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No. 172036 April 23, 2010


May 1993, spouses Faustino and Josefina Garcia and spouses Meliton and Helen Galvez (herein appellees) and defendant
Emerlita dela Cruz (herein appellant) entered into a Contract to Sell wherein the latter agreed to sell to the former, for P3.1M 5
parcels of land at Tanza, Cavite. At the time of the execution of the said contract, 3 of the subject lots were registered in the
name of one Angel Abelida from whom defendant allegedly acquired said properties by virtue of a Deed of Absolute Sale.

As agreed, plaintiffs shall make a down payment upon signing of the contract while the balance shall be paid in 3 installments.

Plaintiffs failed to pay the last installment. They offered to pay the unpaid balance after 1.5 year delay which defendant refused
to accept. Defendant then sold the same parcels of land to intervenor Diogenes G. Bartolome.

In order to compel defendant to accept the full payment and execute the necessary document, plaintiffs filed before the RTC a
complaint for specific performance.

In her answer, defendant argued that the Contract to Sell contains a proviso that failure of plaintiffs to pay the purchase price
in full shall cause the rescission of the contract and forfeiture of 1/2% percent of the total amount paid to defendant; that a
notarized letter stating the intended rescission of the contract to sell and forfeiture of payments was sent to plaintiffs at their
last known address but it was returned.

The trial court ruled that Emerlitas rescission of the contract was not valid. It applied R.A. 6552 (Maceda Law) and stated that
Dela Cruz is not allowed to unilaterally cancel the Contract to Sell. It then ordered Emerlita to accept the balance of the
purchase price. It declared the deed of sale, executed by Emerlita in favor of Atty. Bartolome, null and void

On appeal, the appellate court reversed the trial courts decision and dismissed the case. Emerlitas obligation under the
Contract to Sell did not arise because of petitioners undue failure to pay in full the agreed purchase price on the stipulated
date. The judicial action for the rescission of a contract is not necessary where the contract provides that it may be revoked
and cancelled for violation of any of its terms and conditions. The defendant was ordered to return to plaintiffs the amount in
excess of 1/2% of the payment paid.

Hence, this petition.

WON rescission was correctly applied due to petitioners failure to pay the full payment WON CA failed to consider the
provisions of the Maceda Law.

On Issue No. 1
Contracts are law between the parties, and they are bound by its stipulations. It is clear that the parties intended their
agreement to be a Contract to Sell: Emerlita retains ownership of the subject lands and does not have the obligation to execute
a Deed of Absolute Sale until petitioners payment of the full purchase price.

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. Strictly speaking, there can be no rescission or resolution of
an obligation that is still non-existent due to the non-happening of the suspensive condition. Emerlita is thus not obliged to
execute a Deed of Absolute Sale because of petitioners failure to make full payment.

Article 1191 of the New Civil Code which provides that the power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him; that the injured party may choose between the
fulfillment and the rescission of the obligation; that the Court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period; and that it should be without prejudice to the rights of third persons who have acquired the
thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.

There is nothing in this law which prohibits the parties from entering into an agreement that a violation of the terms of the
contract would cause its cancellation even without court intervention. The rationale for the foregoing is that in contracts
providing for automatic revocation, judicial intervention is necessary in order to determine whether or not the rescission was

Thus, rescission under Article 1191 was inevitable due to petitioners failure to pay the stipulated price within the original
period fixed in the agreement.

On Issue No. 2

The trial court erred in applying R.A. 6552, or the Maceda Law, to the present case.

The Law applies to contracts of sale of real estate on installment payments, including residential condominium apartments but
excluding industrial lots, commercial buildings and sales to tenants. The subject lands do not comprise residential real estate
within the contemplation of the Maceda Law. Even if it is applied, petitioners offer of payment to Emerlita is beyond the 60-
day grace period under Section 4 of the Law.

It is undeniable that petitioners failed to pay the balance of the purchase price on the stipulated date of the Contract to Sell.
Thus, Dela Cruz is within her rights to sell the subject lands to Bartolome. Neither Dela Cruz nor Bartolome can be said to be in
bad faith.

The Court DENIED the petition and AFFIRMED in toto the Court of Appeals Decision.


G.R. No. 182128 February 19, 2014

PONENTE: Reyes, J.

TOPIC: PD 957, Mortgage over subdivision land or condominium lot subject to contract to sell

Some time in July 1994, respondent Dee Dee bought from respondent Prime East Properties Inc.5 (PEPI) on an
installment basis a residential lot located in Binangonan, Rizal, with an area of 204 square meters and covered by TCT No.
619608. Subsequently, PEPI assigned its rights over a 213,093sq m property on August 1996 to respondent Armed Forces of
the PhilippinesRetirement and Separation Benefits System, Inc. (AFPRSBS), which included the property purchased by Dee.

Thereafter, or on September 10, 1996, PEPI obtained a P205,000,000.00 loan from petitioner Philippine National
Bank, secured by a mortgage over several properties, including Dees property. The mortgage was cleared by the Housing and
Land Use Regulatory Board (HLURB) on September 18, 1996.

After Dees full payment of the purchase price, a deed of sale was executed by respondents PEPI and AFPRSBS on July
1998 in Dees favor. Consequently, Dee sought from the petitioner the delivery of the owners duplicate title over the property,
to no avail. Thus, she filed with the HLURB a complaint for specific performance to compel delivery of TCT No. 619608 by the
petitioner, PEPI and AFPRSBS, among others.

Whether or not PNB, as mortgagee, was bound by the contract to sell previously executed over the subdivision lot

YES. In this case, there are two phases involved in the transactions between respondents PEPI and Dee the first
phase is the contract to sell, which eventually became the second phase, the absolute sale, after Dees full payment of the
purchase price. In a contract of sale, the parties obligations are plain and simple. The law obliges the vendor to transfer the
ownership of and to deliver the thing that is the object of sale. On the other hand, the principal obligation of a vendee is to pay
the full purchase price at the agreed time. Based on the final contract of sale between them, the obligation of PEPI, as owners
and vendors of Lot 12, Block 21A, Village East Executive Homes, is to transfer the ownership of and to deliver Lot 12, Block
21A to Dee, who, in turn, shall pay, and has in fact paid, the full purchase price of the property.

It must be stressed that the mortgage contract between PEPI and the petitioner is merely an accessory contract to the
principal threeyear loan takeout from the petitioner by PEPI for its expansion project. It need not be belabored that a
mortgage is an accessory undertaking to secure the fulfillment of a principal obligation, and it does not affect the ownership
of the property as it is nothing more than a lien thereon serving as security for a debt.

Owner or developer of subdivision lot or condominium unit may mortgage the same despite contract to sell

Note that at the time PEPI mortgaged the property to the petitioner, the prevailing contract between respondents
PEPI and Dee was still the Contract to Sell, as Dee was yet to fully pay the purchase price of the property. On this point, PEPI
was acting fully well within its right when it mortgaged the property to the petitioner, for in a contract to sell, ownership is
retained by the seller and is not to pass until full payment of the purchase price. In other words, at the time of the mortgage,
PEPI was still the owner of the property.

Thus, in China Banking Corporation v. Spouses Lozada, the Court affirmed the right of the owner/developer to
mortgage the property subject of development, to wit: P.D. No. 957 cannot totally prevent the owner or developer from
mortgaging the subdivision lot or condominium unit when the title thereto still resides in the owner or developer awaiting the
full payment of the purchase price by the installment buyer. Moreover, the mortgage bore the clearance of the HLURB, in
compliance with Section 18 of P.D. No. 957, which provides that no mortgage on any unit or lot shall be made by the owner or
developer without prior written approval of the HLURB.

Bank-mortgagee bound by the contract to sell over the property mortgaged

Nevertheless, despite the apparent validity of the mortgage between the petitioner and PEPI, the former is still bound
to respect the transactions between respondents PEPI and Dee. The petitioner was well aware that the properties mortgaged
by PEPI were also the subject of existing contracts to sell with other buyers. While it may be that the petitioner is protected by
Act No. 3135, as amended, it cannot claim any superior right as against the installment buyers. This is because the contract
between the respondents is protected by P.D. No. 957, a social justice measure enacted primarily to protect innocent lot
buyers. Thus, in Luzon Development Bank v. Enriquez, the Court reiterated the rule that a bank dealing with a property that is
already subject of a contract to sell and is protected by the provisions of P.D. No. 957, is bound by the contract to sell.

The transferee BANK is bound by the Contract to Sell and has to respect Enriquezs rights thereunder. This is because
the Contract to Sell, involving a subdivision lot, is covered and protected by PD 957. x x x More so in this case where the
contract to sell has already ripened into a contract of absolute sale.

The Court affirmed HLURBs orders:

PNB to cancel the mortgage and surrender/release the title to Dee.
PEPI and AFP-RSBS to pay PNB the redemption value of the subject property as agreed upon by them in the REM
within 6 months from the time the owners duplicate of TCT is actually surrendered and released by PNB to Dee.
In the alternative, in case of legal and physical impossibility on the part of PEPI, AFPRSBS, and PNB to comply and
perform their respective obligation/s, as abovementioned, respondents PEPI and AFPRSBS are hereby ordered to
jointly and severally pay to Dee the amount of P520,000.00) plus interest to be computed from the filing of complaint
on April 24, 2002 until fully paid.
PEPI, AFP-RSBS and PNB to pay solidarily Dee attorneys fees, cost of litigation, and administrative fine.


G.R. No. 144735 October 18, 2001

Respondents averment:
Elvira Ong and Yu Bun Guan are husband and wife, They lived together until she and her children were abandoned by Yu Bun
Guan on Au-gust 26, 1992, because of the latter's 'incurable promiscuity, volcanic temper and other vicious vices'; out of thier
union, 3 children were born, now living with her respondent.

She purchased on March 20, 1968, out of her personal funds, a parcel of land, then referred to as the Rizal property, from
Aurora Seneris, and sup-ported by Title No. 26795, then subsequently registered on April 17,1968, in her name.

Before their separation in 1992, she 'reluctantly agreed' to Yu Bun Guan 'im-portunings' that she execute a Deed of Sale of the
J.P. Rizal property in his favor, but on the promise that he would construct a commercial building for the benefit of the
children. He suggested that the J.P. Rizal property should be in his name alone so that she would not be involved in any
obligation. The consideration for the 'simulated sale' was that, after its execution in which he would represent himself as
single, a Deed of Absolute Sale would be exe-cuted in favor of the three (3) children and that he would pay the Allied Bank, Inc.
the loan he obtained.

Because of the glib assurances of petitioner, respondent executed a Deed of Absolute Sale in 1992, but then he did not pay the
consideration of P200,000.00, supposedly the ostensible valuable consideration. On the contrary, she paid for the capital gains
tax and all the other assessments even amounting to not less thanP60,000.00, out of her personal funds.

Because of the sale, a new title (TCT No. 181033) was issued in his name, but to insure that he would comply with his
commitment, she did not deliver the owners copy of the title to him.

Petitioner, on the other hand, filed a Petition for Replacement of an owners duplicate title.

He made it appear that it was lost, following which a new owners copy of the title was issued to petitioner.

Upon discovery of the fraudulent steps taken by the petitioner, respondent immediately executed an Affidavit of Adverse
Claim on November 29, 1993. She precisely asked the court that the sale of the JP Rizal property be de-clared as null and void;
for the title to be cancelled; payment of actual, moral and exemplary damages; and attorneys fees.
Petioners version:
It was, on the other hand, the version of petitioner that sometime in 1968 or before he became a Filipino, through
naturalization, the JP Rizal property was being offered to him for sale. Because he was not a Filipino, he utilized respondent as
his dummy and agreed to have the sale executed in the name of respondent, although the consideration was his own and from
his personal funds.

When he finally acquired a Filipino citizenship in 1972, he purchased another property being referred to as the Juno lot out of
his own funds. If only to re-flect the true ownership of the JP Rizal property, a Deed of Sale was then executed in 1972.
Believing in good faith that his owners copy of the title was lost and not knowing that the same was surreptitiously concealed
by respon-dent, he filed in 1993 a petition for replacement of the owners copy of the title, in court.

Petitioner added that respondent could not have purchased the property be-cause she had no financial capacity to do so; on
the other hand, he was fi-nancially capable although he was disqualified to acquire the property by reason of his nationality.
Respondent was in pari delicto being privy to the simulated sale.

Issue: Whether or not the Court of Appeals likewise palpably erred in declar-ing the sale of the subject property to herein
petitioner in 1992 to be ficti-tious, simulated and inexistent.

Whether or not the Court of Appeals gravely erred in annulling the title (TCT No. 181033) to the subject property in the name
of herein petitioner in the absence of actual fraud


A contract of purchase and sale is null and null and void and pro-duces no effect whatsoever where the same is without cause
or considera-tion in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to

In the present case, it is clear from the factual findings of both lower courts that the Deed of Sale was completely simulated
and, hence, void and without effect.No portion of the P200,000 consideration stated in the Deed was ever paid. And, from the
facts of the case, it is clear that neither party had any intention whatsoever to pay that amount.

The Deed of Sale was executed merely to facilitate the transfer of the prop-erty to petitioner pursuant to an agreement
between the parties to enable him to construct a commercial building and to sell the Juno property to their children.

Finally, based on the foregoing disquisition, it is quite obvious that the Court of Appeals did not err in ordering the cancellation
of TCT No. 181033, because the Deed of Absolute Sale transferring ownership to petitioner was completely simulated, void
and without effect.


G.R. No. 171590 February 12, 2014

TOPIC: Negligence

In 1988, Rosario filed against Alfonso and Union Bank, Civil Case No. Q-52702 for annulment of the 1984 mortgage,
claiming that Alfonso mortgaged the property without her consent, and for reconveyance.

In a September 6, 1989 Letter-Proposal, Bignay Ex-Im Philippines, Inc. (Bignay), through its President, Milagros Ong
Siy (Siy), offered to purchase the property.

On December 20, 1989, a Deed of Absolute Sale6 was executed by and between Union Bank and Bignay whereby the
property was conveyed to Bignay for P4 million. The deed of sale was executed by the parties through Bignays Siy and Union
Banks Senior Vice President Anthony Robles (Robles). One of the terms of the deed of sale is quoted below:

Section 1. The VENDEE hereby recognizes that the Parcel/s of Land with improvements thereon is acquired through
foreclosure proceedings and agrees to buy the Parcel/s of Land with improvements thereon in its present state and condition.
The VENDOR therefore does not make any x x x representations or warranty with respect to the Parcel/s of Land but that it
will defend its title to the Parcel/s of Land with improvements thereon against the claims of any person whomsoever.

On December 12, 1991, a Decision8was rendered in Civil Case No. Q-52702 in favor of Alfonso. Union Bank appealed
the above Decision with the CA. It likewise sought a new trial of the case, which the trial court denied. The CA appeal was
dismissed for failure to file appellants brief; the ensuing Petition for Review with this Court was similarly denied for late filing
and payment of legal fees.

Union Bank next filed with the CA an action to annul the trial courts December 12, 1991 judgment. In a September 9,
1993 Resolution, however, the CA again dismissed the Petition for failure to comply with Supreme Court Circular No. 28-91.
The banks Motion for Reconsideration was once more denied.

This time, Bignay filed a Petition for annulment of the December 12, 1991 Decision, docketed as CA-G.R. SP No. 33901.
In a July 15, 1994 Decision, the CA dismissed the Petition. Bignays resultant Petition for Certiorari with this Court suffered the
same fate.

Meanwhile, as a result of the December 12, 1991 Decision in Civil Case No. Q-52702, Bignay was evicted from the
property; by then, it had demolished the existing structure on the lot and begun construction of a new building.

Whether or not Union Bank was grossly negligent in this case.

YES. The Court held that the gross negligence of the seller in defending its title to the property subject matter of the
sale thereby contravening the express undertaking under the deed of sale to protect its title against the claims of third
persons resulting in the buyers eviction from the property, amounts to bad faith, and the buyer is entitled to the remedies
afforded under Article 1555 of the Civil Code.

The record reveals that Union Bank was grossly negligent in the handling and prosecution of Civil Case No. Q-52702.
Its appeal of the December 12, 1991 Decision in said case was dismissed by the CA for failure to file the required appellants
brief. Next, the ensuing Petition for Review on Certiorari filed with this Court was likewise denied due to late filing and
payment of legal fees. Finally, the bank sought the annulment of the December 12, 1991 judgment, yet again, the CA dismissed
the petition for its failure to comply with Supreme Court Circular No. 28-91. As a result, the December 12, 1991 Decision
became final and executory, and Bignay was evicted from the property. Such negligence in the handling of the case is far from
coincidental; it is decidedly glaring, and amounts to bad faith. Negligence may be occasionally so gross as to amount to malice
[or bad faith]. Indeed, in culpa contractual or breach of contract, gross negligence of a party amounting to bad faith is a
ground for the recovery of damages by the injured party.

respondents.G.R. No. 82407 March 27, 1995VITUG,


Petitioners sought to be declared the owners of a piece of land situated in Calamba, Laguna bought by"Sociedad Popular
Calambea". The sociedad was organized at the advent of the early American occupation of the Philippines. It did business
and held itself out as a corporation from 1909 up to 1932. Its principal business wascockfighting or the operation and
management of a cockpit. The "Sociedad" acquired the subject parcel of land fromthe Friar Lands Estate of Calamba. Patent
was issued and the Real Property Tax Register of the Office of theTreasurer of Calamba, Laguna showed that the lot was
declared and assessed for taxation purposes.Plaintiffs show that Mariano Elepao and Pablo Clemente, now both deceased,
were the original stockholders of the"sociedad." Pablo Clemente's shares of stocks were later distributed and apportioned to
his heirs. The "sociedad"then issued stock certificates to the heirs. On the basis of their respective stocks certificates, they,
along with theheirs of Mariano Elepao jointly claimed ownership over the subject parcel of land, asserting that their fathers
beingthe only known stockholders of the "sociedad" they, to the exclusion of all others, are entitled to be declared ownersof
the lot. Private respondents, in their answer; likewise claimed ownership of the property by virtue of acquisitive
prescription.The trial court dismissed the complaint on the grounds of insufficiency of evidence and absent a
corporateliquidation, it is the corporation, not the stockholders, which can assert, if at all, any title to the corporate assets.The
CA sustained the dismissal of the complaint.

Whether or not petitioners can be held to have succeeded in establishing for themselves a firm title to the property in

NO. Except in showing that they are the successors-in-interest of Elepao and Clemente, petitioners have been unable to come
up with any evidence to substantiate their claim of ownership of the corporate asset.If, indeed, the sociedad has long become
defunct, it should behoove petitioners, or anyone else who may have anyinterest in the corporation, to take appropriate
measures before a proper forum for a peremptory settlement of its affairs. We might invite attention to the various modes
provided by the Corporation Code for dissolving, liquidatingor winding up, and terminating the life of the corporation.Among
the causes for such dissolution are when the corporate term has expired or when, upon a verified complaint and after notice
and hearing, the SEC orders the dissolution of a corporation for its continuous inactivity for at least 5 years. The corporation
continues to be a body corporate for 3 years after its dissolution for purposes of prosecutingand defending suits by and
against it and for enabling it to settle and close its affairs, culminating in the dispositionand distribution of its remaining
assets. It may, during the 3-year term, appoint a trustee or a receiver who may act beyond that period. If the 3-year extended
life has expired without a trustee or receiver having been expresslydesignated by the corporation, the board of directors (or
trustees) itself may be permitted to so continue as "trustees" by legal implication to complete the corporate liquidation. Still in
the absence of a board of directors or trustees,those having any pecuniary interest in the assets, including not only the
shareholders but likewise the creditors of the corporation, acting for and in its behalf, might make proper representations
with the SEC for working out a final settlement of the corporate concerns.