reduction to the NHMFC's Board of Directors.
Notwithstanding the agreement, NHMFC, through Sison, notified Vive through a letter dated February
10, 2006 of the rescission/cancellation and/or revocation of the Deed of Sale due to the alleged non-
payment of the balance of the purchase price. NHMFC and Cavacon, entered into a Memorandum of
Agreement by virtue of which NHMFC sold the subject property on an "as is-where is" basis to Cavacon.

Issue: Is the contract considered a contract of sale or contract to sell? Is the act done by Atty. Salud in its
transactions covered under the doctrine of apparent authority? Is Maceda Law applicable in the case at
bar?

Held: (1) At the outset, the Court sustains the appellate court's finding that the nature of the agreement
between the parties herein is one akin to a contract to sell. A contract to sell is defined as a bilateral
contract whereby the prospective seller, while expressly reserving the ownership of the subject property
despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the
latter upon his fulfillment of the conditions agreed upon, i.e., the full payment of the purchase price
and/or compliance with the other obligations stated in the contract to sell. Given its contingent nature, the
failure of the prospective buyer to make full payment and/or abide by his commitments stated in the
contract to sell prevents the obligation of the prospective seller to execute the corresponding deed of sale
to effect the transfer of ownership to the buyer from arising. A contract to sell is akin to a conditional sale
where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the
happening of a future and uncertain event, so that if the suspensive condition does not take place, the
parties would stand as if the conditional obligation had never existed. In a contract to sell, the fulfillment
of the suspensive condition will not automatically transfer ownership to the buyer although the property
may have been previously delivered to him. The prospective seller still has to convey title to the
prospective buyer by entering into a contract of absolute sale. Conversely, in a conditional contract of
sale, the fulfillment of the suspensive condition renders the sale absolute and the previous delivery of the
property has the effect of automatically transferring the seller's ownership or title to the property to the
buyer. Section 7 of the contract clearly stipulated that it is only upon Vive's full payment of the purchase
price shall NHMFC be obligated to deliver the title to the property. Otherwise put, by virtue of the
aforequoted provision, NHMFC expressly reserved title and ownership of the subject property in its name
pending Vive's payment of the full amount even though possession thereof was already granted in favor
of Vive. It is, therefore, clear that the parties intended their agreement to be merely a contract to sell,
conditioned upon the full payment of the purchase price. (2) The doctrine of apparent authority is a
species of the doctrine of estoppel. Article 1431 of the Civil Code provides that through estoppel, an
admission or representation is rendered conclusive upon the person making it and cannot be denied or
disproved as against the person relying thereon. Estoppel rests on the rule that when a party has, by his
own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing
true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act or
omission, be permitted to falsify it. In certain instances, therefore, the Court has recognized presumed or
apparent authority or capacity to bind corporate representatives in cases when the corporation, through its
silence or other acts of recognition, allowed others to believe that persons, through their usual exercise of
corporate powers, were conferred with authority to deal on the corporation's behalf. The present case,
however, does not involve any of those instances. First of all, there is no proof to show that Atty. Salud
was, in truth, represented to be "the face" of NHMFC. As NHMFC correctly maintained, Vive failed to
adduce evidence during trial to establish that NHMFC had, indeed, clothed Atty. Salud with apparent
power to grant the moratorium or that Atty. Salud, had, in the past, granted similar moratoriums in Vive's
favor. (3) The Court unequivocally pronounced that the declared policy of the Maceda Law is to protect
the innocent, low-income buyers of real estate who are eager to acquire property upon which to build
their homes from the exploitative and onerous installment schemes of private housing developers who get
to forfeit all payments upon default by the buyer and resell the same property under the same exigent
conditions. The court cannot apply the provisions of the Maceda Law to the present case. It is rather
obvious that the contract before Us is not the kind of onerous contract of adhesion under the Maceda Law
drawn up by private real estate developers designed to entrap innocent low-income earners by requiring
installment payments for several years only to be forfeited by the former upon failure to make a single
payment. It cannot be denied, therefore, that Vive is not the "innocent, low-income buyer" that the
Maceda Law was enacted to protect. Neither is NHMFC the "real estate developer" that said law intends
to regulate in order to prevent the enjoyment of any unnecessary exploitation.

HEIRS OF PABLITO ARELLANO VS MARIA TOLENTINO

G.R. No. 207152, July 15, 2019
TOPIC: Lease
PONENTE: J. REYES, JR., J.

DOCTRINE: Cultivation of an agricultural land will not ipso facto make one a de jure tenant.
Independent and concrete evidence is necessary to prove personal cultivation, sharing of harvest, and
consent of the landowner. Also, while implied tenancy is recognized in this jurisdiction, for it to arise, it
is also necessary that all the essential requisites of tenancy must be proven to be present.

FACTS: Timoteo executed a leasehold agreement with Songcos to cultivate palay. During Timoteo's
lifetime, he permitted his stepson Pablito to assist him in cultivating the subject land. Upon Timoteo's
death, respondent claims that she and her children as heirs of Timoteo have the successor of Timoteo's
tenancy rights. On the other, Pablito claims that he is the rightful tenant as his continuous cultivation of
the subject land, known to the Songcos. Respondent filed a complaint for Recovery of Possession.
PARAD rendered its Decision in respondent's favor and ruling that Pablito was allowed to cultivate the
subject property was only the liberality of his stepfather. On appeal, The DARAB reversed and set aside
the PARAD's Decision. Finding that it was Pablito who has been personally cultivating the subject land
and remitting rentals to the Songcos and that an implied tenancy agreement arose between Pablito and the
Songcos by virtue of the latter's continuous acceptance of the rentals from the former. Court of Appeals
reverted to the PARAD's ruling, upholding Timoteo's tenancy rights and rejecting petitioners' contention
as to Timoteo's alleged failure to personally cultivate the subject land.

ISSUE: Is Pablito considered a lawful tenant of the subject land?

HELD: The CA correctly ruled that Pablito is not the lawful tenant to the agricultural land. Cultivation of
an agricultural land will not ipso facto make one a de jure tenant. Independent and concrete evidence is
necessary to prove personal cultivation, sharing of harvest, and consent of the landowner. Also, while
implied tenancy is recognized in this jurisdiction, for it to arise, it is also necessary that all the essential
requisites of tenancy must be proven to be present: 1. The parties are the landowner and the tenant; 2. The
subject matter is agricultural land; 3. There is consent between the parties to the relationship; 4. The
purpose of the relationship is to bring about agricultural production; 5. There is personal cultivation on
the part of the tenant or agricultural lessee; and 6. The harvest is shared between landowner and tenant. In
this case, the mere fact that Pablito is the one who "physically" cultivates the subject land does not, by
itself, make him the lawful tenant thereof. At most, therefore, Pablito could only be considered as a
farmhand, helping in the cultivation of the land tenanted by his stepfather and there was no proof of a
harvest sharing relationship between Pablito and the Songcos. The receipts are not sufficient to serve such
purpose. Such receipts cannot sufficiently and persuasively prove that Pablito and the Songcos have a
definite sharing arrangement in their supposed tenancy relationship. At most, such receipts could only
prove the fact of delivery of shares to the Songcos, but as to whether such shares were recognized to be
delivered under the terms of an arrangement between Pablito and the Songcos, or whether the same were
delivered merely on behalf of Timoteo under the terms of their existing leasehold agreements, such
receipts are clearly insufficient.

SPOUSES SALITICO V. HEIRS OF FELIX

G.R. No. 240199, April 10, 2019
Topic: Sales; Validity; Delivery
Ponente: CAGUIOA, J.

Doctrine: In a contract of sale, the parties' obligations are plain and simple. The law obliges the vendor to
transfer the ownership of and to deliver the thing that is the object of sale to the vendee.

Facts: The instant case stemmed from a Complaint for Specific Performance with Damages filed by the
petitioners Sps. Salitico against the respondents Heirs of Resurreccion Martinez Felix; Recaredo P.
Hernandez, in his capacity as Administrator of the Estate of Amanda H. Burgos; and the Register of
Deeds of Bulacan (RD). The case was heard before the RTC Malolos. Amanda is the registered owner of
a parcel of land located in Bambang, Bulacan. By virtue of a document entitled Huling Habilin ni
Amanda H. Burgos, the subject property was inherited by the niece of Amanda, Resurreccion, as a
devisee.Resurreccion Felix, as the new owner of the subject property, executed a document entitled
Bilhang Tuluyan ng Lupa, which transferred ownership over the parcel of land in favor of the Petitioner
Sps. Salitico. Probate proceeding of the huling habilin was undertaken before RTC Probate Court.
Recrado Hernandez was appointed as executor of the will, and he filed and presented the Will before
RTC which it approved. Sps. Saltico received a demand letter requiring them to vacate the subject
property and surrender possession over it to the respondent heirs. Spouses Saltico filed a complaint before
the RTC seeking the delivery and return in their favor of the owner’s duplicate copy of the OCT and the
execution of the corresponding Deed of Absolute Sale by way of confirming the Bilihang Tuluyan ng
Lupa. They also prayed that the OCT be cancelled and a new one be issued in their names. RTC
dismissed on the ground of lack of cause of action. CA dismissed the appeal due to the pendency of
probate proceedings.

Issue: Was there a valid sale between Resurreccion Felix and Sps. Saltico, with respect to the subject
property the former inherited from Amanda Burgos?

Held: The instant Petition is partly meritorious. Article 777 of the Civil Code, which is substantive law,
states that the rights of the inheritance are transmitted from the moment of the death of the decedent. As
applied to the instant case, upon the death of Amanda, Resurreccion became the absolute owner of the
devised subject property, subject to a resolutory condition that upon settlement of Amanda's Estate, the
devise is not declared inofficious or excessive. Hence, there was no legal bar preventing Resurreccion
from entering into a contract of sale with the petitioners Sps. Salitico with respect to the former's share or
interest over the subject property. In a contract of sale, the parties' obligations are plain and simple. The
law obliges the vendor to transfer the ownership of and to deliver the thing that is the object of sale to the
vendee.Therefore, as a consequence of the valid contract of sale entered into by the parties, Resurreccion
had the obligation to deliver the subject property to the petitioners Sps. Salitico. In fact, it is not disputed
that the physical delivery of the subject property to the petitioners Sps. Salitico had been done, with the
latter immediately entering into possession of the subject property after the execution of the Bilihang
Tuluyan ng Lupa. Therefore, considering that a valid sale has been entered into in the instant case, there is
no reason for the respondent’s heirs to withhold from the petitioners Sps. Salitico the owner's duplicate
copy of OCT P-1908.

HIPOLITO AND IMELDA AGUSTIN v. ROMANA DE VERA

G.R. No. 233455, April 03, 2019
Ponente: CAGUIOA
Topic: CONTRACT TO SELL vs CONTRACT OF SALE, DOUBLE SALE

Doctrine: What determines whether a sale contract is a 'contract to sell' is that there must exist an
agreement, whether express or implied, at the time of perfection of the sale contract, that the obligation of
the seller to transfer ownership to the buyer pursuant to a sale (even when physical possession may have
been effected) is conditioned upon the full payment by the buyer of the purchase price. Further, "[t]he
prevailing doctrine therefore is that absent any stipulation in the deed or in the meeting of the minds
reserving title (meaning, ownership) over the property to the seller until full payment of the purchase
price and giving the seller the right to unilaterally rescind the contract in case of non-payment, makes the
contract one of sale rather than a contract to sell. Still controlling are (1) the lack of any stipulation in the
sale contract reserving the title of the property on the vendors and (2) the lack of any stipulation giving
the sellers the right to unilaterally rescind the contract upon non-payment of the balance thereof within a
fixed period. The absence of such stipulations in a sale contract makes the said contract a contract of sale.

FACTS: Gregorio B. De Vera (Gregorio) owned a parcel of residential land at Dagupan City. On January
6, 1986, Gregorio and spouses Hipolito and Lolita Agustin executed a document entitled "Contract to
Purchase and Sale" whereby the former agreed to sell to the latter the aforementioned property provided
that a. the vendor will release the title from mortgage b. Downpayment of P30,000 and c. Vendee can
take immediate possession. The Agustin spouses paid the partial payment of P15,000.00 and immediately
took possession of the land and had constructed their residential house and paid the real estate taxes. On
May 17, 2001, Hipolito Agustin sold one-half portion of the land to his sister, Imelda Agustin, who also
introduced improvements on the property and constructed a sari-sari store. Gregorio had not yet delivered
the title prompting Hipolito and Imelda to annotate an adverse claim on August 22, 2007.Subsequently,
Gregorio sold the property to Romana De Vera for Php500,000 on September 6, 2010. Gregorio died on
September 17, 2007. On November 15, 2007, Hipolito filed a Civil Case against the heirs of the Late
Gregorio B. De Vera for Specific Performance, Acknowledgement of the Contract of Purchase and Sale
and Judicial Declaration of Ownership in RTC Dagupan City alleging that despite receipt of the balance
of the purchase price, Gregorio failed to deliver the title as promised by him. They further contend that
assuming there was a double sale, petitioners Hipolito and Imelda are to be preferred as first buyers and
first in possession in good faith and for value. Respondent Romana denied the petitioner’s claim that they
already acquired the subject property, asserting that the construction of petitioner’s house was without the
consent of Gregorio and made thru fraudulent scheme. She argued that the alleged Contract to Purchase
and Sale did not ripen into legal conveyance of real property from Gregorio to petitioners Hipolito and
Imelda. RTC rendered a decision in favor of the petitioner and annulling the Deed of Absolute Sale
between De Vera and Gregorio. The RTC found that the sale of the subject lot to Hipolito was absolute
notwithstanding the title of their agreement. It also found that the contract did not contain an express
reservation of ownership pending full payment of the purchase price. There being a contract of sale, and
not mere contract to sell. The RTC applied the provision on double sale of real property and declared
Romana as a buyer in bad faith having bought the land from Gregorio despite being charged with the
knowledge of petitioner’s ownership claim through the adverse claim and notice of lis pendens annotated.
The CA granted Romana's appeal and reversed the RTC's Decision. The CA held that since the Contract
to Purchase and Sale is not a contract of sale but a mere contract to sell, there was no automatic transfer
of ownership even if Gregorio failed to deliver the title to Hipolito after securing the release of the
[subject] property from bank mortgage. Consequently, the RTC erred in applying Article 1544 of the
Civil Code, which contemplates a double sale of the same real property. According to the CA, "the need
to execute a deed of absolute sale upon completion of payment of the price generally indicates that it is a
contract to sell, as it implies the reservation of title in the vendor until the vendee has completed the
payment of the price.

ISSUE: Was the contract a contract to sell or a contract of sale?

HELD: CONTRACT OF SALE. According to the supreme court, the Essential Elements of a Contract of
Sale under Article 1458 of the Civil Code are: (1) consent or meeting of the minds; (2) determinate
subject matter; and (3) price certain in money or its equivalent. In the instant case, the Court finds that all
the aforesaid elements are present in the instant case. By entering into the agreement entitled "Contract to
Purchase and Sale," both parties had arrived at a meeting of the minds that the seller, i.e., Gregorio,
transferred the ownership and possession of the subject property to the buyer, i.e., Hipolito, with the latter
obliged to pay a price certain in money. From the tenor of the said Contract to Purchase and Sale, it is
understood that ownership and possession over the subject parcel of land shall be transferred to the latter
upon the execution of the said contract. In connection with the fact that Hipolito gained possession over
the subject property upon the execution of the Contract to Purchase and Sale, Article 1477 of the Civil
Code states that the ownership of the thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof. Further, under Article 1478, the parties may stipulate that ownership in the
thing shall not pass to the purchaser until he has fully paid the price. Gregorio did not make any express
or implied reservation whatsoever withholding ownership of the subject property from Hipolito. If
Gregorio really intended that the transfer of ownership over the subject property was dependent on the
fulfilment of other conditions, then he would have expressed words to that effect in the Contract to
Purchase and Sale. Nor would he have willingly transferred the physical possession of the subject
property to Hipolito. With possession being the natural consequence and effect of ownership, it would be
unnatural for a property owner to just let go and cede possession of the property, without even a whimper,
under an agreement selling the said property and, at the same time, allege the retention of ownership over
the property. In fact, aside from the delivery of the subject property to Hipolito, the intention of the
parties to cede ownership of the subject property to Hipolito is further buttressed by the fact that after the
delivery of the subject property to Hipolito, the obligation of paying real estate taxes was immediately
assumed by Hipolito. The fact that Hipolito had already assumed the obligation of paying real property
taxes on the subject property has not been disputed by Romana.

SPS. VELASCO VS LAIGO

GR. 199125, Jan 16, 2019
Topic: Lease

Doctrine: Under Art. 1670 of CC, a new lease is implied if the lessee continues enjoying the thing leased
for 15 days after the termination of the original contract, unless notice to the contrary has been previously
given by the either party.

Facts: Sps Laigo leased out a portion of their land to Sps Velasco for a period of 20 years, commencing
from 1976 to 1996 renewable for 10 years. It was renewed twice, to last until 2006. When the lease
expired in 2006, the Atty. Rillera demanded the Sps Velasco to vacate the property and filed a case of
unlawful detainer. Sps Velasco, however, refused and claimed that the lease was extended until 2025 as
they have already paid in advance as shown in receipts.

Issue: Was the lease contract extended after the expiration upon the lease period in 2006 by the
acceptance of rentals beyond the lease period for another 19 years?

Held: NO. Fidel’s acceptance of payment of rentals beyond the lease period did not cause the extension
of the lease. Under Article 1670 of the Civil Code, a new lease is implied if the lessee continues enjoying
the thing leased for 15 days after the termination of the original contract, unless notice to the contrary has
been previously given, the fact that the lessee continues to stay for 15 more days is not a ground for
inferring a new lease. Thus, an implied new lease or tacita reconduccion will set in when the following
requisites are found to exist:(a) the term of the original contract of lease has expired; (b) the lessor has not
given the lessee a notice to vacate; and (c) the lessee continued enjoying the thing leased for 15 days with
the acquiescence of the lessor. While there was no extension of lease for a continuous period until 2025,
an implied lease for a successive yearly period existed between the parties when respondents failed to
timely give a written notice to vacate to petitioners.
 SALVAÑA V. LABNAO
G.R. No. 210624 (Notice), December 10, 2018
Topic: Sales; Double Sale

Doctrine: Art. 1544 clearly provides that when an immovable property shall have been sold to different
vendees, the ownership shall pertain to the person who in good faith acquiring it who in good faith firs
recorded it in the Registry of Property.

Facts: Moises Mabini was the registered owner of a parcel of land lot in Cebu City. When he died, the
property was partitioned and distributed among his hers: Leoncia, Nieves, Luciano, Eustaquia, Paulina
and Zoila. A 17,530 square meter lot of the land was adjudicated to Nieves. When Nieves died, the lot
passed onto her children, the Insures’. The Insures’ filed a Complaint for Reconveyance of Real Estate,
Declaration of Nullity of Extrajudicial Settlement of Estate with Sale and Certificate of Title against
Leoncia and MCDC. They averred that they have already sold a portion of the lot to Sibonghanoy who
already took possession of said portion and was issued a Tax Declaration under his name. They only
found out that the lot had been sold to MCDC, who was then issued a Certificate of Title under its name,
when Elisa went to pay its real estate tax, denied selling the property to MCDC or giving consent to such
transaction as Leoncia tricked them into signing the deed of sale executed by MCDC.

Issue: Should ownership belong to Sibonghanoy?

Held: No, Article 1544 of the Civil Code clearly provides that If the same thing should have been sold to
different vendees, the ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property. Should it be immovable property, the ownership
shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good
faith. In the present case, in spite of the sale of the portion of the subject lot in 1987, Sibonghanoy failed
to register the sale with the Register of Deeds and, thus, no title was ever issued in his name. Neither did
he register his adverse claim on the subject property. The CA correctly ruled that "priority of ownership
has to be given to MCDC who, in good faith, had the second sale recorded in the Registry of Property,
and, after it, its transferee, appellee Zosimo Labnao." Sibonghanoy slept on his right by failing to register
the property in his name at the earliest opportunity.

THE HEIRS OF SPOUSES SOTES VS ESTACA

G.R. No. 211849, December 3, 2018
Topic: Sales; Element of Contract of Sale

Doctrine: The elements of contract of sale are consent, determinate subject matter, and price certain. One
of the elements,which is the existence of a determinate subject matter, is absent in this case and thus
negating the existence of perfected contract of sale.
FACTS: Atanacio Pernia sold 2 parcels of Lot H 13180 to Spouses Sotes in 1968. In 1978 Spouses sold
purchased again 2 parcels from the same Lot from Atanacio’s son and this was covered by a deed of sale.
In 1996, the respondents executed a deed of sale confirming the 1978 sale to the spouse. In 1997, the
heirs of Atanacio executed an extra judicial partition of the disputed property and was issued a new TCT.
Claiming that they already purchased the lot, the spouses Sotes demanded for the execution of proper
deed of conveyance. The heirs refused. Hence, the petitioner filed a complaint for specific performance,
cancellation of title , damages and attorney’s fee. The RTC ruled in favor of Sotes spouse but the CA
reversed it.

ISSUE: Are spouses Sotes entitled to the lot the allegedly purchased?

HELD: No, the spouse are not entitled to the lot for their failure to prove the identitiy of land by
preponderance of evidence. In an action to recover ownership, the person who wish to recover it must
prove two things: the identity of land and his title thereto. In this case, the bases of the claim of the spouse
are the 1978 and 1996 deeds of sale. Upon perusal of the said deeds, it appears that the portion of lot sold
was not specified as to its metes and bounds and therefore not determinate. Further, in a contract of
sale,the elements of which are consent, determinate subject matter, and price certain. One of the elements
of which which is the existence of a determinate subject matter is absent in this case and thus negating the
existence of perfected contract of sale. Therefore, the deeds prove nothing on such intention of the parties
to transfer the property.

HEIRS OF SPOUSES COLOMA V. SPOUSES MEREDOR

G.R. No. 224136; November 21, 2018
Topic: Contract of Sale; Contracts
Ponente: Bersamin, J.

Doctrine: Under Article 1371 of the New Civil Code, it is provided that “In order to judge the intention
of the contracting parties, their contemporaneous and subsequent acts shall be principally considered."

Facts: The instant controversy involves a one (1)-hectare parcel of land in Villa Aglipay, San Jose, Tarlac
(subject land), registered in the name of Juan F. Coloma (Juan) married to Juliana Parazo (Juliana),
collectively referred to as spouses Coloma. Juan and Juliana were married on March 12, 1954. Juliana and
Juan died intestate on August 17, 2006 and August 26, 2006, respectively. During the subsistence of their
marriage, or on July 31, 2002, TCT No. 47452 was cancelled on the basis of a Deed of Absolute Sale
dated July 23, 1979 (1979 Deed of Absolute Sale) wherein Juan apparently sold the one (1)-hectare
portion of Lot No. 5788-C to the spouses Amando Meredor, Sr. and Dionisia Meredor (respondents) for a
consideration of P2,000. TCT No. 357913 was then issued to the respondents on the same day. However,
it also appears that Juan executed three other Deeds of Absolute Sale in favor of the respondents covering
the same parcel of land, as follows: (1) a Deed of Absolute Sale dated February 27, 1997 for P70,000; (2)
a Deed of Absolute Sale dated February 27, 1997 for P100,000 (collectively, 1997 Deeds of Absolute
Sale); and (3) a Deed of Absolute Sale dated April 24, 2002 for P70,000 (2002 Deed of Absolute Sale).
Petitioners allege that Juan did not sell the subject land to respondents, and if ever he did, the sale is void
for being without the conformity of Juliana. They also alleged that the 2002 Deed of Absolute Sale is void
since the signatures of the spouses Coloma therein were forged, and such forgery is strengthened by the
execution of two other deeds of absolute sale covering the same subject land as both deeds bear the same
document number, page number, book number and series, under the same notary public, same date but
entirely different witnesses. Respondends averred that the subject land was sold to them by Juan during
his lifetime, as evidenced by the Deed of Absolute Sale dated February 27, 1997, notarized by Atty.
Conrado T. Quiaoit. They claimed that Juan did not need the consent of his wife Juliana to sell the subject
land as the same was his capital property, having been inherited from his parents.

Issue: Is there a valid and perfected contract of sale over the subject land between Juan and the
respondents?

Held: Yes. We uphold the validity of the sale as evidenced by the 1997 Deeds of Absolute Sale. This
Court cannot sustain petitioners' bare allegation that all the Deeds of Sale were simulated and falsified
without explaining in particular how such was the case. While it is true that Dionisia denied the execution
of the 1979 and 2002 Deeds of Absolute Sale, the same cannot be said of the 1997 Deeds of Absolute
Sale. As notarized documents, they are public documents. As such, the 1997 Deeds of Absolute Sale have
in their favor the presumption of regularity, and to contradict the same, there must be evidence that is
clear, convincing and more than merely preponderant; otherwise the document should be upheld.
Petitioners' mere denial of Juan's participation in the execution of the same will not suffice. As found by
both the RTC and CA, the evidence presented show that Juan intended to sell the subject land to the
respondents. Under Article 1371 of the New Civil Code, it is provided that "[i]n order to judge the
intention of the contracting parties, their contemporaneous and subsequent acts shall be principally
considered." As testified to by Marcela and Juanito, Juan never questioned the transfer of the subject land
during his lifetime, and in the multiple cases filed between the parties over the subject land, Juan even
sided with the respondents. As found by the CA, their testimonies are bereft of any indication that Juan
exercised acts of dominion over the subject land from the time TCT No. 357913 was issued in the
respondents' name until his death in 2006. Furthermore, the difference in the stated price in the two
February 27, 1997 Deeds of Absolute Sale (P70,000 and P100,000) does not also render the sale invalid.
Respondents' witness, Benjamin, testified that the execution of the two Deeds of Absolute Sale was for
the purpose of reducing the tax liability on the transaction. In fact, Dionisia testified that she and her
husband bought the subject land from Juan for P170,000. To reiterate, petitioners failed to prove that the
1997 Deeds of Absolute Sale were simulated or falsified.

HEIRS OF CIRIACO BAYOG-ANG VS. FLORENCE QUINONES

Topic: Contract of Sale; Contracts; Delivery of the thing sold
Ponente: TIJAM, J.

Doctrine: As heirs they cannot be held to be third persons to the contract executed by their predecessors-
in-interest, for as heirs, they were bound by the same. Article 1311 of the New Civil Code provides that
"contracts take effect only between the parties, their assigns and heirs, except in case where the rights and
obligations arising from the contract are not transmissible by their nature, or by stipulation or by
provision of law." The general rule is that heirs are bound by contracts entered into by their predecessors-
in-interest except when the rights and obligations arising therefrom are not transmissible by (1) their
nature, (2) stipulation or (3) provision of law.
Facts: In 1998, an action for Specific Performance and Damages was filed by Florence Quinones,
together with her husband Jeremias Donasco. The subject of this dispute is a 10,848 square-meter parcel
of land which is part of the property previously owned by Ciriaco Bayog-Ang covered by Original
Certificate of Title (OCT) No. RP-1078 (1596). Respondents claimed that the said parcel of land was sold
to her by Bayog-Ang as evidenced by a Deed of Absolute Sale dated February 25, 1964, and she
demanded from the petitioners that the said portion be segregated and transferred but the same went
unheeded. Petitioners, in their Answer, denied any knowledge of the deed of sale executed by Bayog-Ang
in favor of Florence nor of the latter's claim over the land. They also claimed that before the execution of
the extra-judicial settlement, they went to the Register of Deeds to verify the status of the land and found
nothing was annotated on the certificate of title. By way of affirmative defense, they claimed that the
respondents' action was barred by prescription and laches, and that respondents were never in possession
of the subject lot. They averred that the action was one based on a written contract which prescribed in 10
years reckoned from the execution of the Deed of Absolute Sale in 1964.

Issue: Do the petitioners retain ownership over the subject lot as the registered owners?

Held: NO. Under the law on sales, Article 1496 of the New Civil Code provides that "the ownership of
the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways
specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is
transferred from the vendor to the vendee." In particular, Article 1497 provides that "the thing sold shall
be understood as delivered, when it is placed in the control and possession of the vendee," while Article
1498 states that "when the sale is made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary
does not appear or cannot clearly be inferred." In the present case, what is fairly established is that the
Deed of Absolute Sale is a notarized document. The Deed of Absolute Sale evidencing the conveyance
enjoyed the presumption of validity, it having been duly notarized. Being a notarized document, the Deed
of Absolute Sale is a public document. Thus, in accordance with Article 1498, the sale of the subject land
through the Deed of Absolute Sale, which is a public instrument, transferred ownership from Bayog-Ang
to Florence, there being no indication of any intention to the contrary.

ROYAL PLAINS VIEW, INC. AND/OR RENATO PADILLO V. NESTOR MEJIA

G.R. No. 230832, November 12, 2018
Topic: Contract to Sell; Application of the Maceda Law
Ponente: Reyes, Jr.

Doctrine: In a contract to sell, the ownership is reserved in the seller and is not to pass until the full
payment of the purchase price is made. In the first case, non-payment of the price is a negative resolutory
condition; in the second case, full payment is a positive suspensive condition.

The Maceda Law expressly recognizes the vendor's unqualified right of cancellation of sale on
installments of industrial and commercial properties with full retention of previous payments in case of
default. However, notice is still necessary.
Facts: Subject of the present controversy is a parcel of land in Magdum, Tagum City, Davao del Norte
known as Lot No. 371. During his lifetime, Dominador executed a Contract of Sale in favor of Bias Mejia
(Bias), father of respondent Nestor C. Mejia (Nestor), involving the western portion of the subject land.
However, despite the sale, the title over the property remained in the name of Dominador married to
Maria Ramones (spouses Ramones). The remaining portion of the lot was sold to a certain Pablo Benitez.
After that transaction, Bias died and he was survived by his son, Nestor. Sometime in 2005, Nestor met
petitioner Renato Padillo (Renato), the President of petitioner Corporation, Royal Plains View, Inc., a real
estate company. At that time, Nestor was in actual physical occupation of a parcel of land with an entire
area of 12.3 hectares covered by OCT No. (P-1324) P-232, registered in the name of spouses Ramones.
They both verbally agreed to split the entire lot, the procedure to be handled by Renato's company. On
March 23, 2005, Nestor and petitioner Corporation, represented by Renato's wife, Rosemarie Padillo,
entered into a contract denominated as Deed of Conditional Sale involving that said parcel of land
covered by TCT No. T-225549 and registered in the name of Dominador. Under that contract, petitioner
Corporation bound itself to pay Nestor the sum of P8,000,000.00 of which P500,000.00 was for down
payment. The balance was to be paid in 36 equal monthly installments. One day, Nestor asked petitioner
Renato to give him the original owner's duplicate copy of TCT No. T-225549.23 Petitioner Renato found
out that Nestor had sold the whole property to the spouses Harris and Caroline Egina for the sum of
P12,000,000.00. Renato attempted several times to contact Nestor, but the latter did not take his calls and
simply vanished. Instead, Renato received a document entitled "Rescission of Deed of Conditional Sale"
dated February 5, 2010 from Nestor whereby the latter rescinded the April 11, 2007 Deed of Conditional
Sale alleging that petitioners (Renato and the Corporation) had defaulted in the payment of the monthly
installments agreed upon. On October 12, 2011, petitioners filed a Complaint for Declaration of Nullity of
the Instrument denominated as Rescission of Conditional Sale, Specific Performance, Sums of Money,
etc. against respondent Nestor and the heirs of the spouses Ramones, represented by Remedios Ramones-
Emperado, docketed with the RTC as Civil Case No. 4263. Nestor did not file an Answer. Hence, he was
declared in default in an Order dated May 31, 2012. On April 12, 2013, the RTC issued a Decision
dismissing petitioners' complaint with prejudice. The RTC found that the whole transaction between
petitioners and Nestor was tainted with badges of fraud. It ruled that respondent Nestor could not have
been the owner of the subject property because his father's (Bias') contract with Dominador was a
conditional sale and there was yet no conveyance of the same in Bias' favor. There was also nothing on
record which shows that Dominador's OCT No. (P-1324) P-232 was cancelled with the issuance of TCT
Nos. T-225549 and T-225550. Petitioners, knowing that the subject property was still registered in the
name of Dominador, should not have paid a hefty amount to Nestor. Aggrieved, petitioners filed an
appeal with the CA. In reversing the RTC, the CA, in its Decision 39 dated May 26, 2016, ruled that from
the intent of the parties, the Deed of Conditional Sale entered into by them is a Contract to Sell. As
explicitly stated in the contract, upon full payment of the purchase price, Nestor would be bound to
execute the Deed of Absolute Sale.

The CA made no doubt that the intention of the contract is to reserve the ownership of the land to the
seller (Nestor) until the buyers (petitioners) made full payment of the purchase price. Since petitioners
had already paid at least two years of installments then the provisions of Republic Act (R.A.) No. 6552 or
the Maceda Law should be applied. When Nestor cancelled the contract, he failed to comply with the
requirement under the Maceda Law, that is, the refund of the cash surrender value. The CA concluded
that since there was no valid rescission of the contract to sell, petitioners have not lost the statutory grace
period within which to pay.

Issue: Was the rescission validly made?

Held: No. A contract to sell and a contract of sale were clearly and thoroughly distinguished from each
other, with the High Tribunal stressing that in a contract of sale, the title passes to the buyer upon the
delivery of the thing sold. In a contract to sell, the ownership is reserved in the seller and is not to pass
until the full payment of the purchase price is made. The April 11, 2007 Deed of Conditional Sale
executed between the parties is a contract to sell. As worded, the Deed of Conditional Sale dated April 11,
2007 (which substitutes the earlier Deed of Conditional Sale dated March 23, 2005 except that there was
already a down payment made) provides that upon full payment of the agreed consideration, the vendor
shall execute the deed of absolute sale in favor of the vendee. This stipulation evinces the intention of the
parties for the vendor (respondent) to reserve ownership of the land and the same is not to pass until the
remaining balance (payable in 40 monthly installments) has been fully paid by the vendee (petitioners).
However, contrary to the findings of the CA, the protection provided under R.A. No. 6552 (Maceda Law)
is not applicable. Notwithstanding the parties' stipulation for installment payments, wherein the payment
of the price is more than one, the parties' contract to sell does not automatically fall under the coverage of
the Maceda Law. R.A. No. 6552 provides exclusions for its application which include industrial lots,
commercial buildings and sales to tenants. A purchase by a company involved in the real estate business,
just like the petitioners in this case, of a six-hectare lot can hardly be considered as residential. But this is
not to say that sellers in a contract to sell industrial and commercial lots are precluded to cancel the
contract when buyers defaulted in one installment. The Maceda Law expressly recognizes the vendor's
unqualified right of cancellation of sale on installments of industrial and commercial properties with full
retention of previous payments in case of default. In other words, whether the property is residential,
commercial or industrial, Maceda Law does not make any distinction insofar as the availability of the
remedy of cancellation by the seller in case of nonpayment of installments is concerned. The only
distinction lies on the added protection given by the law to residential buyers, which is not enjoyed by
commercial and industrial lot buyers. However, while we recognize the seller's right to unqualifiedly
cancel the contract to sell (of industrial or commercial properties) upon the buyer's default, as pronounced
in the earlier cited case of Luzon Brokerage, such cancellation must be made with notice to the other party
who failed to perform his end part of the bargain. This gives the opportunity to the other party to question
the cancellation made on account of error, abuse or any other grounds. Such that this time, the burden of
instituting an action is shifted from the injured party to the defaulter. Guided by the foregoing
pronouncements, respondent Nestor's action in canceling (through a notarized Rescission of Conditional
Sale) the contract to sell is unjustified. Considering that the Deed of Conditional Sale was not validly
cancelled, it follows then that the same subsists and remains effective. Thus, the Complaint for the
Nullification of the document denominated as Rescission of the Deed of Conditional Sale is GRANTED.
The Deed of Conditional Sale between the parties is declared VALID and SUBSISTING, and the parties
are enjoined to comply with the other stipulations embodied therein. Petitioners Royal Plains View, Inc.
and/or Renato Padillo are ORDERED to PAY respondent Nestor Mejia, and upon full payment of the
purchase price, respondent Nestor Mejia shall EXECUTE the corresponding Deed of Absolute Sale over
the property. In case of failure of petitioners to pay the sum as herein adjudged, the Deed of Conditional
Sale is deemed cancelled and the payments they had already paid will be considered rentals for the use of
the property.

MULLER vs. PHILIPPINE NATIONAL BANK

G.R. No. 215922. October 1, 2018.
Topic: Lease; Award of rentals beyond the latest demand letter
Ponente: DEL CASTILLO, J.

Doctrine: Under Article 1670 of the Civil Code, "[i]f at the end of the contract the lessee should continue
enjoying the thing leased for fifteen days with the acquiescence of the lessor, and unless a notice to the
contrary by either party has previously been given, it is understood that there is an implied new lease, not
for the period of the original contract, but for the time established in Articles 1682 and 1687. The other
terms of the original contract shall be revived."

Facts: Spouses Fritz and Thelma Muller are the occupants of 2 parcels of land located in Manduriao,
Iloilo City owned by PNB. On May 26, 1987, PNB informed the Mullers that their lease will expire on
June 1, 1987; that they had rental arrears for two and a half years amounting to PhP18,000.00. The
Mullers seeked to renew the lease for another year but PNB denied the request. The spouses also offered
to purchase the property but the same was not given due course by PNB. Due to the continued occupation
of the Mullers, PNB sent its final demand letter dated July 17, 2006 demanding the payment of the rental
arrears from June 1984 to June 1, 2006. The Mullers having failed to pay due attention to the written
demands, PNB instituted a Complaint for Ejectment. The MTC rendered a decision in favor of PNB and
ordered the Mullers to vacate the property and pay PNB the rentals from June 1984 until the date when
the Mullers vacated the property i.e., August 1, 2007. The Mullers filed a notice of appeal. The RTC
rendered a decision modifying the decision of the MTC by fixing the reasonable rental awarded to PNB at
Php1,000.00 per month to be reckoned only from the date of the Mullers' receipt of the latest demand
letter until August 1, 2007 when they vacated the subject property. PNB appealed before the CA. The
latter reinstated the decision dated October 19, 2009 of the MTC with modification that the unpaid rentals
shall earn a corresponding interest of six percent (6%) per annum, to be computed from May 26, 1987
until the finality of the decision. After the decision becomes final and executory, a 12% interest shall be
computed per annum from such finality on the remaining unpaid balance until its satisfaction.

Issue: (1) Is PNB entitled to rentals in arrears prior to July 17, 2006? (2) Are PNB’s claims already
prescribed?

Held: (1) Yes. (2) No.

Under Article 1670 of the Civil Code, "[i]f at the end of the contract the lessee should continue enjoying
the thing leased for fifteen days with the acquiescence of the lessor, and unless a notice to the contrary by
either party has previously been given, it is understood that there is an implied new lease, not for the
period of the original contract, but for the time established in Articles 1682 and 1687. The other terms of
the original contract shall be revived." Thus, when petitioners' written lease agreement with respondent
expired on June 1, 1987 and they did not vacate the subject properties, the terms of the written lease,
other than that covering the period thereof, were revived. The lease thus continued. In this sense, the
prescriptive periods cited by petitioners — as provided for in Articles 1144 and 1145 of the Civil Code 24
— are inapplicable. As far as the parties are concerned, the lease between them subsisted and prescription
did not even begin to set in. Secondly, even when the parties' lease agreement ended and petitioners failed
or refused to vacate the premises, it may be said that a forced lease was thus created where petitioners
were still obligated to pay rent to respondent as reasonable compensation for the use and occupation of
the subject properties. Indeed, even when there is no lease agreement between the parties, or even when
the parties — occupant and property owner — are strangers as against each other, still the occupant is
liable to pay rent to the property owner by virtue of the forced lease that is created by the former's use and
occupation of the latter's property. The CA is thus correct in ruling that petitioners "should be made liable
for damages in the form of rent or reasonable compensation for the occupation of the properties not only
from the time of the last demand but starting from the time they have been occupying the subject
properties without paying for its rent."

SPOUSES ANTONIO BELTRAN and FELISA BELTRAN vs. SPOUSES APOLONIO

CANGAYDA, JR. and LORETA E. CANGAYDA
G.R. No. 225033. August 15, 2018
Topic: Contract to sell vis-à-vis Contract of Sale; Articles 1477-1478.
Ponente: Caguioa, J.

Doctrine: In a contract of sale, title passes to the vendee upon the delivery of the thing sold; whereas in a
contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full
payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and
unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor
until the full payment of the price.

FACTS: Respondents verbally agreed to sell a 300-square-meter residential lot situated in Barangay
Magugpo, Tagum City, Davao del Norte to petitioners for P35,000.00. Petitioners took possession of the
disputed property and built their family home after making an initial payment. Petitioners subsequently
made additional payments, which, together with their initial payment, collectively amounted to
P29,690.00. However, despite respondents' repeated demands, petitioners failed to pay their remaining
balance of P5,310.00. Respondents served upon petitioners a "Last and Final Demand" to vacate the
disputed property within 30 days from notice after 17 years from the expiration of petitioners' period to
pay their remaining balance. Respondents filed a complaint for recovery of possession and damages
before the RTC alleging that petitioners had been occupying the disputed property without authority, and
without payment of rental fees. Petitioners admitted that they failed to settle their unpaid balance of
P5,310.00 within the period set in the Amicable Settlement. However, petitioners alleged that when they
later attempted to tender payment two days after said deadline, respondents refused to accept their
payment, demanding, instead, for an additional payment of P50,000.00. RTC ruled in favor of the
respondents. On appeal before the CA, petitioners raised that the sale of the disputed property constitutes
a sale on installment covered by Republic Act (R.A.) No. 6552, 22 otherwise known as the Maceda Law.
However, CA reject the invocation of Maceda Law and affirmed the ruling of the RTC.

ISSUE: Is the oral contract entered into between the petitioners and respondents a contract of sale?
HELD: The oral agreement entered into by the parties constitutes a contract of sale and not a contract to
sell. Article 1458 of the Civil Code defines a contract of sale: By the contract of sale one of the
contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and
the other to pay therefor a price certain in money or its equivalent. Jurisprudence defines the distinctions
between a contract of sale and a contract to sell to be as follows: In a contract of sale, title passes to the
vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is
reserved in the vendor and is not to pass until the full payment of the price. In a contract of sale, the
vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded;
whereas in a contract to sell, title is retained by the vendor until the full payment of the price, x x x. Based
on the foregoing distinctions, the Court finds, and so holds, that the oral agreement entered into by the
parties constitutes a contract of sale and not a contract to sell.

CRESCINI vs E. ASPE PAWNSHOP

GR No. 195130 (Notice); August 8, 2018
Topic: Contract of Lease

DOCTRINE: A lease contract is not at all times necessary for a successful unlawful detainer action. An
ejectment complaint based on possession by tolerance of the owner is a category of unlawful detainer
cases, which may also succeed after establishing the key jurisdictional facts.

FACTS: The dispute involves an unlawful detainer case filed by Crescini against Aspe over one
commercial door of the building standing on the former's land located at San Roque, Iriga City covered
by TCT No. 1521. Crescini acquired the land and building from its former owner, Lee, by virtue of a sale.
At that time, Lee had an existing six-year lease contract from December 28, 1999 until December 28,
2005 with Aspe over the property. Crescini sent a written notice to Aspe, informing him that the property
was transferred to him. Before the expiry of the lease, Crescini informed Aspe that he will not renew the
lease contract or grant any further extension. These letters were ignored. Without the knowledge of
Crescini made a formal demand for Aspe to vacate the property. For failure to comply, Crescini initiated
the action for unlawful detainer. During the pendency of the proceedings, Aspe vacated the premises and
surrendered the key to the property to the MTCC. MTCC dismissed the case for lack of cause of action.
RTC reversed MTCC. CA reinstated the decision of MTCC.

ISSUE: Is a lease contract always necessary to establish a cause of action for an unlawful detainer case?

HELD: No. MTCC and CA erred when they concluded that a lease contract is always necessary to
establish a cause of action for an unlawful detainer case. An action for unlawful detainer pertains to a
specific circumstances of dispossession. It refers to a situation where the current occupant's initially
lawful possession became unlawful due to the expiration of the right to possess, which may be sourced
from a contract, express or implied, or by mere tolerance. Thus, a lease contract is not at all times
necessary for a successful unlawful detainer action. An ejectment complaint based on possession by
tolerance of the owner is a category of unlawful detainer cases, which may also succeed after establishing
the key jurisdictional facts. WHEREFORE, the petition is GRANTED. The Court of Appeals' Decision
dated September 17, 2010 is REVERSED and SET ASIDE. The Regional Trial Court's Decision dated
February 4, 2009 is hereby REINSTATED.
 VARGAS V. ACSAYAN, JR.
G.R. Nos. 206780 & 206843; March 20, 2019
Topic: Sales; Deed Of Assignment/ Consideration
Ponente: J.C. REYES, JR., J

Doctrine: Consideration is presumed unless the contrary is proven. The presumption that a contract has
sufficient consideration cannot be overthrown by a mere assertion that it has no consideration.

Facts: The said complaint alleged that in October 1997, the spouses Tabangcora offered to sell to
respondent a parcel of land (subject property) in Sariaya, Quezon, consisting of about 4 hectares for a
purchase price of Five Million Nine Hundred Fifty Thousand Pesos (P5,950,000.00), which is to be paid
as follows: 1) as down payment, he shall immediately pay the indebtedness incurred by the spouses
Tabangcora with the Land Bank of the Philippines (LBP) which was covered by a mortgage over the
subject property herein; and 2) the balance shall be paid upon execution of a Deed of Absolute Sale in
favor of respondent. Petitioner spouses Vargas contend that they had already disposed the subject
property in question in favor of Tavar Farm & Marketing, as represented by the spouses Tabangcora,
through a Deed of Assignment dated November 1997, for a valuable consideration. Thus, they could no
longer be held liable for the subsequent acts of the spouses Tabangcora regarding their transactions with
herein respondent involving the subject property.

Issue: Did the Spouses Vargas disposed the subject property thru a Deed of Assignment for a valuable
consideration?

Held: We sustain the validity of the Deed of Assignment executed by spouses Vargas. Under Article
1624 of the Civil Code, assignment of rights partakes of a nature of a sale, such that it 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 any other person not a party to the contract. Here, the
CA invalidated the Deed of Assignment purportedly because the parties never mentioned anything about
a valuable consideration that was paid by the spouses Tabangcora to spouses Vargas. Under Art. 1354 of
the Civil Code, consideration is presumed unless the contrary is proven. The presumption that a contract
has sufficient consideration cannot be overthrown by a mere assertion that it has no consideration . The
valuable consideration need not be specified. To rebut the presumption that there was consideration, it is
incumbent upon respondent to show that no consideration was passed between the parties. However,
respondent cannot explicitly state that the Deed of Assignment was executed without any consideration at
all. In his attempt to nullify the Deed of Assignment, respondent raised some peripheral issues
surrounding the execution of the said Deed. What was clear is that respondent transacted with the spouses
Tabangcora involving the subject property still registered under the names of spouses Vargas.
Considering that spouses Vargas did not execute any SPA authorizing spouses Tabangcora to transact
with respondent, evidently, the latter was just relying on the Deed of Assignment which ceded the rights
and interest of the registered owner to the spouses Tabangcora over the subject property. Respondent
cannot now attack the validity of the said Deed of Assignment which he relied upon when he transacted
with the spouses Tabangcora. As the Deed of Assignment is declared valid, for all intents and purposes,
the subject property has effectively been transferred to Tavar Farm & Marketing, as represented by
Maximino Tabangcora. Verily, when the spouses Tabangcora entered into a contract with respondent, the
same is only binding between them as the contracting parties. Since there was no showing that there was a
privity of contract between spouses Vargas and respondent, then spouses Vargas cannot be held liable to
the respondent for the payment of any amount or interest due to the latter.

SPOUSES MODOMO VS. SPOUSES LAYUG

G.R. No. 197722; August 14, 2019
Topic: Novation; Estoppel in Pais; Reimbursement of Lessee
Ponente: CAGUIOA, J.

Doctrine: Novation is never presumed and the animus novandi, whether total or partial, must appear by
express agreement of the parties, or by their acts that are too clear and unequivocal to be mistaken. The
burden of proving novation lies on the party alleging it.

Estoppel in pais applies wherein one, by his acts, representations or admissions, or by his own silence
when he ought to speak out, intentionally or through culpable negligence, induces another to believe
certain facts to exist and such other rightfully relies and acts on such belief, so that he will be prejudiced
if the former is permitted to deny the existence of such facts.
Art. 1678 par.1 - If the lessee makes, in good faith, useful improvements which are suitable to the use for
which the lease is intended, without altering the form or substance of the property leased, the lessor upon
the termination of the lease shall pay the lessee one-half of the value of the improvements at that time.
Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though
the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon
the property leased than is necessary.

Facts: Petitioner and Respondent entered into a lease agreement. An escalation clause is provided under
the lease contract as well as the agreement that petitioner shall pay the real property tax. Petitioner failed
to pay the lease. Respondent filed a case before the court.
Petitioner contends that there was novation, due to verbal agreements, thus escalation clause and payment
of real property tax will not apply.

Issue: (1) Can verbal agreement be considered as novation to the existing lease contract? (2) Is the
respondent estopped? (3) Can the petitioner avail of reimbursement of the improvements introduced?

Held: (1) Yes. In this case, it is considered as modificatory novation or partial novation. As the evidence
presented by the parties, it was ruled that there was a reduction of payment of the lease contract from
170,000 to 150,000. It was further ruled that escalation clause and payment of real property tax shall still
apply in the present case because the parties should have reduce it into writing when they have made two
addenda. (2) No. Estoppel in pais will not apply because of the letters sent by the respondent as to the
vehement objection to the petitioner’s deficient payments. (3) No. Although under 1678 of the civil code
provides that the petitioner can have reimbursement, petitioner left nothing in the premises when they
vacated it. Hence, they are precluded from seeking reimbursement for improvements that are now
inexistent.
 LAGRIMAS DELA ROSA LAZO v. SPOUSES ELEUTERIO VILLAS AND CLARITA M.
VILLAS AND ROSARIO YAP BAUTISTA
G.R. No. 221792; January 30, 2019
TOPIC: Equitable Mortgage/ Extinguishment Of Obligation

DOCTRINE: In general, payment must be made to the proper person in order to discharge an obligation.
Thus, payment must be made to the obligee himself or to an agent having authority, express or implied, to
receive the particular payment. By express provision of law, payment made by the debtor to the person of
the creditor or to one authorized by him or by the law to receive it extinguishes the obligation.

FACTS: The case started when petitioner Lazo, offered for sale to Bautista a parcel of land situated at
Caloocan City, for the amount P 100,000. Petitioner represented to Bautista that she was the absolute
owner thereof. Bautista initially paid P35,000.00 in cash which petitioner accepted. Thus, petitioner
executed a deed of conditional sale over the said property in favor of Bautista. Bautista had paid
petitioner the full amount stipulated but despite several demand petitioner failed to execute a deed of
absolute sale over the said property. Despite the earlier transaction with Bautista, petitioner subsequently
sold the same parcel of land to a certain Euleterio Villas who acquired the owner's duplicate copy of the
title. Aggrieved, Bautista filed a petition against Lazo for specific performance. Petitioner alleged that the
P35,000.00 paid by Bautista was not part of the purchase price but merely an option money to ensure that
she would not sell the subject property to other buyers. Now, Lazo claims that she did not sell the
property to the Villas either because what was executed was an equitable mortgage and that the payment,
she made to the latter’s lawyer had already extinguished her obligation.

ISSUE: Was the obligation created between Lazo and Spouses Villas is one of equitable mortgage? Was
the obligation was extinguished after the payment made to the counsel of Spouses Villas?

HELD: YES. The Court is convinced that the subject transaction entered into by petitioner and Eleuterio
is one of equitable mortgage on the basis of paragraphs 1, 2, and 6 of Art. 1602. First, the purchase price
of the supposed sale is unusually inadequate. The object of the transaction is 577 square meters of the
parcel of land. The price agreed upon is P50,000.00. This amount appears to be inadequate for the sale of
this property. Second, it is undisputed that petitioner remained in possession of the subject property. The
RTC held that there is no showing that the Spouses Villas ever took possession of the subject property
prior to the expiration of the two-year period. Third, it is evident that the parties entered into the subject
transaction solely in consideration of the loan extended by Eleuterio to petitioner. The underlying cause
of the subject transaction is the loan. In fact, the amount of the loan is the amount of the purchase price
for the supposed sale of the subject property to Eleuterio. The RTC is correct in its observation that the
parties' true intention is to secure the payment of the loan, not to transfer ownership of the subject
property from petitioner to Eleuterio.
YES. In general, payment must be made to the proper person in order to discharge an obligation. Thus,
payment must be made to the obligee himself or to an agent having authority, express or implied, to
receive the particular payment. By express provision of law, payment made by the debtor to the person of
the creditor or to one authorized by him or by the law to receive it extinguishes the obligation. She validly
made payment to Atty. Dandal, Eleuterio's authorized representative, within the two-year period. This
payment was sufficient to extinguish her obligation under the equitable mortgage. The fact that Atty.
Dandal was instructed by Eleuterio to give the payment he received to Clarita and that he failed to do so
because of Clarita's refusal to accept it is irrelevant in determining whether petitioner complied with her
obligation under the equitable mortgage so as to extinguish the same. Hence, she discharged her
obligation and the equitable mortgage was accordingly extinguished.

CASTRO V. MENDOZA, SR.

Topic: Lease; Legal Redemption
Ponente: JARDELEZA, J.

Doctrine: Under Section 12 of the RA 3844, the right of redemption is validly exercised upon
compliance with the following requirements: (a) the redemptioner must be an agricultural lessee or share
tenant; (b) the land must have been sold by the owner to a third party without prior written notice of the
sale given to the lessee or lessees and the DAR; (c) only the area cultivated by the agricultural lessee may
be redeemed; and (d) the right of redemption must be exercised within 180 days from written notice of
the sale by the vendee.

Facts: Jesus sold his undivided interest therein which the respondent Municipality acquired for the
expansion and construction of the Bustos public market.all phases of the sales transaction between Jesus
and respondent Municipality (negotiation and acquisition) and the subsequent construction and
completion of the public market, were effected without issue or complaint from the petitioners. Most
notably, after the transfer of ownership of the property to respondent Municipality, the latter, in 1993,
began construction of the public market. After the inauguration of the public market, petitioners filed their
complaint for Maintenance of Peaceful Possession with prayer for Restraining Order/Preliminary
Injunction; Pre-emption and Redemption. The PARAD ruled that petitioners are the conclusive tenants of
the entire original Santos property, including the property now owned by respondent Municipality.
DARAB affirmed that petitioners are bona fide tenants of the property. However, it also ruled that it
would be impractical to reinstate petitioners in the possession thereof or allow them to redeem it where
there is no showing of petitioners' capacity to pay the redemption price. Petitioners appealed to the CA.

Issue: Did petitioners timely and validly exercised their right of redemption?

Held: No. Under Section 12 of the RA 3844, the right of redemption is validly exercised upon
compliance with the following requirements: (a) the redemptioner must be an agricultural lessee or share
tenant; (b) the land must have been sold by the owner to a third party without prior written notice of the
sale given to the lessee or lessees and the DAR; (c) only the area cultivated by the agricultural lessee may
be redeemed; and (d) the right of redemption must be exercised within 180 days from written notice of
the sale by the vendee. Petitioners belatedly tendered and consigned payment of the redemption price way
beyond the 180-day prescriptive period provided by law. Considering that petitioners failed to consign the
full redemption price of P1.2 Million when they filed the complaint before the PARAD in August 22,
1994, there was no valid exercise of the right to redeem the property. It bears stressing that the right of
redemption under Section 12 of RA 3844, as amended, is an essential mandate of the agrarian reform
legislation to implement the State's policy of owner-cultivatorship and to achieve a dignified, self-reliant
existence for small fanners. Such laudable and commendable policy, however, is never intended to unduly
transgress the corresponding rights of purchasers of land. Consequently, petitioners cannot redeem the
property and gain its ownership.

SPS. ABOITIZ V. SPS. PO

G.R. No. 208450, June 5, 2017
Ponente: Leonen
Topic: Sale; Trusts

Doctrine: A person acquiring a property through fraud becomes an implied trustee of the property’s true
and lawful owner.

Facts: This case involves a parcel of land initially registered under the name of Roberto Aboitiz. It was
originally belonged to the late Mariano Seno. On July 31, 1973,Mariano executed a Deed of Absolute
Sale in favor of his son, Ciriaco Seno. On May 5,1978, Ciriaco sold the two lots to Victoria Po. The
parties executed a Deed of Absolute Sale. On July 15, 1982, Mariano died and was survived by his five
children. In 1990, Peter Po discovered that Ciriaco had executed a quitclaim dated August 7, 1989
renouncing his interest in favor of Roberto. In the quitclaim, Ciriaco stated that he was the declared owner
of Lot Nos. 2835 and 2807.The Spouses Po confronted Ciriaco. By way of remedy, Ciriaco and the
Spouses Po executed a Memorandum of Agreement dated June 28, 1990 in which Ciriaco agreed to pay
Peter the difference between the amount paid by the Spouses Po as consideration for the entire property
and the value of the land the Spouses Po were left with after the quitclaim. However, also in 1990, Lot
No. 2835 was also sold to Roberto. The Mariano Heirs, including Ciriaco, executed separate deeds of
absolute sale in favor of Roberto. Thereafter, Roberto immediately developed the lot as part of a
subdivision called North Town Homes.

On April 19, 1993, Roberto filed an application for original registration of Lot No. 2835, the trial court
granted the issuance of Original Certificate of Title No. 0-887 in the name of Roberto. The lot was
immediately subdivided with portions sold to Ernesto and Jose. On November 19, 1996, the Spouses Po
filed a complaint to recover the land and to declare nullity of title with damages. The Spouses Aboitiz
appealed to the Court of Appeals. The Court of Appeals partially affirmed the trial court decision,
declaring the Spouses Po as the rightful owner of the land. However, it ruled that the titles issued to
respondents Jose, Ernesto, and Isabel should be respected. The Court of Appeals discussed the
inapplicability of the rules on double sale and the doctrine of buyer in good faith since the land was not
yet registered when it was sold to the Spouses Po. However, it ruled in favor of the Spouses Po on the
premise that registered property may be reconveyed to the rightful or legal owner or to the one with a
better right if the title was wrongfully or erroneously registered in another person’s name. The Court of
Appeals held that the Mariano Heirs were no longer the owners of the lot at the time they sold it to
Roberto in 1990 because Mariano, during his lifetime, already sold this to Ciriaco in 1973.It found that
the Deed of Absolute Sale between Ciriaco and the Spouses Po was duly notarized and was thus
presumed regular on its face. Their Memorandum of Agreement did not cancel or rescind the Deed of
Absolute Sale but rather strengthened their claim that they entered into a contract of sale. In addition, it
likewise ruled that, contrary to the assertion of the Spouses Aboitiz, there was no showing that Ciriaco
merely held the property in trust for the Mariano Heirs. It held that the action of the Spouses Po had not
yet prescribed because their complaint in 1996 was within the 10-year prescriptive period as the title in
favor of the Spouses Aboitiz was issued in 1994. However, the Court of Appeals ruled that the certificates
of title of Jose, Ernesto, and Isabel were valid as they were innocent buyers in good faith.

Issue: Is the action of Spouses Po is barred by prescription even with the existence of fraud?

Held: The Spouses Po’s action has not prescribed. In all cases of registration procured by fraud, the
owner may pursue all his legal and equitable remedies against the parties to such fraud without prejudice,
however, to the rights of any innocent holder for value of a certificate of title. Article 1456 of the Civil
Code provides that a person acquiring a property through fraud becomes an implied trustee of the
property’s true and lawful owner. An implied trust is based on equity and is either (i) a constructive trust,
or (ii) a resulting trust. A resulting trust is created by implication of law and is presumed as intended by
the parties. A constructive trust is created by force of law such as when a title is registered in favor of a
person other than the true owner. Thus, it was held that when a party uses fraud or concealment to obtain
a certificate of title of property, a constructive trust is created in favor of the defrauded party. The action
for reconveyance of the title to the rightful owner prescribes in 10 years from the issuance of the title.

EMILIO CALMA VS. ATTY. JOSE M. LACHICA, JR.

G.R. No. 222031, November 22, 2017
TOPIC: Land, Titles and Deeds / Sales and Lease
PONENTE: TIJAM, J.

DOCTRINE: (1) Lands, Titles and Deeds: Every person dealing with registered land may safely rely on
the correctness of the certificate of title issued therefor and is in no way obliged to go beyond the
certificate to determine the condition of the property.
(2) Sales and Lease: Article 1544 states: If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession thereof in good faith, if
it should be movable property. Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription,
the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence
thereof, to the person who presents the oldest title, provided there is good faith.

FACTS: Respondent Atty. Jose M. Lachica, Jr. filed a complaint for Annulment of Void Deeds of Sale,
Annulment of Titles, Reconveyance, and Damages originally against Ricardo Tolentino (Ricardo) and
petitioner Emilio Calma, and later on, Pablo Tumale (Pablo) was impleaded as additional defendant in a
Second Amended Complaint. Respondent, in his complaint, alleged that he was the absolute owner and
actual physical possessor of the subject property, having acquired the same sometime in 1974 for
PhP15,000 through sale from Ceferino Tolentino (Ceferino) married to Victoria Calderon, who are
Ricardo's parents. Consequently, the subject property's title was delivered to respondent also in 1974.
Allegedly, he and his tenant/helper Oscar Justo (Oscar) has been in actual physical possession and
cultivation of the said land continuously since its acquisition up to present. Unfortunately, however, the
1974 Deed of Sale was allegedly lost. Hence, sometime in 1979, respondent and Ceferino agreed to
execute another deed of sale. Spouses Tolentino allegedly took advantage of the situation and demanded
an additional PhP15,000 from respondent to which the latter heeded. Thus, in the new Deed of Sale
executed on April 29, 1979, the consideration for the sale of the subject property was increased to
PhP30,000. After the notarization of the 1979 Deed of Sale on April 29, 1986, respondent requested
Spouses Tolentino to execute an Affidavit of Non-Tenancy and other documents required by the
Department of Agrarian Reform for the transfer of the title in respondent's name. Again, taking advantage
of the situation, Ceferino and his son Ricardo allegedly requested respondent to allow them to cultivate
the 5,000-square meter portion of the subject land. The father and son allegedly offered to process the
transfer of the title to respondent's name to persuade the latter to grant their request. According to the
respondent, because of the trust, confidence, love, and respect that his family had for Ceferino's family, he
entrusted the notarized Deed of Sale, TCT No. T-28380, and the other documents on hand for the transfer
of the title to his name and waited for the Tolentinos to make good on their promise. Respondent, through
Oscar, allegedly continued to possess the entire subject property. on May 25, 1981, before leaving Nueva
Ecija again and being assigned to a far-away province, respondent caused the annotation of a Notice of
Adverse Claim on TCT No. T-28380 to protect his claimed rights and interest in the subject property. Due
to respondent's employment and also because of an illness, he lost contact with the Tolentinos for a long
period of time. Sometime in March 2001, respondent returned to Cabanatuan City. Upon checking with
the Office of the Register of Deeds as regards to the processing of his title over the subject property, he
discovered that the same was transferred under the name of Ricardo, which had been later on transferred
to the petitioner upon Ricardo's sale thereof to the latter. In fine, TCT No. T-28380 under Ceferino's name
was cancelled and replaced by TCT No. T-68769 under Ricardo's name, which was then also cancelled
and replaced by TCT No. T-96168 now under petitioner's name. Respondent argued that the sale between
Ceferino and Ricardo was null and void for being executed with fraud, deceit, breach of trust, and also for
lack of lawful consideration. Respondent emphasized that not only was Ricardo in full knowledge of the
sale of the subject property to him by Ceferino, but also his adverse claim was evidently annotated in the
latter's title and carried over to Ricardo's title. Respondent also alleged that petitioner is an alien, a full-
blooded Chinese citizen, hence, not qualified to own lands in the Philippines, and is likewise a buyer in
bad faith. Respondent, thus, prayed for the annulment of the Deed of Sale between Ceferino and Ricardo,
as well as the Deed of Sale between Ricardo and petitioner. TCT No. T-68769 under Ricardo's name and
TCT No. T-96168 under petitioner's name were likewise sought to be annulled. Respondent further
prayed for the ejectment of Pablo from the 5,000-square meter portion of the subject property and the
reconveyance of the entire property to him. Exemplary damages, actual damages, litigation expenses and
attorney's fees were also prayed for. Defendants before the trial court averred in their Amended Answer
that petitioner is a buyer in good faith and for value, having acquired the subject property on July 10,
1998 through sale from Ricardo. They argued, among others, that petitioner, despite merely relying. on
the correctness of Ricardo's TCT, is duly protected by the law. It was stated in Ricardo's title that
respondent's adverse claim had already been cancelled more than four years before the sale or on April
26, 1994. Thus, defendants argued that petitioner had no notice of any defect in Ricardo's title before
purchase of the subject property.
RTC: Petitioner is an innocent purchaser for value and that he had already acquired his indefeasible
rights over the title; While it may be true that respondent's adverse claim was annotated in Ricardo's title,
the same title also shows that such adverse claim had already been cancelled more than four years before
he bought the property; Respondent's cause of action had already prescribed; Ricardo was, however, held
liable in favor of respondent as, according to the RTC, Ricardo cannot claim good faith because of the
existence of the adverse claim; Ruled that respondent has no recourse against Pablo, who is liable to
petitioner as the lawful owner. CA: Reversed RTC Ruling: Finding that both Ricardo and petitioner were
in bad faith in their respective acquisitions of the subject property. Hence, both their titles should be
annulled; While upholding the RTC's finding that the registration of title in Ricardo's name was null and
void as he had prior knowledge of the sale between his father and respondent, the CA added that because
of such bad faith, Ricardo's title must be annulled. Consequently, as Ricardo had no valid title to the
subject property, he had nothing to convey to petitioner; Concluded that the investigation conducted by
petitioner on the title of the subject property before purchase was not sufficient to consider him to be a
buyer in good faith. The CA noted petitioner's knowledge of the annotation of an adverse claim on
Ricardo's title and that his act of asking assurance from Ricardo, the Register of Deeds, and the bank
where the subject property was mortgaged prior to the sale to petitioner cannot be considered as diligent
efforts to protect his rights as a buyer; That petitioner should not have just relied on the face of the title as
the notice of adverse claim annotated on Ceferino's title carried over to Ricardo's title for a total of 13
years before its cancellation should have alerted him to conduct an actual inspection of the title. Applying
the rule on double sale under Article 1544 of the Civil Code, as his registration is deemed to be no
registration at all because of his bad faith, the buyer who took prior possession of the property in good
faith shall be preferred.

ISSUE: Who between the petitioner and the respondent has better right over the subject property?

HELD: Rule in favor of Petitioner. Sale from Ceferino to respondent. Both the RTC and the CA were
convinced that the sale of the subject property by Ceferino to respondent was valid and as such, the latter
has a valid claim of right over the same. This can be gleaned from the RTC's Decision ordering Ricardo
to pay respondent damages due to the former's bad faith in the acquisition of the subject property,
recognizing thus the latter's interest and right over the same. The CA upheld respondent's rights over the
subject property even more by ordering, among others, the cancellation of petitioner's title and the transfer
thereof to respondent's name. It must be noted that Ricardo did not question the liability imposed against
him by the RTC and the CA anymore as only petitioner came before Us in this petition. Hence, the
question as to respondent's right or the lack thereof in connection with Ricardo's liability cannot be dealt
with by this Court. Consequently, we are constrained to uphold respondent's claimed right over the
subject property.

Sale from Ricardo to petitioner. Unlike the sale from Ceferino to respondent, the Deed of Sale in
petitioner's favor was registered with the Registry of Deeds, giving rise to the issuance of a new
certificate of title in the name of the petitioner. However, the CA ruled that no right was conferred upon
the petitioner by such sale primarily due to his predecessor's bad faith in the acquisition of the subject
property. The CA also found that petitioner, like his predecessor, cannot be considered as a buyer in good
faith. These findings are grounded on the fact that respondent's Notice of Adverse Claim appears in
Ceferino's title and carried over to Ricardo's title, which according to the CA is sufficient notice to both
Ricardo and the petitioner of respondent's interests over the subject property. The CA opined that such
adverse claim should have alerted petitioner to conduct an actual inspection of the property, otherwise, he
cannot be considered to be a buyer in good faith. We do not agree. The Torrens system was adopted to
"obviate possible conflicts of title by giving the public the right to rely upon the face of the Torrens
certificate and to dispense, as a rule, with the necessity of inquiring further." From this sprung the
doctrinal rule that every person dealing with registered land may safely rely on the correctness of the
certificate of title issued therefor and is in no way obliged to go beyond the certificate to determine the
condition of the property. To be sure, this Court is not unaware of the recognized exceptions to this rule,
to wit: (1.) when the party has actual knowledge of facts and circumstances that would impel a reasonably
cautious man to make further inquiry; (2.) when the buyer has knowledge of a defect or the lack of title in
his vendor; or (3.) when the buyer/mortgagee is a bank or an institution of similar nature as they are
enjoined to exert a. higher degree of diligence, care, and prudence than individuals in handling real estate
transactions. Complementing this doctrinal rule is the concept of an innocent purchaser for value, which
refers to someone who buys the property of another without notice that some other person has a right to or
interest in it, and who pays in full and fair the price at the time of the purchase or without receiving any
notice of another person's claim. The following facts are clear and undisputed: (1) petitioner acquired the
subject property through sale from Ricardo as evidenced by a Deed of Absolute Sale dated July 10, 1998,
duly notarized on even date; (2) said sale was registered in the Registry of Deeds, Cabanatuan City on
December 22, 1998 as evidenced by TCT No. T-96168; (3) petitioner made inquiries with the Register of
Deeds and the bank where the subject property was mortgaged by Ricardo as regards the authenticity and
the status of Ricardo's title before proceeding with the purchase thereof; and (4) petitioner was able to
ascertain that Ricardo's title was clean and free from any lien and encumbrance as the said title, together
with his inquiries, showed that the only annotations in the said title were respondent's 1981 adverse claim
and its cancellation in 1994. From the foregoing factual backdrop, there was no indicia that could have
aroused questions in the petitioner's mind regarding the title of the subject property. Hence, We do not
find any cogent reason not to apply the general rule allowing the petitioner to rely on the face of the title.
For one, it is clearly manifest in the records that while respondent's adverse claim appears in Ricardo's
title, it also appears therein that the said adverse claim had already been cancelled on April 26, 1994 or
more than four years before petitioner puchased the subject property. As correctly found by the RTC,
thus, Ricardo's title is already clean on its face, way before petitioner puchased the same. At any rate,
contrary to the CA's ruling, petitioner was never remiss in his duty of ensuring that the property that he
was going to purchase had a clean title. Despite Ricardo's title being clean on its face, petitioner still
conducted an investigation of his own by proceeding to the Register of Deeds, as well as to the bank
where said title was mortgaged, to check on the authenticity and the status of the title. Thus, petitioner
was proven to be in good faith when he dealt with Ricardo and relied on the title presented and
authenticated to him by the Register of Deeds and confirmed by the mortgagee-bank. Respondent, on the
other hand, failed to proffer evidence to prove otherwise. As the fact that petitioner is an innocent
purchaser for value had been established, the validity and efficacy of the registration, as well as the
cancellation, of respondent's adverse claim is immaterial in this case. What matters is that the petitioner
had no knowledge of any defect in the title of the property that he was going to purchase and that the
same was clean and free of any lien and encumbrance on its face by virtue of the entry on the cancellation
of adverse claim therein. Thus, petitioner may safely rely on the correctness of the entries in the title.
Even the defect in Ricardo's title due to his bad faith in the acquisition of the subject property, as found by
both the RTC and the CA, should not affect petitioner's rights as an innocent purchaser for value. ON
SALES AND LEASE: Petitioner has a better right of ownership over the subject property. Applying now
the rule on double sale under Article 1544 of the Civil Code, petitioner's right as an innocent purchaser
for value who was able to register his acquisition of the subject property should prevail over the
unregistered sale of the same to the respondent. Article 1544 states: If the same thing should have been
sold to different vendees, the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property. Should it be immovable property, the
ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of
Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided
there is good faith. The Decision of the Court of Appeals is REVERSED AND SET ASIDE.

SPOUSES MANLAN VS SPOUSES BELTRAN

G.R. No. 222530, November 27, 2019
Topic: Sales; Elements of Double Sale

Doctrine: As ruled in Cheng vs Genato, the requisites that must be met in order for the rule on double
sale under article 1544 to apply are as follows: Two or more sales transactions in issue must pertain to
exactly the same subject matter and must be valid sales transaction; The two or more buyers at odds over
rightful ownership of the subject matter must each represent conflicting interests; The two or more buyers
at odds over rightful ownership of the subject matter must each have bought from the very same seller.

FACTS: This case involves two conflicting claims of two sets of buyer over a certain parcel of land.
Specifically, Lot-1366-E was originally co- owned by Manuel,Serbio,Anfiano, Engracia, Carmela,
Teresito, Corazon, Segunfina and Leonardo, all surnamed “Orbetas.’ On May 5, 1983 Petitioner Spouses
bought a 500 sq.m. portion from Manuel Orbeta. Then, they were allowed to occupy the same after
paying P15,000 out of P30,000 contract price.On 1986, the Orbetas sold 700 sq.m to Spouses
Respondents and on 1990, they sold the remaining 500sq.m., which were then occupied by petitioners, as
well. Respondents demanded petitioners to vacate the lot but the latter refused. Hence, respondents filed
an action to quite their title and the recovery of possession over the 500 sq.m. RTC ruled in favour of the
Beltrans, stating that they are entitled to the possession of the 500 sq.m. but nevertheless declaring the
Manlans entitled to reimbursements for all the improvements introduced therein, they being builders or
possessors in good faith. CA affirmed the aforementioned ;hence, this case.

ISSUE: Will rule on double sales apply?

HELD: No, the rule on double sales will not apply because there are two sets of vendor here and in order
for the rule to apply, there must one vendor and two or more sets of vendees. Article 1544 will not apply
because as ruled in Cheng vs Genato, the requisites that must be met are as follows: Two or more sales
transactions in issue must pertain to exactly the same subject matter and must be valid sales transaction;
The two or more buyers at odds over rightful ownership of the subject matter must each represent
conflicting interests; The two or more buyers at odds over rightful ownership of the subject matter must
each have bought from the very same seller. In this case, it appears that Manuel Orbeta was not
authorized by his co owners to sell the property. The second sale on the other hand was made by all of the
co-owners. There are two sellers and thus the rule on double sale is not applicable.

ANGELINE A. BAYAN AND JAIME A. BAYAN V. CELIA A. BAYAN, EDWARD DY, MA.
LUISA B. TANGHAL, AND THE REGISTER OF DEEDS OF QUEZON CITY
Topic: Mortgage Law
Ponente: J.C. Reyes, JR., J.

Doctrine: 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.
Facts: Petitioners and respondent Celia are the co-owners of three parcels of residential and commercial
land located in Cubao, Quezon City. In 2005, Celia, acting for herself and as alleged Attorney-in-Fact of
Angelina and Jaime, was able to obtain loans on three different occasions from private co-respondents,
and as security, through a fraudulently executed an SPA of Petitioners, mortgaged the three parcels of
land. Petitioners insisted that Celia’s transactions were without their knowledge and consent.

Issue: Can petitioners still redeem the lost parcels of land fraudulently mortgaged by Celia?

Held: No. Petitioners' right of redemption accrued the moment they have written notice of the foreclosure
sale. In legal pre-emption or redemption under the Civil Code of the Philippines, written notice of the sale
to all possible redemptioners is indispensable. Article 1623 of the Civil Code provides: “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.” Keeping in mind the rationale behind the written notice of sale by the vendor/s (co-
owner/mortgagor) to the redemptioners, the Court in the case of Etcuban v. Court of Appeals has clarified
that even if it was not sent by the vendor as long as the redemptioners were notified in writing, the same
is sufficient for their right to redeem to accrue. Justifying its ruling, the Court cited an instance where a
vendor can delay or even effectively prevent the meaningful exercise of the right of redemption by not
immediately notifying the co-owner of the sale, thereby causing serious prejudice to a redemptioner's
right of legal redemption. To avoid this, the Court ruled that any written notice of sale (even if not sent by
the vendor) is sufficient in order for the right of legal redemption of a co-owner to accrue. In the instant
case, the fact that petitioners alleged in their complaint about the foreclosure sale of the mortgage
conclusively shows that petitioners were notified of the sale and were furnished said documents and is
tantamount to an actual knowledge of such fact of sale. No other notice is needed because the Sheriff's
Certificate of Sale itself confirms the fact of sale, its perfection and its due execution. Upon notice of the
foreclosure sale or receipt of any written notice of the fact of sale, petitioners' right of legal redemption
had already accrued such that they should have included said issue at the very onset in their complaint.

BAREZ VS LINSAG
GR. NO. 201211. Nov 21, 2018
Topic: Equitable Mortgage

Doctrine: Paragraph 2 of Article 1602 expressly provides that when a vendor remained in possession of
the subject lot even after the alleged sale, the presumption of equitable mortgage arises. This is because
retention of possession over the land by the vendor is inconsistent with the acquisition of ownership under
a true sale.

Facts: the subject land was registered in the name of the spouses "Davao (Moro)" and "Darangen (Mora)"
However, on July 22, 1957, spouses Davao and Darangen mortgaged the subject lot to the Philippine
National Bank (PNB) to secure a loan worth P600.00. the entire obligation to PNB worth P676.45 was
paid by spouses Barez, in the name of spouses Davao and Darangen. Considering that the subject land
was previously sold by Davao to a certain Isabel Odal (Isabel), a Deed of Resale between Isabel and
Davao was executed on the same date for a sum of P900.00, which was also financed by spouses Barez.
Afterwards, Davao sold the subject land to Yolanda for P3,300.00 evidenced by a Deed of Sale of Land.
Notably, the title of the subject land was transferred and registered in the name of Yolanda on the same
day. Several years later, Yolanda donated the subject lot to her daughter, Marie. Linsag sought the
declaration of the deed of sale as null or an equitable mortage. The respondents claim that the real
intention of their parents in executing the Deed of Sale was not to sell but only to transfer the mortgage of
the subject land from PNB to spouses Barez for a period of ten (10) years.

Issue: Was the contract entered into an absolute sale or equitable mortgage?

Held: Equitable mortgage. Under Article 1604 of the Civil Code, a transaction purporting to be an
absolute sale shall be deemed an equitable mortgage if any of the circumstances in Article 1602 of the
Civil Code is present. Article 1602 of the Civil Code provides that the transaction is 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. Paragraphs 2 and 6 of Article 1602 are
present because (1) the vendor remained in possession of the property as a lessee after the purported sale,
and (2) based on the circumstances surrounding the Deed of Sale, it can fairly be inferred that the parties'
real intention was for the transaction to secure the payment of a debt.