Norkis vs Ca

FACTS:
Alberto Nepales bought from the Norkis Distributors, Inc. brand new Yamaha motorcycle.The Branch
Manager AvelinoLabajo agreed to accept the P7,500.00 price payable by means of a Letter of Guaranty
from the Development Bank of the Philippines (DBP), Kabankalan. Hence, credit was extended to Nepales,
and as security for the loan, he executed a chattel mortgage on the motorcycle in favor of DBP. Labajo
issued the Norkis Sales Invoice perfecting the contract of sale, and Nepales signed the same to conform to
the terms of the sale, while the unit remained in Norkis' possession. On November 6, 1979, it was registered
under Alberto Nepales name in the Land Transportation Commission.
The motorcycle was delivered to a certain Julian Nepales on January 22, 1980, who was allegedly the agent
of Alberto Nepales but the latter denies it.
On February 3, 1980, the motorcycle met an accident while being driven by a certain ZacariasPayba. The
unit was a total wreck, was returned, and stored inside Norkis' warehouse.
On March 20, 1980, DBP released the proceeds of respondent's motorcycle loan to Norkis in the total sum
of P7,500. As the price of the motorcycle later increased to P7,828, Nepales paid the difference of P328
and demanded the delivery of the motorcycle. Norkis failed to deliver the unit, and Nepales filed an action
for specific performance with damages. Norkis answered that the motorcycle had already been delivered to
private respondent before the accident, hence, he should bear the risk of loss or damage as owner of the
unit.
ISSUE:
Who should bear the risk of loss?
COURT RULING:
The Supreme Court ruled that Article 1496 of the Civil Code which provides that "in the absence of an
express assumption of risk by the buyer, the things sold remain at seller's risk until the ownership
thereof is transferred to the buyer," is applicable in the case at bar for there was neither an actual nor
constructive delivery of the thing sold.
In this case, the purpose of the execution of the sales invoice and the registration of the vehicle in the name
of Alberto Nepales with the Land Registration Commission was not to transfer the ownership and dominion
over the motorcycle to him, but only to comply with the requirements of the DBP for processing private
respondent's motorcycle loan. On March 20, 1980, before private respondent's loan was released and before
he even paid Norkis, the motorcycle had already figured in an accident while driven by one ZacariasPayba.
Payba was not shown by Norkis to be a representative or relative of private respondent. The circumstances
in the case itself more than amply rebut the disputable presumption of delivery upon which Norkis anchors
its defense to Nepales' action.

CIRILO PAREDES, plaintiff-appellant,

vs.
JOSE L. ESPINO, defendant-appellee.
Simeon Capule for plaintiff-appellant.
Iigo R. Pea for defendant-appellee.
REYES, J.B.L., Actg. C.J.:

Appeal from an order of the Court of First Instance of Palawan in its Civil Case No. 453,
granting a motion to dismiss the complaint.
Appellant Cirilo Parades had filed an action to compel defendant-appellee Jose L. Espino to
execute a deed of sale and to pay damages. The complaint alleged that the defendant "had entered
into the sale" to plaintiff of Lot No. 67 of the Puerto Princesa Cadastre at P4.00 a square meter; that
the deal had been "closed by letter and telegram" but the actual execution of the deed of sale and
payment of the price were deferred to the arrival of defendant at Puerto Princesa; that defendant
upon arrival had refused to execute the deed of sale altho plaintiff was able and willing to pay the
price, and continued to refuse despite written demands of plaintiff; that as a result, plaintiff had lost
expected profits from a resale of the property, and caused plaintiff mental anguish and suffering, for
which reason the complaint prayed for specific performance and damages.
Defendant filed a motion to dismiss upon the ground that the complaint stated no cause of
action, and that the plaintiff's claim upon which the action was founded was unenforceable under the
Statute of Frauds.
Plaintiff opposed in writing the motion to dismiss and annexed to his opposition a copy of a
letter purportedly signed by defendant (Annex "A"), wherein it was stated (Record on Appeal, pp. 1920)
106 GonzagaSt.
Tuguegarao,Cagayan
May18,1964
Mr.CiriloParedes
Pto.Princesa,Palawan

Dear Mr. Paredes:

So far I received two letters from you, one dated April 17 and the other April
29, both 1964. In reply thereto, please be informed that after consulting with my wife,
we both decided to accept your last offer of Four (P4.00) pesos per square meter of
the lot which contains 1826 square meters and on cash basis.
In order that we can facilitate the transaction of the sale in question, we (Mrs.
Espino and I), are going there (Puerto Princess, Pal.) to be there during the last week
of the month, May. I will send you a telegram, as per your request, when I will reach
Manila before taking the boat for Pto. Princess. As it is now, there is no schedule yet
of the boats plying between Manila and Pto. Princess for next week.
Plaintiff also appended as Annex "A-1", a telegram apparently from defendant advising plaintiff
of his arrival by boat about the last week of May 1964 (Annex "A-1" Record on Appeal, p. 21), as
well as a previous letter of defendant (Appendix B, Record on Appeal, p. 35) referring to the lot as
the one covered by Certificate of Title No. 62.
These allegations and documents notwithstanding, the Court below dismissed the complaint
on the ground that there being no written contract, under Article 1403 of the Civil Code of the
Philippines

Although the contract is valid in itself, the same can not be enforced by virtue of the
Statute of Frauds. (Record on Appeal, p. 37).
1w ph1.t

Plaintiff duly appealed to this Court.

The sole issue here is whether enforcement of the contract pleaded in the complaint is barred
by the Statute of Frauds; and the Court a quo plainly erred in holding that it was unenforceable.
The Statute of Frauds, embodied in Article 1403 of the Civil Code of the Philippines, does not
require that the contract itself be in writing. The plain text of Article 1403, paragraph (2) is clear that
a written note or memorandum, embodying the essentials of the contract and signed by the party
charged, or his agent, suffices to make the verbal agreement enforceable, taking it out of the
operation of the statute.
Art. 1403. The following contracts are unenforceable, unless they are ratified:
(1) . . .
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the
following cases an agreement hereafter made shall be unenforceable by action, unless the
same, or some note or memorandum thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the agreement cannot be received without
the writing, or a secondary evidence of its contents:
xxx

xxx

xxx

(e) An agreement for the leasing for a longer period than one year, or for the sale of
real property or of an interest therein.
1wph1.t

xxx

xxx

xxx

In the case at bar, the complaint in its paragraph 3 pleads that the deal had been closed by
letter and telegram" (Record on Appeal, p. 2), and the letter referred to was evidently the one copy of
which was appended as Exhibit A to plaintiff's opposition to the motion dismiss. This letter,
transcribed above in part, together with that one marked as Appendix B, constitute an adequate
memorandum of the transaction. They are signed by the defendant-appellee; refer to the property
sold as a lot in Puerto Princesa, Palawan, covered, by TCT No. 62; give its area as 1826 square
meters and the purchase price of four (P4.00) pesos per square meter payable in cash. We have in
them therefore, all the essential terms of the contract, and they satisfy the requirements of the
Statute of Frauds. We have ruled in Berg vs. Magdalena Estate, Inc., 92 Phil. 110, 115, that a
sufficient memorandum may be contained in two or more documents.
Defendant-appellee argues that the authenticity of the letters has not been established. That is
not necessary for the purpose of showing prima facie that the contract is enforceable. For as ruled
by us in Shaffer vs. Palma, L-24115, March 1, 1968, whether the agreement is in writing or not, is a
question of evidence; and the authenticity of the writing need not be established until the trial is held.
The plaintiff having alleged that the contract is backed by letter and telegram, and the same being a
sufficient memorandum, his cause of action is thereby established, especially since the defendant
has not denied the letters in question. At any rate, if the Court below entertained any doubts about
the existence of the written memorandum, it should have called for a preliminary hearing on that
point, and not dismissed the complaint.

WHEREFORE, the appealed order is hereby set aside, and the case remanded to the Court of
origin for trial and decision. Costs against defendant-appellee Jose L. Espino. So ordered.
Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernand

G.R. No.176289

April 8, 2013

MOLDEX REALTY, INC., Petitioner,

vs.
FLORA A. SABERON, Respondent.
Facts: respondent Flora asked Moldex, to reserve the lot for her as shown by a Reservation Application 6 Flora opted
to pay on installment and began making a periodical payments Moldex sent Flora notices reminding her to update her
account. Upon inquiry, however, Flora was shocked to find out that as of July 1996, she owed Moldex P247,969.10.
Moldex thus suggested to Flora to execute a written authorization for the sale of the subject lot to a new buyer and a
written request for refund so that she can get half of all payments she made. However, Flora never made a written
request for refund.
Moldex, then sent Flora a Notarized Notice of Cancellation of Reservation Application and/or Contract to Sell. 9 Flora,
on the other hand, filed before the Housing and Land Use Regulatory Board (HLURB) Regional Field Office IV a
Complaint10 for the annulment of the contract to sell, recovery of all her payments with interests, damages, and the
cancellation of Moldexs license to sell. Flora alleged that the contract to sell between her and Moldex is void from its
inception. According to Flora, Moldex violated Section 5 of Presidential Decree (PD) No. 95711 when it sold the subject
lot to her on April 11, 1992 or before it was issued a license to sell on September 8, 1992.12 Flora likewise claimed that
Moldex violated Section 17 of the same law because it failed to register the contract to sell in the Registry of Deeds.13In
its defense, Moldex exercised its right under Republic Act (RA) No. 6552, 14 or the Maceda Law, by cancelling the
reservation Agreement/Contract to Sell and forfeiting all payments made. Finally, Moldex alleged that since Flora was
at fault, the latter cannot be heard to make an issue out of Moldexs lack of license or demand relief from it.
the HLURB Arbiter declared as void the Contract to Sell entered into by the parties because Moldex lacked the required
license to sell at the time of the contracts perfection, in violation of Section 5 of PD 957.
Hence, Moldex was ordered to refund everything Flora had paid, plus legal interest, and to pay attorneys fees.
Moreover, Moldex was ordered to pay a fine for its violation of the above provision of PD 957
In its Petition for Review18 before the HLURB Board of Commissioners (HLURB Board), Moldex argued that the
absence of license at the time of the contracts perfection does not render it void
the HLURB Board, in a Decision19 dated July 29, 1999, dismissed the petition and affirmed in toto the Arbiters Decision.
It held that the law is clear on the prerequisite of a license to sell before a developer can sell lots. Since Moldex did not
have a license to sell at the time it contracted to sell the subject lot to Flora, the Board agreed with the Arbiter in
declaring the contract invalid and in ordering the refund of Floras payments. Moldex then appealed to the Office of the
President (OP).20. the OP affirmed the finding that the contract to sell was a nullity.
Moldex thus sought relief with the CA via a Petition for Review.23the CA agreed with the findings of the tribunals. It
ratiocinated that Moldexs non-observance of the mandatory provision of Section 5 of PD 957 rendered the contract to

sell void, notwithstanding Floras payments and her knowledge that Moldex did not at that time have the requisite
license to sell. It also held that the subsequent issuance by the HLURB of a license to sell in Moldexs favor did not
cure the defect or result to the ratification of the contract.
Issue
Moldex only raises the matter of the validity of the contract to sell it entered with Flora, contending that the same
remains valid and binding.
Our Ruling
A review of the relevant provisions of P.D. 957 reveals that while the law penalizes the selling of subdivision lots and
condominium units without prior issuance of a Certificate of Registration and License to Sell by the HLURB, it does not
provide that the absence thereof will automatically render a contract, otherwise validly entered, void. The penalty
imposed by the decree is the general penalty provided for the violation of any of its provisions. It is well-settled in this
jurisdiction that the clear language of the law shall prevail. This principle particularly enjoins strict compliance with
provisions of law which are penal in nature, or when a penalty is provided for the violation thereof. With regard to P.D.
957, nothing therein provides for the nullification of a contract to sell in the event that the seller, at the time the contract
was entered into, did not possess a certificate of registration and license to sell. Absent any specific sanction pertaining
to the violation of the questioned provisions (Secs. 4 and 5), the general penalties provided in the law shall be applied.
The general penalties for the violation of any provisions in P.D. 957 are provided for in Sections 38 and 39. As can
clearly be seen in the aforequoted provisions, the same do not include the nullification of contracts that are otherwise
validly entered.28
Thus, the contract to sell entered into between Flora and Moldex remains valid despite the lack of license to sell on the
part of the latter at the time the contract was entered into.
Moreover, Flora claims that the contract she entered into with Moldex is void because of the latters failure to register
the contract to sell/document of conveyance with the Register of Deeds, in violation of Section 1730 of PD 957. However,
just like in Section 5 which did not penalize the lack of a license to sell with the nullification of the contract, Section 17
similarly did not mention that the developers or Moldexs failure to register the contract to sell or deed of conveyance
with the Register of Deeds resulted to the nullification or invalidity of the said contract or deed.

GATCHALIAN REALTY INC v EVELYN ANGELES

G.R. NO: 202358
FACTS:

Angeles purchased a house and lot from GRI valued at Php 750,000.00 and Php
450,000.00, respectively, with (24%) interest per annum to be paid by installment within
a period of ten years.

The house and lot were delivered to Angeles.Nonetheless, under the contracts to sell
executed between the parties, GRI retained ownership of the property until full payment
of the purchase price.

After sometime, Angeles failed to satisfy her monthly installments with GRI. According to
GRI, she was given at least 12 notices for payment in a span of 3 years but she still failed
to settle her account despite receipt of said notices and without any valid reason. She was
again given more time to pay her dues and likewise furnished with 3 notices reminding
her to pay her outstanding balance with warning of impending legal action and/or
rescission of the contracts, but to no avail. After giving a total of 51 months grace period
for both contracts and in consideration of the continued disregard of the demands of GRI,
Angeles was served with a notice of notarial rescission.

Angeles was furnished by GRI with a demand letter demanding her to pay the amount of
rentals for her use and occupation of the house and lot and to vacate the same. She was
informed in said letter that the fifty percent (50%) refundable amount that she is entitled
to has already been deducted with the reasonable value for the use of the properties or
the reasonable rentals she incurred during such period that she was not able to pay the
installments due her.

For her continued failure to satisfy her obligations with GRI and her refusal to vacate the
house and lot, GRI filed a complaint for unlawful detainer against Angeles on 11
November 2003.

ISSUE: W/O/N The court a quo erred in holding that the actual cancellation of the contract
between the parties did not take place

RULING:

There was no actual cancellation of the contracts because of GRIs failure to actually
refund the cash surrender value to Angeles.

Cancellation of the contracts for the house and lot was contained in a notice of notarial rescission
dated 11 September 2003. The registry return receipts show that Angeles received this notice on
19 September 2003. GRIs demand for rentals on the properties, where GRI offset Angeles
accrued rentals by the refundable cash surrender value, was contained in another letter dated
26 September 2003. The registry return receipts show that Angeles received this letter on 29
September 2003. GRI filed a complaint for unlawful detainer against Angeles on 11 November
2003, 61 days after the date of its notice of notarial rescission, and 46 days after the date of its
demand for rentals. For her part, Angeles sent GRI postal money orders in the total amount
ofP120,000.

The MeTC ruled that it was proper for GRI to compensate the rentals due from Angeles
occupation of the property from the cash surrender value due to Angeles from GRI. The MeTC
stated that compensation legally took effect in accordance with Article 1290 of the Civil Code,
which reads: "When all the requisites mentioned in Article 1279 are present, compensation takes
effect by operation of law and extinguishes both debts to the concurrent amount, even though
the creditors and debtors are not aware of the compensation." In turn, Article 1279 of the Civil
Code provides:

In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time
a principal creditor of the other;

(2) That both debts consist of a sum of money, or if the things due are consumable, they
be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts are due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by
third persons and communicated in due time to the debtor.

However, it was error for the MeTC to apply Article 1279 as there was nothing in the contracts
which provided for the amount of rentals in case the buyer defaults in her installment payments.

We cannot subscribe to GRIs view that it merely followed our ruling in Pilar Development
Corporation v. Spouses Villar (Pilar) when it deducted the cash surrender value from the rentals
due. In Pilar, the developer also failed to refund the cash surrender value to the defaulting buyer
when it cancelled the Contract to Sell through a Notice of Cancellation. It was this Court, and not
the developer, that deducted the amount of the cash surrender value from the accrued rentals.
Moreover, the developer in Pilar did not unilaterally impose rentals. It was the MeTC that
decreed the amount of monthly rent. Neither did the developer unilaterally reduce the accrued
rentals by the refundable cash surrender value. The cancellation of the contract took effect only

by virtue of this Courts judgment because of the developers failure to return the cash surrender
value.

This was how we ruled in Pilar:

According to R.A. 6552, the cash surrender value, which in this case is equivalent to fifty percent
(50%) of the total payment made by the respondent spouses, should be returned to them by the
petitioner upon the cancellation of the contract to sell on August 31, 1998 for the cancellation to
take effect. Admittedly, no such return was ever made by petitioner. Thus, the said cash
surrender value is hereby ordered deducted from the award owing to the petitioner based on
the MeTC judgment, and cancellation takes effect by virtue of this judgment.

G.R. No. 189145

December 4, 2013
OPTIMUM DEVELOPMENT BANK
vs.
SPOUSES BENIGNO V. JOVELLANOS and LOURDES R. JOVELLANOS
FACTS: On April 26, 2005, Sps. Jovellanos entered into a Contract to Sell6 with Palmera Homes, Inc.
(Palmera Homes) for the purchase of a residential house and lot situated in Block 3, Lot 14, Villa Alegria
Subdivision, Caloocan City (subject property) for a total consideration of P1,015,000.00. Pursuant to the
contract, Sps. Jovellanos took possession of the subject property upon a down payment of P91,500.00,
undertaking to pay the remaining balance of the contract price in equal monthly installments
of P13,107.00 for a period of 10 years starting June 12, 2005.
On August 22, 2006, Palmera Homes assigned all its rights, title and interest in the Contract to Sell in
favor of petitioner Optimum Development Bank (Optimum) through a Deed of Assignment of even date.
On April 10, 2006, Optimum issued a Notice of Delinquency and Cancellation of Contract to Sell for Sps.
Jovellanoss failure to pay their monthly installments despite several written and verbal notices.
In a final Demand Letter dated May 25, 2006, Optimum required Sps. Jovellanos to vacate and deliver
possession of the subject property within seven (7) days which, however, remained unheeded. Hence,
Optimum filed, on November 3, 2006, a complaint for unlawful detainer before the MeTC, docketed as
Civil Case No. 06-28830. Despite having been served with summons, together with a copy of the
complaint, Sps. Jovellanos failed to file their answer within the prescribed reglementary period, thus
prompting Optimum to move for the rendition of judgment.
Thereafter, Sps. Jovellanos filed their opposition with motion to admit answer, questioning the jurisdiction
of the court, among others. Further, they filed a Motion to Reopen and Set the Case for Preliminary
Conference, which the MeTC denied.

ISSUE: w/n there was a valid and effective cancellation of the Contract to Sell in accordance with Section
4 of RA 6552
RULING: YES. Verily, in a contract to sell, the prospective seller binds himself to sell the property subject
of the agreement exclusively to the prospective buyer upon fulfillment of the condition agreed upon which
is the full payment of the purchase price but reserving to himself the ownership of the subject property
despite delivery thereof to the prospective buyer.The full payment of the purchase price in a contract to
sell is a suspensive condition, the non-fulfillment of which prevents the prospective sellers obligation to
convey title from becoming effective, as in this case.
Further, it is significant to note that given that the Contract to Sell in this case is one which has for its
object real property to be sold on an installment basis, the said contract is especially governed by and
thus, must be examined under the provisions of RA 6552, or the Realty Installment Buyer Protection
Act, which provides for the rights of the buyer in case of his default in the payment of succeeding
instalments.
Given the nature of the contract of the parties, the respondent court correctly applied Republic Act No.
6552. Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate
(industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an
installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title
from acquiring binding force. It also provides the right of the buyer on installments in case he defaults in
the payment of succeeding installments, viz.:
(1) Where he has paid at least two years of installments,
(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by
him, which is hereby fixed at the rate of one month grace period for every one year of installment
payments made:
Provided, That this right shall be exercised by the buyer only once in every five years of the life of the
contract and its extensions, if any. (b) If the contract is cancelled, the seller shall refund to the buyer the
cash surrender value of the payments on the property equivalent to fifty per cent of the total payments
made and, after five years of installments, an additional five per cent every year but not to exceed ninety
per cent of the total payments made:
Provided, That the actual cancellation of the contract shall take place after cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation of the total
number of installments made.
(2) Where he has paid less than two years in installments, Sec. 4. x x x the seller shall give the buyer a
grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay
the installments due at the expiration of the grace period, the seller may cancel the contract after thirty
days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by
a notarial act. (Emphasis and underscoring supplied)
Pertinently, since Sps. Jovellanos failed to pay their stipulated monthly installments as found by the
MeTC, the Court examines Optimums compliance with Section 4 of RA 6552, as above-quoted and
highlighted, which is the provision applicable to buyers who have paid less than two (2) years-worth of
installments. Essentially, the said provision provides for three (3) requisites before the seller may actually
cancel the subject contract: first, the seller shall give the buyer a 60-day grace period to be reckoned
from the date the installment became due; second, the seller must give the buyer a notice of
cancellation/demand for rescission by notarial act if the buyer fails to pay the installments due at the
expiration of the said grace period; and third, the seller may actually cancel the contract only after thirty
(30) days from the buyers receipt of the said notice of cancellation/demand for rescission by notarial act.
In the present case, the 60-day grace period automatically operated in favor of the buyers, Sps.
Jovellanos, and took effect from the time that the maturity dates of the installment payments lapsed. With
the said grace period having expired bereft of any installment payment on the part of Sps.
Jovellanos, Optimum then issued a notarized Notice of Delinquency and Cancellation of Contract on April
10, 2006. Finally, in proceeding with the actual cancellation of the contract to sell, Optimum gave Sps.
Jovellanos an additional thirty (30) days within which to settle their arrears and reinstate the contract, or
sell or assign their rights to another.

It was only after the expiration of the thirty day (30) period did Optimum treat the contract to sell as
effectively cancelled making as it did a final demand upon Sps. Jovellanos to vacate the subject
property only on May 25, 2006. Thus, based on the foregoing, the Court finds that there was a valid and
effective cancellation of the Contract to Sell in accordance with Section 4 of RA 6552 and since Sps.
Jovellanos had already lost their right to retain possession of the subject property as a consequence of
such cancellation, their refusal to vacate and turn over possession to Optimum makes out a valid case for
unlawful detainer as properly adjudged by the MeTC.

SPOUSES JAIME SEBASTIAN AND EVANGELINE SEBASTIAN, Petitioners,

vs.
BPI FAMILY BANK, INC., CARMELITA ITAPO AND BENJAMIN HAO, Respondents.
DECISION
BERSAMIN, J.:
The protection of Republic Act No. 6552 (Realty Installment Buyer Protection Act) does not cover a
loan extended by the employer to enable its employee to finance the purchase of a house and lot.
The law protects only a buyer acquiring the property by installment, not a borrower whose rights are
governed by the terms of the loan from the employer.
The Case
Under appeal is the decision promulgated on November 21, 2002,1 whereby the Court of Appeals
(CA) affirmed the dismissal of the action for injunction filed by the petitioners against the
respondents to prevent the foreclosure of the mortgage constituted on the house and lot acquired
out of the proceeds of the loan from respondent BPI Family Bank (BPI Family), their employer.
Antecedents
The petitioners are spouses who used to work for BPI Family. At the time material to this case,
Jaime was the Branch Manager of BPI Familys San Francisco del Monte Branch in Quezon City
and Evangeline was a bank teller at the Blumentritt Branch in Manila. On October 30, 1987, they
availed themselves of a housing loan from BPI Family as one of the benefits extended to its
employees. Their loan amounted to P273,000.00, and was covered by a Loan Agreement,2 whereby
they agreed that the loan would be payable in 108 equal monthly amortizations of P3,277.57 starting
on January 10, 1988 until December 10, 1996;3 and that the monthly amortizations would be
deducted from his monthly salary.4 To secure the payment of the loan, they executed a real estate
mortgage in favor of BPI Family5 over the property situated in Bo. Ibayo, Marilao, Bulacan and
covered by TCT No. T-30.827 (M) of the Register of Deeds of Bulacan.6
Apart from the loan agreement and the real estate mortgage, Jaime signed an undated lettermemorandum addressed to BPI Family,7 stating as follows:
In connection with the loan extended to me by BPI Family Bank, I hereby authorize you to
automatically deduct an amount from my salary or any money due to me to be applied to my loan,
more particularly described as follows:

xxxx
This authority is irrevocable and shall continue to exist until my loan is fully paid. I hereby declare
that I have signed this authority fully aware of the circumstances leading to the loan extended to me
by BPI Family Bank and with full knowledge of the rights, obligations, and liabilities of a borrower
under the law.
I am an employee of BPI Family Bank and I acknowledge that BPI Family Bank has granted to me
the above-mentioned loan in consideration of this relationship. In the event I leave, resign or am
discharged from the service of BPI Family Bank or my employment with BPI Family Bank is
otherwise terminated, I also authorize you to apply any amount due me from BPI Family Bank to the
payment of the outstanding principal amount of the aforesaid loan and the interest accrued thereon
which shall thereupon become entirely due and demandable on the effective date of such discharge,
resignation or termination without need of notice of demand, and to do such other acts as may be
necessary under the circumstances. (Bold emphasis added)
x x x x.
The petitioners monthly loan amortizations were regularly deducted from Jaimes monthly salary
since January 10, 1988. On December 14, 1989, however, Jaime received a notice of termination
from BPI Familys Vice President, Severino P. Coronacion,8 informing him that he had been
terminated from employment due to loss of trust and confidence resulting from his wilful nonobservance of standard operating procedures and banking laws. Evangeline also received a notice
of termination dated February 23, 1990,9 telling her of the cessation of her employment on the
ground of abandonment. Both notices contained a demand for the full payment of their outstanding
loans from BPI Family, viz:
1wphi1

Demand is also made upon you to pay in full whatever outstanding obligations by way of Housing
Loans,Salary Loans, etc. that you may have with the bank. You are well aware that said obligations
become due and demandable upon your separation from the service of the bank.10 (Emphasis
supplied.)
Immediately, the petitioners filed a complaint for illegal dismissal against BPI Family in the National
Labor Relations Commission (NLRC).11
About a year after their termination from employment, the petitioners received a demand letter dated
January 28, 1991 from BPI Familys counsel requiring them to pay their total outstanding obligation
amounting toP221,534.50.12 The demand letter stated that their entire outstanding balance had
become due and demandable upon their separation from BPI Family. They replied through their
counsel on February 12, 1991.13
In the meantime, BPI Family instituted a petition for the foreclosure of the real estate mortgage.14 The
petitioners received on March 6, 1991 the notice of extrajudicial foreclosure of mortgage dated
February 21, 1991.
To prevent the foreclosure of their property, the petitioners filed against the respondents their
complaint for injunction and damages with application for preliminary injunction and restraining
order15 in the Regional Trial Court (RTC) in Malolos, Bulacan.16 They therein alleged that their
obligation was not yet due and demandable considering that the legality of their dismissal was still
pending resolution by the labor court; hence, there was yet no basis for the foreclosure of the
mortgaged property; and that the property sought to be foreclosed was a family dwelling in which
they and their four children resided.

In its answer with counterclaim,17 BPI Family asserted that the loan extended to the petitioners was a
special privilege granted to its employees; that the privilege was coterminous withthe tenure of the
employees with the company; and that the foreclosure of the mortgaged property was justified by the
petitioners failure to pay their past due loan balance.
Judgment of the RTC
On June 27, 1995, the RTC rendered judgment,18 disposing thusly:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment
DISMISSING the instant case as well as defendant banks counterclaim withoutany pronouncement
as to costs.
SO ORDERED.19
Decision of the CA
The petitioners appealed upon the following assignment of errors, namely:
I. THE TRIAL COURT ERRED IN FINDING THAT APPELLEE BANKS FORECLOSURE OF
THE REAL ESTATE MORTGAGE CONSTITUTED ON APPELLANTS FAMILY HOME WAS
IN ORDER.
A. Appellants cannot be consideredas terminated from their employment with
appellee bank during the pendency of their complaint for illegal dismissal with the
NLRC.
B. Appellee bank wrongfully refused to accept the payments of appellants monthly
amortizations.
II. THE TRIAL COUT ERRED IN DENYING APPELLANTS PRAYER FOR INJUNCTION.
A. The foreclosure of appellants mortgage was premature.
B. Appellants are entitled to damages.20
On November 21, 2002, the CA promulgated its assailed decision affirming the judgment of the RTC
in toto.21
The petitioners then filed their motion for reconsideration,22 in which they contended for the first
timethat their rights under Republic Act No. 6552 (Realty Installment Buyer Protection Act) had been
disregarded, considering that Section 3 of the law entitled them to a grace period within which to
settle their unpaid installments without interest; and that the loan agreement was in the natureof a
contract of adhesion that must be construed strictly against the one who prepared it, that is, BPI
Family itself.
On September 18, 2003, the CA denied the petitioners motion for reconsideration.23
Issues

In this appeal, the petitioners submit for our consideration and resolution the following issues, to wit:
WHETHER OR NOT RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING
THE FORECLOSURE OF THE REAL ESTATE MORTGAGE ON PETITIONERS FAMILY HOME IN
ORDER.
WHETHER OR NOT RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DENYING
PETITIONERS MOTION FOR RECONSIDERATION DESPITE JUSTIFIABLE REASONS
THEREFOR.24
Ruling
The petition for review has no merit.
When the petitioners appealed the RTC decision to the CA, their appellants brief limited the issues
to the following:
(a) Whether or not appellee bank wrongfully refused to accept payments by appellants of
their monthly amortizations.
(b) Whether or not the foreclosure of appellants real estate mortgage was premature.25
The CA confined its resolution to these issues. Accordingly, the petitioners could not raise the
applicability of Republic Act No. 6552, or the strict construction of the loan agreement for being a
contract of adhesion as issues for the first time either in their motion for reconsideration or in their
petition filed in this Court. To allow them to do so would violate the adverse parties right to fairness
and due process. As the Court held in S.C. Megaworld Construction and Development Corporation
v. Parada:26
It is well-settled that no question will be entertained on appeal unless it has been raised in the
proceedings below. Points of law, theories, issues and arguments not brought to the attention of the
lower court, administrative agency or quasi-judicial body, need not be considered by the viewing
court, as they cannot be raised for the first time at that late stage. Basic considerations of fairness
and due process impel this rule. Any issue raised for the first time on appeal is barred by estoppel.
The procedural misstep of the petitioners notwithstanding, the Court finds no substantial basis to
reverse the judgments of the lower courts.
Republic Act No. 6552 was enacted to protect buyers of real estate on installment payments against
onerous and oppressive conditions.27 The protections accorded to the buyers were embodied in
Sections 3, 4 and 5 of the law, to wit:
Section 3. In all transactions or contracts, involving the sale or financing of real estateon installment
payments, including residential condominium apartments but excluding industrial lots, commercial
buildings and sales to tenants under Republic Act Numbered Thirty-Eight hundred forty-four as
amended byRepublic Act Sixty-three hundred eighty-nine, where the buyer has paid atleast two
years of installments, the buyer is entitled to the following rights in case he defaults in the payment
of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due within the total grace
period earned by him which is hereby fixed at that rate of one month grace period for every

one year of installment payments made; provided, That this right shall be exercised by the
Buyer only once in every five years of the life of the contract and its extensions, if any.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of
the payments on the property equivalent to fifty percent of the total payments made, and,
after five years of installments, an additional five per cent every year but not to exceed ninety
per cent of the total payments made; Provided, That the actual cancellation or the demand
for rescission of the contract by a notarial act and upon full payment of the cash surrender
value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation of the total
number of installment payments made.
SECTION 4. In case where less than two years of installments were paid, the seller shall give the
buyers a grace period of not less than sixty days from the date the installment become due.
If the buyer fails to pay the installments due at the expiration of the grace period, the seller may
cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act.
SECTION 5. Under Section 3 and 4,the buyer shall have the right to sell his rights or assign the
same to another person or to reinstate the contract by updating the account during the grace period
and before actual cancellation of the contract. The deed of sale or assignment shall be done by
notarial act.
Having paid monthly amortizations for two years and four months, the petitioners now insist that they
were entitled to the grace period within which to settle the unpaid amortizations without interest
provided under Section 3, supra.28 Otherwise, the foreclosure of the mortgaged property should be
deemed premature inasmuch as their obligation was not yet due and demandable.29
The petitioners insistence would have been correct if the monthly amortizations being paid to BPI
Family arose from a sale or financing of real estate. In their case, however, the monthly
amortizations represented the installment payments of a housing loan that BPI Family had extended
to them as an employees benefit. The monthly amortizations they were liable for was derived from a
loan transaction, not a sale transaction, thereby giving rise to a lender-borrower relationship between
BPI Family and the petitioners. It bears emphasizing that Republic Act No. 6552 aimed to protect
buyers of real estate on installment payments, not borrowers or mortgagors who obtained a housing
loan to pay the costs of their purchase of real estate and used the real estate assecurity for their
loan. The "financing of real estate in installment payments" referred to in Section 3, supra, should be
construed only as a mode of payment vis--vis the seller of the real estate, and excluded the
concept of bank financing that was a type of loan. Accordingly, Sections 3, 4 and 5, supra, must be
read as to grant certain rights only to defaulting buyers of real estate on installment, which rights are
properly demandable only against the seller of real estate.
Thus, in Luzon Brokerage Co., Inc. v.Maritime Building Co., Inc.,30 the Court held:
Congress in enacting in September 1972 Republic Act 6552 (the Maceda law), has by law which is
its proper and exclusive province (and not that of this Court which is not supposed to legislate
judicially) has taken care of Justice Barredos concern over "the unhappy and helpless plight of
thousands upon thousands of subdivision buyers" of residential lots.

The Act even in residential properties recognizes and reaffirms the vendor's right to cancel the
contractto sell upon breach and non-payment of the stipulated installments but requires a grace
period after at least two years of regular installment payments (of one month for every one year of
installment payments made, but to be exercise by the buyer only once in every five years of the life
of the contract) with a refund of certain percentages of payments made on account of the cancelled
contract (starting with fifty percent with gradually increasing percentages after five years of
installments). In case of industrial and commercial properties, as in the case at bar, the Act
recognizes and reaffirms the Vendor's right unqualifiedly to cancel the sale upon the buyer's default.
The petitioners purchased the realestate from PHILVILLE Realty,31 not from BPI Family. Without the
buyer-seller relationship between them and BPI Family, the provisions of Republic Act No. 6552
were inapplicable and could not be invoked by them against BPI Family.
Apart from relying on the grace period provided in Republic Act No. 6552 to assert the prematurity of
the foreclosure of the mortgage,32 the petitioners argue that the foreclosure of the mortgage was null
and void because BPI Familys acceptance of their late payments estopped it from invoking
sanctions against them.33 They further argue that the printed conditions appearing at the back of BPI
Familys official receipt,34 which the CA cited to affirm the validity of the foreclosure, partook of a
contract of adhesion that must be strictly construed against BPI Family as the party who prepared
the same.35
The petitioners arguments do not persuade. To reiterate, their reliance on Republic Act No. 6552
was misplaced because its provisions could not extend to a situation bereft of any seller-buyer
relationship. Hence, they could not escape the consequences of the maturity of their obligation by
invoking the grace period provided in Section 3, supra.
The CA correctly found that there was basis to declare the petitioners entire outstanding loan
obligation matureas to warrant the foreclosure of their mortgage. It is settled that foreclosure is valid
only when the debtor is in default in the payment of his obligation.36 Here, the records show that the
petitioners were defaulting borrowers, a fact that the CA thoroughly explained in the following
manner:
Appellants insist that there was no valid ground for appellee bank to institute the foreclosure
proceedings because they still have a pending case for illegal dismissal before the NLRC. They
argue that the reason for the banks foreclosure is their dismissal from employment. As they are still
questioning the illegality of their dismissal, the bank has no legal basis in foreclosing the property.
xxxx
The arguments fail to persuade Us.
First, appellants cannot rely on the mere possibility that if the decision of the NLRC will be in their
favor, part of the reliefs prayed for would be reinstatement without loss of seniority and other
privilege. Such argument is highly speculative. On the contrary, in a thirteen-page decision, the
Labor Arbiter exhaustively discussed the validity of appellant Jaime Sebastians termination. x x x
xxxx
Moreover, appellants appealed the Labor Arbiters decision as early as January 10, 1994. To date,
however, nothing has been heard from appellants if they obtained a favorable judgment from the
NLRC.

Second, even if it turns out the appellants werenot validly terminated from their employment, there is
valid reason to foreclose the mortgaged property.
Appellants themselves admit that they were in arrears when they made the late payments in March,
1991. While this admission was not in the course of the testimony of appellant Jaime Sebastian, this
was done during the hearing of the case when the trial judge propounded the question to him.
Hence, this constitute (sic) judicial admission. An admission, verbal or written, made by a party in the
course of the trial or other proceedings in the same case does not require proof. The admission may
be contradicted only by showing that it was made through palpable mistake or that no such
admission is made. Judicial admissions are those made voluntarily by a party, which appear on
record in the proceedings of the court. Formal acts done by a party or his attorney in court on the
trial of a cause for the purpose of dispensing with proof by the opposing party of some fact claimed
by the latter to be true.
xxxx
Fourth, the terms and conditions of the loan agreement, promissory notes and the real estate
mortgage contract, do not partake of a contract of adhesion. It must be noted that appellants are
personnel of the bank.
Jaime Sebastian was then a branch manager while his wife Evangeline was a bank teller. It is safe
to conclude that they are familiar with the documents they signed, including the conditions stated
therein. It is also presumed that they take ordinary care of their concerns and that they voluntarily
and knowingly signed the contract.
Appellant Jaime Sebastian, in his letter addressed to appellee bank, even acknowledged that "in the
event of resignation or otherwise terminated from his employment, the principal as well as the
interest due shall become entirely due and demandable" (Exh. "E"). The freedom to enter into
contracts is protected by law and the courts are not quick to interfere with such freedom unless the
contract is contrary to law, morals, good customs, public policy or public order. Courts are not
authorized to extricate parties from the necessary consequences of their acts, and the fact that the
contractual stipulations may turn out to be financially disadvantageous will not relieve parties thereto
of their obligations,
Fifth, We cannot also buy appellants argument that appellee refused to accept the subsequent
payments made by them. It is settled that an issue which was not raised during the trial in the court
below could not be raised for the first time on appeal, as to do so, would be offensive to the basic
rules of fair play, justice and due process. Here, appellant Jaime Sebastian twice testified before the
Court, first, during the hearing on the preliminary injunction and on the trial proper. Nothing was
mentioned about the refusal on the part of the bank to accept their subsequent payments.
Assuming, arguendo, that appellee bank indeed refused to accept the subsequent payment from
appellants, they could have consigned the same before the Court. They failed to do so. There was
no effort on their part to continue paying their obligations.
Thus, having signed a deed of mortgage in favor of appellee bank, appellants should have foreseen
thatwhen their principal obligation was not paid when due, the mortgagee has the right to foreclose
the mortgage and to have the property seized and sold with a view to applying the proceeds to the
payment ofthe principal obligation.37
Equally notable was that Jaimes undated letter-memorandum to BPI Family expressly stated the
following:

x x x In the event I leave, resign or amdischarged from the service of BPI Family Bank or my
employment with BPI Family Bank is otherwise terminated, I also authorize you to apply any amount
due me from BPI Family Bank to the payment of the outstanding principal amount of the aforesaid
loan and the interest accrued thereon which shall there upon become entirely due and demandable
on the effective date of such discharge, resignation or termination without need of notice of demand,
and to do such other acts as may be necessary under the circumstances.38
(Bold emphasis supplied.)
The petitioners thereby explicitly acknowledged that BPI Family Bank had granted the housing loan
inconsideration of their employer employee relationship. They were thus presumed to understand
the conditions for the grant of their housing loan. Considering that the maturity of their loan obligation
did not depend on the legality of their termination from employment, their assertion that the
resolution of their labor complaint for illegal dismissal was prejudicial to the ripening of BPI Familys
cause of action was properly rejected. Indeed, a finding of illegal dismissal in their favor would not
automatically and exclusively result in their reinstatement. As fittingly ruled in Bani Rural Bank, Inc.
v. De Guzman:39
"By jurisprudence derived from this provision, separation pay may [also] be awarded to an illegally
dismissed employee in lieu of reinstatement." Section 4(b), Rule I of the Rules Implementing Book VI
of the Labor Code provides the following instances when the award of separation pay, in lieu of
reinstatement to an illegally dismissed employee, is proper: (a) when reinstatement is no longer
possible, in cases where the dismissed employee s position is no longer available; (b) the continued
relationship between the employer and the employee is no longer viable due to the strained relations
between them; and(c) when the dismissed employee opted not to be reinstated, or the payment of
separation benefits would be for the best interest of the parties involved. In these instances,
separation pay is the alternative remedy to reinstatement in addition to the award of backwages. The
payment of separation pay and reinstatement are exclusive remedies. The payment of separation
pay replaces the legal consequences of reinstatement to an employee who was illegally dismissed.
Nonetheless, it is noteworthy that the Labor Arbiter ultimately ruled that Jaimes dismissal was valid
and legal. Such ruling affirmed the legality of the termination of James from BPI Familys
employment. Under the circumstances, the entire unpaid balance of the housing loan extended to
him by BPI Family became due and demandable upon such termination in accordance with Jaimes
express and written commitment to BPI Family. Even if we were to disregard this condition, their
admission of default in their monthly amortizations constituted an event of default within the context
of Section 7 of the loan agreement that produced the same effect of rendering any outstanding loan
balance due and demandable. Section 7 the loan agreement reads as follows:
SECTION 7. EVENTS OF DEFAULT
If any of the following Events of Default shall have occurred and be continuing:
a) The Borrower shall fail to pay when due the Loan(s) any installment thereof, or any other amount
payable under this Agreement the Note(s) or under the Collateral; or
xxxx
then, and in any such event, the Bank may by written notice to the Borrower cancel the Commitment
and/or declare all amounts owing to the Bank under this Agreement and the Note(s), whether of
principal, interest or otherwise, to be forthwith due and payable, whereupon all such amounts shall
become immediately due and payable without demand or other notice of any kind, all of which are

expressly waived by the Borrower. The Borrower shall pay on demand by the Bank, in respect of any
amount or principal paid in advance of stated maturity pursuant to this Section 7, a prepayment
penalty equal to the rate mentioned in Section 2.07 (c).40
With demand, albeit unnecessary, having been made on the petitioners, they were undoubtedly in
default in their obligations.
The foreclosure of a mortgage is but the necessary consequence of the non-payment of an
obligation secured by the mortgage. Where the parties have stipulated in their agreement, mortgage
contract and promissory note that the mortgagee is authorized to foreclose the mortgage upon the
mortgagor's default, the mortgagee has a clear right to the foreclosure in case of the mortgagor's
default. Thereby, the issuance of a writ of preliminary injunction upon the application of the
mortgagor to prevent the foreclosure will be improper.41 As such, the lower courts did not err in
dismissing the injunction complaint of the petitioners.
1wphi1

WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision
promulgated on November 21, 2002; and ORDERS the petitioners to pay the costs of suit.
SO ORDERED.