Law on Sales Digested Cases

HEIRS OF JUAN SAN ANDRES (VICTOR S.ZIGA) and SALVACION S. TRIA, petitioners, vs. VICENTE RODRIGUEZ, respondent. G.R. No. 135634 May 31, 2000 Civil Code provides that 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. Facts: A contract of sale may be absolute or conditional. Juan andres was the owner of the lot situated in liboton, naga city. The sale was evidenced by a deed of sale. Upon the death of juan andres, ramon san andres was appointed as administrator of the estate, and hired geodetic engineer. Jose panero prepared a consolidated plan of the estate and also prepared a sketch plan of the lot sold to respondent. It was found out that respondent had enlarged the area which he purchased from juan. The administrator sent a letter to the respoindent to vacate the said portion in which the latter refused to do. As thus defined, the essential elements of sale are the following: Respondent alleged that apart from the original lot, which had been sold to him, the latter likewise sold to him the following day the remaining portion of the lot. He alleged that the payment for such would be affected in 5 years from the eecution of the formal deed of sale after a survey is conducted. He also alleged that under the consent of juan, he took possession of the same and introduced improvements thereon. Respondent deposited in court the balance of the purchase price amounting to P7,035.00 for the aforesaid 509-square meter lot. On September 20, 1994, the trial court rendered judgment in favor of petitioner. It ruled that there was no contract of sale to speak of for lack of a valid object because there was no sufficient indication to identify the property subject of the sale, hence, the need to execute a new contract. Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a decision reversing the decision of the trial court. The appellate court held that the object of the contract was determinable, and that there was a conditional sale with the balance of the purchase price payable within five years from the execution of the deed of sale. a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject matter; and, c) Price certain in money or its equivalent. 12 As shown in the receipt, dated September 29, 1964, the late Juan San Andres received P500.00 from respondent as "advance payment for the residential lot adjoining his previously paid lot on three sides excepting on the frontage; the agreed purchase price was P15.00 per square meter; and the full amount of the purchase price was to be based on the results of a survey and would be due and payable in five (5) years from the execution of a deed of sale. Petitioner's contention is without merit. There is no dispute that respondent purchased a portion of Lot 1914-B-2 consisting of 345 square meters. This portion is located in the middle of Lot 1914-B-2, which has a total area of 854 square meters, and is clearly what was referred to in the receipt as the "previously paid lot." Since the lot subsequently sold to respondent is said to adjoin the "previously paid lot" on three sides thereof, the subject lot is capable of being determined without the need of any new contract. The fact that the exact area of these adjoining residential lots is subject to the result of a survey does not detract from the fact that they are determinate or determinable. As the Court of Appeals explained: 15 Issue: whether or not there was a valid sale. Concomitantly, the object of the sale is certain and determinate. Under Article 1460 of the New Civil Code, a thing sold is determinate if at the time the contract is entered into, the thing is capable of being determinate without necessity of a new or further agreement between the parties. Here, this definition finds realization. Held: Thus, all of the essential elements of a contract of Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 1 sale are present, i.e., that there was a meeting of the minds between the parties, by virtue of which the late Juan San Andres undertook to transfer ownership of and to deliver a determinate thing for a price certain in money. As Art. 1475 of the Civil Code provides: The 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. . . .That the contract of sale is perfected was confirmed by the former administrator of the estates, Ramon San Andres, who wrote a letter to respondent on March 30, 1966 asking for P300.00 as partial payment for the subject lot. As the Court of Appeals observed: Without any doubt, the receipt profoundly speaks of a meeting of the mind between San Andres and Rodriguez for the sale. Evidently, this is a perfected contract of sale on a deferred payment of the purchase price. All the pre-requisite elements for a valid purchase transaction are present. There is a need, however, to clarify what the Court of Appeals said is a conditional contract of sale. Apparently, the appellate court considered as a "condition" the stipulation of the parties that the full consideration, based on a survey of the lot, would be due and payable within five (5) years from the execution of a formal deed of sale. It is evident from the stipulations in the receipt that the vendor Juan San Andres sold the residential lot in question to respondent and undertook to transfer the ownership thereof to respondent without any qualification, reservation or condition. The stipulation that the "payment of the full consideration based on a survey shall be due and payable in five (5) years from the execution of a formal deed of sale" is not a condition which affects the efficacy of the contract of sale. It merely provides the manner by which the full consideration is to be computed and the time within which the same is to be paid. But it does not affect in any manner the effectivity of the contract. Consequently, the contention that the absence of a formal deed of sale stipulated in the receipt prevents the happening of a sale has no merit. The claim of petitioners that the price of P7,035.00 is iniquitous is untenable. The amount is based on the agreement of the parties as evidenced by the receipt (Exh. 2). Time and again, we have stressed the rule that a contract is the law between the parties, and courts have no choice but to enforce such contract so long as they are not contrary to law, morals, good customs or public policy. Otherwise, court would be interfering with the freedom of contract of the parties. Simply put, courts cannot stipulate for the parties nor amend the latter's agreement, for to do so would be to alter the real intentions of the contracting parties when the contrary function of courts is to give force and effect to the intentions of the parties. The decision of the Court of Appeals is AFFIRMED with the modification that respondent is ORDERED to reimburse petitioners for the expenses of the survey. A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is absolute, not conditional. There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In fact, the sale was consummated upon the delivery of the lot to respondent. 20 Thus, Art. 1477 provides that the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Hernando R. Penalosa vs. Severino Santos G.R. No. 133749 August 23, 2001 Facts: Severino sold his property to henry. Henry applied for a loan with philam life. As It was already approved pending the submission of certain Page 2 documents such as the owners duplicate of transfer certificate of title which is in possession of severino. Henry already took possession of the property in question after ejectment of the lessees. He also paid an ernest money of 300,000 under the premise that it shall be forfeited in favor of severino in case of nonpayment. Severino now claims ownership over the property claiming that henry did not pay for the property, therefore there was no sale to speak of. Issue: whether or not there is a contract of sale perfected in this case. Held: there was a perfected contract of sale due to the second deed of sale. The basic characteristic of an absolutely simulated or fictitious contract is that the apparent contract is not really desired or intended to produce legal effects or alter the juridical situation of the parties in any way.30 However, in this case, the parties already undertook certain acts which were directed towards fulfillment of their respective covenants under the second deed, indicating that they intended to give effect to their agreement. Further, the fact that Severino executed the two deeds in question, primarily so that petitioner could eject the tenant and enter into a loan/mortgage contract with Philam Life, is to our mind, a strong indication that he intended to transfer ownership of the property to petitioner. For why else would he authorize the latter to sue the tenant for ejectment under a claim of ownership, if he truly did not intend to sell the property to petitioner in the first place? Needless to state, it does not make sense for Severino to allow petitioner to pursue the ejectment case, in petitioner's own name, with petitioner arguing that he had bought the property from Severino and thus entitled to possession thereof, if petitioner did not have any right to the property. Also worth noting is the fact that in the case filed by Severino's tenant against Severino and petitioner in 1989, assailing the validity of the sale made to petitioner, Severino explicitly asserted in his sworn answer to the complaint that the sale was a legitimate transaction. He further alleged that the ejectment case filed by petitioner against the tenant was a legitimate action by an owner against one who refuses to turn over possession of his property. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 It should be emphasized that the non-appearance of the parties before the notary public who notarized the deed does not necessarily nullify nor render the parties' transaction void ab initio. We have held previously that the provision of Article 1358 of the New Civil Code on the necessity of a public document is only for convenience, not for validity or enforceability. Failure to follow the proper form does not invalidate a contract. Where a contract is not in the form prescribed by law, the parties can merely compel each other to observe that form, once the contract has been perfected.35 This is consistent with the basic principle that contracts are obligatory in whatever form they may have been entered into, provided all essential requisites are present. 3 The elements of a valid contract of sale under Art. 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. 37 In the instant case, the second deed reflects the presence of all these elements and as such, there is already a perfected contract of sale. The non-payment of the contract price merely results in a breach of contract for non-performance and warrants an action for rescission or specific performance under Article 1191 of the Civil Code. Be that as it may, we agree with petitioner that although the law allows rescission as a remedy for breach of contract, the same may not be availed of by respondents in this case. To begin with, it was Severino who prevented full payment of the stipulated price when he refused to deliver the owner's original duplicate title to Philam Life. His refusal to cooperate was unjustified, because as Severino himself admitted, he signed the deed precisely to enable petitioner to acquire the loan. He also knew that the property was to be given as security therefor. Thus, it cannot be said that petitioner breached his obligation towards Severino since the former has always been willing to and could comply with what was incumbent upon him. In sum, the only conclusion which can be deduced from the aforesaid circumstances is that ownership of the property has been transferred to petitioner. WHEREFORE, the petition is GRANTED. Page 3 received a confidential report from an informant about the rampant trafficking of drugs by Elizabeth Ganguso y Decena a. Dangerous Drugs Enforcement Section..: Facts: Major Juvenile Sulapas.PEOPLE OF THE PHILIPPINES v. SPO1 Gabutin. A buy-bust operation was planned with Dennis Vermug acting as poseur-buyer.a. ELIZABETH GANGUSO G. backed-up by SPO1 Lumapat.R. J. 1995 DAVIDE. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 4 . 115430 November 23. PO3s Mendoza and Garcia with SPO3 Fucanan as team leader. Pasay City Police Station. "Beth Tomboy". JR.k. Officer-in-charge. No. Decision:  ISLAW: If an offense under the RPC is also punishable by another law. Hence. She was sentenced to suffer the penalty of life imprisonment and to pay a fine plus costs for the crime involving drugs. and the challenged decision of the Regional Trial Court of Pasay City is modified. the court shall sentence the accused to an indeterminate sentence. No.A. Though she was not in possession of the object of sale. Whether the trial court erred in finding that the prosecution has fully met the test of moral certainty as to the guilt of the accused on both charges of violation of section 15. 7659. Hence. amending R. 7659. presumption of innocence stands for failure of the prosecution to establish such guilt. as maximum. Finally. In the case at bar.A. though Beth is not the owner. to three years of prision correccional. proper penalty should be within the range of arresto mayor to prision correccional. there was a meeting of minds upon a definite object and upon the price. As regards the penalty imposed. as maximum. Applying R. Simon. Beth made statements in her testimony different to that of the police‘s: policemen barged into her house. At the trial. presumed to have given her consent by not inquiring as to the meaning of “S” when the officer posed to buy “Php 500 worth of S”. accusedappellant Beth is acquitted for the charge of illegal possession of firearms on ground of reasonable doubt. Therefore. they were able to recover a . Article 1459 merely requires that the vendor must have the right to transfer ownership of the object sold at the time of delivery. Article III of the Dangerous Drugs Act of 1972 and of illegal possession of firearms. denied the revolver recovered from her. as minimum. It is sufficient that the members of the operation were accompanied by the informant to the scene. defense presented two witnesses who also claimed that no buy bust operation took place and no revolver was in the possession of the suspect. Ratio Decidendi: Supreme Court held that the elements of a contract of sale were present. She was also sentenced to an indeterminate penalty of ten years and one day of prision mayor. At the same time. Nevertheless. The instant appeal is partly granted. 6425. the maximum term of which shall not exceed the maximum fixed by said law and the minimum shall not be less than the minimum term prescribed by the same. Several documentary exhibits were presented as evidence to the crime. took effect on 31 December 1993. the Regional Trial Court of Pasay convicted her of both charges. since the shabu only weighs 0. and the decision in the case of People v.1954 grams. that amendatory law should be applied retroactively. Issue: Supreme Court also held that failure to conduct prior surveillance and absence of marked money does not affect the evidence of the prosecution. as minimum. the drug subject was presented before the court. Being patently favorable to the appellant. Article III of the Dangerous Drugs Act of 1972 is reduced to an indeterminate sentence of three months of arresto mayor. searched the premises and her person without a warrant and. the sale was adequately proven and. No.A. Beth is Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 5 . Ownership was thereafter acquired upon her delivery to the men in the alley after her payment of the price. with fine and costs for the crime of illegal possession of firearms. The penalty imposed on her for the violation of section 15.  R. to twelve years and one day.38 caliber Paltik revolver from the suspect. penalty should be prision correccional to reclusion temporal depending upon the quantity. No.The operation was carried out and they were successful in arresting Beth for the violation of Dangerous Drugs Act of 1972. Beth appealed. ISLAW. there was no proof that Beth is guilty beyond reasonable doubt for the possession of firearms. she had the right to dispose of the prohibited drug. As modified. L-46892 September 30.R.: Facts: Amparo Del Rosario entered into a contract with Attorney Andres Santos and his wife Aurora Santos whereby the latter sold to the former a 20.HEIRS OF AMPARO DEL ROSARIO v. J. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 6 . by agreement with the latter. Said lot forms part of the several lots belonging to a certain Teofilo Custodio. m. No. owns ½ interest thereof. Due to the failure of spouses Andres to execute the deed after the fulfillment of the condition. Attorney Santos. Del Rosario claims malicious breach of a Deed of Sale. of land which is to be segregated from Lot 1. Parties agreed that spouses Andres shall thereafter execute a Deed of Confirmation of Sale in favor of Del Rosario as soon as the title has been released and the subdivision plan of said Lot 1 has been approved by the Land Registration Commissioner. AURORA SANTOS G. 1981 GUERRERO. as his attorney‘s fees.000 sq. of which lots. 000 sq. out of close friendship between the defendants and the plaintiff. hence. FACTS: Issue: (As far as it concerns Sales) Whether the sale is valid as to the cause or object of the contract. Things having a potential existence may be the object of the contract of sale. which defendants own ½ interest thereof. The sale of a vain hope or expectancy is void. 15. After actions by respective parties. the Dir. It appeared in record that the Timberwealth Corporation was a non-existent organization. CA Page 7 . of land to be taken either from Lot 4 or from Lot 5-A of Custodio‘s lots. The expectant right came into existence or materialized for the appellants actually derived titles from Lot I which subsequently became the object of subdivision. 1461. On Nov.Defendant thereafter filed a motion to dismiss setting up the defenses of lack of jurisdiction of the court over the subject of the action and lack of cause of action as well as the defense of prescription. Spouses paid P 20. Tiro appealed to CA. the payment therefor of P 30. 18. The case at bar is not a case of a vain hope or expectancy which is void under the law. defendants alleged that the claim on which the action or suit is founded is unenforceable under the statute of frauds and that the cause or object of the contract did not exist at the time of the transaction. of Forestry directed a consolidation for the renewal of the concession. Tiro filed a complaint for failure of the spouses to pay the remaining balance. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. Ratio Decidendi: Supreme Court held that the execution of the deed of sale is valid notwithstanding the lack of any title to the lot by appellants at the time of execution f the deed of sale in favor of appellee as there can be a sale of an expected thing in accordance with Article 1461 of the New Civil Code: Art. abandonment or otherwise extinguishment of the demand set forth in the complaint. COURT OF APPEALS and LEONARDO TIRO Aggrieved by the aforesaid decision. Finally. JAVIER and ESTRELLA F. 1966 for the addt‘l forest concession. with costs against the appellants. JAVIER vs. The lower court resolved to deny the motion to dismiss. 1968. By virtue of the deed.000. adjoining the area covered in the first deed.Spouses filed their answer arguing therein the nullity of the deeds and the return of the payments made by them. Decision: The judgment appealed from is hereby affirmed in toto. 1990 Regalado. the defendants filed an appeal with the Court of Appeals which certified the records of the case to the Supreme Court for final determination. JOSE M. the lower court ordered the defendants to execute and convey to plaintiff the 20. m.000 as initial payment and the balance to be paid in instalments as agreed. The parties entered into another deed on Feb. spouses Javier consolidated with the other adjoining concessionaires.The trial court dismissed the complaint hence. subject of a pending application. 1966. 28.000 shall be paid as soon as the application is approved. 1966 in favor of spouses Jose and Estrella Javier and for the amount of P 120. 48194 March 15. tantamount to waiver.: Leonardo Tiro executed a Deed of assignment concerning his shares of stock in Timberwealth Corporation on Feb. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 GR No. They further alleged that the deed of sale was only an accommodation graciously extended. J.On July 16. As agreed. 00. THE COURT OF APPEALS and SUSAN CHUA February 1. guarantee or secure any trade or contract that results or may result therefrom. SC agrees. as stated in the deed itself. This finding is supported by the contemporaneous and subsequent acts of petitioners and private respondent. when it does not prejudice a third person and is not intended for any purpose contrary to law. in connection with such solicitation or acceptance of orders. she was able to get only P 470. Petitioners contend that the deed of assignment conveyed to them the shares of stocks of private respondent in Timberwealth Corporation. under the second paragraph of Article 1461 of the Civil Code. A contract with a false consideration is not null and void per se. securities or property (or extends credit in lieu thereof) to margin. public order or public policy binds the parties to their real agreement. said deed produces no effect. COMMODITIES. never became effective or enforceable. Since private respondent did not obtain that approval.000. since private respondent never acquired any right over the additional area for failure to secure the approval of the Bureau of Forestry. complaint was filed with the trial court. RULING: Decision Modified. 1966 is a relatively simulated contract which states a false cause or consideration. Its Account Executive Elizabeth Diaz invited Susan Chua to invest in commodity futures trading and they subsequently entered into a commodity futures contract without explanation to Susan as to the risks involved. INC. Inc.reversed the judgment. THE FORMER FOR TOTAL ABSENCE OF CONSIDERATION AND THE LATTER FOR NONFULFILLMENT OF CONDITIONS. Petition to review filed with SC. its birth or effectivity can take place only if Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 ONAPAL PHILS. In this case. ISSUE: Moreover. 90707 Campos. and when the event which constitutes the condition happens or is fulfilled. or one where the parties conceal their true agreement. Susan may withdraw anytime and she did. The true cause or consideration of said deed was the transfer of the forest concession of private respondent to petitioners for P120. As to the nullity for the non-fulfilment of the conditions. which must be registered and licensed as a Futures Commission Merchant/Broker and is engaged in soliciting or in accepting orders for the purchase or sale of any commodity for future delivery on or subject to the rules of the contract market and that. good customs. morals. It is settled that the previous and simultaneous and subsequent acts of the parties are properly cognizable indicia of their true intention. engaged in commodity futures trading. Under Article 1346 of the Civil Code. Since said corporation never came into existence. The deed of assignment of February 15. Hence. accepts any money. Jr. a relatively simulated contract. The trial court found and rendered the trading contract a Page 8 . The efficacy of said deed of assignment is subject to the condition that the application of private respondent for an additional area for forest concession be approved by the Bureau of Forestry. hence the said deed is null and void for lack of cause or consideration.000. the agreement executed therefor. the efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. Futures Commission Merchant/Broker refers to a corporation or partnership. Commodities. Their acts reveal that the cause stated in the questioned deed of assignment is false. When a contract is subject to a suspensive condition. no share of stocks was ever transferred to them. A commodity futures contract refers to an agreement to buy or sell a specified quantity and grade of a commodity at a future date at a price established at the floor of the exchange.000 Susan invested. is a commission merchant/broker licensed by SEC. W/N THE TWO DEEDS ARE NULL AND VOID. From P 800.: FACTS: ONAPAL Phils. 1993 GR No. J.. vs. As stipulated in the trading contract. which had for its object the transfer of said right to petitioners. the parties merely speculated on the rise and fall in the price of the goods/commodity subject matter of the transaction. In the realities of the transaction. and (3) the deeds of sale do not reflect and express the true intent of the parties Defendants. On appeal. Emma and Natividad as well as of defendants Fidel. petition for certiorari with SC. in good faith. so petitioner would have to pay private respondent the "margin". The petitioner would keep the money or collect the difference from the private respondent. Nora. Hence. 2003 First Division Ponente: Carpio. Frankwell Enterprises Ltd. 126376 Facts: Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion. customer's orders shall be directly transmitted by the petitioner as broker to its principal. This is clearly a form of gambling provided for with unmistakeable certainty under Article 2018 If a contract which purports to be for the delivery of goods. The trading contract signed by the parties. declaring that the deeds of sale were all executed for valuable consideration. the transaction is null and void. We draw the conclusion that no actual delivery of goods and commodity was intended and ever made by the parties. all surnamed Joaquin. she would be the winner and the petitioner. There is no evidence that the orders and money were transmitted to its principal Frankwell Enterprises Ltd. If private respondent's speculation was correct. As per terms of the trading contract. Clarita. CA upheld the judgment. which in turn must place the customer's orders with the Tokyo Exchange. in Hongkong nor were the orders forwarded to the Tokyo Exchange. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Sps. (2) assuming that there was consideration in the sums reflected in the questioned deeds. Court of Appeals November 20. and Gavino. the winner. Petitioners then filed an action the Regional Trial Court (RTC) of Makati seeking to declare as null and void ab initio the deeds of sale executed by Leonardo and Feliciana claiming that: (1) here was no actual valid consideration for the deeds of sale. and with full knowledge of the consequences of their deeds of sale. Felicitas. on the other hand aver (1) that the sales were with sufficient considerations and made by defendants parents voluntarily. ISSUE: W/N THE TRADING CONTRACT IS NULL AND VOID AS IT APPEARS TO BE A SPECIE OF GAMBLING RULING: Petition Dismissed. the Court of Appeals affirmed the decision of the RTC. But if private respondent was wrong in her speculation then she would emerge as the loser and the petitioner. and (2) that the certificates of title were issued with sufficient factual and legal basis. ONAPAL received the customer's orders and private respondent's money. of Hongkong . Leonardo and Feliciana executed several deeds of sale in favour of their co-defendant children. the loser. securities or shares of stock is entered into with the intention that the difference between the price stipulated and the exchange or market price at the time of the pretended delivery shall be paid by the loser to the winner. Fe. J. Issues: (1) Whether there the deeds of sale are void for lack of consideration Page 9 . GR No. in which either seller or buyer may elect to make or demand delivery of goods agreed to be bought and sold. Tomas.specie of gambling and therefore null and void. The loser may recover what he has paid. By delivery is meant the act by which the res or subject is placed in the actual or constructive possession or control of another. is a contract for the sale of products for future delivery. The RTC dismissed the case. Artemio. but where no such delivery is actually made. the properties are more than three-fold times more valuable than the measly sums appearing therein. Bernardo Buenaventura and Consolacion Joaquin vs. mistake or undue influence. unless there has been fraud. It is not the act of payment of price that determines the validity of a contract of sale. As a consensual contract. Except in cases specified by law. All the respondents believed that they received the commutative value of what they gave. except as may indicate a defect in the consent. then the contract of sale is valid but subject to reformation. respondent Leonardo Joaquin. the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold. the contract of sale is valid. Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. or that the parties really intended a donation or some other act or contract. Held: The petition is without merit. but a consensual contract. petitioners presented Emma Joaquin Valdozs testimony stating that their father. On the other hand. Gross inadequacy of price does not affect a contract of sale. If there is no meeting of the minds of the parties as to the price. lesion or inadequacy of cause shall not invalidate a Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 10 . Payment of the price goes into the performance of the contract. (1) A contract of sale is not a real contract. Failure to pay the consideration is different from lack of consideration. the sale is void. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract. a contract of sale becomes a binding and valid contract upon the meeting of the minds as to Article 1470 of the Civil Code further provides: Art. respondent siblings have also fully paid the price to their respondent father. but the real price was also stated in the Deeds of Sale. 1470. The trial court did not find the allegation of absolute simulation of price credible. Payment of the price has nothing to do with the perfection of the contract. or even affect. the Deeds of Sale. To prove simulation. Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code which would invalidate.(2) Whether the deeds of sale are void for gross inadequacy of price contract. there is no requirement that the price be equal to the exact value of the subject matter of sale. told her that he would transfer a lot to her through a deed of sale without need for her payment of the purchase price. (2) Articles 1355 of the Civil Code states: Art. Article 1471 of the Civil Code states that if the price in a contract of sale is simulated. Indeed. As of the filing of the complaint. If there is a meeting of the minds of the parties as to the price. Not only did respondents‘ minds meet as to the purchase price. If the real price is not stated in the contract. Petitioners failure to prove absolute simulation of price is magnified by their lack of knowledge of their respondent siblings financial capacity to buy the questioned lots. despite the manner of payment. because the price stipulated in the contract is simulated. or even the breach of that manner of payment. price. then the contract is void. 1355. Santiago owned a parcel of land. Petitioner Labagala. on the other hand.000 for the sale of the subject property because petitioner was unemployed and without any visible means of livelihood at the time of the alleged sale. Thereafter. The RTC held that while there was indeed no consideration for the deed of sale executed by Jose in favor of petitioner. the trial court in that case decided in favor of the sisters. 1981. his sisters Nicolasa and Amanda Santiago (respondents). On appeal. including one of Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 11 . Jose did not have the right to transfer ownership of the entire property to petitioner since 2/3 thereof belonged to his sisters. the Court of Appeals reversed the decision of the RTC Issue: Whether the purported deed of sale was valid Held: There is no valid sale. being a minor at the time. Petitioner could not have given her consent to the contract. Jose died intestate. Consent of the contracting parties is among the essential requisites of a contract. the respondents filed an action before the Regional Trial Court of Manila seeking to recover Jose‘s 1/3 share over the property. 2001 Second Division Ponente: Quisumbing. On April 20. recognizing their right of ownership over portions of the property. GR No. Alleging that Jose had fraudulently registered it in his name alone. claims that she is the daughter of Jose and argued that the purported sale of the property was in fact a donation to her. Clearly. Santiago December 4. there is no valid sale in this case. Respondents claim that Jose‘s share in the property ipso jure belongs to them because they are the only legal heirs of their brother. sued Jose for recovery of 2/3 share of the property.Labagala vs. but said deed constitutes a valid donation. 132305 Facts: Jose T. J. who died intestate and without issue. They allege that it is highly improbable for petitioner to have paid the supposed consideration of P150. or some other act or contract. Court of Appeals G. Petitioner‘s motion for reconsideration was denied by the respondent Court. Inc (lessee) entered into a Contract of Lease with Option to Buy with petitioners (lessors) involving a land situated at Quezon City for one (1) year. Article 1471 of the Civil Code provides: If the price is simulated. Lessee filed a petition enjoining the enforcement of said judgment and dismissal of the case for lack of jurisdiction.sale. Respondent Court of Appeals rendered a decision upholding the jurisdiction of City Court and concluding that there was a perfected contract of sale between the parties due to the said partial payment. The petitioneres had a cause of action to institute an ejectment suit against the lessee with the City Court thus the city court (now MTC) has jurisdiction over it. Such petition was denied. 1976. HTP. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 12 . for failure of lessee to pay the rentals the petitioners filed an action for ejectment. During that period the respondent was granted an option to purchase the land. petitioner admittedly did not pay any centavo for the property. Moreover. The filing of lessor of a suit with the RTC did not divest the City Court of its jurisdiction to take cognizance over the ejectment case. Dizon vs.R. J Facts: On 1974. the sale is void. Thereafter. which makes the sale void. Issues: Whether the Quezon City court has jurisdiction over the ejectment case? Whether the money given constitutes partial consideration to the option to purchase the land? Whether or not there is a perfected contract of sale? Ruling: 1. lessee filed for an action for specific performance to compel the execution of a deed of sale pursuant to the option to purchase and the receipt of the partial consideration given to Alice Dizon and for the fixing of period to pay the balance. Private respondent Overland Express Lines. but the act may be shown to have been in reality a donation. The City Court rendered judgment ordering lessee to vacate the leased premises and to pay the rentals in arrears and damages with interests. 122544 302 SCRA 288 FIRST DIVISION Ponente: Martinez. absent which there can be no valid contract. No. the subject lot is capable of being determined without the need of any new contract. However. Since the lessee did not purchase within the stipulated one (1) year and afterwhich still kept possession thereof. Respondent attached to his answer a receipt signed by the late Juan as proof of the purchase. Here. Respondent further alleged that the full payment of the additional lot would be effected within five (5) years from the execution of the deed of sale after a survey is conducted over said property. 135634 332 SCRA 769 SECOND DIVISION Ponente: Mendoza. The receipt described the lot as ―previously paid lot‖. Ramon engaged the serviced of geodetic engineers to survey the lot. Respondent Court of Appeals reversed the decision rendered by the Trial Court. The contract of Sale can be gainsaid to be absolute because there is no reservation of Page 13 . thtey discovered that the respondent had enlarged the area which he purchased from the late Juan. there was no showing that petitioners consented to the act of Alice Dizon nor authorized her to act on their behalf with regard to her transaction with the lessee. In herein case. Issues: Whether the Court erred in holding that there is a valid contract of sale? Whether the Court erred in holding that the consignation is valid? Whether the amount of consignation is untenable? Whether the respondent is barred by prescription and laches from enforcing the contract? Heirs of San Juan Andres vs.2. Facts: Juan San Andres sold a portion of his land to respondent Vicente Rodriguez evidenced by a Deed of Sale. Respondent thereafter deposited in the court the balance of the purchase price. There was no perfected contract of sale between the parties. The trial court rendered judgement in faovr of the petitioner and ruled that there was no contract of sale because there is no valid object because there is no sufficient indication. Therefore. petitioner‘s contention that there is no determinate object is without merit. the lessee cannot enforce its option to purchase anymore. Even assuming that such option still subsists. Ramon San Andres was appointed judicial administrator of his estate. the suit for specific performance to enforce the option to purchase was filed only on 1985 ore more than ten (10) years after accrual of the cause of action. In herein case. when the lessee tendered the amount on 1975. respondent refused to do so claiming that he purchased the same from the late Juan with both parties treating the two lots as one who parcel of land. While the case is pending. From such survey. there was an implicit renewal of the contract reviving all the terms in the original contract which are only germane to the lessee‘s rights of continued enjoyment of the property leased.R.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. J Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Rulings: 1. Upon the death of Juan. There is a valid Contract of Sale because all the essential elements are present. Since the lot subsequently sold to respondent is said to adjoin the ―previously paid lot‖ on three sides thereof. The option to purchase is not deemed incorporated. The term stipulated in the contract of lease with option to buy is just one (1) year. Rodriguez G. Ramon then send a letter demanding the respondent to vacate the portion allegedly encroached by him. Having failed to exercise the option within that period. one of the essential elements for a contract of sale to be perfected is lacking: consent. Vicente also died and was substituted by his heirs. the lessee gave the money to Alice Dizon in an attempt to resurrect the lapsed option. 3. Ramon died and was replaced by son Ricardo. On September 24. he deemed it proper to deposit it in the Court. In herein case since there is no deed of sale yet thus the period when the purchase price should be paid has not commenced yet which makes it not yet due and demandable. which was executed on June 4. 1993. The court is not erroneous because it thereafter ordered the execution of deed and the acceptance of the deposit. filed an action for ejectment against Lagrimas A. LAGRIMAS A.500 would be paid on the last week of August 1988. Hence. and they agreed thereto. CA gave weight to the argument of private respondents Page 14 . petitioner. In their Complaint. Thus. together with the upper portion of the house thereon. but she refused to do so.. They acquired the said properties from Lagrimas who sold the same to them by virtue of a Deed of Absolute Sale. Since there was no Deed of Sale yet and the respondent wants to pay the purchase price. It merely provides for the manner of computation of payment. Thus. They then demanded that Lagrimas vacate the subject premises. The amount is based on the agreement which is the law between the parties. However. Lagrimas requested for time to vacate the premises. NO. Time came when they needed the said house as they were only renting their own residence. 125088 Ruling: FIRST DIVISION AZCUNA. Manila.500 (representing P15. No. The stipulation ―payment of full consideration based on a survey shall be due and payable in five (5) years from the execution of deed of sale‖ is not a condition which affects the efficacy of the contract. and that possession of the property would be transferred to the spouses Ramos only upon full payment of the purchase price. Issue: WHETHER OR NOT THE COURT OF APPELS GRAVELY ERRED AND ABUSED ITS DISCRETION IN NOT INTERPRETING THAT THE "KASUNDUAN" EXECUTED BY AND BETWEEN PETITIONER (DEFENDANT) AND PRIVATE RESPONDENT (PLAINTIFF) SUPERSEDES THE DEED OF SALE WHICH HAS NOT BEEN CONSUMMATED.200. it is binding and the court can only give force and effect to the intentions of the parties. the sum of P22. they initiated this action for ejectment against Lagrimas.ownership. vs. 3. Sometime in May 1988. had been sold by Lagrimas to the spouses Ramos for P31. Prescription does not apply.: Facts: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 The Court of Appeals did not give credence to the statement in the Kasunduan that private respondents paid only P22. Consignation is proper only in cases where an existing obligation is due.. April 14.500 as interest from September 1984 to May 1988) had been paid. 2004 G. that of the said price.R.000. because they were not in immediate need of the premises. spouses Isagani P. that the balance of P8. Ramos and Erlinda Gasingan Ramos. ISAGANI P. 2.500 to petitioner since her indebtedness already reached P26. respondents. Boy (Lagrimas). Erlinda Ramos and Lagrimas executed an agreement (Kasunduan) acknowledging that the subject parcel of land. J. RAMOS and ERLINDA GASINGAN RAMOS. 4. the spouses alleged that they are the owners of a parcel of land and the house existing thereon at 1151 Florentino Torres St. BOY. COURT OF APPEALS. 1986. Singalong. with the Metropolitan Trial Court of Manila.000 cash loan plus P7. therefore. the Deed of Absolute Sale does not contain any stipulation against the constructive delivery of the property to private respondents. the subject property to private respondents (as vendees) after they paid the price of P31. supports private respondents‘ right of material possession over the subject property. The Deed of Absolute Sale. obligated herself to transfer the ownership of. if from the deed the contrary does not appear or cannot clearly be inferred. the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. as in this case. Article 1498 of the Civil Code provides that when the sale is made through a public instrument. and to deliver. the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract. In addition.that Erlinda Ramos was merely tricked into signing the Kasunduan. It has been established that petitioner sold the subject property to private respondents for the price of P31. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 15 . the due execution of which was not controverted by petitioner. By the contract of sale.000. In the absence of stipulation to the contrary. The contract is absolute in nature. In this case. without any provision that title to the property is reserved in the vendor until full payment of the purchase price.000. the ownership of the property sold passes to the vendee upon the actual or constructive delivery thereof. petitioner (as vendor). as evidenced by the Deed of Absolute Sale. Under Article 1477 of the Civil Code. 000. . 1985.00 and not receiving any response thereto. As evidenced by the March 15. 1984 and the balance of $60. 1985 Page 16 . plaintiff paid to the defendants the amounts of $1. August 17. 1985. A contract of sale is a consensual contract and 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. 1986.00. ADORACION CUSTODIO. wrote a letter to the plaintiff dated March 15.00 on December 4.00 paid by CUSTODIO pursuant to the "option" granted to her over the Beata property? NO.00 and P40. 1999 G. SPS. TRINIDAD KALAGAYAN.000. GONZAGA-REYES.: Facts: . represented by her Attorney-in-fact. On January 25.R.00 as earnest money.000. although the period of payment had already expired. 112330 THIRD DIVISION Ruling: The March 15. in order that the same may be reserved for her purchase. No.000. From that moment the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. petitioners. 1985 letter sent by the COS through their lawyer to the CUSTODIO reveals that the parties entered into a perfected contract of sale and not an option contract. 1984. the sum of $30. J. demanding that she pay the balance of $70.000. Metro Manila. Muntinlupa. Defendant's counsel.purchase of the latter's house and lot located at 316 Beata St. and (3) price certain in money or its equivalent. New Alabang Village.000.000. vs. The purchase price of $100. sometime on October 9. for and in consideration of the sum of $100. respondents. as partial payment of the purchase price. plaintiff paid to the defendant Melody Co in the United States. . plaintiff entered into a verbal contract with defendant for her Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds. 1985. (2) determinate subject matter. COURT OF APPEALS AND MRS. informing her that she has lost her "option to purchase" the property subject of this case and offered to sell her another property. said lawyer wrote another letter to plaintiff dated August 8.00 is payable in two payments $40.00 on January 5. HENRY CO AND ELIZABETH CO AND MELODY CO. said earnest money to be deducted from the total purchase price.. Atty.00. One week thereafter. Leopoldo Cotaco.000. Issue: Whether or not the Court of Appeals erred in ordering the spouses Co (COS) to return the $30.000. 000. rescission creates the obligation to return the things which were the object of the contract but such rescission can only be carried out when the one who demands rescission can return whatever he may be obliged to restore. subject of the sale at a price of $100. The COS were of the mistaken belief that CUSTODIO had lost her "option" over the Beata property when she failed to pay the remaining balance of $70.000. 1986 letter. The price received by the appellants has to be returned to the appellee as aptly ruled by the lower court. CUSTODIO immediately sued for the rescission of the contract of sale and prayed for the return of the $30. . Earnest money in the amounts of US$1.000. Under Article 138518 of the Civil Code.000. Even the manner of payment of the price was set forth in the letter.000.000. CUSTODIO acted well within her rights when she attempted to pay the remaining balance of $70. Under Article 1482 of the Civil Code. all three elements of a contract of sale are present in the transaction between the petitioners and respondent. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 17 . for such is a consequence of rescission. Accordingly.00 was accepted by the COS. earnest money given in a sale transaction is considered part of the purchase price and proof of the perfection of the sale.00 and P40.00 she had initially paid.letter.00 to complete the sum owed of $100. Custodio's offer to purchase the Beata property. When the COS refused to accept said payment and to deliver the Beata property. She has therefore nothing to return to the appellants.00 pursuant to their August 8. The property involved has not been delivered to the appellee.00 was already received by the COS.000.00 as the contract was still subsisting at that time. which is to restore the parties in their former situations. This motion was opposed by respondent spouses. In a letter dated March 24. [GRN 137290 July 31. Dauz informing her that because the parties failed to agree on the terms and conditions of the sale despite the extension granted by San Miguel. RTC granted the motion to dismiss but the CA reversed it on appeal and held that all the requisites of a perfected contract of sale had been complied with as the offer made in connection with which the earnest money in the amount of ₱1 Million was tendered by respondent spouses had already been accepted by SMPPI. 1482 Page 18 .000 in cash. The court cited Art. Atty.‖ On July 7. RESPONDENTS.. INC. wrote Atty.would be given as earnest money and the balance would be paid in 8 equal monthly installments from May to December 1994. Dauz signified her clients‘ interest in purchasing the properties for the amount for which they were offered by petitioner. no perfected contract of sale. through its president.000 shall be refundable to us in full upon demand. it is already returning the amount of ₱1 Million given as ―earnest-deposit‖. 2. 1994. subject to the following conditions: ―1. under the following terms: the sum of ₱500. PETITIONER. the complaint did not allege a cause of action because there was no meeting of the minds between the parties and therefore. Federico Gonzales. Inc. However.000 Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Respondent spouses. the said amount of ₱1. Dauz thus wrote San Miguel expressing the interest of respondent spouses. 3. SAN MIGUEL PROPERTIES PHILIPPINES. we will negotiate on the terms and conditions of the purchase. SPOUSES ALFREDO HUANG AND GRACE HUANG. VS. Helena Dauz who was acting for respondent spouses as undisclosed principals.140. The offer was made to Atty. On February 21. and 2. In the event that we do not come to an agreement on this transaction. 1994. 2000] First Division Facts: Petitioner San Miguel Properties Philippines. Pasig City. through their counsel. Parts of its inventory are two parcels of land totaling to 1.000. demanded the execution of the Deed of Sale and attempted to return the earnest-deposit but SMPPI refused to accept it on the ground that the option to purchase had already expired. Capinpin St. petitioner refused the counter-offer. 1994. 738 square meters at the corner of Meralco Avenue and Gen. and we initiate the documentation if there is mutual agreement between us. During said period.. SMPPI will secure the necessary management and board approvals. the properties were offered for sale for ₱52. We will be given the exclusive option to purchase the property within 30 days from date of your acceptance of this offer. is a domestic corporation engaged in the purchase and sale of real properties. the alleged ―exclusive option‖ of respondent spouses lacked a consideration separate and distinct from the purchase price and was thus unenforceable. San Miguel. Barrio Oranbo. 1994. Thus on August 16. respondent spouses filed a complaint for specific performance against SMPPI but the latter moved to dismiss said complaint alleging that: 1. Atty. the CA relied on the following findings: (1) earnest money was allegedly given by respondents and accepted by SMPPI through its vice-president and operations manager. Ruling: The contract of sale was not perfected. the SC holds that respondents did not give the ₱1 Million as earnest money as contemplated in Art. The amount was thus given not as part of the purchase price and proof of the perfection of the contract of sale but only as guarantee that respondents would not back out of the sale. and (2) the documentary evidence in the records show that there was perfected contract of sale. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 19 .of the Civil Code which provides that ―whenever earnest money is given in a contract of sale.‖ Issue: Whether or not the contract of sale was perfected. They even described it as ―earnest-deposit‖. In holding that there is perfected contract of sale. No contract of sale may thus be enforced by respondents. With regard to the alleged payment and acceptance of the earnest money. it shall be considered as part of the price and proof of the perfection of the contract. 1482. Isidro Sobrecarey. All that respondents had was just an option to buy the properties which privilege was not exercised by them because there was a failure to agree on the terms of payment. Respondents presented the amount merely as deposit of what would eventually become earnest money or down payment should a contract of sale be made by them. ―It is true that Article 1482 provides that whenever earnest money is given in a contract of sale.The Court of appeals affirmed said decision. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership. the ―Receipt for Partial Payment‖ shows that the true agreement between the parties is a contract to sell. 1900. The trial court ruled that there was already a perfected contract of sale between the parties and ordered the petitioners to execute a final deed of sale in favor of respondent. Third. ―First.000) anytime. Ruling: The transaction was a contract to sell. Petitioners also wrote him stating that they already delivered a manager‘s check to his counsel in said amount. Respondent thus filed a complaint for specific performance and damages with the RTC of Makati. On March 23. ownership over the property was retained by petitioners and was not to pass to respondent until full payment of the purchase price. VS. respondent offered to buy the lot and petitioners agreed to sell it at ₱1. the parties would stand as if the conditional obligation had never existed. GODOFREDO CAGUIAT. so that if the suspensive condition does not take place. The suspensive condition is commonly full payment of the purchase price. but only a transfer after full payment of the purchase price. wrote petitioners informing them of his readiness to pay the balance of the contract price and requesting them to prepare the Deed of Sale. petitioners retained possession of the certificate of title of the lot. ―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. Second. informed respondent in a letter that Amparo Herrera would be leaving for abroad on or before April 15. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIÑAS… SPOUSES ONNIE SERRANO AND AMPARO HERRERA. through counsel. the agreement between the parties was not embodied in a deed of sale. Issue: Whether or not there was a contract of sale. Petitioners. it shall be considered as part of the price and Page 20 . 1990. ―In this case. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 MR. 2007]First Division Facts: Petitioners are registered owners of a lot located in Las Piñas. through his counsel. PETITIONERS. A few days after. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23. RESPONDENT. respondent. consummation of which is subject only to the full payment of the purchase price. Respondent then gave ₱100. ―When petitioners declared in the ―Receipt for Partial Payment‖ that they – ―RECEIVED FROM MR.‖ there can be no other interpretation than that they agreed to a conditional contract of sale. [GRN 139173 February 28. AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE. 1990 and they are canceling the transaction and that respondent may recover the earnest money (₱100.500 per square meter.000 as partial payment. arguing that the seizure of the two (2) leased equipment stripped PCI LEASING of its cause of action.X Creative Imaging. PCI LEASING is barred from further pursuing any claim arising from the lease agreement and the companion contract documents. ―Clearly. of the Civil Code. July 12. . in order that the provisions of the Recto Law may be circumvented. GIRAFFE defaulted in its monthly rental-payment obligations. and is outside the application and coverage of the Recto Law.its intention to sell the property subject of the finance lease. if not.Instead of an answer.motion for reconsideration was denied. -the trial court granted GIRAFFE‘s motion to dismiss . GIRAFFE filed a Motion to Dismiss.500. -Being leases of personal property with option to purchase as contemplated in the above article. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 . .A.PCI Leasing instituted a case against GIRAFFE.up to the last moment .Upon PCI LEASING‘s posting of a replevin bond. Trial Court‘s decision affirmed Ratio: -The PCI LEASING. The absence. the earnest money was given in a contract to sell. To the petitioner. Giraffe. No.proof of the perfection of the contract. the Page 21 . petitioner PCI LEASING and respondent GIRAFFE entered into a Lease Agreement. 5980 defines and authorizes its existence and business. R. but a lease with option to purchase. 8556. supra.The present case reflects a situation where the financing company can withhold and conceal . this article speaks of earnest money given in a contract of sale. respondent cannot compel petitioners to transfer ownership of the property to him. Article 1485 of the Civil Code should apply. .The demand went unheeded. However.00. 5980.petitioner contends that the financial leasing arrangement it concluded with the respondent represents a straight lease covered by R. as last amended by R. then it should return them. the Financing Company Act. pursuant to Article 1484 of the Civil Code on installment sales of personal property. to be sure. 1998 to GIRAFFE. -GIRAFFE argues that. hence this petition for review.‖ PCI Leasing and Finance Inc. the trial court issued a writ of replevin. .00 and one (1) unit of Oxberry Cinescan 6400-10 worth P6. . In this case. paving the way for PCI LEASING to secure the seizure and delivery of the equipment covered by the basic lease agreement. No. foremost of which is the declarations made in its demand letter to the respondent. No. -GIRAFFE asserts in its Motion to Dismiss that the civil complaint filed by PCI LEASING is proscribed by the application to the case of Articles 1484 and 1485. And following a three-month default. that the basic ―lease agreement‖ does not contain a ―purchase option‖ clause. adding that the agreement between the parties is in reality a lease of movables with option to buy.A. Issue: Whether the agreement between PCI Leasing and GIRAFFE is governed by Articles 1484 and 1485 of the Civil Code? Held: Petition denied. Inc. PCI prayed for the issuance of a writ of replevin for the recovery of the leased property . .A. Being so. as petitioner pointed out. PCI LEASING addressed a formal pay-or-surrenderequipment type of demand letter dated February 24.PCI Leasing on the other hand maintains that its contract with GIRAFFE is a straight lease without an option to buy.900.00. whereby the former leased out to the latter one (1) set of Silicon High Impact Graphics and accessories worth P3. then it could keep the equipment for its own. This is clearly an option to purchase given to the respondent. 2007 GR 142618 First Division Garcia.000. It may be. does not necessarily argue against the idea that what the parties are into is not a straight lease. otherwise known as Financing Company Act of 1998.GIRAFFE lease agreement is in reality a lease with an option to purchase the equipment. This Court has. There could be no other explanation than that if the respondent paid the balance. J Facts: -On December 4. Vs. 1996. however.A year into the life of the Lease Agreement. This has been made manifest by the actions of the petitioner itself. long been aware of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. Any agreement to the contrary shall be void. a situation which. then it would end up making an instant killing out of the transaction at the expense of its client. Else. ―agreement to the contrary being null and void. due to considerations of equity. the respondent.‖ -In choosing. the vendor may exercise any of the following remedies: xxx xxx xxx (3) Foreclose the chattel mortgage on the thing sold. by force of the Recto Law. the petitioner can still sue upon its claim. 1484.‖ ―he shall have no further action‖ against the lessee ―for the recovery of any unpaid balance‖ owing by the latter. the very word ―or‖ as used in the letter conveys distinctly its intention not to claim both the unpaid balance and the equipment.contracts in question are subject to the provision that when the lessor in such case ―has chosen to deprive the lessee of the enjoyment of such personal property. ART. should the vendee's failure to pay cover two or more installments.029. Page 22 . Moreover. we would witness a situation where even if the respondent surrendered the equipment voluntarily. Paragraph (3). the residual value of the property recovered. This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of the same Article 1485. ART. to deprive the respondent of possession of the leased equipment. By virtue of the writ of seizure issued by the trial court. al. we cannot allow this to happen. the petitioner has effectively deprived respondent of their use. not cumulative. Court of Appeals et. which we are hereunder rereproducing.47). -As we articulated in Elisco Tool Manufacturing Corp. when the lessor has deprived the lessee of the possession or enjoyment of the thing. The imperatives of honest dealings given prominence in the Civil Code under the heading: Human Relations. the petitioner waived its right to bring an action to recover unpaid rentals on the said leased items. v. In this case. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Elisco Tool Manufacturing Corp. cannot be any clearer.779. Court of Appeals. 1485. In a contract of sale of personal property the price of which is payable in installments. It is not difficult to discern why: if we add up the amounts paid by the respondent. provide another reason why we must hold the petitioner to its word as embodied in its demand letter. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy. Not only to the respondent. Article 1484 in relation to Article 1485 of the Civil Code. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Article 1485 was fulfilled in this case by the filing by petitioner of the complaint for a sum of money with prayer for replevin to recover possession of the office equipment. public policy and justice. the remedies provided for in Article 1484 of the Civil Code are alternative. Vs. but those similarly situated who may fall prey to a similar scheme. The Recto Law was precisely enacted to prevent this kind of aberration. if one has been constituted. The exercise of one bars the exercise of the others. through replevin. This would be most unfair for the respondent. and the amount claimed by the petitioner as sued upon herein (for a total of P21. We cannot allow the petitioner to renege on its word. Yet more than that. in turn precludes the former from maintaining an action for recovery of ―accrued rentals‖ or the recovery of the balance of the purchase price plus interest. he shall have no further action against the purchaser to recover any unpaid balance of the price. that petitioner was ready to post a bond in an amount double the value of the car. Lantan shall return the subject motor vehicle to the EMPLOYER in good working and body condition. which was P60. Lantan installed accessories worth P15. insurance.000 plus the accrued monthly rentals thereof. 1980. at the end of FIVE (5) year period or upon payment of the 60th monthly rental. .That. should Lantan desire to exercise this option before the 5-year period lapse. . private respondent executed a promissory note which states his promise to pay P 1. -On the same day. -That. -Petitioner alleged that private respondents failed to pay the monthly rentals that despite demands.in its reply. petitioner filed motion for execution pending appeal . petitioner filed a complaint. -That.070. (c) in holding that respondents had fully paid their obligations.petitioner appealed to CA.That. entitled ―replevin plus sum of money.94. as a result of which private respondent Rolando Lantan was laid off. On January 9. with interest at the rate of 14% per annum.65 without the necessity of notice or demand in accordance with the schedule of payment .000. before the Regional Trial Court of Pasig. 1999 Second Division Mendoza J. Nonetheless. he entered into an agreement with the company which provided as follows: . repair and maintenance. and two other persons. gasoline. retention of registration of the car in the company‘s name is only a form of a lien on the vehicle in the event that the Page 23 . Under a typical car plan. the company advances the purchase price of a car to be paid back by the employee through monthly deductions from his salary. hence the petition for review on certiorari Issue/s: Whether the Court of Appeals erred (a) in disregarding the admission in the pleadings as to what documents contain the terms of the parties‘ agreement. as of December 4.CA affirmed in toto the decision of the trial court. and that in case private respondents could not return the car. Petitioner does not deny that private respondent Rolando Lantan acquired the vehicle in question under a car plan for executives of the Elizalde group of companies. identified only as John and Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Susan Doe. until fully paid. However. 1986.After taking possession of the car. Elisco shall have the full right to lease the vehicle to another EMPLOYEE. Metro Manila. they should be held liable for the amount of P60. January 9.trial court rendered its decision in favor of the private respondent .000. 1980. 1984. Lantan may exercise the option to purchase the motor vehicle from Elisco and all monthly rentals shall be applied to the payment of the full purchase price of the car and further. Ratio: First.private respondents claim that their agreement was to buy and sell and not lease with option to buy the car .00 -In 1981.Upon the posting of the bond. The company retains ownership of the motor vehicle until it shall have been fully paid for. he shall for the duration of the lease contract.65 will be leased to Rolando Lantan for 5 years . Elisco Tool Manufacturing Corp is the owner of a car which for and in consideration of a monthly rental of P 1010.‖ against private respondent Rolando Lantan. Elisco Tool ceased operations. part replacement inclusive of all expenses necessary to maintain the vehicle in top condition -That. Rolando Lantan shall pay the lease thru salary deduction from his monthly remuneration in the amount as above specified for a period of FIVE (5) years. (b) in holding that the interest stipulation in respondents‘ Promissory Note was not valid and binding. GR 109966 Facts: -Private respondent Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as head of its cash department.010. oil. his wife Rina. . it being understood however that the option is limited to the EMPLOYEE. in the event of resignation and or dismissal from the service. -On June 6. private respondent was able to make payments for the car in the total amount of P61. in case of default in payment THREE (3) accumulated monthly rentals. he may do so upon payment of the remaining balance on the five year rental unto Elisco. Held: The decision of the Court of Appeals is AFFIRMED with costs against petitioner. the sheriff took possession of the car and after 5 days turned it over to the petitioner .May 31. shoulder all expenses and costs of registration. petitioner maintained that the contract was one of lease with option to purchase and that the promissory note was merely a ―nominal security‖ for the agreement.that. private respondents failed to settle their obligation thereby entitling petitioner to the possession of the car. The agreement does not provide for the payment of interest on unpaid monthly ―rentals‖ or installments because it was entered into in pursuance of a car plan adopted by the company for the benefit of its deserving employees. have frequently resorted to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term.86. in the transfer of title to the lessee. COURT OF APPEALS and MAR-ICK INVESTMENT CORPORATION. reckless and oppressive manner in filing the instant case. it was prayed that private respondent Rolando Lantan be made to pay petitioner the amount of P60. There are also stipulations in car plan agreements to the effect that should the employment of the employee concerned be terminated before all installments are fully paid. even assuming that private respondents have defaulted in the payment of their obligation. the amount that they were supposed to pay as of May 1986. 1485. As this Court noted in Vda. Third.054. Second. 1989. This Court has long been aware of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid. G. Petitioner prayed that private respondents be made to pay the sum of P39. The exercise of one bars the exercise of the others. were worried. In addition. As the trial court correctly noted. 112733 October 24.‖ In the event the car could not be delivered to petitioner. By virtue of the writ of seizure issued by the trial court. not cumulative. There is thus a factual basis for the award of moral damages. the car plan was intended to give additional benefits to executives of the Elizalde group of companies. 1484 are alternative. petitioner acted in a wanton.‖ This prayer of course cannot be granted.employee would abscond before he has fully paid for it. provided the so-called rent has been duly paid. (THIRD DIVISION) Facts: Private respondent Mar-ick Investment Corporation is the exclusive and registered owner of Page 24 . fraudulent. This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of Art. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results. the ―estimated actual value‖ of the car. or with stipulations that if the rent throughout the term is paid. The car was not returned to private respondent until April 16. Both the trial court and the Court of Appeals correctly ruled that private respondents could no longer be held liable for the amounts of P39. 1997 281 SCRA 206 Ponente: ROMERO. This led the trial court to say that petitioner wanted to eat its cake and have it too. upon issuance by the Court of Appeals of a writ of execution. title shall thereupon vest in the lessee. after two (2) years and eight (8) months.86 or P60.00 because private respondents had fulfilled their part of the obligation. The award of attorney‘s fees is likewise proper considering that private respondents were compelled to incur expenses to protect their rights PEOPLE'S INDUSTRIAL AND COMMERCIAL CORPORATION. At the same time.R. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Art. it prayed for the issuance of a writ of replevin or the delivery to it of the motor vehicle ―complete with accessories and Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 equipment. the deputy sheriff seized the vehicle on August 6.00. de Jose v. This has not been rebutted by petitioner.054. Barrueco: Sellers desirous of making conditional sales of their goods.000. for one reason or another. by the terms of the bargain. the Court of Appeals correctly applied to it the following provisions of the Civil Code: The remedies provided for in Art. but who do not wish openly to make a bargain in that form. J. 1485 was fulfilled in this case by the filing by petitioner of the complaint for replevin to recover possession of movable property. embarrassed and mentally tortured‖ by the repossession of the car. ―plus accrued monthly rentals thereof with interests at the rate of fourteen percent (14%) per annum until fully paid. the vehicle will be taken by the employer and all installments paid shall be considered rentals per agreement. Private respondents presented evidence that they ―felt bad. hence. 1986 and thereby deprived private respondents of its use. No. petitioner. respondents. the award of exemplary damages is justified. The contract being one of sale on installment. vs.000. It is obvious that such transactions are leases only in name. plus interest at the legal rate. In the alternative. the parties agreed to the purchase price of P7.20.730. Rizal. After the lapse of ten years. Inc. 1983. What was clearly proven was that both parties negotiated a new contract after the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 termination of the first.‖ Being contracts to sell. With respect to another lot. Thus. by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price. Article 1592 of the Civil Code which requires rescission either by judicial action or notarial act is not applicable. private respondent entered into 6 agreements with petitioner People's Industrial and Commercial Corporation whereby it agreed to sell to petitioner 6 subdivision lots. On May 29. Private respondent's company lawyer volunteered that after the cancellation of the 1961 agreements. The distinction between these contracts is depicted in Adelfa Properties. a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until the full payment of the price.‖ The 1961 agreements are contracts to sell and not contracts of sale. the amount of P7. Siatianum issued checks in the total amount of P37. and that petitioner and Tomas Siatianum be ordered to pay reasonable rentals for the use of the lots.00 and equal monthly installments of P60. Neither of the parties signed the new contract.20 with a down payment of P480. this contract shall. the fact that the parties tried to negotiate a new contract indicated that they considered the first contract as already cancelled. After a series of negotiations between the parties.642.Mar-ick Subdivision in Barrio Buli. by the mere fact of nonpayment. 1403 (2) of the Civil Code as the parties did not sign the draft contract.853. Issue: Whether or not there was a perfected and enforceable contract of sale on October 11. Cainta. Court of Appeals which states that ―the distinction between the two is important for in a contract of sale.11 every 30th of the month. The contract stipulates that the previous contracts have been cancelled due to the failure of the purchaser to pay the stipulated installments. such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. It prayed that petitioner surrender possession of the lots of Mar-ick Subdivision. v. the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded. the title passes to the vendee upon the delivery of the thing sold. the parties Page 25 . whereas. it filed in the Regional Trial Court of Antipolo. the complaint prayed that should the agreements be deemed not automatically cancelled. expire by itself and become null and void. Petitioner alleges that there was a new perfected and enforceable contract of sale between the parties in October 1983. The balance of P6. The parties did not enter into a new contract in accordance with Art. in a contract to sell.72 to private respondent.00 with a down payment of P506. It had paid only the down payment and 8 installments.333. Lower court rendered a decision finding that the original agreements of the parties were validly cancelled. the same agreements should be declared null and void. a complaint for accion publiciana de posesion against petitioner and Tomas Siatianum. Thus. 1961.00. Rizal. Ruling: The contracts to sell of 1961 were cancelled to which the parties voluntarily bound themselves. When petitioner failed to abide by its obligation to pay the installments provision No. petitioner still had not fully paid for the six lots. 9 of the contract automatically took effect which states that ―should the purchaser fail to make the payment of any of the monthly installments as agreed herein. for a period of ten years. Petitioner elevated the case to the Court of Appeals which affirmed in toto the lower court's decision. 1983 which modified the earlier contracts to sell which had not been validly rescinded. they agreed to enter into a new contract to sell on October 11. In a contract of sale. Five of the agreements stipulate that the petitioner agreed to pay private respondent for each lot. There was no meeting of the minds between the parties because Art. nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. whereas in a contract to sell. Receipt by private respondent of the five checks could not amount to perfection of the contract because private respondent never encashed and benefited from those checks. title is retained by the vendor until the full payment of the price. Private respondent received but did not encash the checks. as president and majority stockholder of petitioner. Instead.20 shall be payable in 120 equal monthly installments of P57. 475 of the Civil Code should be read with the Statute of Frauds that requires the embodiment of the contract in a note or memorandum. Respondent Abecia was counsel of complainant Daroy in a case for forcible entry before the Municipal Trial Court of Opol. this draft contract may be deemed to embody the agreement of the parties. Under these facts. There are facts on record proving that the parties had not arrived at a definite agreement. (SECOND DIVISION) Facts: This refers to the complaint for malpractice filed by Regalado Daroy against Esteban Abecia. By Atty. Without an agreement on the matter. its ownership was consolidated in complainant Daroy. the sheriff sold at public auction a parcel of land belonging to one of the defendants to complainant Daroy as highest bidder. a member of the Bar. Misamis Oriental.C. Upon failure of the defendants to redeem the land. Justice and equity. A. In the absence of proof to the contrary. Judgment was rendered in favor of complainant. Article 1486 of the Civil Code provides that a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. Complainant Daroy claimed that respondent Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 26 . Villamayor's admission. the parties may ideally be considered as having perfected the contract of October 1983. ESTEBAN ABECIA. will not be served by a positive ruling on the perfection and performance of the contract to sell. vs. the parties may not in any way be considered as having arrived at a contract under the law. REGALADO DAROY. therefore. Tomas Siatianun explained that he did not sign the contract because it covered 7 lots while their agreement was only for 6 lots. The number of lots to be sold is a material component of the contract to sell. Private respondent did not and has not denied the existence of that contract. On his part. the checks were not encashed because Tomas Siatianun did not sign the draft contract that he had prepared. however. the instant petition for review on certiorari is hereby denied and the questioned Decision of the Court of Appeals is AFFIRMED.should negotiate and enter into a new agreement. installments paid by the petitioner on the land should be deemed rentals. 1998 Ponente: MENDOZA. However. Moreover. after he had drafted the contract and sent it to petitioner. respondent. To satisfy the judgment. J. No. complainant. 3046 October 26. ATTY. the latter deposited a check for downpayment but its representative refused to sign the prepared contract. WHEREFORE. Regalado Daroy. By means of the forged deed of sale. the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions. 1491 of the Civil Code which provides: ART. Abecia. he placed in possession of the land not only the buyer. Ruling: Respondent‘s motion is well taken. The parties apparently had in mind Art. Esteban Abecia is prohibited from acquiring the parcel of land. the latter could not acquire the land. Daroy claimed he discovered the fraud only in 1984. Whether or not respondent Atty. first in the name of Gangay and then in that of Mrs. Calalang. what appears to have happened in this case is that the parties thought that because the land had been acquired by complainant at a public sale held in order to satisfy a judgment in his favor in a case in which respondent was complainant‘s counsel. prosecuting attorneys. Daroy alleged that he entrusted the title to the land to Abecia as his counsel and allowed him to take possession of the land upon the latter‘s request. this prohibition includes the act of acquiring by assignment and shall apply to lawyers. Commissioner Plaridel Jose ruled that respondent Abecia is guilty of malpractice and recommended his disbarment. and others connected with the administration of justice are prohibited from acquiring property or rights in litigation or levied upon in execution. acquired by a client to satisfy a judgment in his favor. 1491. As already stated. Deputy Sheriff stated that when he finally transferred the land to the buyer. the land in question was purchased by complainant at the sheriff‘s sale. Nena Abecia. On July 15. In Guevara v. either in person or through the mediation of another: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 27 . judges. While judges. Indeed. The following persons cannot acquire by purchase. clerks of superior and inferior courts. the resolution of the IBP Board of Governors is RECONSIDERED and the complaint against respondent Esteban Abecia is DISMISSED. we held that the prohibition in Art. the prohibition with respect to attorneys in the case extends only to property and rights which may be the object of any litigation in which they may take part by virtue of their profession. Respondent Abecia filed a Motion for Reconsideration and/or Appeal. but also the latter‘s assignee. even at a public or judicial auction. and other officers and employees connected with the administration of justice. in whose name the title to the land had in fact been transferred. It would appear. 5) Justices. 1491 does not apply to the sale of a parcel of land. 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. Abecia was able to obtain new transfer certificates of title. Issues: Whether or not the Commission on Bar Discipline erred when it held that complainant had no knowledge of the execution of the Deed of Absolute Sale. The Integrated Bar of the Philippines approved the report but reduced the penalty to indefinite suspension. that Daroy already knew that title to the land had already been transferred in the name of the respondent‘s wife. from the Registry of Deeds of Misamis Oriental. 1993. prosecuting attorneys. WHEREFORE. wife of respondent Abecia.Abecia forged his signature in a deed of absolute sale transferring the parcel of land to Jose Gangay and that in a fictitious deed of absolute sale it was made to appear that Gangay in turn conveyed the land to Nena Abecia. therefore. to his attorney as long as the property was not the subject of the litigation. in a decision rendered by the Superior Court of Guam. MAquera. It was purchased by the creditor but Castro retained his right of redemption which was later on assigned to Maquera as payment for his services. and his creditor was in a civil case where Castro‘s property.C. The decision was rendered in against Castro and ordered the auction sale of the land. as he acquired his client‘s property as payment for his legal services. July 30. Leon G. Maquera. 2004. a parcel of land. it concluded that there‘s no evidence to establish that he also committed a breach of ethics in the Philippines. was a subject. then sold it and as a consequence obtained an unreasonable high fee for handling his client‘s case. Tinga.M.In Re: Suspension from the Practice of Law in the territory of Guam of Atty. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 28 . However. 435 SCRA 417. Chang which gave him a huge profit. Thw suspension of Maquere was referred here in the Philippines through the Integrated Bar of the Philippines. He then sold it to C. his client. Castro. Maquera exercised this right and he was able to obtain the property.S Chang and C. B. Leon G. was suspended from the practice of law in Guam for two years. The decision was based on Maquera‘s misconduct. 793 FACTS: Atty. ISSUE: Whether Atty. Maquera‘s acts constitute grounds for his suspension or disbarment in the Philippine Jurisdiction. RULING: Atty. Maquera is suspended for one year for the meantime or until he shall have paid his membership dues, whichever came later. Paragraph 5 of Article 1491 of the New Civil Code prohibits lawyer‘s acquisition by assignment of the client‘s property which is the subject of the litigation handled by the lawyer. Under Article 1492, the prohibition extends to sales in legal redemption. Maquera‘s acts in Guam which resulted in his two-year suspension from the practice of law in that jurisdiction are also valid grounds for his suspension from the practice of law in the Philippines. Such acts are violative of lawyer‘s sworn duty to act with fidelity toward his clients. It is also violative of Canon 17 which states, ―a lawyer owes fidelity to the cause of his client and shall be mindful of the trust and confidence reposed in him.‖ Chua v. Court of Appeals and Valdes-Choy, 401 SCRA 54, April 9, 2003 Carpio, G.R. No. 119255 FACTS: Encarnacion Valdes-Choy advertised for sale her paraphernal house and lot in Makati City which Chua responded to. They both agreed on a purchased price of P100,000.00 payable in cash. Chua gave P100,000.00 to Valdes-Choy as an earnest money and another P485,000.00 for the payment of capital gains tax since Valdes-Choy was not able to pay the said tax. However, Chua did not pay the remaining balance of P10,215,000.00 but demanded that the property be first registered under his name. On the other hand, Valdes-Choy wanted that the remaining purchase balance be deposited in her account before she could transfer the title of her property to him. Chua filed a complaint for a specific performance against her which the trial court held in favor of Chua. However, the Court of Appeals reversed the said decision. ISSUE: Whether there is a perfected contract of sale of immovable property. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 29 RULING: Petition is dismissed. perfected contract of sale. There is no The agreement that the parties entered into is a contract to sell and not a contract of sale. In a contract of sale, the title of the property passes to the vendee upon the delivery of the thing sold and the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded. 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 and the title is retained by the vendor until full payment of the price. Also in the contract to sell, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. The receipt made by both of them shows that the true agreement between the parties was a contract to sell. Ownership over the property was retained by Valdes-Choy and was not to pass to Chua until full payment of the purchase price. VISAYAN SAWMILL COMPANY, INC., and ANG TAY, petitioners, vs. THE HONORABLE COURT OF APPEALS and RJH TRADING, represented by RAMON J. HIBIONADA, proprietor, respondents. G.R. No. 83851 March 3, 1993 DAVIDE, JR. Facts: Ramon J. Hibionada and Visayan Sawmill Company (VISAYAN SAWMILL) entered into a sale involving scrap iron subject to the condition that plaintiffappellee will open a letter of credit in the amount of P250,000.00 in favor of defendant-appellant corporation on or before May 15, 1983. Ramon J. Hibionada through his man, started to dig and gather and scrap iron at the VISAYAN SAWMILL's premises, proceeding with such endeavor until May 30 when VISAYAN SAWMILL allegedly directed Hibionada‗s men to desist from pursuing the work in view of an alleged case filed against Hibionada by a certain Alberto Pursuelo. This, however, is denied by VISAYAN SAWMILL who allege that on May 23, 1983, they sent a telegram to Hibionada cancelling the contract of sale because of failure of the latter to comply with the conditions thereof. On May 26, 1983, VISAYAN SAWMILL received a letter advice from the Dumaguete City Branch of the Bank of the Philippine Islands dated May 26, 1983. Hibionada sent a series of telegrams stating that the case filed against him by Pursuelo had been dismissed and demanding that VISAYAN SAWMILL comply with the deed of sale, otherwise a case will be filed against them. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 30 In reply, VISAYAN SAWMILL is unwilling to continue with the sale due to Hibionada's failure to comply with essential preconditions of the contract. Hibionada filed the complaint below with a petition for preliminary attachment and prayed for judgment ordering the VISAYAN SAWMILL to comply with the contract by delivering to him the scrap iron subject thereof In their Answer with Counterclaim, VISAYAN SAWMILL insisted that the cancellation of the contract was justified because of Hibionada‘s noncompliance with essential preconditions, among which is the opening of an irrevocable and unconditional letter of credit not later than 15 May 1983. Issue: Is there a contract of sale? Is the object of sale delivered? Held: The nature of the transaction between the petitioner corporation and the private respondent is a mere contract to sell or promise to sell, and not a contract of sale. The seller bound and promised itself to sell the scrap iron upon the fulfillment by the private respondent of his obligation to make or indorse an irrevocable and unconditional letter of credit in payment of the purchase price. The VISAYAN SAWMILL's obligation to sell is unequivocally subject to a positive suspensive condition, i.e., the private respondent's opening, making or indorsing of an irrevocable and unconditional letter of credit. The former agreed to deliver the scrap iron only upon payment of the purchase price by means of an irrevocable and unconditional letter of credit. Otherwise stated, the contract is not one of sale where the buyer acquired ownership over the property subject to the resolutory condition that the purchase price would be paid after delivery. Thus, there was to be no actual sale until the opening, making or indorsing of the irrevocable and unconditional letter of credit. Since what obtains in the case at bar is a mere promise to sell, the failure of the private respondent to comply with the positive suspensive condition cannot even be considered a breach — casual or serious — but simply an event that prevented the obligation of petitioner corporation to convey title from acquiring binding force. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Consequently, the obligation of the petitioner corporation to sell did not arise; it therefore cannot be compelled by specific performance to comply with its prestation. In short, Article 1191 of the Civil Code does not apply; on the contrary, pursuant to Article 1597 of the Civil Code, the petitioner corporation may totally rescind. The trial court ruled, however, and the public respondent was in agreement, that there had been an implied delivery in this case of the subject scrap iron because on 17 May 1983, private respondent's men started digging up and gathering scrap iron within the petitioner's premises. The entry of these men was upon the private respondent's request. This permission or consent can, by no stretch of the imagination, be construed as delivery of the scrap iron in the sense that, as held by the public respondent, citing Article 1497 of the Civil Code, petitioners placed the private respondent in control and possession thereof. In the first place, said Article 1491 falls under the Chapter 15 Obligations of the Vendor, which is found in Title VI (Sales), Book IV of the Civil Code. As such, therefore, the obligation imposed therein is premised on an existing obligation to deliver the subject of the contract. In the instant case, in view of the private respondent's failure to comply within the positive suspensive condition earlier discussed, such an obligation had not yet arisen. In the second place, it was a mere accommodation to expedite the weighing and hauling of the iron in the event that the sale would materialize. The private respondent was not thereby placed in possession of and control over the scrap iron. Thirdly, the conversion of the initial contract or promise to sell into a contract of sale by the petitioner corporation's alleged implied delivery of the scrap iron because its action and conduct in the premises do not support this conclusion. Indeed, petitioners demanded the fulfillment of the suspensive condition and eventually cancelled the contract. Page 31 In 1963. In 1952. J. vs. subject of the complaint. to the municipality for the ground of a certain high school and had 4 ha. Where there is no express provision that title shall not pass until payment of the price. 140. when it is placed in the control and possession of the vendee.747 sq. by way of special defense. THE COURT OF APPEALS. On appeal Respondent appellate Court set aside the decision of the lower court hence.m. or 208. converted into a subdivision. used by Petitioner Municipality of Victorias.. m. she donated a portion of Lot No. demanding payment of past rentals and requesting delivery of the area allegedly illegally occupied by Municipality of Victorias. or 33. relocated by a surveyor upon request of lessee Ramon Jover who complained of being prohibited by municipal officials from cultivating the land. NORMA LEUENBERGER and FRANCISCO SOLIVA. G. Held: It is expressly provided by law that the thing sold shall be understood as delivered. When the Mayor replied that Petitioner bought the land she asked to be shown the papers concerning the sale but was referred by the Mayor to the municipal treasurer who refused to show the same. is within her property. about 3 ha. 140 from her grandmother. respondents. she had the remaining 21 ha. alleged ownership of the lot.: Facts: Norma Leuenberger inherited the whole of Lot No. this petition for review on certiorari. and the thing gold has Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 32 .R. It was then that she discovered that the parcel of land. In its answer. Simeona J. petitioner Municipality.MUNICIPALITY OF VICTORIAS. Norma Leuenberger wrote the Mayor of Victorias regarding her discovery. de Ditching. The lower court decided in favor of the Municipality. 1987 PARAS.157 sq. L-31189 March 31. as a cemetery from 1934. petitioner. Vda. de Ditching sometime in 1934. Norma Leuenberger filed a complaint for recovery of possession of the parcel of land occupied by the municipal cemetery. more or less 4 ha. having bought it from Simeona Jingco Vda. No. been delivered, title passes from the moment the thing sold is placed in the possession and control of the buyer. Delivery produces its natural effects in law, the principal and most important of which being the conveyance of ownership, without prejudice to the right of the vendor to payment of the price. 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 be clearly inferred. The execution of the public instrument operates as a formal or symbolic delivery of the property sold and authorizes the buyer to use the document as proof of ownership. Respondent Norma Leuenberger admitted that she inherited the land covered by Transfer Certificate of Title No. T-34036 from her grandmother, who had already sold the land to the petitioner in 1934; hence, she merely stepped into the shoes of her grandmother and she cannot claim a better right than her predecessor-in-interest. INTERNATIONAL CORPORATE BANK, INC. (now UNION BANK OF THE PHILIPPINES), GOLDENROD, INC., PAL EMPLOYEES SAVINGS AND LOAN ASSOCIATION, INC., AYALA CORPORATION, LAS PINAS VENTURES, INC., FILIPINAS LIFE ASSURANCE COMPANY(now AYALA LIFE ASSURANCE, INC.), AYALA PROPERTY VENTURES CORPORATION, and AYALA LAND, INC., respondents. G.R. No. 132709. September 4, 2001. YNARES-SANTIAGO, J.: Facts: The object of the controversy is a portion of a vast tract of land located at Tindig na Manga, Almanza, Las Pinas City. The spouses Gerardo and Emma Ledonio, assigned to the spouses Camilo and Ma. Marlene Sabio (herein petitioners) all their rights, interests, title and participation over a contiguous portion of the subject property measuring 119,429 square meters. Similarly, while the subject property was still the object of several pending cases, the International Corporate Bank, Inc. (or Interbank) acquired from the Trans-Resource Management and Development Corporation all of the latter‘s rights to the subject property by virtue of a deed of assignment executed between them. Sometime thereafter, the Sabios and Interbank settled their opposing claims by entering into a Memorandum of Agreement (or MOA) whereby the Sabios assigned, conveyed and transferred all their rights over the parcel assigned to them to Interbank, with the express exception of of 58,000 square meter contiguous portion of said lot. Thereafter, a dispute arose concerning the 58,000 square meter contiguous portion subject of the MOA, petitioners claiming that respondent Interbank was obligated to complete and perfect its ownership and title to the parcels of land so that Interbank could transfer to petitioners the absolute ownership and title over the contiguous portion. Issue: Whether or not respondents failed to ―complete and perfect ownership and title‖ to the subject property since it was never in actual occupation, possession, control and enjoyment of said property. SPOUSES CAMILO L. SABIO, and MA. MARLENE A. LEDONIO-SABIO, petitioners, vs. THE Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Whether or not symbolic delivery by mere execution of the deed of conveyance is sufficient Page 33 since actual possession, control and enjoyment is a main attribute to ownership. G.R. No. 143369. November 27, 2002. YNARES-SANTIAGO, J.: Held: Facts: Under Article 1498 of the Civil Code, ―when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the object of the contract , if from the deed the contrary does not appear or cannot be inferred.‖ Possession is also transferred, along with ownership thereof, to the petitioners by virtue of the deed of conveyance. Petitioner‘s contention that respondents ―never acquired ownership over the subject property since the latter was never in possession of the subject property nor was the property ever delivered‖ is totally without merit. The mere execution of the deed of conveyance in a public document is equivalent to the delivery of the property. Since the execution of the deed of conveyance is deemed equivalent to delivery, prior physical delivery or possession is not legally required. The deed operates as a formal or symbolic delivery of the property sold and authorizes the buyer or transferee to use the document as proof of ownership. Nothing more is required. The instant controversy stemmed from a dispute over a lot located in Pasay City and registered in the name of Mariano Torres y Chavarria, the predecessor-in-interest of respondents. Petitioner claims that he is the lawful owner of the disputed lot, having purchased it from a certain Eusebio Leonardo Roxas who in turn acquired the same lot by purchase from Mariano Torres. Petitioner filed a complaint for ―Delivery of Possession of Property, Owner‘s Duplicate Certificate of Title, Rentals and Damages‖. Respondents, in their answer, countered that since 1938 up to the present, the lot in question has been registered in the name of the late Mariano Torres y Chavarria, their predecessors-in-interest and that they have been in material possession thereof in the concept of owners. Respondents maintain that they have been in open and peaceful possession of the said property and that it was only in 1993 when they came to know of the alleged claim of petitioners over the same property. The trial court issued an order dismissing petitioner‘s complaint on the ground of prescription and laches. The Court of Appeals likewise ruled that since petitioner‘s cause of action is founded on the the deed of sale dated September 29, 1972, being an action based on written contracts, petitioner‘s complaint falls under Art. 1144 of the Civil Code which provides that an action upon a written contract shall prescribe in 10 years from the time the right of action accrued. Since petitioner brought the instant case only on September 6, 1993 or 21 years from the time his supposed right of action accrued on September 29, 1972, i.e., the date of execution of the contract conveying him the questioned lot, his action was clearly barred by statute of limitations. Petitioner, on the other hand, contends that the applicable provision is Art. 1141 and not Art.1144 of the Civil Code because his action is one for recovery of possession of real property which prescribes in 30 years. LEOPOLDO C. LEONARDO, represented by his daughter EMERCIANA LEONARDO, petitioner, vs. VIRGINIA TORRES MARAVILLA and LEONOR C. NADAL, as Administratrices of the Estate of MARIANO TORRES, as substituted by FE NADAL, respondents. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Issue: Whether or not petitioner‘s action is barred by prescription and laches Held: Page 34 The action by petitioner is already barred by prescription and laches. Petitioner‘s contention is without merit, for petitioner‘s action is actually an action for specific performance, i.e., to enforce the deed of absolute sale allegedly executed in his favor and not an action for recovery of possession. It is a fundamental principle that ownership does not pass by mere stipulation but by delivery. The delivery of the thing constitutes a necessary and indispensable requisite for the purpose of acquiring the ownership of the same by virtue of a contract. Under Art. 1498 of the Civil Code, when the sale is made through a public instrument, 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 be clearly inferred. Thus, the execution of the contract is only a presumptive, not conclusive delivery which can be rebutted by evidence to the contrary, as when there is failure on the part of the vendee to take material possession of the land subject of the sale in the concept of a purchaser-owner. In the case at bar, it is not disputed that the lot in question was never delivered to petitioner notwithstanding the alleged execution of a deed of absolute sale. Petitioner neither had, nor demanded, material possession of the disputed lot. It was the respondents who have been in control and possession thereof in the concept of owners since 1983 up to the present. It follows that ownership of the lot was never transferred to petitioner. Hence, he cannot claim that the instant case is an action to recover ownership and full possession of the property which, in the first place, never came into his possession for lack of requisite delivery. Clearly, the case filed by petitioner was an action for specific performance of a written contract of sale which, pursuant to Art. 1144 of the Civil Code, prescribes in 10 years from the accrual of the right of action. In the same vein, said action is barred by laches having allowed 21 years to lapse before enforcing his alleged right. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 35 The tractor was subsequently sold at public auction. A PNB check was issued in favor of Libra. wanted to buy the tractor from his brother. Wilfredo executed a deed of absolute sale in favor of Perfecto. Perfecto Dy. Ratio: (Dy. vs. And even if no Page 36 . Inc v. Cebu. Ruling: Petition granted. It held that the tractor in question still belonged to Wilfredo Dy when it was seized and levied by the sheriff by virtue of the alias writ of execution. approved the petitioner‘s request. The decision of the Court of Appeals was set aside. RTC rendered judgment in favor of Perfecto. The property was sold to Antonio Gonzales. On appeal. Wilfredo Dy was pending in another court in Cebu regarding a collection case to recover a sum. 1991 Third Division Justice Gutierrez. Perfecto Dy . the sheriff was able to seize and levy on the tractor which was in the premises of Libra in Carmen. Court of Appeals) The mortgagor who gave the property as security under a chattel mortgage did not part with the ownership over the same. thru its manager.Libra requesting that he be allowed to purchase from Wilfredo Dy the said tractor and assume the mortgage debt from the latter. The petitioner. vs. Facts: Perfecto Dy and Wilfredo Dy are brothers. Libra. Jr. therefore he wrote a letter to Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Issue: Whether or not the property(tractor) in question belongs to the mortgagor upon the execution of the chattel mortgage. the Court of Appeals reversed the decision of the RTC and dismissed the complaint. Court of Appeals July 8. It was only when the check was cleared that Perfecto learned about Gelac having already taken custody of the subject tractor. He had the right to sell it although he was under obligation to secure the written contract of the mortgagee. Jr. Both truck and tractor were mortgaged to Libra as a security for the loan. thus the indebtedness of Wilfredo with the financing firm has bee settled. Wilfredo Dy purchased a truck and a farm tractor through financing extended by Libra Finance and Investment Corporation. pronouncing that Perfecto is the owner of the tractor and directing Gelac Trading Corporation and Antonio Gonzales to return the same to Perfecto. Libra insisted. Meanwhile a civil case entitled ‗‖Gelac Trading. Through an alias writ of execution. Perfecto Dy filed and action to recover the subject tractor against ―Gelac Trading ― with the RTC in Cebu City. Jr. however that it be cleared first before Libra could release the tractor in question. The decision of the trial court was reinstated. asked Lauro Panganiban. Article 1496 of the civil code states 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 manner signifying an agreement that the possession is transferred from the vendor to the vendee. respondent. The second batch o plastic bags subjected to trial was likewise a failure. denied full responsibility. vs. Court of Appeals). Inc. Jr. v. Inc. Respondent said that it will pay for. 1993 Third Division Justice Melo Facts: The respondent LPJ Enterprises. Jr. a Vice-President of petitioner Industrial Textile Manufacturing Company of the Philippines(or Itemcop). 123. Industrial Textile Manufacturing Company of the Philippines. With respect to the second. Although the weaving of the plastic bags was already tightened. Issue: Whether or not respondent may be held liable for the plastic bags which were not actually used for packaging cement as originally intended.000 bags of cement per year to Atlas Consolidated Mining Development Corporation. 123 with corresponding interest. he should have done so at the time the Page 37 . third. Inc. Inc. the validity of the sale would still not be affected. January 21. Hence. Parol or extrinsic testimony could not be admitted for the purpose of showing that an invoice or bill of sale that was complete in every aspect and purporting to embody a sale without condition or restriction constituted a contract of sale or return. the legal department of the petitioner sent demand letters to respondent corporation On the trial. v. At this time constructive delivery was already effected. Petitoner delivered the orders consecutively but the respondent only remitted a part of the total amount leaving a balance of P84. The trial court rendered a decision sentencing the defendant to pay the sum of P84. however.. only the plastic bags actually used in packing cement. pp 326-327) The provision in the Uniform Sales Act and the Uniform Commercial Code from which Article 1502 was taken. Cement dust oozed out under pressure through the small holes of the woven plastic bags and the loading and the loading platform was filled with dust.however. The respondent corporation‘s appeal was upheld by the appellate court when it reversed the trial court‘s decision and dismissed the case with costs against petitioner. Cesar Campos. The sale of the object tractor was consummated upon the execution of the public instrument. cement dust still spilled through the gaps.80 Thus. the subject tractor was no longer owned by Wilfredo Dy when it was levied upon by the sheriff(Dy. LPJ Enterprises. clearly requires an express written agreement to make a sales contract either a ―sale of return‖ or a ―sale on approval‖. had a contract to supply 300. Ratio: (Industrial Textile Manufacturing Company of the Phils. The Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Ruling: The decision appealed from is SET ASIDE and the decision of the trial court REINSTATED. If the purchase desired to incorporate a stipulation securing to him the right of return . petitioner agreed to the offer. president of respondent corporation. if he would like to cooperate in an experiment to develop a plastic cement bags. fourth purchase orders. the respondent admitted its liability covered by the first purchase. LPJ Enterprises. The experiment.consent was obtained from the mortgagee. was unsuccessful. Hence.contract was made. Per agreement. Accordingly. the vessel underwent repairs. Petitioner Counsel. v. The contention that petitioner‘s delay was caused by a storm or force majeure is untenable. Inc.280 for 500 metric tons of sulfuric acid.On October 3. On August 6. Court of Appeals reversed the decision of RTC. petitioner paid Php 553. 530. The chartered vessel only withdrew 70 metric tons of sulfuric acid from Basay because said vessel heavily tilted on its port side. this petition ISSUES: Whether or not respondent Court of Appeals erred in holding that the petitioner committed breach of contract due to the delay in the performance of its obligation? Did private respondent err in awarding damages to private respondent? RULING: Supreme Court ruled in sustaining the decision of the Court of Appeals finding in favor of private respondent. 1986. Atty Santos. while the remaining 400 metric tons should be retrieve from Sangi. Upon appeal.R. Philippine Phosphate Fertilizer Corporation. September 23.: FACTS: Petitioner Aerospace Industries purchased five hundred (500) metric tons of sulfuric acid from private respondent Philippine Phosphate Fertilizer Corporation (Philphos). LPJ Enterprises. private respondent instructed petitioner to lift remaining 30 MT of sulfuric acid from Basay or pay maintenance and storage expenses.The agreement provided that the buyer shall pay its purchases in Philippine Currency five days before the shipment date. Cebu. The RTC ruled in favor of the petitioner. QUISUMBING. G. addressed a letter to private respondent. Aerospace Chemical Industries. Private respondent contends that it was the petitioner who was remiss in the performance of its obligation. 100 metric tons of sulfuric acid should be taken from Basay Negros Oriental storage tank. No.Private respondent said that if petitioner will not comply petitioner will be charge storage and consequential costs.In reply. 108129. Hernandez.000 for each delay in shipment. sent a demand letter to private respondent for the delivery of the 272. Petitioner chartered another vessel after several demand of the private respondent. Petitioner charted the M/T Sultan Kayumanggi to carry out the agreed volumes of freight form designated loading areas.49 MT of sulfuric acid or return the purchase price of Php 307. pp 326-327). Because of this. we hold that the transaction between the respondent and petitioner constituted an absolute sale. Petitioner as buyer committed to secure the means of transport to pick-up the purchases from private respondents load ports. The report revealed that the Page 38 . J. Private respondents asked petitioners to retrieve the remaining sulphur in Basay tanks so that said tanks are emptied before December 15. Court of Appeal. acting for the petitioner. SC held that petitioner violated the subject contract of sale supported by preponderant evidence. Despite several demands to deliver remaining sulfuric acids and other counter demands also of private respondents. the buyer cannoy accept part and reject the rest of the goods since this falls outside the normal intent of the parties in the ―on approval‖ situation. 1986. respondent is liable for the plastic bags delivered to it by petitioner(Industrial Textile Manufacturing Company of the Phils. commencing additional orders to replace its sunken purchases. Inc vs. petitioner filed a complaint for specific performance and/or damages before the RTC. Therefore. ruling in favor of the private respondent. On the other hand. private respondent Philphos sent an advisory letter to petitioner to withdraw the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 sulfuric acid purchased at Basay because private respondent has been incurring incremental expenses of 2. 1986. 1999. brother of Conchita redeemed the foreclosed property with DBP. Because they are in need of money. Lower court ruled in favor of the respondents. which defendants failed to pay. The title of the lands then was still in the names of the previous owners. Further since the right to redeem the property is dependent upon the validity of the sale of the parcels of land. That as part of their agreement (Conchita and Anacleto). Francisco and Victorino. petitioner did not comply. 30. No. Petitioner spouses Conchita and Gaudencio seek recovery of the parcel of land from defendant. believing that petitioners are still the owners of the parcels of land. The ownership of the lands was Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 ISSUES: Whether or not the agreement entered into by the parties (Petitioners and respondents) with respect to the sale and period of redemption of the parcels of land valid and enforceable? Whether or not the Respondent is estopped in impugning the validity of the agreement with the petitioner? RULING: Supreme Court ruled affirming the decision of the Court of Appeals and the Lower Court.000. the titles of two parcels of were transferred to Anacleto. respondents in this case Petitioners contend that they are the owners of subject of land and that it bought the same from Conchita‘s brothers. Despite of several repairs of the vessel. Isabela. Moreover. Both parcels of land located in San Manuel. Hence this petition Conchita Nool and Gaudencio Almojera vs. respondent cannot be estopped from raising the defense of nullity of contract. Thus. And since delivery is not possible in this case without transferring ownership of such parcels of land. the awarding of damages against the petitioner is justified . The petitioners in this case cannot assert the right to repurchase the property with the respondents. the vessel still failed to carry the whole metric tons of sulfuric acid. Anacleto agreed to buy from the petitioners the parcels of land for 100. The SC held that the sellers (petitioners) no longer had any title to the parcels of land at the time of sale. secured by real estate mortgage on the said parcels of land.R. they applied and were granted of a loan by DBP. Its unfortunate sinking was not due to force majeure. As requested by Conchita. younger brother of Conchita and Emilia. G.: FACTS: Two parcels of land are the subject of dispute in this case. Moreover. 000 petitioners were to regain possession of the two parcel of land. Hence. since they acted in good faith. July 24. the ownership of the parcels of land was transferred already to DBP and then conveyed to Respondent upon buying the said property to DBP. Anacleto Nool and Emilia Nebre. such right to redeem is also void. Court of Appeals. 1997 PANGANIBAN. as a result.000 of which price is paid to Conchita and upon payment of 14. petitioners filed this complaint to seek recovery of the disputed land. whereby respondents agreed to return the parcels of land at anytime when the petitioners have the necessary amount.vessel chartered by petitioner is unstable and incapable of carrying full load.Petitioner in this case is guilty of delay. the contract of sale between petitioners and respondent is void. J. because of petitioner delay in complying with its obligation to replace immediately the defective chartered vessel despite several demand letters sent by private respondent to it. Court of Appeals affirmed Lower Court Decision. conveyed with DBP for being the highest bidder in the auction sale. Anacleto. Because of this another agreement was entered into by the parties. the proximate cause of the delay of the petitioner cannot be attributed due to force majeure but because of the chartered vessel contracted by petitioner to carry out the sulfuric acid. When petritioners asked to return the parcels of land. Article 1410 of the Civil Code provides that the action or defense for the declaration of the inexistence of a contract does not Page 39 . Anacleto Nool. Despite demands to immediate replace M/T Sultan Kayumanggi.116635. since respondent Anacleto redeemed the property after the period of redemption given to the petitioners. Since the petitioners defaulted in paying the loan the mortgaged lands were foreclosed. respondents refused to return the same. The first area was formerly owned by Victorino Nool and the other parcel of land previously owned by Francisco Nool. Hence. Since petitioner failed to comply with its obligation under the contract it became liable for its shortcomings. This is particularly true where the area is described as "humigit kumulang. Facts: Juana Guitierrez sold a parcel of land.J. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Gloria Villafania sold a house and lot to Rosenda Tigno-Salazar and Rosita Cave-Go which thereafter became a subject of a suit for annulment of documents. unknown to Rosenda and Rosita. private respondent insists that he only sold 822. (2) then.R. Issue: Who between the petitioner and respondent has a better right to the property? Ruling: Denied. Abrigo vs. not the area thereof. Thus. J. The law provides that a double sale of immovables transfers ownership to (1) the first registrant in good faith. The RTC rendered judgment approving the Compromise Agreement submitted by the parties. respondent Anacleto can impugn the nullity of the agreement at anytime. 377 square meters or the estimated 822. However.R. De Vera Semira vs. his nephew could not have transferred a bigger area to petitioner. Section 51 of PD 1529 provides that no Page 40 . Buenaventura An sold the said lot to his nephew who in turn sold the lot to petitioner with the very same boundaries mentioned in the deed of sale executed in his favor by his uncle Buenaventura An. No. Rosita and Rosenda then filed for the annulment of the documents and damages. Where land is sold for a lump sum and not so much per unit of measure or number. lot 4221. regardless of whether the real area should be greater or smaller than that recited in the deed. to Buenaventura An by a deed of sale. Subsequently. more or less." that is. No. Court of Appeals March 2. more or less. and (3) finally. Reinstating the decision of MCTC dated May 4. Gloria again sold the said lot to Romanda de Vera and a TCT was issued to her. Gloria st has a crtificate title of the lot. Issue: Is the sale of Lot 4221 includes the whole 1.5 square meters and the boundaries of the lot. Th are stated in the deed was an estimated area of 822. 1983. the buyer who in good faith presents the oldest title. The vendors are obligated to deliver all the land included within the boundaries. 154409First G. On the other hand. 4 years after the 1 sale." that is.prescribe. 2004 Division G. Gloria Villafania was given one year to buy back the house and lot which she failed to do so.5 square meters. Petitioner claims that he owns the entire 2. 1994 June 21.5 square meters? Ruling: Reversed and set aside. the first possessor in good faith. This is particularly true where the area is described as "humigit kumulang. the boundaries of the land stated in the contract determine the effects and scope of the sale. First Division Facts: Bellosillo. hence. 76031 Panganiban .200 square meters since it is the size of Lot 4221 following its established boundaries. deed. Morales possessed the lot as owner.purporting to convey or affect registered land shall take effect as a conveyance or bind the land until its registration. It is the basic premise of the preferential rights granted to the one claiming ownership over an immovable.[36] Following this principle. alleging bad faith since the Occeñas conducted ocular inspection of the area before the purchase and their caretaker warned Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 them that Arnold is no longer the owner of the lot being sold. Arnold did not return the OCT belonging to Alberta despite repeated requests.e. Angela and Rosario. lease or other voluntary instrument -. as provided by the Civil Code. 2004 Second Division G. Arnold borrowed the Original Certificate of Title (OCT) from Alberta covering the lot. The petition at bar presents a case of double sale of an immovable property. In all cases. constructed a house on it and appointed a caretaker to oversee her property. Indeed. the Occeña spouses alleged that they were buyers in good faith as the titles to the subject lots were free from liens or encumbrances when they purchased them. and registered them all under his name. J. What is material is whether the second buyer first registers the second sale in good faith.except a will -. LYDIA MORALES OBSIANA ESPONILLA June 4. the ownership shall belong: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property. i. Article 1544 of the New Civil Code provides that in case an immovable property is sold to different vendees. against the Occeña spouses. and. with damages. The heirs sold a part of the land to Alberta Morales. Then. with notice of a flaw. SPOUSES TOMAS OCCEÑA and SILVINA OCCEÑA vs..R. provided there is good faith. the ownership shall pertain to the person who in good faith was first in possession. that they verified with the Antique Registry of Deeds that Arnold‘s TCTs were clean and unencumbered. However. this Court has consistently held as regards registered land that a purchaser in good faith acquires a good title as against all the transferees thereof whose rights are not recorded in the Registry of Deeds at the time of the sale. 156973 PUNO. without knowledge of any defect in the title of the property sold. subdivided the entire lot into three sublots. He is charged with notice only of such burdens and claims as are annotated on the title. since such condition is noted on the face of the register or certificate of title. they filed a case for annulment of sale and cancellation of titles. On the other hand. he executed an Affidavit acknowledging receipt of the OCT in trust and undertook to return said title free from changes. Knowledge gained by the first buyer of the second sale cannot defeat the first buyer‘s rights except where the second buyer registers in good faith the second sale ahead of the first. When the respondent heirs of Alberta learned of the sale. (2) should there be no inscription. Arnold subsequently sold the land to spouses Tomas and Sylvina Occeña. good faith is essential. Court of Appeals reversed the decision of the trial court. A person dealing with registered land is not required to go behind the registry to determine the condition of the property. Issue: Whether or not a purchaser of a registered land is obliged to make inquiries of any possible defect or adverse claim which does not appear on the Certificate of Title Ruling: Petition dismissed. Hence the petition. to the person who presents the oldest title. this principle does not apply 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 Page 41 . No. mortgage. modifications or cancellations. Arnold used the OCT he borrowed from the vendee Alberta Morales. (3) in the absence thereof.: Facts: Spouses Nicolas and Irene Tordesillas owned a piece of land which their children Harod. However. the general rule is that one who deals with property registered under the Torrens system need not go beyond the same. The defense of indefeasibility of a Torrens title does not extend to a transferee who takes the certificate of title in bad faith. and grandchildren Arnold and Lilia de la Flor inherited. Lower court declared the Occeña spouses as buyers in good faith and ruled that the action of the heirs was time-barred. but only has to rely on the title. Mendoza. they did not only rely upon Mendoza‘s title. respondents did indeed purchase the property in good faith and accordingly acquired valid and indefeasible title thereto. May 28. One who falls neither be denominated an value nor a purchaser in Held: Petition denied. COURT OF APPEALS. if it should be movable property. the ownership shall pertain to the person who in good faith was first in the possession. for everyone dealing with registered property would still have to inquire at every instance whether the title has been regularly or irregularly issued. The mortgage was duly annotated on the title. If the same thing should have been sold to different vendees. Mendoza executed a Deed of Absolute Sale over still the same property in favor of respondent spouses Clemente and Rosalia Salvador. to inquire into the status of in litigation. Getting wind of the sale of the property to respondents. HON.reasonably prudent man the title of the property within the exception can innocent purchaser for good faith. Should there be no inscription. vs. J. SPOUSES ISABELO and ERLINDA PAYONGAYONG. He mortgaged the land to the Meralco Employees Savings and Loan Association (MESALA) to secure a loan. No. and ultimately. It is stated in the deed that petitioners bound themselves to assume payment of the balance of the mortgage indebtedness of Mendoza to MESALA. to the person who presents the oldest title. the ownership shall be transferred to the person who may have first taken possession thereof in good faith. Spouses Salvador had the lot registered in their name after ocular inspection and verification from the Register of Deeds. Second mortgage was annotated in Mendoza‘s title. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Art. Otherwise. Rosalia personally inspected the property and verified with the Registry of Deeds of Quezon City if Mendoza was indeed the registered owner. (2) in default thereof. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. 2004 Third Division Issue: Whether or not spouses Salvador are innocent purchasers for value G. There being double sale of an immovable property. Payongayong filed for annulment sale with damages against Mendoza and spouses Salvador. Given this factual backdrop. Mendoza executed a Deed of Sale with Assumption of Mortgage over the parcel of land in favor of spouses Payongayong.R. the Torrens system. provided there is good faith.28 In respondents‘ case. to the Page 42 . After 2 years. Hence the petition. the court cannot just disregard such rights. and. Trial Court ruled in favor of Mendoza and Salvador. in the absence thereof. without the knowledge of petitioners. The law is thus in respondents‘ favor. again to secure another loan. ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of Property. public confidence in the certificate of title. 144576 CARPIO MORALES. as the above-quoted provision instructs. would be impaired.: Where innocent third persons rely upon the correctness of a certificate of title and acquire rights over the property. Article 1544 of the Civil Code so provides: Facts: Eduardo Mendoz is the registered owner of a parcel of land in Caloocan. CA affirmed. mortgaged the same property to MESALA. 1544. Should it be immovable property. Isabela Colleges. Under Article 1407 of that code. prompting the latter to bring an action for forcible entry. the trial court rendered its decision. Indeed. It is not necessary to prove that the property was acquired with conjugal funds.132677 Ponente: Facts: The late Nieves Tolentino-Rivera and her husband. Deeds of Sale. The intervenors. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Two complaints-in-intervention were allowed by the trial court. Issue 1: Both the acquisition of the 13-hectare land and the sale of a portion thereof to petitioner in 1949 took place when the Spanish Civil Code was still in effect. As the husband may validly sell or dispose of conjugal property even without the wife‘s consent.R. the Office of the Register of Deeds of Isabela was burned. provided there is good faith. Page 43 . On the contrary. ruling in favor of Isabela Colleges. certain people entered the property of Isabela Colleges. Therefore.5267-hectare land in Cauayan.‖ In its Answer. however. that her signature is a forgery is determinative only of Nieves‘ lack of consent but not of the validity of the sale. Issue 2: The fact that Nieves Tolentino‘s signature in the deed of sales is a forgery does not. Cancellation of Titles. Damages with Preliminary Injunction. In January 1988. the Isabela Colleges declared the land for tax purposes. Isablela rendered a decision ordering the intruders to vacate the land in question. Nieves brought the present suit against the Isabela Colleges for ―Nullity of Titles. Inc. Her application was approved and a sales patent was issued in the name of ―Nieves Tolentino. which was thereafter immediately occupied by the petitioner and used the same as its new campus. Since 1950. the Court of Appeals cited no other evidence to prove that the land was her paraphernal property. Ruling: Wherefore the decision of the Court of Appeals is REVERSED. This presumption arises with respect to property acquired during the marriage. Moreover. herein petitioner contends that the complaint was barred by prescription and/or laches. render the deed of sale void. other than its finding that Nieves was already in possession of the land and applied for a sales patent before she married Pablo Rivera. The above said spouses sold to petitioner Isabela four hectares of their land. vs. On September 30. still using her maiden name. In December 1976. 1994. No. 3. Nieves. this petition. but it did not immediately secure a separate title to the property. and (3) in default thereof.person who in good faith was first in possession. On Appeal. Hence. Pablo Rivera. It was only on January 13. to the person who presents the oldest title. were married in 1921. During the pendency of this case Nieves died and her heirs substituted her. Heirs of Nieves Tolentino–Rivera October 20. The Municipal Trial Court of Cauayan. who were the parties in the ejectment suit. filed an application for a sales patent over a 13. In 1991.) laches cannot defeat that claim of a registered property owner despite the long delay of 41 years. Recovery of Ownership and Possession. the wife‘s consent to the sale is not required. 2000 Second Division Justice Mendoza G. claimed to be buyers in good faith or lessees of Nieves as to certain portions of the subject land. 1970 when it secured a title to the land. Issue: Whether the Court of Appeals erred in ruling that: 1. married to Pablo Rivera‖.) the subject property is paraphernal despite Nieves‘ admission that it was purchased from the government during her marriage with Pablo Rivera out of conjugal funds.) Nieves‘ signature in the questioned deed of sale is forged. the evidence clearly shows that the land was acquires during her marriage with Pablo Rivera. the Isabela Colleges asserted that the property in question had been sold to it with the knowledge and consent of Nieves who in fact signed the deed of sale. Among the titles destroyed was that of the Isabela Colleges which was however administratively reconstituted in 1978. The land was conjugal property and under the Spanish Civil Code. 2. the property of the spouses are deemed conjugal partnership property in the absence of proof that it belongs exclusively to one or the other spouse. Isabela. its decision was reversed. by observance of due diligence. which it had used as its school campus since 1949. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 44 . warranting the presumption that the party entitled to assert his right either has abandoned or declined to assert it. public. could or should have been done earlier.the absence of the wife‘s consent alone does not make the sale ―in fraud‖ of her. the registered owner may lose his right to recover possession of his registered property by reason of laches. Issue 3: Nonetheless while it is true that a Torrens title is indefeasible and imprescriptible. So it is in the present case where the complaint questioning the validity of the sale to petitioner Isabela Colleges was filed only after 42 years had lapsed. Respondents could not feign ignorance of the sale because petitioner had been in open. and continuous possession of the land. It is negligence or omission to assert a right within a reasonable time. Laches means the failure or neglect for an unreasonable and unexplained length of time to do that which. the court of Appeals affirmed the RTC ruling. Issue: Who has the superior right to the parcel of land sold to different buyers at different times by its former owners? Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple sales. The trial court further declared further that petitioners were purchasers in bad faith. that such fact.‖ Based on the foregoing. and merely rely on the fact that they declared the same in their name for taxation purposes. v. however. The Appellee.No. necessarily. by itself. does not. and spouses Pio and Dolores Dichoso. there is absent good faith in the registration of the sale by the petitioners Erwin Bayoca and the spouses Pio and Lourdes Dichoso for which they had been issued certificates of title in their names. However. without knowledge of any defect in the title of the property. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Nogales September 12. filed complaint against the Appellants for ―Accion Reinvindicatoria with Damages. as follows: ―Art. the ownership shall pertain to the person who in good faith was first in possession. On appeal.138201 Ponente: Facts: Gaudioso Nogales acquired ownership over the subject property on the basis of the Compromise Agreement and the Deed of Absolute Sale executed by Julia Deocareza who had acquired of said property from the Canino brothers and sisters. Erwin Bayoca. As for the petitioners Francisco Bayoca and Nonito Dichoso. Should there be no inscription. The Regional Trial Court ruled in favor of Nogales and declared that the sales of portions of said property by Preciosa Canino were null and void. 2000 Third Division Justice Gonzaga-Reyes G. Thus. Ruling: Petition is hereby DENIED and the assailed DECISION of the Court of Appeals is AFFIRMED. to merit the protection under Article 1544. Suffice it to state. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 SPOUSES FLORENDO DAUZ and HELEN DAUZ. if it should be movable property. 1544.Bayoca vs. as buyers in goof faith. constitute evidence of ownership and cannot likewise prevail over the title of respondent Nograles. to the person who presents the oldest title. second paragraph. Should it be immovable property. Francisco Bayoca. what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second buyer registers such second sale in good faith. Nonito Dichoso. that is. the second buyer must act in good faith in registering the deed. in their Answer to the complaint.R. alleged that Preciosa Canino and her siblings acquired just title over the property when they executed their “Deed of Partition of Real Property” and conveyed titles to the vendees. that he purchased the said property from Julia Decareza and thus acquired ownership thereof and that the Appellants respectively purchased portions of said property in bad faith and through fraud. It has been held that in cases of double sale of immovables. 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. Petitioners. The Appellants. the Appellants in the present recourse. Preciosa Canino subsequently sold at different times portions of the subject property to herein petiitoners. and in the absence thereof. they failed to register the portions of the property sold to them. There is no question from the records that respondent Nogales was the first to buy the subject property from Julia. who in turn bought the same from the Canino brothers and sisters. et al. provided there is good faith. Hence this petition.” He alleged in his complaint. SPOUSES ELIGIO and LORENZA ECHAVEZ and the COURT OF APPEALS Page 45 . On account of the undisputed fact of registration by respondent Nogales as the first buyer. rely on the fact that they were the first to register the sales of the different portions of the property resulting in the issuance of new titles in their names. a complaint for declaration of ownership. Consequently. Respondents had the sale to them of the remaining 7. Where both parties claim to have purchased the same property.G. ISSUE: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 In April 1982. 21 September 2007. and. also petitioners.295-square meter portion of the land. On April 1. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.616 square meters in the Registry of the Deeds. thus: Albert Oguis. a new title was issued in respondents‘ names. SANDOVAL-GUTIERREZ. Article 1544. and on January 25. 152407. they had the sale registered in the Registry of Deeds of Benguet. and Helen Oguis Valerio. Article 1544 cited above provides that as between two purchasers. as in this case. and his two children Albert Oguis. On the same date. provided there is good faith. Jr. The Court of Appeals affirmed RTC‘s decision. WHETHER THERE WAS BAD FAITH ON THE REGISTRATION OF THE LAND BY THE RESPONDENTS HELD: Petition DENIED. informed petitioners that he had sold only a portion to respondents. a portion of the land as shown by a Deed of Absolute Sale. Sr. the ownership shall be transferred to the person who may have first taken possession thereof in good faith. but the land was not registered. The new title covers the entire property previously owned by spouses Oguis. a portion sold to them by Albert Oguis. petitioners.R. if it should be movable property. J. in the absence thereof. the ownership shall pertain to the person who in good faith was first in possession. the one who registered the sale in his favor has a preferred right over the other who has not registered his title. Petitioners (spouses Dauz). T13728. 1982. then filed with the RTC.616 square meters portion of the land registered in the same Registry of Deeds. Should there be no inscription. and Florencia Refuerzo Oguis sold a portion of the land to respondents spouses Eligio and Lorenza Echavez. even if the latter is in actual possession of the immovable property Page 46 . Petitioners. Albert Oguis. and his two children. on the other hand. If the same thing should have been sold to different vendees. Sr. failed to cause the registration of the sale to them in the Registry of Deeds. petitioners sold to spouses Ignacio and Francisca Reambonanza. Sr. executed a Deed of Extrajudicial Settlement of Estate. 1989. Petitioners then filed with the Regional Trial Court (RTC) of Baguio and Benguet a Petition for the Issuance of a New Duplicate Copy of TCT No. they sold to spouses Florendo and Helen Dauz. RATIO: Article 1544 of the Civil Code is relevant. the sale of the remaining 7. Sr. Meanwhile. The trial court dismissed the petition. Should it be immovable property. to the person who presents the oldest title. Spouses Albert Oguis. Spouses Oguis later on sold the remaining portion of the land to the same respondents. No. respondents caused the registration of the sale of the 1. the title in the names of spouses Oguis was cancelled and in lieu thereof. himself who requested them not to cause the registration of the sale. Respondents did not immediately register the sale because they waited for spouses Oguis to repurchase the property. 129988. LTD. we still perused the records and found that there is no evidence showing that respondents acted in bad faith. ANTONIO S. we held that bad faith does not simply connote bad judgment or negligence. Private respondents planned to travel to Los Angeles. No.R.Nonetheless. California. which Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 47 . it was Albert Oguis. It means breach of a known duty through some motive. interest or ill will that partakes of the nature of fraud. LAO G. Court of Appeals. 14 July 2003. In China Airlines. Sr. SALVADOR and ROLANDO C. v. J. It imports a dishonest purpose or some moral obliquity and conscious doing of a wrong. CARPIO. Ltd. They initially engaged the services of Morelia Travel Agency (Morelia). COURT OF APPEALS. CHINA AIRLINES. These incidents or circumstances are not present here. v. In fact. Hence this petition. Morelia cancelled the reservations of private respondents. CAL did not allow private respondents. et al. The confirmed tickets issued by Amexco to private respondents upon CAL's confirmation of the reservations are undeniable proof of the contract of carriage between CAL and private respondents. However. Thus. San Isidro. ISSUE: Whether the petitioner is liable despite the fact that such acts complained of were acts done by its employees transport private respondents on its flight on 13 June 1990. SPOUSES SALERA vs SPOUSES RODAJE G. we held that when an airline issues a ticket to a passenger confirmed for a particular flight on a certain date. then the carrier opens itself to a suit for breach of contract of carriage. In this case. from boarding its airplane because their names were not in the passengers' manifest. In the afternoon of the same day. CAL confirmed the booking. On the day of the flight. The law governing common carriers consequently imposes an exacting standard. rule out bad faith by CAL. 135900 RATIO: The nature of an airline's contract of carriage partakes of two types. Amexco used the record locator number given by Lao in confirming the reservations of private respondents. and (2) a contract to transport passengers to their destination. The airline business is intended to serve the traveling public primarily and is thus imbued with public interest. when CAL confirmed the reservations. First Facts: Spouses Salera filed an action for quieting of title regarding a parcel of land in Brgy. The passenger then has every right to expect that he would fly on that flight and on that date. however. All that he has to prove is the existence of the contract and the fact of its non-performance by the carrier. Amexco then issued to private respondents the confirmed tickets for the 13 June 1990 flight of CAL.R.booked them with petitioner China Airlines Ltd (CAL). CAL does not deny its confirmation of the reservations made by Amexco. a contract of carriage arises. and engage the services of the latter. the private respondents were not able to board the plane since their names were not on the passengers‘ list. Leyte. On the same day. in an action based on a breach of contract of carriage. Basud. namely: (1) a contract to deliver a cargo or merchandise to its destination. the aggrieved party does not have to prove that the common carrier was at fault or was negligent. The land was bought from the heirs of Brigido Tonacio as evidenced by the Deed of Absolute Sale executed on June 23. CAL cancelled the reservations when Morelia revoked the booking it had made for the private respondents. CAL breached its contract of carriage with private respondents. HELD: Petition DENIED. as the American Express Travel Service Philippines (Amexco) offers cheaper rates. In Alitalia Airways v. Clearly. No. CA. CAL called up Morelia to reconfirm the reservations of private respondents. We. private respondents decided to drop the services of Morelia. who were then in possession of the confirmed tickets. Lao then called Amexco and gave the tire record locator number if booking reference that CAL had previously issued to Morelia when Morelia booked the reservations of the private respondents. Amexco called up CAL to finalize private respondents' reservation for CAL's 13 June 1990 flight.. If he does not. it bound itself to Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Ponente: Justice Sandoval Division 17 August 2007 – Gutierrez. They allege that they have been in possession of the property and the house they built thereon because they had paid the purchase price even before the Page 48 . 1986. RTC of Calubian. was issued in the names of Spouses Rodaje. 1544 does not apply in this case since the sale was made by Catalino and the heirs of Brigido. vs CA and VELEZ. could not validly sell the lot to respondents. Ting told her that there was a mistake in the price.050.000 to be paid in 30 days. Bad faith was established in the RTC. through counsel. They allege that they been in exercising their right of ownership over the property and the building constructed thereon peacefully. There is no indication from the record that Rodaje first determined the status of the lot. 1997 Issue: Which of the two contracts of sale is valid? Ponente: Justice Panganiban.execution of the deed of sale. 1985. 2994 (R-5) in the name of Brigido was already cancelled and another one. Catalino. Any lot buyer is expected to be vigilant. Spouses Rodaje claimed that they bought the land from Catalino Tonacio. it covers a situation where a single vendor sold one and the same immovable property to two or more buyers. It should have been P1. accepted the offer. by operation of the law on succession would be the heirs of Brigido and not his father. Carmen Page 49 . While tax declarations are not conclusive proofs of ownership. for no one in his right mind would be paying taxes for a property that is not in his actual or at least constructive possession. they found that Tax Declaration No. Uraca agreed to the new price to be payable in installments with a down payment of P1M and the balance of P400. On July 8. Article 1544 of the Civil Code contemplates a case of double sale or multiple sales by a single vendor. purposes.. When Uraca went to Ting. Art. 2408 issued. Third Division Held: Sale made by the heirs of Brigido Tonacao to the spouses Salera is valid. not being the owner or possessor. G. publicly. Leyte declared Spouses Salera as the rightful and legal owners while declaring null and void the Deed of Absolute Sale between Catalino and herein respondents and ordering the cancellation of Tax Declaration No. The petitioners were its lessees. 1986 and that the sale was registered with the Register of Deeds and the Tax Declaration No. Catalino had no legal personality to sell the parcel of land. 2408 was issued in their name. 115158 September 5. adversely and continuously. The respondents proof of payment of realty tax from the period of 1974 to 1984 was paid in lump sum. they are buyers in good faith. The Court of Appeals reversed and set aside the decision of the RTC. Briones Streets in Cebu City. exercising utmost care in determining whether the seller is the true owner of the property and whether there are other claimants. The evidence submitted to the court.00 and to reply within three days. Apart from being the first registrants. No. et al.000 when the sale was executed. They also claimed that they had a verbal contract with Catalino even before the execution of the sale since January 1984. It based its decision on the Civil Code provision on double sale. The Court of Appeals is wrong. JR. When they asked the Provincial Assessor to declare the property under their names for taxation purposes. father of Brigido on June 6.000 and paid the balance of P4. They paid a downpayment of P1.) URACA. (Petition is GRANTED. Sale made by Catalino to spouses Rodaje is invalid.4M. Hence. Petitioners. they are good indicia of possession in the concept of owner. et al. the Velezes through Carmen Velez Ting wrote a letter to petitioners offering to sell the subject property for P1.C. The court cited that the real owners of the land. established that Spouses Rodaje knew beforehand that the property was declared in the name of Brigido Tonacao for taxation Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Facts: The Velezes were the owners of the lot and commercial building in question located at Progreso and M. More specifically. The certification presented by respondents clearly shows that the house is owned by Aida Salera and that respondents started paying the electric bills (in the name of Aida Salera) only in 1986. Tax Declaration No.R.000. however. 2408. The assailed Decision of the Court of Appeals is REVERSED and the Decision of the trial court is REINSTATED. 050. it was mutually withdrawn. for P1. .00. however. It also held that the Avenue Group were buyers in bad faith.00 between the Velezes and herein petitioners. there was no meeting of minds between the parties.4M instead of the original price of P1. 1985. Consequently. On July 13. by the Velezes to petitioners for P1.Velez Ting did not accept the said counter-offer of Emilia Uraca although this fact is disputed by Uraca. Novation is effected only when a new contract has extinguished an earlier contract between the same parties. The certificate of title of the said property was clean and free of any annotation of adverse claims or lis pendens. hence. The second sale merely constituted a mere modificatory novation which did not extinguish the first sale. even if there was agreement as to the price and a second contract was perfected. However. the parties having failed to agree on the terms of the payment. that such perfected contract of sale was subsequently novated.050. if there was one. Extinctive novation requires: (1) the existence of a previous valid obligation. On August 1. Issues: 1. the trial court held that "[d]ue to the unqualified acceptance by the plaintiffs within the period set by the Velezes. they also registered a notice of lis pendens over the property in question with the Office of the Register of Deeds. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Novation is never presumed.) Was there novation of the first contract? 2. constituted a mere promise to sell which was not binding for lack of acceptance or a separate consideration. remained valid and existing. the Velezes sold property to Avenue Merchandising Inc. The Court of Appeals held that there was a perfected contract of sale of the property for P1.050.00. no contract of sale was perfected. there consequently came about a meeting of the minds of the parties not only as to the object certain but also as to the definite consideration or cause of the contract.000. The petitioners and the Velezes clearly did not perfect a new contract because the essential requisite of consent was absent. No payment was made by to the Velezes on July 12 and 13. RTC found two perfected contracts of sale between the Velezes and the petitioners involving the real property in question. On July 31. Since the parties failed to enter into a new contract that could have extinguished their previously perfected contract of sale. (2) the agreement of all the parties to the new contract.000. (3) the extinguishment of the old obligation or contract. . the Avenue Group filed an ejectment case against petitioners ordering the latter to vacate the commercial building standing on the lot in question.00. The registration of a later sale must be done in good faith to entitle the registrant to priority in ownership over the vendee in an earlier sale.000. and (4) the validity of the new one. there can be no novation of the latter. 1985. Petitoners filed an amended complaint impleading the Avenue Group as new defendants after about 4 years after the filing of the original complaint. it must be sufficiently established that a valid new agreement or obligation has extinguished or changed an existing one.400.000.000.00." Article 1231 of the same Code states that novation is one of the ways to wipe out an obligation.050. It added.050. It must be proven as a fact either by express stipulation of the parties or by implication derived from an irreconcilable incompatibility between old and new obligations or contracts. . cancelled and rescinded by novation. .) Was there a double sale of the real property involved? Held: On Novation On October 30.00. 1985. the first sale of the property in controversy. CA added that. 1985.000. and was therefore abandoned by the parties when Carmen Velez Ting raised the consideration of the contract by P350. Since there was no agreement as to the 'second' price offered. On Double Sale Page 50 . petitioners filed the instant complaint against the Velezes. It further held that such second agreement. 1985. the later contract would be unenforceable under the Statute of Frauds. thus making the price P1. Article 1600 of the Civil Code provides that "(s)ales are extinguished by the same causes as all other obligations. The first sale was for P1.000.00 and the second was for P1. In respect to the first sale. the third and not the second paragraph of Article 1544 should be applied to this case. 2 of the disposition is P1.Prior registration of the disputed property by the second buyer does not by itself confer ownership or a better right over the property. No. mortgaging said lots in favor of the estate of Puentevella. Inc. BINALBAGAN APPEALS TECH.. conveying and transferring said lots to petitioner Binalbagan Tech. as provided by the Civil Code. through Angelina P.R. Nava. 100594 March 10. through its president. 1993 (219SCRA777) Third Division (The petition is GRANTED. The Avenue Group was a buyer and registrants in bad faith.000. in her capacity as Judicial Administrator of the intestate estate of Luis B. Puentevella. Knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale. In turn Binalbagan. COURT OF G. They had actual knowledge of the Velezes' prior sale of the same property to the petitioners. J. having been the property's lessees and possessors for decades prior to the sale. Binalbagan started operating a school on the property from 1967 when the titles and possession of the lots were transferred to it. 1967.050. Under this provision. The assailed Decision of the Court of Appeals is hereby SET ASIDE and the dispositive portion of the trial court's decision dated October 19. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 51 . executed a Contract to Sell and a Deed of Sale of 42 subdivision lots within the PhibKhik Subdivision of the Puentevella family. executed an Acknowledgment of Debt with Mortgage Agreement. The intestate estate of the late Luis B. 1544). since such knowledge taints his prior registration with bad faith (Art. petitioners are entitled to the ownership of the property because they were first in actual possession.. There was a pending case involving the said property. said petitioner took possession of the lots and the building and improvements thereon.000. petitioner Hermilo J. private respondents. Upon the transfer to Binalbagan of titles to the 42 subdivision lots.400.: Facts: On May 11. Echaus.00. Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights except where the second buyer registers in good faith the second sale ahead of the first.00 and not P1. vs. INC. Hence. 1990 is REVIVED with the following MODIFICATION — the consideration to be paid under par.) MELO. Article 1544 requires that such registration must be coupled with good faith. Echaus filed an amended complaint by including her mother. 200). enclosing in the letter of demand a statement of account as of September 1982 showing a total amount due of P367. IV.Puentevella sold said lots to Raul Javellana with the condition that the vendee-promisee would not transfer his rights to said lots without the express consent of Puentevella and that in case of the cancellation of the contract by reason of the violation of any of the terms thereof. 24635 is AFFIRMED. Court of Appeals. Paras. 1354 with the RTC in Himamaylan. the case was filed by defendant Puentevella against him. there is: (1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass. Plaintiffs filed a petition for review with the Supreme Court which issued a restraining order against the sale of the properties claimed by the spouses-plaintiffs [in Abierra vs. he warrants that the buyer shall. The period of prescription was interrupted. the thing which is the object of the sale (Art. Judgment was rendered in favor of Puentevella. defendant Puentevella was restored to the possession of the lots and buildings subject of this case. the vendor is bound to transfer the ownership of and deliver. CV No. willing and able to comply with his own obligations thereunder (Art. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 The trial court rendered a decision in favor of the defendants. A party to a contract cannot demand performance of the other party's obligations unless he is in a position to comply with his own obligations. and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing. Plaintiffs in the instant case on appeal filed their Third-Party Claim based on an alleged Deed of Sale executed in their favor by spouses Jose and Lolita Lopez. Similarly. the appellants could not have prospered in any suit to compel performance or payment from the appellees-buyers. all payments therefore made and all improvements introduced on the property shall pertain to the promissor and shall be considered as rentals for the use and occupation thereof. representing the price of the land and accrued interest as of that date. Civil Code of the Philippines. 1982 Civil Case No. Civil Code. As petitioner Binalbagan failed to effect payment. In a contract of sale. 48 Phil. thus. 1547. 1191. from the time ownership is passed. the de la Cruz spouses. 581 [1926]. Petitioner Binalbagan transferred its school to another location.93. this petition for review on certiorari wherein petitioners assign the following alleged errors of the Court of Appeals: Issue: Whether private respondents' cause of action in Civil Case No. as well as warrant. Consequently. Javellana having failed to pay the installments for a period of five years. Berwin. possession of the building and other property was taken from petitioner Binalbagan and given to the third-party claimants. Echaus filed on October 8. Thus. p. the right to rescind a contract can be demanded only if a party thereto is ready. because from 1974 up to 1982. because the appellants themselves were in no position to perform their own corresponding Page 52 . brothers. 45 SCRA 314]. After petitioner Binalbagan was again placed in possession of the subdivision lots. In a contract of sale. and sisters as coplaintiffs. When the Supreme Court dissolved the aforesaid injunction issued by the Court of Appeals.R. Vol. Private respondents appealed to the CA which reversed and set aside the appealed decision. 1354 is barred by prescription. Seva vs.509. private respondent Angelina Echaus demanded payment from petitioner Binalbagan for the subdivision lots. 1495. CA issued a writ of preliminary injunction. Negros Occidental against petitioners for recovery of title and damages. unless a contrary intention appears. 12th ed. have and enjoy the legal and peaceful possession of the thing Art. Ruling: Petition is DENIED and the decision of the Court of Appeals in CA-G. Civil Code). the appellants themselves could not have restored unto the appellees the possession of the 42 subdivision lots precisely because of the preliminary injunction mentioned elsewhere. thus Puentevella was constrained to assert physical possession of the premises to counteract the fictitious and unenforceable claim of herein plaintiffs. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 53 .obligation to deliver to and maintain said buyers in possession of the lots subject matter of the sale. defendant heirs. (2) determinate Page 54 . LAFORTEZA vs. Motion for Reconsideration was denied but the Decision was modified so as to absolve Gonzalo Z. 1988. Laforteza executed an SPA in favor of defendant Roberto Z. Thereafter. the heirs of the late Francisco Q. Laforteza. plaintiff reiterated his request to tender payment of the balance. which affirmed with modification the decision of the lower court. Laforteza for the purpose of selling the subject property.R. A contract of sale is a consensual contract and 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. Laforteza. however. On January 20. naming both attorneys-in-fact for the purpose of selling the subject property and signing any document for the settlement of the estate of the late Francisco Q. A perusal of the MOA shows that the transaction between the petitioners and the respondent was one of sale and lease. Dennis Z. Jr.00 under the Memorandum of Agreement which plaintiff received on the same date. from liability for the payment of moral damages..00 covered by United Coconut Planters Bank Managers Check. 1989. June 16. On October 18. 1989. J. From that moment the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. appointing both as her Attorney-in-fact authorizing them jointly to sell the subject property and sign any document for the settlement of the estate of the late Francisco Q. On October 27. Both agency instruments contained a provision that in any document or paper to exercise authority granted. On September 18. defendants Lea ZuluetaLaforteza and Michael Z. Jr. insisted on the rescission of the MOA. 1998.000. as indicated in its title. 2000 (333SCRA643) Third Division GONZAGA_REYES. 1989. plaintiff sent the defendant heirs a letter requesting for an extension of the 30 DAYS. On November 20.000. The lower court rendered judgment in favor of the plaintiff. Laforteza both executed a Special Power of Attorney (SPA) in favor of defendants Roberto and Gonzalo Z. the defendants. Laforteza had told him that the subject property was no longer for sale. entered into a Memorandum of Agreement (MOA[Contract to Sell]) with the plaintiff over the subject property for the sum of P630.00.00. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 On November 15. Laforteza. However. 1998 . 1989. the signature of both attorneys-in-fact must be affixed. On January 20. plaintiff informed the defendant heirs. Defendants. refused to accept the balance Defendant Roberto Z. Laforteza. Laforteza. A year later. Laforteza. advising him that he had 30 days to produce the balance of P600.000. Facts: On August 2. 137552. Hence this petition. Laforteza and Gonzalo Z. 1988. through defendant Roberto Z. Laforteza represented by Roberto Z.000. Plaintiff filed the instant action for specific performance.ROBERTO MACHUCA Z. plus rentals for the subject property. ALONZO G. Petitioners appealed to the Court of Appeals. The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds. defendants informed the plaintiff that they were canceling the MOA in view of the plaintiffs failure to comply with his contractual obligations. Jr. Issues: W the Memorandum of Agreement is a mere contract to sell. through their counsel wrote a letter to the plaintiff furnishing the latter a copy of the reconstituted title to the subject property. Jr. defendant Dennis Z. that he already had the balance P600. No. plaintiff paid the earnest money of P30. Laforteza executed another SPA in favor of defendants Roberto and Gonzalo Laforteza. Ruling: CA decision is AFFIRMED and the instant petition is hereby DENIED. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. Prior to the issuance of the "reconstituted" title. No. 2001 Mendoza. Jon and Marissa De Ysasi vs. there was a perfected agreement between the petitioners and the respondent whereby the petitioners obligated themselves to transfer the ownership of and deliver the house and lot and the respondent to pay the price amounting to P600. The six-month period during which the respondent would be in possession of the property as lessee.00. Second Division Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 55 . ―An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. An option contract is a separate and distinct contract from that which the parties may enter into upon the consummation of the option.subject matter and (3) price certain in money or its equivalent. there was an absolute obligation on the part of the petitioners and the respondent to comply with the terms of the sale. J.000. the balance of the purchase price was to be paid only upon the issuance of the new certificate of title in lieu of the one in the name of the late Francisco Laforteza and upon the execution of an extrajudicial settlement of his estate. the six-month period merely delayed the demandability of the contract of sale and did not determine its perfection for after the expiration of the six-month period. However.00. was clearly not a period within which to exercise an option. Arturo and Estela Arceo G." In the present case. An option must be supported by consideration.R. An option contract is governed by the second paragraph of Article 1479 of the Civil Code. 136586 November 22. In the case at bench.500. All the elements of a contract of sale were thus present. the respondent was already placed in possession of the house and lot as lessee thereof for six months at a monthly rate of P3. while ruling that petitioners were justified in suspending the payment of rent. although the latter alleged that the repairs made were inadequate. 1993 Davide. First Division Page 56 . their contemporaneous and subsequent acts should be principally considered. the roof of the building leaked and the premises were flooded. The records show that respondent Mrs. the decision was affirmed.00 as deposit for three months. but he is not answerable for patent defects or those.000. Ratio: Petitioners anchor their complaint for damages on respondents' failure. Lydia Geronimo G. The trial court.000. the lessor is responsible for warranty against hidden defects. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Ruling: Decision of Court of Appeals affirmed with modification that the order for payment of unpaid rentals with interest to respondents is deleted. Consequently. Jr.00 as attorney's fees and P20. On appeal to the Court of Appeals.00 as goodwill money and P15. respondents cannot be held liable for the alleged warranty against hidden defects. 1988. there was an implied waiver of right to demand repairs to be made by the lessee.00 as balance of their rentals up to the time they vacated the premises. the MeTC. Yet. J. During his inspection.000. dismissed the complaint and ordered petitioners to pay respondents the sums of P5.. 1371 of the Civil Code provides that ―In order to judge the intention of the contracting parties. In its decision. Arceo caused certain repairs to be done on the leased premises at the request of petitioners. he noticed the rotten plywood on the ceiling. to make the necessary repairs on the leased premises as provided in Art. On appeal to the Regional Trial Court. Petitioners' motion for reconsideration was subsequently denied. Inc. as a result of which the schedule of the delivery of hand painted moldings to petitioners' customers was disrupted. Coca-Cola Bottlers Philippines. as lessors. Hence. the decision was modified inasmuch as petitioners were ordered to pay P20.Facts: On October 1. which they subsequently changed to a claim for damages in view of the expiration of the lease contract. vs. and telephone bills from December 1988 up to the time they vacated the leased premises in June 1989. the latter's premises in order to carry on their business of hand painting and finishing services. spouses Jon and Marissa de Ysasi leased from spouses Arturo and Estela Arceo. for specific performance or rescission of contract with damages. It appears that due to heavy rains. water. Petitioner Jon de Ysasi admitted on cross-examination that he inspected the premises three or four times before signing the lease contract. with interest at the legal rate. 1561 and 1653 of the Civil Code. he decided to go through with the lease agreement.‖ Under Arts. Issue: WON there was an implied waiver of repairs including repairs for hidden and unknown defects by the lessee. Petitioners then filed a complaint in the Regional Trial Court. the latter repaired only a portion of the leased premises.000. however.000. ordered the deposits made by them to be applied to the payment of rentals up to June 1989 and directed them to pay them electric and water bills. Although petitioners asked respondents to make the necessary repairs. No. Petitioners paid P5. For Art. This fact indicates that there was no implied waiver of repairs on the part of the lessee. petitioners stopped paying rent as well as their share of the electric.00 as back rentals. 110295 October 18. The Honorable Court of Appeals and Ms. The Court of Appeals held that under the contract of lease of the parties.R. 1654(2) of the Civil Code. which in his opinion was caused by leaking water or termites. which are visible. Respondents in turn filed an ejectment suit against petitioners in the Metropolitan Trial Court. Ratio: The vendee's remedies against a vendor with respect to the warranties against hidden defects of or encumbrances upon the thing sold are not limited to those prescribed in Article 1567 of the Civil Code which provides: Art.00 to P300. according to the circumstances.1 Page 57 . 1565 and 1566. the liability may itself be deemed to arise from quasi-delict. She demanded from the petitioner the payment of damages but was rebuffed by it. She then went over her stock of softdrinks and discovered the presence of some fiber-like substances in the contents of some unopened Coke bottles and a plastic matter in the contents of an unopened Sprite bottle. She received a letter from the Department of Health informing her that the samples she submitted "are adulterated.R. Those guilty of fraud.: FACTS: Petitioners spouses Dinoare engaged in the business of manufacturing and selling shirts. Responsibility arising from negligence is also demandable in any obligation. with damages either
 case. bar the applicability of the law on quasi-delict.00 per day. as a general rule. Issue: WON the subsequent action for damages by the proprietress against the soft drinks manufacturer should be treated as one for breach of implied warranty against hidden defects or merchantability." as a consequence of the discovery of the foreign substances in the beverages. J. The vendee may also ask for the annulment of the contract upon proof of error or fraud. In the case of Articles 1561. in which case the ordinary rule on obligations shall be applicable. La Union. her sales of soft drinks severely plummeted from the usual 10 cases per day to as low as 2 to 3 cases per day resulting in losses of from P200. 1567. and not long after that she had to lose shop on December 12 1989. Court of Appeals June 20. While it may be true that the pre-existing contract between the parties may.Facts: Lydia L. responsibility arising Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Inocencio Yu Dino vs. On or about August 12 1989. 113564 359 SCRA 91 First Division Puno. for examination. i. She brought the said bottles to the Regional Health Office of the Department of Health at San Fernando. No. the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price. 1564. Geronimo was the proprietress of Kindergarten Wonderland Canteen in Dagupan City.e. 2001 G. 1562. from fraud is demandable in all obligations and any waiver of an action for future fraud is void. an enterprise engaged in the sale of soft drinks (including Coke and Sprite) and other goods to the students of Kindergarten Wonderland and to the public.. and an action based thereon may be brought by the vendee. Ruling: Petiton denied. she became jobless and destitute. Under the law on obligations. or delay in the performance of their obligations and those who in any manner contravene the tenor thereof are liable for damages. the acts which breaks the contract may also be a quasi-delict. negligence. some parents of the students complained to her that the Coke and Sprite soft drinks sold by her contained fiber-like matter and other foreign substances or particles. but such liability may be regulated by the courts. The vendor could likewise be liable for quasi-delict under Article 2176 of the Civil Code. 000 pieces of vinyl mooseheads at P7. Respondent Sio did not ordinarily manufacture these products. Vs.000 pieces of vinyl frogs and 20.Respondent Sio is part owner and general manager of a manufacturing corporation doing business under the trade name "Universal Toy Master Manufacturing.75. On January 24. To fulfill its obligations to the PEA. WENCESLAO was bound to pay respondent a twenty percent Page 58 . The appellate court affirmed the trial court decision. Petitioners then demanded from the respondent a refund of the purchase price of the returned goods in the amount of P208. RTC ruled in favor of the petioners. As respondent Sio refused to pay. Petitioners filed action for collection of a sum of money.: Whether the contract between the contracting parties is a contract of sale or a contract for a piece of work Whether the respondent is responsible for the warranty against hidden defects RULING: Petition is DENIED. Subsequently. this petition. J.M Wenceslao and Associates. READYCON agreed to sell to WENCESLAO asphalt materials valued at P1.R. ISSUE: D. Respondent then filed a Motion for Reconsideration and a Supplemental Motion for Reconsideration alleging therein that the petitioners' action for collection of sum of money based on a breach of warranty had already prescribed. but only upon order of the petitioners and at the price agreed upon. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 FACTS: WENCESLAO had a contract with the Public Estates Authority (PEA) for the improvement of the main expressway in the R-1 Toll Project along the Coastal Road in Parañaque City. petitioners returned to respondent 29.000 pieces of vinyl mooseheads according to the samples specified and approved by the petitioners. Respondent Sio delivered in several installments the 40. Petitioner fully paid the agreed price. WENCESLAO entered into a contract with READYCON.404. No.00. the provisions on warranty of title against hidden defects in a contract of sale apply to the case at bar. the respondent court reversed its decision and dismissed petitioners' Complaint for having been filed beyond the prescriptive period. June 29. Ready Contrading and Construction Corp.000 pieces of vinyl frogs and 20. Hence. 154106 Second Division QUISUMBING. A hidden defect is one which is unknown or could not have been known to the vendee. 1994.308. At any rate.178. Respondent Sio sought recourse in the Court of Appeals.00 per piece in accordance with the sample approved by the petitioners.000 pieces of frogs and mooseheads. These frogs and mooseheads were to be attached to the shirts petitioners would manufacture and sell.772 pieces of frogs and mooseheads for failing to comply with the approved sample. Clearly. the contract executed by and between the petitioners and the respondent was a contract for a piece of work. The contract between the petitioners and respondent stipulated that respondent would manufacture upon order of the petitioners 20. Under the contract." Petitioners and respondent Sio entered into a contract whereby the latter would manufacture for the petitioners 20. 2004 G. Inc. whether the agreement between the parties was one of a contract of sale or a piece of work. 26 except when a party puts in issue in his pleading the failure of the written agreement to express the true intent of the parties. WENCESLAO. the counsel for READYCON wrote a demand letter to WENCESLAO asking that it make good on the balance it owed. it alleged that their contract was not merely one of sale but also of service.On May 30. the contract failed to reflect the true intention of the parties. namely. and if necessary. WENCESLAO prayed for the payment of damages caused by the filing of READYCON‘s complaint and the issuance of the writ of attachment despite lack of cause. ignored said demand. that the extra condition being insisted upon by the petitioners is not found in the sales contract between the parties. that the findings by the RTC.308. bind us now. amounting to P942. or P235. 1991. It was further stipulated by the parties that respondent was to furnish. however. Both the RTC and the appellate court found that the parties‘ contract stated that the buyer shall pay the manufacturer the amount of P1. deliver. with prayer for writ of preliminary attachment against D. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 59 . Again. lay. to rule on whether the written agreement failed to express the true intent of the parties would entail having this Court reexamine the facts. Following the rule on interpretation of contracts. By way of counterclaim. despite the fact of the work‘s acceptance by the government already RTC ruled in favor of the petitioner. Hence this petition. WENCESLAO failed to heed the demand. no other evidence shall be admissible other than the original document itself. make the needed corrections on a prepared base at the jobsite. ISSUE: Was the obligation of WENCESLAO to pay READYCON already due and demandable as of May 30. that respondent shall lay the asphalt in accordance with the specifications and standards imposed by and acceptable to the government.178. however. RULING: Petition Denied. For in a petition for certiorari under Rule 45 of the 1997 Rules of Civil Procedure.75. Besides.110. READYCON filed a complaint with the RTC of Pasig City for collection of a sum of money and damages.12 It alleged READYCON agreed that the balance in the payments would be settled only after the government had accepted READYCON‘s work as to its quality in laying the asphalt.014. Wenceslao and/or Dominador Dayrit. Under Article 1582 of the Civil Code. WENCESLAO admitted that it owed READYCON P1.45 indeed. WENCESLAO also alleged that since the contract did not indicate this condition with respect to the period within which the balance must be paid. Fifteen (15) days after performance of said work. The findings of the trial court as affirmed by the appellate court on this issue. then affirmed by the CA.647. Suffice it to say. The balance of the contract price. was to be paid within fifteen (15) days thereof. However. upon delivery of the materials contracted for. It did not even bother to reply to the demand letter. roll the asphalt.661. the buyer is obliged to pay the price of the thing sold at the time stipulated in the contract. Hence it cannot be used to qualify the reckoning of the period for payment.75. In the proceedings below. CA affirmed. 1991. however. telling against petitioner WENCESLAO is its failure still to pay the unpaid account. However. this Court may not review the findings of fact all over again.M.(20%) downpayment. READYCON demanded that WENCESLAO pay the balance of the contract price. : FACTS Integrated Packaging Corp (petitioner) and FilAnchor Paper Co. June 8. 2000. representing the unpaid purchase price of printing paper bought by petitioner on credit.70.101. 115117.. PACKAGING CORP. No.. COURT OF APPEALS and FIL-ANCHOR PAPER CO. 1978. Second Division] QUISUMBING..R. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 60 . Inc. [G. J. INC.450 reams of printing paper.INTEGRATED vs. an order agreement whereby respondent bound itself to deliver to petitioner 3. The materials were to be paid within a minimum of thirty days and maximum of ninety days from delivery. Respondent filed with the Regional Trial Court (RTC) a collection suit against petitioner for the sum of P766.. (respondent) executed on May 5. 324.101. petitioner did not fulfill its side of the contract as its last payment in August 1981 could cover only materials covered by delivery invoices dated September and October 1980.097 reams of printing paper which was short of 2. SInce that petitioner suffered a dislocation of business on account of loss of contracts and goodwill as a result of respondent's violation of its obligation.30 from the sale. giving rise to a claim for compensation but not to a right to treat the whole contract as broken. Thus.00 which was applied to back accounts. However it also found petitioner's counterclaim meritorious because if not for the failure or delay of respondent to deliver printing paper.875 reams. reducing petitioner's indebtedness to P763. It deleted the award of P790. hence. so that the performance of one is conditioned upon the simultaneous fulfillment of the other. RTC ruled that petitioner should pay P763. down payment or advance payment. Reciprocal obligations are to be performed simultaneously. whether the breach of contract is so material as to justify the injured party in refusing to proceed further and suing for damages for breach of the entire contract.30 as compensatory damages as well as the award of moral damages and attorney's fees. petitioner suffered actual damages and failed to realize expected profits. in total disregard of their agreement and also failed to deliver the balance of the printing paper despite demand therefor. as in this case. In its reply respondent alleged that subsequent to the enumerated purchase invoices in the original complaint.70. the respondent's suspension of its deliveries to petitioner whenever the latter failed to pay on time.324. respondent undertakes to deliver printing paper of various quantities subject to petitioner's corresponding obligation to pay. which are to be separately paid for. Page 61 . The Court of Appeals (CA) reverse and set aside the jugdgment. ISSUE Whether or not the respondent violated the order agreement RULING PETITION DENIED. petitioner made additional purchases of printing paper on credit amounting to P94. Accordingly. for these materials. thus. it depends in each case on the terms of the contract and the circumstances of the case. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 The transaction between the parties is a contract of sale whereby respondent (seller) obligates itself to deliver printing paper to petitioner (buyer) which. 1981.200. It alleged that respondent delivered only 1. Clearly. 1980 to July 23. or whether the breach is severable. the petitioner denied the material allegations of the complaint. is legally justified under the second paragraph of Article 1583 of the Civil Code which provides that: When there is a contract of sale of goods to be delivered by stated installments. In the contract. The respondent did not violate the order agreement when the latter failed to deliver the balance of the printing paper on the dates agreed upon. or the buyer neglects or refuses without just cause to take delivery of or pay for one or more installments. Both parties concede that the order agreement gives rise to a reciprocal obligations such that the obligation of one is dependent upon the obligation of the other. It is also admitted that it is the standard practice of the parties that the materials be paid within a minimum period of thirty (30) days and a maximum of ninety (90) days from each delivery.In its counterclaim. hence.00 and that petitioner refused to pay its outstanding obligation although it made partial payments amounting to P97. binds itself to pay therefor a sum of money or its equivalent (price). and the seller makes defective deliveries in respect of one or more installments.200. the undertaking of respondent to deliver the materials is conditional upon payment by petitioner within the prescribed period.101. petitioner could have sold books to Philacor and realized profit of P790. The agreement provides for the delivery of printing paper on different dates and a separate price has been agreed upon for each delivery. on a maximum 90-day credit. in turn. Hence this petition.70 representing the value of printing paper delivered by respondent from June 5. the former is entitled to moral damages. for lack of factual and legal basis. petitioner is not even required to make any deposit. Respondent appellate court correctly ruled that respondent did not violate the order agreement. petitioner's evidence failed to establish that it had paid for the printing paper covered by the delivery invoices on time. Cruz declined the offer. No. Third Division] ROMERO. Petitioner then made a bid to buy them but Dr. 112212 March 2. Petitioner. Having sketched the jewelry then gave them back to Dr. J. as corporate secretary of the bank. Consequently. On the contrary. respondent has the right to cease making further delivery. Cruz. vs COURT OF APPEALS. hence the respondent did not violate the order agreement. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 62 . NINEVETCH CRUZ and JUAN BELARMINO [G.Here.R. GREGORIO FULE. Ninevetch Cruz (private respondent). it was petitioner which breached the agreement as it failed to pay on time the materials delivered by respondent. a banker by profession and a jeweler at the same time. It so happens that at that time petitioner had shown interest in buying a pair of emerald-cut diamond earrings owned by Dr. asked Remelia Dichoso and Oliva Mendoza to look for a buyer who might be interested in the Tanay property.: FACTS Gregorio Fule (petitioner). 1998. Rizal (Tanay property). At that point former inspected said jewelry at the lobby of the Prudential Bank branch in San Pablo City and then made a sketch thereof. Cruz which he had seen when his mother examined and appraised them as genuine. acquired a 10hectare property in Tanay. The two found Dr. violence. among other things. the problem that should be addressed in this case is whether or not under the facts duly established herein. Petitioner signed the deed. arrived at the residence of Atty. Since the jewelry was appraised only at P160. therefore. The following day. Being consensual. may be in keeping with good faith. Cruz (who arrived later) and the cashier then opened the safety deposit box. Cruz had later agreed to the proposal. that the contract of sale over the Tanay property be declared null and void on the ground of fraud and deceit. petitioner met Atty. the former retrieving a cellophane bag with the jewelry inside and handing over the same to petitioner. Accordingly. The Civil Code provides that contracts are perfected by mere consent. Formal requirements are. Later. according to their nature. a contract of sale has the force of law between the contracting parties and they are expected to abide in good faith by their respective contractual commitments. and registration of the instrument only adversely affects third parties. After a while. Cruz asked. for the benefit of third parties.Subsequently. RULING PETITION DENIED.00 would just be paid later in cash. A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. Belarmino to finally execute a deed of absolute sale. 1984. Thereafter the petitioner headed for the bank. Non-compliance therewith does not adversely affect the validity of the contract nor the contractual rights and obligations of the parties thereunder. at about 8:00 o'clock in the evening of the same day. petitioner went to Prudential Bank once again to take a look at the jewelry. even though there may have been no damage to the contracting parties are: (1) those where one of the parties is incapable of giving consent to a contract. 1984. On October 26. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Hence this petition. Article 1358 of the Civil Code which requires the embodiment of certain contracts in a public instrument. negotiations for the barter of the jewelry and the Tanay property ensued. is only for convenience. held the jewelry against the light and examined it for ten to fifteen minutes. As such. Belarmino complaining that the jewelry given to him was fake.000. RTC.m. the parties agreed that the balance of P40. arriving there at past 5:00 p. Dr. petitioner filed a complaint before the Regional Trial Court (RTC) against private respondents praying.00. Cruz to the petitioner as genuine. petitioner arrived at the residence of Atty. Belarmino (Dr. undue influence or fraud. When Dr. Hence. usage and law. as affirmed by the Court of Appeals. Cruz attended to the safekeeping of the jewelry. It is evident from the facts of the case that there was a meeting of the minds between petitioner and Dr. Cruz. the contract can be voided in accordance with law so as to compel the parties to restore to each other the things that have been the subject of the contract with their fruits. petitioner. intimidation. petitioner now stresses before Page 63 . Contracts that are voidable or annullable. The Attorney accordingly caused the preparation of a deed of absolute sale while petitioner and Dr. the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which. Cruz‘s lawyer) at the latter's residence to prepare the documents of sale. The latter took the jewelry from the bag. together with Dichoso and Mendoza.000. and the price with interest. He then used a tester to prove the alleged fakery. Dr. held the earrings uses as consideration for the sale was delivered by Dr. From this moment. they are bound by the contract unless there are reasons or circumstances that warrant its nullification. "Okay na ba iyan?" Petitioner expressed his satisfaction by nodding his head. and (2) those where the consent is vitiated by mistake. went near the electric light at the bank's lobby. The contract of barter or sale is valid. In the afternoon of October 23. ISSUE Whether or not the deed of sale of the Tanay property is null and void. the finger of suspicion of switching the genuine jewelry for a fake inevitably points to him.00. Cruz if he was 29 satisfied with the same. In his allegations in the complaint. mistake must "refer to the substance of the thing that is the object of the contract. who led Dr. That after two hours he later claimed that the jewelry was not the one he intended in exchange for his Tanay property. petitioner insinuated that an inferior one or one that had only Russian diamonds was substituted for the jewelry he wanted to exchange with his 10-hectare land. As the Civil Code provides. not excluding the alteration of the jewelry or its being switched with an inferior kind. Cruz did not initially accede to petitioner's proposal to buy the said jewelry. correctly ruled that there were no legal bases for the nullification of the contract of sale. therefore. Cruz to believe that the Tanay property was worth exchanging for her jewelry as he represented that its value was P400. Even assuming that he did. petitioner was afforded the reasonable opportunity required in Article 1584 of the Civil Code within which to examine the jewelry as he in fact accepted them when asked by Dr. This gains credence when it is borne in mind that he himself had earlier delivered the Tanay property to Dr. Rather. "(t)here is no mistake if the party alleging it knew the doubt. He had the intellectual capacity and the business acumen as a banker to take precautionary measures to avert such a mistake. petitioner did not clearly allege mistake as a ground for nullification of the contract of sale. are bare of any evidence manifesting that private respondents employed such insidious words or machinations to entice petitioner into entering the contract of barter. in fact. By taking the jewelry outside the bank. Both the trial and appellate courts." On account of his work as a banker-jeweler. On the pretext that those pieces of jewelry turned out to be counterfeit. failed to prove the fact that prior to the delivery of the jewelry to him. Cruz.this Court that he entered into the contract in the belief that the pair of emerald-cut diamond earrings was genuine. 1984 should not have precluded him from having its genuineness tested in the presence of Dr. To invalidate a contract. he would not have agreed to. without them. however. through his agents. Such a mistake caused by manifest negligence cannot invalidate a juridical act. Cruz induced petitioner to sell his Tanay property or that she cajoled him to take the earrings in exchange for said property. Cruz by affixing his signature to the contract of sale. the facts as proven do not support the allegation that petitioner himself could be excused for the "mistake. petitioner subsequently sought the nullification of said contract on the ground that it was. Cruz. it can be rightfully assumed that he was an expert on matters regarding gems.000. petitioner cannot successfully invoke the same." Furthermore.000. it was in fact petitioner who resorted to machinations to convince Dr. through the insidious words or machinations of one of the contracting parties. Said contract of sale being absolute in nature. however. Cruz and petitioner. could not sever the juridical tie that now bound him and Dr. In short. contingency or risk affecting the object of the contract. Dr. The records. or to those conditions which have principally moved one or both parties to enter into the contract. upon the actual and constructive delivery thereof." An example of mistake as to the object of the contract is the substitution of a specific thing contemplated by the parties with another. title passed to the vendee upon delivery of the thing sold since there was no stipulation in the contract that title to the property sold has been reserved in the seller until full payment of the price or that the vendor has the right to unilaterally resolve the contract the moment the Page 64 . Moreover. the other is induced to enter into a contract which. Ownership over the parcel of land and the pair of emerald-cut diamond earrings had been transferred to Dr. There is fraud when. Neither is there any evidence showing that Dr. "tainted with fraud" such that his consent was vitiated. He. Cruz to exchange her jewelry for the Tanay property. Indeed. Had he done so. respectively. The nature and value of the thing he had taken preclude its return after that supervening period within which anything could have happened. he could have avoided the present situation that he himself brought about. The fact that he had seen the jewelry before October 24. considering the value of both the jewelry and his land. it appears that it was petitioner. it was certainly contrary to the nature of a businessman-banker like him to have parted with his real estate for half its price. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Likewise. however. On the contrary.00 or more than double that of the jewelry which was valued only at P160. petitioner executed an act which was more consistent with his exercise of ownership over it. If indeed petitioner's property was truly worth that much. private respondents endeavored to make such substitution. 500. in view of their complaint for rescission. and to pay the capital gains and documentary stamp taxes with the Bureau of Internal Revenue and registration fees with the Register of Deeds. respondents commenced an action for rescission or specific performance with damages. There is no stipulation for the payment of interest in the contract of sale nor proof that the Tanay property produced fruits or income. SPOUSES ALFONSO and ANACLETA BICHARA While it is true that the amount of P40. Petitioner deducted the said amount from the purchase price payable to respondents.000. The filling up of the lots cost petitioner P45.00. No. Respondents refused the tender. G. Cruz is not a sufficient cause to invalidate the contract or bar the transfer of ownership and possession of the things exchanged considering the fact that their contract is silent as to when it becomes due and demandable.000. from the time of judicial or extrajudicial demand for the payment of the price. After receipt of summons. 1983. until fully paid. Consequently. however. Petitioner tendered payment to respondents in the amount of P360. Second Division DE LEON.. They prayed for the rescission of the contract of sale and the return of the properties. 131074 March 27. still did not pay the respondents. Petitioner. petitioner failed to pay respondent.: Facts: Respondent sold a parcel of land located in Legaspi City to Petitioner at the amount of 500 pesos per square meter or a total amount of 405 thousand pesos. Article 1589 of the Civil Code prescribes the payment of interest by the vendee "for the period between the delivery of the thing and the payment of the price" in the following cases: (1) Should it have been so stipulated. Petitioner was thus constrained to undertake the filling up of the said lots.00. The deed of sale contained that the payment is to be effected only after the Deed of Sale shall have been duly registered and a clean title issued in the name of VENDEE. respondents did not fill up the lot with escombro despite several demands made by petitioner. the VENDORS will undertake at their expense to fill the parcels of land with an escombro free from waste materials compacted to the street level upon signing of the Deed of Sale to suit the ground for the construction of the regional office of the Central Bank of the Philippines thereat. (2) Should the thing sold and delivered produce fruits or income. by contracting the services of BGV Construction. its nonpayment by Dr. against petitioner before the Regional Trial Court of Legazpi City. or in the alternative that petitioner be compelled to pay the purchase price plus interest at the rate of 12% per annum from July 19. Also. (3) Should he be in default.buyer fails to pay within a fixed period. Neither did petitioner demand payment of the price as in fact he filed an action to nullify the contract of sale.00 forming part of the consideration was still payable to petitioner. 2000 Neither may such failure to pay the balance of the purchase price result in the payment of interest thereon. Not one of these cases obtains here. J. Such stipulations are not manifest in the contract of sale. Respondents alleged that petitioner failed to pay the purchase price despite demand. petitioner filed its answer averring that it was justified in delaying payment of the purchase price in view of Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 65 . Despite the issuance of the title. CENTRAL BANK OF THE PHILIPPINES vs.R. On its part. however. JR. respondents' breach of several conditions in the contract. some even before the court issued an order for the issuance of a decree of registration. After the court ordered the issuance of a decree of land registration for the subject property. At that time. In a letter.840. Held: Issue 1: Respondents should not be allowed to rescind the contract where they themselves did not perform their essential obligation thereunder which is to fill up the parcels of land with escombro. they aver that this violation led to the rescission of the contract. Second Division Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 66 . through counsel. La Union.000. the vendee is likewise entitled to withhold payment of the purchase price if the vendor fails to perform any essential obligation of the contract. Issue 2: Aside from the instances mentioned under Article 1590 of the civil code. he offered to pay the balance in full for the entire property. According to private respondents. But petitioner made several payments to private respondents. Court of Appeals on the other hand ordered the rescission of the contract of sale hence this petition. in view of the encumbrances noted in the title. subdividing it. private respondents stated they would consider the contract rescinded. He also averred that he had already spent P190. private respondents. Petitioner did not accept private respondents' proposal. the land was untitled although private respondents were paying taxes thereon. within five days from receipt of the letter. Petitioner instituted an action for specific performance against private respondents. but on general principles of reciprocal obligations. Second. Since respondents failed to comply with their obligation.00 upon signing of the contract. Private respondents refused the offer. Of the P312. No. First. their acceptance of partial payments did not at all modify the terms of their agreement. Private respondents on the other hand claimed before the lower court that petitioner maliciously delayed payment of the balance of the purchase price.00 in obtaining title to the property.000. Under the contract. of which petitioner was formally informed. Also. Instead.R. plus interest and attorney's fees. He claimed that the several partial payments he had earlier made. SPOUSES FLORESCO PAREDES and ADELINA PAREDES. alleging that he had already substantially complied with his obligation under the contract to sell. and improving its right-ofway. had impliedly modified the contract. 2000 QUISUMBING. and the balance was to be paid within ten days from the issuance of a court order directing issuance of a decree of registration for the property. Such right is premised not on the aforequoted article. Issue 2: Whether Central Bank is justified in withholding the payment of the purchase price. ALBERT R. It should be emphasized that a contract of sale involves reciprocity between the parties. and THE HONORABLE COURT OF APPEALS G. Issues: Issue 1: Whether respondents are entitled to the remedy of rescission despite of their non-compliance to their obligations to Central Bank. J. in addition to the presence of squatters who were not evicted by respondents. Central Bank is justified in withholding its payment of the purchase price. they may not seek the rescission of the agreement they themselves breached. Otherwise. with interest and attorney's fees. PADILLA vs. Since respondents were in bad faith. 124874 March 17. demanded payment of the remaining balance. it claimed that respondents did not fill up the lots with escombro free from waste materials. But the petitioner was not able to pay the balance in full. Padilla and Floresco and Adelina Paredes entered into a contract to sell involving a parcel of land in San Juan. petitioner undertook to secure title to the property in private respondents' names. such that the failure of petitioner to fully pay at the time stipulated was a violation of the contract. despite repeated demand. respondents then demanded payment of the balance of the purchase price.: Facts: Albert R. petitioner was to pay a downpayment of P50. upon private respondents' request. petitioner alleged that respondents failed to deliver to the former free and legal possession of the two properties.00 purchase price. as agreed Trial court ordered specific performance of Central Bank to pay for the property plus interest. the contract entered into by the parties thus is a contract to sell. the contract therefore may be rescinded but the reason for this is not that private respondents have the power to rescind such contract. the issue of whether or not the breach of contract committed is slight or casual is irrelevant in the case of a contract to sell. 1191 cannot be applied. Issues: Whether the appellants are entitled to rescission under Article 1191 of the Civil Code. but because their obligation thereunder did not arise. There can be no rescission of an obligation that is non-existent. Since petitioner failed to comply with Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 67 . According to the trial court. his obligation to pay the full purchase price within the stipulated period. Private respondents therefore are entitled to rescission under Article 1191 of the Civil Code. It speaks of obligations already existing. this constituted modification of the contract. however. if any existed. The contract itself provides that no terms and conditions therein shall be modified unless such modification is in writing and duly signed by the parties. which may be rescinded in case one of the obligors fails to comply with what is incumbent upon him. though not reduced into writing as required by the contract itself. reversed the ruling of the trial court and confirmed private respondents' rescission of the contract to sell. where title remains in the vendor if the vendee fails to "comply with the condition precedent of making payment at the time specified in the contract. even before the land registration court ordered issuance of a decree of registration for the property. Art. However. hence this petition. private respondents made a timely objection to petitioner's partial payments when they offered to sell to petitioner only one-half of the property for such partial payments. it was only a casual and slight breach that did not warrant rescission of the contract. were evidenced by receipts duly signed by private respondents. The modification alleged by petitioner is not in writing. in the present case. The trial court pointed out that private respondents themselves breached the contract when they requested and accepted installment payments from petitioner. there is still no obligation to convey title of the land on the part of private respondents. however. The payments. The Court of Appeals. but with the obligation to return to petitioner the payments the latter had made. According to the Court of Appeals. considering that the suspensive condition has not yet happened. including expenses incurred in securing title to the property and in subdividing and improving it right of way. Acceptance of delayed payments estopped private respondents from exercising their right of rescission." Moreover Court of Appeals rejected petitioner's claim that there had been a novation of the contract when he tendered partial payments for the property even before payment was due. much less signed by the parties. Held: Pertinent provisions of the contract signify that title to the property remains in the vendors until the vendee should have fully paid the purchase price. saying that even if petitioner indeed breached the contract to sell. Moreover.The lower court ruled in favor of petitioner. The operative act which produces the resolution of contract is decree of court not the mere act of vendor. The party entitled to rescind should apply to the court for a decree of rescission. Hence. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 2. Whether or not the award of moral and exemplary damages is proper. did not oppose the revocation of the contract but only asked for the reimbursement of the initial payment made. Petitioner refused to formally execute an instrument showing their mutual agreement to rescind the contract of sale. hence. private respondent considered the contract rescinded. Quisumbing The filing by Palao of Judicial Confirmation of Rescission of Contract and Damages satisfies the requirement of the law. 2. he argued that the contract is already consummated. the remedy should be for the collection of the balance of the purchase price and not rescission. Whether or not the contract of sale is validly rescinded. He also did not substantiate proof that he Page 68 . The letter written by the private respondent declaring hi intention to rescind did not operate validly. no agreement between the parties was made. on its reply. Palao filed a complaint for Judicial Confirmation of Rescission of Contract and Damages against Iringan and his wife. 129107 September 26. The petitioner knew respondent‘s reason for selling. Court of Appeals G. 2001 1. No. This was brought to the Court of Appeals but the latter also affirmed the decision. Facts: Private respondent Palao sold to petitioner Iringan an undivided portion of land to be paid in installments. Private respondent said that they are not amenable regarding to the reimbursements claimed. On his answer.R.Due to petitioner‘s failure to pay the full amount on the second installment. Simply put. RTC affirmed the rescission and ordered for the payment for damages to Palao. Held: Alfonso Iringan vs. this petition. The petitioner on the other hand. Article 1592 requires the rescinding party to serve judicial or notarial notice of his intent to resolve the contract. Issues: 1. No. Petition denied. The Court ruled that the sale between Concepcion and Iluminada is a consummated contract of sale. Facts: Concepcion Gil and sister Nieves Gil are coowners of a parcel of land. Nieves appealed to the Court of Appeals but the latter also affirmed the assailed decision. The Sheriff was then ordered to execute but instead. 127206 Whether or not the property was validly sold to Iluminada and Agapito Pacetes. As a consequence of the death of Concepcion. one of the two lots given to Concepcion was then sold by the latter to Agapito and Iluminada Pacetes. CA G.R. 2003 Held: Callejo Sr. Concepcion died and now represented by her successors as the petitioners in this instant case. The Court rendered judgment in favor of Concepcion. it is the heirs who have the duty to deliver Page 69 . Nieves and husband constructed a two storey building on the said land. The vendor within 120 days shall be delivered the certificate of title to the vendee.was ready and willing to pay. Issue: Perla Gil vs. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 The certificate of title was not delivered. the awarding for damages is proper. This contract was however subject to the condition that a deposit shall be given at the time of the execution of the contract and the remaining amount shall be paid upon the delivery of the certificate of title to the vendee. Hence. subsequent buyers are not purchasers in good faith. The property was then sold to one Constancio Maglana and was again sold to the present possessor Emilio Magtulac who is constructing a building on said lot. vendee will pay the remaining amount. Therefore. Then. Lot 59 C1. The Court issued a writ of execution but Nieves refused to execute the required deed. Concepcion then filed a complaint against her sister. September 12. Subsequently. They also argue that the consignation made by Iluminada did not produce legal effect. The contract specifies payment provision wherein a deposit will be made at a time of the execution of the instrument. he divided the property into 4 lots and gave two to Concepcion. Petitioners are contending that Concepcion‘s sale of the disputed property to Iluminada and Agapito Pacetes is merely a contract to sell because the full price was not paid by the latter to the former. Amores took possession of the subdivision and developed the same for residential purposes. part of the Victoria Village. declaring Nemenio spouses as the owners of the disputed lot. Iluminada‘s act of paying the remaining amount only after so many years is still valid because after all she has no duty to pay until tile has been delivered to her.such. they were not able to deliver the certificate also. Nemenio and Felisa V. however. Petition denied for lack of merit. He secured the transfer of the title to the same in his name. Constantino M. Galeos and Eugenio V. Court of Appeals. Prior to the sale. Amores February 9.R. Trial court rendered a decision. Galeos sold the entire subdivision. Nemenio. In addition. 105902 RULING: Buena. ISSUE: Severino Baricuatro. Apparently. No. Whether the Nemenio spouses are purchasers in good faith? G. Such knowledge tainted his registration with bad faith. to Amores. vs. Two months from the date of the previous sale.: Issue 1 FACTS: Baricuatro bought two lots. the agreement to collect the balance of the Page 70 . he sold the two lots of the spouses Mariano and Felisa Nemenio. 1968. when he registered his title he already had knowledge of the previous sale. Jr. J. Baricuatro was informed by Galeos about the sale and was advised to pay the balance of the purchase price of the two lots directly to Amores. Nemenio spouses demanded from Baricuatro to vacate the said lots but the latter refused to do so.. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Amores was in good faith when he bought the subdivision. Court of Appeals affirmed in toto the judgment of the trial court. Tenth Division. Whether the sale made to Amores by Galeos is valid? 2. Afterwards. Baricuatro was informed through a letter by Amores about the impending sale of the two lots but the former failed to respond. 2000 1. including the two lots. Mariano B. on installments basis from Galeos on October 16. Decision of CA is REVERSED. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 71 . (Uraca vs Ca) ―The second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law. Issue 2 Nemenio spouses only visited the lots ten months after the sale which was evidenced during the trial of the case. they cannot claim to be purchasers in good faith when they registered the title. 1544. Under Art. hence. the ownership of an immovable property shall belong to the purchaser who in good faith registers it first in the registry of property. The registration made by the spouses were done in bad faith. And so. it amounted to no inscription at all.purchase price of the disputed lots from Baricuatro which presupposes knowledge of the previous sale by Amores.‖ This means that the good faith of the purchaser should be from the time of the perfection of the sale until up to the time that he be declared the sole and true owner of the property. Felipe Amodia. thus. 1. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 72 . and it is sold and the sale is registered no under the Land Registration Act but under Act 3344. 1544 provides: Should it be immovable property. Cecilia Amodia Vda. J. June 23. pursuant to Art 1544. 26. 148846 Nachura. The signatures of the Amodias were forged. RTC‘s decision: Go Kim Chuan as the real owner of the property. Honorable Court of Appeals and Aznar Brothers Realty Company. thus. And Aznar. RULING: Art. 2001 CA‘s decision: Aznar registered ahead in favor of Go Kim Chuan. the Amodias allegedly conveyed the property to Aznar and was registered under Act 344 as there was no title.: FACTS: A property in the name of Go Kim Chuan was originally owned by the Amodias and was brought under the operation of the Torrens System. No. De Melencion. the Amodias conveying the property in favor of Go Kim Chuan and was reconstituted pursuant to RA No. However. failed to show that Go Kim Chuan acquired the property in bad faith. Who between Go Kim Chuan and Aznar has the better right over the subject property? G. If the land is registered under Torrens Title. the said deed did not convey anything in favor of Aznar. Eutiquio Amodia and Go Kim Chuan ISSUE: vs.R.In 1964. the former deed should be given preference over the latter. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. In 1989. the title was lost during the Second World War. such sale is not considered registered. Thereafter. Veneranda Amodia. Go Kim Chuan exercised control and dominion over the subject property in an adverse and continuous manner in the concept of an owner. On the other hand. Soliva. filed a complaint for recovery of ownership against respondent. The petitioner. Trial Court ruled in favor of the respondent on the ground of laches. and so the latter is deemed to be the owner of the property. Hence. The Intestate Estate of Marcelo M. The remedy of the unpaid seller is to sue for collection or rescind the contract. No. She contended that the respondent failed to give full consideration for the house and lot purchased by the latter. did not exercise her right to demand for rescission or specific performance. Villalba Date: December 8.R. stressing that contrary to petitioner‘s submission. and that partial payment thereof was given. Villalba. Hence. the court may not grant him a new term. the recission of the contract shall of right take place. Petition for review is GRANTED. the vendee may pay. herein. over a parcel of land situated in Misamis Oriental. 496. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 73 . 2003 G. this petition.Aznar registered its title under Act 3344 while Go Kim Chuan registered it under Act No. For the rescission of immovables. Under the settled doctrine. respondent argued that the house and lot were sold to him on installment basis. therefore. RULING: SC affirmed CA‘ s and ruled in favor of respondent. Art 1592 provides that even though it may have been stipulated that upon failure to pay the price at the time agreed upon. she was already barred from recovering the property due to laches and prescription. After the demand. nonpayment is a resolutory condition that extinguishes the transaction existing for a time and discharges the obligations created thereunder. barred petitioner‘s claim of ownership. ISSUE: Whether or not the respondent‘s nonpayment of the full consideration would invalidate the contract of sale. He also argued that no demands were made on him to vacate the property for a long a period of time.154017 Division: First Division Ponente: Justice Panganiban FACTS: Petitioner. even after the expiration of the period as long as no demand for rescission has been made upon him. Soliva vs. Prescription. Court of Appeals affirmed this ruling. the nonpayment of the full consideration did not invalidate the contract of sale. Visayan Sawmill Company. Court of Appeals affirmed the ruling. No. which provides for automatic rescission upon failure to deliver or failure to pay movable properties. but simply an event that prevented the obligation of the petitioner corporation to convey title from acquiring binding force. 83851 Division: En banc Ponente: Justice Davide FACTS: Petitioner-corporation entered into a sale involving scrap iron with private respondent. subject to the condition that the latter should open a letter of credit in favor of the former on or before May 15. however. petitioner-corporation insisted that the cancellation of the contract was justified because of private respondent‘s noncompliance with essential pre-conditions. among which was the opening of an irrevocable and Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 74 . could not be applied because implied delivery was already made in the case at bar. On the other hand. Private respondent prayed for judgment ordering the petitioner-corporation to comply with the contract by delivering to him the scrap iron subject thereof. the non-fulfillment could not even be considered a breach. vs. Date: March 3. 1983. Subsequently. Court of Appeals Hence. This implied delivery was manifested by the fact that the petitioner-corporation allowed the private respondent to dig and gather scrap iron from its premises.R. Accordingly. However. Private respondent then started to dig and gather scrap iron. Inc. what transpired between the parties was a contract or promise to sell and not a contract of sale.unconditional letter of credit not later than May 15. ISSUE: Whether or not lower court erred in ruling that automatic rescission could not be applied in the instant case. Petitioner-corporation‘s obligation to sell is subject to a suspensive condition. which was private respondent‘s opening of an irrevocable and unconditional letter of credit. Trial Court ruled in favor of the private respondent finding that Art 1593 of the Civil Code. the petition. 1993 G. In line with the foregoing. RULING: SC found merit on the petition stressing that the lower court erred in the appreciation of the nature of the transaction between petitionercorporation and private respondent. petitioner-corporation sent a letter to the private respondent conveying its intention to discontinue with the sale due to the latter‘s failure to comply with the essential preconditions of their con tract. 1983. this condition was not fulfilled. That within the period of redemption. et al. younger brother of Conchita. ISSUE: Whether or not plaintiffs spouses has the right to repurchase the parcels of land to Anacleto. vs. Since. Plaintiff spouses Conchita Nool seek recovery of the aforementioned parcels of land from defendants Anacleto Nool. Page 75 . Court of Appeals. RULING: Conchita Nool.the defendants to return the same but defendant refused. It is likewise clear that Conchita can no longer deliver the object of the sale to the Anacleto because he has already acquired title and delivery thereof from the rightful owner. plaintiff contacted defendant Anacleto to redeem it from DBP which the latter did. Victorino and Francisco. It is clear that Conchita no longer had any title to the parcels of land at the time of sale because when the mortgaged parcels of land were foreclosed due to their non-payment of said loan. the DBP. G. impelling them to come to court for relief.00. P30. then there is also nothing to repurchase. Third Division PANGANIBAN.000. Anacleto agreed to buy the land for P100. No. Undisputedly. so that DBP‘s titles were cancelled and new certificates of title were issued to him. 116635. plaintiffs were to regain possession which amounts defendant failed to pay. the contract may be deemed to be inoperative.000. Thereafter Anacleto succeeded in buying the same. et al. Plaintiffs asked Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 A contract of repurchase arising out of a sale where the seller did not have any title to the property ―sold‖ is not valid. it is itself void. Since nothing was sold. 1997 None. Anacleto acquired title to the property from DBP and not from the petitioners. Plaintiffs alleged that they are the owners of subject parcels of land and they bought the same from Conchita‘s other brother. ownership of the mortgaged lands was consolidated to DBP. When they were in dire of money.000. DBP gave the mortgagors one year redemption period but this was not exercised by them. J: FACTS: Two parcels of land are in dispute and litigated which was formerly owned by Victorino Nool and Francisco Nool. The right to repurchase presupposes a valid contract of sale between the same parties. For their failure to pay said loan.00 of which was paid to Conchita and upon payment of the balance P14. Petition denied. July 24. Because of this. the mortgage was foreclosed. titles of two parcels were transferred to Anacleto. the alleged contract of repurchase was dependent on the validity of the contract of sale. they obtained a loan from Development Bank of the Philippines (DBP) secured by a real estate mortgage on said land which was still registered in the names of Victorino and Francisco.00. Another agreement was entered where by defendants agreed to return to plaintiffs the land at anytime the latter have the necessary amount.R. A void contract cannot give rise to a valid one. Thus. in consonance that nobody can dispose of what he does not have. By Eulalia‘s own admission it was her customary business practice to require her “biyaheros” to deliver to her the titles to their real properties and to execute in her favour the corresponding deeds of sale over the said properties as security for the money she provided.: RULING: FACTS: 1. Eulalia found that he incurred shortage in his cattle procurement operation so Dominador and his wife Rosalia Bandong executed a Deed of Sale in favour of Eulalia. July 04. so that Eulalia has no right to subsequently transfer ownership of the subject property. To secure the financial capital she advanced for the “biyaheros” Eulalia required them to surrender the Transfer Certificates of Title of their properties and to execute the corresponding Deeds of Sale in her favour. J. 171250. No. she employed “biyaheros” whose primary task involved the procuring of large cattle with the financial capital provided by Eulalia and delivering the procured cattle to her for further diposal. Dominador and Rosalia Bandung ISSUE: G. et al. They alleged that there was no sale intended but only equitable mortgage for the purpose of securing the shortage incurred by Dominador while employed as ―biyahero”. For this purpose. The subject property was thereafter sold by Eulalia and her spouse Carlos Raymundo to Eulalia‘s grandniece Jocelyn which was later registered in the name of Jocelyn and her husband Angelito Buenaobra. Carlos and Eulalia Raymundo. The court of appeals reversed the RTC Decision and found that the transaction entered into by Dominador and Eulalia was not one of sale but an equitable mortgage. said transaction is an equitable mortgage. Page 76 . Sps. 2. Dominador and Eulalia never intended the transfer of ownership of the subject property but to burden the same with an encumbrance to secure the indebtedness incurred by Dominador on the occasion of his employment with Eulalia. Whether or not the transaction entered into by the parties was a contract of sale. No. Eulalia was engaged in the business of buying and selling large cattle. vs. Whether or not Jocelyn is a buyer in Good Faith. The contention of petitioner that Dominador ceded his property to Eulalia as payment for his obligation for it is contrary to human experience because he would first look for means to settle his obligation and the selling of a property on which his house that shelters them stand would be his last resort. CHICO-NAZARIO. Sps. Hence.Jocelyn‘s counsel to vacate. Dominador had been working for Eulalia as one of her “biyaheros” for three decades so she no longer required him to post any security in the performance of his duties. Jocelyn maintained that she was a buyer in good faith and for value. Their relationship is merely mortgagor and mortgagee rather than seller and buyer. Spouses Bandong instituted an action for annulment of sale before RTC against Eulalia and Jocelyn on the ground that their consent to the sale of the subject property was vitiated by Eulalia after they were served by Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 In executing the said Deed of Sale. However. Hence this petition.R. Spouses Buenaobra instituted before the MeTC an action for ejectment against Souses Bandong which they opposed on the ground that they are the rightful owners. 2007 Third Division 1. Likewise she admitted that she was aware that Dominador and Lourdes were in possession of the property. A buyer who does not investigate the rights of one in possession can hardly be regarded as a buyer in good faith. A buyer of real property that is in possession of a person other than the seller must be wary.2. Jocelyn is a grandniece of Eulalia which resides in the same locality where the latter lives and conducts her principal business. Petition is denied. This should put her on guard for any possible abuses that Eulalia may commit with the titles. No. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 77 . Therefore it is impossible for her not to acquire knowledge of her grand aunt‘s business practice of requiring her “biyaheros” to surrender the titles to their properties as security. LEE. It is well-settled that the presence of even one of the foregoing circumstances is sufficient to declare a contract as an equitable mortgage. No.000. Pilipino. she agreed to mortgage a parcel of agricultural land located in Bulacan. From Lee and his wife Lilian Sison. The document bears two signatures above the typewritten words "ERLINDA SAN PEDRO. or a total indebtedness of P150. RUBEN LEE and LILIAN SISON G. may sapat na gulang. Salaping Pilipino. On appeal. who introduced her to respondent.000. Valenzuela. It contains the signatures of two witnesses. kasal kay Lilian Sison at naninirahan sa 230 MacArthur Highway. which states that the petitioner is the true owner of a parcel of land located in Bulacan.000. with interest of P45.00 Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 The document appears on its face to be a contract of sale. ERLINDA SAN PEDRO vs.000. Respondents.000. ang lahat at boo [sic] kong karapatan at pagmamay-ari at pamumusesyon sa nabanggit na lagay ng lupa at mga kaunlaran o mejoras na dito ay makikita o nakatirik o matatagpuan sa nasabing RUBIN T. Roxas and Lee coerced her to sign the "Kasulatan" and that the document was executed merely as written evidence of the loan and mortgage. which is selling to the respondents for the amount of P150. which had an initial asking price of P200. Karuhatan. San Pedro accepted their offer and agreed to sell the land. Nagbibili". aking IPINAGBIBILI.: The trial court rendered a decision in favor of petitioner.00. na ngayong araw na ito ay ibinayad sa akin at tinanggap ko naman ng buong kasiyahang-loob bilang husto at ganap na kabayaran ni RUBIN T. Petitioner claims that she approached one Philip dela Torre.000. ISINASALIN at INILILIPAT ng ganap at patuluyan at walang anumang pasusubali o pananagutan. on the other hand claim that the sale of the property in question was brokered by their mutual acquaintance and broker. Facts: Ruling: The parties in this case executed the "Kasulatan ng Ganap na Bilihan ng Lupa". J. Petitioner was able to secure a loan in the amount of P105. Philip dela Torre.00. in consonance with the rule that the law favors the least transmission of property rights. LEE at sa kanyang mga tagapamana o kahalili. two requisites must concur: (1) that the parties entered into a contract denominated as a sale. and contains the following clause: Na dahil at alang-alang sa halagang ISANG DAAN AT LIMAMPUNG LIBONG PISO (P150. 156522 May 28.00.6 As security for this loan. the dispositive portion of which reads: Issue: Whether the contract in question is an equitable mortgage or a deed of absolute sale. and rendered a decision in favor of respondents.00).therefor. and Page 78 .R. Metro Manila.000.21 and offered to pay P150. the Court of Appeals reversed the trial court. Petitioner claims that Atty. 2004 FIRST DIVISION YNARES-SANTIAGO.For the presumption of an equitable mortgage to arise under Article 1602. They thus negotiated for the purchase of the property.00. .(2) that their intention was to secure an existing debt by way of a mortgage. WHEREFORE. the decision of the Court of Appeals dated November 20. 2004 Second Division QUISUMBING. No. 2002. 147321 January 21. which dismissed the complaint filed by petitioner for lack of merit. J. premises considered. Spouses Gonzalez G. is AFFIRMED Spouses Austria and Leonisa Hilario vs.R. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 79 . using the fictitious contracts of sale. Spouses Hilario failed to present any proof whatsoever that the fair market values of the real property in the area at the time of the transaction were much higher than the selling price of the parcels in question. 2002 vs. Said letter is written not in English but in Filipino in which petitioners are conversant. Petitioners cannot feign ignorance and illiteracy as to its contents. CA: REVERSED. Note that in said letter Leonisa used the term "Kasulatan ng Bilihan" (Deed of Sale). much less an equitable mortgage Spouses on the other hand contend that they bought the said lots from Spouses Hilario merely out of pity for them and that the Deed of Absolute Sale was notarized. Page 80 . capital gains tax. Gonzales requesting them to execute another antedated deed of sale. It is not merely a loan. Lastly. which can only find relevance and necessity in a contract of sale and not in a contract of mortgage. As to the allegation that petitioners were in possession of the properties even after the sale. likewise made mention about capital gains tax and registration fees. providing for a decreased selling price. Leonisa Hilario sent a note to Mrs. ISSUE: Whether the transaction is an absolute sale or equitable mortgage of real property. so as to reduce petitioners' taxes. One lot was priced at P50.000.FACTS: Spouses Hilario filed an action for Declaration of Nulity against Spouses Gonzales involving 3 parcels of lands which were the subject of 2 Deeds of Sale executed Leonisa Hilario in favor of the latter spouses. Here. they failed to rebut the testimony of the Notary Public who testified in court that the petitioners as vendors of the properties personally appeared and acknowledged the sale documents before him. 143868 and Third Division PANGANIBAN. Spouses Hilario claimed that the contract between them and Spouses Gonzalez were not of sale but loans for P260. The transaction is an absolute sale. The existence and genuineness of the letter was never rebutted. 000 and the other at P240.g. She Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Oscar Fernandez Narcisa Tarun November 14. The presumption of equitable mortgage when there is inadequacy of the selling price. and payment of realty taxes is not conclusive. Thus. possession in the premises. It may be rebutted by competent and satisfactory proof to the contrary.000.: FACTS: A fishpond located in Arellano-Bani Dagupan City is co-owned by brothers Antonio. However. Spouses Carlos G.R. J. HELD: AFFIRMED. the true intent of the parties involves a contract of sale. it turned out that Spouses Gonzalez registered the disputed lots in their names through the use of fraud. RTC: ruled in favor of Spouses Hilario. misrepresentation and falsification. it is obviated by the fact that they executed an undertaking promising to vacate the premises. Moreover. e. No. a document is considered a contract of equitable mortgage when the circumstances enumerated in Article 1602 of the Civil Code are manifest. Hence. No. it is important to note that he did not sell it to respondents. ISSUE: Whether or not the transaction is one of absolute sale or equitable mortgage. the said co-owners executed a Deed of Extrajudicial Partition of two parcels of registered land with exchange of shares.R. Fernandez exchanged his share in the 2nd fishpond to the shares of his co-owners on the remaining portion of the 1st fishpond. and (b) when the vendor remains in possession as lessee or otherwise.Santiago. a sale is not set aside. it was Angel B. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Tolentino and Roño vs. CA. one must first satisfy the requirement that the parties entered into a contract denominated as a contract of sale. De Guzman. and that their intention was to secure an existing debt by way of mortgage. CA: REVERSED. Hence. They are entitled to redeem the property. Furthermore. Finally. together with their uncle Armando. The transaction is an absolute sale. or that the parties really intended a donation. 128759 August 1. although the inadequacy may indicate that there was a defect in the consent. When he died. On its face. this action for partition. as follows: (a) when the price of the sale with the right to repurchase is unusually inadequate. Later. unless the price is grossly inadequate or shocking to the conscience. [petitioners]. Spouses Tarun again sought the partition of the property but Angel Fernandez‘s heirs [petitioner] again refused. The sellers were his co-owners -Antonio and Demetria Fernandez -. This involved the st fishpond (1 ) that was co-owned and another nd fishpond (2 ).who. they had been paying the realty taxes thereon. Antonio and Demetria sold their respective shares to Spouses Tarun. Angel B. are not claiming that the sale between them was an equitable mortgage. For the presumption of an equitable mortgage to arise. However. Although it is undisputed that Angel Fernandez was in actual possession of the property. there is no basis to conclude that the price was grossly inadequate or shocking to the conscience. however. It was also stipulated in the deed that the parties recognize and respect the sale earlier made. J: Page 81 . The Spouses Tarun sought the partition of the property but Angel Fernandez refused. mere alleged inadequacy of the price does not necessarily void a contract of sale. HELD: AFFIRMED. Demetria and Angel Fernandez. petitioners failed to establish the fair market value of the property when it was sold in 1967. mortgage. or some other act or contract. who remained in possession of the entire fishpond. 2002 Second Division Quisumbing. Fernandez and later on his heirs. Pongco and Baduria G. From that time on. These sales were registered and annotated in the OCT. RTC: in favor of petitioners. In this case. Armed with the Deed of Absolute Sale. 20248 T-105 and TCT No. The trial court. Petitioners agreed to reconvey the property on the condition that respondents pay the actual market value obtaining in 1971.) Whether the action for declaration nullity of the Deed of Absolute Sale the proper remedy or cause of action. They obtained a loan from the Rehabilitation Finance Corporation (RFC). this instant petition. Thus. The contract shall be presumed to be an equitable mortgage. SC said wrong. invoking Art.) Petitioners argue that Art. respondents filed a complaint for declaration of sale as equitable mortgage and reconveyance of property with damages. The loan to RFC was paid and the mortgage was cancelled. They failed to pay the obligation. De Guzman to sign a Deed of Absolute Sale. 1602 of the Civil Code applies only when there is no express agreement or stipulation between the parties. they asked again Sps. respondents tried to settle the remaining balance of the loan.Facts: Sps. There is nothing in Art. Both the trial court and CA ruled in favor of respondents. Sps. now Development Bank of the Philippines (DBP). there is nothing in Art. It observed that the transactions indicated that petitioners did not intend to hold the property as owner. it is not obligatory for respondent to file an action for reformation of instruments. Hence. 1602 (presumption equitable mortgage) is inapplicable the instant case. 1602 and Art. Upon verification with the RD of QC. But before the expiry of the redemption period. and executed a mortgage security therefor. 20248 T-105 of the Register of Deeds of Quezon City (RD of QC). 1602. 69164 was issued in their name. 1604 of the Civil Code. Afterwards. Consequently. Upon the death of Pedro de Guzman in 1971. 1.000 from Raymundo Tolentino and Lorenza Roño (petitioners). there was an express agreement. Furthermore. Pedro and Josefina De Guzman were the registered owners of a parcel of land covered by TCT No. ruled that these were sufficient to raise the presumption that the contract was an equitable mortgage. but as security for the loan extended to the respondents. 2. But in the instant case. Moreover. 1605 that prohibits the institution of an action different from the one provided therein. It uses the word ―may‖ and denotes discretion and cannot be construed as mandatory. the respondents remained in possession of the property and continued to pay real estate taxes even after the execution of the Deed of Absolute Sale. These are badges of equitable mortgage. Petitioners then requested Sps. The trial court in rendering the decision considered foremost the real parties‘ intent in entering into the transactions. (3) When upon or after the expiration of the right to repurchase another instrument extending Ruling: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 82 . therefore inapplicable.) Whether Art. Petition DENIED.) SC held that well entrenched is the rule that litigants cannot raise an issue for the first time on appeal as this contravenes the basic rules of fair play and justice. of to (1) When the price of a sale with right to repurchase is unusually inadequate. of is (2) When the vendor remains in possession as a lessee or otherwise. petitioners secured the cancellation of TCT No. _______________________________________ Art. hence. 2. the mortgage was foreclosed. De Guzman obtained another loan of P18. the De Guzmans found that the title was already in the name of the petitioners. 1602 that indicates it applies only in the absence of express agreement between the parties. De Guzman to sign a Deed of Promise to Sell as security for the loan. in any of the following cases: Issues: 1. Lourdes and Teresita. her children Rafael. Heirs of Rafael Medalla G. (5) When the vendor binds himself to pay the taxes on the thing sold. 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. No. surnamed Medalla succeeded to her inheritance.the period of redemption or granting a new period is executed. J: Facts: Gorgonio Macainan was the owner of several properties in Bacolod City. Georgina Hilado vs. 2002 Second Division Mendoza. including Berbonia who had predeceased him. any money. In turn. (4) When the purchaser retains for himself a part of the purchase price. In any of the foregoing cases. fruits.R. The provisions of article 1602 shall also apply to a contract purporting to be an absolute sale. Upon his death in 1966. Art. Rafael Medalla‘s share consisted of five hectares in Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 83 . 1604. (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. 144227 February 15. his estate was divided among his heirs. Medalla filed a cross-claim against Hilado.) Whether Art. 1031 for P50. there has been an understanding between them that the same property Page 84 . Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 2. Petitioner now seeks a reversal of the said decision. Issues: 1. Rafael executed a Deed of Absolute Sale.Lot No. In 1979 and 1981. The trial court dismissed Anita‘s complaint and ruled in favor of petitioner. Hence.000 which he had received from Hilado. In fact the CA held that “It is very unlikely for one person who had acquired a property for a certain price to sell the same property to the same person five years after for the same price rate.m. Hilado and Medalla executed three more contracts concerning Lot No. In the instant case. The first deed was for Lot No. 1602 of the Civil Code is present in the instant case. considering that they are unrelated. Berbonia‘s sister. 1031 and the Lopez Jaena property. the court was convinced that the intention was really to sell because all the formalities required for a valid and enforceable contract have been fully satisfied. (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 The presence of these circumstances is sufficient for a contract to be presumed as an equitable mortgage.) Under Art. As such. Anita Macainan brought a suit against Hilado and Medalla for legal redemption. a contract purporting to be an absolute sale is presumed to be an equitable mortgage – (1) when the price of a sale . 1602 in relation to Art. the CA reversed the trial court‘s decision for the reason that the assessed value of Lot No.000. Over the next two years. the series of transactions executed after the 1979 Deed of Absolute Sale indicated quite clearly that the real intention of the parties was to secure the loans of Medalla. there was evidence showing that the price paid by petitioner was unusually inadequate as compared to the market value of the lands in the neighborhood. 1031 is P145.000. Hilado claims it was a deed of sale and not a loan agreement. Also.) Whether the contract of deed of absolute sale executed is the law between the parties. (2) when the vendor remains in possession as lessee or otherwise.000 while the second was for the Lopez Jaena property for P25.197 sq. purporting to sell his share to Georgina Hilado (petitioner). Medalla remained in possession of the lot as corroborated by his tenant Ramon Nessia and also by Anita Macainan. 1031 and 1. in the Lopez Jaena property. alleging that the Deed of Sale in 1979 was an equitable mortgage to secure a loan for P50. Moreover. . Ruling: 1. unless.460 and the consideration was only for P50. stating that Medalla as a third year law proper when the deed was executed had full knowledge of the consequences when he affixed his signature. However. is unusually inadequate. Nevertheless. it can only conclude that it was grossly inadequate. In 1984. . 1604 of the Civil Code. G.200 square meter residential house on two of the lots.000 per square meter while the house was worth about P10 million. they constructed. 109197 June 21. Nicanor de Guzman. Metro Manila. J. de Guzman‘s campaign fund began to run dry and he was compelled to borrow P2. Sometime in April 1987. No. THE HONORABLE COURT OF APPEALS and SPS. the owner of the property may prove that the contract is really a loan with mortgage and that the document does not express the true intent and agreement of the parties.will be resold to Medalla after the fulfillment of a resolutory condition. San Juan. Sometime in 1987. 2001 MELO. In 1987. petitioners. Petition DENIED.) The SC held that in view of the conclusions reached. it will suffice to say that even if a document appears on its face to be a sale. NICANOR G.R. The de Guzman spouses Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 85 . In 1971. respondents. a 1.5 Million from Mario Siochi. Jr. however. the market value of the lots already ranged from P4. DE GUZMAN and ESTER DE GUZMAN. Jr. at a cost of P3 million. SPOUSES JAYME C. decided to run for the position of Representative of the Fourth District of Nueva Ecija. UY and EVELYN UY.: Private respondents Nicanor de Guzman. and Ester de Guzman were the owners of three lots located in Greenhills Subdivision.000 to P5.” 2. vs. the "deed of sale" being more than sufficient to cover the original P2. Consequently. the April 10.Lastly.(2) When the vendor remains in possession as lessee or otherwise. the de Guzmans filed a complaint with the Regional Trial Court of Pasig against Siochi. As found by both the trial court and appellate court. On September 16. 1987. and herein petitioners. In the meantime and without the knowledge of the de Guzman spouses. Aside from these loans.00 each from Siochi. 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 Page 86 . 1987 deed of sale executed by the de Guzmans and Siochi was an equitable mortgage. In the following circumstances. plaintiffs have remained in actual and physical possession of the litigated property up to the present time. the consideration of the sale of P2. De Guzman was able to obtain two more loans of P500.5 Million is grossly and unusually inadequate. however. 1987 deed of sale. de Guzman also owed Siochi several debts.8 Million. Aggrieved. seeking the reformation of the April 10. No additional collateral was required.Third.000.(5) When the vendor binds himself to pay the taxes on the thing sold. in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate. which had already been "sold" to Siochi under the April 10. hence. the de Guzmans remained in possession of the property. as a sort of collateral. 1987. and had new Torrens titles issued in his name. petitioners had Siochi‘s titles over the lots cancelled and had new titles issued over the property. Siochi sold the two lots and the improvements thereon for P2.75 Million to herein petitioners Jayme and Evelyn Uy. the trial court rendered its decision in favor of the de Guzmans. unable to obtain possession of the lots since the premises were occupied by the de Guzman spouses. the latter affirmed the decision of the trial court holding that the sale disputed by the de Guzmans to Siochi was an equitable mortgage. Siochi had the spouses TCT cancelled on the basis of the deed of sale executed by the spouses on April 10. In fact.(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. 1987 Deed of Absolute Sale to the end that the true intention of the parties therein be expressed. petitioners entered into a contract of lease with option to buy with Roberto Salapantan. 1990. sold. Salapantan was. 1602 of the New Civil Code provides: The contract shall be presumed to be an equitable mortgage.(4) When the purchaser retains for himself a part of the purchase price.411 square meter vacant lot. The sale of the same amounted to P4. On December 28. to repay these other loans. the sale is an equitable mortgage.8 million derived from the sale of plaintiffs‘ vacant lot. 1987 whereby they purportedly sold 2 of the 3 lots along with the improvements thereon.Second. 1988 against the de Guzman spouses with the Metropolitan Trial Court of San Juan. additional loans in the total sum of P1 million were extended to plaintiffs by Siochi even after the execution of said sale without Siochi demanding for any additional security. a deed of sale dated April 10. Salapantan.5 million loan and the additional P1 million loan. On July 1.(6) In any other case where it may fairly be 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." however. the proceeds of which were all retained by Siochi. it indubitably shows that the alleged sale was indeed an equitable mortgage. the de Guzmans agreed with Siochi to have their 1.were required to sign. the uncontradicted evidence is that plaintiffs were driven to obtain the emergency loan due to urgent necessity of obtaining funds and they signed the deed of sale knowing that it did not express their real intention. Thereafter. 1988. ISSUE : Whether or not the sale made by herein private respondents was indeed an equitable mortgage as held by both the trial court and the appellate court Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 HELD: YES. Despite the "deed of sale. Salapantan filed a complaint for ejectment on August 1. to Siochi. The court was convinced and found that the questioned deed of sale is in reality a mere equitable mortgage and not an absolute sale in view of the following circumstances: First. Siochi had retained for themselves the entire proceeds of P4. Art. petitioners interposed an appeal with the Court of Appeals. On June 20. 1988. the titles to the house and lots which were sold by Siochi to petitioners actually remained with the mortgagors. despite the alleged deed of sale. Metro Manila. the de Guzmans. 00 will be paid to the Carloses as mortgagees. No. petitioners. Cruz will apply for a housing loan with Land Bank.00. herein private respondent Ricardo delos Reyes. expenses for the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 87 ." Being null and void.000. a family friend of the delos Reyeses and an employee of the Land Bank of the Philippines. which is null and void.00 and fearing foreclosure of the property. Neither did it validate the sale made by Siochi to petitioners. vs. respondents. for help in redeeming their property. petitioners mortgaged this property to Florencio and Nestor Carlos in the amount of P150. J.: Petitioners were the registered owners of a 225-square meter parcel of land located in Antipolo.000. Sometime in August 1991. COURT OF APPEALS. Article 2088 of the Civil Code provides that the "the creditor cannot appropriate the things given by way of pledge or mortgage. 165009. Rizal covered by Transfer Certificate of Title No. using the subject property as collateral.R. 2001 GONZAGA-REYES. The issuance of a certificate of title in Siochi‘s favor did not vest upon him ownership of the property. G. the sale by Siochi of the questioned property to petitioners. It was agreed that petitioners will sign a deed of sale conveying the mortgaged property in favor of private respondent Cruz and thereafter. SPOUSES OCTAVIO and EPIFANIA LORBES. produced no legal effects whatsoever.to petitioners herein as owners-mortgagors. It was further agreed that out of the proceeds of the loan. and an such balance will be applied by petitioners for capital gains tax. the mortgage obligation had increased to P500. or dispose of them. 139884 February 15.000. P500. About a year later. conformably with the well-established doctrine that the mortgagee does not become the owner of the mortgaged property because the ownership remains with the mortgagor. who are not innocent purchasers. petitioners asked their son-in-law. Private respondent delos Reyes agreed to redeem the property but because he allegedly had no money then for the purpose he solicited the assistance of private respondent Josefina Cruz. RICARDO DELOS REYES and JOSEFINA CRUZ. 229891 issued in the name of private respondent Cruz. They alleged that the deed of sale did not reflect the true intention of the parties. petitioners filed on July 22. the presence of even one of the circumstances laid out in Article 1602. Sometime in 1993. 1992 did not reflect the true intention of the parties. such as the Contract to Sell dated June 1992. under Article 1602 of the Civil Code. as set out in Article 1602 of the Civil Code. the sale was indeed an equitable mortgage. Applying the foregoing considerations to the instant case. upon finding that: (1) the Deed of Absolute Sale dated October 21. not of equitable Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 mortgage. and not a concurrence of the circumstances therein enumerated. On June 20. suffices to construe a contract of sale to be one of equitable mortgage. and Transfer Certificate of Title No. Aggrieved. The Supreme Court held that the conditions which give way to a presumption of equitable mortgage. 1995. and registration of a mortgage in favor of Land Bank. 1992. (f) 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. 1992. and that the transaction was not an absolute sale but an equitable mortgage. Receipt of Partial Advance Payment dated September 9. and that the real intention of the parties in securing the loan was to apply the proceeds thereof for the payment of the mortgage obligation. Moreover.cancellation of the mortgage to the Carloses. a contract shall be presumed to be an equitable mortgage when --. considering that the price of the sale was inadequate considering the market value of the subject property and because they continued paying the real estate taxes thereto even after the execution of the said deed of sale. Understandably. apply with equal force to a contract purporting to be one of absolute sale. On October 22. 94-3296. This is simply in consonance with the rule that the law favors the least transmission of property rights. Affidavit of Waiver/Assignment dated August 14. the mortgage was discharged. ISSUE: Whether or not the alleged sale was an equitable mortgage HELD: YES. the Deed of Absolute Sale and its supporting documents do not reflect the true arrangement between the parties as to how the loan proceeds are to be actually applied because it was Page 88 . (c) upon or after the expiration of the right of repurchase another instrument extending the period of redemption or granting a new period is executed. transfer of title to Josefina Cruz. Rizal. considering that the price stated in the Deed of Absolute Sale was insufficient compared to the value of the property. the Land Bank issued a letter of guarantee in favor of the Carloses. and (2) the transaction entered into between petitioners and Cruz was not an absolute sale but an equitable mortgage. and petitioners had continued to pay the real estate taxes thereon after the execution of the said deed of sale. petitioners notified private respondent delos Reyes that they were ready to redeem the property but the offer was refused. In the complaint. Transfer Certificate of Title No. the transaction was unmistakably a contract of sale. (d) the purchaser retains for himself a part of the purchase price. (b) the vendor remains in possession as lessee or otherwise. 229891 in the name of Josefina Cruz was issued in lieu thereof. Moreover. 165009 was cancelled and Transfer Certificate of Title No. On September 29. The Court of Appeals reversed the above decision. 1994 a complaint for reformation of instrument and damages with the RTC of Antipolo. 1992. petitioners claimed that the deed was merely a formality to meet the requirements of the bank for the housing loan. (e) the vendor binds himself to pay the taxes on the thing sold. 1992. as evidenced by the numerous supporting documents thereto.(a) the price of a sale with right to repurchase is unusually inadequate. 1992. the Court found that the true intention between the parties for executing the Deed of Absolute Sale was not to convey ownership of the property in question but merely to secure the housing loan of Cruz. docketed as Civil Case No. finding that the transaction between petitioners and Cruz was one of absolute sale. and. informing them that Cruz‘s loan had been approved. the trial court rendered judgment in favor of petitioners. Thus.2 On November 25. the monthly amortization on the housing loan which was supposed to be deducted from the salary of private respondent Cruz will be reimbursed by private respondent delos Reyes. To the Court of Appeals. in which petitioners had a direct interest since the proceeds thereof were to be immediately applied to their outstanding mortgage obligation to the Carloses. petitioners are still in possession of the property. and 40% of the P1 Million would be appellants personal loan. theorizing that the Deed of Absolute Sale expressed the true intention of the parties.. When the mortgagors failed to pay the mortgage debt. Crisostomo. drafted the Absolute Deed of Sale. TCT in the name of the Tuazons was cancelled and in lieu thereof. The sole purpose for preparing these documents was to satisfy Land Bank that the requirement of collateral relative to Cruz‘s application for a housing loan was met.830. this was two days after petitioners signified their intention to redeem the property by paying the full amount of P600. suppliers and laborers of URPI from levying on subject property. The new title was to serve as security for the loan. The bank agreed to reduce the redemption price to One Million (P1. The facts further bear out that petitioners remained in possession of the disputed property after the execution of the Deed of Absolute Sale and the transfer of registered title to Cruz in October 1992. a TCT was issued in the name of John Siy F. 161 and 163 existing thereon. J. to secure a loan of 4. together with the spouses. 119794 October 3. 1987. The Tuazons brought a Complaint for Reformation of Contract.000. petitioner decided to transfer the title thereof to Lim. Appellee proposed that: 60% of the P1 Million.not the intention of the parties for these documents to do so. or P600. Cruz made no demand on petitioners to vacate the subject premises until March 19.000 would be a URPI loan where machineries worth P3 Million. 2000 Third Division Ponente: PURISIMA. the finding of respondent court that petitioners remained in possession of the property only because they refused to vacate on Cruz‘s demand is not accurate because the records reflect that no such demand was made until more than a year since the purported sale of the property. 1994. spouses Tomas S. lawyer of the Tuazons.265. From the above. See Tiong Cheng and Eng Tang Go See. del Mundo Street. with a two-storey building and Apartment Units Nos.00. together with other properties. Inc. Atty. subject lot to the Philippine Bank of Commerce (PBCom).R.000. the mortgaged property was foreclosed and sold at public auction. Lim filed hi s answer. 7th Avenue. Lim theorizing that the real intention of the parties was to enter into a loan accommodation that their daughter Bernice told that her fiancé. Petitioner Tuazon and his daughter Page 89 . interestingly. By virtue of the said deed. On July 15. No. with PBCom itself as the highest bidder.00) Pesos subject to the condition that petitioner surrendered in favor of PBCom his (petitioner) Producer's Bank stock certificates by way of dacion en pago. COURT OF APPEALS and JOHN SIY LIM G. by way of chattel mortgage. To keep the creditors. Quieting of Title with Damages against John Siy F. mortgaged. the respondent was willing to help them redeem the subject property by accommodating them with 1Million Pesos.90 Pesos. Kaloocan City. Lim.000. which was duly registered. On this basis. Tomas See Tuazon.: FACTS: The case originated from a contract of mortgage constituted on the subject lot. the Court is satisfied that enough of the circumstances set out in Article 1602 of the Civil Code are attendant in the instant case. as to show that the true arrangement between petitioners and private respondent Cruz was an equitable mortgage. Tuazon sold to John Siy Lim (Lim) a 650 square meter conjugal lot along A. Tuazon and Natividad S. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 TOMAS SEE TUAZON vs. would secure it. who was then the President and General Manager of Universal Rubber Products. the voluntary. CA decided in favour of respondent. But not in the concept of owner. Here. to wit: (1) there must have been a meeting of the minds of the parties to the contract. 1987 is couched in clear terms and conditions. the provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. the following requisites must concur. Ruling of CA is affirmed. In the exercise of his right as owner of the property. 161 to a William Sze where Lim signed the contract of lease as the lessor accident. (5) When the vendor binds himself to pay the taxes on the thing sold. Lim leased Apartment No. fraud. Prepared by the lawyer of the herein petitioner. and (3) the failure of the instrument to express the true intention of the parties is due to mistake. Tomas See Tuazon. written and unconditional acceptance of contractual commitments negate the theory of equitable mortgage. (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. The first year of Tuazons continued occupancy of Apt. two requisites must concur: that the parties entered into a contract denominated as a contract of sale and that their intention was to secure an existing debt by way of mortgage. For an action for reformation of an instrument as provided for in Article 1359 to prosper. ISSUE: Whether or not the deed of absolute sale is in fact an equitable mortgage RULING: Petition is denied. The Tuazon family remained in the premises sold to Lim. John Siy Lim had no hand in its preparation. (4) When the purchaser retains for himself a part of the purchase price. petitioner has not shown or established the presence of the aforestated requirements for the reformation of the deed in question. Trial court rendered a decision declaring that the deed of absolute sale was an equitable mortgage. (2) the instrument does not express the true intention of the parties. the Tuazons will pay the appropriate rentals for the continued use and occupation of the property. inequitable conduct or Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 90 . And for these provisions of law to apply. Trial court decided for the respondent. No. 163 was at Lims graciousness with the understanding that after one year. subject Deed of Absolute Sale executed on July 15. Under Article 1604 of the New Civil Code. (2) When the vendor remains in possession as lessee or otherwise. Besides. (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.persuaded him to redeem for himself the extrajudicially foreclosed property from PBCom because Tuazon was financially incapable. Both parties filed an MR. Article 1602 of the Civil Code provides that a contact shall be presumed to be an equitable mortgage by the presence of any of the following: (1) When the price of a sale with right to repurchase is unusually inadequate. 4705 was finally subdivided into several smaller lots and partitioned extrajudicially among the five (5) heirs of Florentino Dominguez although the records only disclosed three (3) names. Concepcion Dominguez-Reyes. The loans were released by Nilda to Concepcion and Araceli on a piecemeal basis.00 Nilda would prepare a Deed of Absolute Sale and Transfer which purported to convey in her favor a portion of the undivided shares of Concepcion and Araceli in Lot No. Nilda Ramos further assured Concepcion and Araceli that the deeds would not be notarized nor would they be enforced against them. insisting that the deeds did not reflect the true intention of the parties as their real intention was simple loans of money the payment of which was to be secured by mortgages. Upon learning of the partition." Page 91 .000.: OF FACTS: Two separate actions for specific performance was filed by Spouses Ramos agains Spouses Reyes and Spouses Victa to compel them to segregate a total of 3000 square meters of lot Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 from each of their respective shares in the estate of the FLorentino Dominguez.000.00 to P20. The Ramoses contended that Conception Reyes and Araceli Vita sold 1.R.J. which she owned. and where the amounts loaned to them presumably came from. That however out of a total of eighteen (18) deeds of sale signed by Concepcion and Araceli. Sometimes they were furnished by Nilda Ramos with duplicate copies of the corresponding receipts although in most instances only one (1) copy was prepared which Nilda retained. Reyes and Araceli D. it appeared that three (3) were actually notarized. Concepcion and Araceli offered to settle their indebtedness but Nilda refused to accept payment. Araceli Dominguez-Victa and Fortunata Dominguez. Finally. 2000 Second Division Ponente: Bellosillo. Nilda represented to them that the instruments were merely for purposes of complying with the formalities required by ARVI Finance Corporation. No. To entice them to sign the deeds. 4705. Concepcion acquired a 2. the Ramoses demanded that the petitioners make good their undertakings under the deed of sale executed beforehand but the latter refused.700 and 1. their father. COURT APPEALS G.300 square meters of lot to them.340 square meters. Early 1991 Lot No. 134166 August 25. Trial court rendered a decision in favor of the Reyes and Victa spouses holding that "the alleged sales were not really sales but receipts of sums of money by way of loans. Concepcion D. and every time the loans reached an aggregate amount of P10. Victa averred that between 1980 to 1985 they obtained individually various loans from Nilda Ramos which were covered by handwritten receipts prepared either by her or by her daughter Dinah Ramos and signed by Concepcion and Araceli.440-square meter lot while Araceli took possession of two (2) lots with a combined area of 2.SPOUSES MARIO REYES VS. are not disputed. the contents of the writing constitute the sole repository of the terms of the contract between the parties x x x x provision also applies even to a contract purporting to be an absolute sale. (b) when the vendor remains in possession as lessee or otherwise. not the concurrence nor an overwhelming number of such circumstances. CA: We have examined the instruments evidencing the transactions under consideration and found the language of each clearly and without ambiguity to be setting forth a contract of sale and purchase. appellants have convincingly proven the reality of the sale of the parcels of land subject hereof x x x these pieces of evidence are not mere drafts of contracts since everything for the existence of a perfect contract of purchase and sale are present. They are in fact admitted x x x x In the mind of this court. The transactions were replete with veritable badges of equitable mortgage. The facts and evidence decidedly show that the true intention of the parties was to secure the payment of the loans and not to convey ownership over the property in question. (d) when the purchaser retains for himself a part of the purchase price. (e) when the vendor binds himself to pay the taxes on the thing sold. Art. and (b) that their intention was to secure an existing debt by way of a mortgage. is sufficient for a contract of sale to be presumed an equitable mortgage. it must be emphasized. The existence of any one of the circumstances defined in the foregoing provision. two (2) requisites must concur: (a) that the parties entered into a contract denominated as a contract of sale. (f) 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. may be presumed to be an equitable mortgage: (a) when the price of a sale with right to repurchase is unusually inadequate. And the authenticity and due execution of these deeds. ISSUE: The pivotal issue then is whether the parties intended the contested Deed(s) of Absolute Sale and Transfer to be bona fide absolute conveyances of parcels of land. if indeed the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. regardless of its nomenclature. Neither can they possibly be mistaken for receipts inasmuch as even their title – typewritten in capital letters and underlined – proclaims what each of the documents is all about x x x x When contracting minds have reduced their agreement into writing. For the presumption of an equitable mortgage to arise under Art. and. 1602. Trial court decision is reinstated and affirmed. 1602 of the Civil Code enumerates the instances when a contract. or merely equitable mortgages RULING: CA decision is inconsistent with law and equity. as in this case. The Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 92 .The Court of Appeals however disagreed and reversed the ruling of the trial court on appeal. (c) 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. Aklan. regardless of its nomenclature. however.. No. in any of the following cases: (1).. CA and Tupas G. documentary and parol evidence may be submitted and admitted to prove such intentio.. The other private respondents then came in as intervenors. On August 15. 2000 Facts:  In April 30. It found that the contract between the parties was one of equitable mortgage and not of sale... as follows: Aguirre vs.. 1602 of the Civil Code enumerates the instances when a contract... 131520 January 28. in what is more popularly known as Boracay Island. Aklan rendered judgment dismissing the Complaint for lack of merit. of the subject land.. The decisive factor in evaluating such agreement is the intention of the parties. petitioner took possession and occupied the said parcel of land. As such therefore.When the price of a sale with right to repurchase is unusually inadequate.When the vendor remains in possession as lessee or otherwise. Tupas.Recovery of Possession with Damages being co-owners with their sister. may be presumed to be an equitable mortgage. Teofista S. petitioner filed a Complaint for Quieting of Title and/or Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 (2). claiming to have been disturbed in the possession of the subject land.  Immediately thereafter.R. petitioner Estelita Aguirre and private respondent Teofista S. Tupas.. Malay. ‗Art...  On August 21.230 square meter parcel of land located in Balabag. 1991. as shown not necessarily by the terminology used in the contract but by their conduct...  Art. 1602. actions and deeds prior to. 1984. the Regional Trial Court of Kalibo.When upon or after the expiration of the right to repurchase Page 93 . (3). words... during and immediately after executing the agreement. courts are not bound by the title or name given by the parties. The contract shall be presumed to be an equitable mortgage.against the spouses Privado Tupas and Teofista S. 1972. Issue: Whether or not the transaction between the parties was not a sale but an equitable mortgage? Ruling: Petition Denied  In determining the nature of a contract. Tupas entered into a Deed of Absolute Sale covering a 3... suffices to give rise to the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 94 . such that.‘ By the terms of Art.. Article 1604 of the Civil Code provides that the provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. 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... not a concurrence. to pay their indebtedness to petitioner..Despite this bold possession.. almost ½ half of the area had been occupied by them. as rightful owner. any money. or an overwhelming number of such circumstances.. petitioner admits that no demand to vacate the land was ever made upon the spouses Tupas.. After a careful review of the records of the case.. in relation to Article 1604 provides that a contract of sale is presumed to be an equitable mortgage 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.When the purchaser retains for himself a part of the purchase price.  Neither was rent ever collected from them for their occupancy of the land. abandon the property she already was in possession of. the existence of any one of the conditions under Article 1602.‘ x x x... This may be gleaned from the following circumstances surrounding the transaction  First. (6). Otherwise. until the action below was filed in 1984.When the vendor binds himself to pay the taxes on the thing sold. the foregoing provisions ‗shall also apply to a contract purporting to be an absolute sale. only to leave possession of the same to her vendor?  It is also of record that private respondents had continued paying tax on the subject land (4).. as mortgagors.. why would she.  The explicit provision of Article 1602 that any of those circumstances would suffice to construe a contract of sale to be one of equitable mortgage is in consonance with the rule that the law favors the least transmission of property rights. That petitioner vacated the subject land after having occupied the same only underscores the fact that no sale took place between the parties.another instrument extending the period of redemption or granting a new period is executed.. (5)..  Coming now to the temporary possession of the subject land by petitioner. That period of time may well be deemed as the time allotted to the spouses Tupas.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. the court find credibility in private respondents‘ claim that the spouses Tupas gave petitioner a ten (10) year period to occupy the subject land as part of their mortgage agreement. per petitioner‘s own account.. it is not disputed that private respondents spouses Tupas built two cottages on the subject land as well as operated a sari-sari store and grew banana plants on the same. In any of the foregoing cases."  As already stated above. 1604.. Their possession remained undisturbed for years. presumption that the contract is an equitable mortgage  Article 1602(6). To stress. we are convinced that it qualifies as an equitable mortgage under Article 1602(6)... The presence of even one of the circumstances in Article 1602 is sufficient basis to declare a contract as one of equitable mortgage. 0-1743 and Lot No. the spouses Jacinto Nemeño and Dalmacia Dayangco-Nemeño. The parcels are: Lot No. Jacinto. Saturnino (now deceased) and Felipa.420 square meters and covered by Tax Declaration No. the Lumayags alleged that said owner‘s duplicate copy of was in Domingo‘s possession but the same was lost when a typhoon hit and destroyed the couple‘s house in Talisay. 1996. the same would show that the taxes for the years 1974-1980 were only made by petitioner on June 4. Ozamiz City. Jacinto. In an order dated December 20. owned two (2) parcels of coconut land located in Manaca. their children Meliton. it may be that the debt was given at the very moment of the mortgage transaction. Timoteo. However. The petition was opposed by the other heirs of Jacinto and Dalmacia who claimed that the owner‘s duplicate copy of the same OCT was actually in the possession and custody of their brother Meliton Nemeño. Meliton. Eleuteria. 1996.  The heirs of Jacinto and Dalmacia. petitioner points out that private respondent Teofista Tupas was not a debtor at any time prior to the sale. subject to the requirements of law regarding consolidation of ownership of real property.almost a year after she had already filed the suit below. 4035 C-4. joined by his five (5) children. Timoteo. Justo. the complaint alleged that the subject Deed of Sale with Pacto De Retro was executed only for the purpose of securing the payment of a loan of P20. No. Dalmacia died survived by her husband.”  More than a decade later. while petitioner presented tax declarations in her favor. conveyed to his daughter Felipa and the latter‘s husband Domingo Lumayag the aforementioned Lot.  In that petition. Eleuteria. 13750  In 1979. or on August 28. hence.R. it cannot be held that the subject land was being used as security for a debt. namely. Court of Appeals G. It was likewise agreed thereunder that in the event no purchase is effected within the said stipulated period of five (5) years “conveyance shall become absolute and irrevocable without the necessity of drawing up a new absolute deed of sale. Justo and Saturnino. 1985. Eleuteria. with an area of five (5) hectares and covered by Original Certificate of Title (OCT) No. it was stipulated that the consideration for the alleged sale of the two (2) aforementioned lots was Twenty Thousand Pesos (P20. 4049. The instrument of conveyance is denominated as Deed of Sale with Pacto De Retro  Thereunder. 2007 Facts:  During their lifetime.000. Cebu. Accounting and Redemption with Damages. On the other hand. and their six (6) children. namely. Timoteo and Justo and grandchildren Ricky and Daisy who are the heirs of Saturnino.  In arguing that the transaction was one of sale. the administrator of the property. 1985. the spouses Domingo Lumayag and Felipa Nemeño-Lumayag filed with the RTC of Ozamiz City a petition for the reconstitution of the owner‘s duplicate copy of one of the two lots subject of the earlier Deed of Sale with Pacto De Retro.  On February 25. Page 95 . consisting of 4. predecessors-in-interest of the herein respondent heirs.000. Lumayag a complaint for Declaration of Contract as Equitable Mortgage.  Essentially.even after the same had been supposedly "sold" to petitioner. when it was burned in a fire on May 22. 1985. 1992.00) and that the vendors a retro have the right to repurchase the same lots within five (5) years from the date of the execution of the instrument on Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 February 25. Lumayag v. 162112 July 3. (hereinafter collectively referred to as the respondent heirs) filed against the spouses Domingo Lumayag and Felipa N. the RTC resolved said petition by ordering the issuance of a new owner‘s duplicate copy and its delivery to the heirs of Jacinto and Dalmacia.00 obtained from the defendant spouses in connection with the medication and hospitalization of the then ailing Jacinto Nemeño. to wit: Meliton. (2) their (plaintiffs‘) continued payment of realty taxes.   To support their claim that the contract in question was an equitable mortgage. Unfortunately. 94-07335-A. while purporting to be a sale. nevertheless reveals the intention of the parties to charge real property as security for a debt. title to and ownership of property are immediately vested in the vendee a retro.00 and an assessed value of P1.120. and contains nothing impossible or contrary to law. But such consequence would only be true if the contract that was executed between the parties was indeed a pacto de retro sale and not an equitable mortgage. or other requisites demanded by a statute.  Hence this appeal.  Here.230.  The law requires the presence of any one and not the concurrence of all of the Issue: Whether or not the transaction between the parties was not a sale but an equitable mortgage? Ruling: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 96 . 1990.  The two (2) courts below unanimously found that the subject Deed of Sale with Pacto De Retro.00 Dissatisfied.420 square meters has a market value of P4. the plaintiff heirs materially pointed out the following: (1) the grossly inadequate price of the subject lots considering that Lot No. of the subject lots with the petitioner spouses only given two-thirds share of the harvest therefrom. per Tax Declaration No. the failure of the respondent heirs to redeem the properties within the stipulated period indubitably vested the absolute title to and ownership thereof to the petitioners. leaving that of the defendant spouses  As stated at the threshold hereof. 1999.760. as here commands is binding upon the court. subject only to the resolutory condition that the vendor repurchases it within the stipulated period.. their appeal was dismissed. 4035 C-4 with an area of 4. (3) the land title and tax declaration remained in the names of Jacinto Nemeño and Dalmacia Dayangco-Nemeño. or form or words. Evidently. for failure of the plaintiff heirs to submit their appeal brief.00 and an assessed value of P15. is in truth and in fact an equitable mortgage. particularly Justo Nemeño‘s.. the appellate court. (4) their possession. in case of doubt.‖  Article 1604 of the Civil Code provides that the provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. Such factual finding. then. in a decision dated February 3. while Lot No. Eventually. and (5) the pactum commissorium stipulation in the subject contract.460. the trial court adjudged the subject Deed of Sale with Pacto De Retro as an equitable mortgage and ordered the defendant spouses to reconvey the lot to the plaintiff heirs for P20.  Under a pacto de retro sale. 94-07355-A. and. more so when supported by the evidence.00.  Petition denied.000. as shown by Tax Declaration No. affirmed that of the trial court but with the modification that the mortgaged properties are subject to foreclosure should the respondents fail to redeem the same within thirty (30) days from finality of the decision. 4049 with an area of 5 hectares has a market value of P40. both parties appealed to the CA. The failure of the vendor a retro to repurchase the property vests upon the vendee a retro by operation of law the absolute title and ownership over the property sold.  An equitable mortgage has been defined ―as one which although lacking in some formality. there is no issue as regards the fact that the subject Deed of Sale with Pacto De Retro provided for a 5-year redemption period which expired on February 25.00. vs. February 9. Indeed. evidence is wanting that petitioners ever enjoyed possession thereof. (c) said respondents‘ payment of realty taxes. as here. to conclude that the transaction is one of equitable mortgage. that the parties intended to enter into an equitable mortgage is further accentuated by respondents‘ continued payment of the real property taxes subsequent to the alleged sale. Undoubtedly.” .5 hectares. petitioner. This stipulation is contrary to the nature of a true pacto de retro sale since in such sale. 2007 G. (b) respondent heirs remained in possession of the subject property even after the execution of the supposedly Deed of Sale with Pacto de Retro. as claimed by the petitioners. the total area of which is almost 5.   Lastly. Payment of those taxes is a usual burden attached to Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 ownership and when. Evidence is extant on record that the respondent heirs. ROBERTS. then this conveyance shall become absolute and irrevocable without the necessity of drawing a new absolute Deed of Sale. If the transaction was really a sale with right to repurchase.is considered a pactum commissorium.000. the inclusion of such stipulation in the deed shows the intention to mortgage rather than to sell. 1994. still. 1985 but only on June 8. respondent. MARTIN B. subject to the requirements of law regarding consolidation of ownership of real property. there are other circumstances convincing enough to support a conclusion that the transaction in question is really an equitable mortgage. the stipulation in the subject deed reading: “if we fail to exercise our rights to repurchase as herein granted within the period stipulated.circumstances enumerated under Article 1602. Well-settled to the point of being elementary is the doctrine that where the vendor remains in physical possession of the land as lessee or otherwise.R. the aforementioned stipulation is a pactum commissorium because it enables the mortgagee to acquire ownership of the mortgaged properties without need of any foreclosure proceedings which is a nullity being contrary to the provisions of Article 2088 of the Civil Code. PAPIO. In stark contrast. subject only to the repurchase of a vendor a retro within the stipulated period. to wit: (a) gross inadequacy of the contract price of P20. remained in possession of the subject lots after the execution of the deed of sale with right to repurchase.166714 Page 97 . it constitutes evidence of great weight that a person under whose name the realty taxes were declared has a valid and rightful claim over the land.      Here. then the latter should have asserted their rights for the immediate delivery of the lots to them instead of allowing some of the respondents to freely stay in the premises. AMELIA S.No. the contract should be treated as an equitable mortgage As well. as vendors a retro. ownership of the property sold is immediately transferred to the vendee a retro upon execution of the sale. such payment is coupled with continuous possession of the property.00 for two (2) parcels of land. and (d) the provision on pactum commissorium While the Supreme Court are not in full accord with the CA in its observation that the consideration of the sale with right to repurchase is grossly inadequate since the market value and assessed value of the two lots were not made on or before the date the subject contract was executed on February 25. the CA correctly found the presence of not merely one but four (4) circumstances indicative of the true nature of the subject transaction as an equitable mortgage. FACTS: Spouses Martin and Lucina Papio mortgage their residential lot in Makati in order to secure P59.000. In Papio‘s Answer he stated that he was given the right of redemption at any time. SR. that he had repurchased the property and consequently he obliged Roberts to execute a deed of absolute sale in his favor. CA ruled in favor of Papio stating that what transpired is not a contract of absolute sale but an equitable mortgage and that Papio is entitled to possession of the property. He asked her to allow him to redeem the property anytime for a reasonable amount. Roberts filed a petition for review assigning as error that petitioner did not alleged in his Answer the defense of equitable mortgage. RULING: CA erred in finding that the transaction is an equitable mortgage. Papio appealed to RTC. He then believed that if he signed the deed.00. Papio refused to pay and leave the premises. Upon Papio‘s failure to pay. Transfer Certificate of Title is now in the name of Amelia Roberts. nevertheless reveals the intention of the parties to change a real property as security for a debt and contain nothing impossible or contrary to law.00 as partial payment and Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 another P100. Ventura misappropriated P39. Papio file a petiton for review in CA. Pursuant to the right to redeem given him.00 and were evidenced by receipts signed by Ventura.00 out of P250.000. To prevent foreclosure. Roberts demanded Papio to vacate the property in case he failed to settle his back rentals amounting to P410. Roberts would acquire ownership over the property.000. Roberts agreed so he signed the Deed of Absolute Sale. Failure of the vendor a retro to exercise the right to repurchase Page 98 .00. he was alarmed when Roberts had a Deed of Absolute Sale over the property prepared. In his Answer. filed a petition for extrajudicial foreclosure.000. With this claims. or other requisites demanded by a statute. Roberts now filed a complaint for unlawful detainer and damages against Papio before Metropolitan Trial Court. the Corp. Metropolitan Trial Court ruled in favor of Roberts. contract of lease subject to renewal at the option of the lessor. However. filed a petition for extrajudicial foreclosure of the mortgage. The decisive factor is the intention of the parties. ownership of the property sold is immediately transferred to the vendee a retro subject only to the right of the vendor a retro to repurchase the property upon compliance with legal requirements for repurchase.000.000. Papio purchased the property for P250. In PACTO DE RETRO SALE. After 2yrs Papio failed to pay the monthly rentals but he and his family remained in the possession of the property for almost 13yrs. Papio alleged that when the Corp. form or words. they executed a Deed of Absolute Sale over the property in favor of Amelia Roberts (his cousin) for P85. he accepted. Since Roberts was already in USA.00 loan from Amparo Investments Corporation. and in its decision it affirmed the findings of MeTC. it is antithetical to an equitable mortgage. Believing that she had made the offer for the purpose of retaining his ownership over the property.00 which is the reason why Roberts refused to execute the Deed of Absolute Sale in favor of Papio if Ventura would not pay the amount she misappropriated.00 purchase price. he remitted to her authorized representative Perlita Ventura the amount of P150. his cousin Roberts offered to redeem the property. An EQUITABLE MORTGAGE is one that although lacking in some formality.THIRD DIVISION Ponente: CALLEJO. However. hence the Ca should not have discussed the same. ISSUE: whether the transaction entered into by the parties under the Deed of Absolute Sale and Contract of Lease is an equitable mortgage. Roberts and Papio executed a 2-yr.000.000. respondent.within the agreed time vests upon the vendee a retro. The right of repurchase is not a right granted the vendor by the vendee. January 28. When the sale is made without such agreement.R. petitioner vs. Papio is barred from claiming otherwise. When the language of the contract is explicit. the courts may not read into it any other intention that would contradict its plain import. 2008 G. SALVADOR DELLOTA. The right of repurchase presupposes a valid contract of sale between the parties. absolute title over the property. leaving no doubt as to the intention of the drafters. One who repurchase a property means that the property was previously sold. by operation of law. DIONISIA DORADO VDA. DE DELFIN.143697 FIRST DIVISION Ponente: SANDOVAL-GUTIERREZ Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 99 . the purchaser acquires the thing sold absolutely. but a right reserved by the vendor in the same instrument of the sale as one of the stipulations of the contract. No. Papio insisted that he repurchased the property thereby admitting that a deed of absolute sale was executed by him and petitioner and not an equitable mortgage. . 173002. Dionisia sold another portion to Gumersinda Deleña as evidenced by a notarized ―Deed of Sale with Right of Redemption‖ thus.000 square meters in favor of Ildefonso Dellota and Patricia Delfin. They insist that the price of P5. nevertheless reveals the intention of the parties to change a real property as security for a debt and contain nothing impossible or contrary to law. J. Dionisia never redeemed this 50.000 square meters. Dionisia executed an Escritura De Venta Con Pacto de Retro over 50. Unangst G. other fees and incidental expenses in the retrieval of the car. RULING: An EQUITABLE MORTGAGE is one that although lacking in some formality. ISSUE: whether the transaction entered into by Dionisia is an equitable mortgage.00 for 5 hectare portion is grossly inadequate.3000. No. The court finds no cogent reason to conclude that the 1949 price of P5. Unangst were arrested on February 02. form or words. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Reyes.FACTS: Dionisia Dorado Delfin is the registered owner of Lot in Capiz with an area of 143.935 square meters.000 square meter portion from Gumersindo. 372. forced or defrauded into affixing her signature on the said contract.00 as payment for car rental fees. Page 100 .300. leaving an unsold area of more than 43. July 04. Dionesia‘s heirs now contend that the Deed of Sale with Right of redemption entered into by Dionisia and Gumersindo is an equitable mortgage. Bautista vs. The decisive factor is the intention of the parties.T. If the terms of the pacto de retro sale were unfavorable to Dionisia. Bautista demanded from Salak the sum of Php 232. 2008 Third Division There is gross inadequacy in price if a reasonable man will not agree to dispose of his property.R. There is no evidence herein whatsoever to show that Dionisia did not understand the ramifications of her signing the Deed of Sale with Right of Redemption. Nor is there any showing that she was threatened. or other requisites demanded by a statute. 1997 for estafa and carnapping for the former‘s failure to return a car he rented from Benjamin Bautista. R.: FACTS: Hamilton Salak and Shirley G. this Court has no business extricating her from that bad bargain. Courts are not guardians of persons who are not legally incompetent.00 as agreed upon by the parties was unreasonable. (06. In this case it shall be presumed that it is an equitable mortgage.) When the vendor binds himself to pay the taxes on the thing sold. first. petitioner allowed respondent Salak to retain the possession of the property despite the execution of the deed since the latter is not even bound to deliver the possession of the property to the former if they would pay him the amount he demanded. for if otherwise. reimbursement of what petitioner paid to the mortgagee. that is. ISSUE: Whether the subject contract is that of sale or an equitable mortgage? HELD: The Deed of Sale with right to repurchase is that of an equitable mortgage. subject to the vendor‘s right to redeem. Page 101 .) 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.) respondent‘s own obligation to petitioner.) When the vendor remains in possession as lease or otherwise. the deed was executed by reason of: (01. The CA ruled in favor of the respondent. Second. The petition is denied for lack of merit. (05. Following the principle. that is.) When the purchaser retains for himself a part of the purchase price. (03. Furthermore. for consolidation of ownership. Jojo Lee. truly speaking. and that the respondents shall pay the taxes and utility bills related to the subject property. After the RTC deciding in favor of the petitioner.) the alleged indebtedness of Salak to petitioner. which the petitioner welcomed. petitioner agrees to pay the mortgage loan over the subject property to a certain Jojo Lee (as the property was then set to be publicly auctioned). ergo. hence this petition for review on certiorari. Ergo. Fact is. Third.) 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 of the performance of any other obligation In the case at bar. The petitioner argues that the deed was clear and unequivocal.Salak and the respondent proposed to sell to the petitioner a house & lot under the Unangst‘s name to amicably settle the cases filed against them and their accounts with the same. free men. retention by the vendor of the possession is inconsistent with the vendee‘s acquisition of the right of ownership under a true sale. the consent was taken in duress since it was signed by the respondent to be freed from police custody. ―Nel consensui tam contrarium est quam vis ataqui mtus‖ (Necessitous men are not. but to answer a present emergency will submit to any terms that the crafty may impose upon them). They executed a deed of sale with right to repurchase within 30 days. and (02. and damages against the respondent. petitioner filed a complaint for specific performance or recovery of possession. Upon the failure of the respondent to repurchase. RATIO DECIDENDI: The Deed of Sale with right to repurchase qualifies as an equitable mortgage under Article 1602. (02. arguing that respondent Unangst‘s consent to the deed was procured under duress and assuming arguendo that the same was freely given the same partakes the nature of an equitable mortgage and not of sale.) When the price of the sale with right to repurchase is unusually inadequate. for respondent merely secured the payment of the unpaid car rentals and the amount advanced by petioner to Jojo Lee. a lack of interest in the property that belies the truthfulness of the sale a retro. It discloses. in the alleged vendee. (04. car rental payments. the purchase price stated in the deed was the amount of the indebtedness of both respondent and Salak to petitioner. the legal title to the property must be immediately transferred to the vendee. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Provided for are the cases to presume a contract to be an equitable mortgage under Article 1602 (NCC): (01. for sum of money. respondent now argues before the CA to annul the deed. such must be construed in its literal sense. and Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 102 . the deed purports to be a sale a retro.) they would sign a deed of sale conveying the mortgaged property in favor of private respondent Cruz. (05. a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. February 15. is given as security for a loan. said contract is firmly settled that whenever it is clearly shown that a deed of sale with pacto de retro.00 that subsequently increased to Php 500.00 in a year. 000. Since the latter has no money for that purpose.00 will be paid to the Carloses as mortgagees. petitioner asked their son-in-law. It was agreed upon by the parties that: (01. regular on its face.Apparently. delos Reyes (herein respondent). on the other hand. P500. since the same was executed in consideration of the aforesaid loans and/or indebtedness.) Cruz will apply for a housing loan with Land Bank. In fear of foreclosure.) and registration of a mortgage in favor of Land Bank. Moreover.) transfer of title to Josefina Cruz. 139884.R. a Land Bank of the Philippines (LBP) employee. it must be regarded as an equitable mortgage. it is provided for in Article 1603 (NCC) that: ―in case of doubt.000. expenses for the cancellation of the mortgage to the Carloses. using the subject property as collateral.) it was further agreed that out of the proceeds of the loan.‖ Lorbes vs. and thereafter (02. (04. Rizal to Florencio and Nestor Carlos for Php 150. and any such balance will be applied by petitioners for capital gains tax. he solicited the help of his friend Josefina Cruz. No. Court of Appeals G. 000. 2001 Octavio and Lorbes (petitioners) mortgaged their parcel of land in Antipolo. (03. for help in redeeming the subject property. ) the deed was merely a formality to meet the requirements of the bank for the housing loan. acts.) When the price of the sale with right to repurchase is unusually inadequate. and subsequently a new title in the name of Cruz was issued in lieu thereof. hence this petition for review on certiorari. ISSUES: Whether the Deed of Absolute Sale entered into by the parties was an equitable mortgage? After which.) (03. the petitioners notified delos Reyes that they are now capable of redeeming the subject property. Furthermore.) (05. When the vendor remains in possession as lease or otherwise. The petitioners argue that: (01. ergo. and that the petitioners were merely forced to enter into the said transaction out of the grave necessity of redeeming the subject property at that time. but the latter refused. When the vendor binds himself to pay the taxes on the thing sold. RATIO DECIDENDI: There is no conclusive test to determine whether a deed of absolute sale on its face is really a simple loan accommodation secured by a mortgage. such as the relative situation of the parties at that time. the attitude. and that the transaction was not an absolute sale but an equitable mortgage. the negotiations between them leading to the deed. the mortgage was discharged. all pertinent facts having a tendency to fix and determine the real nature of their design and understanding.) (02. The CA reversed the decision of the lower court. conduct.) the monthly amortization on the housing loan which was supposed to be deducted from the salary of private respondent Cruz will be reimbursed by private respondent delos Reyes.) that the deed of sale did not reflect the true intention of the parties. This led the former to file an action for reformation of instrument plus damages. ―the decisive decisive factor in evaluating such agreement is the intention of the parties.‖ Provided for are the cases to presume a contract to be an equitable mortgage under Article 1602 (NCC): (01. LBP issued a letter of guarantee in favor of the Carloses. as shown not necessarily by the terminology used in the contract but by all the surrounding circumstances.(06. As such. 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. In 1993. declarations of the parties. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 HELD: The Deed of Absolute Sale is an equitable mortgage.) (04. thus. The lower court ruled in favor of the petitioners. informing them that Cruz‘ loan has been approved. and that the real intention of the parties in securing the loan was to apply the proceeds thereof for the payment of the mortgage obligation. since the sale was executed in order to secure a loan from LBP to save the property from the danger of foreclosure and to use it as collateral thereof for bank loan purposes and that the same does not reflect the real intention of the parties in executing the said Deed of Sale. When the purchaser retains for himself a part of the purchase price. the petitioners are still in possession of the subject property and had been paying the realty taxes thereon even after the execution of the deed. Page 103 . documentary and parol evidence may be submitted and admitted to prove the intention of the parties. considering that the price of the sale was inadequate considering the market value of the subject property and because they continued paying the real estate taxes thereto even after the execution of the said deed of sale The private respondent (delos Reyes) was declared in default and the case proceeded in ex parte. (02. and generally. The CA decision is reversed and the RTC decision is reinstated. (06. free men. And that the conditions herein set forth by the law which give way for the presumption of equitable mortgage apply with equal force to a contract purporting to be one of absolute sale. The SC finds that the true intention between the parties for executing the Deed of Sale was not to convey ownership of the subject property but merely to secure the housing loan of Cruz. suffices to construe a contract of sale to be one of equitable mortgage.‖ since the transaction was borne out of the impending foreclosure of the subject property. the sole purpose of these documents was to satisfy LBP. truly speaking. the consent given by the petitioners where in duress following the principle. and not the concurrence of these circumstances. Although this is not shown in the supporting documents of the principal transaction between the parties. COURT OF APPEALS. NICOLAS PARANGAN and SOLEDAD Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 104 . the petitioners remained in possession of the subject property after the execution of the deed. Second. The presence of even one of these circumstances. vs. in the petitioners had direct interest since the proceeds thereof was to be immediately applied to their outstanding mortgage obligation to the Carloses. petitioner. Lastly. but to answer a present emergency. ADORACION LUSTAN. and Cruz made no demand to the former to vacate the premises. ―Necessitous men are not.) 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 of the performance of any other obligation. will submit to any terms that the crafty may impose upon them. ISSUE Whether or not the Deed of Definite Sale is in reality an equitable mortgage. petitioner filed an action for cancellation of liens. petitioner demanded the return of her certificate of title. January 27. No. Upon appeal to the Court of Appeals (CA). 1972. Ordering defendant Nicolas Parangan to return possession of the land in question to the plaintiff upon payment of the sum of P75. 1978 and the Deed of Definite Sale dated May 6. Instead of complying with the request. of the unauthorized loans. It also ordered defendant Nicolas Parangan to pay all the loans he secured from defendant PNB using thereto as security TCT No. RULING Page 105 .00 by plaintiff to defendant Parangan which payment by plaintiff must be made within ninety (90) days from receipt of this decision. During the period of lease. T-561 to plaintiff. Parangan asserted his rights over the property which allegedly had become his by virtue of the aforementioned Deed of Definite Sale. 1979. declaring the same to be Deeds of Equitable Mortgage. J. 1970. The RTC ordered the cancellation by the Register of Deeds of the Province of lloilo. PHILIPPINE respondents. otherwise. 1997] THIRD DIVISION FRANCISCO. respondent court reversed the trial court's decision. both documents executed by Adoracion Lustan in favor of Nicolas Parangan over Lot 8069 in TCT No. The last three loans were without the knowledge of herein petitioner and all the proceeds therefrom were used by Parangan for his own benefit. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Aggrieved. as null and void. On February 18. sale of the land will be ordered by the court to satisfy payment of the amount. recovery of possession and damages against Parangan and PNB in the Regional Trial Court of Iloilo City.PARANGAN. For fear that her property might be prejudiced by the continued borrowing of Parangan. by virtue of which. petitioner signed a Deed of Pacto de Retro Sale in favor of Parangan which was superseded by the Deed of Definite Sale dated May 4. petitioner leased the land to private respondent Nicolas Parangan for a term of ten (10) years and an annual rent of One Thousand (P1.R.00) Pesos. 1979 which petitioner signed upon Parangan's representation that the same merely evidences the loans extended by him unto the former. On July 29. On April 16. the liens and encumbrances appearing in the Transfer Certificate of the land. Parangan was able to secure four (4) additional loans. These encumbrances were duly annotated on the certificate of title. NATIONAL BANK.000. [G. T561 of plaintiff and defendant PNB to return TCT No. 1973. petitioner executed a Special Power of Attorney in favor of Parangan to secure an agricultural loan from private respondent Philippine National Bank (PNB) with the aforesaid lot as collateral. 1969. petitioner conveyed the subject property and all the improvements thereon unto Parangan absolutely for and in consideration of the sum of Seventy Five Thousand Pesos. Under said document.: FACTS Petitioner Adoracion Lustan is the registered owner of a parcel of land. Parangan was regularly extending loans in small amounts to petitioner to defray her daily expenses and to finance her daughter's education. T-561 of the Register of Deeds of lloilo. a second Special Power of Attorney was executed by petitioner. 111924. On February 25.000. quieting of title. Also. Declaring the Deed of Pacto de Retro Sale dated April 25. and mistake or fraud is alleged." For a presumption of an equitable mortgage to arise. The contents of the same were not read nor explained to her so that she may intelligibly formulate in her mind the consequences of her conduct and the nature of the rights she was ceding in favor of Parangan. The evidence speaks clearly of the nature of the agreement — it was one executed to secure some loans. we must first satisfy two requisites namely: that the parties entered into a contract denominated as a contract of sale and that their intention was to secure an existing debt by way of mortgage. 1604 of the Civil Code. To our mind. When one of the contracting parties is unable to read. And upon proof of the truth of such allegations. This meeting of the minds speaks of the intent of the parties in entering into the contract respecting the subject matter and the consideration thereof. 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 Deed of Definite Sale is in reality an equitable mortgage as it was shown beyond doubt that the intention of the parties was one of a loan secured by petitioner's land. In the case at bench. 1602. not a concurrence nor an overwhelming number of such circumstances. Settled is the rule that where a party to a contract is illiterate or cannot read or cannot understand the language in which the contract is written. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Art. did not embody the true intention of the parties. suffices to give rise to the presumption that the contract is an equitable mortgage. or if the contract is in a language not understood by him. in relation to Art 1604 provides that a contract of sale is presumed to be an equitable mortgage 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. the person enforcing the contract must show that the terms thereof have been fully explained to the former. Page 106 . parol evidence then becomes competent and admissible to prove that the instrument was in truth and in fact given merely as a security for the repayment of a loan. the evidence is sufficient to warrant a finding that petitioner and Parangan merely intended to consolidate the former's indebtedness to the latter in a single instrument and to secure the same with the subject property. In this case. the burden is on the party interested in enforcing the contract to prove that the terms thereof are fully explained to the former in a language understood by him. this burden has not been satisfactorily discharged. The presumption of equitable mortgage prevails. "Art. the latter shall prevail over the former. the owner of the property may prove that the contract is really a loan with mortgage by raising as an issue the fact that the document does not express the true intent of the parties. the court will enforce the agreement or understanding in consonance with the true intent of the parties at the time of the execution of the contract. 1604. (6). Even when a document appears on its face to be a sale. 1602 be present. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. More particularly. Petitioner is illiterate and her condition constrained her to merely rely on Parangan's assurance that the contract only evidences her indebtedness to the latter. The assessment by the trial court of the credibility of witnesses is entitled to great respect and weight for having had the opportunity of observing the conduct and demeanor of the witnesses while testifying. a contract purporting to be an absolute sale shall be presumed to be an equitable mortgage should any of the conditions in Art. A contract is perfected by mere consent. We do not find the testimony of Parangan and Delia Cabial that the contract was duly read and explained to petitioner worthy of credit. Under Art. The contract of definite sale. The existence of any of the circumstances therein. If the words of the contract appear to be contrary to the evident intention of the parties. That the case clearly falls under this category can be inferred from the circumstances surrounding the transaction as herein set forth: Petitioner had no knowledge that the contract she signed is a deed of sale. where petitioner purportedly ceded all her rights to the subject lot in favor of Parangan. they used this amount to redeem some mortgaged properties from the Rural Bank of Pandi. but merely loans in the amount of P260. priced at P50. Bulacan.the other seven belonged to their relatives. J.. According to petitioners.SPOUSES CRISPIN AUSTRIA and LEONISA HILARIO.000. petitioners. 1979 . 1991 . But petitioners claimed that the transactions entered between petitioners and respondents were not actually sales. According to petitioners. and VERONICA GONZALES..000 and the other dated October 23. 2004 ] SECOND DIVISION QUISUMBING. Both deeds were executed by petitioner Leonisa Hilario in favor of respondents. Petitioners admitted that their debts to respondent spouses remained unpaid due to business reverses. January 21.R. To secure the loan. and Veronica Gonzales. No. misrepresentation and falsification. petitioners alleged that they are the owners and possessors of three (3) parcels of land. respondents required petitioners to furnish them with ten (10) TCTs. Three of these certificates covered the petitioners' properties subject of the present case. respondents. respondents thereafter registered the disputed properties in their own names through the use of fraud. against herein respondents Danilo Gonzales. In their Complaint. 1981 priced at P240. Said parcels became the subject of two (2) Deeds of Absolute Sale. all in the name of petitioner Leonisa Hilario. petitioners Crispin Austria and Leonisa Hilario filed a civil action for Declaration of Nullity of Document and Reconveyance before the RTC of Malolos. Bulacan.: FACTS On September 4. 147321. Jr. [G. however. using the fictitious contracts of sale. JR. vs.000. SPOUSES DANILO GONZALES. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 107 . while . one dated July 21. Bulacan. after trial on the merits. respondents insisted in their Answer that on October 1981. before the properties were registered. But then petitioners failed to vacate as promised on said date. 1983. the RTC of Malolos decided Civil Case No.000. According to respondents. The transaction was embodied in a Deed of Absolute Sale and notarized before Notary Public Protacio Cortez. Shortly afterwards. petitioner Leonisa Hilario sold to them the three lots in question.Petitioners alleged that they came to know of said acts of respondents only when they were served with a notice dated May 22. the titles of said lots were transferred to them. On August 11. That suit was decided by the municipal court in respondents' favor. 1983 . However. with moral damages and attorney's fees.6 against petitioners. asking them to vacate the disputed properties.00 was unusually inadequate by any standard for realties.000.000 for the 3 lots was executed and notarized before Notary Public Jose Ramos. according to respondents. without further extension. Jr. It reversed the trial court's decision. Hence the petitioners elevated their case to the Regional Trial Court of Malolos. a new Deed of Absolute Sale indicating a selling price of P50. For their part. and (c) the purchase price of P50. petitioners sought the reconveyance of the three parcels from respondents. After respondents wrote petitioners on June 20. 1983. purportedly to lessen the taxes and fees that they will be paying as the vendors. 1983. 552-M-91 against respondents and in favor of herein petitioners. from respondents' counsel to vacate said lots. 1995 . As a result. There is no conclusive test to determine whether a deed absolute on its face is really a simple loan accommodation secured by a mortgage. Thus. petitioners sent respondents on July 28.the RTC observed that: (a) petitioners as the vendor remained in physical possession of the lots even after the execution of the deed of sale. an UNDERTAKING5 promising to vacate and surrender possession of the properties on or about December 15. requested for the execution of another Deed of Absolute Sale indicating a price of P50. petitioner Leonisa Hilario in a letter dated July 20.000. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 108 . The original amount in the Deed of Absolute Sale was P240. Respondent Veronica Gonzales agreed to buy the same out of pity for petitioners. ISSUE WHETHER OR NOT THE COURT OF APPEALS IS CORRECT IN HOLDING THAT THE CONTRACT BETWEEN PETITIONERS AND RESPONDENTS WAS A SALE AND NOT AN EQUITABLE MORTGAGE OF REAL PROPERTY RULING Decisive for the proper determination of the true nature of the transaction between the parties is the intent of the parties. (b) petitioners paid the realty taxes for the years 1982 and 1983. 1991 . Respondents seasonably appealed the decision to the Court of Appeals. Applying Article 1604 of the Civil Code in relation to Article 1602. whose several properties had earlier been foreclosed by the bank. said respondents were forced to file an ejectment suit before the Municipal Trial Court of Pandi. Their failure to vacate and turn over the purchased lots prompted respondents to send a final demand letter asking petitioners to vacate the premises but petitioners still refused. Petitioners surely cannot now pretend to be ignorant of the real Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 109 . Civil Code). and the decision of the Court of Appeals dated February 23. however. much less an equitable mortgage.Petitioners point out that the requirements of an equitable mortgage have been satisfied by the following circumstances. Such inaction is contrary to their claim of ownership over the subject properties. the petition is DENIED. However. Thus. Mere allegation that the price paid by respondents was inadequate. MOREOVER. In the instant case. It may be rebutted by competent and satisfactory proof to the contrary. nor could they testify as to its details. When all these improvements were being undertaken. For this was not the first time they dealt with each other. which used to belong to plaintiff Austria . it is obviated by the fact that they executed an undertaking promising to vacate the premises. for this purpose. plaintiffs were aware thereof but did not object to any of the work done on the subject premises. use such force as may be reasonably necessary to repel or prevent an actual or threatened unlawful physical invasion or usurpation of his property. without more. It is not merely a loan. Petitioners insist that they entered into a contract only to obtain a loan with respondents and nothing more. to wit: (1) inadequacy of the selling price. considering that the owner of a thing has the right to exclude any person from the enjoyment and disposal thereof and may. The records also show that they did not object when improvements were made on the premises by respondents. As to the allegation that petitioners were in possession of the properties even after the sale. petitioners' claim that the selling price of the lots in question was inadequate needs closer scrutiny. 1999 as well as its resolution dated February 28. into a fishpond. WHEREFORE. is AFFIRMED. 2001 . he failed to rebut the testimony of the Notary Public who testified in court that the petitioners as vendors of the properties personally appeared and acknowledged the sale documents before him. Petitioners failed. But they repeatedly delayed honoring it. (Article 429. (2) possession in the premises. nature of their transaction with respondents. and (3) payment of realty taxes. The latter introduced permanent improvements thereon and had in fact converted the pigpens. to present a copy of said contract in the proceedings before the RTC. does not make a case favorable to petitioners. we are constrained to find that indeed the true intent of the parties involves a contract of sale. Petitioners' allegation that the insufficiency of the selling price creates the presumption that the transaction is an equitable mortgage is unsupported by the evidence on record. Petitioners failed to present any proof whatsoever that the fair market values of the real property in the area at the time of the transaction were much higher than the selling price of the parcels in question. such presumption of equitable mortgage is not conclusive. He sought a renewal of the loan and issued 2 postdated checks. Page 110 . 2002 G. the trial court issued an Order granting respondent's motion for reconsideration and allowing him to repurchase the lots within thirty days from finality thereof. Despite approval of the loan. August 6. CARLOS ANG GOBONSENG. RTC of Dumaguete rendered judgment in favor of petitioner and ruled that the Option to Buy was rendered null and void by respondent's failure to exercise the option within the period of six months." RONALDO P. the parties executed an Option to Buy whereby respondent was allowed to repurchase the lots within a period of 6 months.P690k upon approval of his pending loan application with the State Investment House. Hence. respondent interposed the defense that the transaction was in reality an equitable mortgage. On appeal. ABILLA vs. Subsequently. the Court of Appeals affirmed the decision of the trial court. Thus. the decision became final on February 8. covered by TCT Nos. Inc. the latter threatened to sue him for Estafa. JR. the said lending institution required a collateral for which reason respondent borrowed from petitioner the two titles so he can mortgage the same. Respondent failed to repurchase the lots within the stipulated period. 146651 Respondent (Gobonseng) contracted a loan from petitioner in the sum of P550k. Consequently. On the same day. which was denied. but further declared that "the deed of sale and option to buy actually constitute a pacto de retro sale. respondent filed with the court of origin a motion to repurchase the lots with tender of payment. petitioner Abilla brought the instant petition for review. Respondent defaulted in the payment of the loan. 13607 and 13535. which had reached the amount of P700k. one for P10k and the other for P690k. 1999. respondent failed to make good on his promise to pay his outstanding obligation to petitioner. On February 27.. petitioners instituted an action for specific performance xxx pursuant to the deed of absolute sale. secured by a real estate mortgage over two parcels of land. ISSUE: Whether or not the contract between the parties was an absolute sale with pacto de retro. No. In his answer. Respondent promised to pay petitioner the sum of Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Gabonseng‘s MR was denied. However. His petition filed with SC was also. Hence. 1999. representing the full amount of his obligation. Thus. petitioner cancelled the mortgage in his favor and delivered the two titles to respondent. The second check was dishonoured xxx.R. Respondent thus executed a deed of absolute sale over his17 lots in Dumaguete in favor of petitioner. . founded on facts attendant upon the execution of the sale with pacto de retro. In that event. Naturally. These circumstances. if the matter of the real nature of the contract is submitted for judicial resolution. In Vda. Gabonseng in this case. we held: The application of the third paragraph of Article 1606 is predicated upon the bona fides of the vendor a retro. if it should appear that the parties' agreement was really one of sale — transferring ownership to the vendee. in effect denying respondent the right to repurchase the subject lots. together with the option to buy executed on the same day. it may well be that the deed of sale. Thus. that the agreement was in reality a mortgage. Therefore. but merely to give it as security for a loan or other obligation. founded on facts attendant upon the execution of the sale with pacto de retro. one not intended to affect the title to the property ostensibly sold. which states: However. make this case fall squarely within the situation contemplated in the above-quoted doctrine – that there was a belief on the part of the vendor a retro.e. citing the case of Vda. However. the said article applies and he can still repurchase the property within thirty days from finality of the judgment declaring the transaction as a sale with pacto de retro. but merely to give it as security for a loan or other obligation. that the vendor a retro be allowed to repurchase the property sold within 30 days from rendition of final judgment declaring the contract to be a true sale with right to repurchase. Orias. the loan he extended to respondent became unsecured. respondent may avail of the third paragraph of Article 1606 of the Civil Code and repurchase the lots affected by the deed of absolute sale and option to buy. Conversely. that the agreement was in reality a mortgage. Page 111 . If the rule were otherwise. de Macoy. In our Decision. Respondent's claim of the right to repurchase the lots is anchored on the third paragraph of Article 1606 of the Civil Code. 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. respondent has maintained throughout the proceedings that transaction between him and petitioner was really an equitable mortgage. the proviso is inapplicable. Said obligation would have been satisfied had respondent exercised the option to buy within the stipulated period. we ruled that Article 1606 of the Civil Code does not apply to the case at bar because the transaction between the parties was a pacto de retro sale. honestly and sincerely entertained. the application of the rule is meet and proper. Consistently therewith. The reason is quite obvious. was meant to serve as security for the indebtedness of respondent which had become long overdue. citing the earlier ruling in Felicen. it would be within the power of every vendor a retro to set at naught a pacto de retro. When petitioner lent the two titles to respondent. upon a careful review and analysis of the antecedent facts. by simply instituting an action to reform the contract — known to him to be in truth a sale with pacto de retro — into an equitable mortgage. v. It must appear that there was a belief on his part. the applicability of Article 1606 rests on the bona fide intent of the vendor a retro. 2002. i. one not intended to affect the title to the property ostensibly sold. or resurrect an expired right of repurchase. If he honestly believed that the transaction was an equitable mortgage. peculiar to the case at bar. Parenthetically.HELD: NO. honestly and sincerely entertained. but accompanied by a reservation to the vendor of the right to repurchase the property — and there are no circumstances Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 that may reasonably be accepted as generating some honest doubt as to the parties' intention. Sr. there was a need to secure respondent's obligation after he reneged on his promise to pay the same out of the loan proceeds from State Investment House. we are convinced that the right granted under the third paragraph of Article 1606 may be invoked by respondent. de Macoy v. we rendered the assailed Decision reversing the Order of the RTC.(it was held as a mere mortgage) equitable On January 17. CA. xxx xxx xxx. it matters not what the vendee intended the transaction to be. As such. On August 3. Since the title to the Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 ―WHEREFORE.) situated in Cagayan de Oro City to Agan for P21k. upon the death of Diosdada Nueva. unenforceable and illegal in view of the court‘s order consolidating ownership of the property in her favor. the trial court rendered its questioned Order.The property is covered by TCT No. However. thus: Page 112 . Philadelphia filed a petition for consolidation of ownership against Spouses Nuevas with RTC of Cagayan de Oro City xxx In their answer filed on the Nuevas alleged that the pacto de retro sale was actually an equitable mortgage. 2000. No.m. She argued that she did not find it necessary to file an appeal from the said decision considering that the grant of the third-day period to redeem the property is a mere surplusage and hence. 1991. the vendors can still exercise the right to repurchase said property within thirty (30) days from receipt of this decision pursuant to Article 1606 and 1607 of the New Civil Code. On October 9. 1988. On July 5. based on the evidence presented.033 square meters. Petitioners failed to repurchase the property within the stipulated period. 1990 where Diosdada died.R. On June 19. 155018 FACTS: On April 13. HEIRS OF ANDRES NUEVA and DIOSDADO NUEVA SPS. The agreement is evidenced by a public instrument entitled ―Deed of Sale under a Pacto de Retro‖ executed and duly signed by the late Diosdada and Philadelphia. the consideration for the sale being only P21k as against its Fair Market Value of P81k pursuant to Tax Declaration. title was reconstituted and subsequently transferred and registered in the name of Ann and Lou Nueva. 2003 G. within six (6) months for the same consideration. the Nuevas were constrained to consign the amount with the court. sold under a pacto de retro. 2000. Respondent Agan prayed for the court to delete the said portion of the decision. the ownership in the vendee is hereby consolidated by virtue of the failure of the vendors to redeem the property described in the Deed of Sale under Pacto de Retro xxx consisting of an area of 2. However. with marital consent. On September 12.‖ Because of the refusal of Agan to accept the amount of P52.00 as redemption price. Philadelphia filed a petition for relief from the August 3. December 11. more or less.033 sq. the property was extrajudicially partitioned where Andres sold his interest in the land in question to his daughter Ann and son Lou.property was allegedly lost during the fire that razed the property on March 19. Diosdada Nueva.080. 2000. the judgment consolidating ownership over the disputed property in favor of Philadelphia was rendered by RTC. The parties agreed that the Nuevas are granted the right to repurchase the property sold. 25370 and registered in the name of Spouses Andres and Diosdada Nueva. 2000 decision. 1992. a parcel of land (2. the second paragraph of the dispositive portion gave the vendors a period of 30 days from receipt of the decision within which to redeem the property. [―]SO ORDERED. The dispositive portion of the decision reads: PHILADELPHIA AGAN vs. The dispositive portion. The Court also notes that the RTC erred in allowing petitioners the right to repurchase said property within thirty (30) days from receipt of the RTC Decision. ruled that the transaction is one of sale under a pacto de retro. Experience has demonstrated too often that many sales with right to repurchase have been devised only to circumvent or ignore our usury laws and for this reason. considering that the fair market value of the property was P81k. There is no ambiguity at all in the decision that would warrant clarification. after which respondents purchased the latter‘s share and caused the issuance of a TCT in their name. The RTC in this case made no finding in its Decision that respondents‘ defense that the pacto de retro sale was an equitable mortgage was not made in good faith. however. Respondent heirs filed a petition for certiorari before the CA. At first blush. petitioner filed this presentaction with the SC. Hence. the decision of August 4. the grant of the right to repurchase to respondents is in accordance with the third paragraph of Article 1606. was subsequently annulled. Respondents even reconstituted their title over the property. the law looks upon then with disfavor. petitioners raised the defense that the transaction between the parties was actually an equitable mortgage. and granting respondents thirty (30) days to repurchase the property. and that their predecessor continued to pay the loan under which the mortgage was constituted. however. The lower court. 2000 decision. The law presumes good faith and. respondents are entitled to the right to redeem the property pursuant to the third paragraph of Article 1606 of the New Civil Code. Such title. 2000 is hereby amended by deleting the second paragraph of the disposition thereof. in its August 3. along with Articles 1602-1605 and 1607 of the same Code. on one hand.―WHEREFORE. In its Decision. appears inconsistent. Indeed. the ambiguity is merely ostensible. considering that they remained in possession of the subject property and continued to pay the real taxes thereon. it becomes obvious that the consolidation of the property in petitioner is subject Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 to the suspensive condition of respondents‘ failure to repurchase within the thirty-day period. hence it acted within its authority under Article 1606 of the Civil Code in giving the petitioners thirty days as redemption period. on the other. and partitioned the property with the other heirs. 1998. Article 1606 grants the vendor a retro thirty (30) days ―from the time final judgment was rendered.‖ not from the defendant‘s Page 113 . it does not appear that petitioner even attempted to prove bad faith on the part of respondents during the trial. respondents alleged in their answer that the consideration for the alleged sale. By express provision. also makes reference to the third paragraph of Article 1606 of the New Civil Code. which accounts for the RTC Decision‘s utter silence on the matter. The CA held that: Further. contending that the RTC gravely abused its discretion in granting the petition for relief. At any rate. the dispositive portion of the RTC Decision declaring the consolidation of ownership of the property in petitioner. [―]SO ORDERED. If at all. In their answer to the petition for consolidation filed on October 22. ISSUE: Whether the transaction between the parties in the case at bar was an equitable mortgage. is ―to accord the vendor a retro the maximum safeguards for the protection of his legal rights under the true agreement of the parties. a provision not found in the old Civil Code.‖ Article 1606 is intended to cover suits where the seller claims that the real intention was a loan with equitable mortgage but decides otherwise. The legislative intent behind this Article. We do not agree with the contention of the private respondent that Article 1606 of the Civil Code does not apply in the instant case. HELD: YES. which was P21k was inadequate. Respondents also averred that they remained in possession of the subject property and paid the real taxes thereon.‖ Nuevas‘ MR was denied by the court. the CA reversed the Order of the RTC and rendered judgment in favor of respondent heirs. in the absence of a contrary finding by the RTC in its Decision. Taken together. The seller. Moreover. must entertain a good faith belief that the contract is an equitable mortgage. however. it is the petitioner's contention that the property subject of dispute devolved upon him upon the failure of his co-heirs to join him in its redemption within the period required by law. Thus. Issue: whether or not a co-owner may acquire exclusive ownership over the property held in common? Held: Essentially. payable on or before 5 February 1986. the same amount stipulated in the "Kasunduan. like the trial court. respondents. There is no merit in this petition. ANASTACIO L. giving the vendee a retro the right to demand redemption of the entire property. ownership thereof was consolidated in the name of Alexander Cruz. 1514. There is no doubt that Page 114 . vs. Gertrudes then obtained a loan from petitioners. Gertrudes. 43100 was issued in the name of "Gertrudes Isidro. Unable to pay her outstanding obligation. 125233 March 9. RAYMUNDO LEIS. On the basis of the foregoing facts. Petitioners appealed to the Court of Appeals in vain.00. the same was presumed to be conjugal property under Article 160 of the Civil Code.083.). Gertrudes could only sell to petitioner spouses her one-half share in the property. Spouses ALEXANDER CRUZ and ADELAIDA CRUZ. When Gertrudes Isidro died. petitioners. Private respondents responded by filing a complaint. CAYONDA and the HONORABLE COURT OF APPEALS. failed to pay the loan on the due date. 2000 Facts: Adriano and Gertrudes were married. in the amount of P15. Gertrudes executed two contracts in favor of petitioner Alexander Cruz. 489). CIVIL CODE (1889). 43100. G. the new owners of the property. The second is a "Kasunduan ng Tuwirang Bilihan. No. LAGDANO. Article 1613 of the present Code. The right of repurchase may be exercised by a coowner with respect to his share alone (CIVL CODE. Petitioners are now before this Court seeking the reversal of the decision of the Court of Appeals. art. that did not make him the owner of all of it.R. In other words. received demands to vacate the premises from petitioners.000. granting Gertrudes one year within which to repurchase the property. 1612. He relies on the provisions of Article 1515 of the old Civil Code. The Court of Appeals affirmed the decision of the Regional Trial Court.00 at 5% interest. it did not put to end the existing state of coownership (Supra. the court concluded. The Court has construed ―final judgment‖ to mean one that has become final and executory. herein private respondents. the spouses Alexander and Adelaida Cruz. The first is denominated as "Kasunduan" which the parties concede is a pacto de retro sale. While the records show that petitioner redeemed the property in its entirety." When Adriano died It did not appear that he executed a will before his death. TCT No. her heirs. however." For failure of Gertrudes to repurchase the property. the RTC rendered a decision in favor of private respondents. The Deed of Sale described Gertrudes as a widow. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 The RTC held that the land was conjugal property since the evidence presented by private respondents disclosed that the same was acquired during the marriage of the spouses and that Adriano contributed money for the purchase of the property. art. The loan was secured by a mortgage over the property covered by TCT No. The appellate court. Gertrudes acquired from the then Department of Agriculture and Natural Resources (DANR) a parcel of land. also noted that petitioner did not comply with the provisions of Article 1607 of the Civil Code. holding that since the property was acquired during the marriage of Gertrudes to Adriano.receipt of the judgment. ELEUTERIO LEIS. LORETA L. shouldering the expenses therefor. Art." who was also referred to therein as a "widow." a Deed of Absolute Sale covering the same property for the price of P39. Cruz. Gertrudes Isidro. 43100 in the name of Gertrudes Isidro is ordered REINSTATED. the property was registered in TCT No. He is only charged with notice of the burdens on the property which are noted on the face of the register or the certificate of title. despite the Court of Appeals' finding and conclusion that Gertrudes as well as private respondents failed to repurchase the property within the period stipulated and has lost all their rights to it. A judicial order is necessary in order to determine the true nature of the transaction and to prevent the interposition of buyers in good faith while the determination is being made. This provision states: Art. after the vendor has been duly heard. without prejudice to compliance by petitioners with the provisions of Article 1607 of the Civil Code As gleaned from the foregoing discussion. in the name of Alexander M. 130584. The aforequoted article is intended to minimize the evils which the pacto de retro sale has caused in the hands of usurers. While a vendee a retro. it still ruled against petitioners by affirming the Regional Trial Court's decision on the premise that there was no compliance with Article 1607 of the Civil Code requiring a judicial hearing before registration of the property in the name of petitioners. however. However. 1607. under Article 1613 of the Code. issued solely in the name of the widow. It is conceded that." 9 Property without a judicial order. Unfortunately for private respondents. is hereby ordered CANCELLED. widow. The result is that the property remains to be in a condition of co-ownership. which was issued without judicial order. Failure on the part of all the co-owners to redeem it entitles the vendee a retro to retain the property and consolidate title thereto in his name (Supra. the decision of the Court of Appeals is MODIFIED in that the petitioners are deemed owners of the property by reason of the failure of the vendor. In case of real property. 1607). the purchaser acquires a valid title to the land even as against the heirs of the deceased spouse. "may not be compelled to consent to a partial redemption.redemption of property entails a necessary expense." Where a parcel of land. To require him to do more is to defeat one of the primary objects of the Torrens system. 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 Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 115 . and Transfer Certificate of Title No. forming past of the undistributed properties of the dissolved conjugal partnership of gains. as a rule. Transfer Certificate of Title No. to repurchase the same within the period stipulated." the redemption by one co-heir or co-owner of the property in its totality does not vest in him ownership over it. is sold by a widow to a purchaser who merely relied on the face of the certificate of title thereto. 10 WHEREFORE. art. a co-owner such as Gertrudes could only dispose of her share in the property owned in common. 43100 solely in the name of "Gertrudes Isidro. It does not provide for a mode of terminating a co-ownership. But the provision does not give to the redeeming co-owner the right to the entire property. The rationale for this rule is that "a person dealing with registered land is not required to go behind the register to determine the condition of the property. CORONA. foreclosure was proper.400.872.000 from Family Bank and Trust Company. In a real estate mortgage. JANUARIO ANTONIO VELOSO AND NATIVIDAD VELOSO G.000 of the consigned amount. The complaint filed by respondent spouses is hereby dismissed. 141974 August 9. Upon appeal by the petitioner.782. they filed with the RTC of Quezon City.000 is to take the place of the injunction bond to answer for whatever damages petitioner might suffer because of the issuance of the preliminary injunction previously issued by a different branch of RTC and then later lifted. wrote to petitioners offering to redeem the foreclosed properties for P1. Ratio Decidendi: The Supreme Court found no reason to question the validity of the extra-judicial foreclosure. Whether the extra-judicial foreclosure confirmed by both the trial court and the court of appeals is valid. When the respondents defaulted in the monthly installments due on their loan. INC. the instant petition. v. The balance of P100.66. Family Bank assigned all its rights and interests in the foreclosed properties to BPI Family Bank.000. the trial court ordered the release to the respondents of P1. Being so. due to the default of the respondents to pay their obligation. 2. The loan was secured by a deed of mortgage over three parcels of lands owned by the spouses.554. the Court of Appeals affirmed the trial court‘s decision subject to the modification declaring P2. herein petitioner. Subsequently. Respondents. a complaint for annulment of foreclosure and thereafter were ordered by the latter to deposit with the clerk of court the sum of P1.R. the mortgagee has the right to foreclose on the mortgage and have the property seized and sold to apply the proceeds to the obligation.300. J. Inc.BPI FAMILY SAVINGS BANK.140. Despite the opposition of petitioner. Page 116 .000 representing the redemption price. when the principal obligation is not paid when due. 2004 The trial court rendered a decision declaring the validity of the extra-judicial foreclosure of the mortgaged properties of respondents but allowed the redemption of the same at a redemption price of P2.80 as the redemption price. Decision: The appealed decision of the Court of Appeals is hereby REVERSED and SET ASIDE. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Issue: 1. Hence. Family Bank instituted an extra-judicial foreclosure proceeding on the respondents‘ mortgaged properties and was sold at public auction with Family Bank as the highest bidder for P2.678. No. SPS. Whether the respondent spouses complied with all the requirements for the redemption of the subject properties. Therefore.: Facts: Respondent spouses Januario Antonio Veloso and Natividad Veloso obtained a loan of P1.639.500.935 but were however rejected by the latter. the offer to redeem is ineffectual.: FACTS: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 117 . applies only in the absence of. accompanied by an actual tender of the redemption price. the P1. the offer was not a legal and effective exercise of the right of redemption contemplated under the law. (2) interest of 1% per month on the purchase price.935 and the subsequent consignation in court of P1. statutory law or judicial rules of procedure. In the instant case.400. the judgment debtor must pay the purchaser the redemption price composed of the following: (1) the price which the purchaser paid for the property. But in so granting. otherwise the rule on the redemption period fixed by law can easily be circumvented. A bona fide redemption necessarily implies a reasonable and valid tender of the entire repurchase price.872. Moreover. The law grants the right of redemption.782. otherwise. 1995 GR No. the offer by respondents to redeem the foreclosed properties for P1.As regards the second issue. refusal of the offer by petitioner was completely justified.500.000 while made within the redemption period was ineffective because the amount offered and actually consigned not only excluded the interest but was lower than the P2. (3) the amount of any assessments or taxes which the purchaser may have paid on the property after the purchase. and (4) interest of 1% per month on such assessments and taxes. would have been equivalent to requiring petitioner to accept payment by installments making it necessary to indefinitely extend the redemption period which is contrary to the policy of the law. J. and never against. the law intended that the offer to redeem be valid and effective.66 paid by the highest bidder/purchaser of the properties during the auction sale. In the case at bar. The Supreme Court held in the case of Bodiongan vs.000 consigned by respondents and then subsequently withdrawn by them. LEE CHUY REALTY CORPORATION vs. Article 1616 of the Civil Code provides that the vendor cannot avail himself of the right to repurchase without returning to the vendee the price of the sale. hence.554. The fixing of a definite term within which the property should be redeemed is meant to avoid prolonged economic uncertainty over the ownership of the thing sold. COURT OF APPEALS and MARC REALTY AND DEVELOPMENT CORPORATION December 4. The law on equity as defense. Court of Appeals that in order to effect a redemption. the general rule on redemption is that the statement of intention to exercise the right to repurchase must be accompanied by an actual and simultaneous tender of payment. 104114 Bellosillo. leaving only P100.000 as injunction bond. Furthermore. 2003 GR No. 1989.150060 First Division SC sustains LEE CHUY REALTY. If the price of the alienation is grossly Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Ponente: Vitug. Lee Chuy claims it was never informed of the other sale. Primary Structures Corp.400. vs. 1620 and 1623 of the Civil Code on legal redemption provide: Art. Cebu. and Marc Realty. or by the vendor. as the case may be. 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. 1981. the redemptioner shall pay only a reasonable one. The same was registered on Oct. In its Amended Answer with Counterclaim with Motion to Dismiss. is equivalent to a formal offer to redeem. MARC REALTY insisted that the complaint be dismissed for failure to state a cause of action there being no allegation of prior valid tender of payment nor a prior valid notice of consignation. 1623. 16. Ruben Jacinto. The Bascara‘s and E. Arts. There is actually no prescribed form for an offer to redeem to be properly effected. within the period of redemption. Hence. Jacinto sold theirs to Marc Realty. on the other hand.A piece of land is disputed by Lee Chuy Corp. 1620. excessive. A co-owner desirous of exercising his right of legal redemption is given a period of thirty (30) days from notice of the sale within which to avail of the right to redeem. Anthony and Susan T. Marc Realty claims it was verbally informed and was given a copy of the deed of sale. Valencia August 19. is exercisable within one (1) year from the date of the auction sale as provided for in Act No. Art. On 13 November 1989 LEE CHUY REALTY filed a complaint for legal redemption against MARC REALTY and consigned in court a manager's check for 614. Hence. Under the free patent or homestead provisions of the Public Land Act a period of five (5) years from the date of conveyance is provided.214 square meters. The trial court ruled in favour of Lee Chuy and decreed that neither a separate offer to redeem nor a formal notice of consignation are necessary for the reason that the filing of the action itself. or by filing a complaint in court coupled with consignation of the redemption price within the prescribed period. of his one-sixth pro-indiviso share. Originally the property was co-owned by Ruben Jacinto to the extent of one-sixth and the Bascara‘s and Ernesto Jacinto who collectively owned the remaining five-sixths. 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 five-year period to be reckoned from the date of the sale and not from the date of registration in the office of the Register of Deeds. with an area of 22. the petition. Sps. and Lee Chuy was duly registered. ISSUE: W/N THE FILING OF THE ACTION ITSELF IS EQUIVALENT TO A FORMAL OFFER TO REDEEM RULING: Petition Granted. In respondents appeal to CA. Adjacent to the lot of petitioner are Page 118 . J. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them are sold to a third person. it can either be through a formal tender with consignation. sale bet. On April 30. 3135. Facts: Petitioner is a private corporation based in Cebu City and the registered owner of Lot 4523 situated in Liloan. CA reversed trial court‘s judgment and decreed in contrary that a prior tender or offer of redemption is a prerequisite or precondition to the filing of an action for legal redemption.The redemption of extrajudicially foreclosed properties. on 30 January 1996. as well as the evidence. Forthwith. The three lots. After trial. the previous owner. petitioner filed an action against respondents to compel the latter to allow the legal redemption.parcels of land. is alienated unless the grantee does not own any rural land. and Lot 4529 with a total combined area of 3.751 square meters. identified to be Lot 4527. or by the vendor. both parties appealed the decision of the trial court to the Court of Appeals. ravines. Petitioner claimed that neither Mendoza. The Court of Appeals has equated the statement in the deed of sale to the effect that the vendors have complied with the provisions of Article 1623 of the Civil Code. invoking the provisions of Articles 1621 and 1623. If two or more adjoining owners desire to exercise the right of redemption at the same time. a parcel also adjacent to Lot 4523 belonging to the latter. Article 1623 of the Civil Code provides that the right of legal pre-emption or redemption shall not be exercised except within thirty days from notice in writing by the prospective vendor. The appellate court affirmed the assailed decision. ART. as the case may be. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 This right is not applicable to adjacent lands which are separated by brooks. informed petitioner that they had no intention of selling the parcels. which read: ART. The deed of sale shall not be recorded in the Registry of Property. Thereupon. nor respondents gave formal or even just a verbal notice of the sale of the lots as so required by Article 1623 of the Civil Code. the one who first requested the redemption. On 30 May 1996. The owners of adjoining lands shall also have the right of redemption when a piece of rural land. 1996. roads and other apparent servitudes for the benefit of other estates. unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners. 1621. 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. Issue: Interpretation of Articles 1621 and 1623 of the Civil Code Held: Petition Granted Article 1621 and Article 1623 of the Civil Code. The right of redemption of co-owners excludes that of adjoining owners. in response. the Regional Trial Court of Cebu dismissed petitioners complaint and respondents' counterclaim. have been sold by Hermogenes Mendoza to respondent spouses sometime in December 1994. Respondents. In stressing the mandatory character of the requirement. aforenumbered. the area of which does not exceed one hectare. petitioner sent another letter to respondents tendering payment of the price paid to Mendoza by respondents for the lots. signifying its intention to redeem the three lots. Article 1621 of the Civil Code expresses that the right of redemption it grants to an adjoining owner of the property conveyed may be defeated if it can be shown that the buyer or grantee does not own any other rural land. it sent a letter to respondents. when Hermogenes Mendoza sold to petitioner Lot No. drains. the law states that the deed of sale shall not be recorded in the Registry of Property unless the same is accompanied by an affidavit of the vendor that he has given notice thereof to all possible redemptioners. 1623. as the case may be. Petitioner learned of the sale of the lots only in January. as being the written affirmation under oath. and should both lands have the same area. that the required Page 119 . the owner of the adjoining land of smaller area shall be preferred. 4820. Lot 4528. or by the vendor. Sofia then sold the lot and building to her daughter.written notice to petitioner under Article 1623 has been met. it was no longer renewed by the party. like the appellate court. its terms and conditions. It could not thus be considered a binding equivalent of the obligatory written notice prescribed by the Code. On 1961. After her death the rentals were paid to Teodora. Sen Po Ek Marketing Corp. This Court has long established the rule that notwithstanding actual knowledge of a co-owner. Respondents. as well as its efficacy and status. private respondent sent a letter to petitioner informing him of her intention to sell the premises to Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 120 . Martinez was the registered owner of two (2) parcels of land in Tacloban City. The contract required the lessee to construct a commercial building on the property which shall become the property of Sofia upoon expiration of the lease. Petitioner continued posession and regulary paid monthly rentals to Sofia until her death. 134117 325 SCRA 210 SECOND DIVISION Ponente: De Leon. overlook the fact that petitioner is not a party to the deed of sale between respondents and Mendoza and has had no hand in the preparation and execution of the deed of sale. father of petitioner for a period of ten (10) years. After the new lease contract expired.R. private respondent Teodora P. the contract was renewed with explicit stipulation that the new owner of the building is Sofia. On 1989. Jr. the latter is still entitled to a written notice from the selling co-owner in order to remove all uncertainties about the sale. The written notice of sale is mandatory. On 1973. No. Martinez G. she leased the lots to Yu Siong. Facts: Sofia P. vs. Martinez. one Mrs. Petilla which the petitioner only received a month after. The petitioner sought to purchase the property. Petitioner filed a verified complaint against Teodora for the annulment of the Deed of Sale by her mother in her favor stating that they have preferential right over the land. However, Teodora sold the property to respondent Tiu Uyping. Petitioner prays for the nullity of the second sale. Trial court rendered decision in favor of the petitioner. Court of Appeals rendered a decision reversing the trial court. HTP. Issues: Whether the CA erred in declaring the sale between Sofia and Teodora valid? Whether Petitioner has the right of first refusal to assert against the private respondent? Rulings: 1. Teodora Martinez had the right, as lawful owner of the leased premises, to sell the same to private respondent Tiu Uypin brothers. However, the sale between her and her mother was void for being fictitious. This was established by several badges of simulation proving that the sale was not intended to have any legal effect between them. Some evidence of simulation is the late notarization and Teodora‘s signature not as an owner but merely as an instrumental witness. Also, Sofia continued to receive the rentals until her death. Futhermore, Teodora never asserted her alleged right of ownership over the leased premises. Nonetheless, the sale between Teodora and the Tiu Uyping is valid. Since Teodora is one of the co-heirs she can only her undivided portion since her co-heirs did not give her authority. However, the sale can be subject to ratification. In this case, the other heirs of Sofia executed a ―Confirmation of Sale of Land and Improvements‖. Thus, the sale is considered valid and binding. 2. The Petitioner does not have a right of first refusal to assert against the private respondents. Neither any law nor any contract grants it preference in the purchase of leased premises. Such grant of right of first refusal must be clearly embodied in a written contract, but there is none in the present case. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Nelson Cabales and Rito Cabales v. Court of Appeals, Jesus Feliano and Anunciano Feliano August 31, 2007 GR No. 162421 First Division Puno C.J. Facts: - Rufino Cabales died on July 4, 1966 and left a 5, 714 square meter parcel of land to his wife and children - On July 26, 1971, brothers and co owners sold the property to Dr. Corrompido for P 2,000 with right to repurchase within eight years. The siblings divided the proceeds of the sale among them. --The following month or on August 18, 1971, Alberto secured a note (―vale‖) from Dr. Corrompido in the amount of P300.00. In 1972, Alberto died leaving his wife and son, petitioner Nelson. On December 18, 1975, within the eight-year redemption period, Bonifacio and Albino tendered their payment of P666.66 each to Dr. Corrompido. But Dr. Corrompido only released the document of sale with pacto de retro after Saturnina paid for the share of her deceased son, Alberto, including his ―vale‖ of P300.00. Page 121 On even date, Saturnina and her four (4) children Bonifacio, Albino, Francisco and Leonora sold the subject parcel of land to respondents-spouses Jesus and Anunciacion Feliano for P8,000.00. The Deed of Sale provided in its last paragraph, thus: It is hereby declared and understood that the amount of TWO THOUSAND TWO HUNDRED EIGHTY SIX PESOS (P2,286.00) corresponding and belonging to the Heirs of Alberto Cabales and to Rito Cabales who are still minors upon the execution of this instrument are held in trust by the VENDEE and to be paid and delivered only to them upon reaching the age of 21. - On December 17, 1985, the Register of Deeds of Southern Leyte issued Original Certificate of Title No. 17035 over the purchased land in the names of respondents-spouses. -On December 30, 1985, Saturnina and her four (4) children executed an affidavit to the effect that petitioner Nelson would only receive the amount of P176.34 from respondents-spouses when he reaches the age of 21 considering that Saturnina paid Dr. Corrompido P966.66 for the obligation of petitioner Nelson‘s late father Alberto, i.e., P666.66 for his share in the redemption of the sale with pacto de retro as well as his ―vale‖ of P300.00. - On July 24, 1986, 24-year old petitioner Rito Cabales acknowledged receipt of the sum of P1,143.00 from respondent Jesus Feliano, representing the former‘s share in the proceeds of the sale of subject property. -In 1988, Saturnina died. Petitioner Nelson, then residing in Manila, went back to his father‘s hometown in Southern Leyte. That same year, he learned from his uncle, petitioner Rito, of the sale of subject property. In 1993, he signified his intention to redeem the subject land during a barangay conciliation process that he initiated. -On January 12, 1995, contending that they could not have sold their respective shares in subject property when they were minors, petitioners filed before the Regional Trial Court of Maasin, Southern Leyte, a complaint for redemption of the subject land plus damages. -in their answer, respondents-spouses maintained that petitioners were estopped from claiming any right over subject property considering that (1) Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 petitioner Rito had already received the amount corresponding to his share of the proceeds of the sale of subject property, and (2) that petitioner Nelson failed to consign to the court the total amount of the redemption price necessary for legal redemption. They prayed for the dismissal of the case on the grounds of laches and prescription. No amicable settlement was reached at pre-trial. Trial ensued and on August 11, 2000, the trial court ruled against petitioners On appeal, CA modified tha decision of the trial court Issue: Whether CA erred in (1) recognizing petitioner Nelson Cabales as co-owner of subject land but denied him the right of legal redemption, and (2) not recognizing petitioner Rito Cabales as co-owner of subject land with similar right of legal redemption. Held: Petition denied, modification. CA decision affirmed with Ratio: -When Rufino Cabales died intestate, his wife Saturnina and his six (6) children survived and succeeded him. Article 996 of the New Civil Code provides that ―[i]f a widow or widower and legitimate children or descendants are left, the surviving spouse has in the succession the same share as that of each of the children.‖ -Verily, the seven (7) heirs inherited equally on subject property. Petitioner Rito and Alberto, petitioner Nelson‘s father, inherited in their own rights and with equal shares as the others. -But before partition of subject land was effected, Alberto died. By operation of law, his rights and obligations to one-seventh of subject land were transferred to his legal heirs – his wife and his son petitioner Nelson. -The first sale with pacto de retro to Dr. Corrompido by the brothers and co-owners Bonifacio, Albino and Alberto was valid but only as to their pro-indiviso shares to the land. When Alberto died prior to repurchasing his share, his rights and obligations were transferred to and assumed by his heirs, namely his wife and his son, petitioner Nelson. But the records show that it was Saturnina, Alberto‘s mother, and not his heirs, who repurchased for him. Page 122 As correctly ruled by the Court of Appeals, Saturnina was not subrogated to Alberto‘s or his heirs‘ rights to the property when she repurchased the share. -Upon redemption from Dr. Corrompido, the subject property was resold to respondents-spouses by the co-owners. Petitioners Rito and Nelson were then minors and as indicated in the Deed of Sale, their shares in the proceeds were held in trust by respondents-spouses to be paid and delivered to them upon reaching the age of majority. -the father, or, in his absence, the mother, is considered legal administrator of the property pertaining to the child under his or her parental authority without need of giving a bond in case the amount of the property of the child does not exceed two thousand pesos. Corollary to this, Rule 93, Section 7 of the Revised Rules of Court of 1964, applicable to this case, automatically designates the parent as legal guardian of the child without need of any judicial appointment in case the latter‘s property does not exceed two thousand pesos Saturnina was clearly petitioner Rito‘s legal guardian without necessity of court appointment considering that the amount of his property or one-seventh of subject property was P1,143.00, which is less than two thousand pesos. However, Rule 96, Sec. 1 provides that: Section 1. To what guardianship shall extend. – A guardian appointed shall have the care and custody of the person of his ward, and the management of his estate, or the management of the estate only, as the case may be. The guardian of the estate of a nonresident shall have the management of all the estate of the ward within the Philippines, and no court other than that in which such guardian was appointed shall have jurisdiction over the guardianship effectively ratified it. This act of ratification rendered the sale valid and binding as to him. With respect to petitioner Nelson, on the other hand, the contract of sale was void. He was a minor at the time of the sale. Saturnina or any and all the other co-owners were not his legal guardians with judicial authority to alienate or encumber his property. It was his mother who was his legal guardian and, if duly authorized by the courts, could validly sell his undivided share to the property. She did not. Necessarily, when Saturnina and the others sold the subject property in its entirety to respondentsspouses, they only sold and transferred title to their pro-indiviso shares and not that part which pertained to petitioner Nelson and his mother. Consequently, petitioner Nelson and his mother retained ownership over their undivided share of subject property. -As to whether the petitioners can redeem the land from respondent spouses, it is clear that legal redemption may only be exercised by the co-owner or co-owners who did not part with his or their proindiviso share in the property held in common. As demonstrated, the sale as to the undivided share of petitioner Rito became valid and binding upon his ratification on July 24, 1986. As a result, he lost his right to redeem subject property. -In the face of the established facts, petitioner Nelson cannot feign ignorance of the sale of subject property in 1978. To require strict proof of written notice of the sale would be to countenance an obvious false claim of lack of knowledge thereof, thus commending the letter of the law over its purpose, i.e., the notification of redemptioners. Indeed, the legal guardian only has the plenary power of administration of the minor‘s property. It does not include the power of alienation which needs judicial authority. Thus, when Saturnina, as legal guardian of petitioner Rito, sold the latter‘s proindiviso share in subject land, she did not have the legal authority to do so. Accordingly, the contract of sale as to the proindiviso share of petitioner Rito was unenforceable. However, when he acknowledged receipt of the proceeds of the sale on July 24, 1986, petitioner Rito Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 123 Invoking the provisions of Articles 1621 and 1623. SPS. ANTHONY S. petitioner. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 124 . Petitioner sent another letter to respondents tendering payment of the price paid to Mendoza by respondents for the lots. Adjacent to the lot of petitioner are 3 parcels of land.G. No. petitioner filed an action against respondents to compel the latter to allow the legal redemption. The appellate court affirmed the assailed decision. VALENCIA and SUSAN T. vs.R. 409 SCRA 371 Ponente: VITUG. informed petitioner that they had no intention of selling the parcels. J. Petitioner learned of the sale of the lots then it sent a letter to respondents signifying its intention to redeem the three lots. Regional Trial Court of Cebu dismissed petitioner‘s complaint and respondents' counterclaim. 2003 PRIMARY STRUCTURES CORP. LIU. represented herein by its President ENGR. in response. (FIRST DIVISION) Facts: Petitioner is a private corporation in Cebu City and the registered owner of Lot situated in Liloan. Both parties appealed the decision of the trial court to the Court of Appeals. WILLIAM C. nor respondents gave formal or even just a verbal notice of the sale of the lots as so required by Article 1623 of the Civil Code. Cebu. VALENCIA. Issue: Whether or not petitioner Primary Structures Corporation has the right of redemption over the three parcels of land. the previous owner. The 3 lots have been sold by Hermogenes Mendoza to respondent spouses. Respondents. 150060 August 19. Petitioner claimed that neither Mendoza. respondents. The corporation demanded payment from him but refused to do so. The Court of Appeals has equated the statement in the deed of sale to the effect that the vendors have complied with the provisions of Article 1623 of the Civil Code. the creditor. Respondents overlook the fact that petitioner is not a party to the deed of sale between respondents and Mendoza and has had no hand in the preparation and execution of the deed of sale. The appellate court. WHEREFORE. He blamed the MRMC for not notifying him with the unpaid bills but he failed to obtain any of his claims. The Court of Appeals affirmed the same. Ledonio failed to pay any of the loans covered by the promissory notes when they became due. as the case may be. The transaction between Picache and CDC was an assignment of credit and does not require Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 125 . Ledonio was engaged in a garment business where he leased a real property from Mission Realty and Management Corporation. as well as its efficacy and status. and covered by promissory notes duly signed by him. as well as the evidence that the required written notice to petitioner under Article 1623 has been met. Capitol Development Corporation Chico-Nazario.Ruling: Article 1621 of the Civil Code expresses that the right of redemption it grants to an adjoining owner of the property conveyed may be defeated if it can be shown that the buyer does not own any other rural land. and the assailed decision of the Court of Appeals is REVERSED and SET ASIDE. the instant petition is GRANTED.000. Petitioner is hereby given a period of thirty days from finality of this decision within which to exercise its right of legal redemption. Ledonio v.00. ISSUE: whether the assignment of debt by Picache. He denied that he made such promissory notes in favor of Picache and he further alleged that he only signed the promissory notes as a result of intimidation and fraud. has said that there has been no evidence to show that respondents are not themselves owners of rural lands for the exclusionary clause of the law to apply. It could not thus be considered a binding equivalent of the obligatory written notice prescribed by the Code. its terms and conditions. In stressing the mandatory character of the requirement. No. RULING: Petition is denied for lack of merit. they were only used by Picache by taking advantage of his signature. 2007 Facts: Edgar Ledonio obtained from Patrocinio S. The written notice of sale is mandatory. to another party such as the CDC. G. requires his consent being the debtor. Picache transferred his due from Ledonio to Capitol Development Corporation . Article 1623 of the Civil Code provides that the right of legal pre-emption or redemption shall not be exercised except within thirty days from notice in writing by the prospective vendor. the law states that the deed of sale shall not be recorded in the Registry of Property unless it is accompanied by an affidavit of the vendor that he has given notice to all possible redemptioners. This Court has long established the rule that notwithstanding actual knowledge of a co-owner. Picache two loans with the amount of P60.R. This made foreign investors to desist transacting with him. or by the vendor. sustaining the trial court. as being the written affirmation under oath. 149040 July 4. An incident happened where a group of Meralco employees cut-off the power supply of the plant of Ledonio due to non-payment of electric bills. However. Prior to the case. He alleged that when he made the promissory notes. the latter is still entitled to a written notice from the selling co-owner in order to remove all uncertainties about the sale. The RTC ruled in favor of the respondent corporation finding its version of the facts more credible. Later on. : Facts: On various dates. right or action shall produce no effect as against third persons. or the instrument is recorded in the Registry of Property in case the assignment involves real property. transfers that credit and its accessory rights to another who is the assignee. On the same date. respondents.00). dation in payment or exchange or donation – and without need of the debtor‘s consent. praying that defendant bank be ordered to pay it the aggregate value of the certificates of time deposit of P1. petitioner. the latter set-off and applied the time deposits in question to the payment of the matured loan. The law does not require any formal notice to bind the debtor to the assignee. Thereafter. by a legal cause such as sale.00 plus accrued interest and compounded interest therein at 16% per annum Issue: whether or not Caltex Philippines has a better right over the Certificate of time deposits? Held: Security Bank has a better right because the assignment of the CTDs made by Angel de la Cruz in favor of respondent bank was embodied in a public instrument. Art. unless it appears in a public instrument. who acquires the power to enforce it. Plaintiff filed the instant complaint. COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY. dela Cruz informed defendant Bank that he lost all the certificates of deposit and ask for the replacement of said last CTP where it was granted by the bank. No. the loan of Angel dela Cruz with the defendant bank matured and fell due and on August 5. Angel dela Cruz delivered said certificate of time deposit to plaintiff-petitioner Caltex in connection with his purchase of fuel products from the latter. G. the debtor is bound by it. 1983.. 1992 Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 126 .120. vs. CALTEX (PHILIPPINES). Even if the debtor had not been notified. An assignment of credit. dela Cruz negotiated and obtained a loan from defendant bank in the amount of Eight Hundred Seventy-Five Thousand Pesos (P875. Soon after said grants. that he surrendered to defendant bank ―full control of the indicated time deposits from and after date‖ of the assignment and further authorizes said bank to preterminate. said depositor executed a notarized Deed of Assignment of Time Deposit which stated.000.120. to the same extent as the assignor could have enforced it against the debtor. An assignment of credit has been defined as an agreement by virtue of which the owner of a credit known as the assignor.000.petitioner‘s consent as debtor for its validity and enforceability. but came to know of the assignment by whatever means. set-off and ―apply the said time deposit to the payment of whatever amounts may be due‖ on the loan upon it maturity. all that the law requires is knowledge of the assignment. 97753 August 10. INC. defendant Security Bank and Trust Company issued 280 certificates of time deposit in favor of Angel dela Cruz who deposited of time deposit therein the aggregate amount of P1. among others. J.000.R.00. REGALADO. 1625. When the respondent tried to collect the said credit from the corporation.80 from respondent and paid a downpayment of P150. Despite the situation. Inc. exchange or donation.Respondent bank duly complied with this statutory requirement. Inc.. Contrarily. The respondent appealed the decision to the Court of Appeals and the said court reverses the appealed decision. Facts: Respondent KJS ECO_FORMWORK System Phil. Sonny Lo. the petitioner and respondent executed a Deed of Assignment whereby the petitioner assigned to respondent his receivables in the amount of P335. The respondent delivered the equipments to petitioner but Sonny Lo was only able to pay the first two monthly installments because his business encountered financial difficulties. The respondent filed an action for recovery of a sum of money before the RTC of Makati. 2003 First Division Justice Ynares-Santiago Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 An Assignment of Credit is an agreement by virtue of which the owner of a credit. assignee or lien holder of the CTDs. known as the assignor. The balance was made payable in ten monthly installments. 425. pp 186-188) Lo vs. Ratio: (Lo vs. such as sale. dacion en pago. neither proved the amount of its credit or the extent of its lien nor the execution of any public instrument which could affect or bind private respondent. and without the consent of the debtor . Issue: Whether or not the Deed of Assignment that was executed extinguished the obligation of the petitioner.. petitioner. 462. transfers his credit and Page 127 .14 is AFFIRMED with MODIFICATION. Ruling: The decision of the Court of Appeals ordering petitioner to pay the respondent the sum of P335. the latter has definitely the better right over the CTDs in question. by a legal cause.. Inc. therefore.000. Necessarily. 462. Jomero Realty Corporation refused to honor the Deed of Assignment because it claimed that petitioner was also indebted to it.. KJS Eco-Formwork System Phil. on the other hand is a building contractor. whether as purchaser.80 from Jomero Realty Corporation. October 8. is a corporation engaged in the sale of steel scaffoldings. KJS Eco-Formwork System Phil. The petitioner ordered scaffolding equipments worth P540. as between petitioner and respondent bank.The trial court dismissed the complaint on the ground that the assignment of credit extinguished the obligation when they executed the Deed of Assignment. Court of Appeals reversed the Page 128 . petitioner vs.: Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 FACTS: Private respondents Sanyu Chemical corporation ("Sanyu Chemical") as principal and Sanyu Trading Corporation ("Sanyu Trading") along with individual private stockholders of Sanyu Chemical. The word "indebtedness" is used herein in its most comprehensive sense and includes any and all advances. J. as a special mode of payment. it appeared. the Arrieta spouses. Inc.00 plus penalty charges amounting to P0. as vendor or assignor. additional trade receivables were assigned by Sanyu Chemical to Atok Finance with a total face value of P100. However. executed in the continuing Suretyship Agreement in favor of Atok Finance as creditor. On 13 January 1984. respondents.. Therefore. He should be held liable to pay to respondent the amount of his indebtedness(Lo vs.00. it behooved on petitioner to make good its warranty and paid the obligation. pp 186-188). Sanyu Trading and the individual private respondents who were officers and stockholders of Sanyu Chemical did jointly and severally unconditionally guarantee to ATOK FINANCE CORPORATION the full. In other words. Indeed by warranting the existence of the credit. namely.00. Under this Agreement. From the provision of the civil code(Article 1628). ARRIETA. PABLITO BERMUNDO and LEOPOLDO HALILI. faithful and prompt payment and discharge of any and all indebtedness of private respondent to the Creditor Atok. Halili and Pablico Bermundo as sureties.accessory rights to another. as in any other contract of sale. On 27 November 1981. respondent alleged the non-existence of the credit and asserted its claim to petitioner‘s warranty under assignment. NENITA B. who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor. Atok Finance commenced action against Sanyu Chemical. petitioner should be deemed to have ensured the performance thereof in case the same is later found to be inexistent. ATOK FINANCE CORPORATION. the vendor is bound by certain warranties. ARRIETA. was null and void since. which is in the nature of a sale of personal property. When Jomero claimed that it was no longer indebted to petitioner since the latter also had an unpaid obligation to it. the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt.R. to Atok Finance in consideration of receipt from Atok Finance of the amount of P105.. known as the assignee. 240. Sanyu Chemical had no pre-existing obligation due to Atok Finance. SANYU CHEMICAL CORPORATION. is bound to warrant the existence and legality of the credit at the time of the sale or assignment. petitioner.45. 000. Later. 1993 FELICIANO. Hence. it essentially meant that its obligation to petitioner has been extinguished by compensation. No. Sanyu Chemical assigned its trade receivables outstanding as of 27 November 1981 with a total face value of P125. Atok Finance alleged that Sanyu Chemical had failed to collect and remit the amount due under the trade receivables. The assigned receivables carried a standard term of thirty (30) days. that the standard commercial practice was to grant an extension up to one hundred twenty (120) days without penalties. Pablito Bermundo and Leopoldo Halili before the Regional Trial Court of Manila to collect the sum of P120. The trial court rendered a decision in favor of Atok Finance. debts. DANILO E. it may be well settled that the assignment of credit. COURT OF APPEALS. 80078 May 18. produced the effects of a dation in payment which may extinguish the obligation. 871. The private respondents on the other hand seek for the dismissal of the complaint for lack of cause of action and contended that the Continuing Suretyship Agreement. obligations and liabilities of Principal or any one or more of them. private respondent spouses Danilo E. being an accessory contract. G. however. at the time of its execution. KJS Eco-Formwork System Phil. In dacion en Pago.03 for every peso due and payable for each month starting from 1 September 1983.Upon appeal. 378. to be read in an absolute and literal manner and carried to the limit of its logic. under the terms of the Deed of Assignment. the effect of nonpayment by the original trade debtors was breach of warranty of solvency by Sanyu Chemical. ISSUES: Whether the individual private respondents may be held solidarily liable with Sanyu Chemical under the provisions of the Continuing Suretyship Agreement? Whether or not the continuing suretyship agreement must be held null and void as having been executed without consideration and without a pre-existing principal obligation to sustain it.decision of the trial court. that is. It is an activity or operation that permits the assignee to monetize or realize the value of the receivables before the maturity thereof. The Deed of Assignment was valid and binding upon Sanyu Chemical. the principal places itself in a position to enter into the projected series of transactions with its creditor. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 With respect to the second issue. there would be no need to execute a separate surety contract or bond for each financing or credit accommodation extended to the principal debtor. the SC ruled that such legal proposition is not. But there is no theoretical or doctrinal difficulty inherent in saying that the suretyship agreement itself is valid and binding even before the principal obligation intended to be secured thereby is born. the other private respondents (the Arrieta spouses. Page 129 . on the receivables thereby assigned.Hence. This is clear from Article 2052 of the Civil Code itself." However. by virtue of the operation of the Continuing Suretyship Agreement. this petition. along with the principal debtor Sanyu Chemical. Under the Deed of Assignment. And because assignor Sanyu Chemical became. the assignor Sanyu Chemical becomes a solidary debtor under the terms of the receivables covered and transferred by virtue of the Deed of Assignment. RULING: The Supreme Court granted the petition of Petitioner Atok Finance and sustains the decision of trial court finding in favor of petitioner Atok Finance. Sanyu Chemical received from Atok Finance the value of its trade receivables it had assigned. In other words. solidary obligor under each of the assigned receivables. with such surety agreement. ruling in favor of the private respondents. It is true that a serious guaranty or a suretyship agreement is an accessory contract in the sense that it is entered into for the purpose of securing the performance of another obligation which is denominated as the principal obligation. became solidarily liable for that obligation of Sanyu Chemical. whether private respondents are liable under the Deed of Assignment which they. contesting that it ran counter to the provision that guaranty cannot exist independently because by nature it is merely an accessory contract. The SC held that Court of Appeals here was in serious error. executed in favor of petitioner. Pablito Bermundo and Leopoldo Halili). The contention of private appellants that the suretyship agreement is null and void because it is not in consonance with the laws on guaranty and security on the ground that the agreement was entered into by the parties two years before the Deed of Assignment was executed. resulting in turn in the assumption of solidary liability by the assignor under the receivables assigned. Thus. The liability of Sanyu Chemical to Atok Finance rest on the breach of ex contractu (contractual obligation). Sanyu Chemical obviously benefitted from the assignment. A surety is not bound under any particular principal obligation until that principal obligation is born. SC held that private respondents are liable with respect to the deed they executed in favor of creditor Atok Finance. In other words. like most legal principles. any more that there would be in saying that obligations which are subject to a condition precedent are valid and binding before the occurrence of the condition precedent. It is also true that Article 2052 of the Civil Code states that "a guarantee cannot exist without a valid obligation. By executing such an agreement. Sales Case Digests UST Faculty of Civil Law 2A SY 2009-2010 Page 130 .