Earnest Money Distinguished From Option Money

Once more, the SC in Oesmer, et al. v. Paraiso Dev. Corp., G. R. No. 157493, February 5, 2007, had
the occasion to distinguish earnest money from option money. It said that earnest money and option
money are not the same but distinguished thus: (a) earnest money is part of the purchase price,
while option money is the money given as a distinct consideration for an option contract; (b) earnest
money is given only where there is already a sale, while option money applies to a sale not yet
perfected; and (c) when earnest money is given, the buyer is bound to pay the balance, while when
the would-be buyer gives option money, he is not required to buy, but may even forfeit it depending on
the terms of the option.

Sale With Pacto de Retro Transfer of Ownership

A sale with pacto de retro transfers the legal title to the vendee a retro. The essence of a pacto de
retro sale is that the title and ownership of the property sold are immediately vested in the vendee a
retro, subject to the resolutory condition of repurchase by a vendor a retro to repurchase the property
within the period agreed upon by them, or, in the absence thereof, as provided by law, vests upon the
vendee a retro absolute title and ownership over the property sold by operation of law. The failure of
the vendee a retro to consolidate his title under Article 1607 of the New Civil Code does not impair
such title and ownership because the method prescribed thereunder is merely for the purpose of
registering and consolidating titles to the property. (Cadungog v. Yap, G.R. No. 161223, September
12, 2005).

Pacto De Retro Sale

The essence of a pacto de retro sale is that title and ownership of the property sold is immediately
vested in the vendee a retro, subject to the restrictive condition of repurchase by the vendor a retro
within the period provided in Article 1606 of the New Civil Code, to wit:
The failure of the vendee a retro to repurchase the property vests upon the latter by operation of law
the absolute title and ownership over the property sold. (Cruz vs. Leis, G.R. No. 125233, March 9,
2000; 327 SCRA 570).

Requisites Of Estoppel In Pais

The essential elements of estoppel in pais. It said that the essential elements of estoppel in pais are
considered in relation to the party to be estopped, and to the party invoking the estoppel in his favor.
For the party to be estopped, such party (1) commits conduct amounting to false representation or
concealment of material facts or at least calculated to convey the impression that the facts are

inconsistent with those which the party subsequently attempts to assert; (2) has the intent, or at
least expectation that his conduct shall at least influence the other party; and (3) has knowledge,
actual or constructive, of the real facts. On the party claiming the estoppel, such party (1) has lack of
knowledge and of the means of knowledge of the truth on the facts in question; ((2) has relied, in good
faith, on the conduct or statements of the party to be estopped; (3) has acted or refrained from acting
based on such conduct or statements as to change the position or status of the party claiming the
estoppel, to his injury, detriment or prejudice. (PNB vs. CA, 308 SCRA 229; Kalalo vs. Luz, 34 SCRA
337; PBC vs. CA, 289 SCRA 178; Republic Glass Corp., et al., vs. Qua, G.R. No. 144413, July 30,
2004).

Hidden Defect in Sales

A motor vehicle was sold but there was a hidden defect. It was delivered November 9, 1997 but the
action was filed on April 20, 1999, hence, the defendant moved to dismiss on the ground of
prescription. Will the motion prosper? Why?
Answer: No, because the action has already prescribed. Article 1459 of the Civil Code states that in a
contract of sale, the vendor is bound to transfer the ownership of and to deliver the thing that is the
object of sale. Corollarily, the pertinent provisions of the Code set forth the available remedies of a
buyer against the seller on the basis of a warranty against hidden defects:
Art. 1561. The vendor shall be responsible for warranty against the hidden defects which

the thing sold may have, should they render it unfit for the use for which it is intended, or
should they diminish its fitness for such use to such an extent that, had the vendee been

aware thereof, he would not have acquired it or would have given a lower price for it; but
said vendor shall not be answerable for patent defects or those which may be visible, or
for those which are not visible if the vendee is an expert who, by reason of this trade or
profession, should have known them.
Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the
thing sold, even though he was not aware thereof.
This provision shall not apply if the contrary has been stipulated and the vendor was not aware of
the hidden faults or defects in the thing sold.
Art. 1571. Actions arising from the provisions of the preceding articles shall be barred
after six months from the delivery of the thing sold.
Under Article 1599 of the Civil Code, once an express warranty is breached, the buyer can accept or
keep the goods and maintain an action against the seller for damages. In the absence of an existing
express warranty on the part of the respondent, the allegations in petitioners complaint for damages
were clearly anchored on the enforcement of an implied warranty against hidden defects, i.e., that

the engine of the vehicle which respondent had sold to him was not defective. By filing this case,
petitioner wanted to hold respondent responsible for breach of implied warranty for having sold a
vehicle with defective engine. Such being the case, petitioner should have exercise this right within
six months from the delivery of the thing sold. (Goodyear Phil. Inc. v. Sy, G.R. No. 154554, November
9, 2005, 474 SCRA 427). Since petitioner filed the complaint on April 20, 1999, or more than nineteen
months counted from November 29, 1997 (the date of the delivery of the motor vehicle), his cause of
action had become time-barred. (De Guzman v. Toyota Cubao Inc., G.R. No. 141480, November 29,
2006).

Remedy Against The Seller If There Is Hidden Defect Of The Thing

Sold
Article 1459 of the Civil Code states that in a contract of sale, the
vendor is bound to transfer the ownership of and to deliver the thing
that is the object of sale. Corollarily, the pertinent provisions of the
Code set forth the available remedies of a buyer against the seller on the
basis of a warranty against hidden defects.
Under Article 1599 of the Civil Code, once an express warranty is breached, the buyer
can accept or keep the goods and maintain an action against the seller for damages. In
the absence of an existing express warranty on the part of the respondent, the
allegations in petitioners complaint for damages were clearly anchored on the
enforcement of an implied warranty against hidden defects, i.e., that the engine of the
vehicle which respondent had sold to him was not defective. By filing this case,
petitioner wanted to hold respondent responsible for breach of implied warranty for
having sold a vehicle with defective engine. Such being the case, petitioner should have
exercise this right within six months from the delivery of the thing sold. (Goodyear Phil.
Inc. v. Sy, G.R. No. 154554, November 9, 2005, 474 SCRA 427). Since petitioner filed the
complaint on April 20, 1999, or more than nineteen months counted from November 29,
1997 (the date of the delivery of the motor vehicle), his cause of action had become timebarred. (De Guzman v. Toyota Cubao Inc., G.R. No. 141480, November 29, 2006).

The Mirror Doctrine

The general rule is that a purchaser may be considered a purchaser in good faith when he has
examined the latest certificate of title. An exception to this rule is when there exist important facts
that would create suspicion in an otherwise reasonable man to go beyond the present title and to
investigate those that preceded it. Thus, it has been said that a person who deliberately ignores a
significant fact which would create suspicion in an otherwise reasonable man is not an innocent
purchaser for value. A purchaser cannot close his eyes to facts which should put a reasonable man
upon his guard, and then claim that he acted in good faith under the belief that there was no defect
in the title of the vendor as has been held in other cases, if the buyer fails to take the ordinary
precautions which a prudent man would have taken under the circumstances, specially in buying a
piece of land in the actual, visible and public possession of another person, other than the vendor,
constitutes gross negligence amounting to bad faith.
In this connection, it has been held that where, the land sold is in the possession of a person other
than the vendor, the purchaser is required to go beyond the certificate of title to make inquiries
concerning the rights of the actual possessor. Failure to do so would make him purchaser in bad
faith.
One who purchases real property which is in the actual possession of another should, at least make
some inquiry concerning the right of those in possession. The actual possession by a person other
than the vendor should, at least put the purchaser upon inquiry. He can scarcely, in the absence of
such inquiry, be regarded as a bona fide purchaser as against such possessors. (Lucena vs. CA, G.R.
No. 77468, August 25, 1999).
Being a corporation engaged in the business of buying and selling real estate, it was gross negligence
on its part to merely rely on the sellers assurance that the occupants of the property were mere
squatters considering that it had the means and the opportunity to investigate for itself the accuracy
of such information. (Amancio, et al. vs. CA, et al., G.R. No. 152627, September 16, 2005).

Rules On Double Sale Of Immovables

In double sale of an immovable, the rules of preference are as
follows:
(a)

the first registrant in good faith;

(b)

should there be no entry, the first in possession in good faith; and

(c)
in the absence thereof, the buyer who presents the oldest title in good faith. (Martinez vs. CA,
358 SCRA 38 (2001); Art. 1544, NCC).
Prior registration of the subject property does not by itself confer ownership or a better right over the

property. Article 1544 requires that before the second buyer can obtain priority over the first, he
must show that he acted in good faith throughout (i.e., in ignorance of the first sale and of the first
buyers rights) from the time of acquisition until the title is transferred to him by registration or
failing registration, by delivery of possession. (Uraca vs. CA, 344 Phil 253; Consolidated Rural Bank
(Cagayan Valley) Inc. vs. CA, et al, G.R. No. 132161, January 17, 2005).
One who purchases real property which is in actual possession of others should, at least, make some
inquiry concerning the rights of those in possession. The actual possession by people other than the
vendor should, at least, put the purchaser upon inquiry. He can scarcely, in the absence of such
inquiry, be regarded as a bona fide purchaser as against such possessions. (Rep. vs. CA, 102 SCRA
331; Conspecto vs. Fuerto, 31 Phil. 144). The rule of caveat emptor requires the purchaser to be
aware of the supposed title of the vendor and one who buys without checking the vendors title takes
all the risks and losses consequent to such failure. (Caram vs. Laureta, 103 SCRA 16 [1981];
Consolidated Rural Bank (Cagayan Valley) Inc. vs. CA, et al, G.R. No. 132161, January 17, 2005; see
also Sps. Mathay vs. Court of Appeals, 356 Phil. 870 [1998]).
Registration of the second buyer under Act 3344, providing for the registration of all instruments on
land neither covered by the Spanish Mortgage Law nor the Torrens System (Act 496), cannot improve
the standing of a party since Act 3344 itself expresses that registration thereunder would not
prejudice prior rights in good faith (see Carumba vs. Court of Appeals, 31 SCRA 558). Registration,
however, by the first buyer under Act 3344 can have the effect of constructive notice to the second
buyer that can defeat his right as such buyer in good faith (see Arts. 708-709, Civil Code; see also
Revilla vs. Galindez, 107 Phil. 480; Taguba vs. Peralta, 132 SCRA 700). Art. 1544 has been held to be
inapplicable to execution sales of unregistered land, since the purchaser merely steps into the shoes
of the debtor and acquires the latters interest as of the time the property is sold. (Carumba vs. Court
of Appeals, 31 SCRA 558; see also Fabian vs. Smith, Bell & Co., 8 Phil. 496), (Remalante vs. Tibe,
158 SCRA 138; Sps. Noel & Julie Abrigo vs. De Vera, G. R. No. 154409, June 21, 2004).

Right Of Redemption
If a prospective redemptioner is informed of the sale of a portion of a property subject of coownership, he has to exercise the right of legal redemption within 30 days from notice, otherwise, he
loses the right. If he was informed in 1993 but filed a complaint for legal redemption in 1995, then,
he has lost his right to exercise. 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. (Cabales, et al. v. CA, et al., G.R. No.
162421, August 31, 2007. Puno, C. J).
If a property subject of co-ownership is sold and is redeemed in its entirety by one of the co-owners,
does the redemptioner acquire sole ownership? Why?
ANS: No. A co-owner who redeemed the property in its entirety did not make her the owner of all of
it. The property remained in a condition of co-ownership as the redemption did not provide for a
mode of terminating a co-ownership. (Paulmitan v. CA, G.R. No. 61584, November 25, 1992, 215

SCRA 867; Adille v. CA, 157 SCRA 455 (1988)). But the one who redeemed had the right to be
reimbursed for the redemption price and until reimbursed, holds a lien upon the subject property for
the amount due. Necessarily, when one redeemed for others who had then acquired his proindiviso share in subject property, it did not vest in her ownership over the pro-indiviso share she
redeemed. But he had the right for the amount due until reimbursement. The result is that the heirs
retained ownership over their pro-indiviso share. (Cabales, et al. v. CA, et al., G.R. No. 162421,
August 31, 2007).