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11,2010 Facts This case is about the legal consequences when a buyer in a contract to sell on installment fails to make the next payments that he promised. On August 12, 2002 the Atienzas and respondent Domingo P. Espidol entered into a contract called Kasunduan sa Pagbibili ng Lupa na may Paunang-Bayad (contract to sell land with a down payment) covering the property. They agreed on a price, payable in three instalments. When the Atienzas demanded payment of the second installment of P1,750,000.00 in December 2002, however, respondent Espidol could not pay it. Claiming that Espidol breached his obligation, on February 21, 2003 the Atienzas filed a complaint for the annulment of their agreement with damages before the Regional Trial Court (RTC) of Cabanatuan City in a Civil Case. Issue Whether or not the Atienzas were entitled to the cancellation of the contract to sell they entered into with respondent Espidol on the ground of the latters failure to pay the second installment when it fell due Held The Court declares the Kasunduan sa Pagbibili ng Lupa na may Paunang-Bayad between petitioner Heirs of Paulino Atienza and respondent Domingo P. Espidol dated August 12, 2002 cancelled and the Heirs obligation under it non-existent. Regarding the right to cancel the contract for non-payment of an installment, there is need to initially determine if what the parties had was a contract of sale or a contract to sell. In a contract of sale, the title to the property passes to the buyer upon the delivery of the thing sold. In a contract to sell, on the other hand, the ownership is, by agreement, retained by the seller and is not to pass to the vendee until full payment of the purchase price. In the first place, since Espidol failed to pay the installment on a day certain fixed in their agreement, the Atienzas can afterwards validly cancel and ignore the contract to sell because their obligation to sell under it did not arise. Since the suspensive condition did not arise, the parties stood as if the conditional obligation had never existed. G.R. No. 187288 August 9, 2010 SPOUSES BRAULIO NAVARRO AND CESARIA SINDAO, Petitioners, vs.PERLA RICO GO, Respondent. FACTS: By Deed of Sale of Real Property dated May 23, 1937, Emilia Samson conveyed to JosefaParras, mother of Perla Rico Go (respondent), a 405 square meter parcel of land situated in Domalandan West, Lingayen, Pangasinan. On December 1971, Free Patent No. 51563 (OCT No. P-14822) was issued to the Heirs of Emilias brother, Lorenzo Samson, covering the land. After Josefa purchased the land in 1937, she allowed one Rufino Palma, nephew of petitioner Cesaria, to stay there. In 1984, Josefa donated the land to respondent who allowed Palma to remain on the land until 1989. Via two documents entitled "Paknaan," Palma recognized respondents ownership of the land. Photographs of the execution of the documents were in fact taken. When Palma vacated the land, respondent constructed fences made of galvanized roofing sheets and wooden posts on which was posted a "Private Property, No Trespass" sign. On April 27, 1990, the Samson heirs transferred their rights to the land by a Deed of Extra-Judicial Partition with Sale to Spouses Braulio Navarro and CesariaSindao (petitioners). On May 2001, Transfer Certificate of Title No. 254853 was issued in petitioners name. Petitioner Braulio thereupon destroyed the fences of, and cut all the trees in the land, drawing respondent to file a complaint for annulment of documents Deed of Extra-Judicial Partition with Sale, Free Patent, Original Certificate of Title, Tax Declarations, Declaration of Ownership of Real Property and Damages against petitioners. Petitioner Braulio passed away on March 22, 2002 and was substituted in the action by his heirs. Petitioners invoked good faith in purchasing the land from the Samson heirs in 1990, no encumbrances on the title to the land on file at the Register of Deeds having been annotated. ISSUE: Whether petitioners were in good faith when they bought the property RULING:

No. A person is considered an innocent purchaser in good faith when he buys the property of another, without notice that some other person has a right or an interest in such property, and pays a full price for the same at the time of such purchase, or before he has notice of the claims or interest of some other person in the property. Palma, a relative of petitioner Cesaria, acknowledged via two documents having been allowed by Josefa, respondents mother, to occupy the land. His testimony, therefore, that he sought the permission of the Samson heirs, and not from Josefa, must give way to documentary evidence. Petitioners live in the vicinity of the land which was fenced and planted to fruit bearing trees. As such, they were put on notice that the land was possessed by someone. Where the land subject of sale is in possession of a person other than the vendor, prudence dictates that the vendee should go beyond the certificate of title. Absent such investigation, good faith cannot be presumed. G.R. No. 143573 January 30, 2009

ADORACION ROSALES RUFLOE, ALFREDO RUFLOE and RODRIGO RUFLOE, Petitioners, vs.LEONARDA BURGOS, ANITA BURGOS, ANGELITO BURGOS, AMY BURGOS, ELVIRA DELOS REYES and JULIAN C. TUBIG, Respondents. Petitioner Adoracion Rufloe is the wife of Angel Rufloe, now deceased, while co-petitioners Alfredo and Rodrigo are their children. During the marriage of Adoracion and Angel, they acquired a 371-square meter parcel of land located at Barangay Bagbagan, Muntinlupa, and covered by TCT No. 406851 which is the subject of the present controversy. Sometime in 1978, respondent Elvira Delos Reyes forged the signatures of Adoracion and Angel in a Deed of Sale dated September 8, 1978 to make it appear that the disputed property was sold to her by the spouses Rufloe. On the basis of the said deed of sale, Delos Reyes succeeded in obtaining a title in her name, TCT No. S-74933. Thus, in November 1979, the Rufloes filed a complaint for damages against Delos Reyes alleging that the Deed of Sale was falsified as the signatures appearing thereon were forged because Angel Rufloe died in 1974, which was four (4) years before the alleged sale in favor of Delos Reyes. During the pendency of the case, Delos Reyes sold the subject property to respondent siblings Anita, Angelina, Angelito and Amy (Burgos siblings). A new title, TCT No. 135860, was then issued in their names. The Burgos siblings, in turn, sold the same property to their aunt, Leonarda Burgos. However, the sale in favor of Leonarda was not registered. Thus, no title was issued in her name. The subject property remained in the name of the Burgos siblings who also continued paying the real estate taxes thereon. The RTC rendered its decision declaring that the Deed of Sale in favor of Delos Reyes was falsified as the signatures of the spouses Rufloe had been forged. The trial court ruled that Delos Reyes did not acquire ownership over the subject property. Such was the state of things when the Rufloes filed their complaint for Declaration of Nullity of Contract and Cancellation of Transfer Certificate of Titles against respondents Leonarda and the Burgos siblings, and Delos Reyes. The trial court rendered a decision declaring that Leonarda and the Burgos siblings were not innocent purchasers for value and did not have a better right to the property in question than the true and legal owners, the Rufloes. The trial court also held that the subsequent conveyance of the disputed property to Leonarda by the Burgos siblings was simulated to make it appear that Leonarda was a buyer in good faith. The CA reversed and set aside that of the trial court, declaring in the process that respondents were purchasers in good faith and for value. Thus, this petition. ISSUES: (1) whether the sale of the subject property by Delos Reyes to the Burgos siblings and the subsequent sale by the siblings to Leonarda were valid and binding; and (2) whether respondents were innocent purchasers in good faith and for value despite the forged deed of sale of their transferor Delos Reyes.

RULLING: In the first issue, in declaring that the signatures of the alleged vendors, Angel and Adoracion Rufloe, had been forged the SC upheld the findings of the trial court that (1) the sale was not registered; (2) despite the sale of property to Leonarda, the sellers continued paying taxes on the property from the time they acquired it from Elvira up to the present or a period of ten years; (3) Leonarda never exercised the attributes of ownership; and (4) this simulated sale is the handiwork of Amado who apparently acted advisedly to make it appear that his sister Leonarda as the second transferee of the property is an innocent purchaser for value. It is undisputed that the forged deed of sale was null and void and conveyed no title. It is a well-settled principle that no one can give what one does not have, nemo dat quod non habet. One can sell only what one owns or is authorized to sell, and the buyer can acquire no more right than what the seller can transfer legally. Due to the forged deed of sale, Delos Reyes acquired no right over the subject property which she could convey to the Burgos siblings. All the transactions subsequent to the falsified sale between the spouses Rufloe and Delos Reyes are likewise void, including the sale made by the Burgos siblings to their aunt, Leonarda. In the second issue, as a general rule, every person dealing with registered land, as in this case, may safely rely on the correctness of the certificate of title issued therefor and will in no way oblige him to go beyond the certificate to determine the condition of the property. However, this rule admits of an unchallenged exception: a person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with the need of inquiring further except 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 presence of anything which excites or arouses suspicion should then prompt the vendee to look beyond the certificate and investigate the title of the vendor appearing on the face of said certificate. One who falls within the exception can neither be denominated an innocent purchaser for value nor a purchaser in good faith and, hence, does not merit the protection of the law. The evidence shows that the Rufloes caused a notice of adverse claim to be annotated on the title of Delos Reyes. Despite the notice of adverse claim, the Burgos siblings still purchased the property in question while there being already an action for damages and estafa, filed by the Rufloes against Delos Reyes pending the court. This circumstance should have alerted the Burgos siblings as to the validity of Delos Reyes title and her authority and legal right to sell the property. Equally significant is the fact that Delos Reyes was not in possession of the subject property when she sold the same to the Burgos siblings. It was Amado Burgos who bought the property for his children, the Burgos siblings. Amado was not personally acquainted with Delos Reyes prior to the sale because he bought the property through a real estate broker, a certain Jose Anias, and not from Delos Reyes herself. There was no showing that Amado or any of the Burgos siblings exerted any effort to personally verify with the Register of Deeds if Delos Reyes certificate of title was clean and authentic. In the same vein, Leonarda cannot be categorized as a purchaser in good faith. Since it was the Rufloes who continued to have actual possession of the property, Leonarda should have investigated the nature of their possession. We cannot ascribe good faith to those who have not shown any diligence in protecting their rights. Respondents had knowledge of facts that should have led them to inquire and investigate in order to acquaint themselves with possible defects in the title of the seller of the property. However, they failed to do so. Thus, Leonarda, as well as the Burgos siblings, cannot take cover under the protection the law accords to purchasers in good faith and for value. They cannot claim valid title to the property. Moreover, the defense of indefeasibility of a Torrens title does not extend to a transferee who takes it with notice of a flaw in the title of his transferor. To be effective, the inscription in the registry must have been made in good faith. A holder in bad faith of a certificate of title is not entitled to the protection of the law, for the law cannot be used as a shield for fraud. Bacungan vs. CA Facts:

Respondents Napoleon and Victoria Velo instituted an action for reconveyance with damages against petitioners Alexander and Jean Jimeno Bacungan before the RTC of Rosales, Pangasinan. In the complaint, docketed as Civil Case No. 1085-R, respondents alleged that they were the registered owners of 18 parcels of land situated in Rosales, Pangasinan and embraced in Transfer Certificate of Title (TCT) Nos. 34998, 36022, 35158, 36017, 18128, 26761, 36020, 28387, 35585, 25739, 36023, 40059, 40055, 40060, 40057, 40056, 36967 and 35268. Respondents claimed that sometime in February of 1993, they had experienced business reversals and financial difficulties and had sought assistance from petitioners in securing a loan. Petitioners allegedly proposed that they would obtain the loan from the bank provided that respondents secure the transfer of the titles to petitioners that would be used as security for the loan. Respondents agreed, executed the corresponding deeds of sale and caused the cancellation and issuance of new TCTs over the properties in favor of petitioners. However, respondents claimed that after petitioners had obtained the new titles, they never applied for a loan with the bank but had secretly negotiated for the sale of the properties to third parties. In their answer, petitioners asserted that respondents offered to sell to them 23 parcels of land, 18 of which were used as collateral for the loan respondents had obtained from Traders Royal Bank. Petitioners claimed to have bought 22 parcels of land and executed the corresponding deeds of sale on 26 February 1993 and 10 March 1993. They also allegedly paid in full respondents' obligation with said bank but only 18 certificates of title released by the bank were delivered to petitioners. Petitioners further maintained that out of their gratuitousness, they returned one of the deeds of sale to respondents and considered the sale as cancelled. Petitioners averred that the amounts they paid to respondents, as well as their payments to the bank, were more than enough as consideration of the 23 contracts. After trial on the merits, the RTC rendered a decision on 20 April 1999, dismissing the complaint for lack of merit. The RTC gave evidentiary weight on the notarized deeds of sale, the presumed validity and due execution of which, according to the RTC, were not overcome by the uncorroborated testimony of respondent Victoria Velo. The RTC held that in any case, respondents admitted to have voluntarily consented to the simulation of the contracts, thus, the principle of in pari delicto must prevail and both parties were at fault and should be left at where the law finds them. Respondents elevated the matter to the CA via a petition for review, arguing that the contracts between respondents and petitioners were simulated. On 21 March 2005, the CA rendered the assailed decision, reversing the RTC's judgment. Issue: WON the sale was simulated because of the gross inadequacy of the prices and the failure by respondents to receive the purchase price. Held: Gross inadequacy of price by itself will not result in a void contract. Gross inadequacy of price does not even affect the validity of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or some other contract. Inadequacy of cause will not invalidate a contract unless there has been fraud, mistake or undue influence. That respondents did not receive the purchase price is not entirely correct. As already discussed above, the consideration for the transaction was to secure the payment of respondents' loan to petitioners. Also, the CA's conclusion that petitioner Alexander Bacungan admitted that the sale was simulated is not supported by the records of the case. Petitioners merely admitted that previous to the execution of the deeds of sale, respondents had borrowed other sums of money from them. All told, while the deeds of sale do not reflect the true intention of the parties, their real agreement must nonetheless be recognized and enforced. While neither party claimed that the real agreement was an equitable mortgage, the factual circumstances of the case nudge the Court to declare the real agreement as such and enforce the rights and liabilities of the parties accordingly. This being the case, the proper remedy availed by either party was to institute an action for the reformation of the deeds of sale in order to reflect the true intention of the parties. However, instead of dismissing the complaint altogether, the just and expeditious manner is to settle once and for all the rights and obligations of the parties under the equitable mortgage. It has been established that petitioners advanced the sum of P369,000.00 to respondents that prompted the latter to transfer the properties to petitioners. Thus, before the respondents can recover the said amount, respondents must first return the amount of P369,000.00 to petitioners. In Lustan v. Court Appeals, where the Court established the reciprocal

obligations of the parties under an equitable mortgage, the Court ordered the reconveyance of the property to the rightful owner therein upon the payment of the loan within 90 days from the finality of this decision. WHEREFORE, the petition for review on certiorari is PARTLY GRANTED and the decision and resolution of the Court of Appeals in CA-G.R. CV No. 64370 are AFFIRMED with the following MODIFICATIONS. MARY ANN DEHEZA-INAMARGA VS CELENIA C. ALANO, BERNALDA A. PAROHINOG, GODOFREDO ALANO, AVELINO ALANO, ESTRELLA ALANO, FORTUNATA ALANO,NANY ALANO, SALLY ALANO, ADIONITO ALANO, and SUFRONIA ALANO FACTS: Tomas Alano andCeleniaAlano, owned two parcels of.He mortgaged the properties in favor of Renato Gept.. In 1976, Gepty demanded that Tomas pay the loan. Tomas, however, did not have money at that time to redeem his properties so he sought help from his niece, petitioner Mary Ann Deheza-Inamarga. Petitioner agreed to pay the loan while the spouses, in turn, mortgaged said properties to her. Petitioner kept in her possession OCT Nos. P-761 and P-762 and asked the spouses to sign blank pieces of paper which petitioner said will be converted into receipts evidencing their indebtedness to her. After Tomas had passed away, respondents Celenia and her children went to petitioner to redeem the property. Petitioner, however, told them that she had mortgaged the property to the Rural Bank of Libacao. Respondents learned that the TCTs in petitioners favor were issued by virtue of a Deed of Sale purportedly executed by the Spouses Alano in her favor. Respondents filed a complaint for the declaration of nullity of document, reconveyance and damages against petitioner and the Rural Bank of Libacao. Respondents contended that the deed of sale is null and void because the signatures of the Spouses Alano were forged and even if they were the signatures of the spouses, they were affixed on blank sheets of paper which were not intended to be a deed of sale.

ISSUE: Whether the transaction between petitioner and the Spouses Alano is one of sale or equitable mortgage

RULING: The Spouses Alano who caused the execution of the deed of sale in question and that the document was signed by them in the presence of the notary public. She likewise argues that after the sale, she took possession of the land; and she adds that the consideration for the property was adequate because the property was not productive.] On the other hand, respondents aver that the transaction between the Spouses Alano and petitioner is not one of sale but one of equitable mortgage. Respondents stress that they continued to be in possession of the property even after the alleged execution of the Deed of Sale and they claim that the P7,000 consideration is grossly inadequate for the market value of the property. Respondents further stated that they paid P500 interest annually for the loan. An equitable mortgage is one which, although lacking in some formality, or form, or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law Articles 1602 and 1604 of the Civil Code of the Philippines state: ART. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) (2)

When the price of the sale with right to repurchase is unusually inadequate; 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) (5) When the purchaser retains for himself a part of the purchase price; When the vendor binds himself to pay the taxes on the thing sold;

(6) In any 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 case, 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. ART. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. More than one of the circumstances enumerated in Article 1602 are present, to wit: the inadequacy of the selling price of the properties in relation to its true value; the vendors (Spouses Alano) remained in possession as lessee or otherwise; respondents paid the real property taxes; and the spouses secured the payment of the principal debt owed to petitioner with said properties. On this score, we are in agreement that the parties intended an equitable mortgage and not a contract of sale.

Heirs of Arturo Reyes versus Socco-Beltran Facts: The subject land was a part of a larger parcel of land partitioned into three extra-judicially by the heirs of Constancia Socco sometime in 1965. Respondent applied before the DAR the purchase of the subject land stating that the land was adjudicated in her favor. However, the Heirs of Reyes protested against the application claiming that the subject land was owned by their predecessor-in-interest evidenced by a conditional Contract to Sell executed by the brother of the respondent and stated therein that he was to inherit the subject parcel of land. The director of DAR denied the application on the ground that she was not the actual tiller of the land and abandoned the land for a period of 40 years. On appeal to the secretary of DAR, it was reversed and found that petitioners predecessor-in-interest was not the actual occupant of the said land. Petitioners sought remedy from the Office of the President by appealing but the Office of the President rendered its Decision denying petitioners appeal and affirming the DAR Secretarys Decision. Consequently, petitioners filed an appeal before the Court of Appeals, however, the Court of Appeals affirmed the decision of the Office of the President. Issue: Whether or not petitioners have a better right to the subject property over the respondent Held: Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. It was unmistakably stated in the Contract and made clear to both parties thereto that the vendor, Miguel R. Socco, was not yet the owner of the subject property and was merely expecting to inherit the same as his share as a co-heir of Constancias estate. It was also declared in the Contract itself that Miguel R. Soccos conveyance of the subject to the buyer, Arturo Reyes, was a conditional sale. It is, therefore, apparent that the sale of the subject property in favor of Arturo Reyes was conditioned upon the event that Miguel Socco would actually inherit and become the owner of the said property. Absent such occurrence, Miguel R. Socco never acquired ownership of the subject property which he could validly transfer to Arturo Reyes. Under Article 1459 of the Civil Code on contracts of sale, The thing must be licit and the vendor must have a right to transfer ownership thereof at the time it is delivered. The law specifically requires that the vendor must have ownership of the property at the time it is delivered.It was explicit in the Contract itself that, at the time it was executed,

Miguel R. Socco was not yet the owner of the property and was only expecting to inherit it. Hence, there was no valid sale from which ownership of the subject property could have transferred from Miguel Socco to Arturo Reyes. Without acquiring ownership of the subject property, Arturo Reyes also could not have conveyed the same to his heirs, herein petitioners. YANEZA vs. Court of Appeals G.R. No. 149322 November 28, 2008 Facts: Yaneza is the owner of a parcel of land in San Juan, Baras, Rizal. De Jesus is the owner of a lot which is adjacent to Yanezas lot. De Jesus lot has no access to the nearest road except through a road which they constructed over a portion of Yanezas lot. Yaneza informed De Jesus that he is the owner of Lot 2730-A and that he does not agree with the use of the portion of his lot as an access road because it will affect the configuration of his property. As an option, petitioner offered to sell to the respondents the entire property. De Jesus did not agree, so Yaneza agreed to a perpetual easement of right of way (4 meters wide) and stating that he will prepare the necessary document to facilitate the transaction for a consideration of P20K. De Jesus found out that it covered only 175 sq m, not 280 sq m. There was renegotiation and, for an additional consideration of P40K, Yaneza agreed to sell the entire 280 sq m. De Jesus constructed a road that is wider than that which was provided in the contract. He constructed a road three meters wider than what was agreed upon in the deed of sale Yaneza initially allowed them peaceful possession and use of the area even when he started constructing his house adjacent to the access road. Later, a serious misunderstanding took place between Yaneza and respondents caretaker, Benjamin Manzano, because Manzano refused to allow Yaneza to tap water and electricity from the respondents property. Petitioner allegedly retaliated and constructed a fence along the access road, which could not allow trucks to pass through. Yaneza is now praying for the rescission of the contract for easement of right of way. Issue: WON Yaneza may validly rescind the contract of for easement of right of way? NO Held: The construction of the road beyond the stipulated area does not constitute a breach of contract. Breach of contract implies a failure, without legal excuse, to perform any promise or undertaking that forms part of the contract. Although the contract specifically stated the area covered by the sale, it did not contain a promise by the respondents that they will only occupy such area. Albeit apparently wrong, petitioners cause of action should not have been based on the contract of sale. Rescission of a contract will not be permitted for a slight or casual breach but only for a substantial and fundamental breach as would defeat the very object of the parties in making the agreement. It must be a breach of faith that destroys or violates the reciprocity between the parties. Besides, the original agreement had already been superseded or novated by a new contract, an oral one, covering an increased area of 280 sq m. An additional P40K was paid to the Yaneza which covered the entire 280-sq m area where the access road was laid. The new contract of sale between the parties is valid despite it not being evidenced by any writing. Fort Bonifacio Development Corporationvs. Yllas Lending CorporationG.R. no. 158997 ; October 6, 2008 Facts:

FBDC and Tirreno, Inc. entered into a lease contract over a unit at the Entertainment Center in Taguig. Under Section 20, the parties stipulated that the lessor shall have the right to terminate the contract immediately upon written notice without any need for judicial action or declaration should the lessee fail to fully pay on time any rental, utility and service charge or other financial obligation. Further, Section 22 provides that upon termination or expiration of the lease contract, the lessor shall have the right to retain possession of the properties of the lessee which was used or situated in the leased premises and that the lessor is authorized to offset the prevailing value against any unpaid rentals, charges and/or damages.

On July 2000, Tirreno was already in default in the amount of P5,027,337.91. FBDC then sent a written notice of terminated dated on September 19, 2000 due to Tirrenos failure to settle its outstanding obligation. On September 29 2000, FBDC entered and occupied the leased premises and also appropriated the equipment and properties left by TIrreno pursuant to section 22 of the contract of lease as partial payment of Tirrenos outstanding obligations.

On September 27 2001, respondents filed a complaint for Foreclosure of Chattel Mortgage with replevin alleging that they lent a total of P1.5 million to Tirreno.

On March 4 2002, Yllas Lending Corporation caused the sheriff of Branch 59 to serve an alias writ of seizure against FBDC wherein the latter served on the sheriff an affidavit of title and third party claim. The sheriff delivered the seized properties to respondents. FBDC then questioned the propriety of the seizure and delivery of the properties to respondents without and indemnity bond. FBDC argues that when respondents and Tirreno entered into the chattel mortgage agreement on November 9 2000, Tirreno no longer owned the mortgaged properties as FBDC has already enforced its liens on September 29 2000. Issues: Whether or not Section 22 of the Lease contract is void for being a pledge and a pactum commissorium Held: No, Article 2085 and 2093 of the New Civil Code provides the essential requisites to a contract of pledge: (1) the pledge is constituted to secure the fulfillment of a principal obligation; (2) the pledgor is the absolute owner of the thing pledged; (3) the persons constituting the pledge have the free disposal of their property or have legal authorization for the purpose; and (4) the thing pledged is placed in the possession of the creditor, or of a third person by common agreement. Article 2088 of the Civil Code prohibits the creditor from appropriating or disposing the things pledged, and any contrary stipulation is void.

Section 22 provides: Lien on the Properties of the Lessee Upon the termination of this Contract or the expiration of the Lease Period without the rentals, charges and/or damages, if any, being fully paid or settled, the LESSOR shall have the right to retain possession of the properties of the LESSEE used or situated in the Leased Premises and the LESSEE hereby authorizes the LESSOR to offset the prevailing value thereof as appraised by the LESSOR against any unpaid rentals, charges and/or damages. If the LESSOR does not want to use said properties, it may instead sell the same to third parties and apply the proceeds thereof against any unpaid rentals, charges and/or damages. The Supreme Court held that Section 22 gives FBDC a means to collect payment from Tirreno in case of termination of the lease contract or the expiration of the lease period and there are unpaid rentals, charges, or

damages. Section 22 is not a pactum commissorium because it lacks the fourt requisite, that the thing pledged is placed in the possession of the creditor. Salinas V. Faustino Respondent Bienvenido S. Faustino by a Deed of Absolute Sale dated June 27, 1962, purchased from his several co-heirs, including his first cousins Benjamin Salinas and herein petitioner Dolores Salinas, their respective shares to a parcel of land in the name of their grandmother Carmen Labitan, located in Subic, Zambales. On March 15, 1982, respondent Faustino, joined by his wife, filed before the then Court of First Instance of Zambales a complaint for recovery of possession with damages against petitioner. Respondent spouses further alleged that they allowed petitioner and co-heirs to occupy and build a house on a portion of the land on the condition that they would voluntarily and immediately remove the house and vacate that portion of the land should the respondents need the land. When they asked petitioner and her co-heir-occupants to remove the house and restore the possession of the immediately-described portion of the land, they refused, hence, the filing of the complaint. Petitioner claimed that she is the owner of that portion of the land and alleges that her signature in the June 27, 1962 Deed of Sale is forged. The RTC found petitioner's claim of forgery unsupported. It nevertheless dismissed the complaint. The boundaries of the land indicated in the Deed of Sale are different from that of which is claimed by the respondents. Even the tax declaration submitted by the plaintiff indicates different boundaries with that of the land indicated in the Deed of Sale. ISSUE: Whether or not a description of a lot area can be used as evidence for purchase and ownership of the lot. RULING: In a contract of sale of land in a mass, the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. Thus, it is the boundaries indicated in a deed of absolute sale, and not the area in sq. m. mentioned therein 300.375 sq.m. in the Deed of Sale in respondents favor that control in the determination of which portion of the land a vendee acquires. In concluding that Faustino acquired via the June 27, 1962 Deed of Sale the total land area of 753 sq. m., the Court of Appeals subtracted from the total land area of 1,381 sq. m. reflected in Exh. A, which is Plan of Lot 3, Block 5-k, Psd-8268, as prepared for Benjamin R. Salinas containing an area of 1,381 sq. m. and which was prepared on February 10, 1960 by a private land surveyor, the 628 sq. m. area of the lot claimed by Salinas as reflected in Tax Declaration No. 1017 in her name. As will be shown shortly, however, the basis of the appellate courts conclusion is erroneous. As the immediately preceding paragraph reflects, the Plan of Lot 3, Bk 5-K, Psd-82 was prepared for Spouses Faustino and Salinas first cousin co-heir Benjamin Salinas on February 10, 1960. Why the appellate court, after excluding the 628 sq. m. lot covered by a Tax Declaration in the name of petitioner from the 1,381 sq. m. lot surveyed for Benjamin P. Salinas in 1960, concluded that what was sold via the 1962 Deed of Sale to respondent Faustino was the remaining 753 sq. m., despite the clear provision of said Deed of Sale that what was conveyed was 300.375 sq. m., escapes comprehension. It defies logic, given that respondents base their claim of ownership of the questioned 628 sq. m. occupied by Salinas on that June 27, 1962 Deed of Sale covering a 300.375 sq. m. lot. The Court of Appeals thus doubly erred in concluding that 1) what was sold to respondents via the June 27, 1962 Deed of Sale was the 1,381 sq. m. parcel of land reflected in the Plan-Exh. A prepared in 1960 for Benjamin Salinas, and 2) Salinas occupied 628 sq. m. portion thereof, hence, Spouses Faustino own the remaining 753 sq. m. [G.R. No. 173312, August 26, 2008] ESTATE OF LINO OLAGUER VS. ONGJOCO Facts: The plaintiffs are the legitimate children of the spouses Olaguer. Lino Olaguer died so Special Proceedings for probate of will was filed and Defendant Olivia P. Olaguer was appointed as administrator pursuant to the will. In the order of the probate court some properties of the estate were authorized to be sold to pay obligations of the estate. A subdivision agreement was entered into on November 17, 1973, among Domingo Candelaria, Olivia P. Olaguer, Domingo O. de la Torre and Emiliano M. [Ongjoco]. On January 15, 1976, Jose A. Olaguer claiming to be the attorney-infact of his son Virgilio Olaguer under a general power of attorney, those lot sold to defendant Emiliano M. Ongjoco. Thus, they filed an action for the Annulment of Sales of Real Property and/or Cancellation of Titles by the CFI. Issue:

Whether or not respondent Ongjoco can be considered an innocent purchaser for value. Ruling: The court hold that respondent Emiliano M. Ongjoco was in bad faith when he bought Lots Nos. 1 and 2 from Jose A. Olaguer, as the latter was not proven to be duly authorized to sell the said properties. However, respondent Ongjoco was an innocent purchaser for value with regard to Lots Nos. 76-D, 76-E, 76-F and 76-G since it was entirely proper for him to rely on the duly notarized written power of attorney executed in favor of Jose A. Olaguer. SPS. CORNELIO JOEL I. ORDEN and MARIA NYMPHA V. ORDEN vs. SPS. ARTURO AUREA and MELODIA C. AUREA, SPS. ERNESTO P. COBILE and SUSANA M. COBILE, and FRANKLIN M. QUIJANO G.R. No. 172733, August 20, 2008 FACTS: Petitioners spouses Cornelio Joel I. Orden and Maria Nympha V. Orden are the owners of two parcels of land. On 29 September 1994, a Deed of Absolute Sale was entered into by respondents Aurea, as vendees, and petitioners Orden, as vendors. Respondents Aurea then executed a Joint Affidavit declaring respondents Cobile as the true and real buyers of the subject properties. Respondent Cobile then executed a promissory note in which they promised to pay petitioners Orden the amount of P566,000.00 on or before October 31, 1994, and the remaining P950,000.00 to be paid as soon as the titles to the properties shall have been transferred to them. Respondents Cobile failed to pay the P566,000.00 which was due on or before 31 October 1994. On 13 December 1994, respondents Cobile, through Arturo Aurea, paid petitioners Orden P354,596.28 representing partial payment of the purchase price. Failing to pay the balance of the purchase price, petitioners Orden wrote respondents Cobile a letter dated 11 March 1995 informing the latter of their intention to dispose of the properties to other interested parties if respondents Cobile did not comply with their promise to pay the remaining balance of the purchase price. Petitioners Orden, however, gave respondents Cobile ten days from receipt of the letter to pay; otherwise, their non-payment shall be construed as refusal on their part and the properties shall be sold to others. Respondents Cobile did not make any further payment. All in all, they paid petitioners Orden P738,596.28 (P384,000.00 + P354,596.28). Petitioners Orden did not transfer the titles to the properties to respondents Cobile. On 21 May 1996, petitioners sold the properties to Fortunata Adalim Houthuijzen and the titles thereto transferred to her name. On 30 September 1997, respondents-spouses Aurea and spouses Cobile, and respondent Franklin M. Quijano filed a Complaint before the Regional Trial Court for Enforcement of Contract and Damages with a Prayer for a Writ of Preliminary Attachment, Prohibitory Injuction and Restraining Order against petitioners Orden and the Register of Deeds of Negros Oriental. ISSUE: What is the kind of contract petitioners Orden and respondents Cobile entered into. Did they enter into a Contract of Sale or a Contract to Sell? HELD: The Supreme Court ruled that petitioners Orden and respondents Cobile entered into a contract to sell. The real character of the contract is not the title given, but the intention of the parties. Although there is a document denominated as "Deed of Absolute Sale," and there is no provision therein of reservation of ownership to the seller, the true intent of the parties was to transfer the ownership of the properties only upon the buyer's full payment of the purchase price. This is evident from the promissory note executed by respondents Cobile. It is only upon payment of the full purchase price that title to the properties shall be transferred to their names. Furthermore, circumstances show ownership over the properties was never transferred to respondents Cobile. Respondents neither had possession of nor title to the properties. In fact, petitioners Orden, per their letter to respondents Cobile, even gave the latter the chance to pay the balance of the purchase price before they would sell the properties to other interested persons. From the foregoing, it is evident that the

true agreement of the parties is for the petitioners Orden to retain ownership over the properties until respondents shall have fully paid the purchase price. Respondents Cobile failed to pay the balance of the purchase price. Such payment is a positive suspensive condition, failure of which is not a breach, serious or otherwise, but an event that prevents the obligation of the seller to convey title from arising. The non-fulfillment by respondents Cobile of their obligation to pay, which is a suspensive condition for the obligation of petitioners Orden to sell and deliver the title to the properties, rendered the contract to sell ineffective and without force and effect. The parties stand as if the conditional obligation had never existed. Inasmuch as the suspensive condition did not take place, petitioners Orden cannot be compelled to transfer ownership of the properties to respondents Cobile. In the exercise of the seller's right to automatically cancel the contract to sell, at least a written notice must be sent to the defaulter informing him of the same. The act of petitioners Orden in notifying respondents Cobile of their intention to sell the properties to other interested persons if respondents failed to pay the balance of the purchase price was sufficient notice for the cancellation or resolution of the their contract to sell. Since respondents Cobile failed to fulfill their obligation even after said notice, petitioners were justified in canceling their contract (to sell) and selling to a buyer who was willing to pay the full purchase price. Hence, we sustain petitioners Orden's action. ST. MARY'S FARM, INC., Petitioner, vs.PRIMA REAL PROPERTIES, INC., RODOLFO A. AGANA, JR., and THE REGISTER OF DEEDS OF LAS PIAS, METRO MANILA, Respondents.G.R. No. 158144 July 31, 2008 FACTS: Petitioner was the registered owner of an originally twenty-five thousand five hundred ninety-eight (25,598) square meters of land situated at Bo. Pugad Lawin, Las Pias. In compliance with a final court decision in Civil Case No. 87-42915 of the Regional Trial Court, Branch XL of Manila, petitioner passed and approved on 27 June 1988 a board resolution authorizing defendant Rodolfo A. Agana to cede to T.S. Cruz Subdivision four thousand (4,000) square meters of the land covered by the aforecited Transfer Certificate of Title No. S-1648 (11521-A). Allegedly, after the consummation of this transaction, defendant Rodolfo A. Agana did not return to petitioner the borrowed aforementioned title and, instead, allegedly forged a board resolution of the petitioner corporation supposedly to the effect that petitioner had authorized him to sell the remaining twenty-one thousand five hundred ninety-eight (21,598) square meters of the subject property. A series of transactions thereafter took place between defendant Rodolfo A. Agana and defendant Prima Real Properties, Inc. (Prima) which transactions culminated to the signing on 5 September 1988 of an absolute deed of sale transferring the ownership of the subject land from herein petitioner to herein defendant Prima. After the consummation of the sale, defendant Prima effected the cancellation of Transfer Certificate of Title No. S-1648 (11521-A) in the name of petitioner and in lieu thereof another Transfer Certificate of Title No. T-6175 in the name of defendant Prima was issued by defendant Alejandro R. Villanueva in his capacity as Register of Deeds of Las Pias City. Petitioner insists that "the sale of the realty entered into between respondent Agana, purportedly on behalf of the petitioner, and respondent Prima is null and void for lack of authority on the part of respondent Agana to sell the property. The board resolution allegedly granting Rodolfo Agana the authority to sell in behalf of the company, as certified by Corporate Secretary Atty. Antonio V. Agcaoili, is alleged to be a forgery. Ma. Natividad A. Villacorta, who served as assistant to Marcelino A. Agana, Jr., the President of St. Marys Farm, Inc., in 1988 testified that the board of directors did not hold any meeting on June 27, 1988; that, in fact, the signature of Atty. Antonio Agcaoili was not genuine; and that said document was merely presented to the notary public for notarization without Atty. Agcaoili appearing before him. ISSUE: Whether or not respondent Agana is authorized by petitioner in the deed of sale subjevt of this case. HELD: Yes. Agana was authorized by petitioner. There is nothing on record that will conclusively show that the alleged standard sample signatures of Atty. Antonio Agcaoili, which were submitted to the NBI and made the basis of comparison, were the genuine signatures of the same

Atty. Antonio Agcaoili. Moreover, the examiner testified that it was possible to have variations in the standard signatures of Atty. Agcaoili, caused by certain factors such as passage of time, pressure and physical condition of the writer which may have decisive influences on his handwritings characteristic. Thus, in the instant case, it cannot readily be concluded that a particular signature appearing in those documents is not genuine for lack of proper identification and a more accurate comparison of signatures. A buyer for value in good faith is one who buys property of another, without notice that some other person has a right to, or interest in such property and pays full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. He buys the property with the well-founded belief that the person from whom he receives the thing had title to the property and capacity to convey it. To prove good faith, a buyer of registered and titled land need only show that he relied on the face of the title to the property. He need not prove that he made further inquiry for he is not obliged to explore beyond the four corners of the title. Such degree of proof of good faith, however, is sufficient only when the following conditions concur: first, the seller is the registered owner of the land; second, the latter is in possession thereof; and third, at the time of the sale, the buyer was not aware of any claim or interest of some other person in the property, or of any defect or restriction in the title of the seller or in his capacity to convey title to the property. All the conditions enumerated in the aforementioned case are present in the case at bar, enough for us to consider Prima as a buyer in good faith. Prima Real Properties, Inc. is a company engaged in the buying and selling of real properties. As borne out by the records, respondent exerted efforts to verify the true background of the subject property. Sps. Edgardo and Natividad Fidel v. Court of Appeals, Heirs of Late Primitivo Espineli Facts: On February 21,1995 Josefina, Patricio and Leonardo Espineli , the compulsory heirs of Primitivo Espineli who is the only child of Vicente in his first wife Juliana Asas filed a complaint for annulment of sale, tax declaration and reconveyance with damages against petitioners Edgardo and Natividad Fidel and Guadalupe Espineli-Cruz before the Regional Trial Court regarding the sale of 150 sq.m parcel of unregistered land located at San Miguel Street, Indang Cavite owned by the late Vicente Espineli on the ground that the sale is void and simulated because Vicentes signature was forged. Respondents alleged that the parcel of land owned by the late Vicente was sold on October 7,1994 to the petitioners despite the fact that Vicente died intestate on June 4, 1941. Guadalupe, the only surviving child of Vicente in his second wife denied any knowledge of the deed of sale allegedly signed by Vicente but admitted selling of the property by virtue of another deed of sale signed by her and in representation of her nephews and nieces who are children of her deceased siblings. She further denied any knowledge of Vicentes first marriage to Juliana Asas. She argues that the heirs of Primitivo must first prove their filiation from Vicente prior to the filing of the complaint for annulment of sale. Guadalupe further asserted that Sps. Fidel was able to register the sale of the property and obtain tax declaration. The Regional Trial Court ruled in favor of respondents annulling the sale of the said parcel of land and affirmed by the Court of Appeals. The property should be reconveyed to the estate of Vicente Espinili but the proper proceedings should be instituted to determine the latters heirs. Hence, Sps. Fidel challenged the said decision on the ground that the private respondents had no legal personality to institute the action. Issue: Whether or not respondents have the legal personality to file the complaint for annulment of title Whether or not petitioners are buyer in good faith Ruling: The court held that the first deed of sale allegedly signed by Vicente is void because his signature is a patent forgery. Under Article 1409 par.2 of the New Civil Code of the Philippines , states that those which are simulated or fictitious is a void contract. It cannot be ratified neither can the right to set up the defense of illegality be waived. Further, the court held that the principal action was for the annulment of sale and not an action to impugn legitimacy and that ones legitimacy can be questioned only in a direct action filed by the proper party and the petitioners

are already estopped from assailing whether or not respondents are heirs of Vicente because they already raise the issue during the pre-trial brief. On the second issue, the court ruled that No, the petitioners cannot be considered as buyers in good faith for the fact that they only register the sale of the property and obtain tax declaration not a Torrens title. A tax declaration does not constitute constructive notice to the whole world. The issue of good faith or bad faith is relevant only where the subject of the sale is a registered land but not when the property is an unregistered land. Hence, the petition is denied. G.R. No. 175118 July 21, 2008 SOLIDSTATE MULTI-PRODUCTS CORPORATION, Petitioner, vs. SPS. ERLINDA CATIENZA-VILLAVERDE and VICTOR VILLAVERDE, Respondents. FACTS: In February 1976, Julian Pearandasold to petitioner a parcel of land located in Cavite, covered by TCT No. T-80889. Because the property was then being adversely claimed by a third party, the Intestate Estate of Antenor S. Virata, Pearanda undertook to institute at his own expense whatever legal action that might become necessary and to answer for damages to petitioner should the ownership of the property be "proven to be that of any other person or claimant thru fault of the First Party." The undertaking was reduced to writing in the form of an Agreement with Mortgage. In the same document, respondents agreed to mortgage a property owned by them and covered by TCT No. T-82596 in order to secure Pearandas faithful compliance with the undertaking. Respondents also signed an Agreement to shoulder 50% of the expenses that would be incurred in the suit between petitioner and the Estate of Virata. Petitioner instituted a civil action against the Estate of Virata to remove the cloud on its title. The complaint was dismissed on the ground of failure to state a cause of action. The dismissal was affirmed by the Court of Appeals on, but was ultimately reversed by this Court with the declaration that the parcel of land covered by TCT No. T-80889 was truly owned by petitioner. While the case was pending with this Court, the parties executed a Deed of Absolute Salewhereby respondents sold their property covered by TCT No. T-82596 to petitioner in consideration of the amount of P96,000.00and of the cancellation of the original mortgage obligation under the Agreement with Mortgage. It appears that respondents also received the amount of P105,000.00 from petitioner on account of the sale. Respondents filed a Complaint seeking the annulment of the Deed of Absolute Sale on the ground that their consent to the transaction was vitiated by mistake, undue influence and fraud. They alleged that petitioner had induced them to sell their land on the misinformation that the case filed against the Estate of Virata, which motivated them to sign the Agreement with Mortgage and later the Deed of Absolute Sale, had already been dismissed. ISSUE: Whether the sale was absolutely simulated or fictitious, without consideration and, therefore, void RULING: Yes.The parties executed the Agreement with Mortgage and the Deed of Absolute Sale solely to confront the possibility that the property sold by Pearanda to petitioner would be adjudged to another claimant. The final disposition of the quieting of title case in favor of petitioner rendered the contracts without a cause, therefore void. The evidence clearly shows that while respondents acknowledged receipt of the amount of P96,000.00 in the Deed of Absolute Sale, such amount was not actually paid to them by petitioner. A contract of sale is void and produces no effect whatsoever where the price, which appears thereon as paid, has in fact never been paid by the purchaser to the vendor. The amounts received by respondents are not the consideration for the sale but rather, as they understood it, amounts merely by petitioner out of the latters munificence and good will. Respondents allege that they signed the Deed of Absolute Sale "due to the fraudulent misrepresentation and false notice or information coupled by plaintiffs financial handicap at that time, in consideration of the meager amount of P50, 000.00." There is no stipulation in any of the contracts between the parties which states that ownership of the property in question shall automatically vest in petitioner upon respondents failure to perform their obligations under the mortgage contract. There does not even appear to have been any demand or default yet. That the parties entered into a separate Deed of Absolute Sale is proof that there was no automatic transfer of ownership. BENJAMIN BAUTISTA, vs.SHIRLEY G. UNANGST Facts:

On November 15, 1996, Hamilton Salak rented a car from GAB Rent-A-Car, a car rental shop owned by petitioner Benjamin Bautista. The lease was for three (3) consecutive days at a rental fee of P1,000.00 per day. However, Salak failed to return the car after three (3) days prompting petitioner to file a complaint against him for estafa, violation of Batas Pambansa Blg. 22 and carnapping.On February 2, 1997, Salak and his common-law wife, respondent Shirley G. Unangst, were arrested by officers of the Criminal Investigation Service Group (CISG) of the Philippine National Police while riding the rented car along Quezon City. The next day, petitioner demanded from Salak at the CISG Office the sum of P232,372.00 as payment for car rental fees, fees incurred in locating the car, attorney's fees, capital gains tax, transfer tax, and other incidental expenses. Salak and respondent expressed willingness to pay but since they were then short on cash, Salak proposed to sell to petitioner a house and lot titled in the name of respondent. Petitioner welcomed the proposal after consulting his wife, Cynthia. Cynthia, on the other hand, further agreed to pay the mortgage loan of respondent over the subject property to a certain Jojo Lee in the amount of P295,000.00 as the property was then set to be publicly auctioned on February 17, 1997.To formalize their amicable settlement, Cynthia, Salak and respondent executed a written agreement.They stipulated that respondent would sell, subject to repurchase, her residential property in favor of Cynthia for the total amount of P527,372.00 broken down, as follows: (1) P295,000.00 for the amount paid by Cynthia to Lee to release the mortgage on the property; and (2) P232,372.00, which is the amount due to GAB Rent-A-Car. Cynthia also agreed to desist from pursuing the complaint against Salak and respondent. Respondent and petitioner also executed a separate deed of sale with right to repurchase, specifying, among others, that: (1) respondent, as vendor, shall pay capital gains tax, current real estate taxes and utility bills pertaining to the property; (2) if respondent fails to repurchase the property within 30 days from the date of the deed, she and her assigns shall immediately vacate the premises and deliver its possession to petitioner without need of a judicial order; and (3) respondent's refusal to do so will entitle petitioner to take immediate possession of the property.Respondent failed to repurchase the property within the stipulated period. As a result, petitioner filed, on June 5, 1998, a complaint for specific performance or recovery of possession, for sum of money, for consolidation of ownership and damages against respondent and other unnamed persons before the RTC of Olongapo City. On July 29, 2004, after due proceedings, the RTC rendered a decision in favor of petitioner, In a Decision dated April 7, 2006, the CA reversed and set aside the RTC judgment. Issue: Whether or not the deed of sale with right to repurchase executed by the parties be construed as an equitable mortgage. Ruling: Respondent is correct in alleging that the deed of sale with right to repurchase qualifies as an equitable mortgage under Article 1602. She merely secured the payment of the unpaid car rentals and the amount advanced by petitioner to Jojo Lee. The transaction between the parties is one of equitable mortgage and not a sale with right to purchase as maintained by petitioners. Article 1602 of the New Civil Code provides that the contract 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. PHILIPPINE NATIONAL BANK, vs SPOUSES TOMAS CABATINGAN and AGAPITA EDULLANTES Represented by RAMIRO DIAZ G.R. No. 167058 July 9, 2008 FACTS: Respondent spouses Tomas Cabatingan and Agapita Edullantes obtained two loans, secured by a real estate mortgage, in the total amount of P421,200 from petitioner Philippine National Bank. However, they were unable to fully pay their obligation despite having been granted more than enough time to do so. Thus, on September 25, 1991, petitioner extrajudicially foreclosed on the mortgage pursuant to Act 3135. Thereafter, a notice of extrajudicial sale was issued stating that the foreclosed properties would be sold at public auction. Pursuant to the notice, the properties were sold at public auction on November 5, 1991. The auction began at 9:00 a.m. and was concluded after 20 minutes with petitioner as the highest bidder. March 16, 1993, respondents filed in the RTC a complaint for annulment of extrajudicial foreclosure of real estate mortgage and the November 5, 1991 auction sale, invoking Section 4 of Act 3135 which provides: Section 4. The sale shall be made at public auction, between the hours of nine in the morning and four in the afternoon, and shall be under the direction of the sheriff of the province, the justice or auxiliary justice of peace of the municipality in which such sale has to be made, or of a notary public of said municipality, who shall be entitled to collect a fee of Five pesos for each day of actual work performed, in addition to his expenses. RTC issued an ordered annulment of the sale at public auction. Stating such provision is to give opportunity to more would-be bidders to participate in the auction sale thus giving the judgment-debtor more opportunity to recover the value of his or her property subject of the auction sale. ISSUE: whether a sale at public auction, to be valid, must be conducted the whole day from 9:00 a.m. until 4:00 p.m. of the scheduled auction day. HELD: Petitioner contends that the RTC erred in interpreting Section 4 of Act 3135. The law only prohibits the conduct of a sale at any time before nine in the morning and after four in the afternoon. Thus, a sale held within the intervening period regardless of duration, is valid. Act 3135 regulates the extrajudicial sale of mortgaged real properties by prescribing a procedure which effectively safeguards the rights of both debtor and creditor. Thus, its construction must be equally and mutually beneficial to both parties. Section 4 of Act 3135 provides that the sale must take place between the hours of nine in the morning and four in the afternoon. Pursuant to this provision, Section 5 of Circular No. 7-2002 states: Section 5. Conduct of extrajudicial foreclosure sale (a.) The bidding shall be made through sealed bids which must be submitted to the Sheriff who shall conduct the sale between the hours of 9 a.m. and 4 p.m. of the date of the auction. The property mortgaged shall be awarded to the party submitting the highest bid and, in case of a tie, an open bidding shall be conducted between the highest bidders. Payment of the winning bid shall be made in either cash or in manager's check, in Philippine Currency, within five (5) days from notice. A creditor may foreclose on a real estate mortgage only if the debtor fails to pay the principal obligation when it falls due. Nonetheless, the foreclosure of a mortgage does not ipso facto extinguish a debtors obligation to his creditor. The proceeds of a sale at public auction may not be sufficient to extinguish the liability of the former to the latter. For this reason, we favor a construction of Section 4 of Act 3135 that affords the creditor greater opportunity to satisfy his claim without unduly rewarding the debtor for not paying his just debt. The word "between" ordinarily means "in the time interval that separates." Thus, "between the hours of nine in the morning and four in the afternoon" merely provides a time frame within which an auction sale may be conducted. Therefore, a sale at public auction held within the intervening period provided by law (9:00 am to 4:00 pm) is valid, without regard to the duration or length of time it took the auctioneer to conduct the proceedings. In this case, the November 5, 1991 sale at public auction took place from 9:00 a.m. to 9:20 a.m. Since it was conducted within the time frame provided by law, the sale was valid. Decision of the RTC is reversed an set aside, auction sale is deemed valid.

[G.R. No. 171373, June 18, 2008] LLOYD'S ENTERPRISES AND CREDIT CORPORATION, PETITIONERS, VS. SPS. FERDINAND AND PERSEVERANDA DOLLETON, RESPONDENTS. FACTS: Respondents spouses Dolleton, were the registered owners of a parcel of land covered by TCT No. 153554 with a fourdoor apartment building being leased to various tenants. Respondents mortgaged the property to a certain Santos to secure a loan in the amount of P100,000.00. Upon payment of the loan on 15 August 1994, Santos executed a release and cancellation of the mortgage. The same was annotated on the TCT. On 15 September 1994, TCT No. 153554 in the name of respondents was cancelled and a new TCT No. 197220 was issued in the name of Gagan on the basis of a Deed of Absolute Sale dated 5 August 1994 whereby respondents purportedly sold to Gagan the subject property for the sum of P120,000.00. On 19 September 1994, Gagan and Gueverra mortgaged said property with TCT No. 197220 to petitioner LECC for second loan of P542,928.00 and was annotated on said Title. However, Gagan and Guevarra failed to pay the loan upon maturity. Thus, petitioner foreclosed mortgaged property being the highest bidder and was not redeemed within the oneyear period. Hence, ownership was consolidated in favor of petitioner and was issue a new TCT No. 210363 cancelling TCT No. 197220. Petitioner then sent notices to the apartment tenants on the transfer of ownership and rentals were not remitted to respondents anymore, prompting the latter to cause the annotation of an adverse claim on TCT No. 210363. Respondents prayed among others for the restoration of TCT No. 153554 and nullification of the Deed of Absolute Sale, and the extrajudicial foreclosure proceedings. They denied having executed the Deed of Absolute Sale and alleged that they had merely offered to sell to Gagan the subject property for P900,000.00 on installment basis so that they could pay their loan obligation to Santos. After Gagan had initially paid P200,000.00, they entrusted the owner's copy of TCT No. 153554 to him. Gagan was unable to pay the balance of the purchase price, rather she caused the fraudulent cancellation of TCT No. 153554 and the issuance of TCT No. 197220 in her name, and of eventually using TCT No. 197220 to secure the loans obtained from petitioner. Respondents also faulted petitioner for failing to make adequate inquiries on the true ownership of the property considering the suspicious circumstances surrounding Gagan's and Guevarra's request for loan immediately after the issuance of the new certificate of title. The RTC declared the Deed of Absolute Sale between Gagan and Dolleton as spurious and directed the reconveyance of the property to the true and genuine owners, the spouses Dolleton. CA affirmed RTCs decision. ISSUE: WON Petitioner is a Mortgagee and Buyer in Good Faith RULING: The Court affirmed the reconveyance of the property to respondents Dolleton as petitioner is not a mortgagee in good faith, hence, foreclosure was not valid. Petitioner failed to verify the actual condition of the property, particularly as to who is in actual possession and if the premises are leased to third persons, who is receiving the rental payments therefore. Appellant LECC merely submitted in evidence forms for credit investigation on the borrower's capacity to pay, there is no showing that they actually inspected the property offered as collateral. Had precautionary measure been taken, the lending company's representatives would have easily discovered that the four (4)-door apartment in the premises being mortgaged is rented by tenants and they could have been provided with information that plaintiffs-appellees are still the present lessors/owners thereof. Moreover, the circumstance that the certificate of title covering the property offered as security was newly issued should have put petitioner on guard and prompted it to conduct an investigation surrounding the transfer of the property to defendant Gagan. Had it inquired further, petitioner would have discovered that the property was sold for an unconscionably low consideration of only P120,000.00 when it could have fetched as high as P900,000.00. A purchaser cannot close his eyes to facts which should put a reasonable man on his guard and claim that he acted in good faith under the belief that there was no defect in the title of the vendor. Petitioner is engaged in the business of extending credit to the public and is, thus, expected to exercise due diligence in dealing with properties offered as security. The failure of

respondent to take such precautionary steps is considered negligence on its part and would thereby preclude the defense of good faith. EUREKA PERSONNEL AND MANAGEMENT SERVICES, INC.,Vs.NATIONAL LABOR RELATIONS COMMISSION and APOLONIO A. BUENO,G.R. No. 163013 Facts Apolonio A. Bueno was hired Eureka Personnel and Management Services in behalf of its principal, Saudi Archirodon, Ltd., as mechanic with a monthly salary of SR$1,763. On June 14, 1999, respondent was deployed but was made to work as carpenter with a monthly salary of SR$750. In the course of his employment, private respondent injured his right eyebrow and was treated at the Gosi Hospital in New Jeddah. However, private respondent remained in his quarters and refused to work. On March 21, 2001, respondent was repatriated. he received SR$3,000 from Saudi Archirodon, Ltd.Private respondent filed a complaint for illegal dismissal, non-payment and underpayment of salaries, Issue: Whether or not private respondent is entitled to the salary rate of a mechanic or a carpenter. Held: To resolve this, it was necessary for the appellate court to review the parties respective arguments, which were premised on the following documents: (1) complaint for illegal dismissal; (2) contract of employment; (3) position papers; and (4) Labor Arbiters decision. Under the circumstances, we hold that the documents attached to the petition were insufficient to support petitioners allegations before the Court of Appeals. Besides, even petitioner recognized that the certified true copy of the NLRC Decision dated June 30, 2003 was blurred and illegible, thus making it doubly difficult for the appellate court to resolve the issue raised. The Supreme Court upheld the decision of the court of appeals that the salary should be computed as stated in the contract, awarding salary differential for the whole period of its original contract, computed as follows: SR$1,763 SR$750 = SR$1,013 x 12 mos. = SR$12,156 REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA) through its Director General, LILIA B. DE LIMA vs.ANTONIO and LILI FLORENDOG.R. No. 166866, March 27, 2008 FACTS: On April 14, 1991, the Export Processing Zone Authority, (PEZA), predecessor of PEZA, filed a complaint for the expropriation of seven parcels of land owned by respondents. The complaint was filed in the RTC. The purpose of the expropriation was to establish and develop an export processing zone or a part thereof on those real properties. Accordingly, the parties executed a deed of absolute sale dated June 25, 2001 which set out the terms and conditions of their settlement, the transfer of ownership of Lot No. 4704 under TCT No. 21289 from respondents to petitioner and the execution by the parties of the corresponding deed of absolute sale for the remaining six lots as soon as respondents could settle or clear the encumbrances or other problems affecting them. Thereafter, the consideration for Lot Nos. 4705-H, 4709 and 4710 was paid by petitioner and ownership was subsequently transferred to it. Petitioner prepared a joint motion to dismiss the expropriation case but respondent Antonio Florendo refused to sign because there were still three lots (Lot Nos. 4703-B-part, 4702-C and 4702-B) which had not yet been paid. Respondents could not clear these properties of their encumbrances and liens as there were pending cases filed by third party claimants over them. Instead, they proposed that a partial compromise agreement be executed to cover the four lots that had already been sold and transferred to PEZA. ISSUES:

Whether or not there was a perfected compromise agreement with respect to the remaining three lots which have not been paid by petitioner because respondents could not deliver clean titles thereto. HELD: The Supreme Court ruled in the affirmative. The compromise agreement the parties executed was in the form of a contract of sale. The elements of a valid contract of sale are: (a) consent or meeting of the minds; (b) determinate subject matter and (c) price certain in money or its equivalent. All the elements are present here. The parties agreed on the sale of a determinate object (the seven lots) and the price certain (P26,951,250). A compromise agreement is a contract whereby the parties make reciprocal concessions in order to resolve their differences and thus avoid litigation or to put an end to one already commenced. When it complies with the requisites and principles of contracts, it becomes a valid agreement which has the force of law between the parties. A compromise agreement is a simple contract which is perfected by mere consent. From that moment of the meeting of the minds of the parties, it becomes binding on them. To be valid, judicial approval is not required. When a compromise agreement is given judicial approval, it becomes more than a contract binding upon the parties. Having been sanctioned by the court, it is a determination of the controversy and has the force and effect of a judgment. It is immediately executory and not appealable, except for vices of consent, forgery, fraud, misrepresentation and coercion. The delivery of clean titles was not a condition imposed on the perfection of the contract of sale but a condition imposed on petitioner's obligation to pay the purchase price of these lots. In Jardine Davies Inc. v. CA, the Supreme Court distinguished between a condition imposed on the perfection of a contract and a condition imposed merely on the performance of an obligation. While failure to comply with the first condition results in the failure of a contract, noncompliance with the second merely gives the other party options and/or remedies to protect its interests. PROVINCE OF CEBU, petitioner, vs. HEIRS OF RUFINA MORALES, NAMELY: FELOMINA V. PANOPIO, NENITA VILLANUEVA, ERLINDA V. ADRIANO and CATALINA V. QUESADA, respondents. G.R. No. 170115 February 19, 2008 FACTS: Petitioner Province of Cebu leased in favor of Rufina Morales a 210-square meter lot which formed part of Lot No. 646-A of the Banilad Estate. Sometime in 1964, petitioner donated several parcels of land to the City of Cebu. Among those donated was Lot No. 646-A which the City of Cebu divided into sub-lots. The area occupied by Morales was thereafter denominated as Lot No. 646-A-3, for which Transfer Certificate of Title (TCT) No. 30883 was issued in favor of the City of Cebu. On July 1965, the city sold Lot No. 646-A-3 as well as the other donated lots at public auction in order to raise money for infrastructure projects. The highest bidder for Lot No. 646-A-3 was Bascon but Morales was allowed to match the highest bid since she had a preferential right to the lot as actual occupant. Morales thus paid the required deposit and partial payment for the lot. In the meantime, petitioner filed an action for reversion of donation against the City of Cebu. Petitioner and the City of Cebu then entered into a compromise agreement which the court approved. The agreement provided for the return of the donated lots to petitioner except those that have already been utilized by the City of Cebu. Morales died during the pendency of the Civil Case. Apart from the deposit and down payment, she was not able to make any other payments on the balance of the purchase price for the lot. One of the nieces of Morales, respondent Catalina V. Quesada, wrote to then Cebu Governor Eduardo R. Gullas asking for the formal conveyance of Lot No. 646-A-3 to Morales surviving heirs, in accordance with the award earlier made by the City of Cebu. But, their request remained unheeded. ISSUE: Whether or not there was a perfected contract of sale HELD: The petitioner, as successor-in-interest of the City of Cebu, is bound to respect the contract of sale entered into by the latter pertaining to Lot No. 646-A-3. The City of Cebu was the owner of the lot when it awarded the same to respondents predecessor-in-interest, Morales, who later became its owner before the same was erroneously returned to petitioner under the compromise judgment. The award is tantamount to a perfected contract of sale between Morales and the City of Cebu, while partial payment of the purchase price and actual occupation of the property by Morales and respondents effectively transferred ownership of the lot to the latter. This is true notwithstanding the failure of Morales and respondents to pay the balance of the purchase price.

Petitioner can no longer assail the award of the lot to Morales on the ground that she had no right to match the highest bid during the public auction. When the City of Cebu awarded the lot to Morales, it is assumed that she met all qualifications to match the highest bid. The subject lot was auctioned in 1965 or more than four decades ago and was never questioned. A sale by public auction is perfected "when the auctioneer announces its perfection by the fall of the hammer or in other customary manner". It does not matter that Morales merely matched the bid of the highest bidder at the said auction sale. The contract of sale was nevertheless perfected as to Morales, since she merely stepped into the shoes of the highest bidder. Consequently, there was a meeting of minds between the City of Cebu and Morales as to the lot sold and its price, such that each party could reciprocally demand performance of the contract from the other. A contract of sale is a consensual contract and 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. From that moment, the parties may reciprocally demand performance. ANDRE T. ALMOCERA, Petitioner, vs. JOHNNY ONG, Respondent Plaintiff Johnny Ong tried to acquire from the defendants a town home described as Unit No. 4 of Atrium Townhomes in Cebu City. As reflected in a Contract to Sell, the selling price of the unit was P3,400,000.00 pesos, for a lot area of eightyeight (88) square meters with a three-storey building. Out of the purchase price, plaintiff was able to pay the amount of P1,060,000.00. Prior to the full payment of this amount, plaintiff claims that defendants Andre Almocera and First Builders fraudulently concealed the fact that before and at the time of the perfection of the aforesaid contract to sell, the property was already mortgaged to and encumbered with the Land Bank of the Philippines (LBP). In addition, the construction of the house has long been delayed and remains unfinished. On March 13, 1999, Lot 4-a covered by TCT No. 148818, covering the unit was advertised in a local tabloid for public auction for foreclosure of mortgage. It is the assertion of the plaintiff that had it not for the fraudulent concealment of the mortgage and encumbrance by defendants, he would have not entered into the contract to sell. On the other hand, defendants assert that on March 20, 1995, First Builders Multi-purpose Coop. Inc., borrowed money in the amount of P500,000.00 from Tommy Ong, plaintiffs brother. This amount was used to finance the documentation requirements of the LBP for the funding of the Atrium Town Homes. In trying to recover the amount he paid as down payment for the townhouse unit, respondent Johnny Ong filed a complaint for Damages before the RTC of Cebu City, docketed as Civil Case No. CEB-23687, against defendants Andre T. Almocera and FBMC alleging that defendants were guilty of fraudulent concealment and breach of contract when they sold to him a townhouse unit without divulging that the same, at the time of the perfection of their contract, was already mortgaged with the Land Bank of the Philippines (LBP), with the latter causing the foreclosure of the mortgage and the eventual sale of the townhouse unit to a third person. ISSUE: I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT DEFENDANT HAS INCURRED DELAY. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN SUSTAINING RESPONDENTS REFUSAL TO PAY THE BALANCE OF THE PURCHASE PRICE. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT DEFENDANT ANDRE T. ALMOCERA IS SOLIDARILY LIABLE WITH THE DEFENDANT COOPERATIVE FOR DAMAGES TO PLAINTIFF.


In the case at bar, the obligation of petitioner and FBMC which is to complete and deliver the townhouse unit within the prescribed period, is determinative of the respondents obligation to pay the balance of the contract price. With their failure to fulfill their obligation as stipulated in the contract, they incurred delay and are liable for damages. They cannot insist that respondent comply with his obligation. Where one of the parties to a contract did not perform the undertaking to which he was bound by the terms of the agreement to perform, he is not entitled to insist upon the performance of the other party. On the first assigned error, petitioner insists there was no delay when the townhouse unit was not completed within six months from the signing of the contract inasmuch as the mere lapse of the stipulated six (6) month period is not by itself enough to constitute delay on his part and that of FBMC, since the law requires that there must either be judicial or extrajudicial demand to fulfill an obligation so that the obligor may be declared in default. He argues there was no evidence introduced showing that a prior demand was made by respondent before the original action was instituted in the trial court.

Demand is not necessary in the instant case. Demand by the respondent would be useless because the impossibility of complying with their (petitioner and FBMC) obligation was due to their fault. If only they paid their loans with the LBP, the mortgage on the subject townhouse would not have been foreclosed and thereafter sold to a third person. Anent the second assigned error, petitioner argues that if there was any delay, the same was incurred by respondent because he refused to pay the balance of the contract price. As above-discussed, the obligation of respondent to pay the balance of the contract price was conditioned on petitioner and FBMCs performance of their obligation. Considering that the latter did not comply with their obligation to complete and deliver the townhouse unit within the period agreed upon, respondent could not have incurred delay. For failure of one party to assume and perform the obligation imposed on him, the other party does not incur delay.[15] Under the circumstances obtaining in this case, we find that respondent is justified in refusing to pay the balance of the contract price. He was never in possession of the townhouse unit and he can no longer be its owner since ownership thereof has been transferred to a third person who was not a party to the proceedings below. It would simply be the height of inequity if we are to require respondent to pay the balance of the contract price. To allow this would result in the unjust enrichment of petitioner and FBMC. Thus, said amount should be returned. What is worse is the fact that petitioner and FBMC intentionally failed to inform respondent that the subject townhouse which he was going to purchase was already mortgaged to LBP at the time of the perfection of their contract. This deliberate withholding by petitioner and FBMC of the mortgage constitutes fraud and bad faith. On the last assigned error, petitioner contends that he should not be held solidarily liable with defendant FBMC, because the latter is a separate and distinct entity which is the seller of the subject townhouse. He claims that he, as Chairman and Chief Executive Officer of FBMC, cannot be held liable because his representing FBMC in its dealings is a corporate act for which only FBMC should be held liable. This issue of piercing the veil of corporate fiction was never raised before the trial court. The same was raised for the first time before the Court of Appeals which ruled that it was too late in the day to raise the same. As to the award of damages granted by the trial court, and affirmed by the Court of Appeals, we find the same to be proper and reasonable under the circumstances.