Vous êtes sur la page 1sur 223

LLB 2A

1
LLB 2A

TABLE OF CONTENTS

Adjul, Alyssa T................................................................................................................................. 8


1. GAITE vs. FONACIER.............................................................................................................8
2. KER & CO., LTD. vs. LINGAD.................................................................................................9
3. SCHMID & OBERLY, INC. vs. RJL MARTINEZ...................................................................10
4. FILINVEST CREDIT CORP. vs. COURT OF APPEALS.........................................................11
5. LUZON BROKERAGE Co vs. MARITOME BUILDING Co...................................................13
Alawi, Sitti Fatima M.....................................................................................................................15
6. DIGNOS vs. COURT OF APPEALS........................................................................................15
7. MARTIN vs. REYES...............................................................................................................16
8. MINDANAO ACADEMY, INC. vs. YAP.................................................................................17
9. ESTOQUE vs. PAJIMULA.....................................................................................................18
10. SEGURA VS. SEGURA........................................................................................................20
Allama, Haidisheena A..................................................................................................................21
11. REPUBLIC OF THE PHILIPPINES VS. COURT OF APPEALS...........................................21
12. TOMAS T. TEODORO vs. THE COURT OF APPEALS.......................................................22
13. YU TEK AND CO., VS. BASILIO GONZALES.....................................................................23
14. ONG JANG CHUAN vs. WISE & CO. (LTD)........................................................................24
15. BUNGE CORP. ET. AL.VS. ELENA CAMENFORTE AND COM.........................................25
Amilasan, Mohammad Ghamidi I.................................................................................................26
16. PATERNO vs. SALUD..........................................................................................................26
17. JOSE SANTA ANA, JR. VS. ROSA HERNANDEZ...............................................................27
18. SIBAL vs. VALDEZ..............................................................................................................28
19. LUIS PICHEL VS. PRUDENCIO ALONZO.........................................................................29
20. BUCTON VS. GABAR..........................................................................................................30
Aquino, Czarina Adelene J.............................................................................................................31
21. REPUBLIC OF THE PHILIPPINES vs. LICHAUCO, et al...................................................31
22. DEL ROSARIO vs. SANTOS, ET AL....................................................................................32
23. TIBURCIO LUTERO vs. SIULIONG & CO..........................................................................34
24. KER & CO., LTD. VS JOSE B. LINGAD...............................................................................35
Bautista, Ritchell F........................................................................................................................36
25. INCHAUSTI AND CO. vs. ELLIS CROMWELL..................................................................36
26. MAJARABAS, et. al. vs. LEONARDO..................................................................................38
27. MITSUI BUSSAN KAISHA vs. THE MANIlA E. R. AND L. Co...........................................39

2
LLB 2A

28. E. C. MCCULLOUGH vs. R. AENLLE & CO........................................................................40


29. ZACARIAS ROBLES vs. LIZARRAGA HERMANOS...........................................................41
Besares, Alyanna Mariz C..............................................................................................................43
30. ASKAY vs. COSALAN..........................................................................................................43
31. WARNER, BARNES & CO., LIMITED vs. SANTOS............................................................44
32. PHILIPPINE NATIONAL BANK vs. GONZALEZ,.............................................................. 45
33. THE DIRECTOR OF LANDS vs. ABARCA..........................................................................46
34. DE LEON vs. SALVADOR....................................................................................................47
Binang, Ibnohajar L......................................................................................................................48
35. BORROMEO vs. BORROMEO, et al...................................................................................48
36. CRUZADO vs. BUSTOS AND ESCALLER..........................................................................50
37. GARDNER vs. COURT OF APPEALS..................................................................................52
Bongco, Rocky Rex P.....................................................................................................................53
40. LEOPOLDO DE BELEN vs. COLLECTOR OF CUSTOMS..................................................53
41. FRANCISCO IRURETA GOYENA vs. ILDEFONSO TAMBUNTING..................................55
42. FILIPINAS COLLEGES, INC. vs. TIMBANG, et. al.............................................................57
43. BARRETTO vs. SANTA MARINA........................................................................................ 59
Capotulan, Jennel Jiezde T...........................................................................................................60
45. OBANA VS. COURT OF APPEALS......................................................................................60
46. CAMPILLIO VS. COURT OF APPEALS...............................................................................61
47. Kerr & co. Ltd vs. Collector of internal revenue..................................................................62
Catimbang, Joanne A....................................................................................................................63
50. PEOPLE'S HOMESITE & HOUSING CORP. vs. COURT OF APPEALS............................63
51. ANG vs. THE COURT OF APPEALS....................................................................................64
52. CHRYSLER CORPORATION vs. COURT OF APPEALS.....................................................66
53. ARTEMIO KATIGBAK vs. COURT OF APPEALS...............................................................67
54. JULIAN BORROMEO vs. JOSE FRANCO Y FRANCO, et. al.............................................68
Dapilin, Raiza H............................................................................................................................ 69
55. TAN LEONCO vs. GO INQUI..............................................................................................69
56. ASIATIC PETROLEUM COM. vs. COLLECTOR OF INTERNAL REVENUE....................70
58. LEOQUINCO vs. POSTAL SAVINGS BANK, et al...............................................................71
59. FIDELITY & DEPOSIT CO. vs. WILLIAM A. WILSON, et al..............................................72
Domosmog, Matildevera S............................................................................................................73
60. RUFINA YATCO vs. JESUALDO GANA.............................................................................73
61. KUENZLE & STREIFF vs. MACKE & CHANDLER, et al....................................................75
62. GONZALES et al. vs. ROJAS................................................................................................ 77

3
LLB 2A

63. WALTER EASTON vs. E. DIAZ & Co..................................................................................79


64. OCEJO, PEREZ & CO., vs. THE INTERNATIONAL BANk................................................81
Duarte, Danrie R........................................................................................................................... 83
65. ROMAN vs. GRIMALT........................................................................................................83
66. NAVAL, et al. vs. ENRIQUEZ, et al.....................................................................................84
67. UY PIAOCO vs. MCMICKING.............................................................................................85
68. BUENCAMINO, et al. vs. VICEO, et al................................................................................86
69. YAP UNKI vs. CHUA JAMCO.............................................................................................. 87
Halbi, Rashida I............................................................................................................................ 88
70. JOSE FLORENDO vs. EUSTAQUIO P. FOZ....................................................................... 88
71. DOMICIANO GONZAGA vs. ANGEL JAVELLANA............................................................89
72. VIEGELMANN AND Co et al. vs. JOSE PEREZ..................................................................90
73. SOSTENES CAMPILLO vs.COURT OF APPEALS...............................................................91
Hasan, Azfar M..............................................................................................................................93
74. OBAÑA vs. COURT OF APPEALS AND SANDOVAL.........................................................93
75. DANGUILAN VS. IAC..........................................................................................................94
77. PHILIPPINE SUBURBAN DEV. CORP. vs. AUDITOR GENERAL....................................96
78. JOSEPH AND SONS ENTERPRISES VS COURT OD APPEALS.......................................98
Ibba, Sharmaine A.......................................................................................................................100
79. GERONIMO PANIZALES et. al. vs. VALERIO PALMARES et. al....................................100
80. JOSE B. AZNAR VS. RAFAEL YAPDIANGCO..................................................................101
81. LUZON BROKERAGE CO., INC. VS. MYERS BUILDING CO. INC.................................102
82. ENRIQUEZ DE LA CAVADA, vs. ANTONIO DIAZ...........................................................103
Juguilon, Maria Rona M..............................................................................................................104
83. NICOLAS SANCHEZ vs. SEVERINA RIGOS....................................................................104
84. EUSEBIO S. MILLAR vs. DOROTEO NADRES................................................................105
85. J. F. WRIGHT vs. LA COMPAÑIA DE TRANVIAS...........................................................106
86. MEYER & CO. vs. YANCO................................................................................................. 107
87. LOTHAR F. ENGEL vs. MARIANO VELASCO AND CO................................................... 108
JULKARNAIN, NUR A................................................................................................................110
88. PACIFIC COMMERCIAL COMPANY vs. ERMITA MARKET & COLD STORES, INC., ... 110
89. VILLONCO REALTY vs. BORMAHECO, INC., ................................................................. 113
90. VELASCO vs. COURT OF APPEALS..................................................................................114
91. SPOUSES DOROMAL, SR. AND SALAS vs. COURT OF APPEALS..................................116
92. ELIAS GALLAR vs. HERMENEGILDA HUSAIN, ET AL.................................................. 118
Kamlian, Liezle S..........................................................................................................................119

4
LLB 2A

93. GUZMAN vs. GUIEB..........................................................................................................119


94. BUCTON vs. GABAR.........................................................................................................120
95. CARBONELL vs. COURT OF APPEALS.............................................................................121
96. THE BOARD OF LIQUIDATORS vs. JOSE ROXAS.......................................................... 122
97. SOSTENES CAMPILLO vs. PHILIPPINE NATIONAL BANK...........................................123
Lumabas, Ramel M...................................................................................................................... 124
98. EULOGIO RODRIGUEZ, SR. vs. SOFRONIO FRANCISCO............................................. 124
99. MANOTOK REALTY, INC., vs. COURT OF APPEALS and FELIPE CARILLO................125
100. BRAULIO CASTILLO, ET AL. vs. SIMPLICIA NAGTALON........................................... 126
101. MARIA MAHILUM, et al. vs. COURT OF APPEALS.......................................................128
102. MACONDRAY & CO., INC. vs. PRAXEDES R. DE SANTOS........................................... 129
Mejos, Airesh H........................................................................................................................... 130
103. LEVY HERMANOS, INC. vs. GERVACIO........................................................................130
104. INDUSTRIAL FINANCE CORP. vs. TOBIAS...................................................................131
105. RIDAD vs. FILIPINAS INVESTMENT.............................................................................132
106. ESGUERRA vs. COURT OF APPEALS.............................................................................133
Mercado, Nerizza C......................................................................................................................135
107. FILINVEST CREDIT CORP. vs. COURT OF APPEALS...................................................135
108. INDUSTRIAL FINANCE CORP. vs. RAMIREZ...............................................................137
109. SOUTHERN MOTOR INC. vs. ANGELO MOSCOSO......................................................138
110. SERVICEWIDE SPECIALISTS INC. vs. INTERMEDIATE APPELLATE COURT..........139
111. BACHRACH MOTOR CO., INC. vs. PABLO A. MILLAN..................................................141
Morales, Michael Eugene G......................................................................................................... 142
112. MACONDRAY & CO. vs. BENITO & OCAMPO, ............................................................... 142
113. PASCUAL vs. UNIVERSAL CORP., .................................................................................. 142
114. ZAYAS vs. LUNETA MOTORS.........................................................................................144
115. MANILA TRADING & SUPPLY CO. VS. REYES..............................................................145
Mualim, Amin-Chadrie A............................................................................................................147
116. INDUSTRIAL FINANCE CORPORATION vs. CASTOR TOBIAS....................................147
117. Spouses Nonato vs. IAC and Investor‘s Finance Corp......................................................149
118. VDA. DE QUIAMBAO vs. MANILA MOTORS CO............................................................151
119. ABELLA vs. GONZAGA....................................................................................................154
120. HEACOCK CO. vs. BUNTAL MANUFACTURINMG CO.................................................156
Nasirin, Fatriane A....................................................................................................................... 157
121. MACONDRAY & CO., INC. vs. BENITO and OCAMPO................................................... 157
122. FELIX GOCHAN AND SONS REALTY CORP. vs. HEIRS OF RAYMUNDO BABA........158

5
LLB 2A

123. PHILIPPINE LAWIN BUS, CO. vs. COURT OF APPEALS..............................................159


124. INSULAR LIFE ASSURANCE COMPANY, LTD. vs. YOUNG.........................................160
125. CORONEL vs. COURT OF APPEALS............................................................................... 162
Pasanting, Ray Andrew B............................................................................................................ 163
126. TOYOTA SHAW, INC. vs. COURT OF APPEALS............................................................. 163
127. ALFREDO vs. BORRAS....................................................................................................166
128. AMELIA S. ROBERTS vs. MARTIN B. PAPIO.................................................................167
129. SANCHEZ vs. MAPALAD REALTY CORP.......................................................................169
130. CARMEN DEL PRADO vs. SPOUSES CABALLERO....................................................... 170
Remotin, Rosanie P......................................................................................................................171
136. MOVIDO vs. PASTOR.......................................................................................................171
137. DE LEON vs. ONG............................................................................................................172
138. SPS. BERNARDO BUENAVENTURA AND CONSOLACION JOAQUIN et al. vs. Court of
appeals et al..............................................................................................................................173
139. PENALOSA vs. SANTOS..................................................................................................174
140. TING HO VS TENG GUI.................................................................................................. 175
Rubio, Betty Marie Agnes S.........................................................................................................176
141. PACIFIC OXYGEN & ACETYLENE CO. vs. CENTRAL BANK.........................................176
142. GAITE VS. FONACIER.....................................................................................................178
143. SEVENTH DAY ADVENTIST vs. NORTHEASTERN MISSION..................................... 180
144. CAVITE DEVELOPMENT BANK vs. SPouseS LIM......................................................... 181
145. CRONICO vs. J.M. TUASON & CO., INC.........................................................................182
Saipudin, Irving Jr. C..................................................................................................................184
146. ANG YU ASUNCION et al. vs. COURT OF APPEALS.....................................................184
147. ENRIQUEZ DE LA CAVADA vs. DIAZ............................................................................186
148. RUPERT SORIANO vs. BAUTISTA.................................................................................187
149. LOURDES LIMSON vs. COURT OF APPEALS...............................................................188
150. ADELFA PROPERTIES INC. vs. COURT OF APPEALS..................................................189
Salapuddin, Rea Beth H..............................................................................................................190
151. EQUATORIAL REALTY vs. MAYFAIR THEATER..........................................................190
152. JMA HOUSE INC. vs. STA. MONICA INDUSTRIAL AND DEVT. CORP........................191
153. VASQUEZ vs. AYALA CORP............................................................................................. 193
154. SPS GARCIA vs. COURT OF APPEALS...........................................................................194
155. SPS SERRANO AND HERRERA vs. CAGUIAT...............................................................195
Salim, Sadikol A...........................................................................................................................196
156. LAFORTEZA, et al., vs. MACHUCA.................................................................................196

6
LLB 2A

157. SAN MIGUEL PROPERTIES PH. vs. SPOUSES HUANG...............................................198


158. TOPACIO vs. COURT OF APPEALS................................................................................199
159. ADELFA PROPERTIES, INC VS. COURT OF APPEALS ET AL.....................................200
160. HEIRS OF CECILIO CLAUDEL vs. COURT OF APPEALS, HEIRS OF MACARIO
CLAUDEL et. al....................................................................................................................... 202
Teves, Cherry Mae C....................................................................................................................203
161. SPOUSES DAILON vs. COURT OF APPEALS & SABESAJE, Jr.....................................203
162. UNIVERSAL ROBINA SUGAR MILLING CORP. vs. HEIRS OF ANGEL TEVES..........204
163. LUNETA MOTOR COMPANY vs. DIMAGIBA................................................................205
164. PAMECA WOOD TREATMENT PLANT vs. COURT OF APPEALS & DBP....................206
165. ZAYAS vs. LUNETA MOTORS CORP..............................................................................207
Unding, Abdurasid N..................................................................................................................208
166. MANUEL C. PAGTALUNAN vs. RUFINA DELA CRUZ VDA. DE MANZANO..............208
167. LUISA F. MCLAUGHLIN vs. COURT OF APPEALS.......................................................210
Valdez, Art Josef S....................................................................................................................... 212
170. OLYMPIA HOUSING, INC. vs. PANASIATIC TRAVEL CORP. AND MA. NELIDA
GALVEZ-YCASIANO................................................................................................................ 212
171. MONONSONG vs. ESTIMO..............................................................................................213
172. DISTAJO vs. COURT OF APPEALS................................................................................. 214
173. OLAGUER vs. PURUGGANAN JR...................................................................................215
174. MAHARLIKA PUBLISHING CORP. vs. TAGLE.............................................................. 216
Adjul, Alyssa T............................................................................................................................. 217
175. FERNANDEZ VS. TARUN................................................................................................217
Villapando, Rhovil A....................................................................................................................218
176. NYCO SALES CORPORATION VS. BA FINANCE CORP................................................218
177. FRANCISCO CRISOLOGO ET AL. VS. ISAAC CENTENO ET AL................................... 220
178. PATRICK CHUA PENG HIAN VS. COURT OF APPEALS............................................... 221
179. MARIMPERIO COMPAÑIA NAVIERA, S.A. VS. COURT OF APPEALS........................222
180. SHOTWELL VS. MANILA MOTOR CO., INC.................................................................223

7
LLB 2A

ADJUL, ALYSSA T.

1. GAITE VS. FONACIER

G.R. No. L-11827 July 31, 1961


2 SCRA 380

Facts:
Fonacier was the owner and/or holder of 11 iron lode mineral claims, known as the Dawahan
Group. By a "Deed of Assignment" dated September 29, 1952, Fonacier constituted and appointed
Gaite as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical
person for the exploration and development of the mining claims. On March 19, 1954, Gaite in turn
executed a general assignment conveying the development and exploitation of said mining claims
into the Larap Iron Mines, a single proprietorship owned solely by and belonging to him, on the
same royalty basis provided by the ―Deed of Assignment".

Fonacier decided to revoke the authority granted by him to Gaite to exploit and develop
the mining claims in question, and Gaite assented thereto subject to certain conditions. As a
result, a "Revocation of Power of Attorney and Contract" was executed on December 8, 1954,
wherein Gaite transferred to Fonacier, all his rights and interests on development and
exploitation of said mining claims, in consideration of the sum of P75,000.00, P10,000.00 of
which was paid upon the signing of the agreement, and b. The balance of P65,000.00 will be
paid from and out of the first letter of credit covering the first shipment of iron ores and of the
first amount derived from the local sale of iron ore made by the Larap Mines & Smelting Co.
Inc., its assigns, administrators, or successors in interests.
Payment of P65, 000.00 was secured by two surety bonds: One from Larap Mines and its
stockholders and the other from Far Eastern Surety and Insurance Co.
Issue:
Whether or not Fonacier and his sureties are entitled to take full advantage of the period
granted them for making the payment.

Held:
SC agreed with the court below that the appellant have forfeited the right court below
that the appellants have forfeited the right to compel Gaite to wait for the sale of the ore before
receiving payment of the balance of P65,000.00, because of their failure to renew the bond of
the Far Eastern Surety Company or else replace it with an equivalent guarantee. The expiration
of the bonding company's undertaking on December 8, 1955 substantially reduced the security
of the vendor's rights as creditor for the unpaid P65,000.00, a security that Gaite considered
essential and upon which he had insisted when he executed the deed of sale of the ore to
Fonacier (Exhibit "A"). The case squarely comes under paragraphs 2 and 3 of Article 1198 of the
Civil Code of the Philippines:
"ART. 1198. The debtor shall lose every right to make use of the period: . . .
(2) When he does not furnish to the creditor the guaranties or securities which he has
promised.
(3) When by his own acts he has impaired said guaranties or securities after their
establishment, and when through fortuitous event they disappear, unless he immediately
gives new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's bond upon its expiration
plainly impaired the securities given to the creditor (appellee Gaite), unless immediately
renewed or replaced.

8
LLB 2A

2. KER & CO., LTD. VS. LINGAD

G.R. No. L-20871 April 30, 1971


38 SCRA 524

Facts:
CIR assessed the sum of P20,272.33 as the commercial broker‘s percentage tax,
surcharge, and compromise penalty against Ker & Co. There was a request on the part of
petitioner for the cancellation of such assessment, which request was turned down. As a result, it
filed a petition for review with the Court of Tax Appeals. CTA ruled that that Ker & Co is liable as
a commercial broker under Section 194 (t) of the National Internal Revenue Code.

Ker & Co signed a contract with the United States Rubber International, the former
being referred to as the Distributor and the latter specifically designated as the Company. The
shipments would cover products ―for consumption in Cebu, Bohol, Leyte, Samar, Jolo, Negros
Oriental, and Mindanao except [the] province of Davao‖. Ker & Co, as Distributor, was
precluded from disposing such products elsewhere than in the above places unless written
consent would first be obtained from the Company. It was required to exert every effort to have
the shipment of the products in the maximum quantity and to promote in every way the sale
thereof. The prices, discounts, terms of payment, terms of delivery and other conditions of sale
were subject to change in the discretion of the Company.

Issue:
Whether or not the relationship Ker & Co and US Rubber was that of a vendor-vendee or
principal-broker? PRINCIPAL- BROKER, hence liable under Section 194 (t) of the NIRC.

Held:
The relationship between them is one of brokerage or agency. That the petitioner Ker &
Co., Ltd. is, by contractual stipulation, an agent of U.S. Rubber International is borne out by the
facts that:
1. Petitioner can dispose of the products of the Company only to certain persons
or entities and within stipulated limits, unless excepted by the contract or by the Rubber
Company;
2. It merely receives, accepts and/or holds upon consignment the products,
which remain properties of the latter company
3. Every effort shall be made by petitioner to promote in every way the sale of the
products (Par. 3); that sales made by petitioner are subject to approval by the company
4. On dates determined by the rubber company, petitioner shall render a detailed
report showing sales during the month
5. The rubber company shall invoice the sales as of the dates of inventory and
sales report (Par. 14); that the rubber company agrees to keep the consigned goods fully
insured under insurance policies payable to it in case of loss
6. Upon request of the rubber company at any time, petitioner shall render an
inventory of the existing stock which may be checked by an authorized representative of
the former
7. Upon termination or cancellation of the Agreement, all goods held on
consignment shall be held by petitioner for the account of the rubber company until their
disposition is provided for by the latter.

9
LLB 2A

3. SCHMID & OBERLY, INC. VS. RJL MARTINEZ

G.R. No. 75198 October 18, 1988


166 SCRA 493

Facts:
RJL Martinez Fishing Corporation is engaged in deep-sea fishing. In the course of its
business, it needed electrical generators for the operation of its business. Schmid and Oberly
sells electrical generators with the brand of ―Nagata‖, a Japanese product. D. Nagata Co. Ltd.
of Japan was Schmid‘s supplier. Schmid advertised the 12 Nagata generators for sale and RJL
purchased 12 brand new generators. Through an irrevocable line of credit, Nagata shipped to the
Schmid the generators and RJL paid the amount of the purchase price. (First sale = 3
generators; Second sale = 12 generators).

Later, the generators were found to be factory defective. RJL informed the Schmid that it
shall return the 12 generators. 3 were returned. Schmid replaced the 3 generators subject of the
first sale with generators of a different brand. As to the second sale, 3 were shipped to Japan and
the remaining 9 were not replaced.

RJL sued the defendant on the warranty, asking for rescission of the contract and that
Schmid be ordered to accept the generators and be ordered to pay back the purchase money as
well as be liable for damages. Schmid opposes such liability averring that it was merely the
indentor in the sale between Nagata Co., the exporter and RJL Martinez, the importer. As mere
indentor, it avers that is not liable for the seller‘s implied warranty against hidden defects,
Schmid not having personally assumed any such warranty.
Issue:
1) WON the second transaction between the parties was a sale or an indent transaction?
INDENT TRANSACTION
2) Even if Schmid is merely an indentor, may it still be liable for the warranty? YES,
under its contractual obligations it may be liable. But in this case, Schmid did not warrant the
products.
Held:
An indentor is a middleman in the same class as commercial brokers and commission
merchants. A broker is generally defined as one who is engaged, for others, on a commission,
negotiating contracts relative to property with the custody of which he has no concern; the
negotiator between other parties, never acting in his own name but in the name of those who
employed him; he is strictly a middleman and for some purpose the agent of both parties. There
are 3 parties to an indent transaction, (1) buyer, (2) indentor, and (3) supplier who is usually a
non-resident manufacturer residing in the country where the goods are to be bought. The chief
feature of a commercial broker and a commercial merchant is that in effecting a sale, they are
merely intermediaries or middle-men, and act in a certain sense as the agent of both parties to
the transaction.

RJL MARTINEZ admitted that the generators were purchased ―through indent order.‖
RJL admitted in its demand letter previously sent to SCHMID that 12 of 15 generators ―were
purchased through your company, by indent order and three (3) by direct purchase.‖ The
evidence also shows that RJL MARTINEZ paid directly NAGATA CO, for the generators, and
that the latter company itself invoiced the sale and shipped the generators directly to the former.
The only participation of Schmid was to act as an intermediary or middleman between Nagata
and RJL, by procuring an order from RJL and forwarding the same to Nagata for which the
company received a commission from Nagata.

10
LLB 2A

4. FILINVEST CREDIT CORP. VS. COURT OF APPEALS

G.R. No. 82508 September 29, 1989


178 SCRA 188

Facts:
Herein private respondents‘ spouses Jose Sy Bang and Iluminada Tan were engaged in
the sale of gravel produced from crushed rocks and used for construction purposes. They
intended to buy rock crusher from Rizal Consolidated Corporation which carried a cash price tag
of P550,000.00. They applied for financial assistance from herein petitioner Filinvest Credit
Corporation, who agreed to extend financial aid on the certain conditions.

A contract of lease of machinery (with option to purchase) was entered into by the
parties whereby the private respondents agreed to lease from the petitioner the rock crusher for
two years starting from July 5, 1981, payable as follows: P10,000.00 – first 3 months,
P23,000.00 – next 6 months, P24,800.00 – next 15 months. It was likewise stipulated that at
the end of the two-year period, the machine would be owned by the private respondents. Thus
the private respondent issued in favor of the petitioner a check for P150,550.00, as initial rental
(or guaranty deposit), and 24 postdated checks corresponding to the 24 monthly rentals. In
addition, to guarantee their compliance with the lease contract, the private respondent executed
a real estate mortgage over two parcels of land in favor of the petitioner. The rock crusher was
delivered to the spouses.

However, 3 months later, the souses stopped payment when petitioner had not acted on
the complaints of the spouses about the machine. As a consequence, petitioner extra-judicially
foreclosed the real estate mortgage. The spouses filed a complaint before the RTC. The RTC
rendered a decision in favor of private respondent. The petitioner elevated the case to CA which
affirmed the decision in toto. Hence, this petition.

Issue:
1. Whether or not the nature of the contract is one of a contract of sale.
2. Whether or not the remedies of the seller provided for in Article 1484 are cumulative.

Held:
1. Yes. The intent of the parties to the subject contract is for the so-called rentals to be
the installment payments. Upon the completion of the payments, then the rock crusher, subject
matter of the contract, would become the property of the private respondents. This form of
agreement has been criticized as a lease only in name.

Sellers desirous of making conditional sales of their goods, but who do not wish openly
to make a bargain in that form, for one reason or another, have frequently restored to the device
of making contracts in the form of leases either with options to the buyer to purchase for a small
consideration at the end of term, provided the so-called rent has been duly paid, or with
stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It
is obvious that such transactions are leases only in name. The so-called rent must necessarily be
regarded as payment of the price in installments since the due payment of the agreed amount
results, by the terms of bargain, in the transfer of title to the lessee.

2. No, it is alternative. The seller of movable in installments, in case the buyer fails to pay
2 or more installments, may elect to pursue either of the following remedies: (1) exact fulfillment
by the purchaser of the obligation; (2) cancel the sale; or (3) foreclose the mortgage on the

11
LLB 2A

purchased property if one was constituted thereon. It is now settled that the said remedies are
alternative and not cumulative, and therefore, the exercise of one bars the exercise of the others.
Indubitably, the device – contract of lease with option to buy – is at times resorted to as a means
to circumvent Article 1484, particularly paragraph (3) thereof. Through the set-up, the vendor,
by retaining ownership over the property in the guise of being the lessor, retains, likewise the
right to repossess the same, without going through the process of foreclosure, in the event the
vendee-lessee defaults in the payment of the installments. There arises therefore no need to
constitute a chattel mortgage over the movable sold. More important, the vendor, after
repossessing the property and, in effect, canceling the contract of sale, gets to keep all the
installments-cum-rentals already paid.

12
LLB 2A

5. LUZON BROKERAGE CO VS. MARITOME BUILDING CO.

G.R. No. L-25885 January 31, 1972


43 SCRA 93

Facts:
In Manila, Myers owned 3 parcels of land w/ improvements. Myers then entered into a
contract called a ―Deed of Conditional Sale‖ with Maritime Building. Myers sold the land for
P1million. They agreed on the manner of payment (installment, initial payment upon execution
of contract, interest rate). In the contract it was stipulated that in case of failure of buyer to pay
any of the installments, the contract will be annulled at the option of the seller and all payments
made by the buyer is forfeited. Later on, the stipulated installment of P10k with 5%interest was
amended to the P5k with 5.5% per annum. Maritime paid the monthly installments but failed to
pay the monthly installment of March. VP of Maritime wrote to Pres of Myers requesting for a
moratorium on the monthly payment of the installments because the company was undergoing
financial problems. Myers refused. For the months of March, April, and May, Maritime failed to
pay and did not heed the demand of Myers. Myers wrote Maritime cancelling the ―Deed of
Conditional Sale‖ Myers demanded return of possession of properties. Held Maritime liable for
use and occupation amounting to P10k per month.

In the meantime, Luzon Brokerage was leasing the property from Maritime. Myers
demanded from Luzon the payment of monthly rentals of P10k Myers also demanded surrender
of property. While actions and cross claims between Myers and Maritime were happening, the
contract between Maritime and Luzon was extended for 4 more years. Turns out, Maritime‘s
suspension of its payments to Myers corp arose from a previous event: An award of backwages
made by the Court of Industrial Relations in favor of Luzon Labor Union (employees employed
by Luzon). FH Myers was a major stockholder of Luzon Brokerage. FH Myers promised to
indemnify Schedler (who controlled Maritime) when Shedler purchased FH Myers‘s stock in
Luzon Brokerage company. (This indemnification is for the award of backwages by the CIR)
Schedler claims that after FH Myers estates closed, he was notified that the indemnity on the
Labor Union case will not be honored anymore. And so, Schedler advised Myers corp that
Maritime is withholding payments to Myers corp in order to offset the liability when Myers heirs
failed to honor the indemnity agreement. TC ruled Maritime in breach of contract.

Issue:
1. Has there been a breach of contract?
2. Can Myers extrajudicially terminate the contract?

Held:
Yes. Failure to pay monthly installments constitute a breach of contract. Default was not
made in good faith. The letter to Myers corp means that the non-payment of installments was
deliberately made to coerce Myers corp into answering for an alleged promise of the dead FH
Myers. Whatever obligation FH Myers had assumed is not an obligation of Myers corp. No proof
that board of Nyers corp agreed to assume responsibility to debts of FH Myers and heirs.
Schaedler allowed the estate proceedings of FH Myers to close without providing liability. By the
balance (of payment) in the Deed of Conditional Sale, Maritime was attempting to burden the
Myers corp with an uncollectible debt, since enforcement against FH Myers estate was already
barred. Maritime acted in bad faith. Maritime‘s contract with Myers is not the ordinary sale
contemplated in NCC 1592 (transferring ownership simultaneously with delivery). The
distinction between contracts of sale and contract to sell with reserved title has been recognized
by this Court in repeated decisions upholding the power of promisors under contracts to sell in

13
LLB 2A

case of failure of the other party to complete payment, to extrajudicially terminate the operation
of the contract, refuse conveyance and retain the sums or installments already received, where
such rights are expressly provided for, as in this case. Decision affirmed.

14
LLB 2A

ALAWI, SITTI FATIMA M.

6. DIGNOS VS. COURT OF APPEALS

G.R. No. L-59266 February 29, 1988


158 SCRA 375

Facts:
In July 1965, herein petitioners Silvestre T. Dignos and Isabela Lumungsod de Dignos
(spouses Dignos) sold their parcel of land in Opon, Lapu–Lapu to herein private respondent
Antonio Jabil for the sum of P28,000 payable for two installments, with an assumption of
indebtedness with the First Insular Bank of Cebu in the sum of P12,000 and the next installment
of P4,000 to be paid in September 1965. In November 1965, the spouses Dignos sold the same
parcel of land for P35,000 to defendants Luciano Cabigas and Jovita L. de Cabigas (spouses
Cabigas) who were then US citizens, and executed in their favor an Absolute Deed of Sale duly
registered in the Office of the Register of Deeds.

Upon discovery of the 2nd sale of the subject land, Jabil filed the case at bar in the CFI of
Cebu which rendered its Decision in August 1975 declaring the 2nd sale to the spouses Cabigas
null and void ab initio and the 1st sale to Jabil not rescinded. The CFI of Cebu also ordered Jabil
to pay the remaining P16,000 to the spouses Dignos and to reimburse the spouses Cabigas a
reasonable amount corresponding the expenses in the construction of hollow block fences in the
said parcel of land. The spouses Dignos were also ordered to return the P35,000 to the spouses
Cabigas.

Both Jabil and the spouses Dignos appealed to the Court of Appeals, which affirmed in
July 1981 the CFI of Cebu‘s Decision except for the part of Jabil paying the expenses of the
spouses Cabigas for building a fence. The spouses Dignos contested that the contract between
them and Jabil was merely a contract to sell and not a deed of sale.

Issue:
Whether or not the contract between the parties a contract of sale or a contract to sell?

Held:
The Supreme Court affirmed the Decision of the Court of Appeals saying stated that all
the elements of a valid contract of sale are present in the document and that the spouses Dignos
had no right to sell the land in question because an actual delivery of its possession has already
been made in favor of Jabil as early as March 1965. It was also found that the spouses Dignos
never notified Jabil by notarial act that they were rescinding the contract, and neither did they
file a suit in court to rescind the sale. There is no showing that Jabil properly authorized a
certain Cipriano Amistad to tell petitioners that he was already waiving his rights to the land in
question.

15
LLB 2A

7. MARTIN VS. REYES

G.R. No. L-4402 July 28, 1952

Facts:
Respondent Pedro Revilla and Maria Reyes obtained from the La Previsora Filipina
sometime before November 18, 1939 a loan of P6,500; and with the money, they the price of a
lot, with improvements, which they paid had previously purchased from the Archibishop of
Manila. And they mortgaged the property to La Previsora for the purpose of guaranteeing
repayment of the debt in installments with interest at 12 per cent per annum. It turned out later
that Monte de Piedad y Caja de Ahorros had obtained a judgment against Pedro Revilla for the
sum of P45,000 and had levied execution therefor upon the property and its rentals. Apprised of
this development, the La Previsora started foreclosure proceedings, alleging non-payment of its
credit by the mortgagors. It seems that La Previsora at the same time, or immediately thereafter
conveyed the property by Exhibit C to petitioner Canuto Martin, who then executed the
document Exhibit D undertaking to allow respondents to repurchase the property within sixty
days from October 31, 1941, but at the price of P14,000. This document Exhibit D was signed by
Maria Reyes signifying her assent.

Issue:
Whether or not the respondents properly exercised their right to repurchase?

Held:
No. The Court of Appeals stated that in December 1941, Maria Reyes accompanied by
Marcela Mota de Malonso went to the office of La Previsora, not for the purpose of repurchasing
the property, but to ask for extension of the period. Nevertheless, that Court opined that
inasmuch as the complaint to compel repurchase had been filed on January 2, 1952 within the
sixty-day period mentioned in Exhibit E, the vendors had preserved their redemption option.
Upon a move to reconsider, the Court of Appeals amplified its decision saying, ‖In view of the
refusal of Atty. Pete A. Revilla who was acting in behalf of appellee Canuto Martin, to receive any
amount less than P14,000, nor to accept in behalf of the La Previsora Filipina, claiming that the
latter's right were already ceded to appellee Canuto Martin, we hold that the question to the
efficiency of the amount offered at the time is not as vital to the issue as the necessity of making
one. We find that the plaintiff Maria Reyes, accompanied to one Marcela Mota de Malonso did
make an offer to redeem the property in the property days of December, 1941. Whether or not
the amount they had on that occasion was sufficient to redeem the property at P8,204.60 or
P10,204.60 is not vital to the preservation of the rights of the plaintiff's in view of the refusal to
accept any amount less than P14,000.‖

16
LLB 2A

8. MINDANAO ACADEMY, INC. VS. YAP

G.R. No. L-17681 February 26, 1965


13 SCRA 190

Facts:
By deed entitled "Mutual Agreement", executed on May 10, 1964, Rosenda A. de Nuqui
and her son Sotero Dionisio, Jr. sold three parcels of residential land in Oroquieta, Misamis
Occidental, and another parcel in Ozamis City in favor of Ildefonso D. Yap. Included in the sale
were certain buildings situated on said lands as well as laboratory equipment, books, furniture
and fixtures used by two schools established in the respective properties, the Mindanao
Academy in Oroquieta and the Misamis Academy in Ozamis City. The aggregate price stated in
the deed was P100,700.00, to be paid according to the terms and conditions specified in the
contract. Besides Rosenda and her son Sotero, Jr., both of whom signed the instrument,
Adelaida Dionisio-Nuesa is also named therein as co-vendor, but actually did not take part
either personally or through her uncle and supposed attorney-in-fact, Restituto Abuton. These
three — Rosenda and her two children above named — are referred to in the deed as the owners
pro-indiviso of the properties sold. The truth, however, was that there were other co-owners of
the lands. The buyer, Ildefonso D. Yap, obtained possession of the properties by virtue of the
sale, took over the operation of the two schools and even changed their names to Harvardian
Colleges.

Issue:
Whether or not the Mindanao Academy can reimburse even in bad faith?

Held:
Yes. The appellant claims reimbursement for the value of the improvements he allegedly
introduced in the schools, consisting of a new building worth P8,000.00 and a toilet costing
P800.00, besides laboratory equipment, furniture, fixtures and books for the libraries. It should
be noted that the judgment of the trial court specifies, for delivery to the plaintiffs, only "the
buildings and grounds described in the mutual agreement together with all the permanent
improvements thereon." If the defendant constructed a new building, as he alleges, he cannot
recover its value because the construction was done after the filing of the action for annulment,
thus rendering him a builder in bad faith who is denied by law any right of reimbursement. In
connection with the equipment, books, furniture and fixtures brought in by him, he is not
entitled to reimbursement either, because the judgment does not award them to any of the
plaintiffs in these two actions. What is adjudged is for the defendant to restore to the Mindanao
Academy, Inc. all the books, laboratory apparatus, furniture and other equipment "described in
the Mutual Agreement and specified in the Inventory attached to the records of this case; or in
default thereof, their value in the amount of P23,500.00." In other words, whatever has been
brought in by the defendant is outside the scope of the judgment and may be retained by him.

17
LLB 2A

9. ESTOQUE VS. PAJIMULA

G.R. No. L-24419 July 15, 1968

Facts:
Lot No. 802 of the Cadastral survey of Rosario, was originally owned by the late spouses,
Rosendo Perez and Fortunata Bernal, who were survived by her children, namely, Crispina
Perez, Lorenzo Perez and Ricardo Perez. Ricardo Perez is also now dead. On October 28, 1951,
Crispina P. Vda. de Aquitania sold her right and participation in Lot No. 802consisting of 1/3
portion with an area of 640 square meters to Leonora Estoque. On October29, 1951, a deed of
extrajudicial settlement was entered into wherein Lorenzo Perez, Emilia P. Posadas and her
minor children. On December 30, 1959, Crispina Perez and her children Rosita Aquitania
Belmonte, Remedios Aquitania Misa, Manuel Aquitania, Sergio Aquitania and Aurora Aquitania
sold to Elena Pajimula, the remaining 2/3 western portion of Lot No. 802with an area of 958
square meters. Plaintiff based her complaint for legal redemption on a claim that she is a co-
owner of Lot No. 802, for having purchased 1/3 portion thereof, containing an area of 640
square meters as evidenced by a deed of sale, which was executed on October 28, 1951 by
Crispina Perez de Aquitania, one of the co-owners, in her favor. On the other hand, the
defendant, who on December 30, 1959 acquired the other 2/3portion of Lot No. 802 from
Crispina Aquitania and her children, claimed that the plaintiff bought the 1/3 south-eastern
portion, which is definitely identified and segregated, hence there existed no co-ownership at
the time and after said plaintiff bought the aforesaid portion, upon which right of legal
redemption can be exercised or taken advantage of. Estoque‘s stand is that the deed in her favor
was inoperative to convey the south-eastern third of Lot 802 of the Rosario Cadastre
notwithstanding the description in the deed itself, for the reason that the vendor, being a mere
co-owner, had no right to sell any definite portion of the land held in common but could only
transmit her undivided share, since the specific portion corresponding to the selling co-owner is
not known until partition takes place (Lopez vs. Ilustre, 5 Phil. 567; Ramirez vs. Bautista, 14
Phil. 528). From this premise, the appellant argues that the sale in her favor, although
describing a definite area, should be construed as having conveyed only the undivided 1/3
interest in Lot 802 owned at the time by the vendor, Crispina Perez Vda. de Aquitania.
Wherefore, when the next day said vendor acquired the 2/3 interest of her two other co-owners,
Lot 802 became the common property of appellant and Crispina Perez. Therefore, appellant
argues, when Crispina sold the rest of the property to appellee Pajimula spouses, the former was
selling an undivided2/3 that appellant, as co-owner, was entitled to redeem, pursuant to Article
1620 of the New Civil Code ART. 1620. A co-owner of a thing may exercise the right of
redemption in case the shares of all the other co-owners or of any of them are sold to a third
person. If the price of the alienation is grossly excessive the redemptioner shall pay only a
reasonable one. Should two or more co-owners desire to exercise the right of redemption, they
may only do so in proportion to the share they may respectively have in the thing owned in
common.

Issue:
Whether or not right of redemption can be exercised by Estoque?

Held:
NO. Appellant Estoque became the actual owner of the South eastern third of lot 802on
October 29, 1951. Wherefore, she never acquired an undivided interest in lot 802. And when
eight years later Crispina Perez sold to the appellee Pajimula the western two-thirds of the same
lot, appellant did not acquire a right to redeem the property thus sold, since their respective
portions were distinct and separate.(1) The deed of sale to Estoque (Annex A of the complaint)

18
LLB 2A

clearly specifies the object sold as the south-eastern third portion of Lot 802 of the Rosario
Cadastre, with an area of 840square meters, more or less. Granting that the seller, Crispina
Perez Vda. de Aquitania could not have sold this particular portion of the lot owned in common
by her and her two brothers, Lorenzo and Ricardo Perez, by no means does it follow that she
intended to sell to appellant Estoque her 1/3 undivided interest in the lot for mentioned. There
is nothing in the deed of sale to justify such inference. That the seller could have validly sold her
one-third undivided interest to appellant is no proof that she did choose to sell the same. While
on the date of the sale to Estoque said contract may have been ineffective, for lack of power in
the vendor to sell the specific portion described in the deed, the transaction was validated and
became fully effective when the next day (October 29, 1951) the vendor, Crispina Perez, acquired
the entire interest of her remaining co-owners and thereby became the sole owner of Lot No.
802 of the Rosario Cadastral survey (Llacer vs. Muñoz, 12 Phil. 328). Article 1434 of the Civil
Code of the Philippines clearly prescribes that — .When a person who is not the owner of a thing
sells or alienates and delivers it, and later the seller or grantor acquires title thereto, such title
passes by operation of law to the buyer or grantee." CA decision affirmed.

19
LLB 2A

10. SEGURA VS. SEGURA

G.R. No. L-29320 September 19, 1988

Facts:
The land in question consists of 4,060 square meters and was originally registered under
Original Certificate of Title No. 1994 in the Registry of Deeds of Iloilo in the name of Gertrudes
Zamora. 1 She died intestate and without debts in 1936 and was survived by four children, who
never got around to dividing the property among themselves. This controversy is not among the
four brothers, who are now also deceased. It is Gertrude‘s grandchildren by three of her sons
(the fourth having died without issue) who are involved in this complaint for recovery of
ownership and possession of the disputed inheritance, plus damages. The conflict began when
on April 6, 1941, three of these nine grandchildren, executed a deed of extrajudicial partition
arrogating the entire property to themselves alone as equal pro in diviso owners. This partition
was not registered immediately, but only in 1946, or five years later.

Issue:
Whether or not the plaintiff can apply prescription in acquiring the land.

Held:
It is noted that when Amojido secured the registration of the land in his name following
the deed of sale executed in his favor by the parties to the extrajudicial partition, his certificate
of title carried an express reservation of whatever rights might pertain to the other heirs. This
annotation constituted an acknowledgement of the possibility that a portion of the land might
not belong to him and the commitment that he would be holding such part as impliedly
conveyed to him in trust by and for its true owners. However, when Amojido himself sold the
land to Mirope Mascareñas vda. de Elison on March 13, 1953, the transfer certificate of title
issued in her name no longer carried the said encumbrance. By the deletion of this annotation,
Mirope, as the new transferee, repudiated as of the date of registration the claim of the other
heirs to their shares in the property. From then on her assertion of ownership over the whole
land became adverse even as against the appellants herein. And as the certificate of title was
notice to the whole world of her exclusive title to the land, such rejection was binding on the said
heirs and started as against them the period of prescription.

The record does not show when TCT No. T-19396 in the name of Mirope Mascareñas
vda. de Elison was issued, but it can be conjectured that this was done before February 14, 1957,
when she sold the land to Mildred Elison vda. de Javelosa. On the assumption that the land was
registered in the name of Mirope in 1953 following her purchase without acknowledgement of
the co-heirs' rights, the 10-year prescriptive period would have started from that year.
Suspended on May 28, 1956, when the first complaint was filed, it began running again on
February 16, 1958, 30 days after it was dismissed, and was completed after seven more years in
1965, two years before the second complaint was filed in 1968. Hence, that complaint was
barred by prescription, as correctly held by the trial court, although the different starting point it
used, erroneously, was 1941, date of the extrajudicial partition.

20
LLB 2A

ALLAMA, HAIDISHEENA A.

11. REPUBLIC OF THE PHILIPPINES VS. COURT OF APPEALS

G.R. No. 128531 October 26, 1999


165 SCRA 480

Facts:
Private respondent Vicente Yupangco is the owner of a unit in a condominium building
in Legaspi Street, Makati City, as evidenced by Certificate of Title No. 7648. Because his
aforesaid certificate could not be located, he filed, on January 28, 1994, in the Regional Trial
Court, Branch 136, Makati, a petition for the issuance of a new duplicate certificate of title in lieu
of his lost copy, pursuant to 109 of P.D. No. 1529 (Property Registration Decree). The trial court
ordered the Register of Deeds of Makati to comment on the petition and thereafter set the case
for initial hearing.

Issue:
Whether or not in a proceeding for the issuance of an owners duplicate certificate of title,
the Solicitor General is required to be notified, such that failure to give such notice would render
the proceedings void.

Held:
The decision of the Court of Appeals is AFFIRMED. This is not correct. Considering that
the law does not impose such notice requirement in proceedings for the issuance of a new
owners duplicate certificate of title, the lack of notice to the Solicitor General, as counsel for the
Registrar of Deeds, was at most only a formal and not a jurisdictional defect.

This case should be distinguished from our rulings in cadastral registration cases and
original land registration proceedings which require that the Solicitor General be notified of
decisions and hold as decisive, for the purpose of determining the timeliness of the appeal filed
by the government, the date of his receipt of the decisions therein and not that of the Director of
Lands or of his other representatives. The issue and the applicable laws in those cases are
different.

21
LLB 2A

12. TOMAS T. TEODORO VS. THE COURT OF APPEALS

G.R. No. 140799 September 10, 2002


170 SCRA 620

Facts:
PAMI Development Corporation registered with the Mining Records of Bulacan its
mining claims to a parcel of land consisting of 185.8611 hectares, located at San Mateo,
Norzagaray, Bulacan. it was issued Placer Lease Contracts, later renamed Mining Lease
Contracts (MLC), Nos. V-202 and V-203, for a period of twenty-five years. On January 5, 1965,
PAMI sold its mining claims to respondent Continental Cement Corporation.

Almost fifteen years later, on April 10, 1980, Francisco and Tomas Teodoro applied for
quarry permits with the Bureau of Mines, denominated as AQP-551 and AQP-552, over their
property located at Barrio Pinagkamaligan, Norzagaray, Bulacan. The Bureau of Mines denied
the Teodoros application since it will conflict with the mining claims of respondent.

Subsequently, the Teodoros filed with the then Ministry of Natural Resources a petition
for cancellation of respondents MLC Nos. V-202 and V-203 on the ground of non-development
of mineral lands. The said mining lease contracts of respondent were cancelled for non-
compliance with the work obligations under the law.

Issue:
Whether or not there was extrinsic fraud.

Held:
Extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation which
is committed outside of the trial of the case, whereby the unsuccessful party has been prevented
from exhibiting fully his case, by fraud or deception practiced on him by his opponent. Fraud is
regarded as extrinsic where it prevents a party from having a trial or from presenting his entire
case to the court, or where it operates upon matters pertaining not to the judgment itself but to
the manner in which it is procured. The overriding consideration when extrinsic fraud is alleged
is that the fraudulent scheme of the prevailing litigant prevented a party from having his day in
court. None of these conditions obtain in the case at bar.

22
LLB 2A

13. YU TEK AND CO., VS. BASILIO GONZALES

G.R. No. L-9935 February 1, 1915


29 Phil. 384

Facts:
A contract was executed between the herein parties, whereby Mr. Basilio Gonzales
acknowledges the receipt of Php3, 000 from Yu Tek & Co., and that in consideration of which he
obligates himself to deliver to the latter 600 piculs of sugar of the first and second grade,
according to the result of polarization, within 3 months. There is a stipulation providing for
rescission with Php1,200 penalty in case of failure to deliver. No sugar was delivered, so plaintiff
filed a case praying for the judgment of Php3,000 plus Php1,200. Php3,000 was awarded, thus,
both parties appealed.

Issue:
(a) Whether compliance of the obligation to deliver depends upon the production in
defendant‘s plantation.
(b)Whether there is a perfected Sale.

Held:
(a) There is not the slightest intimation in the contract that the sugar was to be raised by
the defendant. Parties are presumed to have reduced to writing all the essential conditions of
their contract. While parol evidence is admissible in a variety of ways to explain the meaning of
written contracts, it cannot serve the purpose of incorporating into the contract additional
contemporaneous conditions which are not mentioned at all in the writing, unless there has
been fraud or mistake. In an early case this court declined to allow parol evidence showing that a
party to a written contract was to become a partner in a firm instead of a creditor of the firm.
(Pastor vs. Gaspar, 2 Phil. Rep., 592.) Again, in Eveland vs. Eastern Mining Co. (14 Phil. Rep.,
509) a contract of employment provided that the plaintiff should receive from the defendant a
stipulated salary and expenses. The defendant sought to interpose as a defense to recovery that
the payment of the salary was contingent upon the plaintiff's employment redounding to the
benefit of the defendant company. The contract contained no such condition and the court
declined to receive parol evidence thereof.

(b)We conclude that the contract in the case at bar was merely an executory agreement; a
promise of sale and not a sale. At there was no perfected sale, it is clear that articles 1452, 1096,
and 1182 are not applicable. The defendant having defaulted in his engagement, the plaintiff is
entitled to recover the P3,000 which it advanced to the defendant, and this portion of the
judgment appealed from must therefore be affirmed.

23
LLB 2A

14. ONG JANG CHUAN VS. WISE & CO. (LTD)

G.R. No. L-10907 January 29, 1916


33 Phil. 339

Facts:
This is an appeal from a judgment of the Court of First Instance of Manila condemning
the defendant to pay the plaintiff the sum of P1,237.50, together with interest and costs, as
damages for a breach of contract. It has been established by a preponderance of evidence that
the reason for the nonfulfillment, on the part of Wise & Co., of the contract made with the
plaintiff, was that the "Mano" brand of flour which the defendant bound itself to deliver during
the months of September and October had to come from Australia, and at the time the contract
was executed Wise & Co. did not have a sufficient stock of the said brand of flour; and that, as
the government of Australia prohibited the exportation of flour, because of the scarcity of grain
in that country, due to the war that had been declared between Great Britain, of which Australia
is an integral part and the German Empire, it was impossible for the importers to supply Wise &
Co. with a sufficient quantity of flour to enable the latter, in turn, to serve its customers.

Issue:
Whether or not there was a perfected sale.

Held:
The judgment appealed from is affirmed, with costs against the appellant. The
undertaking of the defendant was to sell to the plaintiff 1,000 sacks of "Mano" flour at P11.05
per barrel, 500 sacks to be delivered in September and 500 in October. There was no delivery at
all under the contract. If called upon to designate the article sold, the defendant could only say
that it was "Mano" flour. There was no appropriation of any particular lot of flour. The flour
mentioned in the contract was not "physically segregated from all other articles.' In fact, the
defendant did not have in its possession in Manila, at the time the contract was entered into, the
1,000 sacks of flour which it agreed to deliver in September and October. It is therefore clear
that under the rule laid down in the case of Yu Tek & Co., supra, and the case cited in that
opinion, the sale here in question was not a perfected one.

24
LLB 2A

15. BUNGE CORP. ET. AL.VS. ELENA CAMENFORTE AND COM.

G.R. No. L-4440 August 29, 1952


48 Off. Gaz. 3377

Facts:
A contract was entered into between the Visayan Products Company and Bunge
Corporation (represented by the Universal Commercial Agencies) whereby the former sold to
the latter 500 long tons of merchantable Philippine copra in bulk at the prices of $188.80, U.S.
currency, per ton, less 1 per cent brokerage per short ton of 2,000 pounds, C & F Pacific Coast,
U.S.A.; that, according to the terms and conditions of the contract, the vendor should ship the
stipulated copra during the month of November or December 1947, to San Francisco, California,
U.S.A. for delivery to the vendee; , the vendee sold to El Dorado Oil Works the quantity of copra
it had purchased at the same price agreed upon; and that because of the failure of the vendor to
fulfill its contract to ship and deliver the quantity of copra agreed upon within the period
stipulated, the vendee has suffered damages. Visayan product contended that no contract of sale
was perfected. If any, it was that signed by Vicente Kho, the manager and controlling
stockholder in Visayan product Tacloban, but he was not authorized to sign a contract for
Visayan Product Cebu. Kho admitted that he signed the contract and tried his best to deliver the
copra but due to force majeure failed to do so. Lower court ordered for payment of damages by
Visayan Product to Bunge Corp.

Issue:
Whether or not there was a perfected contract of sale between El Dorado and Bunge
Corporation of the copra to be acquired from sale by Visayan Products.

Held:
We are of the opinion that the lower court erred in disregarding the transaction with the
El Dorado Oil Works simply because it found an apparent discrepancy in the dates appearing in
the contracts Exhibits O and C. Exhibit C appears dated on October 22, 1947, and was executed
in Cebu, Philippines, whereas Exhibit O appears dated on October 21, 1947, and was executed in
New York City. The difference of one day in the execution of these documents is merely nominal
because New York time is several hours behind Cebu time. In fact both transactions have been
practically executed on the same day. Even supposing that the contract with the El Dorado Oil
Works calls for future and not present deliveries. There is nothing improbable for the appellees
to sell copra which they expect to acquire sometime in the future for purposes of speculation.
But this error cannot now materially change the result of this case considering that plaintiffs-
appellees did not appeal from the decision. "It has been held that appellee, who is not appellant,
may also assign errors in his brief where his purpose is to maintain the judgment on other
grounds, but he may not do so if his purpose is to have the judgment modified or reversed, for,
in such case, he must appeal." Wherefore, the decision appealed from is affirmed, with costs
against appellants.

25
LLB 2A

AMILASAN, MOHAMMAD GHAMIDI I.

16. PATERNO VS. SALUD

G.R. No. L-15620 September 30, 1963


9 SCRA 81

FACTS:
Defendant claims to be the owner of the land which plaintiffs seek to recover having been
in adverse possession thereof since 1890 and having registered it in his name Registration Case
No. 23 of the same court on April 16, 1940 for which he obtained a Torrens title.

On March 1912, Jose T. Paterno, as administrator of the estate Maximino Molo Agustin
Paterno, acquired at an auction sale certain parcels of land that were levied in execution
belonging to Esteban de Villa. These includes the land in question which contained 5 hectares.
In 1927, all these lands were adjudicated to Concepcion Paterno Vda. de Padilla, daughter of the
late Maximino Molo Agustin Paterno as her share in the estate. In that year, the lease of the
lands to the De Villas was not renewed and so their possession was returned to the Paternos. In
1943, Concepcion Paterno died leaving all the lands she owned in Batangas, including the one in
question, to plaintiffs as her heirs. Hence, from 1927, when the lease to the De Villas was
terminated, to 1949, plaintiffs had been in possession of the lot with an area of 5 hectares.

The Court of Appeals ruled in favor of the defendant that land in question and the bigger
Parcel of 30.5285 hectares of which it was originally a part, were not included in the auction in
1912 of the properties of Esteban de Villa.

ISSUE:
Whether or not the 5 hectares of land is owned by the defendant

HELD:
The Supreme Court ruled that the Court of Appeals erred in declaring defendant owner
of the parcel of land claimed in his counterclaim. The evidence shows that plaintiff predecessor-
in-interest Concepcion Paterno Vda. de Villa secured in 1928 Original Certificate of Title No. 49
over a parcel of land of which the land involved here was a part. This parcel of land was
originally acquired by the Paternos in 1912. This was leased to Esteban Villa and Pia de Villa
from 1917 to 1925; surveyed Jose T. Paterno on September 25, 1924; was the subject of petition
for registration by the Paternos in 1926, due notice of which was given to the De Villas, and upon
the death of Concepcion Paterno Vda. de Padilla, it was transmitted to plaintiffs by succession.
Since the land in question was registered in the name of the Paternos in 1928 and it was only on
November 19, 1952, date of defendant' answer, that he sought its reconveyance to him, that title
became indefeasible under Section 38, Act No. 496, as amended by Act No. 3630.

26
LLB 2A

17. JOSE SANTA ANA, JR. VS. ROSA HERNANDEZ

G.R. No. L-16394 December 17, 1966


18 SCRA 973

FACTS:
Spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo sold a land in Bulacan to
respondent Rosa Hernandez for 11,000 pesos lump sum. (There were two other previous sales to
different vendees of other portions of the land).

The boundaries of the land were stated in the deed of sale and its approximate land area.
Petitioner spouses caused the preparation of the subdivision plan but Hernandez didn‘t agree to
the partition. As such, petitioners-spouses filed a case alleging that Hernandez is occupying in
excess of 17000 square meter of the land sold. Hernandez claims that the excess area is part of
the land she bought.

ISSUE:
Whether or not the excess area occupied by Hernandez is part of the land sold.

HELD:
The sale involves a definite and identified tract, a corpus certrum that obligated the
vendors to deliver to the buyer all the lands within the boundaries, irrespective of whether its
real area should be greater or smaller than what is recited in the deed.

To hold the buyer to no more than the area recited on the deed, it must be made clear
therein that the sale was made by unit of measure at a definite price for each unit. The sale in
this case only involves the definite boundaries but only approximate land areas. As such, Article
1542 concerning the sale of lump sum must be considered.

27
LLB 2A

18. SIBAL VS. VALDEZ

G.R. No. L-26278 August 4, 1927


50 Phil. 512

FACTS:
Plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of
Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga,
attached and sold to the defendant Emiliano J. Valdez the sugarcane planted by the plaintiff and
his tenants on seven parcels of lands. Plaintiff offered to redeem said sugarcane and tendered to
the defendant Valdez the amount sufficient to cover the price paid by the latter, the interest
thereon after the purchase, and the interest corresponding thereto. However, Valdez refused to
accept the money and to return the sugarcane to the plaintiff. Meanwhile, defendant argued that
the sugar cane was personal property hence not subject to redemption.

ISSUE:
Whether or not future crops to be harvested can be considered a valid object of sale.

HELD:
Yes. A valid sale may be made of a thing, which though not yet actually in existence, is
reasonably certain to come into existence as the natural increment or usual incident of
something already in existence and then belonging to the vendor, and then title will vest in the
buyer the moment the thing comes into existence. (Emerson vs. European Railway Co. ., 67 Me,
387; Cutting vs. Packers Exchange, 21 Am. St. Rep, 63)

A man may sell property of which he is potentially and not actually possessed.

28
LLB 2A

19. LUIS PICHEL VS. PRUDENCIO ALONZO

G.R. No. L-36902 January 30, 1982


111 SCRA 341

FACTS:
Prudencio Alonzo (vendor) executed a deed of sale for the coconut fruits of his land in
Balactasan, Lamitan, Basilan City in favor of Luis Pichel (vendee). The land from which the
subject coconut fruits are derived from was subjected to a cancellation of the award in 1965, due
to the reason of violation of the law that disallows alienation of land. The vendor and his wife
sold to the vendee the fruits of the coconut trees from 1968 to 1976 for consideration of 4,200.
Even during the date of sale, the land was still leased to one Ramon Sua, and it was part of the
agreement of the sale that the sum of 3,650.00 was to be paid by vendor to Ramon Sua as to
release the land.

The RTC decided in favor of the vendor, due to the fact that the deed of sale that was
executed was invalid, due to its supposed violation of R.A. No. 477, in which they equated the
deed of sale executed by the parties as a contract of lease.

ISSUE:
Whether or not the deed of sale is valid

HELD:
Yes, the RTC erred in constructing the deed of sale as a contract of lease. There was no
need on the part of the RTC to interpret the contract, since there was no ambiguity; it merely
contracts the sale of the fruits of the land, not the land itself.

The Supreme Court relied upon the Article 1370 of the Civil Code, regarding the rule on
interpreting contracts. Its interpretation in express form is the preferred. Construction shall be
employed when such literal interpretation is impossible.

The possession of the coconut fruits for 7 years is different from possession of the land,
since the coconut fruits are mere accessories and the land is the principal- a transfer of
accessories and the land is the principal; it is the other way around. The vendor having received
the consideration for the sale of his coconut fruits cannot be allowed to impugn the validity of
the contracts he entered into, to the prejudice of petitioner who contracted in good faith and
consideration. Therefore the judgement of the lower court has been set aside.

29
LLB 2A

20. BUCTON VS. GABAR

G.R. No. L-36359 January 31, 1974


55 SCRA 499

FACTS:
Nicanora Bucton & Josefina Gabar are sisters-in-law. Josefina bought a land from
Villarin on installment basis. Josefina then entered into a verbal agreement with Nicanora that
the latter would pay one-half of the price and would then own one-half of the land. Nicanora
agreed. She paid the initial amount evidenced by a receipt. Bucton then took possession of the
land and made thereon improvements. When a deed of sale was executed in favor of Gabar for
the land, Bucton sought to obtain a separate title but was refused. Bucton filed a case for specific
performance which was granted by the trial court. CA reversed, ruling that the action for specific
performance was based on the receipt of the initial payment which was executed 22 years ago,
thus had already prescribed (10 years prescription for an action based on a written agreement –
Art. 1444). Bucton argues that as owners in actual, continuous and physical possession of the
land since its purchase, their right of action did not prescribe.

ISSUE:
Whether or not Bucton‘s right of action to compel Gabar to execute a formal deed of
conveyance in their favor, has prescribed.

HELD:
No. The real and ultimate basis of petitioners‘ action is their ownership of one-half of the
lot coupled with their possession thereof (not the receipt), which entitles them to a conveyance
of the property.

By the delivery of the possession of the land, the sale was consummated and title was
transferred to Bucton, that the action is actually not for specific performance, since all it seeks is
to quiet title, to remove the cloud cast upon Bucton‘s ownership as a result of Gabar‘s refusal to
recognize the sale made and that as Bucton are in possession of the land, the action is
imprescriptible.

30
LLB 2A

AQUINO, CZARINA ADELENE J.

21. REPUBLIC OF THE PHILIPPINES VS. LICHAUCO, ET AL.

G.R. No. L-21436 August 18, 1972


46 SCRA 305

FACTS:
The Republic of the Philippines, by authority of Republic Act No. 1400, represented by
the Land Tenure Administration, filed on December 2, 1957, in the Court of First Instance of
Pangasinan a complaint against the defendants for the expropriation of the lands of the
"Hacienda El Porvenir", situated in the province of Pangasinan. In the complaint it was alleged,
among other things, that the continuous agrarian conflicts between defendants and their tenants
could be solved only through the purchase of said property by the government. Defendants, in
their amended motion to dismiss, sought the dismissal of the complaint, alleging that the
hacienda was no longer a co-ownership but had been partitioned among the several heirs of
Crisanto Lichauco, herein defendant.

Both the plaintiff and the defendants filed in court an ―Agreement and Joint Motion‖ and
it is stipulated, among other things, that "the plaintiff shall have the option to buy the said
portions in question as adjudicated and pay the corresponding price as in this expropriation
case".

ISSUE:
Whether or not the sale of property yet to be adjudicated by a court is valid and binding

HELD:
Yes. Where it was expressly stipulated that in the event that the difference in area is still
subject of judicial determination is adjusted and/or adjudicated in favor of defendant co-
owners, "the plaintiff shall have the option to buy the said portions in question as adjudicated
and pay the corresponding price as in this expropriation case", said stipulation has the force of
law between the contracting parties and should be complied with.

31
LLB 2A

22. DEL ROSARIO VS. SANTOS, ET AL.

G.R. No. L-46892 September 30, 1981


108 SCRA 43

FACTS:
On January 14, 1974, Amparo del Rosario filed a complaint against the spouses Andres F
Santos and Aurora O. Santos, for specific performance and damages allegedly for failure of the
latter to execute the Deed of Confirmation of Sale of an undivided 20,000 square meters of land,
part of Lot 1, Psu-206650, located at Barrio Sampaloc, Tanay, Rizal, in malicious breach of a
Deed of Sale dated September 28, 1964.

Amparo del Rosario died on September 21, 1980 so that she is now substituted by the
heirs named in her will. Andres F. Santos also died, on September 5, 1980, and he is substituted
by his heirs.

Plaintiff claimed fulfillment of the conditions for the execution of the Deed of
Confirmation of Sale, namely: the release of the title of the lot and the approval of the
subdivision plan of said lot by the Land Registration Commission. The following titles with their
corresponding land areas are: TCT 203580 - 30,205 sq.m.; TCT 203581 - 19, 790 sq.m.; and
TCT 167568 - 40,775 sq.m.

In a motion to dismiss, defendants pleaded, inter alia, the defenses of lack of jurisdiction
of the court a quo over the subject of the action and lack of cause of action. They likewise set up
the defense of prescription allegedly because the deed of sale was dated September 28, 1964 and
supposedly ratified October 1, 1964 but the complaint was filed only on January 14, 1974, a lapse
of more than nine years when it should have been filed within five years from 1964 in
accordance with Art. 1149, New Civil Code. Defendant also claimed that the demand set forth in
the complaint has been waived, abandoned or otherwise extinguished. It is alleged that the deed
of sale was ―only an accommodation graciously extended, out of close friendship between the
defendants and the plaintiff and her casual business partner in the buy and sell of real estate,
one Erlinda Cortez. Defendants characterized the said deed of sale as a mere tentative
agreement which was never intended nor meant to be ratified by and acknowledged before a
notary public. In fact, they claimed that they never appeared before Notary Public Florencio
Landrito. Finally, defendants alleged that the claim on which the action or suit is founded is
unenforceable under the statute of frauds and that the cause or object of the contract did not
exist at the time of the transaction.

Hence, this appeal as only questions of law are involved.


ISSUE:
Whether or not the sale is valid as to the cause or object of the contract.

32
LLB 2A

HELD:
Supreme Court held that the execution of the deed of sale is valid notwithstanding the
lack of any title to the lot by appellants at the time of execution of the deed of sale in favor of
appellee as there can be a sale of an expected thing in accordance with Article 1461 of the New
Civil Code:

Art. 1461. Things having a potential existence may be the object of the contract of sale.

The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition
that the thing will come into existence.

The sale of a vain hope or expectancy is void. The case at bar is not a case of a vain hope
or expectancy which is void under the law. The expectant right came into existence or
materialized for the appellants actually derived titles from Lot 1 which subsequently became the
object of subdivision.

Further, a sale of real property to be enforceable need not be notarized. As correctly


pointed out by the court a quo, the alleged false notarization of the deed of sale is of no
consequence. For a sale of real property or of an interest therein to be enforceable under the
Statute of Frauds, it is enough that it be in writing. It need not be notarized. But the vendee may
avail of the right under Article 1357 of the New Civil Code to compel the vendor to observe the
form required by law in order that the instrument may be registered in the Registry of Deeds.
Hence, the due execution and genuineness of the deed of sale are not really in issue in this case.

As to the appellants‘ allegation that the appellee‘s claim is barred by prescription, the
ruling of the trial court that only seven years and six months of the ten-year prescription period
provided under Arts. 1144 and 155 in cases of actions for specific performance of the written
contract of sale had elapsed and that the action had not yet prescribed, as in accordance with
law. This Court affirmed.

33
LLB 2A

23. TIBURCIO LUTERO VS. SIULIONG & CO.

G.R. No. 31125 January 21, 1930


54 PHIL 272

FACTS:
On June 30, 1919, the plaintiff Tiburcio Lutero and the defendant Siuliong & Co. entered
into a contract (Exhibit A).

On August 21, 1919, the same parties entered into another contract (Exhibit C).

Under contract Exhibit A, the plaintiff had received from the defendant in cash, goods,
and other expenses the amount of P4,606.15. Having delivered 337 piculs and 57 cates of
muscovado sugar, the total value of which is P3,405.58, he had still a balance of P1,199.87 to
pay, and 162 piculs and 44 cates of sugar to deliver.

Under contract Exhibit C, the plaintiff received from the defendant in cash, goods, and
other expenses the total sum of P6,862. Having delivered 319 piculs and 77 cates of muscovado
sugar, the full value whereof is P3,822.44, he had still a balance of P3,031.54 to pay, and 490
piculs and 24 cates of sugar to deliver.

In accordance with contracts Exhibits A and C, the plaintiff bound himself to pay in cash,
according to the current market price, for the undelivered difference.

It is contended by the plaintiff-appellant that the defendant having advanced money to


the plaintiff upon both contracts, said money was given as a loan payable in sugar, which,
according to the law, must be computed on the basis of the market price at the time of delivery;
and that as the maximum price of sugar on the respective dates of delivery was P30, and the
price stipulated in said contracts was not even one-half of the market price, said contracts are
usurious.

ISSUE:
(1) Whether or not the contracts Exhibits A and C, entered into by and between
Lutero and Siuliong & Co. are for usurious loans of money payable in sugar;
(2) Whether or not the plaintiff must pay to the defendant for the sugar which the
former failed to deliver in accordance with the aforesaid contracts.

HELD:
The sale of sugar to be delivered at a future definite time and for a fixed price, a part of
which is advanced by the purchaser to the vendor, is neither usurious nor illegal even though
said price should prove to be much less than the market price on the date of delivery.

The fact that the purchaser does not bring suit against the vendor immediately upon the
latter‘s default in the delivery of the sugar sold, and that he allows six years to elapse, does not
deprive him of his right to bring such action on account of laches, inasmuch as such actions,
arising from a written contract, does not prescribe until after ten years from the time the cause
of action arises (Sec. 43, Code of Civil Procedure).

The purchaser is entitled to damages sustained on account of the vendor‘s default, said
damages consisting in the difference between the price stipulated and the market price of the
goods at the time delivery thereof should have been made.

34
LLB 2A

24. KER & CO., LTD. VS JOSE B. LINGAD

G.R. No. L-20871 April 30, 1971


38 SCRA 524

FACTS:
Petitioner was assessed by then Commissioner of Internal Revenue Domingo the sum of
P20,272.33 as the commercial broker‘s percentage, tax, surcharge, and compromise penalty
for the period from July 1, 1949 to December 31, 1953.

There was a request on the part of the petitioner for the cancellation of such assessment,
which request was turned down.

As a result, it filed a petition for review with Court of Tax Appeals.

ISSUE:
Whether or not the relationship thus created is one of vendor and vendee (contract of
sale) or of broker and principal (contract of agency).

HELD:
The difficulty in distinguishing between the contracts of sale and the creation of an
agency to sell has led to the establishment of rules by the application of which this difficulty may
be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or
promised is the essence of sale. If such transfer puts the transferee in the attitude or position of
an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely
as an agent who must account for the proceeds of a resale, the transaction is a sale; while the
essence of an agency to sell is the delivery to an agent, not as his property, but as the property of
the principal, who remains the owner and has the right to control sales, fix the price, and terms,
demand and receive the proceeds less the agent‘s commission upon sales made.

SC then ruled that the relationship is that of a broker and principal (contract of agency).

National Internal Revenue Code defined commercial broker as all persons, other than
importer, manufacturers, producers or bona fide employees who, for compensation or profit,
sell or bring about sales or purchase of merchandise for other persons or bring proposed buyers
and sellers together and also includes commission merchants such as Ker in this case.

The mere disclaimer in a contract that an entity like petitioner is not ―the agent or legal
representative xxx for any purpose whatsoever‖ does not suffice to yield the conclusion that it is
an independent merchant if the control over the goods for resale of the goods consigned is
pervasive in character.
Thus, SC rejected Ker‘s petition to reverse decision of CTA.

35
LLB 2A

BAUTISTA, RITCHELL F .

25. INCHAUSTI AND CO. VS. ELLIS CROMWELL

G.R. No. L-6584 October 16, 1911


20 Phil 345

FACTS:
Inchausti is engaged in the business of buying and selling at wholesale hemp. It is
customary to sell hemp in bales. The operation of bailing hemp is designated among merchants
by the word ―prensaje‖.

In all sales of hemp by the plaintiff firm, the price is quoted to the buyer at so much per
picul, no mention being made of bailing; but with the tacit understanding, unless otherwise
expressly agreed, that the hemp will be delivered in bales and that, according to the custom
prevailing among hemp merchants and dealers in the Philippine Islands, a charge, is to be made
against the buyer under the denomination of ―prensaje‖. This charge is made in the same
manner in all cases, even when the operation of bailing was performed by the plaintiff or by its
principal long before the contract of sale was made.

Plaintiff Inchausti has always paid to the defendant Collector of Internal Revenue or to
his predecessor in the office of the Collector of Internal Revenue the tax collectible upon the
selling price expressly agreed upon for all hemp sold by the plaintiff firm, but has not, until
compelled to do so, paid the said tax upon sums received from the purchaser of such hemp
under the denomination of ―prensaje‖.

Subsequently, the defendant acting in his official capacity as Collector of Internal


Revenue of the Philippine Islands, made demand in writing upon plaintiff frim for the payment
as tax on sums of money collected from purchasers of hemp under the denomination of
―prensaje.‖

The plaintiff firm paid to the defendant under protest that the tax for the collected
money under the denomination of ―prensaje‖ is illegal upon the ground that said charge does
not constitute a part of the selling price of the hemp, but is a charge made for the service of
baling the hemp.

It is the contention of the defendant that the said charge made under the denomination
of ―prensaje‖ is in truth and in fact a part of the gross value of the hemp sold and of its actual
selling price.

ISSUE:
Whether or not the baled hemp constitute a contract of sale

HELD:
The distinction between a contract of sale and one for work, labor, and materials is tested
by the inquiry whether the thing transferred is one no in existence and which never would have
existed but for the order of the party desiring to acquire it, or a thing which would have existed
and been the subject of sale to some other person, even if the order had not been given. It is
clear that in the case at bar the hemp was in existence in baled form before the agreements of
sale were made, or, at least, would have been in existence even if none of the individual sales

36
LLB 2A

here in question had been consummated. It would have been baled, nevertheless, for sale to
someone else, since, according to the agreed statement of facts, it is customary to sell hemp in
bales. When a person stipulates for the future sale of articles which he is habitually making, and
which at the time are not made or finished, it is essentially a contract of sale and not a contract
for labor. It is otherwise when the article is made pursuant to agreement. Where labor is
employed on the materials of the seller he cannot maintain an action for work and labor. If the
article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale
to anyone, and no change or modification of it is made at the defendant's request, it is a contract
of sale, even though it may be entirely made after, and in consequence of, the defendant's order
for it.

A contract for the sale of an article which the vendor in the ordinary course of his
business manufactures or procures for the general market, whether the same is on hand at the
time or not, is a contract for the sale of goods to which the statute of frauds applies. But if the
goods are to be manufactured especially for the purchaser and upon his special order, and not
for the general market, the case is not within the statute.

It is clear to our minds that in the case at bar the baling was performed for the general
market and was not something done by plaintiff which was a result of any peculiar wording of
the particular contract between him and his vendee. It is undoubted that the plaintiff prepared
his hemp for the general market.

37
LLB 2A

26. MAJARABAS, ET. AL. VS. LEONARDO

G.R. No. 4348 September 12, 1908


11 Phil 272

FACTS:
The plaintiff had rendered services as wet nurse and governess to an infant daughter of
the defendant by virtue of a verbal agreement entered into with the now deceased parents of the
defendant, who, to use the language of the complaint, " promised to liberally compensate the
services of the plaintiff, providing the maintenance of herself, her husband and their child,
during all the time that the services of the plaintiff where required as such wet nurse and
governess."

It is maintained in the demurrer that the obligation contracted by the parents of the
defendant was to support the plaintiff and her family, and that the reason of the death of the
former, as stated in the complaint, under the provision of article 150 of the Civil Code, the said
obligation has been extinguished in fact and in law, and the plaintiff cannot therefore, bring suit
for compliance herewith. The demurrer was overruled by the court below on the ground that
aforesaid agreement constituted a contract for services, although the price was to be measured
by the cost of the maintenance of the plaintiff. This ruling has been assigned as error by the
appellant in his brief.

ISSUE:
Whether or not a contract of services exist although no specified or fixed price was
stipulated

HELD:
Yes. It is not necessary that the certainty of the price be actual or determined at the time
of executing the contract, but that it is sufficient compliance with the law if the same can be
determined by the speculations of the contract made by the party thereto. In the present case the
contracting parties fixed the maintenance of the plaintiff and her family as the price for the
services required of her. Said maintenance is the specific and determinate thing that in its turn
fixes the price, inasmuch as its cost determines the price according to the agreement of the
parties to the contract. There might be a question as to the actual cost of the plaintiff‘s
maintenance, but this is a matter of fact which in such a case would have to be proven. Be it as it
may, whatever might be the cost of said subsistence, it would constitute the price for the services
rendered by the plaintiff; said price is unquestionably the specified one since it refers to a
specified thing designated by the parties as the rate regulating the amount thereof. Therefore,
the appellant's allegation is unfounded, and the order of the court below overruling the
demurrer must be affirmed.

38
LLB 2A

27. MITSUI BUSSAN KAISHA VS. THE MANILA E. R. AND L. CO.

G.R. No. L-13753 February 15, 1919


39 Phil 624

FACTS:
Prior to December 23, 1914, the plaintiff corporation, Mitsui Bussan Kaisha, had
contracted to sell large quantities of coal to the defendant, the Manila Electric Railroad and
Light Company. Deliveries under this contract were made from time to time to meet the
requirements of the defendant company from shipments arriving from Japan. The basic price
fixed in the contract was P9.45 per long ton, but it was stipulated that the price was subject to
modification "in proportion to variations in calories and ash content, and not otherwise." This
means of course and ash contend, and not otherwise." This means of course that the price could
be made certain by the application of known factors.

While extensive deliveries were still to be made under the contract above referred to, the
Legislature, by Act No. 2432, passed December 23, 1914, and imposed a specific tax of one pose
per metric ton on coal. Shortly thereafter this Act was amended in certain respects by Act No.
2445.

In the period embracing the months from March to October, inclusive, of the year 1915,
the plaintiff company brought to Manila from Japan large quantities of coal amounting in all to
11,874.75 metric tons for delivery to the defendant company upon the contract above-
mentioned. In order to effect the entrance of said coal, through the Bureau of Customs, at the
port of Manila, it was necessary for the plaintiff company to pay the new internal-revenue tax
imposed by Acts Nos. 2432 and 2445; and it did in fact pay in satisfaction of said tax the
aggregate sum of P11,874.75. The plaintiff then demanded reimbursement of said sum from the
defendant, basing its claim upon the provision from Act No. 2445. The defendant refused to
accede to this demand, and the present action was instituted by the plaintiff to recover the
amount so paid out by it. From judgment entered in favor of the plaintiff the defendant has
appealed.

ISSUE:
Whether or not the parties have already agreed as to a fixed price when a contract
entered into states "in proportion to variations in calories and ash content and not otherwise"

HELD:
Yes. The stipulation means that the price could be made certain by the application of
known factors (Civil Code, art. 1447), and for the purposes of this case it may be assumed that
the price was fixed at P9.45 per long ton. This provision has exclusive reference to the quality of
the coal delivered, and has no other purpose than to supply a means of ascertaining the value of
the coal by determining its utility combustion.

39
LLB 2A

28. E. C. MCCULLOUGH VS. R. AENLLE & CO.

G.R. No. 1300 February 3, 1904


3 Phil 285

FACTS:
The plaintiff and defendant entered into an agreement August 27, 1901, for the purchase
by the plaintiff and sale by the defendant of certain real property, the tobacco and cigarette
factory known as "La Maria Cristina," said sale including the trade-mark "La Maria Cristina,"
which was been duly registered, the stock of tobacco in leaf and manufacture, machinery, labels,
wrappers, furniture, fixtures, and everything else belonging to the said factory, as shown in the
inventory to be drawn up for the purpose of making formal delivery of the said property.

In this inventory the value of each individual piece of furniture will be fixed at 10 per
cent below the price shown in the partnership inventory. The machinery and cost of installing
the same will also be fixed at 10 per cent below its invoice price. The value of the tobacco, both in
leaf and in process of manufacture, boxes, labels, wrappers, cigars, cigarettes, and paper
mouthpieces for cigarettes will be fixed at the invoice price. The value of tobacco made up into
cigars will be fixed in accordance with the price list of the partnership, less 20 per cent discount.
The cigars will be inventoried at the prices in the same list, less a discount of 35 per cent.

ISSUE:
Whether or not under the terms of the agreement, the price of the property sold be
considered certain

HELD:
Yes. The articles which were the subject of the sale were definitely and finally agreed
upon. The appellee agreed to buy, among other things, all of the leaf tobacco in the factory. This
was sufficient description of the thing sold. The price for each article was fixed. It is true that the
price of this tobacco, for example, was not stated in dollars and cents in the contract. But by its
terms the appellee agreed to pay therefor the amount named in the invoices then in existence.
The price could be made certain by a mere reference to those invoices. By the instrument of
August 27 the contract was perfected and thereafter each party could compel the other to fulfill
it. By its terms the appellee was bound to take all the leaf tobacco then belonging to the factory
and to pay therefor the prices named in the invoices. This obligation was absolute and did not
depend at all upon the quality of the tobacco or its value. The appellee did not, in this contract,
reserve the right to reject the tobacco if it were not of a specific crop. He did not buy tobacco of a
particular kind, class, or quality. He bought all the tobacco which the appellant owned and
agreed to pay for it what the defendant had paid for it.

40
LLB 2A

29. ZACARIAS ROBLES VS. LIZARRAGA HERMANOS

G.R. No. L-26173 July 13, 1927


50 Phil 387

FACTS:
It appears that the hacienda "Nahalinan," belonged originally to the spouses Zacarias
Robles and Anastacia de la Rama, parents of the present plaintiff, Zacarias Robles. Upon the
death of Zacarias Robles Sr., his widow Anastacia de la Rama was appointed administrator of his
estate; and on May 20, 1913, as widow and administrator, she leased the hacienda to the
plaintiff, Zacarias Robles, for the period of six years beginning at the end of the milling season in
May, 1915, and terminating at the end of the milling season in May, 1920. It was stipulated that
any permanent improvements necessary to the cultivation and exploitation of the hacienda
should be made at the expense of the lessee without right to indemnity at the end of the term. As
the place was in a run-down state, and it was foreseen that the lessee would be put to much
expense in bringing the property to its productive capacity, the annual rent was fixed at the
moderate amount of P2,000 per annum.

The plaintiff made various improvements and additions to the plant. The firm of
Lizarraga Hermanos was well aware of the nature and extent of these improvements.

When the plaintiff‘s mother died, defendant came forward with a proposal to buy the
heirs‘ portion of the property. In consideration that the plaintiff should shorten the term of his
lease to the extent stated, the defendant agreed to pay him the value of all betterments that he
had made on the land and furthermore to purchase from him all that belonged to him personally
on the land. The plaintiff agreed to this.

On the ensuing instrument made, no reference was made to the surrender of the
plaintiff‘s rights as lessee, except in fixing the date when the lease should end; nor is anything
said concerning the improvements which the plaintiff had placed. At the same time the promise
of the defendant to compensate for him for the improvements was wanting. Accordingly, the
representative of the defendant explained that this was unnecessary in view of the confidence
existing between the parties.

On the part of the defendant it was claimed that the agreement with respect to
compensating the plaintiff for improvements and other things was never in fact made.

ISSUE:
Whether or not the stipulation for appraisal and agreement as to the price was a
suspensive condition for the enforceability of the contract

HELD:
No. In this connection it is claimed that the true meaning of the proven verbal agreement
is that, in case the parties should fail to agree upon the price, after an appraisal of the property,
the agreement would not be binding; in other words, that the stipulation for appraisal and
agreement as to the price was a suspensive condition in the contract: and since the parties have
never arrived at any agreement on the price (except as to the carabao), it is contended that the
obligation of the defendant has never become effective. We are of the opinion that the
stipulation with respect to the appraisal of the property did not create a suspensive condition.
The true sense of the contract evidently was that the defendant would take over the movables
and the improvements at an appraised valuation, and the defendant obligated itself to promote

41
LLB 2A

the appraisal in good faith. As the defendant partially frustrated the appraisal, it violated a term
of the contract and made itself liable for the true value of the things contracted about; as such
value may be established in the usual course of proof. Furthermore, it must occur to any one, as
the trial judge pointed out, that an unjust enrichment of the defendant would result from
allowing it to appropriate the movables without compensating the plaintiff thereof.

42
LLB 2A

BESARES, ALYANNA MARIZ C.

30. ASKAY VS. COSALAN

GR No. 21943 September 15, 1924


46 Phil. 179

FACTS:
Askay, an illiterate Igorrote between 70 and 80 years of age, residing in the municipal
district of Tublay, Province of Benguet, who at various times has been the owner of mining
property. The defendant is Fernando A. Cosalan, the nephew by marriage of Askay, and
municipal president of Tublay, who likewise has been interested along with his uncle in mining
enterprises.

About 1907, Askay obtained title to the Pet Kel Mineral Claim located in Tublay,
Benguet. On November 23, 1914, if we are to accept defendant's Exhibit 1, Askay sold this claim
to Cosalan. Nine years later, in 1923, Askay instituted action in the Court of First Instance of
Benguet to have the sale of the Pet Kel Mineral Claim adhered null, to secure possession of the
mineral claim, and to obtain damages from the defendant in the amount of P10,500. Following
the presentation of various pleadings including the answer of the defendant, and following trial
before Judge of First Instance Harvey, judgment was rendered dismissing the complaint and
absolving the defendant from the same, with costs against the plaintiff. On being informed of the
judgment of the trial court, plaintiff attacked it on two grounds: The first, jurisdiction, and the
second, formal. Both motions were denied and an appeal was perfected.

ISSUE:
Whether or not the deed of sale can be cancelled based on the plaintiff‘s claim

HELD:
No, in our judgment he has failed to establish his claim. Fraud must be both alleged and
proved. One fact exists in plaintiff's favor, and this is the age and ignorance of the plaintiff who
could be easily duped by the defendant, a man of greater intelligence. Another fact is the
inadequacy of the consideration for the transfer which, according to the conveyance, consisted
of P1 and other valuable consideration, and which, according to the oral testimony, in reality
consisted of P107 in cash, a bill fold, one sheet, one cow, and two carabaos. Gross inadequacy
naturally suggests fraud and is some evidence thereof, so that it may be sufficient to show it
when taken in connection with other circumstances, such as ignorance or the fact that one of the
parties has an advantage over the other. But the fact that the bargain was a hard one, coupled
with mere inadequacy of price when both parties are in a position to form an independent
judgment concerning the transaction, is not a sufficient ground for the cancellation of a contract.

43
LLB 2A

31. WARNER, BARNES & CO., LIMITED VS. SANTOS

G.R. No. L-4932 November 16, 1909


14 Phil. 446

FACTS:
Plaintiff brought an action for the purpose of foreclosing a mortgage. Later the cause was
brought on for trial, and after hearing the evidence adduced during the trial, the lower court
rendered a judgment in favor of the plaintiff. The judgment of the lower court further provided
that if the defendant failed to pay the amount of aid judgment that an execution might issue
against the property. On the 6th day of March, 1908, upon the petition of the plaintiff, the
amount of said judgment not having been paid, judge of said court, issued an order of execution,
directing the sheriff to sell the property covered by the said mortgage. The mortgaged property,
under said execution, was duly sold on the 10th day of April, 1908. On the 21st day of April,
1908, the defendant appeared in the court and objected to the confirmation of the sale upon the
ground that there was another person who would pay the sum of P5,500 for the property sold.
The return of the sheriff shows that he sold the property for the sum of P4,715. The defendant in
said motion requested that the property be put up and sold again. It will be noticed that the
defendant appeared and objected to the confirmation of the sale eleven days after the sale had
been consummated, and so far as the record discloses this was his first appearance during the
pendency of the cause in the lower court. On the 21st day of April, 1908, after duly considering
the objection made by the defendant, the lower court overruled the said objection and confirmed
the sale of said property.

ISSUE:
Whether or not the objection of the defendant to the confirmation of the sale constituted
a sufficient cause for refusing to confirm such sale.

HELD:
The basis of the objection of the defendant in the lower court was that he was able to
obtain from another person about P800 more than the sheriff received from the person to whom
he sold said property. This person was not discovered by the defendant until ten or twelve days
after the sale took place. No objection is made by the defendant that the sale was not duly
advertised or that there was any collusion on the part of the sheriff or the other parties
interested in the sale. It is the duty of the court, of course, in the sale of the property under the
conditions of the present case, to obtain as much money for the judgment debtor out of his
property as it is possible. This duty on the part of the court, however, does not justify negligent
delay in an attempt to protect his rights on the part of the said judgment debtor.

In the present case the defendant made no attempt to defend his rights until some days
after judgment, execution, and sale. The Supreme Court of the United States has held in
numerous decisions, that a sale under foreclosure proceedings would not be set aside upon the
ground that the sheriff did not receive as much money as he might have received, providing all
of the proceedings were valid and regular, unless the sale was made for a sum grossly
inadequate in comparison with the real value of the property.

44
LLB 2A

32. PHILIPPINE NATIONAL BANK VS. GONZALEZ,

November 23, 1921


45 Phil. 693

FACTS:
November 23, 1921, Philippine National Bank commenced a suit against Manuel Ernesto
Gonzales to foreclose a real mortgage made to secure a promissory note for P15,000. March 17,
1922, the plaintiff bank filed an amended complaint against the same defendant, in which the
original was reproduced, to foreclose a second mortgage for P15,000 upon the same land
described in the original complaint. The bank filed for default and the court subsequently
declared defendant in default. On January 11, 1923, an execution was issued for the sale of the
real property described in the mortgages to satisfy the amount of the judgment. On August 28,
1922, the total of the judgment in the first cause of action, including the interest, was P17,313.59,
and in the second mortgage, on the same date, it was P17,755. February 16, 1923, the sheriff filed
a motion to confirm the sale to Lopez and the court made an order duly conforming the sale.
April 5, 1923, the defendant Gonzales, through his then attorney, filed a motion for
reconsideration of the order entered in this case

April 16, 1923, the court rendered a decision in which he found as a fact that all of the
necessary requisites for the notice of sale had been duly complied with but that it appeared that
the value of the land, which was sold to the appellant, was P45,940, for which he did only
15,000, and on account of this difference in value for taxation purposes and the value for which
the land was sold, the court set aside the confirmation, and ordered a resale "thereby giving the
aforesaid defendant a greater opportunity in order that he may obtain a better price, if possible,
from the sale of the aforesaid lands." From that order, Lopez appeals, assigning as error that
"the trial court erred in setting aside, without good cause having been shown, the prior order
confirming the judicial sale, and ordering the resale of the land in question.

ISSUE:
Whether or not the trial court erred in setting aside the decision.

HELD:
It will be noted that in the first instance, the trial court confirmed the sale on the motion
of the sheriff, and that in the last order, he specifically found as a fact that there had been a
compliance of all of the essential requisites for a sale on execution, and that the order,
confirming the sale, was set aside upon the sole ground of inadequacy of consideration. It will
also be noted that in the motion to set aside the sale, the only ground specified is "that order is
not in accordance with law." In other words, in the motion itself no grounds are specifically set
forth or alleged as to why the sale should be set aside, and that in the body of the motion, it is
not claimed that the land was sold for an inadequate consideration.
Not a witness was called to testify as to the value of the land. In other words, the only
evidence before the court as to value was the certificate of the deputy municipal treasurer, and
that was to the effect that the four pieces of land therein described had an assessed valuation of
P45,940. Neither was there any showing made nor any evidence presented, that, in the event the
property in question was resold, that it would sell for more than P15,000. That as to the land in
question, it appears of record that on August 28, 1922, the amount of the bank's judgment was
P17,313.59. It also appears that the bank was personally represented at the sale, and that it
refused to bid more than P15,000. For such reason, the property was sold to Lopez, as the
highest bidder. In other words, it appears of record that the bank itself consented and agreed to
the sale of the property in question for more than P3,000 less than the amount of its claim.

45
LLB 2A

33. THE DIRECTOR OF LANDS VS. ABARCA

G.R. No. L-38581 December 18, 1934


61 Phil. 70

Facts:
The lot now in question was the subject of litigation between Datu Bualan and his co-
claimants, on the one hand, and Ciriaco Lizada, on the other. Juan A. Sarenas and Domingo
Braganza were the attorneys for Datu Bualan and his co-claimants in that suit, wherein a
judgment was rendered declaring Datu Bualan and his co-claimants the owners of the land
involved in the litigation. Subsequently, a controversy arose between the Bagobos and their
attorneys as to the amount of fees due the latter, whereupon the attorneys took possession of the
property now in question. Action was brought by the Bagobos against their former attorneys for
the recovery of the land. In this action (civil case No. 607) judgment was rendered ordering the
attorneys to return the property seized by them, and requiring the Bagobos to pay their former
attorneys the sum of P6,000 as fees. As a result of this judgment Datu Bualan and his co-
claimants paid Sarenas and Braganza the sum of P5,126.13. They also paid to the municipal
treasurer of Davao in the name of Sarenas and Braganza, for taxes and penalties due on the
property in the year 1926, while the same was in the possession of the latter, the sum of
P1,035.87. The Bagobos assumed that, by these payments which amounted in all to P6,162, the
judgment rendered against them for P6,000 together with interests due thereon, was fully
satisfied.

Claiming that the sum paid to the municipal treasurer of Davao should not be credited
on the amount of the judgment obtained by them, Sarenas and Braganza caused the clerk of the
court to issue a writ of execution on the said judgment. By reason of the writ of execution so
issued, the sheriff levied on the property here in question and sold it to Sarenas and Braganza
for the sum of P877.25. Upon the failure of the Bagobos to redeem the property, they filed their
claim in the present cadastral case, alleging that they were the absolute owners of lot No. 700.

Issue:
Whether or not the sum paid by the Bagobos to the municipal treasurer should be
credited.

Held:
Yes, it should be credited. In fairness and equity, which after all are the true aims of the
law, the amount paid by Datu Bualan and his co-claimants for taxes and penalties due on the
contested property should be credited on the judgment obtained by Sarenas and Braganza in
civil case No. 607. Such taxes and penalties accrued while the property was in that possession
under a claim of ownership. It follows that the error assigned by Datu Bualan and his co-
claimants against the judgment below, to the effect that the lower court erred in subjecting the
property sought to be registered to a lien in favor of Sarenas and Braganza for P877.25 with
interests, must be sustained.

46
LLB 2A

34. DE LEON VS. SALVADOR

G.R. No. L-30871 December 28, 1970


36 SCRA 567

FACTS:
A judgment for P35,000.00-actual, moral and exemplary damages and a writ of
execution was obtained by Enrique de Leon against private respondent Eusebio Bernabe in Civil
Case No. C-189 of Branch XII of the Rizal court of first instance, Caloocan City branch presided
by Judge Fernando A. Cruz. The city sheriff sold the said properties to herein petitioner, as the
highest bidder for the total sum of P30,194.00. The sheriff executed the corresponding
certificate of sale in her favor, which was duly registered on February 21, 1967 with the Caloocan
City register of deeds. On February 7, 1968, Bernabe filed a separate civil action for the
annulment of execution sale. This second case, instead of being referred to Judge Cruz presiding
over Branch XII which had issued the writ of execution, was assigned to Branch XIV, the other
Caloocan City branch of the Rizal Court of First Instance presided by Judge Serafin Salvador,
who issued on February 19, 1968 a writ of preliminary injunction enjoining therein defendants,
particularly the sheriff to desist "from taking further proceedings against the properties of the
plaintiff [Bernabe] that were sold at public auction on February 14, 1967, and from issuing a
sheriff‘s deed of sale at the expiration of the period of redemption on February 21, 1968 in favor
of defendant Aurora P. de Leon." Aurora moved to dissolve the injunction and to dismiss this
second case on the grounds of laches and lack of jurisdiction of Judge Salvador‘s court to
interfere with the execution proceedings pending in the first case before Judge Cruz‘ court which
is of equal and co-ordinate jurisdiction.

ISSUE:
Whether or not Branch XIV presided by Judge Salvador has exclusive jurisdiction to set
aside for alleged irregularities the execution sale made by Judge Cruz‘s court.

HELD:
It is patent that such exclusive jurisdiction was vested in Judge Cruz‘ court. Having
acquired jurisdiction over Case No. C-189 and rendered judgment that had become final and
executory, it retained jurisdiction over its judgment, to the exclusion of all other co-ordinate
courts for its execution and all incidents thereof, and to control, in furtherance of justice, the
conduct of its ministerial officers in connection therewith. 2 Execution of its judgment having
been carried out by the sheriff with the levy and sale of the judgment debtor‘s properties,
Eusebio Bernabe as judgment debtor could not in the guise of a new and separate second action
(Case No. 1217) ask another court of coordinate jurisdiction, Judge Salvador‘s court, to interfere
by injunction with the execution proceedings, to set them aside and to order the holding of a
new execution sale — instead of seeking such relief by proper motion and application from
Judge Cruz‘ court which had exclusive jurisdiction over the execution proceedings and the
properties sold at the execution sale. As early as 1922, in Cabigao v. del Rosario, 3 this Court laid
down the doctrine that "no court has power to interfere by injunction with the judgments or
decrees of a court of concurrent or coordinate jurisdiction having power to grant the relief
sought by injunction," pointing out that" the various branches of the Court of First Instance of
Manila are in a sense coordinate courts and to allow them to interfere with each other‘s
judgments or decrees by injunctions would obviously lead to confusion and might seriously
hinder the administration of justice.

47
LLB 2A

BINANG, IBNOHAJAR L.

35. BORROMEO VS. BORROMEO, ET AL.

G.R. No. L-18498 March 30, 1967


52 Off. Gaz. 1392

FACTS:
Vito Borromeo, a widower and permanent resident of the City of Cebu, died on March 13,
1952, at the age of 88 years, without forced heirs but leaving extensive properties in the province
of Cebu.

Of the same year, Jose H. Junquera, filed with the Court of First Instance of said
province a petition for the probate of a one page document as the last will left by said deceased,
devising all his properties to Tomas, Fortunato and Amelia, all surnamed Borromeo, in equal
and undivided shares, and designating Junquera as executor thereof (Special Proceedings No.
916-R). The document was dated May 17, 1946, drafted in Spanish, and allegedly signed, and
thumb marked by said deceased, in the presence of Dr. Cornelio G. Gandionco, Eusebio
Cabiluna and Filiberto Leonardo as attesting witnesses. On June 14, 1952, the probate court
appointed Junquera as special administrator of the estate.

On November 14 of the same year, Teofilo Borromeo filed an opposition to the probate of
the will based on the following grounds: (1) that the formalities required by law had not been
complied with; (2) that the testator was mentally incapable of making a will at the time of its
execution; (3) that the will was procured by undue and improper influence, on the part of the
beneficiaries and/or some other person; (4) that the signature of the testator was procured by
fraud; and (5) that the testator acted by mistake or did not intend the instrument he signed to be
his will at the time he affixed his signature thereto.

On May 28, 1960, the Court rendered a decision denying the probate of the will and
declaring itself without jurisdiction to pass upon the question of ownership over the thirteen lots
which the Cebu Arcade etc. claimed as its own. All the parties appealed — the proponents of the
will from the portion of the decision denying probate, and the oppositors and the Republic of the
Philippines, from that portion thereof where the court refused to decide the question of
ownership of the thirteen lots already mentioned.

ISSUE:
Whether or not the evidence of record is sufficient to prove the due execution of the will
in question.

HELD:
It must be conceded that in this jurisdiction, the subscribing witnesses to a contested will
are regarded as the best witnesses in connection with its due execution. It is similarly true,
however, that to deserve full credit, their test, testimony must be reasonable and unbiased, and
that, as in the case of any other witness, their testimony may be overcome by any competent
evidence — direct or circumstantial (Board, etc. vs. Shasser, 10 Kan. 585, 168 Pac. 836 [1917]).

It is also an appellate practice of long standing in this jurisdiction to accord great weight
to the findings of fact made by the trial court and not to disturb them unless said court had
failed to consider material facts and circumstances or had given undue weight to, or

48
LLB 2A

misconstrued the testimony of particular witnesses, the reason for this being that the trial judge
had full opportunity to hear and observe the conduct and demeanor of the witnesses while
testifying and was consequently in a better position than the reviewing court to determine the
question of their credibility. While this is not applicable to the present case because His Honor,
the judge who penned the appealed decision was not the same judge before whom the evidence
of the parties was presented, it must be stated that, judging from the carefully written decision
under review, it was only after a thorough study of the record that His Honor arrived at the
conclusion that the subscribing witnesses do not appear to be wholly disinterested persons.

While it is true that the testimony of these subscribing witnesses was given around eight
years after the alleged execution of the questioned will, still we believe that the transaction in
which they claim to have taken an important part is of such character and importance that it
cannot be a very easy matter for anyone of them to have a hazy recollection of the number of
copies signed by the testator and by them. Stranger still would it be for them to say something in
open contradiction with the reality on the matter. If, as may be clearly deduced from their
testimony.

49
LLB 2A

36. CRUZADO VS. BUSTOS AND ESCALLER

G.R. No. L-10244 February 29, 1916


34 PHIL 17

FACTS:
Agapito Cruzado was a poor man living in Pampanga, he had a job in court but was still
not enough to support his family. He aspired to hold the office of procurador in the CFI of
Pampanga but he was unable to give the required bond, an indispensable condition for his
appointment.

Since Cruzado was friends with Bustos, a rich woman in their place. He begged the latter
to simulate a mortgage deed of a certain property and have it executed in court in his favor only
to pose that he has real property to enable him to qualify to such position of procurador. In
truth, the said mortgage was a front and fraudulent but was effected by making a pretended
contract which bore the appearance of truth.

It is unquestionable that the contract of sale was perfect and binding upon both
contracting parties since their names both appear in that instrument to have agreed upon the
thing sold. But it is also undeniable that the said contract was not consummated. (1) Cruzado did
not pay the purchase price of P2, 200 (2) He never took possession of the land apparently sold
in the said deed. All that the vendee did was to pledge the land as a security for the faithful
discharge of the duties of his office.

Santiago Cruzado, the son, brought an action for recovery of possession, founded on the
right transmitted to him by his father at his death – a right arising from the said simulated deed
of sale of the land in question.

ISSUE:
Whether or not the said deed of sale was simulated, not with the intent to defraud 3rd
persons, but for the sole purpose of making it appear that Agapito Cruzado has real property

Whether or not the rights of transmission acquired by Santiago Cruzado from the death
of his father, pertaining to the said land in contest is valid and without defect

HELD:
Under the law, the contract of purchase and sale, as consensual, is perfected by consent
as to the price and the thing and is consummated by the reciprocal delivery of the one and the
other. Full ownership of the thing sold being conveyed to the vendee, from which moment the
right of action derived from this right may be exercised. The record discloses that there was no
payment made by Cruzado to Bustos, thus, rendering the contract not to be consummated.

Art 1164 states that, a creditor has a right to the fruits of the time the obligation to deliver
it arise. However, he shall not acquire a property right thereto until it has been delivered to him
Besides the failure to pay the purchase price, neither the vendee nor his heirs, had at any time
taken possession of the land. Seven witnesses attest to the fact, Bustos and her husband while
still living, continued to possess the said land supposedly sold to Agapito Cruzado and cultivated
it, as she had done long before the sale of September 1875 to September 1891, the date of
complaint by Santiago Cruzado.

50
LLB 2A

Consequently, at the death of Agapito, he could not have transmitted to the Santiago as
his successor any greater right than a personal right to exact fulfillment of a contract, as plaintiff
was not the owner of the said land, he could not validly register it. This fulfillment of a right as
already prescribed since, under the law, prescription towards real property shall be 30years. In
the case at bar, the action to recover took 34 years to bring it to court, thus has already
prescribed.
Petition is denied.

51
LLB 2A

37. GARDNER VS. COURT OF APPEALS

G.R. No. L-59952 August 31, 1984


131 SCRA 585

FACTS:
The case involves several transfers of the subject real property. It appears that
petitioners the Gardner spouse enter into an agreement with Respondent spouses, the Santos‘s
to subdivide 2 parcels of land and executed an absolute deed of sale in favor of the latter. The
real truth is that what occurred was a sale ‗in trust‘ since the petitioner obtained an amount of
money from the respondents, who in turn promised to improve the land.

Apparently, the Santos‘s transferred the properties to the Cuencas who in turn
transferred it to the Verroyas who executive a mortgage over the lot. Then Verroya executed a
deed of transfers to the Natividads. Note that from the titles of the Cuencas (the Second
Transferee) to the titles of the Natividads (the Fourth Transferee), the Adverse Claim of the
Gardners continued to be carried, and that throughout the successive transfers, the petitioners
continued to remain in possession, cultivation and occupation of the disputed properties.

In their Answer, the Santos‘s claimed that the sale to them was conditional in the sense
that the properties were to be considered as the investment of the petitioners in the subdivision
venture and that in the event that this did not materialize they were to re-convey the lots to
petitioners upon reimbursement by the latter of all sums advanced to them; and that the deed of
sale was to be registered for the protection of the Santos‘s considering the moneys that the latter
would be advancing.

Hence, the Gardners filed an action for declaration of Nullity, Rescission and damages
against the 5 transferees and mortgagees. The RTC ruled in favor of petitioners declaring the
transfers null and void. The CA affirmed in Toto the RTC but reconsidered it decision and ruled
that the sale of land to Natividad‘s are valid.

ISSUE:
Whether or not the admissions made by Santos in the pleadings are admissible

HELD:
NO, the testimony of Ariosto Santos is at variance with the allegations in his Answer. As
a general rule, facts alleged in a party's pleading are deemed admissions of that party and
binding upon it, but this is not an absolute and inflexible rule. An Answer is a mere statement of
fact which the party filing it expects to prove, but it is not evidence.
1. Santos himself, in open Court, had repudiated the defenses raised in his answer and
against his own interest, his testimony is deserving of weight and credence. Both the Trial Court
and the Appellate Court believed in his credibility and we find no reason to overturn their
findings thereon. Santos likewise admitted against his own interest that the petitioners did not
receive from him any consideration, which corroborated the declarations of the petitioners. The
Subdivision Joint Venture Agreement and the Supplemental Agreement express that the true
and real nature of the agreement between the parties, which was for a subdivision and not a sale
transaction.
2. All Five Transfers were absolutely simulated and fictitious and were, therefore, void ab
initio and inexistent. Contracts of sale are void and produce no effect whatsoever where the
price, which appears therein as paid, has, in fact, never been paid by the purchaser to the
vendor.

52
LLB 2A

BONGCO, ROCKY REX P.

40. LEOPOLDO DE BELEN VS. COLLECTOR OF CUSTOMS

46 Phil. 241

Facts:
Timoteo Tienzo was a duly accredited customs broker in the City of Manila, and in
connection with his business as such broker, operated a number of trucks for the purpose of
conveying merchandise arriving at the port of Manila to various consignees, his customers,
throughout the city. On or about April 7, 1921, Tienzo procured a permit from the Insular
Collector for the withdrawal of 12,500 sacks of flour from one of the piers for delivery to one
Chua Soco, then a merchant in the City of Manila. The bill of lading for said flour was not
produced by Tienzo at the time he procured the delivery permit, and in order to get possession
of the flour he obligated himself, upon his bond as a customs broker, to have the bill of lading
forthcoming in due time. Said bill of lading, however, was never produced by Tienzo or his
principal, Chua Soco, with the result that the collector of customs caused an action of replevin to
be begun in the name of the Government on June 10, 1921, to recover the flour which had been
delivered as aforesaid, or in case the flour itself could not be secured, to recover judgment for
the value thereof in the amount of P47,816.32. an attachment was sued out by the plaintiff
against the property of the defendant Tienzo, on the ground that he was about fraudulently to
dispose thereof; and on June 13, 1921, the sheriff levied said attachment on seven trucks that
had been operated by Tienzo in connection with his business as customs broker and truckman.
After the sheriff had taken the trucks into custody the plaintiff in this case, Leopoldo de Belen, a
brother-in-law of Tienzo, made claim to the trucks, relying on a document of transfer (Exhibit
A), dated June 1, 1921, and executed by Tienzo and himself, in which Tienzo purports to convey
to Belen all of the trucks involved in this controversy. The consideration stated in this
instrument is the sum of P25,000, said to have been advanced upon previous occasions to
Tienzo by Belen. The sheriff having ignored the claim of Belen to the ownership of the trucks,
the present action of replevin was instituted by Belen against the Collector of Customs and the
sheriff for the recovery of the trucks and compensation for the unlawful detention of the same.
Upon hearing the cause the trial judge found that the document referred to (Exhibit A) was
evidently a fictitious transfer, conceived and executed for the purpose of placing the trucks in
question beyond the reach of the creditors of Tienzo, and he held said instrument to be
completely without effect. He therefore absolved the defendants from the complaint, and the
plaintiff appealed.

Issue:
Whether or not that the document referred to (Exhibit A) was evidently a fictitious
transfer, conceived and executed for the purpose of placing the trucks in question beyond the
reach of the creditors of Tienzo.

Held:
Yes. It is sufficient to refer to the testimony of one Gerardo Garcia, specially deputized by
the sheriff to serve the summons and other papers relating to the case No. 20110, instituted by
the Government and the Collector of Customs against Chua Soco and Timoteo Tienzo. This
witness states that in a conversation between himself and the present plaintiff soon after the
service of the complaint, the latter said that Tienzo was owner of the trucks and that he (Belen)
was merely an instrument of Tienzo. This admission of the plaintiff, in connection with the
relation of the parties and the financial difficulties then impending over Tienzo, establish in our

53
LLB 2A

opinion a strong presumption that the transfer referred to was made for the purpose of placing
the trucks beyond the reach of legal process directed against Tienzo. Nor is this presumption
overcome by the documents C to C-6, purporting to be receipts for money advanced by Belen to
Tienzo during the years, 1918, 1919, and 1920. The Court thinks the trial judge was right in
entertaining the suspicion that these receipts might have been manufactured to meet the
situation, without representing bona fide debts of Tienzo to Belen. At any rate it is quite clear
that Belen was aware of the financial embarrassment in which Tienzo was involved, and the
evidence in our opinion establishes the conclusion drawn by the trial court, namely, that the
transfer of the trucks was a simulated transaction.

54
LLB 2A

41. FRANCISCO IRURETA GOYENA VS. ILDEFONSO TAMBUNTING

G.R. No. L- November 18, 1902


956 1 Phil. 490

Facts:
The plaintiff's principal owned a tract of land and the building thereon known as No. 20
Calle San Jose, Ermita, Manila. This tract contained 152.46 square meters of land. A broker,
representing the plaintiff, stated to the defendant that this lot was for sale and, on information
received from the plaintiff, that it measured 23 meters in front and 8 meters in depth. The
plaintiff and defendant had certain negotiations between themselves concerning the sale. On
March 12, 1901, the defendant signed the following document:

On this date I have bought from Don Francisco Yrureta Goyena a lot at No. 20
Calle San Jose, Ermita, for the sum of thirty-two hundred pesos, this money to be paid as
soon as the bill of sale is signed. Manila, March 12, 1901. (Signed) Tambunting.

The plaintiff signed a similar document. What the negotiations between the parties were
prior to the signing of the these documents does not appear. There is no evidence whatever in
the record that they came to any agreement in regard to the sale other than the one contained in
the papers of March 12. On the day assigned for the execution of the instrument, all the parties
being in the office of the notary, the defendant told the latter to insert in the writing the price,
$3,200, and then refused to sign it because the lot did not contain the area which the plaintiff,
through the broker, had represented that it contained. He expressed his willingness to sign it if a
proportional reduction was made in the price. The plaintiff refused to make, and this action was
brought under article 1451 of the Civil Code. The private contract expresses a specific thing as
the object of the contract. Upon this point there is no controversy. There is no doubt as to which
lot is No. 20 on Calle San Jose, of the District of Ermita of the city of Manila. The private
contract specifies a certain price, 3,200 pesos. There is no controversy whatsoever upon this
point. There is no question that this sum is there specified plainly and specifically, and without
being made subject to any condition whatever.

Issue:
Whether or not there was a perfect contract

Held:
Evidently nothing is lacking for the existence of a perfect contract of purchase and sale.
Article 1445 of the Civil Code is as follows: "By the contract of purchase and sale one of the
contracting parties undertakes to deliver a specific thing, and the other to pay therefore a price
certain, in money or in something representing it. Article 1450 of the same Code is a follows:
"The sale shall be perfected between vendor and vendee and shall be binding on both of them, if
they have agreed upon the thing which is the object of the contract and upon the price, even
when neither has been delivered." This private document was not a more draft or project. It
cannot be said that the purchase is not to be understood as perfected until the execution of the
public instrument. That private document is not subject to any term or condition whatever. The
least that can be said about the private document is that it contains a promise to buy, not a mere
project of sale, and a promise to buy, according to article 1451, confers upon the contracting
parties the right to reciprocally demand the performance of the contract. If the contract were not
perfected no right would accrue in favor of the contracting parties to reciprocally demand its
performance. A thing which has no existence can produce no effect. Because it is merely a
private document which contemplates the subsequent execution of a public instrument, it does

55
LLB 2A

not follow that it is not enforceable as it now stands. "Contracts," says article 1278, "shall be
obligatory whatever may be the form in which they have been entered into, provided that the
essential elements for their validity are present," to wit, a determinate thing, a price certain, and
a meeting of the minds with respect to the object of the contract. Hence the contract in question
is obligatory.

56
LLB 2A

42. FILIPINAS COLLEGES, INC. VS. TIMBANG, ET. AL.

G.R. No. L-12812 September 29, 1959


52 OFF. GAZ. 3624

Facts:
This is an appeal taken from an order of the Court of First Instance of Manila dated May
10, 1957 (a) declaring the Sheriff's certificate of sale covering a school building sold at public
auction null and void unless within 15 days from notice of said order the successful bidders,
defendants-appellants spouses Maria Garcia Timbang and Marcelino Timbang, shall pay to,
appellee Maria Gervacio Blas directly or through the Sheriff of Manila the sum of P5,750.00 that
the spouses Timbang had bid for the building at the Sheriff's sale; (b) declaring the other
appellee Filipinas Colleges, Inc. owner of 24,500/3,285,934 undivided interest in Lot No. 2-a
covered by certificate of tile No 45970, on which the building sold in the auction sale is situated;
and (c) ordering the sale in public auction of the said undivided interest of the Filipinas
Colleges, Inc., in lot No. 2-a aforementioned to satisfy the unpaid portion of the judgment in
favor of appellee Blas and against Filipinas Colleges, Inc. in the amount of P8,200.00 minus the
sum of P5,750.00 mentioned in (a) above. The order appealed from is the result of three
motions filed in the court a quo in the course of the execution of a final judgment of the Court of
Appeals rendered in 2 cases appealed to it in which the spouses Timbang, the Filipinas Colleges,
Inc., and Maria Gervacio Blas were the parties. Filipinas Colleges, Inc. having failed to pay or
deposit the sum of P32,859.34 within the time prescribed, the spouses Timbang, in compliance
with the judgment of the Court of Appeals, on September 28, 1956, made known to the court
their decision that they had chosen not of appropriate the building but to compel Filipinas
Colleges, Inc., for the payment of the sum of P32,859,34. The motion having been granted, a
writ of execution was issued on January 8, 1957. On January 16, 1957, appellee Blas in turn filed
a motion for execution of her judgment of P8,200.00 representing the unpaid portion of the
price of the house sold to Filipinas Colleges, Inc. Over the object of the Timbangs, the court
grated the motion and the corresponding writ of execution was issued on January 30, 1957, date
of the granting of the motion for execution, Blas through counsel, sent a letter to the Sheriff of
Manila advising him of her preferential claim or lien on the house to satisfy the unpaid balance
of the purchase price thereof under Article 2242 of the Civil Code, and to withhold from the
proceed of the auction sale the sum of P8,200.00. Levy having been made on the house in virtue
of the writs of execution, the Sheriff of Manila on March 5, 1957, sold the building in public
auction in favor of the spouses Timbang, as the highest bidders, in the amount of P5,750.00.
Personal properties of Filipinas Colleges, Inc. were also auctioned for P245.00 in favor of the
spouses Timbang. As a result of these actuation, three motion were subsequently filed before the
lower court. The Timbang spouses presented their opposition to each and all of these motions.

Issue:
Whether or not the appellants as owner of the land may seek recovery of the value of the
land by writ of execution, levy the house of the builder and sell it in public auction.

Held:
No. The Court has already held in Matias vs. The Provincial Sheriff of Nueva Ecija that
while it is the inveriable practice, dictated by common sense, that where the successful bidder is
the execution creditor himself, he need not pay down the amount of the bid if it does not exceed
the amount of his judgement, nevertheless, when there is a claim by a third-party, to the
proceeds of the sale superior to his judgment credit, the execution creditor, as successful bidder,
must pay in cash the amount of his bid as a condition precedent to the issuance to him of the
certificate of sale. In the instant case, the Court of Appeals has already adjudged that appellee

57
LLB 2A

Blas is entitled to the payment of the unpaid balance of the purchase price of the school
building. Blas is actually a lien on the school building are concerned. The order of the lower
court directing the Timbang spouses, as successful bidders, to pay in cash the amount of their
bid in the sum of P5,750.00 is therefore correct. With respect to the order of the court declaring
appellee Filipinas Colleges, Inc. part owner of the land to the extent of the value of its personal
properties sold at public auction in favor of the Timbang, this Court Likewise finds the same as
justified, for such amount represents, in effect, a partial payment of the value of the land. failure
of the Timbang spouses to pay to the Sheriff or to Manila Gervacio Blas said sum of P5,750.00
within fifteen (15) days from notice of the final judgment, an order of execution shall issue in
favor of Maria Gervasio Blas to be levied upon all properties of the Timbang spouses not exempt
from execution for the satisfaction of the said amount.

58
LLB 2A

43. BARRETTO VS. SANTA MARINA

G.R. No. 8238


26 Phil. 200

Facts:
La Insular cigar and cigarette factory is a joint account association with a nominal capital
of P865,000, the plaintiff's share being P20,000, or 4/173 of the whole. On March 14, 1910, the
plaintiff's attorneys wrote the defendant's local representative a letter offering to sell to the
defendant plaintiff's participation in the factory. The result of the correspondence between the
parties and their representatives was that Exhibit G was duly executed on May 3, 1910. In
accordance with the terms of this exhibit a committee of appraisers was appointed to ascertain
and fix the actual value of La Insular. The net value was at P4,428,194.44. Of this amount 4/173
part represented the plaintiff‘s share on his P20,000 of the nominal capital. In Exhibit J which
was executed on November 22, 1910, the plaintiff acknowledged to have received from the
defendant that amount. Subsequently to the execution of Exhibit J, demand was made by the
plaintiff upon the defendant for his share of the profits from June 30, 1909, to November 22,
1910. This demand was refused and thereupon this action was instituted to recover said profits.
The plaintiff admits that if the agreement of May 3, 1910, was a perfected sale he cannot recover
any profits after that date; while on the other hand defendant concedes that if the said
agreement was only a promise to sell in the future it, standing alone, would not prevent recovery
in this action.

Issue:
Whether the agreement executed by both parties on May 03, 1910 was a perfected
contract of sale?

Held:
Yes. Article 1450 of the Civil Code reads: "The sale shall be perfected between vendor and
vendees and shall be binding on both of them, if they have agreed upon the thing which is the
object of the contract and upon the price, even when neither has been delivered." This is
supplemented by article 1447 of the Code which reads as follows: "In order that the price may be
considered fixed, it shall be sufficient that it be fixed with regard to another determinate thing
also specific, or that the determination of the same be left to the judgment of a specified person."

Under article 1450, there are two indispensable requisites in a perfected sale: (1) There
must be an agreement upon the thing which is the object of the contract; and (2) the contracting
parties must agree upon the price. The object of the contract in the case at bar was the whole of
the plaintiff's right, title, and interest in La Insular. This whole was 4/173 of the entire net value
of the business. The parties agreed that the price should be 4/173 of the total net value. The
fixing of such net value was unreservedly left to the judgment of the appraisers. As to the thing
and the price the minds of the contracting parties met, and all questions relating thereto were
settled. Nothing was left unfinished in so far as the contracting parties were concerned. Neither
party could withdraw from the contract without the consent of the other. The result is that the
two essential requisites necessary to constitute a perfected sale were present.

59
LLB 2A

CAPOTULAN, JENNEL JIEZDE T.

45. OBANA VS. COURT OF APPEALS

G.R.NO. L-36249 March 29, 1985


135 SCRA 557

Facts:
Petitioner bought 170 cavans of rice from a Chinese Chan Lin for 33 pesos each, Chan lin
purchase this rice from respondent Sandoval and ask to be delivered to San Fernando, La Union
upon the delivery of goods chan lin was nowhere to be found and herein petitioner claim that he
had already paid for the goods and refuse to pay Sandoval‘s driver. Respondent Sandoval filed
an action for replevin for the recovery of said goods but was dismissed by the trials courts on his
appeal there appellate court ruled in favour of respondent ordering petitioner to return or pay
the value of the goods, hence the petition for review.

Issue:
1. Whether or not there was a perfected sale.
2. Whether or not ownership was transferred to Chan Lin.
3. Whether or not the action for replevin is proper against petitioner.

Held:
1. Yes there was a perfected sale between Chan Lin and respondent Sandoval under
article 1475 of the civil code there is a perfected sale when there is consent upon the subject
matter and price, even if neither is delivered.

2. Yes ownership of the rice was transferred to Chan Lin upon to delivery of the
thing to him under pursuant to art 1477 and 1496 of the civil code.

 Art. 1477. The ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof.

 Art. 1496. The ownership of the thing sold is acquired by the vendee from
the moment it is delivered to him in any of the ways specified in Articles
1497 to 1501, or in any manner signifying an agreement that the
possession is transferred from the vendor to the vendee.

3. Yes the action of replevin or recovery of personal property is tenable since


petitioner has already been reimbursed by Chan Lin hence rescinding the sale between him and
Sandoval, therefore petitioner no longer has any reason not to return the goods.

60
LLB 2A

46. CAMPILLIO VS. COURT OF APPEALS

G.R. No. L-56483 May 29, 1984


129 SCRA 513

Facts:
Herein petitioner was able to purchase 2 parcels of land at an auction, the said lots where
own by Tomas de Vera. De vera previously sold the said parcels of land to a Simplicio Santos,
the sale was a private sale and was not recorded in the registry of deeds. Petitioner was issued a
deed of sale and it was registered. Simplicio Santos now files an action to annul the levy and the
sale of the parcels of land, the trial court dismissed his action but was reversed by the appellate
court on ground that‘s herein petitioner had acquired no right over the parcels of land since the
parcels of land were no longer the property of the judgment debtor de vera during the time of
the sale and auction. Hence this petition for certiorari assailing the judgment of the appellate
court.

Issue:
1. Who has superior right to the disputed parcels land?
2. In cases of double sale such as this who has superior rights.

Held:
1. The court held that herein petitioner has superior right over the disputed land, on
grounds that It is settled in this jurisdiction that a sale of real estate, whether made as a result of
a private transaction or of a foreclosure or execution sale, becomes legally effective against third
persons only from the date of its registration, hence the ruling of the court of appeals is not
proper since as far as the register is concerned the legal owner of the lot is the judgement debtor
de Veras during the time it was sold in auction therefore transferring all his rights to herein
petitioner. Furthermore in Philippine National Bank vs. Court of Appeals, 98 SCRA 207 it is
stated that a A bona fide purchaser for value of such property at an auction sale acquires good
title as against a prior transferee of same property if such transfer was unrecorded at the time of
the auction sale.
2. The person who registers the land in good faith has superior right in cases of double sale.

61
LLB 2A

47. KERR & CO. LTD VS. COLLECTOR OF INTERNAL REVENUE

G.R. No. 46667 June 20, 1940


70 Phil. 36

Facts:
Petitioner Company bought goods from Shaw, Wallace & Co. of Calcutta, India, in which
they offered a priced and was accepted, Petitioner now in their own name contracted sale with
the local buyers for the sale of the goods for a much higher price which includes their profit.
Petitioner now assails the action of the government which collected them traders‘ tax, they
contend that they are merchants and not traders and are exempted from tax under article 1459.

Issue:
1. Whether or not there is a perfected sale between petitioner and Shaw & Wallace
Company.
2. Whether or not there was a perfected sale between petitioner and local buyers.
3. Whether or not Petitioner Company can be considered as a merchant under
art.1459.

Held
1. Yes there was a perfected sale since the price was already agreed upon or the offer
was accepted

2. No, there was no sale between local buyers and petitioner since the goods never
ended in the hands of the petitioner but directly to the local buyers hence they merely acted as a
mediator between the parties and gain profit for the transaction.

3. No. Court held that petitioner is a trader and not a merchant, therefore is not
exempted from the traders tax, petitioner was never the one who sold the goods to the local
buyers but only acted as a broker between them. Therefore they never engage in any contract of
sale with the local buyers.

62
LLB 2A

CATIMBANG, JOANNE A.

50. PEOPLE'S HOMESITE & HOUSING CORP. VS. COURT OF APPEALS

G.R. No. L-61623 December 26, 1984


133 SCRA 777

FACTS:
The PHHC board of directors on February 18, 1960 passed Resolution No. 513 wherein it
stated "that subject to the approval of the Court Council of the PHHC‘s consolidation
subdivision plan, awarding Lot 4 with an area of 4,182.2 square meters located at Diliman,
Court City to respondents Rizalino and Adelaida Mendoza (spouses Mendoza) at a price of
twenty-one pesos (P21.00) per square meter. The City Council disapproved the consolidation
subdivision plan in August 1960 but approved in February 1964 its revised version where Lot 4
was reduced to an area of 2,608.7 square meters. Then in October 1965, the PHHC withdrew the
tentative award of Lot 4 to the spouses Mendoza for the latter‘s failure neither to pay its price
nor to make a 20% initial deposit, and re-awarded said lot jointly and in equal shares to Miguela
Sto. Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo Redublo and Jose Fernandez, all of
whom made the initial deposit. The subdivision of Lot 4 into five lots was later approved by the
Court council and the Bureau of Lands.

The spouses Mendoza asked for reconsideration and for the withdrawal of the said 2nd
award to Sto. Domingo and four others, and at the same time filed an action for specific
performance plus damages. The trial court sustained the award but the Court of Appeals
reversed the said decision, declared void the re-award to Sto. Domingo and four others, and
ordered the PHHC to sell Lot 4 with an area of 2,608.7 square meters at P21.00 per square
meter to spouses Mendoza.

ISSUE:
Whether or not there was a perfected sale of Lot 4, with the reduced area, to the
Mendoza‘s which they can enforce against the PHHC by an action for specific performance.

HELD:
We hold that there was no perfected sale of Lot 4. It was conditionally or contingently
awarded to the Mendoza‘s subject to the approval by the city council of the proposed
consolidation subdivision plan and the approval of the award by the valuation committee and
higher authorities.

When the plan with the area of Lot 4 reduced to 2,608.7 square meters was approved,
the Mendoza‘s should have manifested in writing their acceptance of the award for the purchase
of Lot 4 just to show that they were still interested in its purchase although the area was reduced
and to obviate ally doubt on the matter. They did not do so. The PHHC board of directors acted
within its rights in withdrawing the tentative award.

"The contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. From that moment, the parties may
reciprocally demand performance, subject to the law governing the form of contracts." (Art.
1475, Civil Code).

63
LLB 2A

51. ANG VS. THE COURT OF APPEALS

G.R. No. 80058 February 13, 1989


170 SCRA 286

FACTS:
Petitioners Ernesto Ang and Rosalinda Ang, brother and sister, are the owners of three
(3) parcels of land located at Quezon City with an aggregate area of 2,096 sq. m which they
purchased at a price of P680,000.00. Negotiations were undertaken for the sale of the
aforementioned properties between the petitioners as sellers and private respondent Lee Chuy
Realty Corporation, through its president Henry Lee Chuy as buyer.

Lee Chuy issued in favor of Ang a check in the amount of P50,000.00 together with a
receipt embodying the terms and conditions of their agreement indicating the agreed total price
of P1,600,000. The accompanying receipt was not returned by Ang and instead another receipt
prepared and signed by Ang which did not state the agreed price and forwarded to Lee Chuy.

Ang demanded to Lee Chuy to pay the balance of the purchase price and failure to do so
will result in the cancellation of their agreement. Lee Chuy replied that they had been ready
since December to perform its part of the agreement while Ang had not yet complied with their
undertaking to clear the subject properties of the obstructions thereon. Ang demanded the
refund of the P 50,000.00 down payment on account of the failure of Ang to comply with their
undertaking and their subsequent withdrawal from the sale. Upon the failure of the Ang to
return the down payment, Lee Chuy filed a complaint for the collection of a sum of money with
damages before RTC. The trial court rendered its decision in favor of Ang.

CA reversed the RTC decision and held that Ang were the ones who breached the
agreement.

ISSUE:
Whether or not Ang breach the agreement and the agreed price is P2,340,000.00.

HELD:
Yes, Ang is liable to refund the P 50, 000 down payment of Lee Chuy.
CA found that Ang breached the agreement when they failed to undertake fulfillment of
the 2 conditions; (1) that Ang will remove and clear the subject property of all occupants and
obstructions and (2) that when the property is cleared of all occupants and obstructions, Ang
shall deliver a deed of absolute sale in favor of Lee Chuy with all pertinent papers necessary.

However, such breach does not warrant a resolution of the contract. While it is true that
in reciprocal obligations, such as the contract of purchase and sale, the power to rescind is
implied and any of the contracting parties may, upon non-fulfillment by the other party of his
part of the obligation, resolve the contract, rescission wig not be permitted for a slight or casual
breach of the contract. Rescission may be had only for such breaches that are so substantial and
fundamental as to defeat the object of the parties in making the agreement.

The two conditions that were breached by petitioners are not essential for the fulfillment
of the obligations to but merely an incidental undertaking. The rescission of the contract may
not be allowed on this ground alone. Lee Chuy at first did not seek to rescind the contract on the
basis of the non-fulfillment of these conditions. Lee in fact sought definite advice from Ang as to
when they can comply with the conditions. Indeed, it was the failure of the Ang to comply with

64
LLB 2A

the conditions of the agreement that caused the delay in the payment by Lee. When Ang refused
to proceed with the sale unless Lee agreed to pay the higher price, Ang thereby committed a
serious breach of the agreement. There was a perfected contract of sale and the purchase price
was set at P1,600,000. Ang cannot increase the purchase price agreed upon without the consent
of private respondent. Lee had the right to rescind the agreement.

Since Ang had already sold the properties to Chua, they can no longer perform to deliver
the property to Lee. This is another breach of their agreement. CA aptly characterized the
actuations of Ang to be "double-dealing."

As to the agreed price, there is is no doubt that there was a perfected contract for the sale
as evidenced by the down payment of P50,000.00. If the price was really P2,340,000, they
could have easily written the amount in the receipt. Ang were the ones who clearly caused the
obscurity when they omitted the purchase price in the receipt they prepared and signed. Hence,
such obscurity must be construed against them.

If the true price was P2,340,000, it would be unusual for Ang to enter into such an
agreement with Chua at a lesser purchase price. The only logical conclusion is that Ang had
intentionally omitted the price of P1,600,000 in the receipt they signed either to compel Lee
Chuy to agree to a price increase or to enable them to back out of their agreement
notwithstanding their plan to reduce their capital gains tax liability. The claim of Ang is that
they could no longer accept the offers from Dolora Chua because of their previous commitment
with Lee Chuy. - This pretension is not supported by the evidence. The records show that Ang
had entered into an "Agreement of Purchase or Sale" with Dolora 1 day before the date of the
receipt of down payment.

Ang also argue that the document is an agreement and not a mere offer.- We find no
cogent basis to view the same as a mere offer. It is clearly stated in the agreement that
petitioners received P20,000 from Chua as down payment with the balance of the purchase
price of P2,160,000.00 to be paid in full at the time the land shall have been cleared and that
Ang bind themselves to deliver to Chua the deed of sale upon full payment.

65
LLB 2A

52. CHRYSLER CORPORATION VS. COURT OF APPEALS

G.R. No. L-55684 December 19, 1984


133 SCRA 567

FACTS:
Petitioner is a domestic corporation engaged in the assembling and sale of motor
vehicles and other automotive products. Respondent Sambok Motors Co., a general partnership,
during the period relevant to these proceedings, was its dealer for automotive products with
offices at Bacolod (Sambok, Bacolod) and Iloilo (Sambok, Iloilo).

On October 2, 1970, Sambok, Bacolod, ordered from petitioner various automotive


products worth P30,909.61, payable in 45 days; that on November 25, 1970, petitioner delivered
said products to its forwarding agent, Allied Brokerage Corporation, for shipment; that Allied
Brokerage loaded the goods on board the M/S Doña Florentina, a vessel owned and operated by
Negros Navigation Company, for delivery to Sambok, Bacolod; that when petitioner tried to
collect from the latter the amount of P31,037.56, representing the price of the spare parts plus
handling charges, Sambok, Bacolod, refused to pay claiming that it had not received the
merchandise; that petitioner also demanded the return of the merchandise or their value from
Allied Brokerage and Negros Navigation, but both denied any liability. In its Answer, Sambok,
Bacolod, denied having received from petitioner or from any of its co-defendants, the
automotive products referred to in the Complaint, and professed no knowledge of having
ordered from petitioner said articles.

ISSUE:
Whether or not Sambok Bacolod bears the loss of the cargo for which it is liable in
damages to Chrysler.

HELD:
No, Sambok Bacolod cannot be faulted for not accepting or refusing to accept the
shipment from Negros Navigation four years after shipment. It was found out that upon receipt
of the Bill of Lading, Sambok Bacolod initiated, but did not pursue steps to take delivery as they
were advised by Negros Navigation that because some party were missing, they would just be
informed as soon as the missing parts were located. It was only four years later that the said
parts were found in their off-shore bodega but were already deteriorated and valueless. The
evidence is clear that Negros Navigation could not produce the merchandise nor ascertain its
whereabouts at the time Sambok, Bacolod, was ready to take delivery. Where the seller delivers
to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them.

From the evidentiary record, Negros Navigation was the party negligent in failing to
deliver the complete shipment either to Sambok, Bacolod, or to Sambok, Iloilo, but as the Trial
Court found, petitioner failed to comply with the conditions precedent to the filing of a judicial
action. Thus, in the last analysis, it is petitioner that must shoulder the resulting loss. The
general rule that before, delivery, the risk of loss is home by the seller who is still the owner,
under the principle of "res petit domino", is applicable in petitioner's case.

In sum, the judgment of respondent Appellate Court will have to be sustained not on the
basis of misdelivery but on non-delivery since the merchandise was never placed in the control
and possession of Sambok, Bacolod, and the vendee.

66
LLB 2A

53. ARTEMIO KATIGBAK VS. COURT OF APPEALS

G.R. No. L-16480 January 31, 1962


4 SCRA 243

FACTS:
This case arose from an agreed purchase and sale of a Double Drum Carco Tractor
Winch. Artemio Katigbak upon reading an advertisement for the sale of the winch placed owner
and operator of the International Tractor and Equipment Co., Ltd., went to see Lundberg and
inspected the equipment. The price quoted was P12,000.00. Desiring a reduction of the price,
Katigbak was referred to Daniel Evangelista, the owner. After the meeting, it was agreed that
Katigbak was to purchase the winch for P12,000.00, payable at P5,000.00 upon delivery and
the balance of P7,000.00 within 60 days. The condition of the sale was that the winch would be
delivered in good condition. Katigbak was apprised that the winch needed some repairs, which
could be done in the shop of Lundberg. It was then stipulated that the amount necessary for the
repairs will be advanced by Katigbak but deductible from the initial payment of P5,000.00. The
repairs were undertaken and the total of P2,029.85 for spare parts was advanced by Katigbak for
the purpose. For one reason or another, the sale was not consummated and Katigbak sued
Evangelista, Lundberg and the latter's company, for the refund of such amount. Lundberg and
Evangelista filed separate Answers to the complaint, the former alleging non-liability for the
amount since the same (obligation for refund) was purely a personal account between defendant
Evangelista and plaintiff Katigbak. Evangelista, on his part, claimed that while there was an
agreement between him and Katigbak for the purchase and sale of the winch and that Katigbak
advanced the payment for the spare parts, he (Katigbak) refused to comply with his contract to
purchase the same that as a result of such refusal he (Evangelista) was forced to sell the same to
a third person for only P10,000.00, thus incurring a loss of P2,000.00. The lower court ordered
the defendants to pay plaintiff with legal interest. The Court of Appeals reversed the judgment.
Plaintiff-appellee Katigbak brought the matter to this Court on appeal by certiorari.

ISSUE:
Whether or not Evangelist can dispose of the property where the buyer fails to pay the
price and take delivery.

HELD:
The facts of the case under consideration are identical to those of the Hanlon case. The
herein petitioner failed to take delivery of the winch, subject matter of the contract and such
failure or breach was, according to the Court of Appeals, attributable to him, a fact which We are
bound to accept under existing jurisprudence. The right to resell the equipment, therefore,
cannot be disputed. It was also found by the Court of Appeals that in the subsequent sale of the
winch to a third party, the vendor thereof lost P2,000.00, the sale having been only for
P10,000.00, instead of P12,000.00 as agreed upon, said difference to be borne by the supposed
vendee who failed to take delivery and/or to pay the price.

67
LLB 2A

54. JULIAN BORROMEO VS. JOSE FRANCO Y FRANCO, ET. AL

G.R. No. 1698 September 26, 1905


5 Phil. 49

FACTS:
On the 29th of April, 1902, and before the notary public Jose Maria Rosado y Calvo, a
resident attorney of the city of Manila, Jose Franco, Cesar Franco, Antonio Franco, Manuel
Franco, Soledad Franco, and Catalina Franco, as parties of the first part, the latter in her own
behalf and in behalf of her minor child, Concepcion Franco, and Julian Borromeo y Galan, as
party of the second part, executed a contract.

This contract was an agreement to sell a property owned by defendants-appellees,


namely frame houses with nipa roofs built upon lots, to plaintiff-appellant with the
corresponding set of conditions wherein each party is set to fulfill. One of the conditions as
provided for in the agreement is that plaintiff be given six months from the date of the execution
of the instrument to complete the documents for said property. However, plaintiff failed to
comply with the condition, hence, with liberty defendants disposed the property as they may
deemed fit. Plaintiff instituted a complaint in the Court of First Instance praying that judgment
be rendered in his favor and against the defendants. Defendants in their answer stated that the
plaintiff has failed to comply with the conditions under which the promise to sell the property to
him was made.

ISSUE:
Whether or not plaintiff has the right to compel the defendants to carry out their
agreement to sell notwithstanding his failure to comply with the condition in the agreement.

HELD:
Yes, plaintiff has the right to do so. The agreement on the part of plaintiff as set out in
clause (c), to complete the title papers to the said property within the six months, is not a
condition subsequent of the obligation to sell. It is only a mere incidental stipulation which the
parties saw fit to include in the agreement. Being not contrary to law, public morals, or public
policy, unable to complete the title papers of the said property does not prevent performance of
sale. The stipulation is incidental and not inherent to the agreement or promise to sell. Also, the
contract in question contains mutual obligations and is considered bilateral in nature. In this
regard, the obligation to buy the property in question is correlative with the obligation to sell it.
Plaintiff to perfect the papers to the property within six (6) months is not correlative to
obligation to sell the property. Hence the stipulation in the agreement does not create reciprocal
rights and therefore, defendants do not have the right to cancel the obligation. As state in the
case, one obligation is entirely independent of the other. The latter obligation is not subordinate
to nor does it depend upon the fulfillment of the obligation to perfect the title deeds to the
property. Hence, the judgment of the lower court is REVERSED. Defendants are directed to sell
to the plaintiff the two houses and lots upon which they stand under the terms and conditions as
provided for in the agreement.

68
LLB 2A

DAPILIN, RAIZA H.

55. TAN LEONCO VS. GO INQUI

G.R. No. L-3383 September 13, 1907


8 Phil. 531

Facts:
Plaintiff Tan Leonco left for China in 1987, before leaving, he turned over the
management of his abaca (hemp) plantation to Tan Tonguan. Tan Tonguan obtained P800
worth of fiber that he delivered to Respondent‘s warehouse in exchange for a cheque. Upon
returning from China, Tan Leonco duly presented the Cheque to Lim Uyco, who refused
payment because he had received instructions to that effect from the company.

Respondent‘s argument: Bill of exchange was not protested after presentment, and that
there is some question of the right of the plaintiff to recover upon said bill without the same
having been duly protested.

Issue:
Whether or not protest is needed in this case in order to hold respondent/drawer liable?

Held:
NO. In as much as the defendant had himself ordered the drawee not to pay the said bill
of exchange, protest and notice of nonpayment under these conditions, was unnecessary in
order to render the drawer, or defendant in this case, liable. Also, it is not disputed that the
warehouse in which the hemp was deposited was the warehouse of the defendant. The hemp
became the property of the defendant upon the delivery thereof in the warehouse of the
defendant (arts. 1462 and 1463, Civil Code), and was property of the defendant at the time of its
destruction by the insurrectos. There had been a complete delivery of the said abaca to the
defendant, and the loss occurring thereafter, without any fault of the plaintiff, was loss of the
defendant.

69
LLB 2A

56. ASIATIC PETROLEUM COM. VS. COLLECTOR OF INTERNAL REVENUE

G.R. No. L-12687 August 27, 1918


38 Phil. 510

Facts:
The defendant, under threat of penalty, compelled the plaintiff to pay the internal
revenue tax provided for under above said section of Act No. 2432 upon all such oils which the
plaintiff had on hand on the first day of January, 1915, whether or not the same had been sold
theretofore or not. The tax was paid under protest.

The plaintiff contends that the tax collected was illegal, for the reason that the law had
expressly relieved him from the necessity of paying the same on all such oils which he had
"disposed of to consumers or persons other than manufacturers or wholesale dealers, prior to
January 1, 1915"; that inasmuch as he had made a valid and legal sale of such oils before January
1, 1915 even though the same had not been actually delivered they had been "disposed of" and he
was therefore relieved from the necessity of paying the tax imposed by said Act. No contention
was made that the oils "disposed of" had been disposed of to "manufacturers or wholesale
dealers." To this note, Section 17 (paragraph 72a) of Act No. 2432, among other things, provides
that "no tax (imposed by law) shall be collected on such articles have been disposed of to
consumers or persons other than manufacturers or wholesale dealers. Said Act took effect upon
the first day of January, 1915.

Issue:
Whether or not a dealer is required to pay the internal revenue tax, provided for under
section 17, (paragraph 72a) of Act No. 2342, upon mineral oils, but not delivered, prior to the
first day of January, 1915.

Held:
Considering the provisions of said quoted section, it is clear that the plaintiff could not
be compelled to pay the tax imposed by said Act upon mineral oils which had been disposed of
to consumers or persons, etc., prior to the first day of January, 1915. The court ruled that the
plaintiff had "disposed of" the mineral oils in question before the first day of January, 1915, and
was therefore relieved from the necessity of paying the internal revenue tax imposed by the
defendant. Moreover, the Legislature, by Act No. 2445, fully recognized that the phrase
"disposed of" meant nothing more or less than a contract whereby the vendor was bound to
furnish an article, because in said Act (No. 2445) it provided that "whenever any person has
prior to the enactment of this law (2432) entered into a contract whereby he has bound himself
to furnish to another an article subject to the tax or increased rate of tax . . .," the purchaser, and
not the vendor, was subject to pay such tax in the absence of stipulations to the contrary.

70
LLB 2A

58. LEOQUINCO VS. POSTAL SAVINGS BANK, ET AL.

G.R. No. L-23630 August 25, 1925


47 Phil. 772

Facts:
This is a case involving of a piece or parcel of land belonging to the Bank, situated at
Navotas, Province of Rizal, having offered P27,000 for said property. The Plaintiff herein alleged
that he was the highest bidder at a public auction held by the defendants on March 31, 1924.
Then he wrote a letter to the defendants on May 9, 1924, advising that he was ready to tender
payment for the land as soon as the deed of sale of the same in his favor is executed and
delivered by the defendants. That the defendants refused to execute the deed in spite of requests
made therefor by him and that said refusal caused him damages in the sum of P25,000 more or
less. Plaintiff prayed that said defendants be ordered to execute and deliver the deed of sale of
said land in his favor, and to pay him damages amounting to P25,000, and the costs.

Issue:
Whether or not Leoquinco may compel PSB accept his offer and to execute a deed of sale
of the land in his favor.

Held:
No. In a resolution adopted by the board of directors authorizing the sale at public
auction of the property in question, as well as in the notice announcing said sale, the defendants
expressly reserved to themselves "the right to reject any and all bids‖. By taking part in the
auction and offering Leoquinco voluntarily submitted to the terms and conditions of the auction
sale as announced in the notice and has clearly acknowledged the right to reserve to the PSB.
Clearly, Leoquinco has no ground of action to compel the PSB to execute a deed of sale of the
land in his favor nor to comply his bid and offer. The owner of the property offered to sale in
auction has the right to prescribe the manner.
Therefore, the sentence appealed from should be and is hereby affirmed, with costs against the
appellant.

71
LLB 2A

59. FIDELITY & DEPOSIT CO. VS. WILLIAM A. WILSON, ET AL.

G.R. No. 2684 March 15, 1907


8 Phil. 51

Facts:
On October 17, 1904, the plaintiff filed a complaint against Wilson and The American
Surety Company asking, first, that judgment be rendered against Wilson for the sum of
$4,464.90, that amount having been paid by plaintiff to the Government under plaintiff's surety
bond; second, that there be applied to the payment of said judgment the said sum of $785 found
in possession of Wilson and that said plaintiff be preferred in its right to the said money and to
receive the same; and third, that a depositary be named by the court for the purpose of caring
for and administering said amount during the pendency of the case.

Wilson had ceded and transferred to the said Terrell all of his, the said Wilson's rights in
and to the said $785 in payment on account of a larger sumhen owed by said Wilson to the said
H.D. In this case of intervention The Fidelity and Deposit Company of Maryland, the plaintiff in
the principal cause, and The American Surety Company of New York together in cooperation
and against the claim of the intervenor Terrell, both of them, alleging on their part, better right
that the intervenor to receive the sum in question, asked that the said sum be delivered to them
in equal shares and portions as part payment and on account of the amounts which they had
paid respectively to the Government as sureties on the bond of Wilson.

Issue:
Whether or not Terrell and The Fidelity and Deposit Company of Maryland can claim
ownership of the funds in accordance to Art 609 of the Civil Code

Held:
―In conformity with said doctrine as established in paragraph 2 of article 609 of said
code, "the ownership and other property rights are acquired and transmitted by law, by gift, by
testate or intestate succession, and, in consequence of certain contracts, by tradition." And as
the logical application of this disposition article 1095 prescribes the following: "A creditor has
the right to the fruits of a thing from the time the obligation to deliver it arises. However, he
shall not acquire areal right." (And the ownership is surely such) "Until the property has been
delivered to him." In accordance with such disposition and provisions, the delivery of a thing
constitutes a necessary and indispensable requisite for the purpose of acquiring the ownership
of the same by virtue for a contract. With this, it can therefore be concluded that: "The transfer
of the ownership in the contract of such transfer, does not produce the effect by the fact of the
mere consent, but is acquired by tradition and in the due observance of general precepts."
Therefore, by reason of the non-delivery Terrell did not acquire the ownership of the property
transferred to him by Wilson.

The court therefore finds that neither of the two creditors should enjoy preference with
regard to the other.

72
LLB 2A

DOMOSMOG, MATILDEVERA S.

60. RUFINA YATCO VS. JESUALDO GANA

G.R. No. L-3876 March 27, 1909


13 Phil. 305

FACTS:
Rufina Yatco brought these proceedings against Jesualdo Gana for the recovery of two
parcels of arable land and one building lot situated in the municipality of Cabuyao, Province of
La Laguna, a description of which is contained in the complaint. She prayed therein that the said
lands be returned to her, that the defendant be sentenced to pay her P850 for losses and
damages, that said defendant lose he crops existing thereon at the present time as well as the
fruits of said lands, and that he pay the costs. Besides a general denial of all the facts alleged in
the complaint, the defendant, on his part set up the following as special defense: First. That he is
the sole and exclusive owner of the building lot and the two parcels of land referred to in the
complaint, he having acquired them from Eugenio Andal by a contract of purchase and sale on
the 16th of October, 1894. Second. That he has been in the quiet and peaceful possession of the
said property as owner for more than 11 years, to wit, since the aforesaid 16th day of October,
1894; and he asked to be absolved of the complaint. At the hearing it was stipulated between the
parties that the two parcels of unirrigated lands situated on the east and west side of the road
from Calamba to Cabuyao, as well as the building lot concerning which the defendant had
offered evidence, are the same as those claimed by the plaintiff.

ISSUE:
Whether or not who among the purchasers had acquired ownership and dominion over
the subject property.

HELD:
According to the Civil Code, and before its enactment, it was already common doctrine
that a contract of purchase and sale is perfected by the consent of the parties thereto as to the
thing and the price, and is consummated upon the payment of the price and the delivery of the
thing. There might be a question as to which of these acts would authorize intervention in
accordance with the principles of law, and the law has preferred to fix the act of consummation,
considering, no doubt, that until this is realized the property is at the disposition of the court
having jurisdiction of the question of dominion, and which may deliver the property to the
proper party, thus avoiding new complications and expenses. But even outside of the said term,
or after the limit fixed by law, when the state of the proceedings in execution no longer
permitted an intervention, and it was therefore the duty of the judge to reject the same by an
order of dismissal, if the action was one for dominion, the right of the third party was reserved
to institute an action against the proper person and as it might be proper, as provided in
paragraph 2 of the said article, in order that there may be no doubt as to his being entitled to
bring an action against the person who acquired the property. (Manresa, Ley de Enjuiciamiento
Civil, 641, 642, and 647.) Thus the right of action of the third party who was prejudiced by the
judicial sale as to his intervention, could only be exercised while the proceedings in execution
were pending and before the consummation of the judicial sale by any of the acts fixed in article
1515 of the law which was in force at the time, that is to say, before the execution of the public
instrument of sale, or before the delivery of the thing sold adjudicated in payment; but with
respect to an action for recovery, the same may be exercised at any time so long as the right has
not expired by limitation. Hence, the silence of the defendant in the face of the proceedings in

73
LLB 2A

connection with the attachment, adjudication, and possession of the property claimed, did not
prejudice him in any way. Inasmuch as the main point is the legitimacy of the sale made by
Eugenio Andal to Jesualdo Gana, and in view of the fact that this contract was executed even
before the lands that were sold had been judicially attached, the trial court has not committed
any error by declaring that Eugenio Andal could validly sell them to Jesualdo Gana; and the
circumstance that they were subject to the credit of Isidro Yatco against the spouses Andal and
Faciolco was not an obstacle to the validity of the sale because they were not subject to the
security of the credit as by a real right formally attached to the said lands, but by the mere
delivery of the title deeds that the debtors made to the creditors.

74
LLB 2A

61. KUENZLE & STREIFF VS. MACKE & CHANDLER, ET AL.

G.R. No. L-5295 December 16, 1909


14 Phil. 610

FACTS:
This is an action brought by the plaintiff to recover of the defendants the sum of 1,000
pesos, the value of certain personal property, constituting a saloon bar, furniture, furnishings,
and fixtures. The plaintiff alleges that on or about the month of January, 1907, it was the owner
of the Oregon Saloon in Cavite, Province of Cavite, consisting of bar, furniture, furnishings, and
fixtures, of the value of 1,000 pesos; that during the said month of January, 1907, the defendant
Jose Desiderio, as sheriff, levied upon such property by virtue of an execution issued upon a
judgment secured by the defendant Macke & Chandler, against Stanley & Krippendorf; that said
plaintiff notified the sheriff, in the manner provided by law, that it was the owner of said goods
and forbade the sale thereof under said execution; that, notwithstanding such claim upon the
part of the plaintiff, the said sheriff sold said goods under said execution; that said firm of
Macke & Chandler was the purchaser of said goods and the same were delivered to it; that the
defendants Bachrach, Elser, and Gale, were the sureties upon the bond given to the sheriff by
Macke & Chandler before said goods were sold. The defendants in this case allege that the
property described by the plaintiff and sold at the execution sale referred to was not the property
of the plaintiff at the time of said levy and sale, but was the property of Stanley & Krippendorf,
who were in possession of the same at the time of such levy. They further allege that during the
month of January, 1907, the said Stanley & Krippendorf, being indebted in a considerable sum
to the plaintiff in this case, attempted to sell to the said plaintiff by an instrument in writing the
property in question; that said instrument was never recorded; that said instrument was a
private document; that the said property was not delivered to the plaintiff under said sale but
that said property remained from the time of said sale forward in the exclusive possession and
control of said Stanley & Krippendorf, and that they conducted the business subsequent to the
execution of said instrument exactly as they had prior thereto — in their own name —
purchasing goods and paying therefor without reference to the plaintiff in this case.

ISSUE:
Whether or not the said instrument of sale had any effect in transferring the property in
question.

HELD:
The case of the Fidelity and Deposit Company against Wilson (8 Phil. 51) lays down a
doctrine which we think is decisive of this case. In that case it was held that the ownership of
personal property cannot be transferred to the prejudice of third persons except by delivery of
the property itself; and that a sale without delivery gives the would-be purchaser no rights in
said property except those of a creditor. The bill of sale in the case at bar, under the
circumstances of this case, could have no effect against a person dealing with the property upon
the faith of appearances. The case of Kuenzle & Streiff against A. S. Watson & Co. (7 Off Gaz.,
425), 1 cited by the appellant in its brief, does not sustain its contention. That was a case of the
sale of property upon the condition that the title thereto should remain in the vendor until the
purchase price thereof should be fully paid, and that, in case of non-payment of the debtor of
any installment thereof when due, the vendor would have a right to take possession of the
property and deal with it as provided for in the contract. In that case the court held that such a
contract for the conditional sale of goods was valid in these Islands between the parties thereto,
and was valid also as to third persons, provided possession of the property therein described was
taken by the vendor before the rights of third persons intervened against the same. In the case at

75
LLB 2A

bar it is evident that the bill of sale, so called, was in no sense a conditional sale of property, such
as is described in the case of Kuenzle & Streiff against A. S. Watson, & Co., and the principles
applicable thereto are entirely inapplicable in the case at bar. Moreover, possession of the
property in suit was not taken at any time by the plaintiff. The defendant Macke & Chandlre,
having purchased the property at an execution sale, property conducted, obtained a good title to
the property in question as against the plaintiff in this case.

76
LLB 2A

62. GONZALES ET AL. VS. ROJAS

G.R. No. 5449 March 22, 1910


16 Phil. 51

FACTS:
That this land of fishery belonged to the sisters Juliana Samonte and Atanasia Samonte,
during their lifetime, who are said to have inherited it from their grandfather, Jose Samonte;
that while these sisters were still living, and being co-owners of the said land, they leased the
same to Mamerto Siaoson on March 21, 1895. There is to be noted in this contract the period
covered by the lease, which was for twelve years, so that, beginning on March 21, 1895, it was
not to terminate until the same day and month of 1907. It is also to be observed that this
contract was executed in the form of a public instrument, registerable in the registry of property,
though it does not appear as actually registered therein; that the two sisters, Juliana and
Atanasia Samonte, obtained, each one of them, a title of ownership to this land, by halves, on
March 26, 1895, both titles being obtained by composition with the Government; that Juliana
Samonte left at her death four legitimate children, to wit, Brigido Matias, Natalia, and Felisa
Villanueva y Samonte; and that Atanasia at her death also left three children, Eugenio,
Margarita, and Leon Reyes y Samonte. Mariano Gonzales, in his own behalf and in the name of
his brother and sister, Juan, Silvestra, Cipriana, and Candida Gonzales, petitioned for the
registration of a parcel of land used for the purposes of a fishery or vivarium, situated in Pitas,
barrio of Taliptip, in the town and Province of Bulacan, the boundaries and area of which are
specified in the application and plan filed, the total area thereof being 16 hectares, 10 acres, 95
centares, and 25 square decimetres, appraised in the last assessment at $1,650, United States
currency.

Alejandro Rojas opposed this petition for registration, alleging that he was the owner of
the same fishery that was the subject of the application of Mariano Gonzales and the co-
petitioners.

ISSUE:
Whether or not the sale made by Juliana Samonte to Alejandro Rojas in 1900 was
consummated.

HELD:
Article 1462 of the Civil Code provides that —"A thing sold shall be considered as
delivered when it is placed in the hands of the vendee. "When the sale is made by means of a
public instrument, the execution thereof shall be equivalent to the delivery of the thing which is
the object of the contract; if in said instrument the contrary does not appear or may be clearly
inferred." No actual delivery was made of the possession of the reality in question. There was no
public instrument, the execution of which could have constituted a form of delivery of the thing
sold. On the contrary, from the instrument executed, which is only a private one, it clearly
appears that the delivery of the fishery was postponed to a fixed date, to wit, that of the
termination of the contract of lease then pending, which was to be six years from the date
thereof. "This form of delivery, says Manresa, is subject, however, with respect to its efficacy, to
the terms of the instrument; for, if from the latter it should appear, or can be deduced, that it
was not the purpose of the contracting parties to effect the delivery, it could not be understood
that the delivery had taken place. Such a case would arise, for example, when a fixed date was
set when the vendee must take possession of the thing (10 Civil Code, 122.)" Consequently, at
the death of the vendor, Juliana Samonte, the fishery sold was a specific property bound by an
obligation, but not delivered, and continued to form part of the mass of her property, subject to

77
LLB 2A

an eventual right unknown to her heirs, who were those upon whom it was incumbent, in 1907,
to fulfill her obligation to make the delivery. Her heirs, being entirely unaware of such an
obligation, for in nowise could they have known that fishery had been sold and was a thing
owing and obligated to a third party, disposed of it by selling it to the petitioners. In good faith,
they possessed the fishery; in good faith, they sold it; and in good faith, the petitioners acquired
it. Against this sale so effected there is nothing that can be set up as a vice of the said contract.
The heirs of Juliana Samonte did not sell a thing, the fishery, which did not belong to them, for
the ownership thereof, had not yet been transmitted by Juliana Samonte, and they continued to
hold it until it should be demanded of them and the transfer or tradition should be effected by
them.

78
LLB 2A

63. WALTER EASTON VS. E. DIAZ & CO.

G.R. No. 10012


32 Phil. 180

FACTS:
On October 24, 1913, counsel for Walter Easton filed a written complaint in the Court
of First Instance of Albay in which he alleged as a cause of action that he was the sole and
exclusive owner of a still bearing the trade-mark "Ecrot," valued at P500, installed on a piece of
land occupied by Smith, Bell & Co., Ltd., and in charge of Jose Parlade; that, as a result of the
civil case No. 1737 of said court, brought by E. Diaz and company against Jose Parlade, in spite
of Parlade having testified the still was the property of the plaintiff Walter Easton, the defendant
knowing that this still did not belong to Parlade, and for the purpose of prejudicing the plaintiff,
sought in bad faith to have it attached; that, on October 22, 1913, it was duly attached by the
sheriff who took it apart and removed it from the place where it stood; that, on October 23, 1913,
the plaintiff presented to the sheriff a third party claim of ownership, setting forth therein that
damages to the extent of not less that P100 a day were being caused the claimant for each day
the sheriff retained the still in his possession because this was the season for the distillation of
ilang-ilang, a period which lasts only until the end of the month of November; but that the
defendant company gave bond to secure the sheriff in order that he might proceed to sell the still
at public auction; that the said sheriff would proceed with the said public sale and would cause
the plaintiff damage, very difficult if not impossible to repair, unless the court ordered the
suspension of the sale; that, by the retention of the still by the sheriff or other persons, the
plaintiff was being damaged to the extent of P100 for each day that it was out of his possession,
which damages could be only partly prevented by the immediate restitution of the property so
detained to the plaintiff.

The latter's counsel, therefore, prayed the court that a preliminary injunction issue
against the defendant company, its attorneys, agents and employees, and the provincial sheriff,
restraining them from performing any act whatever which might prevent the plaintiff from using
the said distilling apparatus; to order the sheriff to make immediate return of the still to the
place where it had been installed, upon the furnishing of such bond as the court might consider
sufficient; to declare that the said still is the exclusive property of the plaintiff, and to sentence
the defendant company to pay to the plaintiff the sum of at least P100 for each day that has
elapsed or may elapse from the date of the attachment of the still to that of its return; with the
costs against the defendant.

ISSUE:
Whether or not who was the owner of the ilang-ilang still which, on October 22, 1913.

79
LLB 2A

HELD:
The fact that the still was never delivered to the purchaser is an additional circumstance
which, in view of the evidence adduced by the defendant company, strengthens the conviction
that no such sale took place and that the still continues to belong to Parlade. For the acquisition
and transmission by law of ownership and other property rights, delivery of the things
transferred is indispensable. (Art. 609, Civ. Code.) It is a doctrine established by jurisprudence,
that the delivery of a thing is a necessary and indispensable requisite in order to acquire its
ownership by virtue of a contract. In the decision of the case of Kuenzle & Streiff vs. Macke &
Chandler (14 Phil. 610) and also in others, the following doctrine is laid down: The ownership of
personal property cannot be transferred to the prejudice of third persons except by delivery of
the property itself, and a sale without such delivery gives the would-be purchaser no rights in
said property except those of a creditor. In conclusion, it appears then from the record in this
case that the still attached against Jose Parlade at the instance of E. Diaz & Co. is the exclusive
property of the debtor and that the sale said to have been made by Parlade to the plaintiff,
Walter Easton, was simulated and made long after the attachment of the said still and for the
purpose of preventing its sale and the payment of the sum which Parlade owed to E. Diaz & Co.

80
LLB 2A

64. OCEJO, PEREZ & CO., VS. THE INTERNATIONAL BANK

G.R. No. L-10658 February 14, 1918


37 SCRA 631

FACTS:
On the 7th day of March, 1914, Chua Teng Chong of Manila, executed and delivered to
the International Banking Corporation, hereinafter referred to as "the bank," a promissory note,
payable one month after date, for the sum of P20,000. Attached to this note was another private
document, signed by Chua Teng Chong, in which it was stated that he had deposited with the
bank, as security for the said note, 5,000 piculs of sugar, which in said document were said to be
stored in a warehouse situated at No 1008, Calle Toneleros, Binondo, Manila. It appears from
the evidence, assuming that the sugar was in the warehouse on that date, that the bank did not
take possession of it when the document was executed and delivered, and that Chua Teng Chong
continued to retain the sugar in his possession and control. The bank made no effort to exercise
any active ownership over said merchandise until the 16th of April, when it discovered that the
amount of sugar stored in the said warehouse was much less than the 5,000 piculs mentioned in
the contract. The agreement between the bank and Chua Teng Chong with respect to the alleged
pledge of the sugar was never recorded in a public instrument. It does not appear from the
evidence that the promissory note represents money delivered by the bank on the date of its
execution, although it is stated therein that it was executed for value received. On the 24th day
of March, 1914, the plaintiff partnership Ocejo, Perez and Co., entered into contract with Chua
Teng Chong for the sale to him of a lot of sugar. It was agreed that delivery should be made in
the month of April, the sugar to be weighed in the buyer's warehouse. It appears that this sugar
was brought to Manila by a steamer in the month of April, and 5,000 piculs were delivered by
plaintiff to Chua Teng Chong. The delivery was completed April 16, 1914, and the sugar was
stored in the buyer's warehouse situated at No. 119, Muelle de la Industria. On April 17, 1914,
plaintiff partnership presented, for collection, its account for the purchase price of the sugar, but
the buyer refused to make payment, and put up to the present time the sellers have been unable
to collect the purchase price of the merchandise in question.

ISSUE:
Whether or not can the pledge of the sugar to the bank be sustained upon the evidence as
to the circumstances under which it obtained physical possession thereof?

HELD:
There can be no doubt that from March 24, 1914, on which date the parties agreed in
regard to the quantity of the sugar which the seller was to deliver and the price which the buyer
was to pay, the contract was perfected (Civil Code, Art. 1450). It is also clear that the obligation
of the seller to make delivery of the thing sold was not subject to the condition that the buyer
was to pay the price before delivery. The witness Pomar, called on behalf of the seller, testified
that the price was to be paid after the completion of delivery. (Stenographic notes, p. 4.) The
sugar was delivered to the buyer March 16, 1914. The seller delivered it into the buyer's
warehouse, leaving it entirely subject to his control. Article 1462 of the Civil Code provides that
the thing sold is deemed to be delivered "when it passes into the possession and control of the
buyer." It is difficult to see how the seller could have divested himself more completely of the
possession of the sugar, or how he could have placed it more completely under the control of the
buyer. Article 1506 of the Civil Code provides that the contract of sale may be rescinded for the
same causes as all other obligations, in addition to the special causes enumerated in the
preceding articles. It is also observed that the article does not distinguish the consummated sale

81
LLB 2A

from the merely perfected sale, and we do not believe that there is any reason for making this
distinction.

82
LLB 2A

DUARTE, DANRIE R.

65. ROMAN VS. GRIMALT

G.R. No. 2412 April 11, 1906


6 Phil. 96

Facts:
Grimalt transacted with Roman for several days for the purchase of a schooner named
Santa Marina. They agreed upon the sale of the vessel for the sum of P1500 payable on three
installments. The sale was predicted upon the condition that it was seaworthy and that Roman
would perfect his title thereto as it was found out to be registered to Paulina Giron. If the said
conditions were complied with only then will Grimalt purchase the same. Roman promised
however, to perfect his title to the vessel but he failed to do so, then due to a storm, the vessel
sank in the bay. On the 30th of June 1904, plaintiff demanded for the payment of the purchase
price of the vessel in the manner stipulated and defendant failed to pay.

Issue:
Whether there was a perfected contract of sale and who will bear the loss.

Held:
No. Where no valid contract of sale exists it creates no mutual rights or obligations
between the alleged purchaser and seller, nor any legal relation binding upon them. There was
no perfected contract of sale because the purchase of which had not been concluded. The
conversations had between the parties and the letter written by defendant to plaintiff did not
establish a contract sufficient in itself to create reciprocal rights between the parties. If no
contract of sale was actually executed by the parties the loss of the vessel must be borne by its
owner and not by the party who only intended to purchase it and who was unable to do so on
account of failure on the part of the owner to show proper title to the vessel and thus enable
them to draw up contract of sale.

83
LLB 2A

66. NAVAL, ET AL. VS. ENRIQUEZ, ET AL.

G.R. No. 1318 April 12, 1904


3 Phil. 669

Facts:
Don Jorge Enriquez, as heir of his deceased parents, Antonio Enriquez and Doña Ciriaca
Villanueva, whose estates were at that time still undistributed, by public instrument sold to Don
Victoriano Reyes his interest in both estates. The deed was executed in Manila before Don
Enrique Barrera, a notary public, who certified in the document that the vendor received the
said consideration at the time of the execution of the instrument. The plaintiffs demand that
these deeds be declared null and void, as well as the contracts evidenced thereby, apparently
solely so far as they refer to the estate of Don Antonio Enriquez, no mention being made of the
estate of Doña Ciriaca Villanueva in the complaint. The plaintiffs contended that the deeds in
question were consummated and were executed for the purpose of deceiving and defrauding
Don Jorge Enriquez and his family. The conclusion of the plaintiffs was that as such executor
Don Francisco was unable to acquire by his own act or that of any intermediary the said heredity
portion of Don Jorge under the provision of paragraph 3 of Article 1459 of the Civil code.

Issue:
Whether or not Don Francisco Enriquez as executor and administrator of estate of Don
Antonio is incapacitated to acquire by purchase the hereditary right of Jorge Enriquez

Held:
Although an executor cannot lawfully purchase property in his possession as such, this
prohibition does not forbid the purchase by him of the undivided interest of an heir in the
estate. The thing sold in the two contracts of sale mentioned in the complained was the
hereditary right of Don Jorge Enriquez, which evidently was not in charge of the executor, Don
Francisco Enriquez. Executors, even in those cases in which they administer the property
pertaining to the estate, do not administer the hereditary rights of any heir. This right is vested
entirely in the heirs, who retain it or transmit it in whole or in part, as they may deem
convenient, to some other person absolutely independent of the executor, whose authority,
whatever powers the testator may have desired to confer upon him, do not and cannot under
any circumstances in the slightest degree limit the power of the heirs to dispose of the said right
at will. That right does not form part of the property delivered to the executor for
administration. This conclusion having been reached, the Court is of the opinion that article
1459 of the Civil Code, cited by the plaintiffs to show the alleged incapacity of Don Francisco
Enriquez as executor of the will of Don Antonio Enriquez, to acquire by purchase the hereditary
right of Jorge Enriquez, and has no application to the present case. The prohibition which
paragraph 3 of that article imposes upon executors refers to the property confided to their care,
and does not extend, therefore, to property not falling within this class. Consequently, even
upon the supposition that the executor, Don Francisco Enriquez, was the person who really
acquired the hereditary rights of Jorge Enriquez, the sale in question would not for that reason
be invalid, the executor, Don Francisco Enriquez, not being legally incapable of acquiring the
hereditary right in question as the plaintiffs erroneously suppose.

84
LLB 2A

67. UY PIAOCO VS. MCMICKING

G.R. No. 4237 March 5, 1908


10 Phil. 286

Facts:
Uy Chiam Liong, in a notarial document dated January 17, 1906, purporting to be a
contract of purchase and sale, sold and transferred to the plaintiff the property and shares of
stock which is the subject-matter of a case filed by the defendants Antonio R. Bayan Ju, Yap Qui
Chin and Khy Pack. The certificates evidencing these shares of stock, under the charter or by
laws of the said company, were transferable only by endorsement and the issue of new scrip to
the purchaser by the company upon the surrender of the duly indorsed certificate of the vendor.
The certificates of stock not being in the immediate possession and control of the vendor at the
time of said alleged sale, no endorsements thereof was made in accordance with the by-laws of
the company, nor is there any evidence in the record that the company was notified of the
alleged sale. The trial court ruled in favor of the defendants and issued attachment orders
against the property of Uy Chiam Liong. Plaintiff prayed that the attachments be dissolved and
that the stock be restored to its legitimate owner.

Issue:
Whether the ownership and title to the stock in question passed from the original owner
to the plaintiff in this action by virtue of the contract of purchase and sale evidenced by the
notarial document

Held:
A bona fide contract of purchase and sale of stock in a company or corporation set out in
a notarial document conveys to the vendee, as between the vendor and vendee, the entire title,
legal and equitable of the vendor; although as between the vendee and the company or
corporation the vendee acquires only an equitable title, which the company or corporation is
bound to recognize and permit to be ripened into a legal title when he presents to do the acts
required by the charter or by-laws in order to make a transfer. Statutory provisions and by-laws
of companies or corporations which require transfers of stock to be recorded on the books of
such companies or corporations regulate merely the respective rights of the corporation and the
individual stockholder. No one can claim to be a stockholder, and to exercise the rights of a
member of such company or corporation, in virtue of a sale to him, until the corporation has
taken cognizance of the sale, and, by transfer on its books, has substituted the purchaser for the
vendor; for whether one has acquired the rights of a member of a company or corporation is a
question to be determined by the laws of the company or corporations, promulgated in
conformity with statutory regulations. But the question whether a purchaser has acquired a
good and perfect title to any property or things, tangible or intangible, is a question solely to be
determined by the provisions of general law touching the sale and transfer of such objects. The
Court is of opinion therefore that all the right, title, and interest of Uy Chiam Liong in and to the
stock in question vested in the plaintiff on the 17th day of January, 1906, the date of the contract
of purchase and sale evidenced by the notarial document. Hence subsequent attachments levied
on this stock at the issuance of creditors of Uy Chiam Liong are invalid and should be dissolved.

85
LLB 2A

68. BUENCAMINO, ET AL. VS. VICEO, ET AL.

G.R. No. L-4929 March 5, 1909


13 Phil. 97

Facts:
On the 28th day of April, 1898, Anastacio Sabat, father of Anselmo Sabat, sold and
conveyed the two parcels of land to Doña Manuela David, the mother of the petitioners, for
3,500 pesos. The deed of conveyance contained an agreement that the vendor might repurchase
the same within three years from the date thereof. Anastacio, who died in 1902, and Anselmo,
have never repurchased the property or made any offer to do so. It is claimed, however, by this
appellant, that the contract evidenced by notarial document was afterwards changed by him and
Doña David from a contract of sale with a right of repurchase to a mortgage contract. The trial
court rejected their claims, hence this appeal.

Issue:
Whether or not the document was of a contract of sale with a right to repurchase

Held:
The document set forth in the opinion held to be a contract of sale with a right to
repurchase. In a contract of sale with a right to repurchase, when no time is specified within
which the repurchase must be made, it must be done within four years. Considering it as a sale
with the right to repurchase, no time being mentioned therein for the exercise of the right to
repurchase, it lasted only for four years, which had expired prior to the commencement of this
proceeding. Although the defendant Sabat testified that he had been in possession of the
property until 1905, the evidence of the petitioners satisfies us that they and their mother had
been in possession since 1901, and probably since 1898. Gelasio Buencamino testified that he
went to see Anastasio Sabat in 1901 to tell him that the time repurchase had expired and that
Sabat then told him that the purchaser should continue in possession because he, Sabat, had no
money with which to repurchase the property.

86
LLB 2A

69. YAP UNKI VS. CHUA JAMCO

G.R. No. 5202 December 16, 1909


14 Phil. 602

Facts:
On November 10, 1906, plaintiff and defendant executed a written agreement whereby
the business partnership then existing between them was dissolved, and plaintiff sold and
defendant bought plaintiff's interest in the partnership for the sum of P1, 728.94, payable in
three installments, as set out in the agreement. Appellant admits the execution of the contract,
but denies plaintiff's right to a recovery thereunder, on the ground that plaintiff failed to comply
with his obligation to deliver the property sold to the purchaser and to secure to him the
peaceable possession thereof. The amended complaint alleged that the total indebtedness thus
contracted by the defendant had become due and payable and had not been paid in whole or in
part at the time when that complaint was filed. Judgment was rendered by the trial court in
favor of the plaintiff and against the defendant for P1, 728.94 together with interest upon the
various installments from the date when they fell due. From this judgment defendant appealed,
and the case is now before the Court on his bill of exceptions.

Issue:
Whether or not the defendant has the right to set up a counterclaim for unliquidated
damages against plaintiff's claim based on the contractual obligation

Held:
Compensation as defined in Articles 1195 and 1195 of the Civil code, while it resembles in
many respects the common-law set-off, and certain counterclaim provided for in the Code of
Civil Procedure, differs therefrom in that compensation takes place by mere operation of law,
and extinguishes reciprocally the two debts as soon as they exist simultaneously, while a set-off
or counterclaim must be pleaded to be effectual. The provisions of Chapter 5 of the new Code of
Civil Procedure, and especially Section 95 thereof, give to the defendant, in any action instituted
against him the right, if he so desires, to secure in that action the final disposition of all claims
which he may against the plaintiff, whatever may be their nature or origin, and the judgment
appealed from should, therefore, be reversed, and the record returned to the trial court, where
the parties will be given an opportunity to submit evidence upon the last above-mentioned cause
of action set up in defendant's counterclaim, and the judgment already rendered will be
modified or not in accordance with defendant's success or failure in establishing the damages
alleged in this counterclaim.

87
LLB 2A

HALBI, RASHIDA I.

70. JOSE FLORENDO VS . EUSTAQUIO P. FOZ

G.R. No. 6565 October 24, 1911


20 Phil. 388

Facts:
Eustaquio P. Foz executed in Manila a contract, ratified before a notary on May 11, 1909.
In the contract a consideration of the sum of six thousand pesos (P 6000.00), sold ceded and
conveyed forever and perpetually to Sr. Jose Florendo, his house and camarin of strong
materials, together with the lots on which they are erected as well as the specified boundaries.
Florendo paid P 2000.00 and which shall pay the remaining four thousand in Vigan at any time
during the said month or the said next month. If in case the buyer cannot go to Vigan, he could
pay the debt to the church at Vigan and obtain the title of the house and that he could also send
the remainder to Manila. Records were also made in this instrument that the rents of the said
property may be collected by Foz only up to and including the month of June.

Eustaquio Foz went to Vigan, and on June 23 of the same year, Jose Florendo,
accompanied by a notary, tendered to the former the P 4000.00, the rest of thd price of the sale;
but Foz refused to receive them, saying that the true price of the sale, recorded in another
instrument held by Florendo, while still in Manila, repudiated the contract. Whereby, these were
recorded with the notarial certificate. Then, Florendo executed against Foz. He asked the
defendant be sentenced: (a) to comply with the contract of absolute purchase and sale, by
delivering to the plaintiff the property sold; (b) to pay to the plaintiff the rents of the entire
realty from July 1, 1909; (c) that, out of the P 4000.00 deposited by the plaintiff in the
municipal treasury of Vigan, Ilocos Sur, payment be made to the Roman Catholic Apostolic
Church and (d) to pay the costs of the trial.

The defendant alleged that it was false that he had sold his property for the price of P
6000.00; that, if he signed the deed of sale, he has deceived in so doing, as he had heard, or
believed that he had heard, when it was previously read to him, that the amount stated therein
was P 10,000, which was the true sum agreed upon between himself and the plaintiff as the
price of the property. Therefore, he asked that the deed of sale be declared to be false, null and
void, and in counter-complaint, prayed that the plaintiff be compelled to return to him the
ownership title of the property, which was in the plaintiff‘s possession.

Issue:
Whether or not the deposit of 4000.00 php is a part of the price and Florendo can file
against Foz for completion of the contract.

Held:
The conveyance of s thing sold does not depend on the payment of the price. As the
contrary does not appear nor is to be inferred from the public instrument executed by the
defendant, its execution was really a formal or symbolical delivery of the property sold and
authorized the plaintiff to use the title of ownership as proof that he was thenceforth the owner
of the property. It is the material delivery of the property sold which the defendant must make in
compliance with the contract; inasmuch the formal delivery de jure was made. The judgment
appealed is affirmed and the cost against appellant.

88
LLB 2A

71. DOMICIANO GONZAGA vs. ANGEL JAVELLANA

G.R. No. 6843 September 3, 1912


23 Phil. 125

Facts:
On May 21, 1910, Gonzaga brought suit against Angel Javellana for the ownership of the
said parcel of land consisting of the 449 square meters and 30 square centimeters, the
identification of which is a fact agreed upon at the trial, requested that he be declared the owner
thereof and that the defendant be compelled to recognize the said parcel to be of the plaintiff‘s
exclusive and legitimate ownership, and that the latter be place in the possession thereof.

The defendant, after denying all the facts set forth in the complaint, impugned the
purchase alleged by the plaintiff and claim that it was fictitious. The Court of First Instance of
Iloilo decided the suit in behalf of the plaintiff. The defendant appealed from that judgment and
forwarded his appeal to this court through the means of a bill of exceptions.

It appears that the parcel of land concerned in this suit was sold twice to different
purchasers: to the plaintiff, on June 23, 1905, and the sale was inscribed in the property registry
on December 15, 1909; and to the defendant on October 26 , 1908, and this sale was likewise
entered in the said registry on May 5, 1910.

In the judgment, good faith is supposed on the part of both purchasers, and it is not
argued in this appeal that either of them showed bad faith.

Issue:
Whether or not, Gonzaga can claim the ownership of the said property.

Held:
Therefore, as the judgment appealed from is in accord with this legal provision and the
merits of the proceedings, the same is hereby affirmed, with the costs of this instance against the
appellant. The rules of the preference provide by the Civil Code for deciding between the claims
of the different purchasers of one it shall belong to the first person acquiring it and first
recorded in the registry; second, there should be no entry, it shall belong to the person who first
took possession

The first purchaser, therefore, has in his favor priority of the title and priority of entry in
the property registry; and it is this priority of registration that is the positive reason for deciding
on this appeal that – ―If the thing to be real property, ownership thereof shall belong to the
person acquiring it who first recorded it in the registry.‖

89
LLB 2A

72. VIEGELMANN AND CO ET AL. VS. JOSE PEREZ

G.R. No. 10870 February 18, 1918


37 Phil. 678

Facts:
Tan Achiong alias Yap Cangco is a merchant and a resident of this city Manila. He is the
sole and absolute owner of a hat factory situated on Calle Sacristia, No. 231, Binondo, Manila
and to which the goods are free of charges and liabilities. He received 1000 php from Don Jose
Perez to which he assigned, sold, and the said personal property and to take over the title of the
said goods. The said sale was executed under the covenant or condition that if he should return
to the purchaser within the period of three months from the date of the execution of this
instrument the 1000.00 php. So, Jose Perez accepted the said deed of sale under right of
repurchase, in the precise terms and conditions upon which it has been executed in his favor by
the vendor. Due to that, Jose leased the said property during the term for redemption, to Yap
Cangco, the personal property sold to him by Cangco for the monthly rental of 30 php.

After the date of the acknowledgement of the said instrument, for more than three
months, Yap Cangco was declared insolvent; that on the 4th day of November, 1913, K.
Matsumato was designated as assignee y the creditors; and that on the same day he was ordered
to sell all the insolvent‘s estate.

On November 18, 1913, Perez presented a claim in the course of the insolvency proceedings,
setting forth that under the terms of the foregoing document, he had become the owner of the
property described therein, as a result of the failure of the insolvent to redeem or repurchase it
at the time stipulated.

Issue:
Whether or not the said sale is valid.

Held:
It must be clear that Perez the purchaser of the goods described therein, is entitled to the
possession of these goods as against the assignee of the vendor, in the insolvency proceedings, or
to the proceeds of the sale of these goods by the assignee in the course of those proceedings. In
the said instrument and the circumstances under which it was executed, it should not be held to
be a genuine and valid sale of the goods therein mentioned with a reserved right to repurchase
the vendor. Twenty days and hereafter the judgment entered in the court below is reversed, in so
far as it denies the right of the appellant, Jose Perez, to a preference, as against unsecured
general creditors, in the distribution of funds in the hands of the assignee in these bankruptcy
proceedings, to the full amount of the indebtedness acknowledged in the public document above
set forth, without costs in this instance, and ten days thereafter let the record be returned to the
court below where the judgment will be entered making provision for the distribution of these
funds in accordance herewith.

90
LLB 2A

73. SOSTENES CAMPILLO VS.COURT OF APPEALS

G.R. No. L-56483 May 29, 1984


129 SCRA 513

Facts:
On February 27, 1961, Tomas de Vera and his wife Felisa Serafico sold two parcels of
land located in Tondo, Manila, designated as Lots 1 and 2 of the consolidation and subdivision
plan (LRC) Pcs. 888 and segregated from Transfer Certificate of Title No. 37277 under Transfer
Certificate of Title No. 63559, to Simplicio Santos, now deceased and is represented by his
administrator, Zenaida Diaz Vda. De Santos, the herein private respondents. Said sale was
however never presented for registration in the office of the Registry of Deeds of Manila nor
noted in the title covering the property.

On January 27, 1962, petitioner Sostenes Campillo obtained a judgment for a sum of
money against Tomas de Vera in Civil Case No. 49060 of the Court of First Instance of Manila.
That judgment became final and executory, and petitioner obtained an order for the issuance of
a writ of execution. The writ was issued on April 4, 1962 and pursuant thereto, the City Sheriff
levied on three (3) parcels of land covered by TCT No. 63559 in the name of Tomas de Vera,
including the two (2) parcels of land which the latter previously sold to Simplicio Santos.

On July 25, 1962, the three parcels of land were sold at the public auction for P 17,550.8
in favor of the petitioner who was issued the corresponding certificate of sale. Claiming to be the
owner of the two parcels of land by reason of the previous sale of him by Tomas de Vera,
Simplicio Santos filed an action to annul the levy, notice of sale, sale at public auction and final
deed of sale at the said land and in favor of the petitioner. In resisting the complaint, the herein
petitioner as one of the defendants below, alleged that he is an innocent purchase for the value
and that the supposed previous sale could not be preferred over the levy and sale at public action
because it was not registered. After due trial, the lower court rendered judgment sustaining the
validity of the levy and sale at public auction primarily because at the time of the levy and sale,
the disputed properties were still registered in the name of the judgment debtor, Tomas de Vera.
The trial court ruled, the sale to Simplicio Santos which was neither registered nor noted in the
title of the subject lots, cannot bind third persons.

Issue:
Whether or not the said right of title to Sostenes Campilio who subsequently purchase
them at an execution sale and obtained through a certificate of title.

Held:
It is settled in this jurisdiction that a sale of real estate, whether made as a result if a
private transaction or of a foreclosure or execution sale, becomes legally effective against third
persons only from the date of its registration. Consequently, and considering that the properties
subject matter thereof were actually attached and levied upon at the time when said properties
stood in the official records of the Registry of Deeds as still owned by and registered in the name
of the judgment debtor, Tomas de Vera, the attachment, levy and subsequent sale of said
properties are proper and legal. The net result is that the execution sale made in favor of the
herein petitioner transferred to him all the rights, interest and participation of the judgment
debtor in the aforestated properties as actually appearing in the certificate of title, unaffected by
any transfer or encumbrance not so recorded therein.

91
LLB 2A

Since the sale made in favor of the vendee did not comply with the above-quoted provision, the
transaction was ineffectual as to third persons. And since the sale made in favor of the second
vendee complied with relevant provision, the sale to him was good and should be protected.
The questioned decision of the respondent appellate court is hereby reversed and set aside, and
that the judgment of the lower court is reinstated. Without pronouncement to the cost.

92
LLB 2A

HASAN, AZFAR M.

74. OBAÑA VS. COURT OF APPEALS AND SANDOVAL

135 SCRA 557 March 29, 1985

FACTS:
On November 21, 1964, Anicleto Sandoval (owner of Sandoval‘s and Sons Rice Mill) was
approached by Chan Lin who offered to purchase from him 170 cavans of rice at the price of
P37.25 per cavan. The driver attempted to collect the payment from Chan Lin and Petitioner
Anacleto Sandoval but the latter refused, stating that he had already made the payment to Chan
Lin. Further demands having been met with refusal, Sandoval, as plaintiff, filed suit for Replevin
against petitioner, before the Municipal Court of San Fernando, La Union which ordered
petitioner- defendant to pay to Sandoval ½ of the cost of the rice or P2,805. On appeal by the
petitioner to the court of First Instance, judgment was rendered dismissing the complaint. On
appeal to respondent Appellate Court, Sandoval obtained a reversal in his favor. Hence, the
present petition seeks for the review of the decision of Court of Appeals ordering Obaña inaction
for Replevin to return to Sandoval, Private Respondent herein, 170 cavans of rice or to pay its
value in the amount P37.25 per cavan, with legal interest from the filing of the complaint until
fully paid.

ISSUE:
Whether or not the petitioner-dependent had unjustly enriched himself at the expense of
another by holding on to property no longer belonging to him.

HELD:
The judgment under review is hereby affirmed. No person should be benefited without a
valid basis or justification, shall enrich himself at the expense of another and hold on to a
property no longer belonging to him. The petition- defendant in his own testimony said that he
was repaid the sum of P5,600 by Chan Lin and claimed that he delivered the rice back to them.
However, the driver denied that the rice had ever been returned. The driver‘s version is more
credible since Sandoval‘s lawyer had manifested in open court that they would have withdrawn
the complaint if the return of the rice had been effected. In law and equity, therefore, Sandoval
is entitled to recover the rice, or the value thereof since he was not paid the price there for. Costs
against petitioner.

93
LLB 2A

75. DANGUILAN VS. IAC

G.R. No. L-69970 November 28, 1988


168 SCRA 22

FACTS:
A parcel of lot owned by Domingo Melad was being claimed by petitioner Felix
Danguilan and respondent Apolonia Melad.

Apolonia Melad contends that she acquired the property when Dominggo Melad sold it
to her when she was just 3 years old in which her mother paid the consideration. (Evidence:
Deed of sale dated December 4, 1943 with a sum consideration of P80.00.) Apolonia contended
that she just moved out of the farm only in 1946 when Felix Danguilan approached her and
asked permission to cultivate the land and to stay therein.

Dangguilan, on the other hand, presented for his part 2 documents executed in
September 14, 1941 and December 18, 1943, to prove his claim that the properties were given to
him by Dominggo Melad through an onerous donation. The onerous part of the donation
includes the taking care of the farm and the arrangement of the burial of Dominggo.

RTC ruled in favor of Danguilan. CA reversed RTC‘s ruling. It ruled that there was a
donation, which was void for failing to comply with the formalities.

ISSUE:
Who has the better right between parties?

HELD:
Domingo Melad intended to donate the property to petitioner Danguilan
It is our view, considering the language of the two instruments that Domingo Melad did
intend to donate the properties to the petitioner Danguilan. We do not think, however, that the
donee was moved by pure liberality. While truly donations, the conveyances were onerous
donations as the properties were given to petitioner Danguilan in exchange for his obligation to
take care of the donee for the rest of his life and provide for his burial.

Hence, it was not covered by the rule in Article 749 of the Civil Code requiring donations
of real properties to be effected through a public instrument, and the 2 private documents
remain valid.

Assuming there was a valid deed of sale, PR Melad failed to show that it was
consummated (no actual delivery + no possession)

At any rate, even assuming the validity of the deed of sale, the record shows that
Apolonia Melad did not take possession of the disputed properties and indeed waited until 1962
to file this action for recovery of the lands from petitioner Danguilan. If she did have possession,
she transferred the same to Danguilan in 1946, by her own sworn admission, and moved out to
another lot belonging to her step-brother.

Her claim that the petitioner was her tenant (later changed to administrator) was
disbelieved by the trial court, and properly so, for its inconsistency. In short, she failed to show
that she consummated the contract of sale by actual delivery of the properties to her and her
actual possession thereof in concept of purchaser-owner.

94
LLB 2A

No constructive delivery allowed if property is in actual and adverse possession of a third


person. In our jurisdiction, it is a fundamental and elementary principle that ownership does
not pass be mere stipulation but only by delivery and the execution of a public document does
not constitute sufficient delivery where the property involved is in the actual and adverse
possession of third persons.

Therefore, in our Civil Code it is a fundamental principle in all matters of contracts and a
well- known doctrine of law that "non mudis pactis sed traditione dominia rerum
transferuntur".

In conformity with said doctrine as established in paragraph 2 of article 609 of said code,
that "the ownership and other property rights are acquired and transmitted by law, by gift, by
testate or intestate succession, and, in consequence of certain contracts, by tradition".

In accordance with such disposition and provisions the delivery of a thing constitutes a
necessary and indispensable requisite for the purpose of acquiring the ownership of the same by
virtue of a contract.

One who is in possession is presumed to be the owner

In this case, there no dispute that it is Danguilan and not Melad who is in actual
possession of the litigated properties. And even if the claim of petitioner and respondent are
weak, judgment must be in favor of the Danguilan for one who is in possession is presumed to
be the owner, and cannot be obliged to show or prove a better right.

95
LLB 2A

77. PHILIPPINE SUBURBAN DEV. CORP. VS. AUDITOR GENERAL

G.R. No. L-19545 April 18, 1975


63 SCRA 397

FACTS:
On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting
on the reports of the Committee created to survey suitable lots for relocating squatters in Manila
and suburbs, approved in principle the acquisition by the People‘s Homesite and Housing
Corporation of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan and of
another area either in Las Piñas or Parañaque, Rizal, or Bacoor, Cavite for those who desire to
settle south of Manila. On June 10, 1960, the Board of Directors of the PHHC passed Resolution
No. 700 (Annex ―C‖) authorizing the purchase of the unoccupied portion of the Sapang Palay
Estate at P0.45 per square meter ―subject to the following conditions precedent:

3. That the President of the Philippines shall first provide the PHHC with the
necessary funds to effect the purchase and development of this property from the
proposed P4.5 million bond issue to be absorbed by the GSIS.

4. That the contract of sale shall first be approved by the Auditor General
pursuant to Executive Order dated February 3, 1959.

On July 13, 1960, the President authorized the floating of bonds under Republic Act Nos.
1000 and 1322 in the amount of P7,500,000.00 to be absorbed by the GSIS, in order to finance
the acquisition by the PHHC of the entire Sapang Palay Estate at a price not to exceed P0.45 per
sq. meter.

On December 29,1960, Petitioner Philippine Suburban Development Corporation, as


owner of the unoccupied portion of the Sapang Palay Estate and the People‘s Homesite and
Housing Corporation, entered into a contract embodied in a public instrument entitled ―Deed of
Absolute Sale‖ whereby the former conveyed unto the latter the two parcels of land
abovementioned. This was not registered in the Office of the Register of Deeds until March 14,
1961, due to the fact, petitioner claims, that the PHHC could not at once advance the money
needed for registration expenses.

In the meantime, the Auditor General, to whom a copy of the contract had been
submitted for approval in conformity with Executive Order No. 290, expressed objections
thereto and requested a re-examination of the contract, in view of the fact that from 1948 to
December 20, 1960, the entire hacienda was assessed at P131,590.00, and reassessed beginning
December 21, 1960 in the greatly increased amount of P4,898,110.00.

It appears that as early as the first week of June, 1960, prior to the signing of the deed by
the parties, the PHHC acquired possession of the property, with the consent of petitioner, to
enable the said PHHC to proceed immediately with the construction of roads in the new
settlement and to resettle the squatters and flood victims in Manila who were rendered
homeless by the floods or ejected from the lots which they were then occupying. On April 12,
1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of
P30,099.79 from the purchase price to be paid by it to the Philippine Suburban Development
Corporation. Said amount represented the realty tax due on the property involved for the
calendar year 1961. Petitioner, through the PHHC, paid under protest the abovementioned
amount to the Provincial Treasurer of Bulacan and thereafter, or on June 13, 1961, by letter,

96
LLB 2A

requested then Secretary of Finance Dominador Aytona to order a refund of the amount so paid.
Upon recommendation of the Provincial Treasurer of Bulacan, said request was denied by the
Secretary of Finance in a letter-decision dated August 22, 1961. Petitioner claimed that it ceased
to be the owner of the land in question upon the execution of the Deed of Absolute Sale on
December 29, 1960. It is now claimed in this appeal that the Auditor General erred in
disallowing the refund of the real estate tax in the amount of P30,460.90 because aside from the
presumptive delivery of the property by the execution of the deed of sale on December 29, 1960,
the possession of the property was actually delivered to the vendee prior to the sale, and,
therefore, by the transmission of ownership to the vendee, petitioner has ceased to be the owner
of the property involved, and, consequently, under no obligation to pay the real property tax for
the year 1961.
**Respondent, however, argues that the presumptive delivery of the property under Article 1498
of the Civil Code does not apply because of the requirement in the contract that the sale shall
first be approved by the Auditor General, pursuant to the Executive Order.

ISSUE:
WON there was already a valid transfer of ownership between the parties.

HELD:
Considering the aforementioned approval and authorization by the President of the
Philippines of the specific transaction in question, the prior approval by the Auditor General
envisioned by Administrative Order would therefore, not be necessary.

Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe
actual (real tradition) or constructive (constructive tradition). 2 When the sale of real property is
made in a public instrument, the execution thereof is equivalent to the delivery of the thing
object of the contract, if from the deed the contrary does not appear or cannot clearly be
inferred.

In other words, there is symbolic delivery of the property subject of the sale by the
execution of the public instrument, unless from the express terms of the instrument, or by clear
inference therefrom, this was not the intention of the parties. Such would be the case, for
instance, when a certain date is fixed for the purchaser to take possession of the property subject
of the conveyance, or where, in case of sale by installments, it is stipulated that until the last
installment is made, the title to the property should remain with the vendor, or when the vendor
reserves the right to use and enjoy the properties until the gathering of the pending crops, or
where the vendor has no control over the thing sold at the moment of the sale, and, therefore, its
material delivery could not have been made.

In the case at bar, there is no question that the vendor had actually placed the vendee in
possession and control over the thing sold, even before the date of the sale. The condition that
petitioner should first register the deed of sale and secure a new title in the name of the vendee
before the latter shall pay the balance of the purchase price, did not preclude the transmission of
ownership. In the absence of an express stipulation to the contrary, the payment of the purchase
price of the good is not a condition, precedent to the transfer of title to the buyer, but title passes
by the delivery of the goods.

WHEREFORE, the appealed decision is hereby reversed, and the real property tax paid
under protest to the Provincial Treasurer of Bulacan by petitioner Philippine Suburban
Development Corporation, in the amount of P30,460,90, is hereby ordered refunded. Without
any pronouncement as to costs.

97
LLB 2A

78. JOSEPH AND SONS ENTERPRISES VS COURT OD APPEALS

G.R. No. L-46765 August 29, 1986


143 SCRA 663

FACTS:
On April 1, 1964 respondent Rodolfo T. Lat purchased the lot in question from the
Makati Development Corporation. One condition embodied in the Deed of Absolute Sale was
that the lot could not be sold, transferred, or conveyed until after the construction of a house
thereon was completed. In spite of his having fully paid for the lot, respondent Lat could not
have it registered in his name because another condition of the sale was that the deed of sale
could not be registered and the title would not be released to the buyer until the house has been
completely constructed.

On July 24, 1965, respondent Lat entered into an agreement to purchase and sell the lot
with respondent Paz Banaad Laurel. After paying the full consideration of P38,830.00,
respondent spouses Laurel, hereinafter referred to as the Laurels, constructed a residential
house on the lot.

After completing the construction of the house, the Laurels advertised the house and lot
for sale. Petitioner's President and Secretary, Alfredo Joseph and his daughter Alegria Neri,
went to see the Laurels at the latter's residence and negotiated for the purchase of the property.

Having agreed on the terms and conditions of the sale, the parties executed a Deed of
Conditional Sale on April 23, 1966. Because the house and lot, while already owned by the
Laurels, were still registered in the name of respondent Lat, the deed was signed with the latter
as vendor and the Laurels as witnesses.

The consideration for the conditional sale was P125,000.00, of which P20,000.00 was
payable upon the execution of the deed and the balance payable in six equal installments of
P17,500.00 each at specified dates between June 7, 1966 and January 22, 1967.

Petitioner failed to pay the second and subsequent installments on time. As of October
22, 1966, when petitioner should have paid P90,000.00 under the contract, it had paid only
P60,000.00. The July 22, 1966 installment was paid only on September 1, 1966 while the
September 7, 1966 installment was paid with a check which bounced.

Because of its difficulties in paying its obligations and to enable it to pay the Laurels in
full, petitioner through Mrs. Alegria Neri proposed to the Laurels that a loan be secured from a
bank using the property as collateral. The proceeds of the loan would be applied to the unpaid
installments already due while petitioner would assume the payment of the bank loan.

Since the title to the property was still in respondent Lat's name, the People's Bank and
Trust Co. advised the parties to have the title transferred to respondent Paz Banaad Laurel. A
deed of absolute sale was executed by respondent Bienvenido Laurel as attorney-in-fact of
Rodolfo T. Lat in favor of Paz Banaad Laurel on November 7, 1966. On November 9, 1966 a
confirmation of the sale was executed by Rodolfo T. Lat and TCT No. 176760 was issued in Paz
Banaad's name.

98
LLB 2A

On November 28, 1966, the Laurels mortgaged the disputed property to the bank to
secure a P56,000.00 loan. The loan was payable in quarterly installments of P14,000.00 each
between February 28, 1967 and November 28, 1967.

Out of the P54,217.47 net proceeds of the bank loan, P48,145.12 was applied to
petitioner's unpaid installments already past due, while the balance of P6,063.35 was turned
over to it. Petitioner failed to pay the P17,500.00 final installment under the deed of conditional
sale executed on April 23, 1966. It also failed to pay any of the loan amortizations due to the
People's Bank and Trust Company, this in spite of its having leased the property to the United
States Agency for International Development (USAID) at a monthly rental of Pl,000.00.

To stave off foreclosure, the Laurels paid for bank loan, interests and expenses, including
the P6,083.35 earlier given to petitioner, in the total sum of P63,452.22. On July 25, 1967 in
view of petitioner's refusal to surrender the house and lot to them, the Laurels filed a complaint
for ejectment against the petitioner and USAID with the Municipal Court of Makati. The court
decided the case in favor of the Laurels. The record is not clear as to the present status of this
case. Petitioner states in its brief that this case was later dismissed on appeal to the Court of
First Instance, but respondents state in their brief that the case is still pending.

On December 18, 1967, petitioner filed a complaint for annulment of title and of
contract, with damages and preliminary injunction. The Laurels filed a counterclaim for the
cancellation and termination of the Deed of Conditional Sale; for the recovery of possession and
payment of rentals; and for damages. As earlier stated, both the former Court of First Instance
of Rizal and the Court of Appeals decided the case against petitioner. The trial court issued an
order of execution pending appeal but it was stayed upon the filing of a supersede as bond by
petitioner.

ISSUE:
The property was delivered to it after the execution of the Deed of Conditional Sale.

HELD:
Finally, petitioner claims that because the property was delivered to it after the execution
of the Deed of Conditional Sale, the ownership thereof was transferred to it in accordance with
Articles 1477 and 1496 of the Civil Code of the Philippines. This claim is without basis. Petitioner
fails to distinguish between a contract of sale and a contract to sell, between a deed of absolute
sale and a deed of conditional sale. In a contract of sale or in a deed of absolute sale, ownership
is transferred simultaneously with the delivery of the real property sold; whereas in a contract to
sell or in a deed of conditional sale, ownership is transferred after the full payment of the
installments of the purchase price or the fulfillment of the condition and the execution of a
definite or absolute deed of sale. In the case at bar, ownership could have been transferred to
petitioner only after it had fully paid the installments of the purchase price and a deed of
absolute sale had been executed in its favor.

WHEREFORE, the petition is hereby dismissed for lack of merit and the decision
appealed from is affirmed, with costs against petitioner.

99
LLB 2A

IBBA, SHARMAINE A.

79. GERONIMO PANIZALES ET. AL. VS. VALERIO PALMARES ET. AL.

G.R. No. L-32143 October 31, 1972


47 SCRA 376

Facts:
The controversy here hinges on Lot No. 1777 of the Cadastral Survey of Passi, Province of
Iloilo. Plaintiff- appellee, Geronimo Panizales, based his claim to the disputed lot as purchaser
in a private sale on March 19, 1958. While defendant Valerio Palmares, the sole appellant,
bought the same at the public auction sale on March 16, 1961 by virtue of a writ of execution. It
appears on the record that insofar as Amado Panizales and Estrella Castromayor, are concerned,
all their rights, title, interests, share and participation in Lot 1777, Passi Cadastre, were
transferred to Juan Panizales on March 4, 1958. Likewise, the same were transferred to
Geronimo Panizales on March 19, 1958. The lower court decided in favor of Geronimo Panizales.
However, Valerio Palmares appealed the decision alleging, principally, that Lot No. 1777 was his
despite the acquisition by Geronimo in a private sale. Moreover, the writ of execution could not
be declared invalid for the reason of its nonconformity with the judgment to be executed in Civil
Case No. 4044.

Issue:
Whether or not the lower court was correct in deciding that Geronimo Panizales was the
rightful owner of the lot in question by virtue of private sale on 19 March 1958 as against the
acquisition of Valerio Palmares who bought the subject property at the public auction sale on 16
March 1961?

Held:
It is undisputed that as far back as March 19, 1958, the lot in question had been disposed
of. It ceased therefore as of that date to form part of the property of the judgment debtor.
Without stretch of imagination, if at that time the judgment debtor had no more right to or
interest in the property because he had already sold it to another then the purchaser acquires
nothing.

100
LLB 2A

80. JOSE B. AZNAR VS. RAFAEL YAPDIANGCO

G.R. No. L-18536 March 31, 1965


13 SCRA 486

Facts:
Sometime in May, 1959, Teodoro Santos advertised in two metropolitan papers the sale
of his FORD FAIRLANE 500. A certain L. De Dios, claiming to be a nephew of Vicente Marella,
went to the Santos residence to answer the Consequently, Ireneo Santos, son of Teodoro Santos,
together with L. De Dios went to the house Marella who agreed to buy the car for P 14, 700.00
on the understanding that the price would be paid only after the car had been registered in his
name. Vicente Marella said that the amount he had on hand then was short by some P2,000.00
and begged off to be allowed to secure the shortage from her sister supposedly living somewhere
on Azcarraga Street, also in Manila. Marella requested the registration papers who, said that he
would show them to his lawyer. Trusting the good faith of Marella, Irineo Santos handed over
the registration papers to the latter. On the same day, Vicente Marella was able to sell the car in
question to the plaintiff-appellant herein, Jose B. Aznar, for P15,000.00 which was later on
seized by Captain Rafael Yapdiangco, the head of the Philippine Constabulary unit. In due time,
Jose B. Aznar filed a complaint for replevin against Captain Rafael Yapdiangco, the head of the
Philippine Constabulary unit which seized the car in question Claiming ownership of the vehicle,
he prayed for its delivery to him. In the course of the litigation, however, Teodoro Santos moved
and was allowed to intervene by the lower court.

Issue:
Between Teodoro Santos and the plaintiff-appellant, Jose B. Aznar, who has a better
right to the possession of the disputed automobile?

Held:
Under Article 712 of the Civil Code, "ownership and other real rights over property are
acquired and transmitted by law, by donation, by testate and intestate succession, and in
consequence of certain contracts, by tradition." As interpreted by this Court in a host of cases, by
this provision, ownership is not transferred by contract merely but by tradition or delivery.
Contracts only constitute titles or rights to the transfer or acquisition of ownership, while
delivery or tradition is the mode of accomplishing the same (Gonzales v. Rojas, 16 Phil. 51;
Ocejo, Perez and Co. v. International Bank, 37 Phil. 631, Fidelity and Deposit Co. v. Wilson, 8
Phil. 51; Kuenzle & Streiff v. Wacke & Chandler, 14 Phil. 610; Easton v. Diaz Co., 32 Phil. 180).

In the case on hand, the car in question was never delivered to the vendee by the vendor
as to complete or consummate the transfer of ownership by virtue of the contract. It should be
recalled that while there was indeed a contract of sale between Vicente Marella and Teodoro
Santos, the former, as vendee, took possession of the subject matter thereof by stealing the same
while it was in the custody of the latter's son.

101
LLB 2A

81. LUZON BROKERAGE CO., INC. VS. MYERS BUILDING CO. INC.

G.R. No. L-25885 January 31, 1972


43 SCRA 93

Facts:
Originally, this case stemmed from the decision of the Court of First Instance Manila
when it declared that Myers Building Co. is only entitled to receive the rentals, inter alia, despite
breach of contract by Maritime Building Co. It is undisputed that Myers Building Co., Inc.,
owner of three parcels of land in the City of Manila, together with the improvements thereon,
entered into a contract entitled "Deed of Conditional Sale" in favor of Bary Building Co., Inc.,
later known as Maritime Building Co., Inc., whereby the former sold the same to the latter for
P1,000,000.00, Philippine currency. They agreed that in case of failure on the part of the vendee
to pay any of the installments due and payable, the contract shall be annulled at the option of
the vendor and all payments already made by vendee shall be forfeited and the vendor shall have
right to re-enter the property and take possession thereof. Maritime Building Co., defaulted in
payment. In fact, it failed to pay the monthly installment corresponding to the month of March
1961, for which the Vice-President, George Schedler, of the Maritime Building Co., Inc., wrote a
letter to the President of Myers, Mr. C. Parsons, requesting for a moratorium on the monthly
payment of the installments until the end of the year 1961, for the reason that the said company
was encountering difficulties in connection with the operation of the warehouse business.
Hence, Myers Building Co., Inc. demanded upon Luzon Brokerage Co., Inc. to whom the
Maritime Building Co., Inc. leased the properties. Likewise, Myers demanded the payment of
monthly rentals of P10,000.00 and the surrender of the same to it. As a consequence, the Luzon
Brokerage Co., Inc. found itself in a payment to the wrong party, filed this action for
interpleader against the Maritime Building Co., Inc.

Issues:
1. Whether or not there has been no breach of contract by Maritime; and assuming that
there was one, Myers was not entitled to rescind or resolve the contract without recoursing to
judicial process?

2. Who is entitled to the rentals?

Held:
1. Well settled is, however, the rule that a 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" (Lopez vs. Commissioner of Customs, L-28235, 30 January
1971, 37 SCRA 327, 334,, and cases cited therein). Resort to judicial action for rescission is
obviously not contemplated.... The validity of the stipulation cannot be seriously disputed. It is
in the nature of a facultative resolutory condition which in many cases has been upheld by this
Court. (Ponce Enrile vs. Court of Appeals, L-27549, 30 Sept. 1969; 29 SCRA 504).

2. While Myers was not a party to the lease, its cancellation of the conditional sale of the
premises to Maritime, Luzon's lessor, could not but raise reasonable doubts as to the
continuation of the lease, for the termination of the lessor's right of possession of the premises
necessarily ended its right to the rentals falling due thereafter. In any event, Luzon's doubts
were grounded under the law and the jurisprudence of this Court. Hence, it was correct for
Luzon to deposit the rentals in court "until otherwise directed by a court of competent
jurisdiction.

102
LLB 2A

82. ENRIQUEZ DE LA CAVADA, VS. ANTONIO DIAZ

G.R. No. L-11668 April 1, 1918


37 Phil. 982

Facts:
This case requires the fulfillment of a contract option. Defendant-appellant Antonio Diaz
granted an option contract to Antonio Enriquez to purchase his hacienda consisting of 100 and
odd hectares. But such sale was subject to the approval and issuance of a Torrens title by the
government for which Enriquez will pay Diaz the sum of thirty thousand pesos (P30,000.00) in
cash or within the period of six years beginning with the date of purchase. Soon after the
execution of said contract, defendant presented two petitions in the Court of Land Registration
for obtaining registration. Said petitions were granted, and each parcel as registered and a
certificate of title was issued for each part under the Torrens system to the defendant herein.
Later, and pretending to comply with the terms of said contract, the defendant offered to
transfer to the plaintiff one of said parcels only, which was a part of said "hacienda." The
plaintiff refused to accept said certificate for a part only of said "hacienda". The theory of the
defendant is that the contract of sale of said "Hacienda de Pitogo" included only 100 hectares,
more or less, of said "hacienda," and that by offering to convey to the plaintiff a portion of said
"hacienda" composed of "100 hectares, more or less," he thereby complied with the terms of the
contract. The theory of the plaintiff is that he had purchased all of said "hacienda," and that the
same contained, at least, 100 hectares, more or less.

Issue:
Whose theory is correct- defendant or the plaintiff?

Held:
The lower court sustained the contention of the plaintiff, to wit, that the sale was a sale of
the "Hacienda de Pitogo" and not a sale of a part of it, and rendered a judgment requiring the
defendant to comply with the terms of the contract by transferring to the plaintiff, by proper
deeds of conveyance, all said "hacienda," or to pay in lieu thereof the sum of P20,000 damages,
together with 6 per cent interest from the date upon which said conveyance should have been
made.

103
LLB 2A

JUGUILON, MARIA RONA M.

83. NICOLAS SANCHEZ VS. SEVERINA RIGOS

G.R. No. L-25494 June 14, 1972

FACTS:
Nicolas Sanchez and Severina Rigos executed an instrument entitled "Option to
Purchase," whereby Mrs. Rigos agreed, promised and committed to sell to Sanchez a parcel of
land within two (2) years from said date with the understanding that said option shall be
deemed terminated and elapsed if Sanchez shall fail to exercise his right to buy the property
within the stipulated period. Inasmuch as several tenders of payment made by Sanchez within
said period were rejected by Mrs. Rigos, on March 12, 1963, the former deposited said amount
with the Court of First Instance of Nueva Ecija and commenced against the latter the present
action, for specific performance and damages. Rigos contended that the contract between them
was only a unilateral promise to sell, and the same being unsupported by any valuable
consideration, by force of the New Civil Code, is null and void. Sanchez alleged in his compliant
that, by virtue of the option under consideration, "defendant agreed and committed to sell" and
"the plaintiff agreed and committed to buy" the land described in the option. The lower court
rendered judgment in favor of Sanchez and ordered Rigos to accept the sum Sanchez judicially
consigned, and to execute in his favor the requisite deed of conveyance.

ISSUE:
Whether or not there was a contract to buy and sell between the parties or only a
unilateral promise to sell.

HELD:
The Supreme Court affirmed the lower court‘s decision. The instrument executed in 1961
is not a "contract to buy and sell," but merely granted Sanchez an option to buy, as indicated by
its own title "Option to Purchase." The option did not impose upon Sanchez the obligation to
purchase Rigos' property. Rigos "agreed, promised and committed" herself to sell the land to
Sanchez, but there is nothing in the contract to indicate that her aforementioned agreement,
promise and undertaking is supported by a consideration "distinct from the price" stipulated for
the sale of the land. Article 1479 refers to "an accepted unilateral promise to buy or to sell."
Since there may be no valid contract without a cause or consideration, the promisor is not
bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his
accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in
a perfected contract of sale.

104
LLB 2A

84. EUSEBIO S. MILLAR VS. DOROTEO NADRES

G.R. No. 48679 August 11, 1943

FACTS:
A judgment having been secured by plaintiff Eusebio S. Millar in the justice of the peace
court of Tayabas against defendant Doroteo Nadres for the sum of P558.14, the provincial
sheriff, pursuant to a writ of execution, sold at public auction the two parcels of land belonging
to said defendant and plaintiff was the highest bidder for the mount of the judgment. Defendant
failed to redeem the property within the time prescribed by the rules, and on March 8, 1934, a
final deed of sale was executed in plaintiff's favor and thereafter transfer certificates of title were
issued to him. Subsequently, upon defendant's request, plaintiff accorded him an option to
repurchase the two parcels of land until December 31, 1934. In November of same year,
defendant paid P200 on account but failed to pay the balance until the period of option expired.
Finally, defendant was ordered to vacate the property and to deliver their possession to plaintiff.
From this judgment defendant interposed the present appeal.

ISSUE:
Whether or not there was an implied extension of the period for the right of redemption
since that extension has not been determined then by both parties.

HELD:
This contention is not borne out by the facts found by the trial court. In the trial court's
decision it is stated that upon the expiration of the first option on December 31, 1934, plaintiff
gave defendant a second option to expire on April 30, 1938. There is nothing in the decision to
show that an indefinite extension of time has ever been given impliedly the defendant.
Furthermore, such an implied extension was without consideration in so far as plaintiff was
concerned and may be treated merely as a period of grace which may be made ineffectual upon
failure of the debtor to comply with the terms thereof within a reasonable time. The first option
given the defendant was for one year, and when for more than three years he failed to take
advantage of the period of grace given him, plaintiff was more than justified in terminating such
period of grace. In this connection a distinction should be drawn between the consideration for
the option to repurchase itself. The P400 paid by defendant to plaintiff were part of the
repurchase price but not of the consideration for the option to repurchase. For such option and
for the extensions given the defendant, no consideration at all has even been paid to plaintiff.
Thus, the provisions of articles 1128 of the Civil Code do not apply.

105
LLB 2A

85. J. F. WRIGHT VS. LA COMPAÑIA DE TRANVIAS

G.R. No. 2296 November 10, 1905

FACTS:
On April 1901, Walter Fitton, as one of the parties thereto, and Rafael Reyes, Enrique
Brias, Cosme Churruca, and Jose Rosales, who then composed the administrative council of the
anonymous partnership called the Street Car Company of the Philippines, entered into a
contract with the following terms and conditions, that, Fitton binds himself to acquire two-
thirds at least of the shares of the Street Car Company; that, Fitton binds himself to deposit in
the Chartered Bank of India, Australia, and China a guarantee for the sum of thirty thousand
pesos, Mexican, as security of the proposal and for the safety of the shareholders of the
company; that, the conditions of the contract will be valid for the period of two months from this
date, after which, should Fitton not take charge, for any reason, of the two-thirds of the shares
and founder‘s stock of the Street Car Company, he will lose every right on the security deposited.
The day after the two months had expires, Reyes notified Fitton for the second time in writing
that the number of stocks and cedulas were deposited already at his disposition. Fitton wrote a
letter to Reyes asking for an extension of time of payment. The Administrative Council granted
his request. Finally, the money was so deposited in cash with the company. Mr. Samson,
Attorney in Fact of Fitton, wrote Reyes for the return of Thirty Thousand pesos because half of
the shares were still in Madrid and it will be impossible for Reyes to deliver the said stocks. The
defendant demanded Fitton for the fulfillment of the contract. On the other hand, plaintiff
prayed for the recovery of the money deposited.

ISSUE:
Whether or not Fitton‘s failure to buy the stock depend upon the will of the stockholders.

HELD:
The Court hold, as have been said before, that the provisions of paragraph 4 of the
contract must govern; that if the reason why Fitton did not buy the stock did not depend upon
the will of the stockholders, the plaintiff cannot recover; that the real reason why he did not buy
the stock was because he did not have the money to pay for it; that this reason did not depend
upon the will of the stockholders, and that consequently the plaintiff cannot recover.

106
LLB 2A

86. MEYER & CO. VS. YANCO

G. R. No. 13203 September 18, 1918

FACTS:
A sale of eighty (80) drums of caustic soda was agreed between Behn, Meyer and Co. and
Teodoro Yanco. The merchandise was shipped from New York to Manila. However, the ship
carrying the cargo was detained at Penang and the seventy-one (71) of the eighty (80) drums
were removed. Respondent Yangco also refused to accept the nine (9) remaining and also
refused to accept the offer of Behn meyer to have the products substituted with other
merchandise, which however were different from what was ordered. It must be noted that the
contract provided for ―c.i.f. Manila, pagadero against delivery of documents.‖ Yanco filed an
action seeking for damages for alleged breach of contract.

ISSUE:
Whether or not Behn, Meyer and Co. should bear the burden of the loss of the
merchandise.

HELD:
The Court held that the appellant should bear the burden of the loss of the merchandise.
The facts show that the contract provided for ―c.i.f. Manila, pagadero against delivery of
documents.‖ This view is corroborated by the facts. The goods were not shipped nor consigned
from New York to plaintiff. The place of delivery was Manila and plaintiff has not legally excused
default in delivery of the specified merchandise at that place. In resume, the Court find that the
plaintiff has not proved the performance on its part of the conditions precedent in the contract.
The warranty- the material promise- of the seller to the buyer has not been complied with. The
buyer may therefore rescind the contract of sale because of a breach in substantial particulars
going to the essence of the contract. As contemplated by Article 1451 of the Civil Code, the
vendee can demand fulfillment of the contract, and this being shown to be impossible, is
relieved of his obligation. There thus being sufficient ground for rescission, the defendant is not
liable.

107
LLB 2A

87. LOTHAR F. ENGEL VS. MARIANO VELASCO AND CO.

G.R. No. Nos. L-21651-21653 December 29, 1924

FACTS:
Plaintiffs were export brokers, or jobbers, of textile merchandise in the City of New York,
while the defendant was the owner, as it still is, of a large store in Manila where general
merchandise is sold both at wholesale and retail. Defendant Velasco from time to time imports
textile fabrics on a large scale. In 1920 commercial relations were established between the
plaintiffs and the defendant, and in the succeeding three (3) months the defendant sent to the
plaintiffs numerous orders for merchandise. The defendant would first obtain from the plaintiffs
by cable information as to the prices of the goods desired, and would thereupon send a
cablegram to the plaintiffs, instructing them to buy and hold specified qualities of goods in the
amount and at the prices stated. Defendant would dispatch by mail more extended instructions,
confirming the cablegram and giving such other advice as was desirable. Upon receiving the
defendant's written order by mail the plaintiffs transmitted the instructions contained therein to
the manufacturer for execution and at the same time prepared and forwarded to the defendant a
formal written sales note, conforming in the main to the terms specified in the previous
communications between the plaintiffs and the defendant. As a result of this procedure the
plaintiffs became directly obligated to the manufacturer who produced the goods, while the
defendant became obligated to the plaintiffs, assuming that all conditions essential to the
creation of liability had been fulfilled. The plaintiffs proceed upon the idea of breach of contract
on the part of the defendant in its failure to accept and to pay for the goods covered by the
orders above referred to. The defendant interposed answers in the three cases denying generally
the allegations of the complaints and setting forth various special defenses, with counterclaims
and an affirmative cross action. Upon hearing the proof the trial judge absolved the plaintiffs
from the defendant's counterclaims and cross complaint and gave judgment for the plaintiffs to
recover of the defendant the sum of P152,217.74, with interest at six per centum, to be calculated
upon different portions of the total from specified dates. From this judgment the defendant
appealed.

ISSUE:
Whether or not the correspondence conducted by cable are admissible against the
defendant.

HELD:
The provision, ―Telegraphic correspondence shall only be the basis of an obligation
between contracting parties who have previously admitted this medium in a written contract,
and provided the telegrams fulfill the conventional conditions or conventional signs which may
have been previously fixed and agreed to by the contracting parties,‖ this provision was in force
at the time all of the orders involved in this litigation were given, and it is therefore insisted that
the messages transmitted by cable are inadmissible against the defendant. In this connection it
will be noted that no prior written agreement is in evidence by which the parties expressly
admitted telegraphic correspondence as a basis of contract, though it is true that the private
cable code used by the defendant in its cable correspondence with the plaintiffs had been
supplied by the latter. We are unable to concede to this provision the effect claimed for it by the
defendant, namely, of eliminating entirely from the case so much of the correspondence as was
conducted by cable. Upon examining the documentary proof, it will be found that upon sending
its orders by cable, the defendant followed with letters of confirmation by mail, in which the
various cables were referred to and in effect incorporated in the written correspondence. By
reason of this circumstance it is proper to refer to the cablegrams in relation with the letters.

108
LLB 2A

There is nothing in the provision quoted from article 51 which prohibits parties to a contract
from ratifying agreements effected by telegraphic communications; and subsequent ratification,
or incorporation of the telegraphic communications in written letters of the same or later date,
must be conceded to have all the effect of a previous written agreement under the provision
quoted. Furthermore, it is apparent that even under the statute telegraphic communications
conveying notification of acts done could not be ignored, where the basis of a contract has
already been established, and the same must be true of telegraphic directions communicated by
one contracting party to another in relation with the performance of the contract. In this
connection we note that the attorneys for the defendant, while vigorously insisting upon the
elimination of the telegraphic correspondence in general, have not hesitated to rely upon more
than one cablegram passing between the parties. The failure of the defendant to accept and pay
for all the goods ordered and shipped to Manila was undoubtedly due, as will hereafter more
fully appear, to the inability of the defendant to command the funds necessary to meet the
obligations, but when confronted with the necessity of dishonoring the orders, the responsible
officers of the defendant put forth various pretexts to justify its position. Several of these excuses
are manifestly of trivial import, but inasmuch as they have been called upon to do service in the
defendant's answer and cross complaint, they will be examined by us in due time.

109
LLB 2A

JULKARNAIN, NUR A.

88. PACIFIC COMMERCIAL COMPANY VS. ERMITA MARKET & COLD STORES,
INC.,

G.R. No. L-34727 March 9, 1932


56 Phil. 617

Facts:
On September 14, 1927, the Pacific Commercial Co., the plaintiff herein, sold to the
Ermita Market & Cold Stores, Inc., the defendant herein, an automatic refrigerating machine.

The parties signed the usual printed sales-contract form of the plaintiff company, the
purchase price, payable by installments as stated in the sales contract. By mutual agreement, the
said machine was installed by the plaintiff, to be paid by the defendant, in favor of the plaintiff.
Complying with the terms of the sales contract, the defendant paid the plaintiff an initial
amount of the purchase price of the machine, leaving a balance.

A few days after installation, the defendant advised the plaintiff that the machine was not
serving the purpose for which it was sold and that it was lacking ammonia receiver and oil
separator, and further alleges that the temperature in the refrigerating rooms did not reach, and
had never reached, owing to the negligence of the plaintiff in not repairing or putting in good
working condition the said refrigerating machine, the defendant had been forced to close its
establishment and for which reason the defendant claimed damages against the plaintiff.

The plaintiff denied generally and specifically each and every and every allegation in the
said cross-complaint and by way of special defense, alleged that whatever defects or deficiency
there might have been in the temperature in the refrigerating rooms of defendant's
establishment, or in the functioning of the machine, these were due to the defects and
imperfections of the coils which were supplied and installed by the defendant itself, as well as to
the incompetency and inefficiency of the defendant's personnel to operate the machine. By
which the Court of First Instance of Manila rendered its judgment, ordering the defendant to
pay the remaining amount plus interest and other damages, so, the defendant appealed.

Issue:
Whether or not the installed refrigeration machine was the same machine agreed upon
by the plaintiff and the defendant

Held:
The judgment of the Court of First Instance of Manila is affirmed in its entirety.
After a careful examination of the record, we have not the least doubt that the plaintiff
delivered the machine as described in the sales contract, and the fact that the defendant could
not use it satisfactorily in the three cold stores division cannot be attributed to plaintiff's fault;
as far as we can see, the machine was strictly in accordance with the written contract between
the parties, and the defendant can hardly honestly say that there was any deception by the
plaintiff.

But it is clear that the defendant company did not fully understand the use of the motor.
It complains that the machine would not properly refrigerate the refrigerating rooms, but it is

110
LLB 2A

evident that the machine could not operate automatically when the defendant had three
refrigerating rooms which it expected to maintain at three different temperatures.

The defendant also complained that the machine was not equipped with a thermostat
and that the lack of its obstructed the work of the refrigerating. In the first place, the thermostat
was not include in the sales contract and in the second place it would not have been of any
service to defendant because it could not possibly operate automatically at three different
temperatures with the defendant's insufficient equipment.

The defendant's complaint that the machine did not contain an oil separator is not true;
the oil separator is combined with the receiver and condenser in a single combined piece in the
machine.

111
LLB 2A

112
LLB 2A

89. VILLONCO REALTY VS. BORMAHECO, INC.,

G.R. No. L-26872 July 25, 1975


65 SCRA 352

Facts:
Cervantes and his wife owned 3 parcels of land along Buendia where the buildings of
Bormaheco Inc were situated. Beside their property were lots owned by Villonco Realty.
Cervantes entered into several negotiations with Villonco for sale of the Buendia property.
Cervantes made a written offer of P400/sqm with a down payment of P100,000.00 to serve as
earnest money. The offer also made the consummation of the sale dependent upon the
acquisition by Bormaheco of a Sta. Ana property. Villonco made a counter-offer stating that the
earnest money was to earn 10% interest p.a. The check was enclosed with the reply letter.
Cervantes accepted and cashed the check. The Sta. Ana Property was awarded to Bormaheco;
the transfer was also duly approved. However, Cervantes sent the check back to Villonco with
the interest thereon—stating that he was no longer interested in selling the property. He also
claims that no contract was perfected; Villonco sues for specific performance.

Issue:
Whether or not there was a perfected contract of sale

Held:
YES. There was a perfected contract of sale. The alleged changes made in the counter-
offer are immaterial and are mere clarifications. The changes of the words ―Sta. Ana property‖
to another property as well as the insertion of the number ―12‖ in the date, and the words
―per annum‖ in the interest are trivial. There is no incompatibility in the offer and counter-offer.
Cervantes assented to the interest and he, in fact, paid the same. Also, earnest money constitutes
proof of the perfection of the contract of sale and forms part of the consideration. The condition
regarding the acquisition of the Sta. Ana property was likewise fulfilled; there is thus no ground
for the refusal of Cervantes to consummate the sale.

113
LLB 2A

90. VELASCO VS. COURT OF APPEALS

G.R. No. L-31018 June 29, 1973


51 SCRA 439

Facts:
On November 29, 1962, herein petitioners and respondents had entered into a contract
of sale by virtue of which the latter offered to sell and agreed to buy by the former, a parcel of
land with an area of 2,059 sq. ms. Located in Quezon City, for a total purchase price of P
100,000.00.

Petitioners alleged he was to give a down payment of 10,000.00 pesos to be followed by


P 20,000.00 and the balance of P70,000.00 to be paid in installment basis, the monthly
amortization of which was to be determined as soon as the P 30,000.00 down payment had
been completed.

On January 8, 1964, the petitioners tendered to pay the additional down payment of P
20,000.00 to complete the down payment of P 30,000.00, but the respondents refused to
accept and eventually it likewise refused to execute a deed of sale agreed upon, so, petitioner
demanded for damages and specific performance from the respondents of an alleged deed of
sale of a parcel of land residential land in their favor.

Respondents denied that it has had any direct-dealing, much less, contractual relations
with the petitioners regarding the property in question and contends that the alleged contract
described attached to the complaint is entirely unenforceable under the statute of fraud.
Accordingly, respondents refused to accept the additional down payment for it had considered
the offer to sell rescinded on the account of the petitioners‘ failure to pay on or before December
31, 1962.

On November 3, 1968, the CFI Quezon City rendered a decision dismissing the
complaint of the petitioners, which was affirmed by the Court of Appeals on September 5, 1969,
upon motion by the petitioner. So, a petition for certiorari and mandamus was filed before the
Supreme Court by the petitioners.

Issue:
1. Whether or not there was a perfected contract of sale
2. Whether or not a definite agreement on matters of payment of purchase price is an
essential element in the formation of a binding and enforceable contract

Held:
No contract of sale was perfected because the minds of the parties did not meet ―in
regard to the manner of payment‖. The material averments contained in Velasco‘s complaint
themselves disclose a lack of complete ―agreement in regard to the manner of payment‖ of the
lot in question. The complaint states penitently ―that plaintiff and defendant further agreed that
the total down payment shall be P30, 000.00, Including the P10.000.00 partial payment as
mentioned , and that upon completion of the said down payment of P30,000.00, the balance
P70,000.00 shall be paid by the plaintiff to the defendant in 10 years from November 29, 1962;
and that the time within which the full down payment of the P30,000.00 was to be completed
was not specified by the parties but the defendant was duly compensated during the said time
prior to the completion of the down payment of P30,000.00 by way of lease rentals on the house
existing thereon which was earlier leased by the defendant to the plaintiff‘s sister-in-law,

114
LLB 2A

Socorro J. Velasco, and which were duly paid to the defendant by checks drawn by plaintiff. The
Velascos themselves admit that they and Magdalena Estate still have to meet and agree on how
and when the down payment and the installment payments were to be paid. Such being the
situation, it cannot be said that a definite and firm sales agreement between the parties have
been perfected over the lot in question.

A Definite agreement on the manner of payment of the purchase is an essential element


in the formation of a binding and enforceable contract of sale. In the present case, the Velascos
delivered to Magdalena Estate the sum of P10, 000.00 as part of the down payment that they
had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale
agreement between the parties under article 1482 of the new Civil Code, as the Velascos
themselves admit that some essential matter (the terms of payment) still had to be mutually
covenanted.

115
LLB 2A

91. SPOUSES DOROMAL, SR. AND SALAS VS. COURT OF APPEALS

G.R. No. L-3608 September 05, 1975


66 SCRA 575

Facts:
Lot 3504 of the cadastral survey of Iloilo, situated in the poblacion of La Paz, one of its
districts, with an area of a little more than 2-1/2 hectares was originally decreed in the name of
the late Justice Antonio Horilleno, in 1916, under Original Certificate of Title No. 1314, Exh. A,
but before he died, he executed a last will and testament attesting to the fact that it was a co-
ownership between himself and his brothers and sisters, the co-owners were: beside 1. Justice
Horilleno (daughter Mary as heir), 2. Luis, 3. Soledad, 4. Fe, 5. Rosita, 6. Carlos and 7.
Esperanza,' all surnamed Horilleno, and since Esperanza had already died, she was succeeded
by her only daughter and heir herein plaintiff, Filomena Javellana, in the proportion of 1/7
undivided ownership each; even though their right had not as yet been annotated in the title, the
co-owners led by Carlos, had wanted to sell their shares, or if possible if plaintiff Filomena
Javellana were agreeable, wanted to sell the entire property, and they hired an acquaintance
Cresencia Harder, to look for buyers, and the latter came to interest defendants, the father and
son, named Ramon Doromal, Sr. and Jr., and in preparation for the execution of the sale, since
the brothers and sisters Horilleno were scattered in various parts of the country, 1. Carlos in
Ilocos Sur, 2. Mary in Baguio, 3. Soledad and 4. Fe, in Mandaluyong, Rizal, and 5. Rosita in
Basilan City, they all executed various powers of attorney in favor of their niece, Mary H.
Jimenez • they also caused preparation of a power of attorney of identical tenor for signature by
plaintiff, Filomena Javellana, and sent it with a letter of Carlos, dated 18 January, 1968 Carlos
informed Filomina that the price was P4.00 a square meter,-although it now turns out according
to Exh. 3 that as early as 22 October, 1967, Carlos had received in check as earnest money from
defendant Ramon Doromal, Jr., the sum of P5,000.00 and the price therein agreed upon was
five (P5.00) pesos a square meter• in another letter also of Carlos to Plaintiff Filomina in 5
November, 1967, Exh. 6, he had told her that the Doromals had given the earnest money of
P5,000.00 at P6.00 a square meter• At any rate, Plaintiff Filomina not being agreeable, did not
sign the power of attorney, and the rest of the co-owners went ahead with their sale of their 6/7,
Carlos first seeing to it that the deed of sale by their common attorney in fact, Mary H. Jimenez
be signed and ratified as it was signed and ratified in Candon, Ilocos Sur, on 15 January, 1968,
Exh; 2, then brought to Iloilo by Carlos in the same month, and because the Register of Deeds of
Iloilo refused to register right away, since the original registered owner, Justice Antonio
Horilleno was already dead, Carlos had to ask as he did, hire Atty. Teotimo Arandela to file a
petition within the cadastral case, on 26 February, 1968, for the purpose, after which Carlos
returned to Luzon, and after compliance with the requisites of publication, hearing and notice,
the petition was approved. on 29 April, 1968, Carlos already back in Iloilo went to the Register
of Deeds and caused the registration of the order of the cadastral court approving the issuance of
a new title in the name of the co-owners, as well as of the deed of sale to the Doromals, as a
result of which on that same date, a new title was issued TCT No. 23152, in the name of the
Horillenos to 6/7 and plaintiff Filomena Javellana to 1/7, the Doromals paid unto Carlos by
check, the sum of P97,000,00 of Chartered Bank which was later substituted by check of Phil.
National Bank, because there was no Chartered Bank Branch in Ilocos Sur, but besides this
amount paid in check, the Doromals according to their evidence still paid an additional amount
in cash of P18,250.00 since the agreed price was P5.00 a square meter and thus was
consummated the transaction. On 10 June, 1968, there came to the residence of the Doromals in
Dumangas, Iloilo, plaintiff Filomena‘s lawyer, Atty. Arturo H. Villanueva, bringing with him her
letter of that date, making a formal offer to repurchase or redeem the 6/7 undivided share in Lot
3504 for P30,000.00 in cash which will be delivered as soon as the contract of sale is executed

116
LLB 2A

in favor of Filomena. the Doromals were aghast, and refused the next day, 11 June, 1968,
plaintiff Filomena filed this case, and in the trial, thru oral and documentary proofs, sought to
show that as co-owner, she had the right to redeem at the price stated in the deed of sale of
P30,000.00 but defendants Spouses Doromals in answer, and in their evidence, oral and
documentary sought to show that plaintiff had no more right to redeem, and that if ever she
should have, that it should beat the true and real price paid by them which amounts to
P115,250.00 trial judge : plaintiff had no more right, to redeem, because 'Plaintiff was informed
of the intended sale of the 6/7 share belonging to the Horillenos. 'Court of Appeals reversed the
trial court's decision and held that although respondent Filomena Javellana was informed of her
co-owners' Proposal to sell the land in question to petitioners she was, however, "never
notified... least of all, in writing", of the actual execution and registration of the corresponding
deed of sale, hence, said respondent's right to redeem had not yet expired at the time she made
her offer for that purpose thru her letter of June 10, 1968 delivered to petitioners on even date.
The intermediate court further held that the redemption price to be paid by respondent should
be that stated in the deed of sale which is P30, 000.00 notwithstanding that the preponderance
of the evidence proves that the actual price paid by petitioners was P115,250.00

Issue:
Whether or not Filomena‘s right to redeem had expired

Held:
NO. There is No showing that Filomena was notified. The letters sent by Carlos Horilleno
to respondent and dated January 18, 1968, Exhibit 7, and November 5, 1967, Exhibit 6,
constituted the required notice in writing from which the 30-day day period fixed in said
provision should be computed. But to start with, there is no showing that said letters were in fact
received by respondent Filomena and when they were actually received. Besides, petitioners do
not pinpoint which of these two letters, their dates being more than two months apart, is the
required notice. In any event, as found by the appellate court, neither of said letters referred to a
consummated sale.

It cannot be said that the Court of Appeals erred in holding that the letters
aforementioned sufficed to comply with the requirement of notice of a sale by co-owners under
Article 1623 of the Civil Code. We are of the considered opinion and so hold that for purposes of
the co-owner's right of redemption granted by Article 1620 of the Civil Code, the notice in
writing which Article 1623 requires to be made to the other co-owners and from receipt of which
the 30-day period to redeem should be counted is a notice not only of a perfected sale but of the
actual execution and delivery of the deed of sale. This is implied from the latter portion of Article
1623 which requires that before a register of deeds can record a sale by a co-owner, there must
be presented to him, an affidavit to the effect that the notice of the sale had been sent in writing
to the other co-owners. A sale may not be presented to the register of deeds for registration
unless it is in the form of a duly executed public instrument.

117
LLB 2A

92. ELIAS GALLAR VS. HERMENEGILDA HUSAIN, ET AL.

G.R. No. L-20954 May 24, 1967


20 SCRA 186

Facts:
Husains in this case are the heirs of Teodoro Husain. Teodoro Husain sold the land
under dispute for 30 pesos to Serapio Chichirita with the right to repurchase within 6 years.
Teodoro transferred his right to his sister, Graciana Husain. Graciana paid the redemption price
and later sold the land to Elias Gallar for cattle. Possession of the land, together with the owner's
duplicate of the certificate of title of Teodoro Husain, was delivered on the same occasion to
Gallar, who since then has been in possession of the land. A couple of years after, Gallar filed
this suit in the Court of Instance of Iloilo on October 10, 1960 to compel Hermenegilda and
Bonifacio Husain, as heirs of Teodoro Husain, to execute a deed of conveyance in his favor so
that he could get a transfer certificate of title. He also asked for damages. The Husains countered
by saying that Graciana already paid the redemption price thus their father had already
reacquired ownership over the same. They also claim that the action of Elias has already
PRESCRIBED.

Issue:
1. Whether or not ownership was transferred to Gallar
2. Whether or not the action has already prescribed

Held:
1. YES, ownership has been transferred to Gallar. The right of repurchase may be
exercised only by the vendor in whom the right is recognized by contract or by any person to
whom the right may have been transferred. Graciana Husain must, therefore, be deemed to have
acquired the land in her own right, subject only to Teodoro Husain's right of redemption. As the
new owner she had a perfect right to dispose of the land as she in fact did when she exchanged it
for cattle with Gallar.

2. NO, the action is imprescriptible. This action is not for specific performance; all it
seeks is to quiet title, to remove the cloud cast on appellee's ownership as a result of appellant's
refusal to recognize the sale made by their predecessor. And, as plaintiff-appellee is in
possession of the land, the action is imprescriptible. Appellant's argument that the action has
prescribed would be correct if they were in possession as the action to quiet title would then be
an action for recovery of real property which must be brought within the statutory period of
limitation governing such actions.

118
LLB 2A

KAMLIAN, LIEZLE S.

93. GUZMAN VS. GUIEB

G.R. No. L-28862 November 24, 1972


48 SCRA 68

FACTS:
That on September 15, 1964 defendant filed Civil Case No. 126601 in the City Court of
Manila against the plaintiffs for specific performance with consignation, which case is now
pending trial before Branch VIII of the City Court of Manila with the agreement that the said
case be held in abeyance pending a final decision in the instant case. As show in Official Receipt
No. 048717-I, dated September 15,1965 issued by the Treasurer of Manila, photosatic copy of
which is hereto attached and made part hereof as Exhibit ―23‖ for the defendants, defendants
duly consigned with the City Court of Manila, sum of P4,040.00 the sum which plaintiff
Genoveva Rodriguez refused to accept when it was tendered to her on July 31,1964 by
defendants; That on October 22,1964, the plaintiff Leon de Guzman filed an ejectment case
against the defendants herein in the City Court of Manila, Branch II, for non-payment of rentals
from August 1964, Civil Case No. 128123 which case is also pending, awaiting a final decision in
the instant case; That plaintiffs or their predecessor in interest were never in actual physical
possession of the property involved in this litigation.

ISSUE:
Whether the option to purchase real property, contained in Exhibit 1, was renewed in the
option to purchase real property, Exhibit 16, Whether upon failure of defendants to pay rentals
for forty five (45) months, their right to exercise the option to purchase real property was
extinguished.

HELD:
―Option to Purchase Real Property‖ dated October 5,1959 cannot be considered as a
renewal of the first ―Option dated November 20,1954‖ as the same is not duly acknowledge
before a notary public and not signed in the presence of witnesses‖ and because if it were such
as renewal,‖ it should have been executed on November 29,1959, the date of the expiration: of
the first option, and, furthermore, because there is no statement therein saying that it is a
renewal. It is obvious that this posture is without merit. To be effective is an option, there was
no need at all that the document of October 5, 1959 be a renewal of the first option for there is
no why it cannot be considered as another option by itself, in fact, nowhere in the appealed
decision does it appear that the trial court took it as a renewal. And since there is no dispute that
it is genuine, as very well pointed out by His Honor, it constitutes an enforceable agreement
under Article 1403 (2) of the Civil Code, or the Statute of Frauds, the same being at least a note
or memorandum, in writing, of the agreement of the parties and signed by the party charged, in
this case, Teodoro de Guzman, the Predecessor in interest of appellants. Secondly, in effect, the
contention of appellants is that the failure of appellees to pay the stipulated rentals for long
periods, particularly, those for the forty-five months they paid only on July 21, 1964, rendered
their option null and void under the following provision of the option agreement, Exhibit 16.

119
LLB 2A

94. BUCTON VS. GABAR

G.R. No. L-36359 January 31, 1974


55 SCRA 499

FACTS:
Josefina bought a parcel of land from Villarin. By verbal agreement, Josefina sold a ½
portion thereof to Nicanora for P3, 000. Nicanora paid P1, 000 then P400--all evidence by
receipts---then she loaned Josefina P1, 000 and thereafter along with her spouse, took
possession of the lot and built their house as well as apartments thereon. Villarin then issued a
Deed of Sale to Josefina, but the latter refused to execute the corresponding Deed of Sale to
Nicanora. Josefina claimed that the amounts paid by Nicanora were in the concept of loans.
Thus, Nicanora filed a case for specific performance.

ISSUE:
WON there was a sale between Josefina and Nicanora
HELD:
YES. Assuming that at the time when Josefina sold the lot to Nicanora, she was not yet
the owner thereof. When Villarin executed the Deed of Sale in her favor, title passed to Nicanora
by operation of law. Although the sale between Josefina and Nicanora was verbal. It was as
between them. Considering that Nicanora has paid the purchase price, she became owner of ½
of the lot. Likewise, although the complaint was titled ―specific performance‖ it was actually one
for quieting of title, which is imprescriptible so long as the plaintiff is in possession of the lot.

120
LLB 2A

95. CARBONELL VS. COURT OF APPEALS

G.R. No. L-29972 January 26, 1976


69 SCRA 99

FACTS:
Poncio, a Batanes native, owned a parcel of land, which he offered to sell to Carbonell
and Infante. The land was mortgaged to Republic Bank. Poncio and Carbonell executed an
instrument where the latter allowed the former to remain in the premises in spite of the sale for
a period of 1 year. Later on, when the Formal Deed of Sale was to be executed, Poncio told
Carbonell that he could no longer proceed with the sale as he had already sold the same to
Infante for a better price. Carbonell immediately sought to register adverse claim; 4 days later,
Infante registered the sale with the adverse claim annotated thereto. Infante thereafter
introduced significant improvements on the property. They now dispute ownership over the said
land.

ISSUE:
Who has a better title, Carbonell or Infante?

Held:
Carbonell. In order to claim the benefit of Art.1544, the buyer of realty must register the
property in good faith. It is a pre-condition to a superior title. In this case, Infante was not in
good faith, thus the prior sale to Carbonell must prevail. Infante registered her claim 4 days after
the adverse claim was registered, she had notice that Carbonell paid off the mortgage debt as the
mortgage passbook was already in his possession. She likewise ignored Carbonell and refused to
talk to here. These are badges of bad faith that taint her registration.

121
LLB 2A

96. THE BOARD OF LIQUIDATORS VS. JOSE ROXAS

G.R. No. 84419 December 4, 1989


179 SCRA 809

Facts:
On April 12, 1940, PDCI entered into a management contract with the National Food
Products Corporation (NFPC) whereby the latter agreed to finance the construction,
maintenance, management and operation of the fishponds of PDCI and NFPC gave loans and
advances necessary therefor. As security for the payment of said loan, PDCI executed a real
estate mortgage on all its properties in favor of NFPC. Among the properties given as collateral
was lot No. 3247, formerly belonging to Maria Roxas Lisao and covered by TCT No. RO-4331
(17921) of the Register of Deeds of Capiz, which contains an annotation stating that the same
was transferred and assigned in favor of PDCI and mortgaged to NFPC. Said original certificate
of title was later cancelled by TCT No. 12651 in the name of PDCI. The NFPC was later abolished
under Executive Order No. 372, series of 1950, and petitioner Board of Liquidators (Board for
short) was created to liquidate and settle its affairs and dispose of its properties. On December
13, 1972 petitioner Board executed with the PDCI a contract of amicable settlement whereby
petitioner PDCI agreed to pay the Board the sum of P170, 000.00 in full settlement of its
mortgage obligation. Petitioner Board agreed to assist PDCI in ejecting the squatters in the
premises and to deliver the certificate of title covering the property as well as the records
pertinent thereto. Said contract of amicable settlement was approved by the Office of the
President.

Issue:
When there was a valid conveyance of the subject matter by Maria to her brothers and
sisters.

Held:
Thus, since what appears to have been conveyed by Maria to her brothers and sisters was
no longer her property, the quitclaim, deed and donation that she executed are null and void. As
a matter of fact even prior to said conveyance, the property had been mortgaged by PDCI to the
NFPC who is certainly a mortgagee in good faith. Furthermore, the alleged verbal sale executed
by the donees brothers and sister of Maria Roxas Lisao in favor of respondent Jose Roxas is also
null and void not only because they had no title to convey but also because the sale of the land,
which is verbal, and the presentation of which was timely objected to, are not enforceable under
the statue of frauds. It is not a valid sale, and is inadmissible in evidence.

122
LLB 2A

97. SOSTENES CAMPILLO VS. PHILIPPINE NATIONAL BANK

G.R. No. L-19890 May 21, 1969


28 SCRA 220

Facts:
After receiving the deed of final sale, appellee presented it for registration to the Register
of Deeds of Pasay City on April 18, 1961. As in this connection he was required to comply with
the provisions of Section 78 of Act 496, on April 28, 1961 he filed in the Court of First Instance
of Rizal (Pasay City Branch) "A Petition for Entry of New Certificate of Title Under Section 78,
Act 496". After due hearing with previous notice served upon the Register of Deeds of said city,
the Court issued on May 9, 1961 an order directing the latter to cancel T.C.T. No. 236-A and to
issue in lieu thereof another certificate in the name of appellee. However, said officer refused to
comply with said order unless the owner's duplicate of T.C.T. No. 236-A — which was in the
possession of the Bank — which was surrendered to his office. Appellee's request for the delivery
of said owner's duplicate made upon the Bank was, however, denied by the latter. As set out in
par. 6 of the complaint the said mortgage encumbrance of P13,000.00 in favor of defendant
appears annotated in the covering Certificate of Title No. 236-A aforesaid at the time plaintiff
attached said property, and consequently, it was the duty of plaintiff to investigate the status of
said property as well as the aforementioned encumbrance, before purchasing the property and
assuming the mortgage.

Issue:
WON plaintiff's pretensions of assumption of the defendant‘s mortgage are not valid.
WON the sale of real estate, made as a result of a private transaction or of a foreclosure
or execution sale, becomes legally effective against third parties.

Held:
It is an admitted fact that the extra-judicial foreclosure sale made in favor of the Bank on
December 17, 1958 was registered in the Office of the Register of Deeds of Pasay City only on
April 21, 1960. It is settled in this jurisdiction that a sale of real estate, whether made as a result
of a private transaction or of a foreclosure or execution sale, becomes legally effective against
third parties only from the date of its registration (Section 50, Act 496; Anderson & Co. vs.
Garcia 64:506) which, in the case of the foreclosure sale in favor of the Bank, as stated
heretofore, was effected only on April 21, 1960. Consequently, when the same property subject-
matter thereof was act usually attached and levied upon on March 16, 1960 and the levy thus
made was registered on the same date, the property stood in the official records of the
government still as property of Justiniano D. Quirino and was therefore properly attached,
levied upon and subsequently sold as his property. The net result of this is that the execution
sale made in favor of herein appellee transferred to him all the rights, interest and participation
of Quirino in the aforesaid property at that time, subject only to the lone encumbrance duly
registered and annotated on the back of Certificate of Title No. 236-A issued in the name of
Quirino (Ramirez vs. Causin, G.R. L-10794, July 31, 1957; Capistrano vs. Philippine National
Bank, et al., G.R. L-9628, August 30, 1957; Vargas vs. Tancioco 67:308; Philippine Executive
Commission vs. Abadilla 74:68).

123
LLB 2A

LUMABAS, RAMEL M.

98. EULOGIO RODRIGUEZ, SR. VS. SOFRONIO FRANCISCO

G.R. No. L-12039 June 30, 1961


2 SCRA 648

Facts:
This is an Appeal from the decision of the Court of First Instance of Manila. Exequiel
Ampil was the registered owner of the land in question under Original Certificate of Title No.
2497. On March 24, 1924, Exequiel Ampil executed a deed of sale covering the land in favor of
defendant Maximo Francisco. Despite the sale, the Torrens title continued until 1937 in the
name of the vendor Exequiel Ampil. At the trial, defendant presented the owner's duplicate of
Original Certificate of Title No. 2497 which was delivered to defendant by Ampil. Prior to
October 21, 1933, Exequiel Ampil was indebted to various creditors but the payment of this
indebtedness was guaranteed by the plaintiff Eulogio Rodriguez, Sr., so that on that date
Exequiel Ampil executed a document entitled "Venta Condicional". The deed was duly registered
in the office of the Register of Deeds on November 15, 1933. This deed conveyed the land
together with some other parcel to plaintiff by a conditional sale, the conveyance to be absolute
upon the fulfillment of certain conditions. On December 10, 1936, plaintiff filed an affidavit
consolidating ownership over the land in question by virtue of the fact that the conditional sale
of October 21, 1933 between him and Ampil had become absolute. However, as the Owner's
Duplicate Certificate of Title was unavailable, a petition was filed in the original registration
proceedings in the Court of First Instance of Rizal for the issuance of a new owner's duplicate
and after due notice and hearing, the court ordered that the lost certificate be cancelled and a
new one issued to the owner. Then, on February 12, 1937 by virtue of the affidavit of
consolidation, the Register of Deeds of Rizal cancelled Original Certificate of Title No. 2497 and
issued to plaintiff Transfer Certificate of Title No. 31204.

Issue:
Whether or not the public document entitled "CONTRATO DE VENTA CONDICIONAL"
is a deed of equitable mortgage.

Held:
No. The provisions of the deed of sale in question may be summarized as follows: that
the vendor sold to the vendee the real properties in consideration of the obligation assumed by
the vendee — to pay what the vendor owed to several parties; that if the vendor paid the debts
aforesaid, the sale shall become inoperative and void, but that if the vendee paid the same debts
by reason of the vendor's failure to do so, the sale made shall become absolute and irrevocable
automatically, without the need of executing any other deed of conveyance. Considering the
provisions of the agreement, we agree with the trial court that "the contract is obviously a
perfected contract of sale and subject to a resolutory condition, authorized by Articles 1145, 1113
(2nd par.) and 1114 of the Civil Code." It does not constitute a mere security — which is the
manifest purpose of a contract of mortgage — but instead it makes a conditional transfer of
ownership which becomes automatically absolute and final upon performance of the condition
agreed upon, namely, payment by the vendee of what the vendor owed the parties mentioned in
the deed of conveyance. This, as the lower court found, had been done by the vendee. As a
consequence, the conditional sale in his favor became absolute. WHEREFORE, the decision
appealed from is affirmed, with costs.

124
LLB 2A

99. MANOTOK REALTY, INC., VS. COURT OF APPEALS AND FELIPE CARILLO

G.R. No. L-39044 January 3, 1985


148 SCRA 174

Facts:
Herein appellee MANOTOK REALTY, INC. is the registered owner of the lot in dispute.
It acquired the aforementioned property from the Testate Estate of Clara Tambunting de
Legarda, being the highest bidder in a sale conducted by the Probate Court. After having
acquired said property, the appellee subdivided it, but could not take possession thereof because
the whole area is occupied by several houses among which is the one belonging to the herein
appellant Felipe Carillo. Demands to vacate and to surrender possession of the property were
made and served to the appellant. In spite of such demands, the appellant continued to occupy
the disputed lot and refused to surrender possession thereof. He argues that he acquired the lot
in dispute from a certain Delfin Dayrit on September 25, 1962, pursuant to a deed of
assignment; that Dayrit in turn had acquired the property from the late Carla Tambunting by
virtue of a Contract of Sale on Installment Basis; that Dayrit had religiously paid the monthly
installments as they fell due, his last payment being on May 25, 1954, then leaving an unpaid
balance when the said parcel was conveyed to defendant Carillo, for which receipts were duly
issued; that Dayrit could not continue paying the succeeding installments as they fen due
because Vicente Legarda, the surviving spouse of Clara Tambunting, refused to receive any
payment for the same and that it was only on September 25, 1962, when Dayrit conveyed the lot
to appellant Carillo. After the petitioner failed in its attempts to take possession of the lot, it filed
the reivindicatory action against the respondent. The trial court decided the case in favor of the
petitioner.

Issue:
Whether or not appellant may be considered as a possessor in good faith of the property
in question.

Held:
No. In this case, it was shown that under the contract of sale on installment basis, Delfin
Dayrit had only paid a total of P4,917.30, leaving an unpaid balance of P3,860.20 as of August 9,
1954. The said contract specifically provides that ". . . if for some reason or other the purchaser
cannot pay a certain installment on the date agreed upon, it is hereby agreed that said purchaser
will be given a maximum limit of two months' grace in which to pay his arrears, after which the
property will revert to the original owner hereof: the Clara Tambunting Subdivision,." The
subsequent installment after August 9, 1954, not having been paid, the property, therefore,
reverted to Clara Tambunting and therefore formed part of her estate, which was subsequently
acquired by appellee. Thus, when appellant purchased the parcel of land in question from Dayrit
on August 25, 1962—or eight (8) years after the default—the latter had no more right over the
same. 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 behalf that there was no defect in the
title of the vendor (Leung Yee v. Strong Machinery Co., 37 Phil. 644). Consequently, appellant
cannot be deemed a possessor in good faith and is not, therefore, entitled to reimbursement for
the improvements he had introduced in the property in question.

125
LLB 2A

100. BRAULIO CASTILLO, ET AL. VS. SIMPLICIA NAGTALON

G.R. No. L-17079 January 29, 1962


4 SCRA 48

Facts:
On November 11, 1952, Court of First Instance of Ilocos Norte rendered judgment
declaring the plaintiffs Braulio Castillo, et al., owners pro-indiviso of the land described in the
complaint with the right to possess it and that the defendants are ordered to restore the
possession of the eastern portion thereof to the plaintiffs, to pay damages in the amount of
P210.00 every year since 1943 until they deliver the possession of said portion to the plaintiffs,
and to pay the costs. On appeal by the defendants, the Court of Appeals affirmed said decision in
all respects, with costs against the defendants-appellants therein. The decision having become
final, a writ of execution was issued against all the defendants, to satisfy the damages and costs
awarded therein which, together with the expenses incidental to such execution, amounted to
P3,401.00. Consequently, ten parcels of land, three of which belonged exclusively to herein
appellee Simplicia Nagtalon, one of the defendants, were levied upon and sold for P3,401.00 at
the execution sale conducted on July 8, 1957.

On July 8, 1958, the last day of the one-year period for redemption, appellee Simplicia
Nagtalon deposited with the Deputy Provincial Sheriff the sum of P317.44 representing 1/12 of
the consideration of the sale plus 1% interest thereon, and prayed for the issuance of the
corresponding deed of redemption as to the three parcels of land belonging to her. The
purchaser opposed the same on the ground that the amount thus tendered did not cover the full
redemption price of the said three parcels of land which were auctioned separately. In view of
said opposition, Nagtalon filed a motion with the court to compel the Sheriff to issue the deed of
redemption prayed for. On August 26, 1958, the court, acting on said motion, issued an order
holding that the liability of the defendants, as appearing in the dispositive part of the executed
decision, was only joint and that the tender by movant Nagtalon of the sum corresponding to
1/12 of the purchase price was sufficient to redeem her properties sold at public auction. Thus,
the Deputy Provincial Sheriff was directed to execute and deliver to movant Nagtalon the
certificate of redemption covering the three parcels of land owned by her. The purchaser's and
the Sheriff's motion for reconsideration having been denied, they instituted the instant appeal.

Issue:
Whether or not the lower court committed an error in holding movant's tender of the
sum of P317.44 as valid redemption of the three parcels of land owned by her, and in ordering
the issuance of the corresponding certificate of redemption therefor.

Held:
No. The procedure for the redemption of the properties sold at execution sale is
prescribed in Section 26, Rule 39, of the Rules of Court. Thereunder, the judgment debtor or
redemptioner may redeem the property from the purchaser, within 12 months after the sale, by
paying the purchaser the amount of his purchase, with 1% per month interest thereon up to the
time of redemption, together with the taxes paid by the purchaser after the purchase, if any. In
other words, in the redemption of properties sold at an execution sale, the amount payable is no
longer the judgment debt but the purchase price. Considering that appellee tendered payment
only of the sum of P317.44, whereas the three parcels of land she was seeking to redeem were
sold for the sums of P1,240.00, P21.00, and P30.00, respectively, the aforementioned amount of
P317.44 is insufficient to effectively release the properties. However, as the tender of payment
was timely made and in good faith in the interest of justice we incline to give the appellee

126
LLB 2A

opportunity to complete the redemption purchase of the three parcels, as provided in Section
26, Rule 39 of the Rules of Court, with and executory. The decision of the lower court is hereby
affirmed.

127
LLB 2A

101. MARIA MAHILUM, ET AL. VS. COURT OF APPEALS

G.R. No. L-17970 June 30, 1966


17 SCRA 482

Facts:
Pedro Mahilum was the registered owner of a parcel of land. Upon the death of Pedro
Mahilum in 1934, he was succeeded by his six children, namely, Tomas, Juan, Clemente,
Antonia, Juliana and Tomasa who on May 13, 1935, executed a "deed of definite sale" in favor of
Gorgonia Flora, married to Basilio Sotes. The vendors had acknowledged the deed of sale before
Notary Public Nicolas D. Destua. It further appears that Gorgonia Flora, the herein plaintiff, had
declared the contested portion for taxation purposes and began paying the taxes therefor in
1936. The Mahilums, however, claimed that they never sold any portion of the aforesaid Lot. As
a matter of fact, according to them, Original Certificate of Title No. RO-6024 (22893) is free
from any encumbrance whatsoever. They further claimed that if plaintiff had been in possession
of a portion of said lot, it was a mere toleration on their part, but not an acknowledgment of her
right of ownership over the property. In the six children of the late Tomas Mahilum, only two
were living at the trial of this case, namely, Tomasa and Juan. According to Tomasa, neither she
nor her brothers and sisters appeared before notary public Nicolas Destua, much less thumb
marked and/or signed the deed of sale. According to the plaintiff, only Clemente Mahilum
affixed his signature on the document, and they simply thumb marked the same. Juan Mahilum
alleged in their complaint for "Annulment of Contract of Definite Sale," that Gorgonia Flora Vda.
de Sotes fraudulently took advantage of the illiteracy or incapacity of the plaintiff and their
brothers and sisters, Tomas, Clemente and Antonia who were then living, induced them to sign
a certain writing, which writing the defendant, in conspiracy with Notary Public, Nicolas D.
Destua ..., falsely and fraudulently represented to be an acknowledgment of debt of plaintiffs
father, Pedro Mahilum, but which is in fact a Definite Contract of Sale disposing of Lot No. 2195
as aforesaid.

Issue:
Whether or not the Court of Appeals erred in not holding that the deed of sale is
inadmissible in evidence because it lacks the necessary documentary stamps.

Held:
No. The stamps referred to by petitioners (and required by Section 238 of the Internal
Revenue Code so that a public document may be admitted as evidence) are supposed to be, and
as a matter of practice actually are, affixed to the original or first copy of the document and not
to any of the duplicates or carbon copies thereof. There is no evidence whatsoever that such
practice was not observed in regard to the deed of sale involved in this case, and consequently
the presumptions that official duty has been regularly performed, that private transactions have
been fair and regular, and that the regular course of business has been followed, must be applied
(Sec. 69[q], Rule 123; now Sec. 5, Rule 131). The burden is upon those who seek to destroy this
presumption to do so by convincing proof. The decision of the Court of Appeals is affirmed, with
costs against petitioners-appellants.

128
LLB 2A

102. MACONDRAY & CO., INC. VS. PRAXEDES R. DE SANTOS

G.R. No. L-42416 April 9, 1935


61 PHIL. 730

Facts:
The complaint alleges, for a first cause of action, that on January 11, 1934, Praxedes R.
De Santos executed and delivered to the plaintiff Macondray & Co., INC. a promissory note for
the sum of P1,000, with interest rate of 12 per cent per annum, payable in installments and in
case of default in the payment of the principal or interest an additional sum equal to 20 per cent
of the total amount due was to be paid as attorney's fees; that to guarantee the payment of this
note the defendant executed a chattel mortgage on a automobile; if the mortgaged property be
lost, destroyed or damages, the mortgage would immediately have the right to foreclose and
declare the whole amount of the principal and interest, secured by said mortgage, due and
payable; on January 21, 1934, the mortgaged automobile, while in possession of the defendant,
met with an accident resulting in its total wreck and loss; by reason of the failure of the
defendant to replace or to restore the automobile or to pay the value thereof plaintiff foreclosed
its mortgage and what remained of the wrecked automobile was sold at public auction for the
sum of P50; that after applying this amount to the account of defendant there was an unpaid
balance of P980.39 plus interest at 12 per cent per annum from March 24, 1934, and 20 per cent
of the amount due as attorney's fees, which defendant refused to pay. As an alternative cause of
action, the plaintiff reproduces the allegations contained in the first cause of action and prays
that defendant be sentenced to pay the plaintiff the above-mentioned amount with interest. The
defendant, as the only ground of her demurrer, alleges that under the provisions of Act No.
4122, article 1454-A of the Civil Code, there is no cause of action against her. The defendant
demurred to the complaint, the trial court sustained it and gave the plaintiff five days within
which to amend. Plaintiff accepted to the order sustaining the demurrer and gave notice that it
elected to stand upon its complaint and thereupon the lower court, upon motion of the
defendant, dismissed the complaint with costs against the plaintiff. Plaintiff accepted to the
order dismissing the complaint and moved for a new trial. Upon the denial of this motion and
upon appeal to this court, plaintiff alleges that the trial court erred: I. In sustaining the
demurrer of the defendant to the plaintiff's complaint; II. In dismissing the case; III. In not
rendering judgment in accordance with the prayer of the plaintiff's complaint; IV. Conceding,
but not admitting, that the case falls under the provisions of Act No. 4122, the lower court erred
in not finding that the said law is unconstitutional in that it confiscates property without due
process of law and denies the equal protection of the laws of the plaintiff. V. In not granting the
plaintiff's motion for new trial.

Issue:
Whether or not the contention of the defendant that under the provisions of Act No.
4122, article 1454-A of the Civil Code, there is no cause of action against her is valid.

Held:
No. In order to apply the provisions of article 1454-A of the Civil Code it must appear
that there was a contract for the sale of personal property payable in installments and that there
has been a failure to pay two or more installments. In view of the above, the trial court erred in
sustaining the demurrer. The appellant's first, second, third and fifth assignments of error are
sustained. Wherefore it is not necessary to pass upon the fourth assignment of error. The order
of the trial court dismissing the complaint is hereby set aside and this case will be remanded to
the trial court for further proceedings in accordance with law, with the costs of this appeal
against the defendant-appellee.

129
LLB 2A

MEJOS, AIRESH H.

103. LEVY HERMANOS, INC. VS. GERVACIO

G.R. No. L-46306 October 27, 1939


69 Phil. 52

Facts:
On March 10, 1937, plaintiff Levy Hermanos, Inc., sold to defendant Lazaro Blas
Gervacio, a Packard car. Defendant, after making the initial payment, executed a promissory
note for the balance of P2,400, payable on or before June 15, 1937, with interest at 12 per cent
per annum, to secure the payment of the note, he mortgaged the car to the plaintiff. Defendant
failed to pay the note in its maturity. Wherefore, plaintiff foreclosed the mortgage and the car
was sold at public auction, at which plaintiff was the highest bidder for P1,800. The present
action is for the collection of the balance of P1,600 and interest.

Issue:
Whether or not the cash payment made by Gervacio should be considered as an
installment

Held:
No. Article 1454-A of the Civil Code reads as follows:

In a contract for the sale of personal property payable in installments shall confer upon
the vendor the right to cancel the sale or foreclose the mortgage if one has been given on the
property, without reimbursement to the purchaser of the installments already paid, if there be
an agreement to this effect. However, if the vendor has chosen to foreclose the mortgage he shall
have no further action against the purchaser for the recovery of any unpaid balance owing by the
same and any agreement to the contrary shall be null and void. In order to apply the provisions
of article 1454-A of the old Civil Code it must appear that there was a contract for the sale of
personal property payable in installments and that there has been a failure to pay two or more
installments.

The contract in this case, while a sale of personal property, is not, however, one on
installments, but on straight term, in which the balance, after payment of the initial sum, should
be paid in its totality at the time specified in the promissory note. The transaction is not,
therefore, the one contemplated in Article 1454-A and accordingly the mortgagee is not bound
by the prohibition therein contained as to the right to the recovery of the unpaid balance.

130
LLB 2A

104. INDUSTRIAL FINANCE CORP. VS. TOBIAS

G.R. No. L-41555 July 27, 1977


78 SCRA 28

Facts:
On June 16, 1968, respondent Castor Tobias bought on installment one (1) Dodge truck
from Leelin Motors, Inc. To answer for his obligation he executed a promissory note in favor of
the latter, for the sum of P29.070.28 payable in thirty-six (36) equal installments with interest
at the rate of 12% per annum payable in the amounts and dates indicated in said promissory
note.

On June 19, 1969, Leelin Motors, Inc. indorsed the promissory note and assigned the
chattel mortgage to petitioner Industrial Finance Corporation. As a consequence respondent
Tobias paid six (6) installments on the promissory note directly to the petitioner Industrial
Finance Corporation the last of which was made on February 19, 1970.

On February 16, 1971, petitioner filed in the Court of First Instance of Manila an action
against respondent Tobias to recover the unpaid balance of the promissory note. The lower
court dismissed the complaint. On appeal, the Court of Appeals affirmed the decision of the
lower court dismissing the complaint of petitioner Industrial Finance Corporation but modifying
the same by ordering respondent Tobias to pay the cost of repairs of the damaged truck in the
amount of P5, 396.78 plus interest.

Issue:
Whether the petitioner is still free to avail of the remedy of exacting fulfillment of the
obligation of respondent Tobias

Held:
Art. 1484 is clear that "should the vendee or purchaser of a personal property be in
default in the payment of two or more of the agreed installments, the vendor or seller has the
option to either exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to
foreclose the mortgage on the purchased personal property, if one was constituted. Since the
case involves the sale of personal property on installments Art. 1484 of the Civil Code should
apply.

Here, petitioner has not cancelled the sale, nor has it exercised the remedy of
foreclosure. Since the petitioner has not availed itself of the remedy of cancelling the sale of the
truck in question or of foreclosing the chattel mortgage on said truck, petitioner is still free to
avail of the remedy of exacting fulfillment ' of the obligation of respondent Tobias.

Also, it is claimed by respondent Tobias that he has surrendered the truck to petitioner
in his letter dated May 27, 1970. But the alleged surrender was ineffectual as far as the petitioner
is concerned because petitioner could not take possession of the truck in question as it was in
the custody of Leelin Motors, Inc., which had a mechanic's lien over it. Even respondent Tobias
cannot expect petitioner to accept the term of surrender because aside from the fact that the
truck being surrendered met an accident petitioner was not satisfied with the repair of the
finished portion of the truck in question. Petitioner therefore was justified refusing to accept
such surrender and in bringing suit to recover the balance of the purchase price.

131
LLB 2A

105. RIDAD VS. FILIPINAS INVESTMENT

G.R. No. L-39806 January 27, 1983


120 SCRA 246

Facts:
Plaintiffs purchased from the Supreme Sales arid Development Corporation two (2)
brand new Ford Consul Sedans complete with accessories, for P26,887 payable in 24 monthly
installments. To secure payment thereof, plaintiffs executed on the same date a promissory note
covering the purchase price and a deed of chattel mortgage not only on the two vehicles
purchased but also on another car (Chevrolet) and plaintiffs' franchise or certificate of public
convenience granted by the defunct Public Service Commission for the operation of a taxi fleet.
Then, with the conformity of the plaintiffs, the vendor assigned its rights, title and interest to the
above-mentioned promissory note and chattel mortgage to defendant Filipinas Investment and
Finance Corporation.

Due to the failure of the plaintiffs to pay their monthly installments as per promissory
note, the defendant corporation foreclosed the chattel mortgage extra-judicially of the two Ford
Consul cars where plaintiff were not notified and defendant corporation was the highest bidder
and purchaser. Another auction sale was held involving the remaining properties subject of the
deed of chattel mortgage since plaintiffs' obligation was not fully satisfied by the sale of the
vehicles.

On February 21, 1966, plaintiffs filed an action for annulment of contract with Filipinas
Investment and Finance Corporation before the Court of First Instance of Rizal. The court
declared that the chattel mortgage is null and void in so far as the taxicab franchise and the used
Chevrolet car of plaintiffs are concerned, and the sale at public auction conducted by the City
Sheriff of Manila concerning said taxicab franchise has no legal effect.

Issue:
Whether or not the foreclosure of the chattel mortgage is valid

Held:
NO. Under Art. 1484, in a contract of sale of personal property the price of which is
payable in installments, the vendor may exercise any of the following remedies :(1) Exact
fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the
vendee's failure to pay cover two or more installment.

In the instant case, Defendant Corporation elected to foreclose its mortgage upon default
by the plaintiffs in the payment of the agreed installments. Having chosen to foreclose the
chattel mortgage, and bought the purchased vehicles at the public auction as the highest bidder,
it submitted itself to the consequences of the law as specifically mentioned, by which it is
deemed to have renounced any and all rights which it might otherwise have under the
promissory note and the chattel mortgage as well as the payment of the unpaid balance. The
foreclosure is null and void.

132
LLB 2A

106. ESGUERRA VS. COURT OF APPEALS

G.R. No. 119310 February 3, 1997


173 SCRA 1

Facts:
Julieta Esguerra filed a complaint for administration of conjugal partnership or
separation of property against her husband Vicente Esguerra, Jr. before (the trial) court. The
parties entered into a compromise agreement which was submitted to the court. By virtue of
said agreement, Esguerra Bldg. I located at 140 Amorsolo St., Legaspi Village was sold and the
net proceeds distributed according to the agreement.

Petitioner started claiming one-half of the rentals of the said building which VECCI
refused. Thus, petitioner filed a motion with respondent court praying that VECCI be ordered to
remit one-half of the rentals to her effective January 1990 until the same be sold. On October
30, 1990 respondent (trial) court ruled in favor of herein petitioner. Meanwhile, Esguerra Bldg.
II was sold to (herein private respondent Sureste Properties. Inc.) for P150,000,000.00. On 17
June 1993, (Julieta V. Esguerra) filed a motion seeking the nullification of the sale before
respondent (trial) court on the ground that VECCI is not the lawful and absolute owner thereof
and that she has not been notified nor consulted as to the terms and conditions of the sale.

Not being a party to the civil case, private respondent Sureste filed a Manifestation
concerning (herein petitioner's) motion to declare the sale void ab initio. In its Manifestation
(Sureste) points out that in the compromise agreement executed by VECCI and (Julieta V.
Esguerra), she gave her express consent to the sale of the said building.

Issue:
Whether or not the Contract of Sale is unenforceable

Held:
The Civil Code provides that a contract is unenforceable when it is ". . . entered into in
the name of another person by one who has been given no authority or legal representation, or
who has acted beyond his powers." And that "(a) contract entered into in the name of another by
one who has no authority or legal representation, or who has acted beyond his powers, shall be
unenforceable, . . ."

In the case at bar, the sale of Esguerra Building II by VECCI to private respondent
Sureste Properties, Inc is valid. The sale was expressly and clearly authorized under the
judicially-approved compromise agreement freely consented to and voluntarily signed by
petitioner Julieta Esguerra. Thus, petitioner's contention that the sale is unenforceable as to her
share for being unauthorized is plainly incongruous with the express authority granted by the
compromise agreement to VECCI, which specified no condition that the latter shall first consult
with the former prior to selling any of the properties listed there.

Moreover, petitioner's contention runs counter to Article 1900 of the Civil Code which
provides that: So far as third persons are concerned, an act is deemed to have been performed
within the scope of the agent's authority, if such act is within the terms of the power of attorney,
as written, even if the agent has in fact exceeded the limits of his authority according to an
understanding between the principal and the agent.

133
LLB 2A

Thus, as far as private respondent Sureste Properties, Inc. is concerned, the sale to it by
VECCI was completely valid and legal because it was executed in accordance with the
compromise agreement, authorized not only by the parties thereto, who became co-principals in
a contract of agency created thereby, but by the approving court as well. Consequently, the sale
to Sureste Properties, Inc. of Esguerra Building II cannot in any manner or guise be deemed
unenforceable, as contended by petitioner.

134
LLB 2A

MERCADO, NERIZZA C.

107. FILINVEST CREDIT CORP. VS. COURT OF APPEALS

G.R. No. 82508 September 29, 1989


178 SCRA 188

Facts:
The private respondents, the spouses Jose Sy Bang and Iluminada Tan were engaged in
the sale of gravel produced from crushed rocks and used for construction purposes. They
intended to buy rock crusher from Rizal Consolidated Corporation which carried a cash price tag
of P550,000.00. They applied for financial assistance from herein petitioner Filinvest Credit
Corporation, who agreed to extend financial aid on the certain conditions.

A contract of lease of machinery (with option to purchase) was entered into by the
parties whereby the private respondents agreed to lease from the petitioner the rock crusher for
two years starting from July 5, 1981, payable as follows: P10,000.00 – first 3 months,
P23,000.00 – next 6 months, P24,800.00 – next 15 months. It was likewise stipulated that at
the end of the two-year period, the machine would be owned by the private respondents. Thus
the private respondent issued in favor of the petitioner a check for P150,550.00, as initial rental
(or guaranty deposit), and 24 post-dated checks corresponding to the 24 monthly rentals. In
addition, to guarantee their compliance with the lease contract, the private respondent executed
a real estate mortgage over two parcels of land in favor of the petitioner. The rock crusher was
delivered to the spouses.

However, 3 months later, the spouses stopped payment when petitioner had not acted on
the complaints of the spouses about the machine. As a consequence, petitioner extra-judicially
foreclosed the real estate mortgage. The spouses filed a complaint before the RTC. The RTC
rendered a decision in favor of private respondent. The petitioner elevated the case to CA which
affirmed the decision of RTC in toto.

Issues:
1. Whether or not the nature of the contract is one of a contract of sale.
2. Whether or not the remedies of the seller provided for in Article 1484 are cumulative.

Held:
1. YES. The intent of the parties to the subject contract is for the so-called rentals to be
the installment payments. Upon the completion of the payments, then the rock crusher, subject
matter of the contract, would become the property of the private respondents. This form of
agreement has been criticized as a lease only in name. Thus in, Vda. De Jose v. Barrueco, we
stated: Sellers desirous of making conditional sales of their goods, but who do not wish openly to
make a bargain in that form, for one reason or another, have frequently restored to the device of
making contracts in the form of leases either with options to the buyer to purchase for a small
consideration at the end of term, provided the so-called rent has been duly paid, or with
stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It
is obvious that such transactions are leases only in name. The so-called rent must necessarily be
regarded as payment of the price in installments since the due payment of the agreed amount
results, by the terms of bargain, in the transfer of title to the lessee.

135
LLB 2A

2. NO, it is alternative. The seller of movable in installments, in case the buyer fails to
pay two or more installments, may elect to pursue either of the following remedies: (1) exact
fulfillment by the purchaser of the obligation; (2) cancel the sale; or (3) foreclose the mortgage
on the purchased property if one was constituted thereon. It is now settled that the said
remedies are alternative and not cumulative, and therefore, the exercise of one bars the exercise
of the others. Indubitably, the device – contract of lease with option to buy – is at times resorted
to as a means to circumvent Article 1484, particularly paragraph (3) thereof. Through the set-up,
the vendor, by retaining ownership over the property in the guise of being the lessor, retains,
likewise the right to repossess the same, without going through the process of foreclosure, in the
event the vendee-lessee defaults in the payment of the installments. There arises therefore no
need to constitute a chattel mortgage over the movable sold. More important, the vendor, after
repossessing the property and, in effect, cancelling the contract of sale, gets to keep all the
installments-cum-rentals already paid.

The Petition is GRANTED; the Decision of the Court of Appeals dated March 17, 1988 is
hereby REVERSED AND SET ASIDE, and another one rendered DISMISSING the complaint.
Costs against the private respondents.

136
LLB 2A

108. INDUSTRIAL FINANCE CORP. VS. RAMIREZ

G.R. No. L-43821 May 26, 1977


77 SCRA 153

Facts:
On December 4, 1970 Arnaldo Dizon sold to Consuelo Alcoba his 1966 model Chevrolet
car for P13,157.89, payable in eighteen monthly installments, which were secured by a chattel
mortgage on the car. On the same date, Dizon assigned for ten thousand pesos to Industrial
Finance Corporation (herein petitioner) all his rights and interest in the chattel mortgage.
Consuelo Alcoba defaulted in the payment of the first four installments. Because of that default
and by virtue of the acceleration clause in the promissory note forming part of the mortgage, the
whole obligation became due and demandable. As of February 27, 1972 Consuelo Alcoba owed
petitioner the sum of P7,678.05. Petitioner sued her in the Court of First Instance of Manila for
"replevin with damages‖ for the recovery of the mortgaged car by means of a writ of replevin.
The lower court issued the writ of replevin. But the sheriff was not able to seize the mortgaged
car.
On September 27, 1973, or long after the judgment had become final, she paid Industrial
Finance Corporation the sum of P2,000. The lower court issued Writs of Execution but were
returned unsatisfied. A second alias writ of execution was issued. The sheriff was able to levy
upon the mortgaged car which was then in the possession of the Aco Motor Service of Dagupan
City. At the execution sale held on April 25, 1974 Industrial Finance Corporation bought the
mortgaged car for P4,000. However, in order to take possession of the car, the corporation had
to pay P4,250 to the Aco Motor Service to satisfy its lien for the repair and storage of the car.
The corporation contended that, because of that payment, it sustained a loss of P250 in the
execution sale. It asked for a third alias writ of execution in order to satisfy the balance of
Consuelo Alcoba's obligation. Consuelo Alcoba opposed the motion for a third alias writ of
execution. The lower court in its order of March 2, 1976 denied the motion for a third alias writ
of execution. It treated the execution sale as a "virtual foreclosure of the chattel mortgage"
which, although not beneficial to the mortgagee, Industrial Finance Corporation, barred it from
recovering the deficiency under article 1484. Hence, the instant certiorari case.

Issue:
Whether or not the mortgagee-assignee in installment sales of personal property is
entitled to an alias writ of execution after choosing the remedy of specific performance.

Held:
YES. According to article 1484, it is only when there has been a foreclosure that the
mortgagor is not liable for any deficiency. In this case, there was no foreclosure. The mortgagee
evidently chose the remedy of specific performance, It levied upon the car by virtue of an
execution and not as an incident of a foreclosure proceeding. It is entitled to an alias writ of
execution for the portion of the judgment that has not been satisfied.

The rule is that in installment sales, if the action instituted is for specific performance
and the mortgaged property is subsequently attached and sold, the sale thereof does not amount
to a foreclosure of the mortgage. Hence, the seller-creditor is entitled to a deficiency judgment
(Southern Motors, Inc. vs. Moscoso, 112 Phil. 94).

WHEREFORE, the trial court's order denying the motion for a third writ of execution is
reversed and set aside. Costs against respondent Consuelo Alcoba.

137
LLB 2A

109. SOUTHERN MOTOR INC. VS. ANGELO MOSCOSO

G.R. No. L-14475 May 30, 1961


2 SCRA 168

Facts:
Plaintiff Southern Motors, Inc. sold to defendant Angel Moscoso one Chevrolet truck on
installment basis, for P6,445.00. Upon making a down payment, the defendant executed a
promissory note for the sum of P4,915.00, representing the unpaid balance of the purchase price
to secure the payment of which, a chattel mortgage was constituted on the truck in favor of the
plaintiff. Of said account, the defendant had paid a total of P550.00, of which P110.00 was
applied to the interest and P400.00 to the principal, thus leaving an unpaid balance of
P4,475.00. The defendant failed to pay three (3) installments on the balance of the purchase
price. Plaintiff filed a complaint against the defendant, to recover the unpaid balance of the
promissory note. Upon plaintiff's petition, a writ of attachment was issued by the lower court on
the properties of the defendant. Pursuant thereto, the said Chevrolet truck, and a house and lot
belonging to defendant, were attached by the Sheriff and said truck was brought to the plaintiff's
compound for safe keeping. After attachment and before the trial of the case on the merits,
acting upon the plaintiff's motion for the immediate sale of the mortgaged truck, the Provincial
Sheriff of Iloilo sold the truck at public auction in which plaintiff itself was the only bidder for
P1,OOO.OO. The trial court condemned the defendant to pay the plaintiff the amount of
P4,475.00 with interest at the rate of 12% per annum from August 16, 1957, until fully paid, plus
10% thereof as attorney‘s fees and costs. Hence, this appeal by the defendant.
ISSUE:
Whether or not the attachment caused to be levied on the truck and its immediate sale at
public auction was tantamount to the foreclosure of the chattel mortgage on said truck.
HELD:
NO. Article 1484 of the Civil Code provides that in a contract of sale of personal property
the price of which is payable in installments, the vendor may exercise any of the following
remedies: (I) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the
sale, should the vendee's failure to pay cover two or more installments; and (3) Foreclose the
chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to
pay cover two or more installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be
void. The plaintiff had chosen the first remedy. The complaint is an ordinary civil action for
recovery of the remaining unpaid balance due on the promissory note. The plaintiff had not
adopted the procedure or methods outlined by Sec. 14 of the Chattel Mortgage Law but those
prescribed for ordinary civil actions, under the Rules of Court. Had the plaintiff elected the
foreclosure, it would not have instituted this case in court; it would not have caused the chattel
to be attached under Rule 59, and had it sold at public auction, in the manner prescribed by
Rule 39. That the plaintiff did not intend to foreclose the mortgage truck is further evinced by
the fact that it had also attached the house and lot of the appellant at San Jose, Antique. We
perceive nothing unlawful or irregular in plaintiff's act of attaching the mortgaged truck itself.
Since the plaintiff has chosen to exact the fulfillment of the appellant's obligation, it may enforce
execution of the judgment that may be favorably rendered hereon, on all personal and real
properties of the latter not exempt from execution sufficient to satisfy such judgment. It should
be noted that a house and lot at San Jose, Antique were also attached. No one can successfully
contest that the attachment was merely an incident to an ordinary civil action. The mortgage
creditor may recover judgment on the mortgage debt and cause an execution on the mortgaged
property and may cause an attachment to be issued and levied on such property, upon beginning
his civil action.

138
LLB 2A

110. SERVICEWIDE SPECIALISTS INC. VS. INTERMEDIATE APPELLATE COURT

G.R. No. 74553 June 8, 1989


174 SCRA 80

Facts:
The private respondent Galicano Siton purchased from Car Traders Philippines, Inc. a
Mitsubishi Celeste vehicle and paid P25,000.00 as down payment of the price leaving a balance
of P68,400.00. On August 14, 1979, Siton executed a promissory note in favor of Car Traders
Philippines, Inc. expressly stipulating that the face value of the note which is P 68,400.00, shall
"be payable, without need of notice of demand, in installments of the amounts following and at
the dates hereinafter set forth, to wit: P 1,900.00 monthly for 36 months due and payable on the
14th day of each month starting September 14, 1979, thru and inclusive of August 14, 1982". As
further security, Siton executed a Chattel Mortgage over the subject motor vehicle in favor of Car
Traders Philippines, Inc. The credit covered by the promissory note and chattel mortgage
executed by respondent Galicano Siton was first assigned by Car Traders Philippines, Inc. in
favor of Filinvest Credit Corporation who subsequently reassigned said credit in favor of
petitioner Servicewide Specialists, Inc. and respondent Siton was advised of this second
assignment. Alleging that Siton failed to pay 3 monthly installments, the petitioner filed this
action against Galicano Siton and "John Doe." The relief sought by the plaintiff is a Writ of
Replevin over subject motor vehicle or, in the alternative, for a sum of money of P 20,319.42
plus interest thereon at the rate of 14% per annum from January 11, 1982 until fully paid. After
the service of summons, Justiniano de Dumo, identifying himself as the "John Doe" in the
Complaint, inasmuch as he is in possession of the subject vehicle, he alleged the fact that he has
bought the motor vehicle from Galicano Siton on November 24, 1979. The Regional Trial Court
rendered a decision denying the Writ of Replevin and ordered the defendants to pay the
remaining balance on the motor vehicle without additional interest. Not satisfied with the
decision of the trial court, the petitioner appealed to the Intermediate Appellate Court which
affirms in toto the decision of the trial court in its judgment on April 25, 1986. Hence, this
petition.

Issues:
1. Whether or not the sale of a mortgaged property without notice to the mortgagee
affects the validity of the sale.
2. Whether or not in sale of personal property in installment, when the seller chose the
remedy of fulfillment it is deemed to have waived the third remedy of foreclosure.

Held:
1. NO. The rule is settled that the chattel mortgagor continues to be the owner of the
property, and therefore, has the power to alienate the same; however, he is obliged under pain of
penal liability, to secure the written consent of the mortgagee. (Francisco, Vicente, Jr., Revised
Rules of Court in the Philippines, (1972), Volume IV-B Part I, p. 525). Thus, the instruments of
mortgage are binding, while they subsist, not only upon the parties executing them but also
upon those who later, by purchase or otherwise, acquire the properties referred to therein. The
absence of the written consent of the mortgagee to the sale of the mortgaged property in favor of
a third person, therefore, affects not the validity of the sale but only the penal liability of the
mortgagor under the Revised Penal Code and the binding effect of such sale on the mortgagee
under the Deed of Chattel Mortgage.

139
LLB 2A

2. YES. Article 1484 of the New Civil Code prescribes three remedies which a vendor may
pursue in a contract of sale of personal property the price of which is payable in installments, to
wit: 1) to exact fulfillment of the obligation; 2) cancel the sale; and 3) foreclose the mortgage on
the thing sold. These remedies are alternative and the vendor cannot avail of them at the same
time. It is clear from the prayer of petitioner in its brief on appeal to the appellate court that it
had chosen the remedy of fulfillment when it asked the appellate court to order private
respondents to pay the remaining unpaid sums under the promissory note. By having done so, it
has deemed waived the third remedy of foreclosure, and it cannot therefore ask at the same time
for a Writ of Replevin as preparatory remedy to foreclosure of mortgage. In a similar case, where
the vendor filed an action containing three remedies: to collect the purchase price; to seize the
property purchased by suing for replevin and to foreclose the mortgage executed thereon, We
held that such a scheme is not only irregular but is a flagrant circumvention of the prohibition of
the law (Luneta Motor Company vs. Dimagiba No. L-17061, December 30, 1961, 3 SCRA 884).

140
LLB 2A

111. BACHRACH MOTOR CO., INC. VS. PABLO A. MILLAN

G.R. No. 42256 April 25, 1935


61 Phil. 409

FACTS:
On December 12, 1933, the defendant, Pablo A. Millan, for value received, executed and
delivered to the Bachrach Motor Co., Inc. (plaintiff) his promissory note for the sum of P939
payable in the City of Manila, Philippine Islands, in monthly installments. Said amount of P939
was the balance of the purchase price of one second hand Renault touring car purchased by the
said defendant from the plaintiff, as may be seen from the chattel mortgage executed by the
defendant in favor of the plaintiff on December 12, 1933, and registered in the office of the
Register of Deeds of the City of Manila. Defendant failed to pay three monthly installments
(December 22, 1933, and January 22 and February 22, 1934) which violated the terms of the
said promissory note and chattel mortgage. After crediting all the payments made by defendant
on account of said promissory note, he still owes the plaintiff the sum of P928.50, together with
interest thereon. Defendant offered to return the second hand Renault touring car to the
plaintiff in payment of the full amount under the promissory note and the chattel mortgage but
plaintiff refused to receive the same, and has filed this complaint for the full amount of the
purchase price without foreclosing the chattel mortgage. The trial court dismissed the case.

ISSUE:
Whether or not the adoption of article 1454-A (Act No. 4122), amending article 1454 of
the Civil Code also repealed that part of article 1124 of the Civil Code, which gives the prejudiced
person the right to exact the fulfillment of an obligation.

HELD:
NO. Before Act No. 4122 was adopted the legal right to exact the fulfillment of an
obligation was also available to the person prejudiced by the failure of one of the obligors to
comply with the terms of an obligation. Act No. 4122 does not expressly or impliedly prohibit
the party injured by the failure of one of the obligors, in a sale of personal property on
installments, from exacting the fulfillment of that obligation. Neither do the terms of that Act
expressly provide nor do they imply that, upon failure to pay two or more installments on the
purchase price of personal property sold on the installment plan, the vendor must "cancel the
sale or foreclose the mortgage if one has been given on the property."

In view of the foregoing, it is evident that the Legislature in adopting Act No. 4122 did
not intend to limit the remedies available to a vendor of personal property on the installment
plan to the right to cancel the sale or foreclose the mortgage if one had been given on the
property. The real object of that law is to prevent the exercise of either of these rights by such a
vendor until after the vendee has failed to pay two or more installments and furthermore to
prescribe and limit the rights of the vendor after he has availed himself of either of the remedies
mentioned therein.

In a sale of personal property on the installment plan the vendor may elect to exact the
fulfillment of the obligation, as the plaintiff has done in this case, cancel the sale or foreclose his
mortgage if one has been given on the property so sold. If he elects to cancel or foreclose he is
bound by the provisions of article 1454-A of the Civil Code.

141
LLB 2A

MORALES, MICHAEL EUGENE G.

112. MACONDRAY & CO. VS. BENITO & OCAMPO,

62 phil. 461

113. PASCUAL VS. UNIVERSAL CORP.,

61 SCRA 121

Facts:
Plaintiff-appellee spouses Lorenzo Pascual and Leonila Torres (spouses Pasqual)
executed the real estate mortgage subject matter of this complaint on December 14, 1960 to
secure the payment of the indebtedness of PDP Transit, Inc. (PDP Trans.) for the purchase of 5
units of Mercedes Benz trucks, with a total purchase price or principal obligation of P152,506.50
which was to bear interest at 1% per month starting that day, but the plaintiffs' guarantee is not
to exceed P50,000.00 which is the value of the mortgage. The PDP Trans., as the spouses
Pasqual's principal, paid to defendant-appellant Universal Motors Corporation (Universal
Motors) the sum of P92,964.91 on April 5, 1961 for two of the five Mercedes Benz trucks and on
May 22, 1961 for the remaining three, thus leaving a balance of P68,641.69 including interest
due on February 8, 1965.

On March 19, 1965, Universal Motors filed this complaint with the CFI of Manila against
the PDP Trans. to collect the balance due under the Chattel Mortgages and to repossess all the
units sold to PDP Trans. as the spouse Pascual‘s principal, including the 5 units guaranteed
under the subject Real (Estate) Mortgage. During the hearing, Universal Motors admitted that it
was able to repossess all the units sold to the latter, including the 5 units guaranteed by the
subject real estate mortgage, and to foreclose all the chattel mortgages constituted thereon,
resulting in the sale of the trucks at public auction. As the real estate mortgagors, the spouses
Pascual filed an action with the CFI of Quezon City for the cancellation of the mortgage they
constituted on 2 parcels of land in favor of the Universal Motors to guarantee the obligation of
PDP Trans. to the amount of P50,000. The said CFI rendered judgment in favor of the spouses
Pascual and ordered the cancellation of the mortgage.

Issue:
Was Article 1484 of the New Civil Code applicable in the case at bar?

Held:
The Supreme Court affirmed the lower court‘s decision. Appellant Universal Motors
argues that Article 1484 is not applicable to the case at bar because there is no evidence on
record that the purchase by PDP Trans. of the 5 trucks was payable in installments and that the
PDP Trans. had failed to pay two or more installments. Universal Motors also contends that
what Article 1484 prohibits is for the vendor to recover from the purchaser the unpaid balance
of the price after he has foreclosed the chattel mortgage on the thing sold, but not a recourse
against the security put up by a third party. The Supreme Court concluded to the contrary,
saying that the first issue was whether or not the sale was one on installments. The lower court
found that it was, and that there was failure to pay two or more installments, a finding which is
not subject to review by the Supreme Court. The next contention is that what article 1484
withholds from the vendor is ―the right to recover any deficiency from the purchaser after the
foreclosure of the chattel mortgage,‖ and not a ―recourse to the additional security put up by a

142
LLB 2A

third party to guarantee the purchaser's performance of his obligation.‖ But the Supreme Court
to sustain this argument of the appellant would be to indirectly subvert and public policy
overturn the protection given by Article 1484.

143
LLB 2A

114. ZAYAS VS. LUNETA MOTORS

117 SCRA 726

Facts:
Eutropio Zayas, Jr, purchased on installment basis a motor vehicle described as ONE (1)
UNIT FORD THAMES FREIGHTER Mr. Roque Escaño of the Escaño Enterprises in Cagayan de
Oro City, dealer of respondent Luneta Motor Company. The promissory note stated the amounts
and dates of payment of twenty-six installments covering the P7,920.00 debt. Simultaneously
with the execution of the promissory note and to secure its payment, Zayas executed a chattel
mortgage on the subject motor vehicle in favor of the respondent. After paying a total amount of
P3,148.00, the petitioner was unable to pay further monthly installments prompting the
respondent Luneta Motor Company to extra-judicially foreclose the chattel mortgage.

In his answer with affirmative defenses and counterclaim, Eutropio Zayas, Jr. admitted
having executed the promissory note for the monthly payments, on a Ford Thames vehicle
bearing Engine No. 400E-127738 which he purchased from the Luneta Motor Company but he
denied his alleged outstanding liability of P1,551.74 plus interest thereon … the said obligation if
there was any, had already been discharged either by payment or by sale in public auction of the
said motor vehicle as evidenced by a Notice of Sale

ISSUE:
Whether or not Luneta Motors can collect the deficiency of the Chattel Mortgage.

HELD:
Foreclosure of chattel mortgage; Agency; Principal and agent relationship; Being a
collecting agent of a company proves the nature of relationship between principal and agent.
The Escaño Enterprises of Cagayan de Ore City was an agent of Luneta Motor Company. A very
significant evidence which proves the nature of the relationship between Luneta Motor
Company and Escaño Enterprises is Annex ―A. of the petitioner‘s OPPOSITION TO URGENT
MOTION FOR RECONSIDERATION. Annex ―A‖ is a certification from the cashier of Escaño
Enterprises on the monthly installments paid by Mr. Eutropio Zayas, Jr. In the certification, the
promissory note in favor of Luneta Motor Company was specifically mentioned. There was only
one promissory note executed by Eutropio Zayas, Jr. in connection with the purchase of the
motor vehicle. The promissory note mentioned in the certification refers to the promissory note
executed by Eutropio Zayas, Jr. in favor of respondent Luneta Motor Company. x x x Escaño
Enterprises, a dealer of respondent Luneta Motor Company, was merely a collecting-agent as far
as the purchase of the subject motor vehicle was concerned. The principal and agent
relationship is clear. But even assuming that the ―distinct and independent entity‖ theory of the
private respondent is valid, the nature of the transaction as a sale of personal property on
installment basis remains. When, therefore, Escaño Enterprises, assigned its rights vis-a-vis the
sale to respondent Luneta Motor Company, the nature of the transaction involving Escaño)
Enterprises and Eutropio Zayas, Jr. did not change at all. As assignee, respondent Luneta Motor
Company had no better rights than assignor Escaño Enterprises under the same transaction.
The transaction would still be a sale of personal property in installments covered by Article 1484
of the New Civil Code. To rule otherwise would pave the way for subverting the policy
underlying Article 1484 of the New Civil Code, on the foreclosure of chattel mortgages over
personal property sold on installment basis.

144
LLB 2A

115. MANILA TRADING & SUPPLY CO. VS. REYES

62 PHIL. 461

Facts:
On December 13, 1933, following the enactment of Act No. 4122 or the Installment Sales
Law, E.M. Reyes executed in favor of the Manila Trading & Supply Co., a chattel mortgage on an
automobile as security for the payment of the sum of P400, which Reyes agreed to pay in ten
equal monthly installments. As found by the trial judge, Reyes failed to pay some of the
installments due on his obligation. Thereupon the Manila Trading & Supply Co., proceeded to
foreclose its chattel mortgage. The mortgaged property was sold at public auction by the sheriff
of the City of Manila for the sum of P200, after applying this sum, with interest, costs, and
liquidated damages to Reyes' indebtedness, the latter owed the company a balance of P275.47,
with interest thereon at the rate of 12 percent per annum from February 19, 1934.

When Reyes failed to pay the deficiency on the debt, the company instituted an action in
the Court of First Instance of Manila for the recovery thereof. To plaintiff's complaint defendant
filed an answer in which he pleaded as a defense that plaintiff, having chosen to foreclose its
chattel mortgage, had no further action against defendant for the recovery of the unpaid balance
owed by him to plaintiff, as provided by Act No. 4122. After trial the lower court sustained
defendant's defense and rendered a judgment absolving him from the complaint, with costs.
From this judgment, the plaintiff has taken an appeal and here contends that the lower court
erred in not declaring Act No. 4122 of the Philippine Legislature unconstitutional for the
following reasons: (1) in that it embraces more than one subject, (2) in that it unduly restrains
the liberty of a person to contract with respect to his property rights, (3) in that it is class
legislation, and (4) in that it denies vendors and lessors of personal property the equal
protection of the laws.

ISSUES:
1.) Whether or not Act No. 4122 violates the constitutional provision "that no bill which
may be enacted into law shall embraced more than one subject and that subject shall be
expressed in the title of the bill.
2.) Whether or not the said law violates the non-impairment clause.

HELD:
Act No. 4122 known as the enforcement sales law is valid and enforceable.
The Philippine Legislature having had the purpose in mind in enacting Act No. 4122 to
provide legislation concerning sales on the installment plan, this subject was sufficiently
expressed by indicating in the title that the law had to do with an amendment of the Civil Code
in the portion thereof given to purchase and sale. Legislation should not be embarrassed by
overly strict construction. The constitutional provision "that no bill which may be enacted into
law shall be expressed in the title of the bill" while designed to remedy an evil was not designed
to require great particularity in stating the object of the law in its title.

Parties have no vested rights in particular remedies or modes of procedure, and the
Legislature may change existing remedies and modes of procedure without impairing the
obligations of contracts, provided an efficacious remedy remains for the enforcement of a
mortgage may not, even when public policy is invoked as an excuse, be pressed so far as to cut
down the security of a mortgage without moderation or reason or in a spirit of oppression.

145
LLB 2A

In the Philippines three remedies are available to the vendor who has sold personal
property on the installment plan. (1) He may elect to exact fulfillment of the obligation
(Bachrach Motor Co. vs. Millan [1935], 61 Phil 409). (2) If the vendee shall have failed to pay
two or more installments, the vendor may cancel the sale. (3) If the vendee shall have failed to
pay two or more installments, the vendor may foreclose the mortgage if one has been given on
the property. Act 4122 does no more than qualify the remedy.

The question of the validity of an act is solely one of constitutional power. Questions of
expediency of motive or of results are irrelevant. Nevertheless it is not improper to inquire as to
the occasion for the enactment of a law. Most constitutional issues are determined by the Court's
approach to them. The proper approach should be to resolve all presumptions in favor of the
validity of an act in the absence of a clear conflict between it and the constitution. All doubts
should be resolved in its favor. Public policy, obvious from a statute, when defined and
established by legislative authority and when violative of no constitutional principle, should be
perpetuated by the Courts.

146
LLB 2A

MUALIM, AMIN -CHADRIE A.

116. INDUSTRIAL FINANCE CORPORATION VS. CASTOR TOBIAS

G.R. No. L-41555 July 27 1977


78 SCRA 28

Fact:
Tobias bought on installment one a dodge truck from Leelin Motors, Inc. To answer for
his obligation he executed a promissory note in favor of the latter, for the sum of P29 070.28
payable in thirty – six (36) equal installments with interest at the rate of 12% per annum payable
in the amounts and dates indicated in said promissory note. To secure payment of the
promissory note, respondent Tobias executed in favor of Leelin Motors, Inc. a chattel mortgage
on the dodge truck. Leelin Motors, Inc. indorsed the promissory note and assigned the chattel
mortgage to petitioner Finance Corporation.

Tobias paid six (6) installments on the promissory note directly to the petitioner
Industrial Finance Corporation but defaulted on more than two installments, IFC through a
letter gave Tobias a choice of either paying the balance of the purchase price or surrender the
truck. Tobias responded to the letter voluntarily and willingly surrendering the truck which was
still in the custody of Leelin Motors ever since the truck met an accident. Upon learning that the
truck met an accident, IFC decided not to get the truck anymore from Leelin Motors. Instead,
IFC filed an action against Tobias to recover the unpaid balance of the promissory note.

Issue:
Whether possession by the mortgagee of the disputed vehicle bars its foreclosure.

Held:
Possession by the mortgagee of the disputed vehicle bars the chattel mortgage
foreclosure. The contract being a sale of machinery payable in installments, the applicable
provision of law is Article 1484 of the Civil Code, which gives the vendor the option to exercise
any one of the alternative remedies therein mentioned: exact fulfillment of the obligation, cancel
the sale, or foreclose the chattel mortgage. But he vendor – mortgagor in the present case
desisted, on its own initiative, from consummating the auction sale, without gaining any
advantage or benefit, and without causing any disadvantage,, or harm to the vendees –
mortgagees. The least that could be said is that such desistance of the plaintiff from proceeding
with auction sale was a timely disavowal that cancelled or rendered useless its previous choice to
foreclose; its acts, being extra-judicial, brought no trouble upon any court, and were harmless to
the defendants. For this reason, the plaintiff cannot be considered as having ―exercised‖ (the
Code uses the word ―exercise‖) the remedy of foreclosure because of its incomplete
implementation, and, therefore, the plaintiff is not barred from suing on the unpaid account.

The remedies provided for in Art. 1484 are considered alternative, not cumulative such
that the exercise by the others. Here, petitioner has not cancelled the sale, nor has it exercised
the remedy of foreclosure. Foreclosure, judicial or extrajudicial, presupposes something more
than a mere demand to surrender possession of the object of the mortgage. Since the petitioner
has not availed itself of the remedy of cancelling the sale of truck in question or of foreclosing
the chattel mortgage on said truck, petitioner is still free to avail of the remedy of exacting
fulfillment of the obligation of respondent Tobias, the vendee of the truck in question. In Radio
wealth Inc. vs. Lavin, the facts of which are similar to the present case, the issue was ―whether

147
LLB 2A

the plaintiff is precluded to press for collection of an account secured by a chattel mortgage after
it shall have informed the defendants of its intention to foreclose said mortgage, and the
voluntary acceptance of such step (foreclosure) by defendant mortgagor,‖ the Supreme Court
ruled in favor of the plaintiff mortgagee.

148
LLB 2A

117. SPOUSES NONATO VS. IAC AND INVESTOR‘S FINANCE CORP.

G.R. No. L-67181 November 22 1985


140 SCRA 255

Facts:
In 1976, Spouses Restituto Nonato and Ester Nonato purchased a Volkswagen from the
People‘s Car Inc. on installment basis. To secure their complete payment, Nonato executed a
promissory note and a chattel mortgage in favor of People‘s Car Inc. Subsequently, People‘s Car
Inc. assigned its rights and interest over the note and mortgage in favor of Investor‘s Finance
Corp (IFC). For failure of the spouses to pay two or more installments, despite demands, the car
was repossessed by IFC. Despite repossession, IFC still demanded from Nonato that they pay
the balance of the price of the car. IFC, then, filed a complaint for the payment of the price of the
car with damages. Nonato, in their defense, argued that when the company repossessed the car,
IFC had, by that act, effectively cancelled the sale of the vehicle. As such, it was barred from
exacting the recovery of the unpaid balance of the purchase price as mandated by Article 1484.
The trial court rendered in favor of IFC and ordered the spouses Nonato pay the balance of the
purchase price of the car with interest. CA affirmed the same.

Issue:
WON a vendor or his assignee, who had cancelled the sale of a motor vehicle for failure
of the buyer to pay two or more of the stipulated installments, may also demand payment of the
balance of the purchase price.

Held:
No. The applicable law in this case at bar is Article 1484 which provides that in a contract
of sale of personal property the price of which is payable in installments, the vendor may
exercise any of the following remedies:

1. Exact fulfillment of the obligation, should the vendee fail to pay;


2. Cancel the sale, should the vendee‘s failure to pay cover two or more installments;
3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should
the vendee‘s failure to pay cover two or more installments. In this case, he shall have no
further action against the purchaser to recover any unpaid balance of the price. Any
agreement to contrary shall be void.

This provision means that should the vendee or the purchaser of a personal property
default in the payment of two or more of the agreed installments, the vendor or the seller has the
option to avail any of these 3 remedies – either to exact fulfillment by the purchaser of the
obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal
property, if one was constituted. These remedies have been recognized as an alternative, not
cumulative, that the exercise of one should bar the exercise of the others.

In the present case, it is not disputed that IFC had taken possession of the car purchased
by the Nonatos after the spouses defaulted in their payments. The defense of IFC that it the
repossession of the vehicle was only for the purpose of appraising its value and for storage and
safekeeping pending full payment of the spouses is untenable. The receipt issued by IFC to the
spouses when it took possession of the vehicle that the vehicle could be redeemed within 15
days. This could only mean that should the spouses fail to redeem the car within the period
provided, IFC would retain permanent possession of the vehicle. IFC even notified the spouses

149
LLB 2A

Nonato that the value of the car was not sufficient to cover the balance of the purchase price and
there was no attempt at all on the part of the company to return the car.

The acts performed by IFC are consistent with the conclusion that it had opted to cancel
the sale of the vehicle. Therefore, it is barred from exacting payment from the petitioners of the
balance of the price of the vehicle which it had already repossessed (it cannot have its cake and
eat it too).

150
LLB 2A

118. VDA. DE QUIAMBAO VS. MANILA MOTORS CO.

G.R. No. L-17384 October 31 1961


3 SCRA 444

Facts:
On 7 March 1940, Gaudencio R. Quiambao, deceased husband of Nestora Rigor Vda. De
Quiambao and father of the other petitioners bought from Manila Motor Company, Inc. one (1)
Studebaker car on installment plan. Upon default in the payment of a number of installments,
the company sued Gaudencion Quiambao in Civil Case 53043 of the CFI Manila. On 4 December
1940, judgment was entered in said case, awarding in favor of the company the sum of P3,
054.32, with interest thereon at 12% per annum, and P300.00 attorney‘s fees. On 14 July 1941,
the court issued a writ of execution directed to the Provincial sheriff of Tarlac, who thereupon
levied on and attached two parcels of land covered by TCT 18390 of the Office of the Register of
Deeds for Tarlac. On 27 August 1941, Atty. Felix P. David, then counsel for the Manila Motor
Company, accompanied by the sheriff, personally apprised Gaudencio Quiambao of the levy.
The latter pleaded to have the execution sale suspended and begged for time within which to
satisfy the judgment debt, proposing that in the meanwhile, he would surrender to the company
the Studebaker car. This proposition was accepted; accordingly, Gaudencio Quiambao delivered
the car to the company, and Atty. David issued a receipt therefore. On 16 October 1941,
Gaudencio Quiambao remitted to the company, on account of the judgment, the sum of
P500.00; he , however, failed to make further payments, thus leaving a balance still unsettled of
P1,952.47, with interest thereon at 12% per annum from 6 March 1940.

In the meantime, the Pacific war broke out, and when the Japanese forces occupied the
country shortly thereafter, the invader seized all the assets of the Manila Motor Company, Inc.
as enemy property. After the war, the company filed with the Philippine War Damage
Commission, among other things, a claim for its mortgage lien on the car of Gaudencio
Quiambao and was awarded the sum of P780.47, P409.75 of which amount had already been
paid. On 12 October 1949, the company addressed a letter to Gaudencio Quiambao asking him
to fill a blank form relative to the lost car. Quiambao having since died, his widow, Nestora
Rigor Vda. De Quiambao, returned the form with the statement that the questioned car was
surrendered to the company for storage. On 18 May 1953, a demand was made on the widow to
settle the deceased‘s unpaid accounts, but in view of her refusal, the company urged the Sheriff
of Tarlac to carry out the pre-war writ of execution issued in Civil Case 58043. Although the
records of the case had been lost during the war, and have not been reconstructed, a copy of said
writ of execution kept on file by the provincial sheriff was saved. Accordingly, the latter
advertised for sale at public auction the properties levied upon.

Notified of the sheriff‘s action, the heirs of the deceased Quiambao filed the suit to annul
and set aside the writ of execution and to recover damages. Judgment was rendered by the CFI
in favor of the Quiambaos, but on appeal to the Court of Appeals (CA –GR 17031 – R), the
decision was reversed and another entered dismissing the complaint. Hence, the appeal by writ
of certiorari.

1. Heacock case does not apply; delivery of car to company did not produce the effect of
rescinding or annulling the contract of sale; buyer surrendered car to postpone satisfaction of
the judgment amount.

Unlike the situation that arose in the H.E. Heacock Company case (66 Phil 245-246)
wherein the vendor demanded the return of the thing sold, and thereby indicated an

151
LLB 2A

unequivocal desire on its part to rescind its contract with the vendee, here it was the buyer
(deceased Gaudencio Quiambao) who offered indeed pleaded, to surrender his car only in order
that he might be given more time within which to satisfy the judgment debt, and suspend the
impending execution of sale of the properties levied upon. The very receipt issued the by the
company, and accepted without objection by the deceased (Gaudencio Quiambao), indicated
that the car was received pending settlement of the judgment debt and, conversely, strengthen
the proposition that the delivery of the car to the company was merely to postpone the
satisfaction of the judgment amount, are that the deceased still paid the further sum of P500.00
on account of his indebtedness about two months after the car was surrendered, and that
despite the company‘s acceptance of the car, the company made repeated demands against
the petitioners to settle the deceased‘s unpaid accounts.

2. Receipt of car not for appropriation but as security to satisfaction of judgment credit;
does not amount to foreclosure of chattel mortgage.

Since the company did not receive the car for the purpose of appropriating the same, but
merely as security for the ultimate satisfaction of its judgment credit, the situation under
consideration could not have amounted to a foreclosure of the chattel mortgage.

3. Payment of war damage compensation does not produce same and equal legal effect as
formal foreclosure.

Having been the party who was last in possession of the lost car, the company was well
within its rights, or better still, under obligation, to protect the interest of the car owner, as well
as its own, by claiming, as it did, the corresponding war damage compensation for the car. Such
action of the company cannot reasonably be construed as a constriction of its rights under the
pre-war judgment.

4. Scenario barring recovery of any unpaid balance.

In Manila Motor Company, Inc., vs. Fernandez (52 OG 16, 6883, 6885), it was held that
― it is the actual sale of the mortgaged chattel in accordance with Section 14 of Act 1508 that
would bar the creditor (who chooses to foreclose) from recovering any unpaid balance (Pacific
Commercial Company vs. Dela Rama, 72 Phil 380).‖

5. Suit filed was for specific performance and not for rescission or cancellation of
contract of sale.

The best reason why respondent company may not be construed as having rescinded or
cancelled the contract of sale or foreclosed the mortgage on the automobile is precisely because
it brought suit for specific performance, and won, in the pre-war Civil Case 58043.

6. Pre-war judgment has not prescribed; period covered by moratorium law and closure
of regular courts at the outbreak of war deducted.

The pre-war judgment was entered on 4 December 1940, and on 14 July 1941, a writ of
execution was issued. The company took no further step to enforce the judgment until 19 may
1954, on which date, Manila Motors scheduled 2 parcels of land owned by the Quiambaos for
sale at public auction pursuant to the writ of 14 July 1941. From the entry of judgment to 19 May
1954, a period of 13 years, 5 months and 15 days had elapsed.

152
LLB 2A

From this term, the period covered by the debt moratorium under EO 32 (which applied
to all debts payable within the Philippines), from the time the order took effect on 10 March
1945, until it was partially lifted by RA 342 on 26 July 1948 must be deducted. Deducting the
period during which EO 32 was in force, which is 3 years, 4 months and 16 days, from 13 years, 5
months and 15 days, the period covered from the entry of the pre-war judgment to the time the
company attempted to sell the levied properties at auction, there is still left a period of 10 years
and 29 days.

But as held in Talens vs Chuakay & Co., GR No. L-10127, June 30, 1958, the Court took
judicial notice of the fact that regular courts in Luzon were closed for months during the early
part of the Japanese occupation until they were reconstituted by order of the Chairman of the
Executive Commission on 30 January 1942. This interruption in the functions of the courts has
also been held to interrupt the running of the prescriptive period (see also Palma vs Celda, 81
Phil 416). That being the case, respondent company could not be barred by prescription from
proceeding with the execution sale pursuant to the levy and writ of execution issued under the
pre-war judgment, considering that even the minimum period of from 8 December 1941, the
outbreak of the Pacific War, to 30 January 1942 is already a term of 1 month and 23 days.

7. Pre-war writ of execution and levy may still be enforced by sale of the levied property
after the lapse of the 5-year period within which a judgment may be executed by motion.

A valid execution issued and levy made within the period provided by law may be
enforced by a sale thereafter. The sale of the property by the sheriff and the application of the
proceeds are simply the carrying out of the writ of execution and levy which when issued were
valid. This rests upon the principle that the levy is the essential act by which the property is set
apart for the satisfaction of the judgment and taken into custody of the law, and that after it has
been taken from the defendant, his interest is limited to its application to the judgment,
irrespective of the time when it may be sold (Southern Cal. L. Co. vs. Hotel Co., 94 Cal. 217, 222;
Government of P.I. vs. Echaus, 71 Phil 318). Thus,, a valid judgment may be enforced by motion
within 5 years after its entry , and by action after the lapse of said period but before the same
shall have been barred by any statute of limitations , and that a valid execution issued and levy
made within the 5-year period after entry of the judgment may be enforced by sale of the
property levied upon thereafter, provided the sale is made within 10 years after the entry of
judgment.

8. Ansaldo vs. Fidelity, not in point

The case of Ansaldo vs. Fidelity and Surety Company of the Philippine Islands, GR No. L-
2378, April 27, 1951, is not in point, for there the judgment creditor attempted to carry out the
writ of execution 10 years after the entry of judgment.

9. Amount received from the Philippine War Damage Commission must be credited to
the Quiambao‘s account.

The Quiambaos should be credited the amount of P409.75 which the Manila Motors
Actually received from the Philippine War Damage Commission on account of the car of
Gaudencio Quiambao that had been seized from it by the enemy occupant during the war. This
should reduce the principal amount still due Manila Motors from the Quiambao to the sum of
P1,542.72.

153
LLB 2A

119. ABELLA VS. GONZAGA

G.R. No. 345743 September 19, 1931


56 Phil. 132

Facts:
Cirilo Abella demanded specific performance of the contract entered into with Mariano
Gonzaga on April 15, 1921, which parts of it read as follows:

SPECIAL CONTRACT OF LEASE

Mariano Gonzaga, landowner, and Cirilo Abella, tenant, do hereby enter into a
contract of lease under the following conditions:

First. Mariano Gonzaga, as land owner, does hereby lease the following
described parcel of land situate within the jurisdiction of San Felipe Neri to Cirilo
Abella to use with all the active and passive easements thereof, to wit: etc. The
surveyed parcel contains an area of one hectare, seventy-eight ares, and fifty-
eight centares.

Second. The lease shall run for five years: from March 5, 1921 to March 5,
1926.

Third. The rent shall be one thousand one hundred fourteen pesos and
34/100 (P1,114.34) per annum payable in advance at the house of the
undersigned on the 5th of March every year.

Fourth. In consideration of the sum of one thousand three hundred ninety


–two pesos and (P1,392.92) which the tenant has now paid, and his promise to
pay rent of the remaining nineteen quarters at the periods fixed in the preceding
clause, the owner undertakes at the termination of this contract to transfer free of
charge to the tenant the full ownership of the leased property, provided the
tenant has made the aforesaid payments.

Gonzaga contended in his answer that Abella‘s right to compel him to make the transfer
of the land in question is not absolute, but conditional; that the conditions have not been
complied with, but violated by the latter, who made the last payment over a year after the
obligation had become due.

Issue:
Is the special contract of lease entered into by the parties a contract of sale on
installments?

Held:
Yes. The contract is clearly a sale on installments. The document entitled ―Special
Contract of Lease‖ and the special quality consists in the stipulation found in clause IV, to wit:
that in consideration of the sum of one thousand three hundred ninety –two pesos and 92/100
(P1,392.92) which the tenant has now paid, and his promise to pay rent of the remaining
nineteen quarters at the periods fixed in the preceding clause, the owner undertakes at the
termination of this contract to transfer free of charge to the tenant the full ownership of the
leased property, provided the tenant has made the aforesaid payments. When Abella paid the

154
LLB 2A

last installments, the SC arrived at the inevitable conclusion that although in the contract the
usual words ―lease,‖ ―lessee,‖ and ―lessor‖ were employed, that is no obstacle to the
holding that said contract was a sale on installments, for such was the evident intention of the
parties in entering into said contract. (Art 1281, par. 2, of the Civil Code, as interpreted in the
cases of Reyes vs. Limjap, 15 Phil 420; and De la Vega vs. Ballilos, 34 Phil 683)

155
LLB 2A

120. HEACOCK CO. VS. BUNTAL MANUFACTURINMG CO.

G.R. No. 44471 September 26 1938


66 Phil. 246

Fact:
1. Buntal, et al rented a machine from Heacock Company for a term of 20 calendar
months.

2. Buntal, et al unable to return the machine and failed to pay the lease.

3. The lower court held that the contract is a contract of lease. It also decided that
Heacock should pay P555, the total amount they bound themselves to pay (rate of rent is P35 a
month starting august 1931).

Issue:
Is the contract a contract of purchase and sale on installments?

Held:
Yes.
1. It was stipulated in the contract that:
―In consideration of the sum of P160 to it in hand paid by the hirer, the owner hereby
grants to hirer the option to purchase while the present lease is in force and effect, the property
made the subject of this agreement, at the purchase price of P860….‖

2. The court finds that the amount P160 paid by Buntal Manufacturing Company was an initial
payment for the P860 purchase price.

3. The court also stated that the intention of the parties should be taken into consideration when
the contract in question is not clear. The intention was seen in the contract they stipulated.

156
LLB 2A

NASIRIN, FATRIANE A.

121. MACONDRAY & CO., INC. VS. BENITO AND OCAMPO

G.R. No. 43014 September 24, 1935


62 Phil. 246

Fact:
The defendants admit each and every allegation in each and every paragraph of the
plaintiff‘s amended complaint subject to the stipulations herein contained. The promissory
notes mentioned were executed by the defendants to cover the unpaid balance of the price of
certain personal properties purchased by them from the plaintiff payable in installments, the
said properties being covered by the two chattel mortgages specified therein. Upon the failure of
the defendants to pay the two (2) and more installments on the purchase price of said personal
properties, plaintiff foreclosed the mortgages executed on said properties. The properties
mortgaged were sold at public auction to the plaintiff which was the only bidder therefor. The
parties, in view of this stipulation, submit for determination by the court the sole question of law
whether by virtue of sec. 1454-A of the Civil Code (Act No. 4122 of the Philippine Legislature)
plaintiff is entitled to recover from the defendants the unpaid balance of the purchase price of
said personal properties.

Issue:
Whether or not the provisions of Law No.4122 of the Philippine Legislature benefits in
this case the defendants.

Held:
Yes. Not challenged the effectiveness and the validity of the Act. The notes in question
are hand granted after the rule of law. It is obvious, therefore, that the transaction at issue here
falls within its laws, among which are available expressly that the seller will have no action
against the purchaser, to recover the unpaid balance after the property executed, and that any
agreement contrary to this legal provision is null and void.

157
LLB 2A

122. FELIX GOCHAN AND SONS REALTY CORP. VS. HEIRS OF RAYMUNDO BABA

G.R. No. 138945 August 19, 2003

Facts:
In 1966, DoroteaInot and 2 of her children, Victoriano Baba and Gregorio Baba sold a
parcel of land to Felix Gochan and Sons Realty Corporation (Gochan Realty). Consequently, the
title over the land was transferred to Gochan Realty.

In 1995, the other 5 children of Inot (Bestra, Maricel, Crecencia, Antonio and Petronila –
all surnamed Baba) discovered the sale executed in 1966. They filed a complaint for quieting of
title and reconveyance with damages against Gochan Realty. They alleged that Gochan Realty
and their mother and two siblings connived in executing the extrajudicial settlement and deed of
sale which fraudulently deprived them of their hereditary share in the said parcel of land. And
that said transactions are void insofar as their respective shares are concerned because they
never consented to the said sale and extrajudicial settlement.

The trial court dismissed the complaint filed by Baba et al as it ruled that their action has
prescribed by reason of prescription and laches. It applied the rule that the fraudulent
conveyance of the property creates an implied trust, an obligation created by law, which
prescribes in ten years from the date of the issuance of the certificate of title. The Court of
Appeals reversed the decision of the trial court. It found that the heirs‘ action is a suit to enforce
an implied or constructive trust based on fraud, but it ruled that since the heirs are in possession
of the disputed property, their action cannot be barred by prescription and laches, being in the
nature of a suit for quieting of title.

Issue:
Whether or not from the allegations of the complaint, there exists a cause of action to
declare the inexistence of the contract of sale with respect to the shares of respondents in Lot
No. 3537 on the ground of absence of any of the essential requisites of a valid contract.

Held:
If the answer is in the negative, then the dismissal of the complaint must be upheld,
otherwise, the dismissal on the ground of prescription is erroneous because actions for the
declaration of inexistence of contracts on the ground of absence of any of the essential requisites
thereof do not prescribe.

Under Article 1318 of the Civil Code, there is no contract unless the following requisites
concur: (1) consent of the contracting parties; (2) object certain which is the subject matter of
the contract; and (3) cause of the obligation. The absence of any of these essential requisites
renders the contract inexistent and an action or defense to declare said contract void ab initio
does not prescribe, pursuant to Article 1410 of the same Code. In Delos Reyes v. Court of
Appeals, it was held that one of the requisites of a valid contract under Article 1318 of the Civil
Code, namely, the consent and the capacity to give consent of the parties to the contract, is an
indispensable condition for the existence of consent. There is no effective consent in law without
the capacity to give such consent. In other words, legal consent presupposes capacity. Thus,
there is said to be no consent, and consequently, no contract when the agreement is entered into
by one in behalf of another who has never given him authorization therefor unless he has by law
a right to represent the latter.

158
LLB 2A

123. PHILIPPINE LAWIN BUS, CO. VS. COURT OF APPEALS

G. R. No. 130972 January 23, 2002

Facts:
On 7 August 1990 plaintiff Advance Capital Corporation, a licensed lending investor,
extended a loan to defendant Philippine Lawin Bus Company (hereafter referred to as LAWIN),
in the amount of P8,000,000.00 payable within a period of one (1) year, as evidenced by a
Credit Agreement (Exhibits B to B-4-B). To guarantee payment of the loan, defendant Lawin
executed in favor of plaintiff the following documents: (1) A Deed of Chattel Mortgage wherein 9
units of buses were constituted as collaterals. On 02 November 1990, defendant Bus Company
was able to avail an additional loan of P2,000,000.00 for one (1) month under Promissory Note
00028. Defendant LAWIN failed to pay. Thus, plaintiff foreclosed the mortgaged buses and as
the sole bidder thereof, the amount of P2,000,000.00 was accepted by the deputy sheriff
conducting the sale and credited to the account of defendant LAWIN. Thereafter, despite
repeated demands, the defendants failed to pay their indebtedness which totaled of
P16,484,992.42. Thus, the suit for sum of money, wherein the plaintiff prays among others that
defendants solidarily pay plaintiff as of July 31, 1992 the sum of (a) P16,484,994.12 as principal
obligation under the two promissory notes Nos. 003 and 00037, plus interests and penalties. In
answer to the complaint, defendants-appellees assert by way of special and affirmative defense,
that there was already an arrangement as to the full settlement of the loan obligation by way of
Sale of the nine (9) units‘ passenger buses the proceeds of which will be credited against the loan
amount as full payment thereof; or in the alternative. The trial court declaring the obligation or
indebtedness of defendants EXTINGUISHED. CA reversed the said decision.

Issue:
Whether or not there was dacion en pago between the parties upon the surrender or
transfer of the mortgaged buses to the respondent.

Held:
No. SC agreed with the Court of Appeals that there was no dacion en pago that took place
between the parties.

In dacion en pago, property is alienated to the creditor in satisfaction of a debt in money.


It is the delivery and transmission of ownership of a thing by the debtor to the creditor as an
accepted equivalent of the performance of the obligation. It extinguishes the obligation to the
extent of the value of the thing delivered, either as agreed upon by the parties or as may be
proved, unless the parties by agreement, express or implied, or by their silence, consider the
thing as equivalent to the obligation, in which case the obligation is totally extinguished."

Article 1245 of the Civil Code provides that the law on sales shall govern an agreement of
dacion en pago. A contract of sale is perfected at the moment there is a meeting of the minds of
the parties thereto upon the thing which is the object of the contract and upon the price.

In this case, there was no meeting of the minds between the parties on whether the loan
of the petitioners would be extinguished by dacion en pago.

159
LLB 2A

124. INSULAR LIFE ASSURANCE COMPANY, LTD. VS. YOUNG

G.R. No. 140964 January 16, 2002

Facts:
In December, 1987, respondent Robert Young, together with his associates and co-
respondents (Gabriel La'O II, Arthur Tan, Lope Juban, Jr., Maria Lourdes Ongpin, Antonio
Ongpin, Elsie Dizon, Yolanda Bayer, Cecilia Viray, Manuel Viray and Jose Vito Borromeo)
acquired by purchase Home Bankers Savings and Trust Co., now petitioner Insular Savings
Bank ("the Bank," for brevity), from the Licaros family for P65,000,000.00. On October 1, 1991,
Insular Life and Insular Life Pension Fund formally informed Young of their intention to
acquire 30% and 12%, respectively, of the Bank's outstanding shares, subject to due diligence
audit and proper documentation. On October 9, 1991, Insular Life and Young, authorized to
represent the other stockholders, entered into a Memorandum of Agreement (MOA), wherein
Insular Life and its Pension Fund agreed to purchase 830,860 common shares and 311,572
common shares, respectively, for a total consideration of P198,000,000.00. Under its terms, the
MOA is subject to Young's representations and warranties that, as of September 30, 1991, the
Bank has (a) a total outstanding paid-in capital of P157,714,900.00, (b) a total net worth of
P114,801,539.00, and (c) total loans with doubtful recovery of P60,000,000.00. The MOA is
also subject to these "condition precedents": (1) Young shall infuse additional capital of
P50,000,000.00 into the Bank, and (2) Insular Life and its Pension Fund shall undertake a due
diligence audit on the Bank to determine whether the provision for P60,000,000.00 doubtful
account made by Young is sufficient.

On January 7, 1992, Young and his associates filed with the Regional Trial Court (RTC),
Branch 142, Makati City, a complaint against the Bank, Insular Life and its counsel, Atty. Jacinto
Jimenez, petitioners, for annulment of notarial sale, specific performance and damages,
docketed as Civil Case No. 92-049. The complaint alleges that under the MOA, Insular Life
should apply the purchase price of P198,000,000.00 (corresponding to the 55% of the
outstanding capital stock of the Bank) to Young's loan of P200,000,000.00 and pay the latter
P162,000,000.00, representing the remaining 45% of its outstanding capital stock, which must
be set-off against the loans of the other respondents. The RTC dismissed the complaint, ordered
the respondents to pay the Bank their respective loans with interest at the rate of 30% per
annum and monthly penalty interest of 3% from the date they are due until fully paid. CA
reverse the decision. The Court of Appeals construed the MOA as a contract of sale since it
applied Article 1599 of the Civil Code which pertains to cases where there is a breach of
warranty.

Issue:
Whether or not the MOA is a contract of sale.

Held:
No. The foregoing provisions of the MOA negate the existence of a perfected contract of
sale. The MOA is merely a contract to sell since the parties therein specifically undertook to
enter into a contract of sale if the stipulated conditions are met and the representation and
warranties given by Young prove to be true. The obligation of petitioner Insular Life to purchase,
as well as the concomitant obligation of Young to convey to it the shares, are subject to the
fulfillment of the conditions contained in the MOA. Once the conditions, representation and
warranties are satisfied, then it is incumbent upon the parties to perform their respective
obligations under the contract. Conversely, in the event that these conditions are not met or
complied with, no obligation on the part of either party arises. This is in accord with Article 1181

160
LLB 2A

of the Civil Code which provides that "(i)n conditional obligations, the acquisition of rights, as
well as the extinguishment or loss of those already acquired, shall depend upon the happening of
the event which constitutes the condition." And when the obligation assumed by a party to a
contract is expressly subjected to a condition, the obligation cannot be enforced against him
unless the condition is complied with.

161
LLB 2A

125. CORONEL VS. COURT OF APPEALS

G.R. No. 103577 October 7, 1996

Facts:
In 1985, Coronel executed a document entitled "Receipt of Down Payment" in favor of
Alcaraz for P50,000dp of P1.24M as purchase price for an inherited house and lot promising to
execute a deed of absolute sale as soon as it has been transferred in their name. The balance of
P1.19M is due upon the execution of the deed. When title to the property was finally transferred
to their names, the Coronels sold the property to Mabanag for P1.58M after she paid P300K dp.
Because of this, they cancelled and rescinded the contract with Alcaraz by returning the
P50,00dp. Alcaraz filed a complaint for specific performance against the Coronels and cause the
annotation of a notice of lispendens on the TCT. Mabanag, on the other hand, caused the
annotation of a notice of adverse claim with the RD. However, the Coronels executed a Deed of
Absolute Sale in favor Mabanag. RTC ruled in favor of Alcaraz. CA affirmed.

Issue:
Whether the ―receipt of down payment‖ serves a contract to sell or a conditional contract
of sale.

Held:
Contract of sale. The sale of the subject parcel of land between petitioners and Ramona
P. Alcaraz, perfected on February 6, 1985, prior to that between petitioners and Catalina B.
Mabanag on February 18, 1985, was correctly upheld by both the courts below.

The agreement could not have been a contract to sell because the sellers herein made no
express reservation of ownership or title to the subject parcel of land. Furthermore, the
circumstance which prevented the parties from entering into an absolute contract of sale
pertained to the sellers themselves (the certificate of title was not in their names) and not the
full payment of the purchase price. Under the established facts and circumstances of the case,
the Court may safely presume that, had the certificate of title been in the names of petitioners-
sellers at that time, there would have been no reason why an absolute contract of sale could not
have been executed and consummated right there and then.

Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely
promise to sell the property to private respondent upon the fulfillment of the suspensive
condition. On the contrary, having already agreed to sell the subject property, they undertook to
have the certificate of title change to their names and immediately thereafter, to execute the
written deed of absolute sale.

162
LLB 2A

PASANTING, RAY ANDREW B.

126. TOYOTA SHAW, INC. VS. COURT OF APPEALS

G.R. NO. L-116650 MAY 23, 1995

FACTS:
Agreements between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc.;

1. All necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG


BERNARDO) a week after, upon arrival of Mr. Sosa from the Province (Marinduque)
where the unit will be used on the 19th of June.

2. The down payment of P100,000.00 will be paid by Mr. Sosa on June 15, 1989.

3. The TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up and released by
TOYOTA SHAW, INC. on the 17th of June at 10 a.m.

Mr. Luna L. Sosa wanted to purchase a Toyota Lite Ace but had difficulty in finding a
dealer selling an available unit. When he was told upon contacting Toyota Shaw that there was
an available unit, he and his son Gilbert went to its office at Shaw Blvd., Pasig, Metro Manila on
14 June 1989. They met there a Toyota sales representative named Popong Bernardo and he
emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he, his
family, and a balikbayan guest would use it on 18 June 1989 to go to his home province
Marinduque and celebrate his birthday on 19th of June 1989.

Mr. Sosa was assured by Bernardo that the unit will be ready for pickup on 10 a.m. of 17
June 1989 and he signed an agreement between him and Bernardo. They also agreed that the
purchase price‘s balance will be paid through BA Finance‘s credit financing while Gilbert signed
on his behalf the financing application with Toyota Shaw and BA Finance.

On 15 June 1989, he and his son Gilbert went back to give Toyota Shaw the PhP100,000
down payment (initial cash outlay) and his son signed the printed Vehicle Sales Proposal (VSP)
No. 928 Bernardo accomplished under CONFORME. VSP No. 928 showed Luna Sosa‘s name,
his home address, the vehicle‘s model series Lite Ace 1500 and described as 4 Dr minibus,
payment terms on installment, balance to be financed by BA (PhP274,137) and the mentioned
initial cash outlay – the delivery were not filled out. It also contained the following conditions:
First, the sale is subject to unit‘s availability. Second, the price stated is subject to change
without prior notice, and that applicable price will be the one in effect and prevailing at selling
time. Bernardo‘s supervisor Rodrigo Quirante checked and approved the VSP.

On 17 June 1989, Bernardo called around 9:30 a.m. informing Gilbert that the vehicle
would not be ready for pick up at 10:00 a.m. as previously agreed, but at 2:00 p.m. the same
day. Sosa and Gilbert met Bernardo 2 p.m. at the latter's office and Bernardo informed them
that the Lite Ace was being readied for delivery. But after waiting for about an hour, Bernardo
told them that the car could not be delivered.

The RTC Marinduque Br. 38 decided that there was a contract of sale between Toyota
Shaw through its agent Mr. Popong Bernardo and Mr. Luna Sosa. The said trial court also held
that Toyota Shaw did gave impression that Bernardo has an (apparent) authority to transact

163
LLB 2A

with Sosa in its behalf, and it did not made known to Sosa that Bernardo dealt beyond his
capacity. Thus, the RTC ordered Toyota Shaw to pay damages to Mr. Sosa:

1. The sum of P75,000.00 for moral damages;


2. The sum of P10,000.00 for exemplary damages;
3. The sum of P30,000.00 attorney's fees plus P2,000.00 lawyer's transportation fare
per trip in attending to the hearing of the case;
4. The sum of P2,000.00 transportation fare per trip of the plaintiff in attending the
hearing of this case; and to pay the costs of suit.

Dissatisfied with the trial court‘s decision, Toyota Shaw appealed the RTC judgment to
the Court of Appeals, but the appellate court affirmed in totality the lower trial court‘s judgment
via its 29 July 1994 decision.

ISSUES/RULING:
Toyota Shaw appealed decision of Court of Appeals that affirmed in toto Regional Trial
Court (RTC) Marinduque Br. 38‘s decision raising the following issues,

1. Whether or not agreement signed by Popong Bernardo (as sales agent of Toyota Shaw)
and Mr. Luna Sosa constituted a perfected contract of sale.

The Supreme Court held that there was no perfected contract between Toyota Shaw and
Mr. Luna Sosa, in relation to the agreement signed by Sosa and Bernardo. The court reasoned
the following things:
(1) There was no obligation for Toyota Shaw to deliver the vehicle to Sosa and that the
PhP100,000 initial cash outlay did not specifically refer to a sale of vehicle.

(2) The document did not show the meeting of the minds contemplated in Art. 1475 of
the New Civil Code needed for perfection of a sale contract. For one thing, Mr. Sosa did
not sign the agreement. Also, it is clear from the agreement that Mr. Bernardo is a mere
agent of Toyota Shaw and it is incumbent for Sosa to know if Bernardo has the authority
to act in Toyota Shaw‘s behalf. The Court stated that at most, the agreement may be
considered as part of the negotiation stage of the sale contract.

2. Whether or not Mr. Luna Sosa can demand delivery of the Lite Ace despite Toyota
Shaw‘s allegation that BA Finance disapproved his credit application and for non-
payment of the consideration for the vehicle.

As to this issue, the Supreme Court upheld the argument of Toyota Shaw that the
disapproval of Sosa‘s credit financing application by BA Finance because he refused to pay the
full purchase price, causing cancellation of the VSP. Moreover, Toyota returned the PhP100,000
through a check they issued to Mr. Luna Sosa (its receipt proven by Toyota Shaw‘s check
voucher signed by Sosa). The VSP was mere proposal and in view of the events after it was
signed, there was no demandable rights for Sosa to ask the vehicle‘s delivery.

164
LLB 2A

3. Whether or not Mr. Luna Sosa is entitled to damages.

The Supreme Court held that Sosa is not entitled to awarding of moral and exemplary
damages, as well as payment for attorney‘s fees and costs of suit, since the only ground Sosa
used to claim moral damages is it was known to his friends, townmates, and relatives that he
was buying a Toyota Lite Ace which they expected to see on his birthday and because of van‘s
failure of delivery, he suffered humiliation, shame, and sleepless nights. The Court reasoned that
he should not have announced his plan to buy the car knowing that he might not be able to pay
its full purchase price and therefore, he was the one himself who brought embarrassment by
bragging about a thing which he did not own yet.

The petition of Toyota Shaw is granted and the decision of Court of Appeals affirming the
Marinduque RTC‘s decision is reversed. The counterclaims are likewise dismissed.

165
LLB 2A

127. ALFREDO VS. BORRAS

G.R. NO. 144225 JUNE 17, 20013


404 SCRA 145

FACTS:
Spouses Alredo owned a parcel on land situated in Brgy. Culi, Mabiga, Hermosa, Bataan.
The Alfredo Spouses mortgaged the subject land to the DBP for P7,000.00, and in order to pay
their debt, the Alfredo Spouses sold the subject land to the Borras Spouses for P15,000.00. The
Borras pay the loan and its interest and the balance is to be paid by the Alfredos, and they
(Alfredos) delivered the Owner's Duplicate Copy of OCT No. 284 to them (Borras).

Later, Borras discovered that the Alfredos had re-sold portions of the land to several
persons. Borras filed an adverse claim with the Register of Deeds of Bataan, and later did they
know that the Alfredos had secured a duplicate copy of OCT No. 284, the tax declaration and the
receipts of the reality. Alfredos filed a complaint for Specific Performance; they claimed the sale,
not being in writing, is unenforceable under the Statute of Frauds.

ISSUES/RULING:

1. Whether or not the contract of sale is unenforceable under the Statute of Frauds.

No, the Statute of Frauds provides that a contract of sale of real property shall be
unenforceable unless the contract or some note or memorandum of the sale is in writing and
subscribed by the party charged or by his agent. The existence of the receipt dated 11 March
1970, which is a memorandum of the sale, removes the transaction from the provisions of
the Statute of Frauds.

2. Whether or not the Deed of Absolute Sale over the portion of the Subject Land issued to
the subsequent buyers, purchaser of good faith.

No, The Subsequent Buyers were deemed to have constructive notice of the adverse
claim of Borras. When the subsequent buyers purchased portions of the subject land, they
were also not registrants in good faith.

166
LLB 2A

128. AMELIA S. ROBERTS VS. MARTIN B. PAPIO

G.R. NO. 166714 FEBRUARY 9, 2007


515 SCRA 346

FACTS:
The Spouses Papio was the owners of a 274 sq m residential lot located in Makati. In
order to secure a59k loan from the Amparo Investments Corp, they executed a real estate
mortgage on the property. Upon Papio‘s failure to pay the loan, the corporation filed a petition
for the extrajudicial foreclosure of the mortgage. Since the couple needed money to redeem the
property and to prevent the foreclosure of the real estate mortgage, they executed a Deed of
Absolute Sale over the property in favor of Martin Papio‘s cousin, Amelia Roberts.* Of the 95k
purchase price, 59k was paid to the Amparo Investments Corp, while the 26k difference was
retained by the spouses. As soon as the spouses had settled their obligation, the corporation
returned the owner‘s duplicate TCT which was then delivered to Amelia Roberts.

The parties (Roberts as lessor and Martin Papio as lessee) executed a 2-year contract of
lease. The contract was subject to renewal or extension for a like period at the option of the
lessor, the lessee waiving thereby the benefits of an implied new lease. The lessee was obliged to
pay monthly rentals of 800 to be deposited in the lessor‘s account.

A new TCT was issued in the name of Amelia Roberts as owner. Martin Papio paid the
rentals and thereafter for another year. He then failed to pay rentals, but he and his family
nevertheless remained in possession of the property for almost 13 years. Roberts reminded
Papio that he failed to pay monthly rentals amounting to a total liability of 410k.She demanded
that Papio vacate the property within 15days from receipt of the letter in case he failed to settle
the amount. Roberts filed a complaint for unlawful detainer and damages against Martin Papio

ISSUE:
Whether or not the Deed of Absolute Sales and Contract of Lease executed by the parties
is an equitable mortgage over the property.

RULING:
No. An equitable mortgage is one that, although lacking in some formality, form or
words, or other requisites demanded by a statute, nevertheless reveals the intention of the
parties to charge a real property as security for a debt and contain nothing impossible or
contrary to law. A contract between the parties is an equitable mortgage if the following
requisites are present: a. the parties entered into a contract denominated as a contract of sale
and b. the intention was to secure an existing debt by way of mortgage. The decisive factor is the
intention of the parties.

In an equitable mortgage, the mortgagor retains ownership over the property but subject
to foreclosure and sale at public auction upon failure of the mortgagor to pay his obligation. In
contrast, in a pacto de retro sale, ownership of the property sold is immediately transferred to
the vendee a retro subject only to the right of the vendor a retro to repurchase the property upon
compliance with legal requirements for the repurchase.

The failure of the vendor a retro to exercise the right to repurchase within the agreed
time vests upon the vendee a retro, by operation of law, absolute title over the property. One
repurchases only what one has previously sold. The right to repurchase presupposes a valid
contract of sale between same parties. By insisting that he had repurchased the property, Papio

167
LLB 2A

thereby admitted that the deed of absolute sale executed by him and Roberts was in fact and in
law a deed of absolute sale and not an equitable mortgage; he had acquired ownership over the
property based on said deed. Respondent is thus estopped from asserting that the contract
under the deed of absolute sale is an equitable mortgage unless there is an allegation and
evidence of palpable mistake on the part of respondent, or a fraud on the part of Roberts.

168
LLB 2A

129. SANCHEZ VS. MAPALAD REALTY CORP.

G.R. NO. 148516 DECEMBER 27, 2007

FACTS:
Respondent Mapalad was the registered owner of 4 parcels of land located along Roxas
Boulevard, Baclaran, Paranaque. On March 21, 1986, shortly after EDSA revolution, Jose
Campos executed an affidavit admitting that Mapalad was one of the companies held in trust for
former President Marcos. Campos turned over, all assets, properties, records and documents
pertaining to Mapalad to the new administration led by President Corazon Aquino. PCSS issued
writs of sequestration for Mapalad and all its properties. Rolando Josef, appointed Vice
President/Treasurer and GM of Mapalad, discovered for that there was 4 TCTs missing. Josef
inquired about it and discovered Felicito Manalili, Mapalad‘s former director and general
manager took them. On November 16, 1992, Nordelak Development Corporation filed a notice
of adverse claim over the subject properties based on deed of sale purportedly executed by
Miguel Magsaysay in his capacity as President and board chairman of Mapalad. A. Magsaysay
Inc., a corporation controlled by Miguel Magsaysay, acquired ownership of all the shares of
stock of Mapalad however was terminated after selling all his shares to Novo Properties on
December 3, 1982.

Mapalad commenced the present action for annulment of deed of sale and reconveyance
of title with damages against Nordelak. During the pendency of the case, Nordelak sold the
subject property to a certain Manuel Luis Sanchez, now petitioner.

ISSUE:
Whether or not there is a valid sale between Mapalad and Nordelak.

RULING:
A contract is defined as a juridical convention manifested in legal forms, by virtue of
which one or more persons bind themselves in favor of another, to give, to do or not to do. The
essential requisites of a valid contract of sale are (a) consent of the contracting parties, (b) object
certain, and (c) cause of obligation. Consent may be given only by a person with legal capacity to
give consent. In the case of juridical person such as corporation like Mapalad, consent may only
be granted through its officers who have been duly authorized by its board of directors.

In the present case, consent was purportedly given by Miguel Magsaysay, the person who
signed for and in behalf of Mapalad in the deed of absolute sale. However, during the trial, he
admitted to be no longer connected with Mapalad because he already divested all his interests in
said corporation as early as 1982. Even assuming, for the sake of argument, the signatures were
genuine, it would still be voidable for lack of authority resulting in his capacity to give consent
on the part of Mapalad.

169
LLB 2A

130. CARMEN DEL PRADO VS. SPOUSES CABALLERO

G.R. NO. 148225 MARCH 3, 2010

Facts:
In a judgment rendered in Cadastral Case, Regional Trial Court, adjudicated in favor of
Spouses Antonio L. Caballero several parcels of land, one of which was the subject of this
controversy. On May 25, 1987, the same court, ordered the National Land Titles and Deeds
Registration Administration to issue the decree of registration and the corresponding titles of
the lots in favor of the Caballeros.

On June 11, 1990, respondents sold to petitioner, Carmen del Prado, the said lot.
Original Certificate of Title (OCT) covering the lot was issued only on November 15, 1990, and
entered in the "Registration Book" of the City of Cebu on December 19, 1990.

Within 1 year from date of entry of decree of registration, (On March 20, 1991),
petitioner filed in the same cadastral proceedings a Petition for Registration of Document under
P.D. 1529 in order that a certificate of title be issued in her name.

Respondents opposed on the main ground that the claimed area was substantially
excessive than that originally agreed upon. They moved for the outright dismissal of the petition
on grounds of prescription and lack of jurisdiction.

RTC decided in favor of petitioner. CA reverses RTC, because the latter has no
jurisdiction. Petition for registration of document is not a remedy under PD 1529 because one
year period has lapsed.

ISSUE/RULING:

Whether or not prescription has set in.

Yes. For filing wrong remedy, the 1 year period had expired. Petitioner‘s recourse, by
filing the petition for registration in the same cadastral case, was improper. It is a fundamental
principle in land registration that a certificate of title serves as evidence of an indefeasible and
incontrovertible title to the property in favor of the person whose name appears therein. Such
indefeasibility commences after one year from the date of entry of the decree of registration.
Inasmuch as the petition for registration of document did not interrupt the running of the
period to file the appropriate petition for review and considering that the prescribed one-year
period had long since expired, the decree of registration, as well as the certificate of title issued
in favor of respondents, had become incontrovertible.

170
LLB 2A

REMOTIN, ROSANIE P.

136. MOVIDO VS. PASTOR

GR No. 172279 February 11, 2010

Facts:
Pastor alleged that he and Movido executed a contract to sell where Movido agreed to
sell a parcel of his land in Cavite. Pastor also alleged that the contract provided that if a Napocor
power line transferred the subject lot, the purchase price would be lowered. He also claimed that
Movido undertook the cause of the survey of the property in order to determine the portion
affected by the Napocor power line.

The petitioner also alleged that he already paid more than half of the price and that he
was willing and ready to pay the balance of the purchase price but due to petitioner‘s refusal to
have the property surveyed despite incessant demands, his unpaid balance could not be
determined with certainty. Movido alleged that their original negotiation for the sale of his
property involved a smaller lot area and that Pastor was in delay in paying several installments
and that his is a material breach because they agreed that the survey of the property would only
be done after Pastor would have paid the seventh [7th] installment.

Issue:
Whether or not the validity of a contract will depend on certain stipulations in it.

Held:
No, the validity of a contract will not depend on certain stipulations in it. In this case, the
two contracts that were executed by the parties would reveal that the payment of the purchase
price does not depend on the survey of the property. In other words, the purchase price should
be paid whether or not the property is surveyed. The survey of the property is important only
insofar as the right of respondent to the reduction of the purchase price is concerned. On the
portion that is excluded from the contract as well as the portions covered by the agreement
which will be subject to reduction of the purchase price, is also not conditioned on the payment
of any installment.

171
LLB 2A

137. DE LEON VS. ONG

G.R. No. 170405 February 2, 2010

Facts:
De Leon sold 3 parcels of land to Ong. The properties were mortgaged to Real Savings
and Loan Association. The parties executed a notarized deed of absolute sale with assumption of
mortgage. The deed of Assumption of mortgage shall be executed in favor of Ong after the
payment of four hundred fifteen thousand [415,000]. Ong complied with it. De Leon handed the
keys of to Ong and informed the loan company that the mortgage has been assumed by Ong.
Ong made some improvements in the property.

After sometime, Ong learned that the properties were sold to Viloria and changed the
locks to it. Ong went to the mortgage company and learned that the mortgage was already paid
and the titles were given to Viloria. Ong filed a complaint for the nullity of second sale and
damages. De Leon contended that Ong does not have cause of action against him because the
sale was subject to a condition which requires the approval of the loan company and that he and
Ong only entered a contract to sell.

Issue:
Whether or not the parties entered into a contract of sale.

Held:
Yes, the parties entered into a contract of sale. In a contract of sale, the seller conveys
ownership of the property to the buyer upon the perfection of the contract. The non-payment of
the price is a negative resolutory condition. Contract to sell is subject to a positive suspensive
condition. The buyer does not acquire ownership of the property until he fully pays the purchase
price. The present case, the deed executed by the parties did not show that the owner intends to
reserve ownership of the properties. The terms and conditions affected only the manner of
payment and not the immediate transfer of ownership. It was clear that the owner intended a
sale because he unqualifiedly delivered and transferred ownership of the properties to the
respondent.

172
LLB 2A

138. SPS. BERNARDO BUENAVENTURA AND CONSOLACION JOAQUIN ET AL. VS.


COURT OF APPEALS ET AL.

G.R. NO. 126376 November 20, 2003

Facts:
Joaquin and Landrito are the parents of the plaintiffs and the defendants. They would
like to be declared null and void ab initio certain deeds of sale of real property executed by
Joaquin and Landrito in favor of their co-defendants. Petitioners aver that the deeds are
simulated and therefore null and void ab initio because firstly, there was no actual valid
consideration for the deeds of sale over the properties, secondly, assuming that there was
consideration in the sums reflected in the questioned deeds, the properties are more than three-
fold times more valuable than the measly sums appearing therein, thirdly, the deed of sale do
not reflect and express the true intent of the parties [vendors and vendees], fourthly, the
purported sale of the properties in litis was the result of a deliberate conspiracy designed to
unjustly deprive the rest of the compulsory heirs of their legitimate.

Issue:
Whether or not the Deed of Sale are void for lack of consideration.

Held:
No, the deeds of sale are not void for lack of consideration. A contract of sale is not a real
contract, but a consensual contract. As a consensual contract, a contract of sale becomes binding
and valid contract upon the meeting of the minds as to price. If there is a meeting of the minds
of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even
the breach of that manner of payment.

If the real price is not stated in the contract, then the contract of sale is valid but subject
to reformation. If there is no meeting of the minds of the parties as to the price, because the
price stipulated in the contract is simulated, then the contract is void. Article 1471 of the Civil
Code states that if the price in a contract of sale is simulated, the sale is void. It is not the act of
payment of price that determines the validity of a contract of sale. Payment of the price has
nothing to do with the perfection of the contract. Payment of the price goes into the performance
of the contract. Failure to pay the consideration is different from lack of consideration. The
former results in a right to demand the fulfillment or cancellation of the obligation under an
existing valid contract while the latter prevents the existence of a valid contract.

173
LLB 2A

139. PENALOSA VS. SANTOS

G.R. No. 133749 August 23, 2001


363 SCRA 545

Facts:
Penalosa entered into two contracts of sale with Santos. The contract is a conditional
contract of sale. According to the stipulations of the contract, Penalosa would have to evict the
illegal settlers in the lot after which, the sale will be formalized. However, Penalosa failed to pay
the purchase price. Santos contends that the contracts are absolutely simulated and therefore
void.

Issue:
Whether or not the contract of sale was absolutely simulated for want of consideration

Held:
No, the contract of sale was not simulated. The contracts were perfected and the entire
requirements for the perfection of a contract of sale were satisfied. The meeting of the minds of
Santos and Penalosa perfected the contract despite the failure of Penalosa to pay the purchase
price.

174
LLB 2A

140. TING HO VS TENG GUI

G.R. No. 130115 July 16, 2008

Facts:
Felix Ting Ho. Jr. Merla Ting Ho Braden, Juana Ting Ho and Lydia Ting Ho Belenzo
against their brother, respondent Vicente Teng Gui. The controversy revolves around a parcel of
land, and the improvement which should form part of the estate of their deceased father. Felix
Ting Ho, and should be partitioned equally among each of the siblings. Petitioners alleged that
their father Felix Ting Ho died intestate on June 26, 1970, and left upon his death an estate.

According to petitioners, the said lot and properties were titled and tax declared under
trust in the name of respondent Vicente Teng Gui for the benefit of the deceased Felix Ting Ho
who, being a Chinese citizen, was then disqualified to own public lands in the Philippines; and
that upon the death of Felix Ting Ho, the respondent took possession of the same for his own
exclusive use and benefit to their exclusion and prejudice.

Issue:
Whether or not the sale was void

Held:
No, the sale was not void. Article 1471 of the Civil Code has provided that if the price is
simulated, the sale is void, but the act may be shown to have been in reality a donation, or some
other act or contract. The sale in this case, was however valid because the sale was in fact a
donation. The law requires positive proof of the simulation of the price of the sale. But since the
finding was based on a mere assumption, the price has not been proven to be a simulation.

175
LLB 2A

RUBIO, BETTY MARIE AGNES S.

141. PACIFIC OXYGEN & ACETYLENE CO. VS. CENTRAL BANK

G.R. No. L-21881 March 1, 1968

FACTS:
Plaintiff Pacific Oxygen and Acetylene Co. applied with the Philippine Trust Company,
an agent of the Central Bank, for commercial credit in the amount of $63,964.00 in favor of the
Independent Engineering Co., Inc., O'Fallon to cover the shipment of a plant and were
approved. Plaintiff as well for the same purpose, applied with the Philippine Trust Company for
the purchase of forward exchange in the same amount of $63,964.00.

Thereafter, the Philippine Trust Company applied with the Central Bank for the
purchase of forward exchange in the amount of $63,694.00 to cover its U.S. dollar commitment
against the letter of credit opened under free market rate for the plaintiff. Then, the Central
Bank in turn executed a forward exchange contract for the sale of foreign exchange in the said
amount. Upon plaintiff's application, the letter of credit was amended to increase the amount by
$3,910.00 to cover the estimated freight and ship charges, to be followed as in the case of the
original letter of credit with the purchase of forward exchange for a similar amount.

As a result, the Philippine Trust Company applied for the purchase of forward exchange
with the Central Bank in the amount of $71,617.00 of which $67,874.00 would cover its U.S.
dollar commitments against the letter of credit opened under free market rate for the plaintiff.
Then the next day the Central Bank executed the corresponding forward exchange contract for
the same.

However, the Central Bank suspended the margin levy. The Independent Engineering
Co., Inc., O'Fallon, Illinois, U.S.A., the beneficiary, drew two drafts against said letter of credit in
the sums of $19,277.41 and $48,596.59 and the Continental Illinois National Bank and Trust
Company of Chicago, correspondent of the Philippine Trust Company, Manila, honored the first
draft on and the second draft as shown by the debit advices on the same dates addressed to
Philippine Trust Company.8 The Philippine Trust Company sent to the plaintiff statements of
account on the importation in which were included the 15% margin fee.9 The plaintiff paid
under protest to the Central Bank, thru the Philippine Trust Company, the amounts of
P22,058.00 and P8,780.65, or a total of P30,839.49, representing the 15% margin fee, the
amount sought to be recovered. The lower court rendered judgment in favor of the plaintiff and
against the defendant ordering the refund of the above sum of P30,839.49. A motion to set aside
judgment by defendant Central Bank having been filed and thereafter denied, this appeal was
taken.

ISSUE:
Whether or not the collection made by the defendant from the plaintiff in the amount of
P30,839.00 is valid.

176
LLB 2A

HELD:
The appeal, as earlier mentioned, possesses merit. The language of the law is clear. A
margin fee may be collected from "all sales of foreign exchange by the Central Bank and its
authorized agent banks.

It is well-settled in our law that a contract of sale exists from the moment "one of the
contracting parties obligates himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefore a price certain in money or its equivalent." There is a
perfection of such a contract "at the moment there is a meeting of minds upon the thing which is
the object of the contract and upon the price" from which moment, "the parties may reciprocally
demand performance, subject to the provisions of the law governing the form of contracts." It is
a fair restatement of the prevailing principle in American law that an agreement by one party to
sell and deliver, and by the other to purchase at a mentioned price and terms certain personal
property on or before a specified future date is a contract of sale and not an option.

177
LLB 2A

142. GAITE VS. FONACIER

G.R. NO. L-11827 JULY 31, 1961


2 SCRA 830

FACTS:
Defendant-appellant Isabelo Fonacier, owner and/or holder of 11 iron lode mineral
claims constituted a ―Deed of Assignment in favor of the appointed Fernando A. Gaite,
plaintiff-appellee, as his true and lawful attorney-in-fact to enter into a contract with any
individual or juridical person for the exploration and development of the mining claims on a
royalty basis. Hence, the execution of a general assignment conveying the development and
exploitation of said mining claims into the Larap Iron Mines, solely owned, on the same royalty
basis. Thereafter, Gaite underwent development and the exploitation for the mining claims
which he estimates to be approximately 24 metric tons of iron ore.

However, Fonacier decided to revoke the authority granted by him to Gaite and executed
a Revocation of Power of Attorney and Contract". Gaite assented thereto subject to the several
conditions among which is the transfer to him of P20,000.00 plus royalties from the mining
claims, which further includes the rights and interest over the 24K+ tons of iron ore that had
been extracted and the balance of P65K was to be paid for covering the first shipment of iron
ores.

To secure the payment of the said balance of P65,000.00, Fonacier executed a surety
bond, with himself as principal and the Larap Mines and Smelting Co. and its stockholders.
However, Gaite refused said surety unless another bond underwritten by a bonding company
was put up by defendants to secure the payment of the P65,000.00 balance .Hence, a second
bond was executed with the Far Eastern Surety and Insurance Co. as additional surety, but it
provided that the liability of the surety company would attach only when there had been an
actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less than
P65,000.00, and that, furthermore, the liability of said surety company would automatically
expire on December 8, 1955.

On December 1955, the second bond had expired and no sale amounting to the
stipulation as prior agreed nor had the balance been paid to petitioner by respondent. Thus such
failure, prompted petitioner to file a complaint in the CFI of Manila for the payment of the
balance and other damages.

The Trial Court ruled in favor of plaintiff ordering defendant to pay the balance of P65k
with interest. Afterwards an appeal was affected by the respondent where several motions were
presented for resolution: a motion for contempt; two motions to dismiss the appeal for
becoming moot and academic; motion for a new trial, filed by appellee Gaite. The motion for
contempt was held unmeritorious, while the rest of the motions were held unnecessary to
resolve.

ISSUE:
Whether or not the lower court erred in holding that the obligation of appellant Fonacier
to pay appellee Gaite the P65,000.00 (balance of the price of the iron ore in question)is one with
a period or term and not one with a suspensive condition, and that the term expired on
December 8, 1955.

178
LLB 2A

HELD:
We find the court below to be legally correct in holding that the shipment or local sale of
the iron ore is not a condition precedent (or suspensive) to the payment of the balance of
P65,000.00, but was only a suspensive period or term. What characterizes a conditional
obligation is the fact that its efficacy or obligatory force (as distinguished from its
demandability) is subordinated to the happening of a future and uncertain event; so that if the
suspensive condition does not take place, the parties would stand as if the conditional obligation
had never existed. That the parties to the contract Exhibit "A" did not intend any such state of
things to prevail is supported by several circumstances.

WHEREFORE, finding no error in the decision appealed from, we hereby affirm the
same, with costs against appellants.

179
LLB 2A

143. SEVENTH DAY ADVENTIST VS. NORTHEASTERN MISSION

G.R. No. 150416 July 21, 2006

FACTS:
This case involves two supposed transfers of the lot previously owned by the spouses
Cosio. The first transfer was a donation to petitioners‘ alleged predecessors-in-interest in 1959
while the second transfer was through a contract of sale to respondents in 1980. A TCT was later
issued in the name of respondents. Claiming to be the alleged donee‘s successors-in-interest,
petitioners filed a case for cancellation of title, quieting of ownership and possession,
declaratory relief and reconveyance with prayer for preliminary injunction and damages against
respondents. Respondents, on the other hand, argued that at the time of the donation,
petitioners‘ predecessors-in-interest has no juridical personality to accept the donation because
it was not yet incorporated. Moreover, petitioners were not members of the local church then.
The RTC upheld the sale in favor of respondents, which was affirmed by the Court of Appeals,
on the ground that all the essential requisites of a contract were present and it also applied the
indefeasibility of title.

ISSUE:
Whether or not the donation was valid.

HELD:
No. The donation was void because the local church had neither juridical personality nor
capacity to accept such gift since it was inexistent at the time it was made.

The Court denied petitioners‘ contention that there exists a de facto corporation. While
there existed the old Corporation Law (Act 1459), a law under which the local church could have
been organized, petitioners admitted that they did not even attempt to incorporate at that time
nor the organization was registered at the Securities and Exchange Commission. Hence,
petitioners obviously could not have claimed succession to an entity that never came to exist.
And since some of the representatives of petitioner Seventh Day Adventist Conference Church of
Southern Philippines, Inc. we‘re not even members of the local church then, it necessarily
follows that they could not even claim that the donation was particularly for them.

WHEREFORE, the petition is hereby DENIED.

180
LLB 2A

144. CAVITE DEVELOPMENT BANK VS. SPOUSES LIM

G.R. No. 131679 February 1, 2000

FACTS:
On June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker named
Remedios Gatpandan, offered to purchase a property from Cavite Development Bank (CDB).
Pursuant to the foregoing terms and conditions of the offer, Lim paid CDB P30,000.00 as
Option Money and was issued an official receipt dated June 17, 1988. However, after some time
Lim discovered that the subject property was originally registered in the name of Perfecto
Guansing, father of mortgagor Rodolfo Guansing, under TCT No. 91148. Rodolfo succeeded in
having the property registered in his name under TCT No. 300809, the same title he mortgaged
to CDB and from which the latter‘s title (TCT No. 355588) was derived. Nevertheless, Perfecto
was able to restore previous title and cancelling TCT No. 300809 on the ground that the latter
was fraudulently secured by Rodolfo. This decision by the Regional Trial Court had since
become final and executory. Aggrieved by what was considered a serious misrepresentation by
the CDB on their ability to sell the subject property, an action for specific performance and
damages against petitioners in the Regional Trial Court was filed on August 29, 1989 by the Lim
spouses and was rendered a decision in their favor which was further affirmed by the Court of
Appeals.

ISSUE:
Whether or not private respondent is entitled to recover the P30,000.00 option money
and interest for damages thereon.

HELD:
Private respondents are thus entitled to recover the P30,000.00 option money paid by
them. Moreover, since the filing of the action for damages against petitioners amounted to a
demand by respondents for the return of their money, interest thereon at the legal rate should
be computed from August 29, 1989, the date of filing of Civil Case No. Q-89-2863, not June 17,
1988, when petitioners accepted the payment. In a void sale, the seller has no right whatsoever
to keep the money paid by virtue thereof and should refund it, with interest at the legal rate,
computed from the date of filing of the complaint until fully paid. Indeed, Art. 1412(2) which
provides that the non-guilty party "may demand the return of what he has given" clearly implies
that without such prior demand, the obligation to return what was given does not become legally
demandable.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the


MODIFICATION as to the award of damages as above stated.

181
LLB 2A

145. CRONICO VS. J.M. TUASON & CO., INC

G.R. No. L-35272 August 26, 1977

FACTS:
Plaintiff Florencia Cronico and defendant-appellant Claudio Ramirez expressed their
willingness to buy the lot owned by Appellant J. M. Tuason & Co. Inc. by sending separate
individual letters to appellant company requesting information concerning the area, the price
and other terms and conditions of the contract to sell. On March 20, 1962, the appellant
company sent separate reply letters to the said prospective buyers. However, it so happened that
plaintiff Cronico went to the appellant company's office on March 21, 1962, and she was
informed that the reply letter of the appellant company to prospective buyers of the same lot had
been mailed. Thus, plaintiff Cronico went to the post office in Manila and she was able to get the
letter and went directly to the office of Gregorio Araneta Inc. presenting the letter to Benjamin
Bautista, Head of the Real Estate Department of said company. Since she had no money,
plaintiff requested a check in the amount of P33,572.00 to cover the down payment for the lot
but was denied contending that it was Gregorio Araneta II who would decide whose offer to buy
may be accepted after the appellant company receives the registry return cards attached to the
registered letters sent to the offerors.

On the other hand, on March 22, 1962 after receiving the letter, appellant Ramirez
proceeded to the office of Benjamin Bautista in the same morning stating that he accepted the
conditions stated in the appellant company's letter and was similarly advised to wait for the
decision of Gregorio Araneta II. The next day, March 23, 1962, appellant Ramirez presented his
letter to the appellant company confirming his verbal acceptance of the terms and conditions in
connection with the sale.

On March 31, 1962, Atty. Jose E. Patangco in behalf of appellant Ramirez wrote the
appellant company requesting the early execution of the proper contract to sell over the lot. A
check in the amount of P33,572 was enclosed in the letter to cover the down payment for said
lot. The request was favorably considered. Hence the execution of sale on April 2, 1962, between
the J. M. Tuason & Co. Inc., and Claudio R. Ramirez. Meanwhile, on March 27, 1962, the
appellant company received a letter from Atty. Godofredo Asuncion in behalf of Florencia
Cronico requesting that the lot subject of litigation be 'sold to her. She tendered a check to cover
the down payment which was, however, returned. On April 4, 1962, the appellant company sent
a letter to the plaintiff-appellee informing her that it had decided to sell the lot in question to
appellant Ramirez. This triggered the instant suit.

ISSUE:
Whether or not petitioner has become the obligee or creditor of the respondent company
by complying first with the terms of the letter-offer.

182
LLB 2A

HELD:
The contention of the petitioner that she has become the obligee or creditor of the
respondent company because she was the first to comply with the terms of the letter-offer has
no merit. Her so-called acceptance has no effect because she violated the condition of "first
come, first served" by taking delivery of the reply letter of the respondent company in the entry
section of the Manila post office and of the fact that her formal letter of acceptance was only
received by the respondent company on March 27, 1962. In view of all the foregoing, we find
that the Court of Appeals has not committed any of the errors assigned in the brief of the
petitioner.

WHEREFORE, the decision of the Court of Appeals is hereby affirmed, without


pronouncement as to costs.

183
LLB 2A

SAIPUDIN, IRVING JR. C.

146. ANG YU ASUNCION ET AL. VS. COURT OF APPEALS

G.R. No. 109125 December 2, 1994


283 SCRA 602

FACTS:
On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by
Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose
Tan before the Regional Trial Court, Branch 31, Manila in Civil Case No. 87-41058, alleging,
among others, that plaintiffs are tenants or lessees of residential and commercial spaces owned
by defendants described as Nos. 630-638 Ongpin Street, Binondo, Manila; that they have
occupied said spaces since 1935 and have been religiously paying the rental and complying with
all the conditions of the lease contract; that on several occasions before October 9, 1986,
defendants informed plaintiffs that they are offering to sell the premises and are giving them
priority to acquire the same; that during the negotiations, Bobby Cu Unjieng offered a price of
P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs thereafter asked the
defendants to put their offer in writing to which request defendants acceded; that in reply to
defendant's letter, plaintiffs wrote them on October 24, 1986 asking that they specify the terms
and conditions of the offer to sell; that when plaintiffs did not receive any reply, they sent
another letter dated January 28, 1987 with the same request; that since defendants failed to
specify the terms and conditions of the offer to sell and because of information received that
defendants were about to sell the property, plaintiffs were compelled to file the complaint to
compel defendants to sell the property to them. Defendants filed their answer denying the
material allegations of the complaint and interposing a special defense of lack of cause of action.

After the issues were joined, defendants filed a motion for summary judgment which was
granted by the lower court. The trial court found that defendants' offer to sell was never
accepted by the plaintiffs for the reason that the parties did not agree upon the terms and
conditions of the proposed sale, hence, there was no contract of sale at all.

Aggrieved by the decision, plaintiffs appealed to this Court in CA-G.R. CV No. 21123.
There was no meeting of the minds between the parties concerning the sale of the property.
Absent such requirement, the claim for specific performance will not lie. Appellants' demand for
actual, moral and exemplary damages will likewise fail as there exists no justifiable ground for
its award.

The decision of this Court was brought to the Supreme Court by petition for review on
certiorari. The Supreme Court denied the appeal on May 6, 1991 "for insufficiency in form and
substances" (Annex H, Petition). On November 15, 1990, while CA-G.R. CV No. 21123 was
pending consideration by this Court, the Cu Unjieng spouses executed a Deed of Sale (Annex D,
Petition) transferring the property in question to herein petitioner Buen Realty and
Development Corporation.

184
LLB 2A

As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng
spouses was cancelled and, in lieu thereof, TCT No. 195816 was issued in the name of petitioner
on December 3, 1990. On July 1, 1991, petitioner as the new owner of the subject property wrote
a letter to the lessees demanding that the latter vacate the premises.

On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought
the property subject to the notice of lis pendens regarding Civil Case No. 87-41058 annotated on
TCT No. 105254/T-881 in the name of the Cu Unjiengs. The lessees filed a Motion for Execution
dated August 27, 1991 of the Decision in Civil Case No. 87-41058 as modified by the Court of
Appeals in CA-G.R. CV No. 21123.

ISSUE:
Whether or not the contract of sale is perfected by the grant of a Right of First Refusal.

HELD:
No, A Right of First Refusal is not a perfected Contract of Sale under Art. 1458 or an
option under par. 2 Art. 1479 or an offer under Art. 1319. In a Right of First Refusal, only the
object of the contract is determinate. This means that no vinculum juris is created between the
seller- offeror and the buyer- offeree.

185
LLB 2A

147. ENRIQUEZ DE LA CAVADA VS. DIAZ

G.R. NO. L-11668 April 1, 1918

FACTS:
The defendant and the plaintiff entered into a ―contract of option‖ whereby defendant-
appellant Antonio Diaz granted the option to the plaintiff-appellee Antonio Enriquez de la
Cavada to purchase his hacienda in Tayabas within the period necessary for the approval and
issuance of a Torrens Title. In the same instrument he obligated himself to sell said hacienda for
70,000 pesos. The plaintiff, on the other hand has agreed to buy said property at the agreed
purchase price. Soon after the execution of said contract, and in part compliance with the terms
thereof, the defendant obtained the registration of a part of the ―Hacienda de Pitogo‖ for which
he was given certificates of title. Later, and pretending to comply with the terms of said contract,
the defendant offered to transfer to the plaintiff one of said parcels only, which was a part of said
―hacienda‖. The plaintiff refused to accept said certificate for a part only of said ―Hacienda‖
upon the ground (A) that it was only a part of the ―Hacienda de Pitogo‖, and (B) under the
contract he was entitled to a transfer to him all said ―Hacienda‖. The trial court has ruled for
the plaintiff hence this petition.

ISSUE:
Whether or not there was a perfected contract of sale.

HELD:
YES, the subject contract was not, in fact, an ―optional contract‖ as that phrase is
generally used. Reading the said contract from its four corners it is clearly as absolute promise
to sell a definite parcel of land for a fixed price upon definite conditions. The defendant
promised to convey to the plaintiff the land in question as soon as the same was registered under
the Torrens system, and the plaintiff promised to pay to the defendant the sum of 70, 000,
under the conditions named, upon the happening f that event. The contract was not, in fact,
what is generally known as a ―contract of option‖. It differs very essentially from a contract of
option. The contract of option is a separate and distinct contract from the contract which the
parties may enter into upon the consummation of the option. A consideration for an optional
contract is just as important as the consideration for any other kind of contract. If there was no
consideration for the contract of option, then it cannot be entered any more than any other
contract where no consideration exists.

186
LLB 2A

148. RUPERT SORIANO VS. BAUTISTA

GR. NO. L- 15752 DECEMBER 29, 1962


6 SCRA 946

FACTS:
Spouses Bautista (respondent) owned a parcel of land in the Municipality of Teresa,
province of Rizal, containing 30, 222 square meters, by a creek. The respondents entered into a
―Kasulatan ng Sanglaan‖ in favor of petitioners Rupert Soriano and Olimpia de Jesus. It has
likewise been agreed that if the financial condition of the mortgagees will permit, they may
purchase said land absolutely on any date within the two-year term of this mortgage at the
agreed price of 3, 900.00. Sometimes after entering into the agreement, the petitioners paid a
sum of 450 pursuant to the conditions agreed upon. However, the respondents did not issue a
receipt and returned the money. The Attorney of the petitioners informed the respondent of
their desire to buy the land. Despite this, the respondents refused to comply with the demand,
hence, the petitioners filed before the Court Of First Instance a case. On the other hand, the
respondent filed a case against the petitioners but was dismissed for lack of jurisdiction. They
then filed a case again asking the CFI to order the petitioners to accept payment of the principal
and release the mortgage. The CFI of Rizal ruled after a joint trial of the cases filed both by the
petitioners and the respondents, that the respondents should issue a deed of sale for the
property upon petitioners‘ payment of the balance price.

ISSUE:
Whether or not the Petitioners are entitled to special performance consisting of the
execution of the deed of sale.

HELD:
YES. The respondent being mortgagors, they cannot be deprived of the right to redeem
the mortgaged property. While the agreement is a mortgage and contains a customary right of
redemption, it has a special provision which renders the mortgagor‘s right to redeem defeasible
at the election of the mortgagees. There is nothing illegal or immoral in this. It is an option to
buy, allowed by Art. 1479 of the Civil Code. The mortgagor‘s promise to sell is supported by the
same consideration as that of that mortgage itself, which is distinct from that which would
support the sale, an additional amount having been agreed upon to make up the entire price of
3,900.00, should the option be exercised. The mortgagor‘s promise was in the nature of a
continuing offer, non- withdrawable during a period of two years, which upon acceptance by the
mortgagees rise to a perfected contract of purchase and sell.

187
LLB 2A

149. LOURDES LIMSON VS. COURT OF APPEALS

375 SCRA 209 APRIL 20, 2001

FACTS:
Spouses offered to sell to Lourdes Limson the subject land through their agent Marcosa
Sanchez. She agreed to buy the property and gave them 20,000.00 as ―earnest money‖; the
respondent signed a receipt and gave her 10 day option period to buy the property. Lorenzo de
Vera informed her that the property was mortgaged to the Ramoses and asked her to pay the
balance of the purchase price to settle the obligation with the latter. She agreed to meet with the
respondents and Ramoses to consummate transaction but Asuncion and the Ramoses did not
appear. She claimed that she was willing to pay but transaction did not materialize because of
unpaid back taxes on the property. She gave respondents checks to pay the said taxes which
were considered as part of the purchase price. Limson learned that the property is subject to
negotiation between the spouses and SUNVAR Realty Development Corporation. Limson filed
an affidavit of Adverse Claim which was annotated to the title. A Deed of Sale was executed
between spouses and SUNVAR and a title was issued to SUNVAR with the annotation of adverse
claim.

ISSUE:
Whether or not there was a perfected contract to sell between petitioner and
respondents.

HELD:
NO. The agreement was a ―contract of option‖ not a ―contract to sell‖. An option is not
of itself a purchase, but merely secures the privilege to buy. It is not a sale of property but a sale
of the right to purchase. It is simply a contract by which the owner of property agrees with
another person that he shall have the right to buy his property at a fixed price within a certain
time. He does not sell his land; he does not then agree to sell it; but he does sell something. i.e.,
the right or privilege to buy at the election or option of the other party. Its distinguishing
characteristic is that it imposes no binding obligation on the person holding the option, aside
from the consideration for the offer. Until acceptance, it is not, properly speaking, a contract,
and does not vest, transfer, or agree to transfer, any title to, or any interest or right in the subject
matter, but is merely a contract by which the owner of the property gives the optionee the right
or privilege of accepting the offer and buying the property on certain terms.

188
LLB 2A

150. ADELFA PROPERTIES INC. VS. COURT OF APPEALS

240 SCRA 565, JANUARY 25, 1995

FACTS:
Private respondents and their brothers Jose and Dominador were the registered CO-
OWNERS of a parcel of land in Las Piñas, covered by a TCT. Jose and Dominador sold their
share to Adelfa. Thereafter, Adelfa expressed interest in buying the western portion of the
property from private respondents herein. Accordingly, an ―exclusive Option to purchase‖ was
executed between Adelfa and Private respondents and option money of 50, 000.00 was given to
the latter. Before Adelfa could make payments, it received summons as a case was filed against
Jose and Dominador and Adelfa, because of a complaint in a civil case by the nephews and
nieces of private respondents herein. As consequences, Adelfa, through a letter, informed the
private respondents that it would hold payment of the full purchase price and suggested that
they settle the case with their said nephews and nieces. However, Salud did not heed the
suggestion; respondent‘s informed Atty. Bernardo that they are cancelling the transaction. Atty.
Bernardo made offers but they were all rejected.

The RTC in Makati dismissed the civil case. A few days after, private respondents
executed a Deed of Conditional Sale in favor of Chua, over the same parcel of land. Atty.
Bernardo wrote to private respondents informing that in view of the dismissal of the case, Adelfa
is willing to pay the purchase price, and requested that the corresponding Deed of Absolute Sale
be executed. This was ignored by private respondents. On the other hand, the private
respondents sent a letter to Adelfa enclosing therein a check representing the refund of half the
option money paid under the exclusive option to purchase, and requested Adelfa to return the
owner‘s duplicate copy of Salud. But, Adelfa failed to surrender the certificate of title; hence the
private respondents filed a civil case before the RTC of Pasay, for annulment of contract with
damages. The trial court directed the cancellation of the exclusive option to purchase. On
appeal, respondent Court of Appeals affirmed in toto the decision of the RTC hence this petition.

ISSUE:
Whether or not the agreement between the parties is a contract to sell.

HELD:
YES. The alleged option contract is a contract to sell, rather than a contract of sale. The
distinction between the two is important for in contract of sale, the title passes to the vendee
upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is
reserved in the vendor and is not to pass until the full payment of the price. In a contract of sale,
the vendor has lost and cannot recover ownership until and unless the contract is resolved or
rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of
the price. Thus, a Deed of Sale is considered absolute in nature where there is neither a
stipulation in the Deed that title to the property sold is reserved in the seller until the full
payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the
moment the buyer fails to pay within a fixed period.

189
LLB 2A

SALAPUDDIN, REA BETH H.

151. EQUATORIAL REALTY VS. MAYFAIR THEATER

264 SCRA 483 March 21 1996

Facts:
Carmelo & Bauermann, Inc. (―Camelo‖ ) used to own a parcel of land with two 2-storey
buildings constructed thereon, located at Claro M. Recto Avenue, Manila, which it leased to
Mayfair Theater Inc. (―Mayfair‖) for a period of 20 years. The Contract of Lease contained a
provision granting Mayfair a right of first refusal to purchase the subject properties. However,
on July 30, 1978 — within the 20-year-lease term — the subject properties were sold by
Carmelo to Equatorial Realty Development, Inc. (―Equatorial‖) for the total sum of
P11,300,000, without first offering to Mayfair. Mayfair filed a Complaint before the RTC of
Manila for (a) the annulment of the Deed of Absolute Sale between Carmelo and Equatorial, (b)
specific performance, and (c) damages. The lower court rendered a Decision in favor of Carmelo
and Equatorial but the CA reversed such decision rescinding the sale and ordered to allow
Mayfair Theater, Inc. to buy the aforesaid lots for P11,300,000.00. Mayfair bought the property.
However, Equatorial filed an action for the collection of a sum of money against Mayfair,
claiming payment of rentals or reasonable compensation for Mayfair‘s use of the subject
premises after its lease contracts had expired. Equatorial alleged that representing itself as the
owner of the subject premises by reason of the Contract of Sale; it claimed rentals arising from
Mayfair‘s occupation thereof. The trial court dismissed the Complaint holding that the rescission
of the Deed of Absolute Sale did not confer on Equatorial any vested or residual proprietary
rights.
Issue:
Whether Equatorial is entitled to back rentals.
Held:
No. In the case, there was no right of ownership transferred from Carmelo to Equatorial
in view of a patent failure to deliver the property to the buyer. By a contract of sale, ―one of the
contracting parties obligates himself to transfer ownership of and to deliver a determinate thing
and the other to pay therefore a price certain in money or its equivalent.‖ Ownership of the thing
sold is a real right,[ which the buyer acquires only upon delivery of the thing to him ―in any of
the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that
the possession is transferred from the vendor to the vendee.‖ This right is transferred, not by
contract alone, but by tradition or delivery. And there is said to be delivery if and when the thing
sold ―is placed in the control and possession of the vendee.‖ From the peculiar facts of this
case, it is clear that petitioner never took actual control and possession of the property sold, in
view of respondent‘s timely objection to the sale and the continued actual possession of the
property. While the execution of a public instrument of sale is recognized by law as equivalent to
the delivery of the thing sold, such constructive or symbolic delivery, being merely presumptive,
is deemed negated by the failure of the vendee to take actual possession of the land sold. In the
case, Mayfair‘s opposition to the transfer of the property by way of sale to Equatorial was a
legally sufficient impediment that effectively prevented the passing of the property into the
latter‘s hands. Rent is a civil fruit that belongs to the owner of the property producing it by right
of accession. Consequently and ordinarily, the rentals that fell due from the time of the
perfection of the sale to petitioner until its rescission by final judgment should belong to the
owner of the property during that period. Not having been the owner, Equatorial cannot be
entitled to the civil fruits of ownership like rentals of the thing sold.

190
LLB 2A

152. JMA HOUSE INC. VS. STA. MONICA INDUSTRIAL AND DEVT. CORP.

G.R. No. 15411 August 31, 2006

Before the Court is a Petition for Review on Certiorari of the Decision of the Court of Appeals
(CA) in CA-G.R. CV No. 60085 affirming on appeal the Decision of the Regional Trial Court
(RTC), Quezon City, Branch 105, in Civil Case No. Q-91-10576.

Facts:
JMA House Incorporated (JMA) applied for a P1,500,000.00 loan from the Pioneer
Savings and Loan Association, Inc. (Pioneer). To secure payment thereof, JMA executed a real
estate mortgage over a parcel of land located Lot No. 4, Block No. 13, Subdivision Plan No. Psd-
35337 Quezon City. There was likewise three-storey commercial and residential building which
was occupied by tenants. Upon the failure of JMA to pay its loan, the real estate mortgage was
foreclosed extrajudicially. Pioneer became the new owner of the said properties after a public
auction was made.

On June 23, 1986, Pioneer and JMA executed a Deed of Legal Redemption and Absolute
Sale in which Pioneer, for and consideration of P2,300,000.00, transferred to JMA all the rights
over the property, including the improvements thereon.

On June 30, 1986 JMA, represented by its General Manager Rosita Alberto, executed a
Deed of Absolute Sale over the lot, including the buildings thereon, in favor of Sta. Monica,
represented by Eugenio Trinidad. As agreed upon by the parties, the parties likewise executed a
contract denominated as Option to Buy, in which Sta. Monica gave JMA the option to buy within
one (1) year from the execution of the Deed Of Absolute Sale on or before July 1, 1987, with a
grace period of one year immediately upon the expiration thereof . The parties agreed that, in
case JMA availed of such extension, JMA would be obligated to pay an additional amount
equivalent to 3.5% a month as liquidated damages, until the whole amount is fully paid and/or
the option is finally exercised. When JMA failed to repurchase said properties from Sta. Monica,
the latter sold said properties to A. Guerrero Development Corporation (AGCOR). Despite the
sale of the property to AGCOR, Trinidad received, five checks amounting a total of
P3,000,000.00 and amount of P57,000.00 from Atty. Rosalie Alberto a member of the JMA
Board of Directors as partial payment of the account of JMA for the property. However, the
checks were dishonored by the drawee Bank.

Issue:
Whether or not JMA House Inc can still exercise option to buy when it failed to pay Sta.
Monica Industrial and Development Corp the agreed payment for the property sold.

Held:
It is clear that petitioner failed to exercise its option on or before June 30, 1987. Neither
did petitioner exercise its option and pay the liquidated damages to respondent Sta. Monica
from July 1, 1987 up to June 1988. This impelled respondent Sta. Monica to inform petitioner
that because of its failure to exercise its option to purchase the property, it had to discontinue
collecting the rentals from the tenants of the buildings. On February 2, 1988, respondent Sta.
Monica sold the property to respondent AGCOR, which secured TCT No. 376746 on February 17,
1988.

The Option to Buy provides that acceptance must be accompanied by payment of


liquidated damages; such payment is a condition precedent to the exercise of the right to buy,

191
LLB 2A

and the money must be tendered or offered. A mere notice of an intention to accept, or of an
acceptance without such payment or tender, does not constitute a valid compliance. Respondent
Sta. Monicas acceptance of the five checks in the total amount of P3,000,000.00 and the cash
amount of P57,000.00 on June 30, 1988, as partial payment of petitioners account did not
resuscitate the right which petitioner had by then already lost, particularly since the property
had already been sold and titled to AGCOR. The said partial payment was an exercise in futility,
made worse by the fact that the five checks were dishonored by the drawee bank.

192
LLB 2A

153. VASQUEZ VS. AYALA CORP.

G.R. No. 149734 November 19, 2004

FACTS:
The Vasquez spouses sold to Ayala Corporation all their shares of stocks in Conduit
Development, Inc. Stipulated under the Memorandum of Agreement (MOA) paragraph 5.15,
was that Ayala Corp. would give the Vasquez Spouses a first option to purchase four developed
lots at the prevailing market price at the time of the purchase. By virtue of the provision of the
MOA, Ayala offered to sell the four lots to the plaintiffs, the parties were not able to agree to
what prevailing price should apply. The Regional Trial Court ruled that since the option to
purchase the lots was with a consideration, paragraph 5.15 is an option contract. The Court of
Appeals held otherwise and claimed that it was a right of first refusal there being no separate
consideration.

ISSUE:
Whether or not paragraph 5.15 of the MOA constitute an option contract or a right of
first refusal.

HELD:
As stated in paragraph 5.15 in the MOA, it clearly constitute a right of first refusal there
being no fixed period and a determined price at which the subject lots will be offered for sale as
connoted by the phrase ―at the prevailing market price at the time of the purchase‖. Notably,
paragraph 5.5 is not in any way a preparatory or a separate and distinct contract from which the
parties may enter into upon its consummation. The contested purpose of the paragraph is to
give the Vasquez Spouses the first option to purchase the lots at a price acceptable by Ayala upon
the latter‘s offer. Thus, articles 1324 and 1479 were not applicable to this case and paragraph
5.15 is not considered to be an option contract. Petitioner‘s right of first refusal was deemed lost
when Ayala rejected their counter-offer.

193
LLB 2A

154. SPS GARCIA VS. COURT OF APPEALS

G.R. No.172036 April 23 2010

Facts:
On May 28, 1993, plaintiffs 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 Three Million
One Hundred Seventy Thousand Two Hundred Twenty (P3,170,220.00) Pesos, five (5) parcels
of land situated at Tanza, Cavite.

As agreed upon, plaintiffs shall make a down payment of Five Hundred Thousand
(P500,000.00) Pesos upon signing of the contract. The balance of Two Million Six Hundred
Seventy Thousand Two Hundred Twenty (P2,670,220.00) Pesos shall be paid in three
installments, viz: Five Hundred Thousand (P500,000.00) Pesos on June 30, 1993; Five
Hundred Thousand (P500,000.00) Pesos on August 30, 1993; One Million Six Hundred Seventy
Thousand Two Hundred Twenty (P1,670,220.00) Pesos on December 31, 1993.

On its due date, December 31, 1993, plaintiffs failed to pay the last installment in the
amount of One Million Six Hundred Seventy Thousand Two Hundred Twenty (P1,670,220.00)
Pesos. Sometime in July 1995, plaintiffs offered to pay the unpaid balance, which had already
been delayed by one and [a] half year, which defendant refused to accept. On September 23,
1995, defendant sold the same parcels of land to intervenor Diogenes G. Bartolome for Seven
Million Seven Hundred Ninety Three Thousand (P7,793,000.00) Pesos.

Issue:
Whether or not the failure of the plaintiffs to pay the last installment extinguishes the
obligation of the defendant to deliver ownership in a contract to sell.

Held:
Yes. Contracts are law between the parties, and they are bound by its stipulations. It is
clear from the above-quoted provisions that the parties intended their agreement to be a
Contract to Sell: Dela Cruz 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.] Dela Cruz is thus not obliged to
execute a Deed of Absolute Sale in petitioners favor because of petitioners‘ failure to make full
payment on the stipulated date.

194
LLB 2A

155. SPS SERRANO AND HERRERA VS. CAGUIAT

G.R. No. 139173 February 28, 2007

FACTS:
Spouses Serrano agreed to sell in favor of respondent Caguiat a parcel of land at
₱1,500.00 per square meter. Caguiat paid a partial amount of ₱100, 000.00 as evidenced by a
receipt issued by petitioners indicating therein respondent‘s promise to pay the remaining
balance. After making known of his readiness to pay the balance, respondent requested from the
petitioners to prepare the Deed of Sale. When petitioners cancelled the transaction and intended
to return to respondent his partial payment, Caguiat filed a complaint for specific performance
and damages. The Trial Court relying on Article 1482 of the Civil Code ruled that the partial
payment made by Caguiat of ₱ 100, 000.00 being an earnest money signified the perfection of
the contract of sale. The Court of Appeals denied the petitioner‘s motion for reconsideration in
affirmation of the lower court‘s decision.

ISSUE:
Whether or not the partial payment constitutes an earnest money as manifested in
Article 1482 of the Civil Code.

HELD:
No. Article 1482 applies only to earnest money given in a contract of sale. It was
apparent that the earnest money in the case at bar was given in lieu of a contract to sell. Unlike
in a contract of sale, the ownership of the parcel of land was retained by the Spouses Serrano
and shall only be passed to Caguiat upon full payment of the purchase price as evidenced by the
receipt. Relatively, no Deed of Sale has been executed as proof of the intention of the parties to
immediately transfer the ownership of the parcel of land. Spouses Serrano also retained
ownership of the certificate of title of the lot, thereby indicating no actual or constructive
delivery of the ownership of the property. Finally, should the transaction pushed through,
Caguiat‘s payment of the remaining balance would have been a suspensive condition since the
transfer of ownership was subordinated to the happening of a future and uncertain event.

195
LLB 2A

SALIM, SADIKOL A.

156. LAFORTEZA, ET AL., VS. MACHUCA

GR No. 137552 June 16, 2000


333 SCRA 643

Facts:
Roberto Laforteza and Gonzalo Laforteza, Jr., in their capacities as attorneys-in-fact of
Dennis Laforteza, entered into a MOA (Contract to Sell) with Alonzo Machuca over a house and
lot registered in the name of the la\te Francisco Laforteza. Machuca was able to pay the earnest
money but however failed to pay the balance on time. Upon a request of an extension of time,
Machuca informed petitioner heirs that the balance was already covered, but petitioners refused
to accept the balance and told Machuca that the subject property is no longer for sale. The
petitioners contend that the Memorandum of Agreement is merely a lease agreement with
―option to purchase‖; hence, it only gave the respondent a right to purchase the subject
property within a limited period without imposing upon them any obligation to purchase it. And
since the respondent‘s tender of payment was made after the lapse of the option agreement, his
tender did not give rise to the perfection of a contract of sale.

Issue:
1. Whether or not the tender of payment after the lapse of the option agreement gave rise
to the perfection of a contract of sale.
2. Whether or not the six-month period during which the respondent would be in
possession of the property as lessee was a period within which to exercise an option.

Held:

1. Whether or not the tender of payment after the lapse of the option agreement gave rise to
the perfection of a contract of sale.

It did. A perusal of the Memorandum Agreement shows that the transaction between the
petitioners and the respondent was one of sale and lease.

A contract of sale is a consensual contract and is perfected at the moment there is a


meeting of the minds upon the thing which is the object of the contract and upon the price.
From that moment the parties may reciprocally demand performance subject to the provisions
of the law governing the form of contracts. In the case at bench, all the elements of a contract of
sale were thus present.

196
LLB 2A

2. Whether or not the six-month period during which the respondent would be in
possession of the property as lessee was a period within which to exercise an option.

The six-month period during which the respondent would be in possession of the
property as lessee, was clearly not a period within which to exercise an option. An option is a
contract granting a privilege to buy or sell within an agreed time and at a determined price. An
option contract is a separate and distinct contract from that which the parties may enter into
upon the consummation of the option. An option must be supported by consideration. An option
contract is governed by the second paragraph of Article 1479 of the Civil Code, which reads:

Art. 1479…
An accepted unilateral promise to buy or to sell a determinate thing for a price
certain is binding upon the promissor if the promise is supported by a consideration
distinct from the price.

In the present case, the six-month period merely delayed the demandability of the
contract of sale and did not determine its perfection for after the expiration of the six-month
period, there was an absolute obligation on the part of the petitioners and the respondent to
comply with the terms of the sale.

197
LLB 2A

157. SAN MIGUEL PROPERTIES PH. VS. SPOUSES HUANG

G. R. No. 137290 31 July 2000

Facts:
San Miguel Properties offered two parcels of land for sale and the offer was made to an agent
of the respondents. An ―earnest-deposit‖ of P1 million was offered by the respondents and was
accepted by the petitioner‘s authorized officer subject to certain terms. Petitioner, through its
executive officer, wrote the respondent‘s lawyer that because the parties failed to agree on the terms
and conditions of the sale despite the extension granted by the petitioner, the latter was returning the
―earnest-deposit‖. The respondents demanded execution of a deed of sale covering the properties
and attempted to return the ―earnest-deposit‖ but petitioner refused on the ground that the option
to purchase had already expired. A complaint for specific performance was filed against the
petitioner and the latter filed a motion to dismiss the complaint because the alleged ―exclusive
option‖ of the respondents lacked a consideration separate and distinct from
the purchase price and was thus unenforceable; the complaint did not allege a cause of action
because there was no ―meeting of the mind‖ between the parties and therefore the contact of
sale was not perfected. The trial court granted the petitioner‘s motion and dismissed the action.
The respondents filed a motion for reconsideration but were denied by the trial court. The
respondents elevated the matter to the Court of Appeals and the latter reversed the decision of
the trial court and held that a valid contract of sale had been complied with. Petitioner filed a
motion for reconsideration but was denied.

Issue:
Whether or not there was a perfected contract of sale between the parties

Held:
Yes. It is not the giving of earnest money, but the proof of the concurrence of all the
essential elements of the contract of sale which establishes the existence of a perfected sale.

The P1 million ―earnest-deposit‖ could not have been given as earnest money because
at the time when petitioner accepted the terms of respondents‘ offer, their contract had not yet
been perfected. This is evident from the following conditions attached by respondents to their
letter. The first condition for an option period of 30 days sufficiently shows that a sale was never
perfected. As petitioner correctly points out, acceptance of this condition did not give rise to a
perfected sale but merely to an option or an accepted unilateral promise on the part of
respondents to buy the subject properties within 30 days from the date of acceptance of the
offer. Such option giving respondents the exclusive right to buy the properties within the period
agreed upon is separate and distinct from the contract of sale which the parties may enter. All
that respondents had was just the option to buy the properties which privilege was not, however,
exercised by them because there was a failure to agree on the terms of payment. No contract of
sale may thus be enforced by respondents.

Even the option secured by respondents from petitioner was fatally defective. Under the
second paragraph of Art.1479, an accepted unilateral promise to buy or sell a determinate thing
for a price certain is binding upon the promissor only if the promise is supported by a distinct
consideration. Consideration in an option contract may be anything of value, unlike in sale
where it must be the price certain in money or its equivalent. There is no showing here of any
consideration for the option. Lacking any proof of such consideration, the option is
unenforceable.

198
LLB 2A

158. TOPACIO VS. COURT OF APPEALS

GR No. 102606 July 3, 1992

Facts:
The spouses De Villa (parents-in-law of Topacio) were the former owners of a lot in QC.
It was previously mortgaged to Ayala Investment and Development Corp to secure an obligation
of P500k. For failure to pay this will make the mortgage foreclosed and consequently BPI
acquired the property as highest bidder. Topacio wanted to buy the property. He made an offer
for P900k, but was asked to improve it. Together, they arrived at P1.25M as the purchase price,
with 30%downpayment and the balance payable in cash upon execution of the Deed of Sale.
Topacio paid the initial payment of P375k. BPI wrote to Topacio and informed him that he had
until January 4, 1986 to pay the balance of P875k. P. asked for extensions. BPI agreed to extend
up to June 30. Topacio was unable to meet the deadline so BPI wrote a letter to Topacio, where
BPI declared itself free to sell the property to other buyers and that Topacio could claim his
initial payment of P375k. Topacio merely asked for more extensions.

While BPI kept telling Topacio that he could claim the P375k back (in the form of a
cashier‘s check), Topacio declined. But BPI mailed the check to him. The check remained with
Topacio, uncashed. BPI then told Topacio that the property would be sold for P1.6M instead, so
Topacio reminded them of the original agreement (P1.25M), but BPI refused.

RTC: In favor of Topacio, finding that there is a perfected contract of sale which is still
enforceable because BPI did not rescind either by judicial or notarial rescission.

Court of Appeals: Reversed. The contract is a contract to sell, not a contract of sale.

Issue:
Whether or not the herein Subject Contract is a Contract to sell or contract of sale

Held:
It is a Contract of sale. The payment by Topacio of P375k was the operative act that gave
rise to a perfect contract of sale. It is considered earnest money (something of value to show that
the buyer was really in earnest, and given to the seller to bind the bargain). It is considered part
of the purchase price and proof of the perfection of the contract. The parties agreed on the object
(house and lot in White Plains), and the price and the manner of payment. Nothing in the
transaction indicates that BPI has not reserved its title on the property, nor did it provide for
any automatic rescission in case of default. So when Topacio failed to pay the balance of P875k
despite several extensions, BPI could not validly rescind the contract w/o complying with the
provision of Art1592 or Art 1191 on notarial or judicial rescission respectively.

199
LLB 2A

159. ADELFA PROPERTIES, INC VS. COURT OF APPEALS ET AL.

G.R. No. 111238 January 25, 1995


240 SCRA 565

FACTS:
Private respondents and their brothers Jose and Dominador were the registered CO-
OWNERS of a parcel of land in Las Pinas, covered by a TCT. Jose and Dominador sold their
share (eastern portion of the land) to Adelfa. Thereafter, Adelfa expressed interest in buying the
western portion of the property from private respondents herein. Accordingly, an ―exclusive
Option to Purchase‖ was executed between Adelfa and Private Respondents and option money
of 50,000 was given to the latter. A new owner‘s copy of the certificate of title was issued (as the
copy with respondent Salud was lost) was issued but was kept by Adelfa‘s counsel, Atty.
Bernardo. Before Adelfa could make payments, it received summons as a case was filed (RTC
Makati) against Jose and Dominador and Adelfa, because of a complaint in a civil case by the
nephews and nieces of private respondents herein. As a consequence, Adelfa, through a letter,
informed the private respondents that it would hold payment of the full purchase price and
suggested that they settle the case with their said nephews and nieces. Salud did not heed the
suggestion; respondent‘s informed Atty. Bernardo that they are canceling the transaction. Atty
Bernardo made offers but they were all rejected. RTC Makati dismissed the civil case. A few days
after, private respondents executed a Deed of Conditional Sale in favor of Chua, over the same
parcel of land. Atty Bernardo wrote private respondents informing them that in view of the
dismissal of the case, Adelfa is willing to pay the purchase price, and requested that the
corresponding deed of Absolute Sale be executed. This was ignored by private respondents.
Private respondents sent a letter to Adelfa enclosing therein a check representing the refund of
half the option money paid under the exclusive option to purchase, and requested Adelfa to
return the owner‘s duplicate copy of Salud. Adelfa failed to surrender the certificate of title;
hence the private respondents filed a civil case before the RTC Pasay, for annulment of contract
with damages. The trial court directed the cancellation of the exclusive option to purchase. On
appeal, respondent CA affirmed in toto the decision of the RTC hence this petition.

ISSUE:
Whether or not the agreement between parties is a contract to sell, and not contract of
sale

HELD:
The agreement between the parties is a contract to sell, and not an option contract or a
contract of sale. There are two features which convince us that the parties never intended to
transfer ownership to petitioner except upon the full payment of the purchase price: Firstly, the
exclusive option to purchase, although it provided for automatic rescission of the contract and
partial forfeiture of the amount already paid in case of default, does not mention that petitioner
is obliged to return possession or ownership of the property as a consequence of non-payment.
There is no stipulation anent reversion or reconveyance of the property to herein private
respondents in the event that petitioner does not comply with its obligation. With the absence of
such a stipulation, although there is a provision on the remedies available to the parties in case
of breach, it may legally be inferred that the parties never intended to transfer ownership to the
petitioner to completion of payment of the purchase price. Secondly, it has not been shown there
was delivery of the property, actual or constructive, made to herein petitioner. The exclusive
option to purchase is not contained in a public instrument the execution of which would have
been considered equivalent to delivery. Neither did petitioner take actual, physical possession of
the property at any given time. It is true that after the reconstitution of private respondents‘

200
LLB 2A

certificate of title, it remained in the possession of petitioner‘s counsel, Atty. Bayani L. Bernardo,
who thereafter delivered the same to herein petitioner. Normally, under the law, such
possession by the vendee is to be understood as a delivery. 18However, private respondents
explained that there was really no intention on their part to deliver the title to herein petitioner
with the purpose of transferring ownership to it. They claim that Atty. Bernardo had possession
of the title only because he was their counsel in the petition for reconstitution.

201
LLB 2A

160. HEIRS OF CECILIO CLAUDEL VS. COURT OF APPEALS, HEIRS OF MACARIO


CLAUDEL ET. AL.

G.R.No. 85240 July 12, 1991

Facts:
Basilio also known as "Cecilio" Claudel, acquired from the Bureau of Lands, Lot No. 1230
of the Muntinlupa Estate Subdivision, located in the poblacion of Muntinlupa, Rizal, with an
area of 10,107 square meters; he secured Transfer Certificate of Title (TCT) No. 7471 issued by
the Registry of Deeds for the Province of Rizal in 1923; he also declared the lot in his name, the
latest Tax Declaration being No. 5795. He dutifully paid the real estate taxes thereon until his
death in 1937. 3 Thereafter, his widow "Basilia" and later, her son Jose, one of the herein
petitioners, paid the taxes. The same piece of land purchased by Cecilio would, however, become
the subject of protracted litigation thirty-nine years after his death. Two branches of Cecilio's
family contested the ownership over the land-on one hand the children of Cecilio, namely,
Modesto, Loreta, Jose, Benjamin, Pacita, Carmelita, Roberto, Mario, Leonardo, Nenita, Arsenia
Villalon, and Felisa Claudel, and their children and descendants, now the herein petitioners
(hereinafter referred to as HEIRS OF CECILIO), and on the other, the brother and sisters of
Cecilio, namely, Macario, Esperidiona, Raymunda, and Celestina and their children and
descendants, now the herein private respondents (hereinafter referred to as SIBLINGS OF
CECILIO).

Issue:
Whether or not a contract of sale of land may be proven orally

Held:
The rule of thumb is that a sale of land, once consummated, is valid regardless of the
form it may have been entered into. 11 For nowhere does law or jurisprudence prescribe that the
contract of sale be put in writing before such contract can validly cede or transmit rights over a
certain real property between the parties themselves. However, in the event that a third party, as
in this case, disputes the ownership of the property, the person against whom that claims is
brought cannot present any proof of such sale and hence has no means to enforce the contract.
Thus the Statute of Frauds was precisely devised to protect the parties in a contract of sale of
real property so that no such contract is enforceable unless certain requisites, for purposes of
proof, are met. The purpose of the Statute of Frauds is to prevent fraud and perjury in the
enforcement of obligations depending for their evidence upon the unassisted memory of
witnesses by requiring certain enumerated contracts and transactions to be evidenced in
Writing.

202
LLB 2A

TEVES, CHERRY MAE C.

161. SPOUSES DAILON VS. COURT OF APPEALS & SABESAJE, JR.

GR No. 78903 February 28, 1990

FACTS:
Respondent Ruperto Sabesaje, Jr. filed a case to recover ownership of a parcel of land
which is based on a private document of absolute sale executed by petitioner Segundo Dalion,
who however denied the fact. Petitioner contends that the signature found in the document was
a forgery and that even if the signature was his; the sale was invalid since it was embodied in a
Private Document. The Court of Appeals, then, rendered a judgment in favor of respondent
upholding the validity of the sale. Hence, petitioner filed an action to annul and set aside the
said decision.

ISSUE:
Whether or not a sale of land embodied in a Private Document is valid.

HELD:
Yes, the sale of land is still valid. The necessity of a Public Document stated in Art 1358
of the Civil Code is only for convenience and not for validity or enforceability. Since Sale is a
consensual contract, wherein it is perfected by mere consent, it is therefore not a requirement
for its validity to be embodied in a Public Document.

203
LLB 2A

162. UNIVERSAL ROBINA SUGAR MILLING CORP. VS. HEIRS OF ANGEL TEVES

G.R No. 128574 September 18, 2002


389 SCRA 316

FACTS:
Two parcels of land were owned by Andres Abanto. When he died, his heirs executed an
Extrajudicial Settlement of the Estate of the Deceased and Simultaneous Sale in favor of United
Planters Sugar Milling Company, Inc. (UPSUMCO), and of Angel M. Teves which were not
registered. Due to UPSUMCO‘s needs, Teves verbally allowed it to use the lot in exchange that
the payment of real property taxes would be shouldered by the former. Years later, UPSUMCO‘s
properties were acquired by the Philippine National Bank (PNB) which later became in
petitioner Universal Robina Sugar Milling Corporation‘s (URSUMCO) possession through sale.
The said properties include Teves‘ lot. Teves subsequently filed a complaint for recovery of
possession before the Regional Trial Court (RTC) which rendered a decision in favor of
respondent. Petitioner, then, appealed before the Court of Appeals which later affirmed the
RTC‘s decision holding that the transaction between Teves and Abanto's heirs is a contract of
sale, not one to sell, because ownership was immediately conveyed to the purchaser upon
payment. The court of Appeal further held that Teves' failure to register the sale is not fatal since
a contract of sale is perfected by mere consent of the contracting parties and has the force of law
between them. Hence, a petition for review on certiorari was raised.

ISSUE:
Whether or not the respondents have established a cause of action against petitioner

HELD:
Yes. Respondents have established a cause of action against petitioner because the
Extrajudicial Settlement of the Estate of the Deceased and Simultaneous Sale is a contract of
sale, and not a contract to sell. There was a transfer of ownership upon the delivery of the thing
sold and therefore binds third parties. And though the contract of sale was not registered, it does
not affect its validity. Being consensual in nature, it is binding between the parties.

204
LLB 2A

163. LUNETA MOTOR COMPANY VS. DIMAGIBA

G.R. No. L-17061 December 30, 1961


3 SCRA 884

Facts:
Due to unpaid price of the truck bought from petitioner Luneta Motor Company,
defendants Angel Dimagiba and Natividad Noriel issued a promissory note in favor of the
former for the sum of Php16,126.12 payable in 18 monthly installments. To guarantee the said
payments, two chattel mortgages were executed separately by the defendants placing two trucks
as security. When defendants failed to pay several installments as agreed in the promissory note,
petitioner filed a complaint before the Court of First Instance not only to recover the balance of
his obligation but to secure the seizure of the two trucks mortgaged with a prayer that the
proceeds that may be realized after the sale of said trucks be applied to the payment of the
judgment that may be rendered in the case. Because of the vague nature of the allegations
contained in the complaint, the court rendered a decision holding that since choosing to
foreclose the mortgages executed, pursuant to Article 1484 of the new Civil Code, it can no
longer recover the balance of the purchase price. Petitioner appealed to the Court of Appeals
which later affirmed the former court‘s decision.

Issue:
Whether or not the company‘s petition is a violation of Art. 1484 of the Civil Code.

Held:
Yes, the company‘s petition is a flagrant circumvention of the prohibition of the law. In
Art 1484 of the Civil Code, the remedies in which a vendor may pursue in a contract of sale of
personal property where price is payable in installments are: (1) exact fulfillment of the
obligation; (2) cancel the sale; and (3) foreclose the mortgage on the thing sold. The article
provides that one shall have no further action against the purchaser to recover any unpaid
balance of the purchase price once a remedy had already been chosen. Accordingly, any
agreement to the contrary shall be void.

205
LLB 2A

164. PAMECA WOOD TREATMENT PLANT VS. COURT OF APPEALS & DBP

G.R. No. 106435 July 14, 1995


310 SCRA 281

Facts:
Petitioner PAMECA Wood Treatment Plant, Inc. obtained a loan from respondent DBP.
By virtue of the loan, petitioner executed a promissory note for the amount obtained, promising
to pay the loan by installment. A chattel mortgage was also executed over petitioner‘s properties
to secure said loan. Upon petitioner‘s failure to pay, respondent foreclosed the chattel mortgage,
and, as sole bidder in the public auction, purchased the foreclosed properties. Respondent, then,
filed a complaint before the Regional Trial Court for the collection of the balance. The court
rendered decision in favor of respondent which was then affirmed by the Court of Appeals.

Issue:
Whether or not Art 1484 of the Civil Code, can be applied in the case which prevents
DBP from collecting the balance.

Held:
NO. Art 1484 of the Civil Code only applies clearly and solely to the sale of personal
property where the price of which is payable in installments. Although Article 1484, paragraph
(3) expressly bars any further action against the purchaser to recover an unpaid balance of the
price, where the vendor opts to foreclose the chattel mortgage on the thing sold, should the
vendees failure to pay cover two or more installments, this provision is specifically applicable to
a sale on installments.

206
LLB 2A

165. ZAYAS VS. LUNETA MOTORS CORP.

G.R. No. L-30583 October 23, 1982

FACTS:
Petitioner Eutropio Zayas, Jr, purchased on installment basis a motor vehicle from Mr.
Roque Escaño the dealer of respondent Luneta Motor Company. The motor vehicle was
delivered to the petitioner who paid the initial payment and executed a promissory note in the
amount of P7,920.00, the balance of the total selling price, in favor of respondent Luneta Motor
Company. The promissory note stated the amounts and dates of payment of the installments
covering the P7,920.00 debt. To secure its payment, the petitioner executed a chattel mortgage
on the subject motor vehicle in favor of the respondent. After paying a total amount of
P3,148.00, the petitioner was unable to pay further monthly installments prompting the
respondent Luneta Motor Company to extra- judicially foreclose the chattel mortgage. The
motor vehicle was sold at a public auction with the respondent Luneta Motor Company as the
highest bidder in the amount of P5,000.00. Since the payments made by petitioner plus the
P5,000.00 realized from the foreclosure of the chattel mortgage, the total amount could not
cover the P7,920.00 amount of the promissory note executed by the petitioner. Respondent,
then, filed an action before the Municipal Trial Court for the recovery of the balance of P1,551.74
plus interests but was subsequently denied. The case was then brought up to the Supreme Court
for review by certiorari to secure a reversal of the respondent court's orders which remanded for
further proceedings instead of affirming the city court's order of dismissal.

ISSUE:
Whether or not a deficiency amount after the motor vehicle has been sold at public
auction could still be recovered by respondent company

HELD:
No, deficiency amount after the motor vehicle has been sold at public auction could no
longer be recovered by respondent. The principal and agent relationship is clear. But even
assuming that the ―distinct and independent entity‖ theory of the private respondent is valid,
the nature of the transaction as a sale of personal property on installment basis remains. When,
therefore, Escaño Enterprises assigned its rights vis-à-vis the sale to respondent Luneta Motor
Company, the nature of the transaction involving Escaño Enterprises and Zayas, Jr. did not
change at all. As assignee, respondent Luneta Motor Company had no better rights than
assignor Escaño Enterprises under the same transaction. The transaction would still be a sale of
personal property in installments covered by Article 1484 of the New Civil Code.

207
LLB 2A

UNDING, ABDURASID N.

166. MANUEL C. PAGTALUNAN VS. RUFINA DELA CRUZ VDA . DE MANZANO

G.R. No. 147695 September 13, 2007

FACTS:

In July 1974
–A Contract to Sell between Patricio Pagtalunan and wife of Teodoro Manzano on; -a
house and lot costing 17,800 with P1500 as DP and P150 as monthly installment
-Immediate occupation; extrajudicial rescission in case of default after 90 days from due
date of the monthly installment; payments and improvements are considered as rentals
and payment for damages suffered; leave the premises peacefully

In Dec 1979
- Respondent stopped paying the installments without explanation. Only 12,950 has
been paid
- Petitioner asserted that she became a lessee by reason of her default and she continued
to possess the property by mere tolerance of Patricio and the petitioner

In 1980
– respondent claimed that she was paying religiously until she was informed by Patricio
that he‘s no longer interested in continuing the contract (refund + recover possession);
agreement to suspend the payment period but there was harassment through demolition

In Feb 1997
– letter to vacate which she ignored

In April 1987
–complaint for unlawful detainer which the MTC granted in favor of the petitioner
-The MTC held that respondent‘s failure to pay not a few installments caused the
resolution or termination of the Contract to Sell. The last payment made by respondent
was on January 9, 1980(Exh. 71). Thereafter, respondent‘s right of possession ipso facto
ceased to be a legal right, and became possession by mere tolerance of Patricio and his
successors-in-interest. Said tolerance ceased upon demand on respondent to vacate the
property.

In June 1999
– RTC reversed MTC decision. According to the RTC, the agreement could not be
automatically rescinded since there was delivery to the buyer. A judicial determination of
rescission must be secured by petitioner as a condition precedent to convert the
possession de facto of respondent from lawful to unlawful. CA affirmed RTC decision but
applied Maceda Law (RA 6552). The CA held that the Contract to Sell was not validly
cancelled or rescinded under Sec. 3 (b) of R.A. No. 6552, and recognized respondent‘s
right to continue occupying unmolested the property subject of the contract to sell.

208
LLB 2A

ISSUE:
W/N Maceda Law is applicable
W/N there is a valid rescission

HELD:
Yes. The CA correctly ruled that R.A No. 6552, which governs sales of real estate on
installment, is applicable in the resolution of this case. This case originated as an action for
unlawful detainer. Respondent is alleged to be illegally withholding possession of the subject
property after the termination of the Contract to Sell between Patricio and respondent. It is,
therefore, incumbent upon petitioner to prove that the Contract to Sell had been cancelled in
accordance with R.A. No. 6552. The Maceda Law recognizes 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. The Court
agrees with petitioner that the cancellation of the Contract to Sell may be done outside the court
particularly when the buyer agrees to such cancellation. However, such cancellation must be
done in accordance with the law.

Where the buyer has paid at least 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 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 percent of the total payments made and, after
five years of installments, an additional five percent every year but not to exceed ninety percent
of the total payments made: Provided ,That the actual cancellation of the contract shall take
place 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 and upon full payment of the cash surrender value to
the buyer.

Petitioner claimed that there was full compliance with the law to warrant the rescission
since the demand letter made by his counsel is the notice of cancellation by notarial act which
the law speaks of. As for the refund, he already appropriated the payments as rentals.

209
LLB 2A

167. LUISA F. MCLAUGHLIN VS. COURT OF APPEALS

G.R. No. L-57552 October 10, 1986

FACTS:
Petitioner Luisa McLaughlin (seller) and private respondent Ramon Flores (buyer)
entered into a contract of conditional sale of real property. The total purchase price is P140,000.
P26,550 should be paid upon execution of the deed and the balance not later than May 31, 1977
with an interest of 1% per month until fully paid. Flores failed to pay and hence petitioner filed a
complaint for the rescission of the deed of conditional sale. Eventually, the parties entered into a
compromise agreement, which was accepted by the court. The parties agreed that Flores shall
pay P50,000 upon signing of the agreement and the balance in 2 equal installments payable on
June 30, 1980 and December 31, 1980. Flores also agreed to pay P1, 000 monthly rental until
the obligation is fully paid for the use of the subject matter of the deed of conditional sale. They
also agreed that in the event Flores fails to comply with his obligations, the petitioner will be
entitled to the issuance of a writ of execution rescinding the deed of conditional sale and all the
payments made will be forfeited in favor of the plaintiff. On October 15, 1980, petitioner wrote
to Flores demanding payment of the balance on or before October 31. This demand included the
installment due on June 30 and December 31, 1980. On October 30, Flores sent a letter
signifying his willingness and intention to pay the full balance. On November 7, petitioner filed a
motion for writ of execution alleging that Flores failed to pay the installment due on June 1980
and also failed to pay the monthly rentals from that date. She prayed that the deed of
conditional sale be rescinded with forfeiture of all payments and payment of the monthly rentals
and eviction of Flores. The trial court granted the motion. On November 17, Flores filed a
motion for reconsideration tendering at the same time a certified manager‘s check payable to
petitioner and covering the entire obligation including the December 1980 installment. The trial
court denied the motion. On appeal, the CA ruled in favor of Flores holding that the delay in
payment was not a violation of an essential condition which would warrant a rescission since On
November 17 or just 17 days from the October 31 deadline set by petitioner, Flores tendered the
certified manager‘s check and that it was inequitable for Flores to forfeit all the payments made
(P101, 550).

ISSUE:
Whether it is inequitable to cancel the contract and to have the amount paid by Flores be
forfeited to petitioner particularly after Flores had tendered the certified manager‘s check in full
payment of the obligation.

210
LLB 2A

HELD:
YES, there is already substantial compliance by Flores with the compromise agreement.
More importantly, the Maceda law recognizes the vendor‘s right to cancel the contract to sell
upon the breach and nonpayment of the stipulated installments but requires a grace period after
at least 2 years of regular installment payments. But in cases where less than 2 years of
installments were paid, the seller shall give the buyer a grace period of not less than 60 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 the
receipt by the buyer of the notice of the cancellation or the demand for rescission of the contract
by a notarial act. Assuming that under the terms of agreement the December 31 installment was
due when on October 15 petitioner demanded payment of the balance on or before October 31,
petitioner could cancel the contract after 30 days from the receipt by Flores of the notice of
cancellation. Considering petitioner‘s motion for execution filed on November 7 as a notice of
cancellation, petitioner could cancel the contract after 30 days from the receipt by Flores of said
motion. Flores‘ tender of payment together with his motion for reconsideration on November 17
was well within the 30 day period granted by law. The tender made by Flores of a certified bank
manager‘s check was a valid tender of payment. It covered the full amount of the obligation.
However, although he had made a valid tender of payment which preserved his rights as a
vendee, he did not follow it with consignation or deposit of the sum due with the court. Hence he
remains liable for the payment of his obligation because of his failure to deposit the amount due
with the court.

211
LLB 2A

VALDEZ, ART JOSEF S.

170. OLYMPIA HOUSING, INC. VS. PANASIATIC TRAVEL CORP. AND MA. NELIDA
GALVEZ-YCASIANO

G.R. No. 140468 January 16, 2003

Facts:
The object in litigation is a condominium unit sold at the price of P2,340,000.00 payable
on installments at the rate of P33,657.40 per month. On August 8, 1984, plaintiff Olympia
Housing, Inc. and defendant Ma. Nelida Galvez-Ycasiano entered into a Contract to Sell,
whereby the former agreed to sell the latter condominium unit. Pursuant to the Contract to Sell,
defendant Ma. Nelida Galvez-Ycasiano made a reservation/deposit in the amount of
P100,000.00 on July 17, 1984 and 50% down payment in the amount of P1,070,000.00 on July
19, 1984.Defendants made several payments in cash and thru credit memos issued by plaintiff
representing plane tickets bought by plaintiff from defendant Panasiatic Travel Corp., which is
owned by defendant Ma. Nelida Galvez-Ycasiano, who credited/offset the amount of the said
plane tickets to defendant‘s account due to plaintiff.

Plaintiff alleged that far from complying the terms and conditions of said Contract to
Sell, defendant failed to pay the corresponding monthly installments which as of June 2, 1988
amounted to P1,924,345.52. Demand to pay the same was sent to defendant Ma. Nelida Galvez-
Ycasiano, but the latter failed to settle her obligation. For failure of defendant to pay her
obligation plaintiff allegedly rescinded the contract by Notarial Act of Rescission. At present, the
subject condominium unit is being occupied by defendant Panasiatic Travel Corp., hence the
suit for Recovery of Possession (Accion Publiciana) with prayer for attorney‘s fees, exemplary
damages and reasonable rentals for the unit from July 28, 1988 at the rate of P32,100.00 per
month until the condominium unit is finally vacated. Defendant Ma. Nelida Galvez-Ycasiano, by
admitting the existence of the Contract to Sell, interpose the defense amounting to
P1,964,452.82 in accordance with the provisions of the contract to sell, that she decided to stop
payment of the purchase price in the meantime because of substantial differences between her
and the plaintiff in the computation of the balance of the purchase price. The Regional Trial
court dismissed the complaint, having been prematurely foiled without petitioner via Metro
bank Cashier‘s Check. Petitioner refused to accept the payment, constraining respondents to
consign at the disposal of the court.

Both parties appealed the judgment of the trial court. In it‘s now questioned the decision
of June 11, 1999, the appellate court sustained the trial court.

Issue:
Whether or not the effect of the filing of the notarial act of rescission attached thereto
vis-à-vis the requirements of R.A. No. 6552.

Held:
The notarial act of rescission must be accompanied by the refund of the cash surrender
value. The actual cancellation of the contract can only be deemed to take place upon the expiry
of a 30-day period following the receipt of the buyer of the notice of cancellation or demand for
rescission by a notarial act and the full payment of the cash surrender value.

212
LLB 2A

171. MONONSONG VS. ESTIMO

G.R. No. 136773 June 25, 2003


404 SCRA 683

Facts:
Allegedly, Guevarra inherited a property from Justina Navarro, which is now under
possession of the heirs of Guevarra. Guevarra had six (6) children; one of them is Vicente Lopez,
the father of petitioner Manonsong. The respondents, the Jumagio sisters and Leonica Lopez
claimed that the property was actually sold to them by Justina Navarro prior to her death. The
respondents presented the Deed of Sale. The petitioners filed a complaint praying for the
partition and award to them of an area equivalent to 1/5 by right of representation. RTC ruled
that the conveyance made by Justina is subject to nullity because the property conveyed had a
conjugal character and that Guevarra as her compulsory heir should have the legal right to
participate with the distribution of the estate under question to the exclusion of others. The
Deed of Sale did not at all provide for the reserved legitime or the heirs, and, therefore it has no
force and effect against Guevarra and should be declared a nullity ab initio.

Issue:
Whether or not petitioners were able to prove that Manonsong is a co-owner of the
property and therefore entitled to demand for its partition.

Held:
There was no evidence presented to establish that Navarro acquired the property during
her marriage. There is no basis applying the presumption under Article 160 of the Civil Code to
present the case. On the contrary, Tax Declaration No. 911 showed that, as far back as in 1949,
the property was declared solely in Navarro‘s name. This tends to support the argument that the
property was not conjugal.

We likewise find no basis for the trial court‘s declaration that the sale embodied on the
Kasulatan deprived the compulsory heirs of Guevarra of their legitimes. As opposed to a
disposition inter vivos by lucrative or gratuitous title, a valid sale for valuable consideration does
not diminish the estate of the seller. When the disposition is for valuable consideration, there is
no diminution of the estate but merely a substitution value, the property sold is replaced by
equivalent monetary consideration.

Under Article 1458 of the Civil Code, the elements of the valid contract of sale are: (1)
consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money
or its equivalent. The presence of these elements is apparent on the face of the Kasulatan itself.
The property was sold in 1957 for P250.00.

213
LLB 2A

172. DISTAJO VS. COURT OF APPEALS

G.R. No. 112954 August 25, 2000

Facts:
Abietras designated one of her sons, Rufu, to be the administrator of the parcels of land
that she owned. She, then, sold portions of her lot to her children, one of which was sold to Rufu.
Likewise, Abietra‘s brother sold some lot to Rufu. Upon Abietra‘s death, the latter‘s siblings
demanded possession of the land owned by Rufu. Upon his refusal, they filed before RTC a
complaint for Recovery of Possession and partition. RTC dismissed the complaint but the
petitioners alleged that Rufu cannot acquire the parcels of land because the Civil Code prohibits
the administrator from acquiring the same.

Issue:
Whether or not the contention of the petitioners are correct.

Held:
Under paragraph (2) of 1491, the prohibition against purchasing property in their hands
for sale and management is not absolute. It does not apply if the principal consents to the sale of
property in the hands of the agent or administrator. In this case, the deeds of sale signed by
Abietras shows that she gave consent to the sale of the properties in favor of her son, Rufu, who
was the administrator of the properties. Thus, the consent of the principal Iluminada Abietras
removes the transaction of the prohibition contained in Article 1491 (2).

Petitioner also alleged that Rufu Distajo employed fraudulent machinations to obtain the
consent of Iluminada Abietras to the sale of the parcels of land. However, petitioner failed to
adduce convincing evidence to substantiate his allegations.

214
LLB 2A

173. OLAGUER VS. PURUGGANAN JR.

G.R. No. 158907 (2007)


515 SCRA 460

Facts:
The respondent was the owner of shares of stocks of Business Corp. he was active in the
political opposition against Marcos dictatorship. Anticipating the possibility of his arrest and
detention by the military, he executed a SPS appointing his attorneys-in-fact Locsin, Joaquin
and Hofilena for the purpose of selling and transferring his shares of stocks with Business day.
During the trial, petitioner testified that he agreed to execute the SPA in order to cancel his
shares of stock, even before they are sold, for the purpose of concealing that he was a
stockholder of Business day, in event of a military crackdown against the opposition. The parties
acknowledge the SPA before Emilio Purugganan, the corporate Secretary and the notary public.
Then, he was arrested. When he was released from detention, he discovered that he was no
longer registered as stockholder. He demanded that respondents restore to him full ownership,
but they refused to do so. He filed a complaint before RTC against Purugganan and Locsin to
declare as illegal the sale of shares of stock. He alleged that respondent exceeded his authority
under the SPA. SPA only applied in absence and incapacity. RTC dismissed and found the sale of
shares between him and respondent Locsin was valid.

Issue:
Whether or not the CA erred in ruling that there was perfected sale.

Held:
Petitioner sought to impose a strict construction of the SPA by limiting the definition of
the word ABSENCE to a condition wherein a person disappears from his domicile, his
whereabouts being unknown without leaving an agent to administer his property. Incapacity for
the petitioner would be limited to mean ―minority, insanity, and imbecility, the state of being
deaf-mute, prodigality and civil interdiction. He claims that his arrest and subsequent detention
are not among the instances covered by the terms absence and incapacity as provided in the SPA
in favor of Locsin. It is a general rule the SPA must be strictly construed, however, the rule is not
absolute and should not be applied to the extent of destroying the very purpose of the power. He
already authorized agents to do specific acts of administration and no longer necessitated the
appointment of one by the court.

215
LLB 2A

174. MAHARLIKA PUBLISHING CORP. VS. TAGLE

G.R. No. 65594 July 9, 1986

Facts:
GSIS owned a parcel of land with a building and printing equipment in Paco, Manila. It
was sold to Maharlika in a Conditional Contract of Sale with the stipulation that if Maharlika
failed to pay monthly installments in 90 days, the GSIS would automatically cancel the contract.
Because Maharlika failed to pay several monthly installments, GSIS demanded that Maharlika
vacate the premises. Even though Maharlika refused to do so, the GSIS published an
advertisement inviting the public to bid in a public auction. A day before the scheduled bidding,
Adolfo Calica, the President of Maharlika, gave the GSIS General Manager Roman Cruz gave a
not to Maharlika saying ―Hold Bidding. Discuss with me.‖ However, the public bidding took
place as scheduled and the property was subsequently awarded to Luz Tagle, the wife of GSIS
Retirement Division Chief. Maharlika demanded that the sale be considered null and void, as
Mrs. Tagle should have been disqualified from bidding for the GSIS property. RTC and CA both
ruled that the Tagle were entitled to the property and Maharlika should vacate the property.

Issue:
Whether or not the respondents are entitled to the property.

Held:
No. The sale to them was against public policy. First of all, the GSIS head office was
stopped from claiming that they did not give the impression to Maharlika that they were
accepting the proposal for a compromise agreement. The act of the general manager is binding
on the GSIS. Second, Article 1491 (4) of the Civil Code provides that public officers and
employees are prohibited from purchasing the property of the State or any GOCC or institution,
the administration of which has been entrusted to them cannot purchase, even at public or
judicial auction, either in person or through the mediation of another. The Supreme Court held
as an employee of the GSIS, Edilberto Tagle and his wife are disqualified from bidding on the
property belonging to the GSIS because it gives the impression that there was politics involved
in the sale. It is not necessary that actual fraud be shown, for a contract which tends to injure the
public service is void although the parties entered into it honestly and proceeded under it in
good faith.

216
LLB 2A

ADJUL, ALYSSA T.

175. FERNANDEZ VS. TARUN

G.R. No. 143868 November 14, 2002

Facts:
A fishpond was originally covered by a OCT, co-owned by the Fernandez siblings. 2 of
the 5 siblings, Antonio and Demetria, sold their respective shares to the spouses Tarun, both
registered and annotated on the OTC.

Later, the co-owners of the subject fishpond and another fishpond executed a Deed of
Extra-Judicial Partition of 2 parcels of registered land with exchange of shares. Among the
parties to the deed are the Fernandez siblings. It was stipulated in the deed that the parties
recognize and respect the sale in favor of Spouses Tarun stated above.

By virtue of the Deed of Extra-Judicial Partition, Angel Fernandez exchanged his share
on the 2nd fishpond to the shares of his co-owners in the remaining portion of the first fishpond,
making Angel and the Spouses Tarun co-owners of the first fishpond. By virtue of said deed, a
TCT was issued in the name of Angel and spouses Tarun. However, it was Angel and later on his
heirs who remained in possession of the entire fishpond.

When Angel was still alive, Spouses Tarun sought the partition of the property and their
share of its income. Angel refused to heed their demand. After the death of Angel, Spouses
Tarun wrote his heirs (petitioners herein) of their desire for partition but this was rejected by
the latter. Hence the suit for partition and damages

RTC ruled in favor of petitioners. CA reversed the decision. Hence this petition.

Issue:
Whether or not the transaction is one of absolute sale or equitable mortgage.

Held:
Petitioners aver that the sale to respondents is void, because it did not comply with the
requirements of the Civil Code. According to them, they were not notified of the sale, but learned
about it only when they received the summons for the partition case. They claim their right to
redeem the property under the following provisions of the Civil Code:

―Article 1620. A co-owner of a thing may exercise the right of redemption in case the shares
of all the other co-owners or of any of them are sold to a third person. If the price of the
alienation is grossly excessive, the redemptioner shall pay only a reasonable one.‖

In this case, it is quite clear that respondents are petitioners‘ co-owners. The sale of the
contested property to Spouses Tarun had long been consummated before petitioners succeeded
their predecessor, Angel Fernandez. By the time petitioners entered into the co-ownership,
respondents were no longer ―third persons,‖ but had already become co-owners of the whole
property. A third person, within the meaning of Article 1620, is anyone who is not a co-owner.

217
LLB 2A

VILLAPANDO, RHOVIL A.

176. NYCO SALES CORPORATION VS. BA FINANCE CORP.

G.R. No. 71694 August 16, 1991

Facts:
Nyco Sales Corporation, whose president and general manager is Rufino Yao, is engaged
in the business of selling construction materials with principal office in Davao City. Sometime in
1978, the brothers Santiago and Renato Fernandez (hereinafter referred to as the Fernandezes),
both acting in behalf of Sanshell Corporation, approached Rufino Yao for credit
accommodation. They requested Nyco, thru Yao, to grant Sanshell discounting privileges which
Nyco had with BA Finance Corporation. Yao apparently acquiesced, hence on or about
November 15, 1978, the Fernandezes went to Yao for the purpose of discounting Sanshell's post-
dated check which was a BPI-Davao Branch Check No. 499648 dated February 17, 1979 for the
amount of P60,000.00. The said check was payable to Nyco. Following the discounting process
agreed upon, Nyco, thru Yao, endorsed the check in favor of BA Finance. Thereafter, BA Finance
issued a check payable to Nyco which endorsed it in favor of Sanshell. Sanshell then made use of
and/or negotiated the check.

Accompanying the exchange of checks was a Deed of Assignment executed by Nyco in


favor of BA Finance with the conformity of Sanshell. Nyco was represented by Rufino Yao, while
Sanshell was represented by the Fernandez brothers. Under the said Deed, the subject of the
discounting was the aforecited check. At the back thereof and of every deed of assignment was
the Continuing Surety ship Agreement whereby the Fernandezes unconditionally guaranteed to
BA Finance the full, faithful and prompt payment and discharge of any and all indebtedness of
Nyco. The BPI check, however, was dishonored by the drawee bank upon presentment for
payment. BA Finance immediately reported the matter to the Fernandezes who thereupon
issued a substitute check dated February 19, 1979 for the same amount in favor of BA Finance. It
was a Security Bank and Trust Company check bearing the number 183157, which was again
dishonored when it was presented for payment. Despite repeated demands, Nyco and the
Fernandezes failed to settle the obligation with BA Finance, thus prompting the latter to
institute an action in court.

Nyco and the Fernandezes, despite having been served with summons and copies of the
complaint, failed to file their answer and were consequently declared in default. On May 16,
1980, the lower court ruled in favor of BA Finance. Nyco, however, moved to set aside the order
of default, to have its answer admitted and to be able to implead Sanshell. The prayer was
granted through an order dated June 23, 1980, wherein the decision of the court was set aside
only as regards Nyco. Trial ensued once more until the court reached a second decision. On
appeal, the appellate court also upheld BA Finance but modified the lower court's decision by
ordering that the interest should run from February 19, 1979 until paid and not from February 1,
1979. Nyco's subsequent motion for reconsideration was denied.

Issue:
Whether or not the assignor is liable to its assignee for its dishonored checks.

218
LLB 2A

Held:
An assignment of credit is the process of transferring the right of the assignor to the
assignee, who would then be allowed to proceed against the debtor. It may be done either
gratuitously or generously, in which case, the assignment has an effect similar to that of a sale.
According to Article 1628 of the Civil Code, the assignor-vendor warrants the credit itself (its
existence and legality) and the person of the debtor (his solvency), if so stipulated, as in the case
at bar. Consequently, if there be any breach of the above warranties, the assignor-vendor should
be held answerable therefor. There is no question then that the assignor-vendor is indeed liable
for the invalidity of whatever he assigned to the assignee-vendee. The decision appealed from is
AFFIRMED.

219
LLB 2A

177. FRANCISCO CRISOLOGO ET AL. VS. ISAAC CENTENO ET AL.

G.R. No. L-20014 November 27, 1968

Facts:
On January 18, 1955, the spouses Francisco Crisologo and Consolacion Florentino filed
in the Court of First Instance of Ilocos Sur an ex parte petition for consolidation of ownership in
them as vendees a retro of two parcels of land situated at Barrio Lapting, Lapog, Ilocos Sur, on
the ground that the vendors, the spouses Isaac Centeno and Asuncion Aquino, have failed to
exercise their right of repurchase within the periods stipulated in the two contracts of sale with
pacto de retro. On January 28, 1955, after hearing at which the petitioners presented evidence in
support of the petition, the court a quo, through Judge Francisco Geronimo, granted the
petition. On July 19, 1956, the vendors filed a motion to set aside the Order of January 28, 1955,
and on July 27, 1956, the court a quo, through Judge Felix Q. Antonio, granted the motion on
the ground that the movants had not been duly notified of the hearing. On motion by the
petitioners to set aside the Order of July 27, 1956, on the ground that the vendors had been
notified by registered mail of the hearing, the lower court, by its Order of February 27, 1957,
granted the motion and set aside the Order of July 27, 1956. The vendors appealed the Order of
February 27, 1957, to the Court of Appeals. On June 27, 1958, the Court of Appeals rendered
judgment in the appeal setting aside the lower court's Order of February 27, 1957, after holding
that the vendors had not been legally notified of the petition and the hearing, and that the Order
of January 28, 1955, was a patent nullity. The Court of Appeals remanded the record to the
lower court for reopening and for further proceedings. Accordingly, after the vendors had been
duly summoned as respondents, they filed their answer alleging that the two contracts of sale
with pacto de retro were really intended as equitable mortgages as securities for usurious loans.
After trial, the lower court rendered its decision on October 26, 1960, holding that respondents'
allegation was substantiated by their evidence. Judgment was rendered in favor of the
respondents.

Issue:
Whether or not the appellants contention that the lower court erred in not finding that
the Order of January 28, 1955, was valid, final and executory and that all proceedings thereafter
taken, including the vendors' appeal to the Court of Appeals and its decision rendered in said
appeal setting aside the Order of February 27, 1957, and remanding the case reopening and
further proceedings, as well as the proceedings thereafter taken including the decision of
October 26, 1960, are null and void.
Held:
Article 1607 of the Civil Code which provides that: ―In case of real property, the
consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with
the provisions of article 1616 shall not be recorded in the Registry of Property without a judicial
order, after the vendor has been duly heard.‖ contemplates a contentious proceeding wherein
the vendor a retro must be named respondent in the caption and title of the petition for
consolidation of ownership and has been duly heard. The judgment of the Court of Appeals
setting aside the Order of February 27, 1957, and in consequence thereof the Order of January
28, 1955, as a patent nullity on the ground that the lower court did not acquire jurisdiction over
the persons of the vendors because they had not been duly summoned is res judicata on the
question of nullity of said orders; and after the remand to the court below, the proceedings
further taken wherein the vendors were named as respondents and duly summoned and heard,
after which on October 26, 1960, the appealed judgment was rendered in favor of the
respondents, were valid, being in accordance with the contentious proceeding provided for in
Article 1607 of the Civil Code.

220
LLB 2A

178. PATRICK CHUA PENG HIAN VS. COURT OF APPEALS

G.R. No. L-60015 December 19, 1984

Facts:
Miguel C. Veneracion, owner of a 2,194-square-meter lot located at 787 Melencio Street,
Cabanatuan City, leased it in 1948 to Patrick Chua Peng Hian for ten years. The lease was
renewed for another ten years. Chua constructed on that lot a two-storey building where he
conducted his sawmills and lumber business on the ground floor. He and his family occupied the
second floor as residence. On May 25, 1968, after the second lease agreement had expired,
Veneracion leased to Chua 1,850 square meters of the lot for three years or from May 1, 1968 to
May 1, 1971 at the monthly rental of P1,500. It was stipulated in paragraph 5 of the lease
contract that it ."shall terminate automatically without extension and the lessee shall vacate and
surrender the premises without any obstruction thereon". Chua also agreed to pay Veneracion
"compensatory damages" of P20,000 plus attorney's fee of P2,000 should Veneracion seek
judicial relief by reason of Chua's non-fulfillment or violation of the terms of the lease. On
February 6, 1969 Veneracion died. After the third lease contract expired or on May 21, 1971,
Veneracion's heirs demanded that Chua vacate the premises and pay the accrued rentals. Chua
did not comply with their demand.

Issue:
Whether or not Chua‘s alienation in the contract of lease of his improvements was
tantamount to a disposition of conjugal realty without the wife's consent.

Held:
The contention has no merit. The said building and improvements on the leased land
may be treated as personal properties. The validity of a stipulation that the lessor would become
the owner of the improvements constructed by the lessee on the leased land has been sustained
by the Supreme Court. The case is governed by the lease contract which is the law between the
parties.

221
LLB 2A

179. MARIMPERIO COMPAÑIA NAVIERA, S.A. VS. COURT OF APPEALS

G.R. No. L-40234 December 14, 1987

Facts:
In 1964 Philippine Traders Corporation and Union Import and Export Corporation
entered into a joint business venture for the purchase of copra from Indonesia for sale in
Europe. Exequiel Toeg of Interocean was commissioned to look for a vessel and he found the
vessel "SS Paxoi" of Marimperio available. Philippine and Union authorized Toeg to negotiate
for its charter but with instructions to keep confidential the fact that they are the real charterers.
Consequently on March 21, 1965, in London England, a "Uniform Time Charter" for the hire of
vessel "Paxoi" was entered into by the owner, Marimperio Compania Naviera, S.A. through its
agents N. & J. Vlassopulos Ltd. and Matthews Wrightson, Burbridge, Ltd. to be referred to
simply as Matthews, representing Interocean Shipping Corporation, which was made to appear
as charterer, although it merely acted in behalf of the real charterers, private respondents
herein. On March 29, 1965, the Charterer was notified by letter by Vlassopulos through
Matthews that the vessel "PAXOI" had sailed from Hsinkang at noontime on March 27, 1965
and that it had left on hire at that time and date under the Uniform Time-Charter. The Charterer
was however twice in default in its payments which were supposed to have been done in
advance. Although the late payments for the charter of the vessel were received and
acknowledged by Vlassopulos without comment or protest, said agent notified Matthews, by
telex on April 23, 1965 that the ship-owners in accordance with Clause 6 of the Charter Party
were withdrawing the vessel from Charterer's service and holding said Charterer responsible for
unpaid hiring and all legal claims.

Issues:
Whether or not respondents have the legal capacity to bring the suit for specific
performance against petitioner based on the charter party, and Whether or not the default of
Charterer in the payment of the charter hire within the time agreed upon gives petitioner a right
to rescind the charter party extra judicially.

Held:
In the law of agency with an undisclosed principal, the Civil Code in Article 1883 reads:

If an agent acts in his own name, the principal has no right of action against the
persons with whom the agent has contracted; neither have such persons against the
principal. In such case the agent is the one directly bound in favor of the person with
whom he has contracted, as if the transaction were his own, except when the contract
involves things belonging to the principal. The provisions of this article shall be
understood to be without prejudice to the actions between the principal and agent. The
true charterers of the vessel were the private respondents herein and they chartered the
vessel through an intermediary which upon instructions from them did not disclose their
names. Article 1883 cannot help the private respondents, because although they were the
actual principals in the charter of the vessel, the law does not allow them to bring any
action against the adverse party and vice, versa. The question that now arises is whether
or not petitioner can rescind the charter party extra-judicially. The answer is also in the
affirmative. A contract is the law between the contracting parties, and when there is
nothing in it which is contrary to law, morals, good customs, public policy or public
order, the validity of the contract must be sustained. A 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.

222
LLB 2A

180. SHOTWELL VS. MANILA MOTOR CO., INC.

G.R. No. L-7637 December 29, 1956

Facts:
On 8 November 1948 Inma Rohde Shotwell, successor-in-interest of the late William H.
Rohde, the lessor, sued the lessee and the assignee in the Court of First Instance of Manila to
recover from them allegedly due and unpaid rentals from 1 January 1942 to 30 November 1945.
The Court rendered judgment in favor of the plaintiff and against the defendant Manila Motor
Co., Inc., ordering the latter to pay the former the sum of P175.00 (rental for the month of
January 1945), with interest at the rate of six per centum per annum from the date of the filing
of the complaint until fully paid; and declaring the contract of lease terminated as of the
destruction of the buildings in February, 1945. The case against the defendant Chartered Bank
of Australia and China is dismissed for lack of evidence. The payment of the rental due from the
defendant Manila Motor Co., Inc., is suspended until the Moratorium Law has been lifted,
unless the said defendant waives its right under said Law. From this judgment the plaintiff
appealed to the Court of Appeals. The judgment appealed from was affirmed, with the only
modification that the payment of the amount of P175.00 as rental of the property involved in
this litigation for the month of January, 1945, is not suspended and should not be made as soon
as this decision becomes final. This is an appeal by certiorari under Rule 46 from a judgment of
the Court of Appeals.

Issue/s:
Whether or not (1) the lease contract was novated; (2) the destruction of the building of
the leased property during the battle of liberation in February of 1945, caused the termination of
the lease; (3) the Executive Order on moratorium still affects the payment of any of the rentals
that might be due the plaintiffs; and (4) there is any balance of the accumulated rentals of the
premises that the Manila Motor Co., Inc. is bound to pay to the plaintiffs, with interest thereon
from the filing of the action.
Held:
The defendant Chartered Bank of India, Australia and China never exercised its option
on said lease. The assignment thereof was made just to benefit said defendant Bank and not to
work against it. The SC do not see any reason why the lessee could be obliged to make the
renewal, replacement or rebuilding of the improvements for the benefit of the lessor in order to
make the lease continue in operation under circumstances that might be disadvantageous to the
lessee, when the contract itself left that reconstruction or replacement at the will of the latter. As
quoted from Manresa: "There is no room for doubt that the loss of the thing extinguishes the
lease contract." and that "by loss of the thing shall be understood not only its material and
complete destruction, but also such essential change of condition or state that renders it unfit
for the purpose to which it was being used". The defendant-appellee, the Manila Motor Co., Inc.,
cannot be held liable for any rents after the liberation of the City of Manila, or from February 1
to November 30, 1945, as pretended by appellees. The part of the decision that suspends the
payment of the rental due from the defendant Manila Motor Co., Inc., until the moratorium
would be lifted, unless the said defendant waives its right under such law, was in accordance
with previous decisions of the Supreme Court, but the doctrine has been recently changed
(Royal L. Rutter vs. Placido J. Esteban — SC — G. R. L-3708, May 18, 1953, and other decisions
that followed), and there is now no reason for such suspension. Defendant-appellee Manila
Motor Co., Inc. is, therefore, in duty bound to pay the sum of P175.00 as rental of the premises
for the month of January, 1945. Anyway, said defendant in its answer admits its obligation to
pay that rental for said month. Finding no error in the judgment under review The Supreme
Court affirms the decision of the Court of Appeals.

223